Source: Manila Bulletin
MANILA, Philippines — In Benigno Aquino’s first year as president, he has pursued tax evaders, narrowed a record budget deficit and brought the nation’s credit rating to one step from investment grade. Companies are now lining up to help with his next task — bridging an infrastructure gap.
HSBC Holdings Plc. says it has six clients ready to bid for some of the $16 billion of projects to build hospitals, roads and airports that Aquino, 51, has unveiled, while Japan’s Sumitomo Corp. may offer to upgrade and maintain two railways in Manila. Aquino, in a speech marking his anniversary yesterday, said he will avoid mistakes made by the previous administration by fighting corruption and reining in spending.
“There’s huge investor interest in the Philippines right now,” said Benjamin Gilmartin, associate director for debt capital markets at HSBC in Hong Kong, who is helping clients raise funds for the infrastructure projects. “The government is moving in the right direction of bringing projects forward at the same time as building global investor interest.”
Credit rating upgrades from Fitch Ratings and Moody’s Investors Service show the progress the Philippines has made under Aquino in reducing a budget deficit that has plagued the nation for 22 of the past 26 years. Securing investments may yet prove a tougher challenge as the Philippines competes with the rest of the region for foreign capital to develop the infrastructure it needs to meet Aquino’s target of 8 percent annual growth.
“He’s off to a good start, but I want to see these infrastructure investments off the ground,” said Matt Hildebrandt, an economist at JPMorgan Chase & Co. in Singapore. “That’s harder.”
Fitch raised the country’s debt to one step below investment grade on June 23, days after Moody’s upgraded the Philippines to the highest rating since the start of 2005. Philippine dollar debt has returned 3.8 percent this year, beating Malaysia and India, according to indexes of Asia dollar-denominated government bonds complied by HSBC.
Morgan Stanley this week boosted the Philippines’ market rating to “equal-weight” from “underweight.” The Philippine Stock Exchange Index has surged 27 percent in the past year, outperforming benchmark indexes in Malaysia and Singapore.
From 1970 to 2009, the Philippines lured less foreign direct investments than its Southeast Asian neighbors, according to the United Nations Conference on Trade and Development. It attracted $32.3 billion, compared to $285.8 billion for Singapore and $104.1 billion for Thailand.
“All the progress has mostly been on the fiscal side,” said Yvette Marquez-Carlos, who helps manage the equivalent of $11 billion at BPI Asset Management in Manila. “We are benefitting mainly from the sentiment that Asia will give you better returns. Aquino is trying but it feels like progress is a little slow.”
Since announcing its infrastructure plans in September, the administration has yet to seek bids from investors for the 11 priority projects it identified for this year under the Public-Private Partnership. Those include the construction of two provincial airports and building three toll roads on the main island of Luzon.
“It’s taking some time because we want to ensure that these projects provide a reasonable return to investors and that the risks are properly identified and shared,” said Philamer Torio, executive director of the Public-Private Partnership Center. “If it’s not a well structured project, you might get a failed bid.”
U.K.’s Serco Group Plc, Japan’s Marubeni Corp. and Mitsubishi Corp. are among 16 prospective bidders for the upgrade and maintenance of two railways in Manila, according to a document obtained from the PPP Center.
Aquino, the son of former President Corazon Aquino, has faced other setbacks too. Less than two months into his tenure, eight members of a Hong Kong tour group died during a bus siege in Manila after a dismissed policeman demanding reinstatement fired on the hostages. The jobless rate was 7.2 percent in the first quarter, the highest in the Asia-Pacific region.
Still, JPMorgan’s Hildebrandt said the “general mood and tone of policy making” in the Philippines is shifting.
