3 infra projects shift to ODA funding

(The Philippine Star) - March 24, 2017 - 12:00am

MANILA, Philippines - As more government-to-government financing options become available for local infrastructure projects, the Investment Coordination Committee (ICC) of the National Economic and Development Authority (NEDA) has shifted the financing mode for three major infrastructure projects to official development assistance (ODA).

NEDA officials said the change would enable government to deliver the projects sooner and at a more cost-effective manner.

NEDA ICC approved the change in the financing mode for the $53.6-million Chico River Pump Irrigation Project in Cagayan and Kalinga provinces from national government funding to ODA. The project is among those shortlisted for Chinese financing.

The ICC is also endorsing the change in financing mode from public-private partnership (PPP) to ODA for the New Centennial Water Source Kaliwa-Dam Project. This has also been endorsed to China as a high priority project for financing.

Likewise, financing for the North-South Railway Project (NSRP)-South Line was changed to ODA from PPP. The line consists of a commuter line from Tutuban, Manila and Calamba, Laguna and long-haul railway operations between Tutuban and Legazpi, Albay. It will also have extended long haul operations on the branch line between Calamba and Batangas as well as between Legazpi and Matnog.

Socioeconomic Planning Secretary Pernia said China has expressed strong interest in financing the capital requirements for the long haul line while Japan, through its ODA arm Japan International Cooperation Agency (JICA) remains interested in financing the commuter line.

The NSRP is expected to cost P260 billion, higher than the earlier estimate of around P170 billion due to changes made in specifications such as the change in the use of the internationally accepted standard gauge railway track and the increase in right-of-way acquisition costs.

The operations and maintenance (O&M) of the long haul line may eventually be offered as a PPP project but state-owned Philippine National Railways (PNR) will initially operate the NSRP until it becomes commercially viable.  The O&M for the commuter line, on the other hand, will be offered as a PPP project.

“The long-haul line will take some time to be commercially viable so in the meantime, it will be government-operated. But the moment it kicks off as a possible PPP arrangement, it will be tackled,” said NEDA director for public investment Jonathan Uy.

The government is increasingly looking into capital requirement financing of projects outside of PPP but favors offering the O&M component to the private sector to take advantage of its expertise in operations.

Uy said the NSRP line reaching up to Legazpi should be operational by April 2019. This will cut travel time from Manila to Legazpi to five hours from around nine hours.

Obtaining ODA financing for these key projects will enable the government to expedite the delivery of vital services, Pernia said. It will also give the government favorable financing terms.

“There are offers (for ODA). It’s going to be quicker especially if it’s (financing) from China,” said Pernia.

Uy said the burden that will be passed on to consumers was also taken into consideration in changing the financing mode for crucial projects to ODA.  If only the O&M component of the projects are passed on to the private sector, companies would not be hard-pressed to pass on higher costs to consumers to support capital requirements for construction.

NEDA deputy director general for investment programming Rolando Tungpalan said shifting to ODA would also satisfy the need for long term financing as sovereign loans bear terms of up to 30 years.

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