The Philippine Star, 01 January 2015
By Zinnia B. Dela Pe√Īa
MANILA, Philippines – Despite the overwhelming task of rebuilding following a powerful typhoon that ripped through the Visayas region, the Philippines showed great resilience and managed to sustain its growth momentum in 2014, albeit at a slower pace, as the government continued to step on the brakes on public spending.
Once known as the ‚Äúsick man of Asia,‚ÄĚ the Philippines has pulled through admirably to remain one of the fastest-growing economies in the region, owing to improvements in fiscal management and the Aquino administration‚Äôs good governance initiatives.
Since President Aquino came into office in 2010, the Philippines has witnessed an unprecedented period of macro-economic buoyancy which allowed it to attract greater foreign investments and win investment-grade ratings.
In 2013, the country expanded 7.2 percent to make it the second best-performing economy in Asia after China, driven by the robust services and industry sector as well as strong household consumption.
Thanks to the steady influx of remittances from millions of Filipinos working abroad as well as investments from business process outsourcing companies, the Philippines defied a regional slowdown which saw China‚Äôs economy slumping to its slowest pace of growth since the global financial crisis.
Effects from a slowdown in the world‚Äôs second largest economy have trickled through to South Korea, Hong Kong, Singapore and Indonesia.
Stable remittances from Filipino overseas workers have provided a strong foundation for a healthy buildup of international reserves, which stood at $79 billion as of the end of November. The amount is equivalent to 8.3 times the country‚Äôs short-term external debt based on original maturity.
The Philippine economy, however, slowed sharply in the third quarter ‚ÄĒ its weakest pace of growth since 2011 ‚ÄĒ due to anemic public spending, poor agricultural performance and port congestion.
State underspending remains an acute problem that could jeopardize President Aquino‚Äôs goal of boosting annual expansion to as much as 8.5 percent by the end of his term in 2016.
While the government spent six percent more in the nine months through September than the same period a year earlier, the amount was still 16 percent less than programmed.
Underspending by the government has been estimated at P274 billion in first nine months of 2014 alone.
Government expenditure has further weakened after the Supreme Court declared unconstitutional certain portions of the government‚Äôs Disbursement Acceleration Program (DAP), a fund allocation scheme intended to pump-prime the economy and address government underspending.
Last July 1, the high court unanimously voted to partially void DAP, saying it was unlawful to take unspent funds from projects that took time to be implemented and transfer these from one government branch to another.
According to the Supreme Court, the DAP encroached on congress‚Äô exclusive power to appropriate funds.
The pullback in spending reflects the cautious stance by government agencies amid concerns over the misuse of public funds.
Major government agencies have become even more reluctant to spend to allow careful screening of projects and streamlining of procedures.
Finance Secretary Cesar Purisima said besides the DAP ruling, court restraining orders on deals under the government‚Äôs Public-Private Partnership (PPP) initiative had also affected spending and the implementation of other projects.
Purisima cited the temporary restraining order (TRO) on the largest PPP program, the extension of the Light Rail Transit (LRT) 1 from Baclaran to Cavite, and the writ of kalikasan on the Redondo power plant in Subic, Zambales, issued three years ago that remains in effect.
Analysts said the lack of taxation reforms has also been blamed for the slowdown in state spending.
Public expenditure as a percentage of gross domestic product (GDP) remains low at 16.3 percent compared to the regional average of 24 percent.
Purisima said the government has a lot of room to ramp up spending given higher collections from its two biggest revenue earners ‚ÄĒ the Bureau of Internal Revenue and Bureau of Customs.
State revenues grew 12.6 percent from January to October with both BIR and BOC posting double-digit growth in collections. Together, the BIR and BOC make up more than 80 percent of total government revenues.
Purisima said the reforms implemented by the BIR and BOC have brought the Philippines closer to its goal of hitting a 16.6-percent tax-to-GDP ratio from the 14.08 percent recorded in the first three quarters of 2014.
The government saw its tax effort rise to 14.1 percent from 13.7 percent while revenue effort improved to 15.8 percent from 15.3 percent.
‚ÄúThese latest tax and revenue effort figures, along with manageable national and general government debt levels, clearly manifest that the Philippines continues to stand on firm fiscal footing, which remains to be at the core of our country‚Äôs growth story,‚ÄĚ Purisima said.
Finance Undersecretary and chief economist Gil Beltran said the DOF is sticking to its economic growth average forecast of six percent until the end of President Aquino‚Äôs term.
Beltran cited weakening inflation, low interest rates and a stable foreign exchange rate as reasons for the DOF‚Äôs bullish outlook on the economy.
‚ÄúInflation slowed to 3.7 percent in November. Interest rates net of inflation remain one of the lowest in Asia despite QE tapering in the United States,‚ÄĚ he said.
Beltran also cited the four credit upgrades received by the Philippines, most recently by Moody‚Äôs on Dec. 11 and S&P on May 8 to a notch above investment grade, the highest rating ever given by both ratings agencies to the country.
The Philippines also received upgrades from Japanese R&I and NICE Investors Service of Korea.
Apart from this, the World Economic Forum has also recognized the Philippines as the most improved country since 2010 with a seven-slot gain in its 2014 international competitiveness rankings.
The Philippines also received Finance Asia‚Äôs Region‚Äôs Best Borrower Award for its innovative execution of an accelerated one-day switch tender offer last January 2014, its first transaction as an investment grade sovereign.
The country was likewise cited by the Economist Intelligence Unit for a financial inclusion policy framework that is among the best three in the world, the best in Asia, and as an acknowledged leader in microinsurance regulation.
The GIZ also cited the Philippines as the Asian emerging country with the highest microinsurance outreach as the country recorded 27 million persons covered. The Philippine model is now being used by GIZ in its technical assistance program for neighboring Asian countries.
‚ÄúWith these improvements and citations, the challenge is there for us to outperform ourselves. In 2015, we will work harder to push the revenue effort further up by at least 1/2 percentage point of GDP, reduce the NG debt ratio by at least a percentage point and further expand fiscal space for infrastructure and social services,‚ÄĚ Beltran said.
The Philippines will host the APEC finance ministers‚Äô meeting to showcase its development experience in the hope of boosting foreign investments.
‚ÄúSeeing the fruits of our labor appear in a virtuous cycle only makes one thing clear: We will roll our sleeves up and hunker down to institutionalize reforms in the tail-end of this administration,‚ÄĚ Beltran said.
For 2015, the Aquino administration aims to pass a comprehensive and equitable tax reform package that improves tax administration and revises the tax structure to boost growth and equity for all Filipinos.
Both chambers of Congress earlier approved their versions of a bill increasing the ceiling for tax exemption on bonuses for workers in the public and private sector.
The tax exemption covers all bonuses, including 13th month pay and Christmas bonus.
Aside from this, there are proposals from various parties to cut personal income tax rates from 32 percent to 25 percent to make them comparable to the standard taxation regime in the Asean region.
The Senate believes now is the right time to adjust individual income tax rates and brackets as the existing rates remain unchanged since 1996.
To recover the losses from higher tax exemptions, the DOF is looking at other tax-revenue raising measures, which include the imposition of additional tax on softdrinks and other sugary drinks.
‚ÄúAs we approach the finish line, we will power through with our priorities to modernize the Bureau of Customs, and rationalize fiscal incentives,‚ÄĚ Beltran said.
Among the other measures being pushed pushed by the DOF are the Tax Incentives Management and Transparency Act, the Rationalization of the Mining Fiscal Regime, and the Amended Build-Operate-Transfer Law.
‚ÄúIngredients for sustained growth remain abundant as the fundamentals of our economy remain sound. Our reform agenda has been and will always be a force for inclusive and sustainable growth for an increasingly competitive Philippines,‚ÄĚ Purisima said.
The Institute of Chartered Accountants in England and Wales said the Philippines‚Äô low budget deficit and slowing inflation will push the economy to grow over 6.4 percent in 2015, making it the fastest growing in Southeast Asia.
However, the group warned that the country‚Äôs accelerating growth must be supported by the construction of quality infrastructures.
The Philippines continues to lag behind its counterparts in the Southeast Asian region when it comes to public infrastructure.
The inadequate supply of reliable infrastructure remains as one of the impediments to the country‚Äôs global competitiveness.
Despite its strong economic performance in recent years, the Philippines still posted low scores in other key indicators such as fixed phone lines, households with power, and paved roads.
Sluggish infrastructure development has been partly attributed to corruption and inefficient investment.
To catch up with its neighbors and sustain inclusive growth, the Philippines needs to raise public infrastructure spending to about five percent of GDP from the current 2.5 percent annually, which is one of the lowest rates in the region.
Foreign investors pointed to bureaucratic inefficiencies, particularly delays in the bidding and review process, as well as disputes within the private sector as barrier to investment and growth.
The Philippines ranks 91 among 144 countries in the World Economic Forum‚Äôs infrastructure rankings.
In the World Bank‚Äôs latest ranking of ease of doing business, the Philippines slid nine places to 95 out of 189 countries. The country fares poorly in the categories ability to start a business, access to credit, enforcement of contracts, and protection of minority investors.
The Philippines also continues to be in the bottom half in the Corruption Perceptions Index, the most widely used international measurement of corruption.
The Corruption Perception Index ranks countries based on how corrupt their public sector is perceived to be based on a scale of zero to 100, where zero means that a country is perceived as highly corrupt and 100 means it is perceived as very clean.
Despite these, the Philippines is still seen to post the most favorable growth rate in Southeast Asia in the next five years on expectations that post-typhoon reconstruction accelerates and exports rise, the Organization for Economic Cooperation and Development said.
‚ÄúWhoever will take office in June 2016 will inherit an economy that has less debt, more able workers, fewer dependents, low borrowing costs, and excess savings,‚ÄĚ Trinh Nguyen, a Hong Kong-based analyst at HSBC said in the report.
‚ÄúWe believe the Philippines, as an economy in 2016 will be in the best shape in decades,‚ÄĚ Nguyen said.
Philippine Daily Inquirer, 06 October 2014
By Ben O. de Vera
Focus on infra, tourism, power and capital market
Philippine economic managers will hold a roadshow in Japan this week to encourage Japanese companies to make the Philippines their hub, particularly in the areas of infrastructure, tourism, power sector and the capital market.
In a statement issued over the weekend, the Investor Relations Office (IRO) said the roadshow, to be held at Shangri-La Hotel in Tokyo, Japan on Oct. 8, would carry the theme ‚ÄúSustaining Inclusive Growth through Infrastructure and Capital Market Development.‚ÄĚ
During the said roadshow, Philippine officials will ‚Äúdiscuss before the Japanese audience updates on the Philippines‚Äô economic performance and outlook, as well as the country‚Äôs development plans and targets for the medium term,‚ÄĚ IRO said.
Economic managers joining the roadshow are Finance Secretary Cesar V. Purisima, Socio-economic Planning Secretary Arsenio M. Balisacan, Public Works and Highways Secretary Rogelio L. Singson, Tourism Secretary Ramon R. Jimenez Jr. and Securities and Exchange Commission Chair Teresita J. Herbosa.
‚ÄúThere have been exciting developments in the Philippine economy over the past four years, and even more exciting things are expected to happen over the medium term as the agenda of good governance, infrastructure development and social progress continue. We would like to share the positive outlook to investors and fund managers in Japan, and tell them it is worthwhile to do business in the Philippines,‚ÄĚ Purisima was quoted by IRO as saying.
Latest government data showed that pledges made by Japanese firms to the country‚Äôs investment promotion agencies in the first quarter of 2014 rose by 59.3 percent to P8.327 billion from P5.229 billion in the first three months of last year. For the entire 2013, Japanese investors committed P44.784 billion worth of projects.
Also joining the Philippine team at the Tokyo roadshow are National Treasurer Rosalia V. de Leon, Public-Private Partnership Center Executive Director Cosette V. Canilao, Bangko Sentral ng Pilipinas Assistant Governor Johnny Noe E. Ravalo, Bureau of Internal Revenue Deputy Commissioner Nelson M. Aspe, Transportation and Communications Undersecretary Rene K. Limcaoco, Energy Undersecretary Raul B. Aguilos, IRO Executive Director Editha L. Martin, and Philippine Stock Exchange head of marketing services Jose Antonio S. Vilar.
‚ÄúThe Philippine delegation will also talk about the income potentials for investments in the priority sectors of the government, as well as the processes involved in securities and tax registration in the Philippines,‚ÄĚ the IRO said.
Also, the event would showcase talks by Japan Bank for International Cooperation director and senior economist Etsuaki Yoshida and Japan International Cooperation Agency director general for Southeast Asia and Pacific Hidetoshi Irigaki. The two Japanese speakers will discuss their outlook on the Philippines‚Äô monetary and fiscal system as well as the infrastructure sector.
The IRO said the Philippine economy expanded by an average of 6.3 percent between 2010 and 2013, making it one of the ‚Äúfastest-growing‚ÄĚ Asian economies of late.
For this year, the government had projected the gross domestic product (GDP) to grow by between 6.5 and 7.5 percent. In the remaining two years of the Aquino administration, the GDP rates are expected to expand by 7 to 8 percent in 2015 and 7.5 to 8.5 percent in 2016.
Manila Bulletin, 09 July 2014
By Chino Leyco
The Philippines has secured another credit-rating upgrade, this time from Japan-based R&I, which sees consistent rise in per-capita income in the country as a result of immense growth in infrastructure investments and continuity of reforms.
R&I raised the country‚Äôs long-term foreign-currency issuer rating by a notch from the minimum investment grade of BBB- to BBB. The rating was assigned a ‚Äústable‚ÄĚ outlook, which means it is unlikely to change within a year.
At the same time, the credit watchdog maintained the country‚Äôs short-term debt rating at a-2, which indicates high certainty that short-term financial obligations would be paid.
‚ÄúThe Philippines‚Äô economy continues to show strong growth, thanks to brisk investment coupled with private consumption driven by remittances from overseas Filipinos,‚ÄĚ R&I said in a report released yesterday.
‚ÄúThis should allow for relatively high growth and raise per-capita income levels steadily,‚ÄĚ it stressed.
Per-capita income in the Philippines has been modest compared with those of more advanced neighbors, but the country is catching up in this area. From $3,684 in 2009, per capita income in the country (using current prices and purchasing power parity) increased to $4,649 last year.
R&I recognized the country‚Äôs healthy fiscal situation, saying this helps fulfill the plan of boosting public spending.
‚ÄúSavings in interest payments, thanks to fiscal consolidation, help the government to finance infrastructure projects. Budget execution is also expected to accelerate,‚ÄĚ it said.
This year‚Äôs state budget for infrastructure at P404.3 billion, R&I cited, is 40 percent more than last year‚Äôs.
R&I also said the rollout of more projects under the Public-Private Partnership (PPP) program would help drive more job-generating investments and sustain the rise in incomes.
‚ÄúFurthermore, public-private partnerships, which utilize private capital [for funding public infrastructure], are underway, albeit gradually, and will likely boost investments,‚ÄĚ R&I said.
Earlier this year, the government awarded contracts for two PPP projects, namely the P1.72-billion automated fare collection and single ticketing system for the MRT and the LRT, and the P17.5-billion Mactan Cebu International Airport expansion project. This brings to seven the total number, and to P62.6 billion the aggregate cost, of the PPP projects awarded so far.
R&I also recognized the country‚Äôs sound macroeconomic fundamentals, including ample foreign-exchange reserves, improving manageability of government debt, and within-target inflation.
It also said reforms instituted by the Aquino administration, including legislative and administrative reforms in tax collection, helped improve the investment climate. R&I expressed belief reforms will be sustained even beyond 2016.
‚ÄúThere is risk that the next government will not be as reform-minded as the Aquino administration. However, pressures from growing international relationships, such as the establishment of the ASEAN Economic Community in 2015, along with public expectation for sustained reform initiatives, should deter the post-Aquino government from going backwards,‚ÄĚ it said.
Meantime, Governor Amando M. Tetangco Jr. of the Bangko Sentral ng Pilipinas welcomed the upgrade, saying this validates soundness of existing policies.
‚ÄúThe latest development on the country‚Äôs credit standing is a recognition of a host of favorable macroeconomic indicators, particularly an inflation outlook that is conducive for business and the stability of the financial system amidst a difficult operating environment,‚ÄĚ Tetangco said.
‚ÄúThe upgrade is an expression of confidence, in part, on the ability of the Monetary Authority to implement appropriate and timely measures that ward off threats to the economic stability we are enjoying. The BSP will continue to craft policies that will help maintain this stability,‚ÄĚ the BSP chief added.
Finance Secretary Cesar V. Purisima, likewise, affirmed the focus on sustainability of favorable trends for the economy.
‚ÄúReforms that this government has started to institutionalize help ensure that the positive momentum will not falter,‚ÄĚ Purisima said.
‚ÄúOn the fiscal front, administrative and policy reforms implemented by the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC) will make it easier in the future to keep the growth trend in public revenues,‚ÄĚ he said.
Investor Relations Office¬†(IRO) Executive Director Editha Martin said the country‚Äôs upward movement in the credit-ratings scale bodes well for raising the country‚Äôs international profile as an investment destination.
‚ÄúIt is always good to have institutions outside the government point out the strengths of the Philippine economy. The string of credit-rating upgrades that the country has secured in recent years makes it difficult for investors not to notice the Philippines,‚ÄĚ Martin said.
By ¬†Chino Leyco
The Philippine government‚Äôs infrastructure program, the supposed centerpiece of the Aquino administration, is seen to become a new global benchmark that other developing nations may emulate, a cabinet official said.
On the sideline of the World Economic Forum (WEF) on East Asia, Finance Secretary Cesar V. Purisima cited the two-pronged approach of the government in boosting infrastructure, which include Public-Private Partnership (PPP) program, and higher budget allocation for infrastructure projects.
‚ÄúWe need connections to supply chains. We need to make it easy for tourists to visit and move around the country. We need to make it easier for investors to do business here. All of these require heavy investments in infrastructure, and the Aquino administration is doing exactly that,‚ÄĚ Purisima said in a speech delivered at the Bloomberg Leadership Forum.
He said the national government targets to increase the budget for infrastructure from 2.9 percent¬† of the economy, as measured by its gross domestic product (GDP), last year and 3.1 percent this year, to 5 percent by 2016.
Moreover, under the PPP program, over P1 trillion in infrastructure projects are already in the pipeline.
According to data from the PPP Center, there are 57 infrastructure projects under the PPP program that are in various stages of implementation.
So far, contracts have already been awarded for seven PPP projects that have a combined cost of P62.6 billion.
These projects are the following: Daang Hari-SLEX Link Road Project, PPP for School Infrastructure Project Phase 1, NAIA Expressway Project, PPP for School Infrastructure Project Phase 2, Modernization of the Philippine Orthopedic Center, Automatic Fare Collection System, and Mactan-Cebu International Airport Passenger Terminal.
‚ÄúSoon, one can look at the PPP program of the Aquino administration and say that it has been one of the better [economic development] programs not only in the Philippines but in the world,‚ÄĚ Purisima said.
Rising infrastructure spending is credited for helping boost growth of the Philippines, which last year became the fastest growing economy in Southeast Asia and one of the fastest in the world with an expansion rate of 7.2 percent.
Robust economic growth achieved amid relatively weak global economy helped the Philippines secure investment grades last year.
Malaya Business Insight, 23 May 2014
By Angela Celis and Irma Isip
The Philippines will continue to close its main gateway, the Ninoy Aquino International Aiport under the ‚Äėopen skies‚Äô of Asean which takes effect next year according to Trade Secretary Gregory Domingo.
Domingo during a lull in the discussions at the World Economic Forum on East Asia admitted to reporters ‚Äúpressure from local airlines‚ÄĚ to keep NAIA closed to international airlines.
Finance Secretary Cesar Purisima also explained to delegates that the country needs to ease first the congestion at the Ninoy Aquino International Airport before it can be opened as the key entry point from the open skies being negotiated by the 10 economies in Asean.
In a related development, Transport and Communications Secretary Joseph Emilio Sevilla said the government will build a second runway at the NAIA that will cost P2 billion, as an immediate solution to the congestion.
Domingo said: ‚Äúwe are part of the open skies (agreement in Asean) but our stand is our open skies is all ports outside Manila,‚ÄĚ
Purisima said infrastructure bottlenecks in the aviation industry must first be addressed before pushing for open skies policy on a national scale.
Purisima said yesterday NAIA is a problem aching to be solved immediately.
(As if to make a bad situation worse, air conditioning failed in Terminal I and III for about two weeks. ¬†Terminal II built by Lucio Tan for Philippine Airlines remains comfortable)
‚ÄúThe challenge really is congestion in Manila so we need to fix the infrastructure (if) we want to have more connections,‚ÄĚ Purisima said at the forum on East Asia Economic Outlook.
Purisima politely suggested open skies policy will attract more foreign airlines and increase the number of tourists only if the airports are comparable to those in Asean region. ¬†The Federal Aviation Authority of the US has raised to 1 the category of the NAIA from 2. ¬†The upgrade directly relates to safety.
Congestion is a different problem.
The Aquino administration adopted a pocket open skies policy, which liberalized the country‚Äôs secondary international airports by allowing more foreign carriers to fly and bring in more tourists.
‚ÄúIt‚Äôs okay to take small steps as long as you continue to take the right direction,‚ÄĚ the finance chief added.
Tony Fernandes, AirAsia CEO, said during the forum there is great potential in the Asean region.
‚ÄúWe‚Äôre moving in the right direction, but there‚Äôs still a lot to be done. Open skies is one thing, but there are still a lot of invisible barriers,‚ÄĚ Fernandes said.
‚ÄúThere‚Äôs a disconnect between policymakers and what the private industry thinks. The communication has to grow between the private sector and the government,‚ÄĚ he added.
Meanwhile Purisima said he is confident the Aquino administration will succeed in pushing through with its planned reforms in the last two years of its term.
‚ÄúThe good thing about President Aquino is that he is extremely popular. He has the political capital to make sure that on the last two years of his term, he will follow through with the reforms,‚ÄĚ Purisima said.
‚ÄúWhat‚Äôs important is we have set the foundations. We can‚Äôt finish it all in six years. But the important thing is the opportunity is there. That‚Äôs why we‚Äôre optimistic,‚ÄĚ he added.
Meanwhile, the alternative runway will be located in the South of the main current runway, Abaya said the biggest challenge is the relocation of the 600 households that will be affected .
NAIA¬†has only one runway that currently handles commercial aircraft takeoff and arrival of 40 events per hour its lower compared three years ago of 52 to 56 events per hour. But , NAIA still operating beyond its capacity limit of 36 events per hour. NAIA handles 625 flights daily.
At the session on Connect on Trade:Lifting Barriers to Growth, Singapore Senior Minister of Finance Josephine Teo said when Asean opens its skies next year, demand for air traffic will grow, driven by a growing middle class in Asia and specifically in Asean who are now interested and can afford to travel.
Open skies will allow Asean airlines to fly with fewer restrictions within the region and according to Teo, Asean could consider the EU aviation as a reference point.
She said while there is today overcapacity among low cost airlines, it is a matter of timing that demand would grow and multiple links and direct city links are needed to satisfy the travelling preferences of people in Asean.
The benefit, Teo added, would be in reduced cost of air transport passenger and freight.
‚ÄúBut this¬†goes beyond idea of single aviation for the market and demand for air travel but also because of the tremendous effort on harmonizing regulatory requirements.‚ÄĚ
She admitted though that challenges many Asean economies face is in the overcapacity of their airports and need to invest in airport infrastructure to expand the capacities.
Teo also broached the idea of considering liberalizing air transport agreement (ATA) as a bloc with other countries like what it forged with China.
Teo said there is a potential for a region to region ATA between Asean and EU.
The Philippine Star, 23 May 2014
By Teresa Cerojano
MANILA, Philippines ‚ÄĒ An Asian Development Bank official warned Thursday of a largely unnoticed crisis in Southeast Asia: private investment in infrastructure has not recovered in the nearly two decades since the Asian financial crisis.
Stephen Groff, ADB Vice President for operations, said in an interview on the sidelines of the World Economic Forum on East Asia, that private funding for infrastructure in five of the biggest Southeast Asian members has declined steeply. It was $38 billion in 1997 and around $25 billion in 2010.
“It’s coming up but it’s nothing like it was in 1997,” he told The Associated Press. “Essentially, the ASEAN financial crisis led to a crisis of confidence with governments, a crisis of confidence in the private sector, and there hasn’t been enough investment or discussion or development of tools that allow risk-sharing to be used appropriately.”
The five members he referred to were Indonesia, Malaysia, the Philippines, Thailand and Vietnam. The other members are Singapore, Cambodia, Laos, Myanmar and Brunei.
Groff said while private investors assume risks, there are other types of risks that governments and financial institutions need to assume “and that hasn’t yet come into play as much as it needs to.”
The region, which will launch next year a common market comprising 600 million people, needs to spend $60 billion yearly until 2020 to meet its infrastructure needs. But Groff said ASEAN currently spends only about half that.
He said while there has been some progress in a number of countries in recent years in helping facilitate private investments in infrastructure by addressing legal and regulatory issues that restrict private participation, the process is not easy and takes time.
There is a need to think about financing interest mechanisms, mechanisms to mitigate risks, developing bankable projects that attract private investments and bringing back home the region’s extra savings that have been invested in low-yielding treasury bonds in the U.S. and Europe, he added.
To bring back some of those funds, the ADB has helped develop the ASEAN Infrastructure Fund which began lending last year. Two infrastructure projects in Indonesia have been funded while more projects throughout the region are in the pipeline, Groff said.
The fund is being managed by the ADB, with funding coming from ASEAN members and the bank.
Indonesian Finance Minister Muhamad Chatib Basri said infrastructure is the “first priority” for his country after it had established political stability under outgoing President Susilo Bambang Yudhoyono.
However, he said the ” main challenge in the future is not only sustainable growth but also shared growth.”
Philippine Finance Secretary Cesar Purisima said the region’s relatively young population, natural resources and its geographic location are factors that would contribute to growth. But to make sustainable growth a reality the “capital surplus region” has to make more infrastructure investments, he added.
“We have the money … but we need to make our financial markets more efficient and more connected,” he said. “Governance is the most important ingredient because businesses want predictability, want open economy, want to be able to reduce the risks.”