Metro Manila (CNN Philippines) — The government is exploring hybrid financing arrangements as a way to fund its major infrastructure projects, the Finance Department said on Sunday.
In a statement, Finance Secretary Carlos Dominguez III said the Department will look into such arrangements to finance the administration’s big-ticket infrastructure programs– most notably the EDSA Bus Rapid Transit (BRT) project and the Metro Manila flood control project.
The proposed hybrid financing arrangements will combine development aid and loans to raise more funds for future projects.
Dominguez said it will enable the government “to profitably manage the leveraging” of close to ₱1 trillion in official development assistance (ODA) and loans from Japan and China.
This comes as the government aims to raise a total of ₱366 billion yearly to support its development programs.
“Our major plan here is to leverage that. [That is], to take projects and then use part-ODA and part-multilateral agency loans so that we can actually increase the number of projects that we can do,” Dominguez said.
Dominguez cited the possible mixing of ODA with development funds from the Asian Development Bank (ADB) and the World Bank as an example of what the Department of Finance has in mind to raise funds.
“That’s like putting a jigsaw puzzle together using ODA from China and matching that with AIIB (Asian Infrastructure Investment Bank) and ADB funds. So we can be creative in those ways,” he said.
The Philippines had previously entered into similar financing arrangements for other infrastructure developments.
Previous projects include the Laguindingan Airport in Misamis Oriental, which was built through a combination of loans from the Korea Economic Development Cooperation Fund (EDCF) and an export loan from Korea Eximbank.
For its next venture, the government is eyeing hybrid financing arrangements for both the EDSA Bus Rapid Transit and the Metro Manila flood control project.
The Department said the BRT, which is supported by the ADB, and the Metro Manila flood control project, which is being backed by the World Bank, have been presented to the China-led AIIB for possible financing.
Aside from hybrid financing agreements, the Finance Department also seeks to raise enough funds for its infrastructure program through the Comprehensive Tax Reform Program (CTRP).
Dominguez said the government expects some ₱206.8 billion to come from tax reform in its first full year of implementation.
Congress is studying the first package of the CTRP. The tax reform aims to cut personal income tax while enforcing other revenue measures to supplement the lower personal tax rates.
