Government to set up $10-billion infrastructure fund

MANILA, Philippines - The Aquino administration plans to start a $10-billion infrastructure fund in October to finance rail and port projects, finance officials said over the weekend.

Revenue Commissioner Kim Henares said the government is currently discussing the project with fund managers and investors who can put their free assets in infrastructure.

The government is tapping the private sector to finance infrastructure projects so government funds can be concentrated on social services. 

The administration plans to cut the budget gap, which is expected to reach P325 billion this year, to two percent of the gross domestic product by 2013 without raising or creating new taxes.

As of July, the budget shortfall had widened to P229.4 billion – 70.6 percent of the target this year. 

Finance Secretary Cesar Purisima said the government is also discussing the fund with the World Bank and Asian Development Bank. 

“We’re currently under negotiations with different entities to pool funds in pesos that’s low cost and long-term so there’s a match with our revenue flow on the infrastructure project,” he said.

Purisima said American companies have disposable funds they can invest. 

“There’s a lot of money for infrastructure,” he said. “(US companies have) a trillion

dollars of investible funds and they don’t know where to put it.”

The government sees P2.03 trillion ($50 billion) in infrastructure spending on power plants and roads from 2007 to 2010.

In an earlier statement, the National Economic and Development Authority said the government would spend P1.26 billion on projects, including water filtration plants.

The private sector is expected to make up the rest of the forecast spending, the NEDA said.

Higher spending on infrastructure may help the Philippines sustain its economic expansion even as oil prices continue to rise and growth in the US slows. The US is the Southeast Asian nation’s biggest overseas market for goods and the largest source of remittances sent home by Filipinos working overseas.

Government and private investment in the construction of power plants and the expansion of transmission lines through 2010 may reach P527 billion, the economic planning agency said.

The country also needs to invest about P361.1 billion in electricity generation from 2006 to 2010 to help prevent power failures, the government said.