Project bonds not needed ‘for now’

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By Melissa Luz T. Lopez
Senior Reporter

THE GOVERNMENT is not keen on offering bonds to fund big-ticket infrastructure projects, National Treasurer Rosalia V. De Leon said yesterday, noting that the country continues to have enough money to support public spending plans.

National Treasurer Rosalia V. De Leon — BW FILE PHOTO

“For now, we are not really looking into project bonds because these are really focused on financing for a particular project… That’s something that we can explore, but the cost structures would have to be evaluated to ensure that these are cost-effective [compared] to what we are getting from our general issuances,” Ms. De Leon said during a webinar hosted by BPI Capital Corp.

The government generates fresh funds from the sale of Treasury bills and bonds every other week, as part of the P727.64-billion borrowing plan for 2017.

Ms. De Leon assured investors that the Philippines is in “a position of strength” with ample resources and healthy debt profile to support the government’s P8.44-trillion 2017-2022 infrastructure spending plan under the “Build, Build, Build” initiative of the administration of President Rodrigo R. Duterte.

The fiscal balance is expected to be maintained with the budget deficit projected to remain within three percent of gross domestic product (GDP) annually despite bigger spending, Ms. De Leon added, as the Treasury’s fund-raising and fresh revenues from tax reforms provide fresh liquidity.

“The financing comes as a secondary issue because what’s important is to get these projects off the ground,” Ms. De Leon said.

“Fortunately for us, we have the resources and the fiscal wherewithal to be able to build, build, build, so it’s not an issue for us anymore.”

The government will tap some $1.81 billion in official development assistance (ODA) in 2018 alone, Ms. De Leon said, noting that loans secured via Chinese and Japanese ODA come with below-market interest rates, hence, providing more “cost-efficient” funding sources.

BPI Executive Vice-President Dennis Gabriel M. Montecillo said banks will not necessarily run out of opportunities to take part in the infrastructure boom despite the government’s preference for foreign grants, saying that they can still lend to suppliers and real estate developers apart from private construction firms.

Ferdinand A. Pecson, executive director of the Public-Private Partnership (PPP) Center, added that PPPs still have a role to play in the infrastructure story particularly through operation and maintenance (O&M) contracts, as the government seeks to tap the expertise of companies in running day-to-day work in new facilities.

The O&M contract for Clark International Airport in Pampanga will be the first to be offered to private-sector investors under the Duterte administration’s hybrid PPP model, Mr. Pecson added.

NEW ISSUES
Plans to float specialized debt papers remain on the table as the Bureau of the Treasury readies paperwork in this regard, Ms. De Leon said.

She told reporters on the sidelines of yesterday’s Treasury bill auction that her office has yet to take up with the Department of Budget and Management (DBM) the planned offering of long-term bonds that would raise funds for the multi-year rehabilitation of Marawi City, which is currently experiencing the fourth month of battle between government forces and Islamic State-inspired militants.

“We will be discussing with Secretary (Benjamin E.) Diokno regarding the authority, because we need the authority in terms of where it will be spent,” she explained, adding that the tenor, among other details, is being determined.

Earlier this month, Finance Secretary Carlos G. Dominguez III said he was considering the issuance of P30 billion in “patriotic” bonds to support the recovery of war-torn Marawi.

The DBM had previously said that the government will release at least P15 billion for the city’s rehabilitation in the next two years, on top of the Chinese government’s donation worth P15 million and the Japanese government’s $2 million.

At the same time, Ms. De Leon said the Treasury is also preparing documents for the maiden issuance of panda bonds — yuan-denominated debt papers to be sold to Chinese investors — as the government looks for a “clear market” and opportunity to proceed with the plan.

In April, Mr. Dominguez had said he wants these papers offered by the “third or fourth quarter” this year, worth $200 million and with tenors of three and five years.

The government plans to secure a fifth of its borrowings from foreign sources this year, while 80% will be borrowed from the domestic market in an effort to limit the country’s exposure to external shocks.



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