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MANILA – (UPDATED 6:30 p.m.) The Government Service Insurance System, Asian Development Bank and two other foreign financial institutions on Tuesday announced the establishment of a $625 million fund to finance infrastructure projects in the Philippines.
Called the Philippine Investment Alliance for Infrastructure or PINAI, bulk of the fund at $400 million came from state-run GSIS. The ADB chipped in $25 million, while Dutch pension fund manager APG and Australia’s Macquarie Group raised the balance. Macquarie Infrastructure and Real Assets, which has $97 billion of assets under management across 24 countries, will manage PINAI.
In a press briefing, Frank Kwok, MIRA managing director, said the PINAI aims to fund 5-10 projects costing $50 million to $125 million each, including those in the Public-Private Partnership Program of the Aquino administration.
"Over the last few years, we've been reviewing Southeast Asia as a potential region to invest in infrastructure and establish an infrastructure fund. In our review, we believed the Philippines to be one of the most promising, if not the most promising country to establish an infrastructure fund and investing in infrastructure," Kwok said.
Philip Erquiaga, ADB-Private Sector Operations director-general, said PINAI is timely as the Philippines grapples with infrastructure constraints.
Under the Philippine Development Plan, the country needs $120 billion to address its infrastructure bottlenecks in the medium term. Twelve percent of this requirement is expected to be filled in by the private sector.
"The growth dividend associated with this level of infrastructure investment has the potential of being huge. I believe the Philippines is ripe for take-off," Erquiaga said.
He said infrastructure investments are key to sustaining the Philippines’ economic growth. The ADB forecast Philippine gross domestic product growth of 4.8 percent this year and 5 percent next year.
"As the largest infrastructure fund ever assembled for the Philippines, this fund is envisioned to create more jobs for our people and put the country on the path of sustained and higher level of inclusive economic growth," Robert G. Vergara, GSIS president, said.
Plan to pool GFI money for PPP dropped
Vergara said the idea for PINAI arose after the Aquino administration dropped a plan to require government financial institutions like GSIS to chip in P20 billion each for a debt facility that would bankroll PPP projects.
"As the PPP programs are slowly evolving, it appeared that this mode of financing was no longer necessary. In fact we had made funds available for whenever a drawdown had to be made. I think towards the middle of third quarter last year I sort of just asked if this would still be on, it seemed to appear that [the government] has moved away from that sort of financing," Vergara said.
"That's really the reason why we came up with this vehicle," he said, referring to PINAI.
In any event, direct investment in long-term projects such as infrastructure promise higher returns than fixed-income instruments, Vergara said, citing GSIS’ $600 million exposure in bonds.
"I'm not too concerned about the immediate returns that we can generate from the investments abroad. The returns are really projected to come around at year 5 and that's fine for us. We do project our liabilities to be somewhere within 14 to 15 years and assets around 10 to 12 years," he said.
After the government ditched the planned infrastructure bonds, GSIS now can invest the P20 billion originally allotted for the purpose into equities and other instruments. About P85 billion to P90 billion of the pension fund’s portfolio investments are in equities.\
With a report from Likha Cuevas-Miel
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