Business Business News ADB, Dutch funds for infra projects
ADB, Dutch funds for infra projects
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- Published on Wednesday, 01 August 2012 00:00
- Written by ANGELA LORAINE CELIS
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The Asian Development Bank (ADB) and Algemene Pensioen Groep (APG) Dutch pension fund (APG) are investing $625 million (P26 billion) for infrastructure projects in the country.
In a press conference yesterday, the two institutions groups launched the Philippine Investment Alliance for Infrastructure (PINAI) fund, alongside state-owned pension fund Government Service Insurance System (GSIS) and the Macquarie Infrastructure and Real Assets (MIRA) Group, both of which earlier announced that they will invest in the said fund.
State-owned GSIS will invest $400 million, ADB with $25 million, while the remaining $200 million are shouldered by APG and MIRA group, although the actual amount of investments for each group were not disclosed.
The private equity fund will be managed by MIRA Group, the largest infrastructure fund manager globally.
“The fund will invest in Philippine core infrastructure assets with an initial focus on existing projects that need expansion and rehabilitation, but will also be in a position to support the development of critical infrastructure projects from the ground up,” the ADB said yesterday.
According to the Department of Budget and Management, the government’s infrastructure budget this year is P339.3 billion, which include capital outlays and infrastructure subsidies for government owned and controlled corporations. Next year, the DBM is proposing an infrastructure budget of P407.1 billion.
Frank Kwok, MIRA Managing Director, said that that the fund can also be used to support the Aquino administration’s public-private partnership (PPP) projects.
“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 invest in infrastructure,” Kwok said.
According to the Philippine Development Plan for 2011 to 2016, around 12 percent of the country’s $14.3 billion investment requirements need to come from the private sector. The investors are looking at financing five to 10 investments, with approximately $50 million to $125 million to be provided for each project to ensure portfolio diversification.
Kwok said that possible infrastructure projects that could be financed by the fund are those in power generation and distribution, transportation projects such as toll roads and airports, utilities such as water, renewable energy, and social infrastructure projects.
“The Philippines is one of the fastest growing economies in Asia and significant investments in infrastructure are required to support the continued growth of the economy,” Hans-Martin Aerts, head of Infrastructure Asia at APG Asset Management Asia, said.
“PINAI provides for an excellent investment opportunity and we expect it to enjoy an early mover advantage and to generate attractive risk-adjusted returns for our clients,” he said.
Meanwhile, Roberto Vergara, GSIS president and general manager, said that the PINAI fund is “now open for business.”
“This fund is envisioned to create more jobs for our people and put the country on the path of sustained and higher levels of inclusive economic growth,” Vergara said.
Vergara added that through the private equity fund, the GSIS will diversify its income sources and achieve greater returns that will allow the agency to provide enhanced services and benefit programs for its 1.7 million members and pensioners.
“PINAI will be fully deployed and invested within the three years’ investment horizon,” the GSIS chief said.
Philip Erquiaga, ADB director general for Private Sector Operations, said that based on an ADB report, Asia needs to invest approximately $8 trillion in infrastructure between 2010 and 2020 to sustain its growth trajectory.
The private sector accounts for 20 percent of financing and investment in infrastructure assets, public funding for 70 percent, while the remaining 10 percent is funded through official development assistance.
“Given budgetary constraints and fiscal consolidation requirements, it will be difficult to further increase public funding for infrastructure in most Asian countries. The private sector’s share will need to expand to cover the gap in funding needs,” Erquiaga said.
