RP plans P100-B fund to shield economy from crisis

MANILA, Philippines – The government and the private sector have agreed to jointly put up a P100-billion fund to spur spending in infrastructure and insulate the country from the effects of the global financial crisis.

President Arroyo made the announcement before foreign and local businessmen during the 34th Philippine Business Conference (PBC) at the Manila Hotel yesterday. It was the Philippine Chamber of Commerce and Industry (PCCI) that first broached the idea of establishing a P100 billion fund.

“We hope the private banking sector will join in this,” she told the business forum.

“That way, we can put our money in human capital formation which will provide direct income and services to the poor,” she said.

She said the P100 billion is just a portion of the P2 trillion total investment “that we would want to put up in case of a recession in the US economy.”

In the event of a US recession, she said the country “will need more private financing and BOT (build-operate-transfer) projects so that we can realign some of our infrastructure money to strengthen programs that promote human capital formation.”

Mrs. Arroyo also said the measures are aimed at minimizing the impact on the remittances of Filipinos working overseas, a key engine of growth.

“So far there has been no displacement of expatriates related to the financial crisis,” she said.

“Given the huge investment associated with transport projects, P75 billion, the government will increasingly tap the private sector in the development of priority projects under the BOT Law,” she said.

“Projects like the Tarlac-Pangasinan-La Union Toll Expressway, C-6, Manila-Cavite Coastal Road, the North Metro Manila Skyway, Southern Luzon Expressway (SLEX), Southern Luzon Arterial Road (STAR) among others are proposed for private sector financing,” she said.

Mrs. Arroyo said the domestic economy has “shock absorbers” including a strong banking system that will help it weather the global economic turmoil.

The government is also confident its full-year budget deficit could be smaller than the targeted P75 billion or 0.5 percent of gross domestic product, Mrs. Arroyo said.

“So far as of the end of September, it is P53.4 billion which we can extrapolate to P71.2 billion by the end of the year and privatizing Petron will provide additional headroom of P25.7 billion,” she said.

The government has offered to sell its 40 percent stake in oil refiner Petron Corp. to Ashmore Group PLC, which already holds 50.57 percent of the company.

PCCI board member Ambassador Francis Chua said the private sector is still in the process of raising money for the fund. “We will all (PCCI members) have to contribute,” he said in an interview.

The government’s contribution will come from the Government Service Insurance System (GSIS), the Social Security System (SSS), the Development Bank of the Philippines (DBP), the Land Bank of the Philippines (LBP) and the National Development Co. (NDC).

The five state-run firms will contribute P10 billion each.

DBP president and chief executive officer Reynaldo David confirmed that the bank had been asked to contribute to the fund.

“DBP and others were asked to put up P10 billion to help pump prime the economy and fund the infrastructure spending,” David said in a telephone interview.

“Hopefully, the fund will be ready before the end of the year,” he said.

David said he is not sure who or which group will manage the fund. “I think we, together with the others who will finance it, will have a say.”

“Contributing to the fund is attractive to private banks because they will already have a ready market,” PCCI chairman emeritus Donald Dee said.

He said the proponents of the fund, in coordination with the National Economic and Development Authority (NEDA) will evaluate which infrastructure projects to fund.

Dee explained that the P100 billion would be released pro rata, depending on the result of each project evaluation.

“We need the government to pump prime the economy. The private sector cannot do it alone,” PCCI president Edgardo Lacson said.

“This is fresh capital and it is vital to help us in light of the global economic crunch,” he added.