ADB still not keen on lending to LGUs

CEBU, Philippines - The Asian Development Bank (ADB) is still not keen on lending to Local Government Units (LGUs) in the Philippines due to complicated processes that it entails.

ADB Philippine Country Office director Neeraj Jain said that although there is a lending facility designed to help LGUs to avail of lending facility for infrastructure development, the Philippine LGUs cannot enjoy this as of yet.

Unlike in other countries wherein LGU process for channeling the funding is easier, in the Philippines, “it is more complex.”

“Financing modalities are still not in place. We are willing to lend to class one LGUs, but it is harder for us to understand the processes,” said Jain.

In the next three years, Jain said ADB is not keen on offering its lending facilities to LGUs in the country saying “it is easier for us to enter into national projects.”

Jain said it is no wonder that the Philippines is lagging behind in terms of infrastructure development compared to other countries, it is because lending windows have been impeded by complicated processes.

He said ADB, which is a multi-lateral bank, is allowed to lend directly to potential LGUs, but there are some IRR (Implementing Rules and Regulations) that are not clear. He said the processes in channeling the funding is not clear, and is not entirely direct to LGUs.

Although, ADB is working with the Philippine government on how to minimize the complexities, unless it is fixed and streamlined, funding from the bank cannot be given directly to LGUs which are entitled to the funding.

All over Asia, Jain said the Philippines has the most complex processes in terms of LGU direct lending system. He said funding facilities should be properly created and set up well.

Now that the Philippines is challenged specifically in fixing its infrastructure to boost different potential industries, such as industrial and tourism, should look at this concern more seriously.

Moreover, he said that there are policies that are changed “in the middle of the game,” which will not only discouraged the investors, but also funding agencies like ADB.

Jain said that the Philippines should maintain a predictability of its policies to spur growth and fast development.

Cebu City for instance, is a good candidate for ADB direct lending facilities, as a Class A City, however, its potential to get the lending facility is largely intervened by complexities in the processes, as well as red tape and bureaucracy.

On the other hand, Jain announced that ADB is going to announce the availability of lending facility for the private sector, an equity fund for infrastructure development for big ticket borrowers.

He noted that in the Philippines, what is lacking is the availability of equity financing, while what is common however is debt financing.

In the manufacturing sector for instance, while the Philippines has huge potential to compete with other countries, it has to study serious the opportunities it can maximize in the manufacturing sector, and identify the entry-points where the country can compete well.

Fixing the infrastructure in boosting the manufacturing sector is seen to strengthen the Philippines’ economic strength.

He said the Philippines should identify constraints and road blocks in this concern, so it can thrive in manufacturing sector, even to industries which offer high labor absorption. “The Philippines should build its local capabilities.” (FREEMAN)