ADB Lending to the Philippines to Focus on Infrastructure in 2018-2020

ADB

Transport will be a substantial component of ADB’s support to the Philippines, including efforts to improve connections between Manila and nearby provinces.

The Asian Development Bank (ADB) will boost its infrastructure support to the Philippines in the next three years to help the government build flagship infrastructure and social and regional projects, create more jobs, and advance sustainable and inclusive growth.

ADB’s planned lending in 2018-2020, outlined in a new country operations business plan (COBP), is expected to total $3.68 billion. More than half of the funds will finance transport, water, and flood management projects, and help the public sector strengthen its capacity to accelerate infrastructure development.

In 2018, ADB lending is expected to reach $920 million, rising to a record high of about $1.4 billion a year in 2019 and 2020. All loans are subject to approval by ADB’s Board of Directors.

The program, is in line with the government’s 2017-2022 Philippine Development Plan, which aims to support President Rodrigo Duterte’s ambitious “Build, Build, Build” (BBB) initiative and help address persistent income and regional growth disparities in the country.

In 2018, ADB lending is expected to reach $920 million, rising to a record high of about $1.4 billion a year in 2019 and 2020.

“Apart from being aligned with our priorities and key result areas, specific directions of ADB’s assistance provide evidence that they are ready to support us in very concrete ways,” said Rolando Tungpalan, Undersecretary for Investment Programming at the National Economic and Development Authority. “The partnership is even tighter with this COBP.”

Support for “Build, Build, Build” infrastructure plan

Underinvestment in infrastructure has been identified as one of the major constraints to the Philippines’ growth, despite the economy being among the fastest growing in Southeast Asia, averaging 6.3% in the last six years. In 2017-2018, the Philippines ranked 97th out of 137 countries in terms of infrastructure in the World Economic Forum’s Global Competitiveness Index, well below Malaysia (22nd), Thailand (43rd), and Indonesia (52nd).

To usher in what it calls the “golden age of infrastructure”, the government plans to spend an equivalent of 5.3% of gross domestic product (GDP) in 2017, against an average of less than 3% from 2010-2016.

Public infrastructure spending is expected to accelerate further to 6.3% of GDP in 2018 and around 7.4% by 2022 under the BBB program, which covers $160 billion to $180 billion worth of projects until 2022—mainly roads, railways, bridges, airports, and seaports.

These projects are expected to be funded via a combination of official development assistance, bilateral support, and public-private partnership (PPP) initiatives. ADB’s new lending program will cover part of the government’s priority list of high-impact projects under the BBB program.

“We look forward to continuing to work closely with our counterparts to tackle the Philippines’ development challenges and using our access to technical know-how and management to help the government realize its aspirations of transforming the Philippines into a high-middle income economy,” said Richard Bolt, ADB Country Director for the Philippines.

A history of collaboration on infrastructure

ADB has been working together with the Philippines for half a century, and the infrastructure focus is nothing new.

In the 1970s, it helped the government build hydropower facilities and vital road networks across Mindanao, which the Philippines then identified as a priority investment area. It also supported the rehabilitation of the 474-kilometer Manila-Legazpi line of the Philippine National Railways in 1976—ADB’s first railways project.

“ADB remains a dedicated partner to the government as it seeks to further lower poverty and unemployment rates, and improve people’s living standards.”
Richard Bolt

In 2000, ADB helped finance the first PPP in the Philippines for a major road network—the rehabilitation of the North Luzon Expressway which linked Manila to northern provinces. It also supported the setting up of the government’s PPP Center in 2011.

2018-2020 lending program

The 2018-2020 program will help the government undertake major railway projects aimed at developing Manila’s connectivity to nearby provinces, thus helping ease the current daily commute of many Filipinos working in the capital but residing outside Manila.

ADB is preparing assistance for the Malolos-Clark Railway Project in 2019, and the South Line extension of the North-South Commuter Rail system—two railway systems linking Manila to neighboring northern and southern cities and provinces.

Another part of the lending pipeline is phase 1 of the Metro Manila Transport Project worth $100 million for 2018. The project aims to help decongest traffic in the metropolis through knowledge solutions and system management and capacity improvements in existing transport modes.

To promote regional development, ADB is supporting initiatives particularly in Mindanao, such as the $70 million Davao Public Transport Modernization Project which seeks to upgrade the city’s jeepney transport; the $100 million Regional Development Project-South Central Mindanao Phase 1; and the $300 million Improving Growth Corridors in Mindanao Road Sector project phase 2 that will extend road rehabilitation in the region.

To further help local government units and state agencies implement and manage infrastructure projects, the policy-based Local Government Development Program and Expanding Private Participation in Infrastructure Program, each worth $300 million, are part of the pipeline.

Lowering poverty and unemployment

Apart from infrastructure, ADB’s lending pipeline up to 2020 also includes support for the social sector to help Filipino youth get good jobs, particularly via the Secondary Education Support Project and the Facilitating Youth School-to-Work Transition Program. Social protection support will continue through the Expanded Social Assistance Project.

A portion of the 2018-2020 pipeline is devoted to supporting development of the financial sector—particularly capital markets, inclusive finance, and the creation of a disaster risk pool under the Disaster Risk Financing Project.

ADB is also providing post-conflict support for Marawi City and other areas affected by the five-month siege of the city in 2017.

“ADB remains a dedicated partner to the government as it seeks to further lower poverty and unemployment rates, improve people’s living standards, and strengthen institutional capacity of agencies involved in finance, infrastructure, environment, and social sector reforms,” Bolt said.