Shift from ODA to PPP for project funding backed

With Spate of Rating Upgrade

MANILA, Philippines — The Foundation for Economic Freedom (FEF) is urging the Philippines to consider funding more projects through public-private partnership (PPP) as this will be cheaper and speedier in the long-term with increasing credit confidence in the country.

The association of economists, former government officials, and members of the business community said the recent Philippine credit rating upgrade  by S&P Global Ratings to “BBB+” from “BBB” would result in increased investor confidence in the economy, and lower borrowing costs for the government and the private sector.

“In light of lower borrowing costs to government and the private sector, the government may wish to consider shifting away from projects funded by official development assistance (ODA) and its tied procurement, to ones funded via PPP,” said FEF.

The organization said PPP projects would turn out to be cheaper than ODA projects because the private sector proponent would be driven to finish the project within the allotted time and budget.

FEF said the administration’s economic reforms, sound fiscal policies and prudence in external debt management paved the way for a credit rating upgrade.

“The administration should sustain the ratings upgrade by acting quickly to solve the water shortage, power shortfalls, and infrastructure bottlenecks,” it said.

FEF said this is also a good time for the government to push for reforms that would drastically reduce poverty “and strengthen the economy’s structural foundations.”

In particular, a stronger focus is urged on promoting agricultural growth which has been lagging behind population growth. 

“Its weak performance had been acting as a drag to manufacturing and the other sectors of the economy, making the country vulnerable to food price shocks,” said FEF.

The organization also urged the government to “shore up the country’s weak export performance” in order to contain the ballooning trade and current account deficits.”  

‘The country cannot continue to rely on OFW remittances to finance its negative external trade position,” said FEF.

As goods exports remain weak amid sluggish global demand, FEF said the administration should also promote tourism and a stable mining policy regime to generate more dollars to finance the growing capital import requirements of its aggressive infrastructure program.