Davao City taps LBP for P900-M dev’t program

The Land Bank of the Philippines (LBP) is being tapped by the local government of Davao City for a proposed P900-million development program.

Included in the proposed development program is the relocation of informal settlers occupying government and other prime lands, establishment of a modern drainage system, establishment of a synchronized traffic system, and the establishment of a circumferential road network with trade, foreign investments and tourism in mind.

In a press briefing Wednesday night, LBP chairman Luis P. Lorenzo Jr. said the program will take seven to 10 years to implement. "It is the biggest lending program of the LBP in terms of local government unit (LGU) in the recent past," Lorenzo revealed.

Earlier big ticket LGU loans involving the LBP were P650 million for Palawan and P500 million for Cagayan de Oro.

Officials of the bank said the average lending rate for LGUs is prime rate plus two or three percent.

Lorenzo said that with the impending suspension or reduction of the internal revenue allotment (IRA) for LGUs, lending through government financial institutions (GFIs) is turning out to be a good alternative. Other GFIs are the Development Bank of the Philippines (DBP) and the Philippine Export-Import Credit Agency (PhilExim).

LGUs can also tap private funding sources or even official development assistance (ODA) funds as long as there are sovereign guarantees.

LBP president and chief executive officer Gary Teves said LGU lending is a win-win situation as the loans would have sovereign guarantees.

"The Landbank can easily extend or cover the possible shortfall in the IRA for LGU development programs which in turn could help the bank grow while ensuring that development programs could get off the ground," Teves said. "In turn, growth of LGU development program should result in national economic development."

However, the bank president said the project still has to go through the tedious process of review and examinations "as all government projects" including public bidding and review by the inter-agency coordinating committee Cabinet committee (ICC-CC).

LGU projects must be "bankable with a definite capacity to pay" before it could get the ICC-CC nod much less the consent of the LBP to issue the loan.

We are not here to create a white elephant; we want to help them (LGUs) develop their capacity to pay or make sure that they have the capacity," both top officials of the bank added.