Korean Eximbank cuts rates for PPP loans

MANILA, Philippines - The state-owned Export-Import Bank of Korea is eyeing further interest rate cuts to be extended under its concessional loan facility to proponents of major infrastructure projects under the public private partnership (PPP) scheme of the Philippine government.

Korea Eximbank chief representative of the Manila office Tae-ik Park said the bank recently revised the regulation for its Economic Development Cooperation Fund (EDCF) wherein untied aid through PPP schemes would be given a further interest rate cut of 50 percent.

The bank oversees the operation of the official development assistance (ODA) program under the EDCF facility. Loans under the facility usually carry an interest rate of 0.15 percent per annum payable in 40 years inclusive of a 10-year grace period.

Park pointed out that Korea Eximbank decided to further cut interest rates in support of the Philippine government’s efforts to undertake much needed infrastructure projects and social services under the PPP program.

He explained that financial demand has been increasing due to the sovereign debt crisis in Europe and the economic uncertainty in the US but commercial banks are not willing to extend loans to big-ticket projects.

“We would like to actively support economic and social infrastructure development projects implemented through PPP schemes, by establishing and strengthening channels with the Philippine government regarding PPP projects,” he stressed.

He said Korea Eximbank has proposed the establishment of a PPP Consultative Group that would include the PPP Center of the Philippines as well as the National Economic and Development Authority (NEDA).

The Korean government has decided to increase its EDCF volume to $1.2 billion this year to 49 countries. EDCF disbursement is expected to increase by 20.7 percent to $560 million.

Park said the Philippines is the fifth largest recipient of EDCF after Vietnam, Indonesia, Sri Lanka, and Cambodia.

He said the Korean government is currently financing 16 projects in the Philippines worth $614 million that were proposed by the government in line with the National Development Plan.

According to him, both the Philippines and Korea concluded a framework arrangement worth $500 million for 2011 to 2013 last year due to increasing demand of development cooperation between the bilateral partners.

Big-ticket projects included the $208 million Jalaur River Multipurpose project and the $37.8 million Samar Pacific Coastal road project as well as the proposed $88.6 million Pampanga Flood Control project and the $25 million Baler-Casiguran road project.

He said EDCF priority sectors include green growth projects such as renewable energy, water supplies and waste water treatment, and solid waste treatment.

Park said the Korean government is now establishing a Country Partnership Strategy with the Philippines that would cover 2012 to 2015 to be finalized next month. The CPS would help allocate 70 percent of ODA budget to agriculture and water resources development, health and medical service, and socioeconomic infrastructure development.

Furthermore, he explained that Korea Eximbank have supported $1.7 billion for financing services in the Philippines of which $630 million as of April has yet to be disbursed.

So far, the bank has committed to provide comprehensive loans and guarantees amounting to $6.8 billion this year.

For his part, Korea Eximbank representative Dong-hun Lee said the bank could serve as a one-stop solution wherein the government could tap the EDCF facility while the private sector could avail of the financing services.