Bloomberg News

Philippines Scales Down Projects for Investor Bids in 2011

October 05, 2011

(Updates with declines in stocks in seventh paragraph.)

Oct. 5 (Bloomberg) -- The Philippines said it may offer at least two projects to investors under the so-called public- private partnership starting this quarter, scaling down from an earlier plan for 10 proposals this year.

There are four projects worth 34.3 billion pesos ($777 million) in advanced stages of preparation, Cosette Canilao, deputy executive director at the Public-Private Partnership Center, said in an interview in Manila yesterday. They include two toll roads, a plan to build about 10,000 classrooms and a proposal to manufacture vaccines such as influenza, diphtheria and tetanus, she said.

“Planning these projects takes a great deal of time to ensure their success,” Canilao said. “We want to create a program that can become a legacy that would solve our nation’s infrastructure needs.”

More than a year after announcing its infrastructure plans, Philippine President Benigno Aquino’s administration has yet to seek bids from investors for projects under the public-private plan. The delay may undermine Aquino’s goal to bolster growth to create jobs and cut poverty as the Southeast Asian nation competes with the rest of the region for foreign capital to develop roads, ports and utilities.

From 1970 to 2009, the Philippines lured less foreign direct investments than its Southeast Asian neighbors, according to the United Nations Conference on Trade and Development. It attracted $32.3 billion, compared with $285.8 billion for Singapore and $104.1 billion for Thailand.

Rail, Airport Projects

The government may invite bids to extend railway lines and operate airports after the first quarter of 2012, Transportation and Communications Secretary Mar Roxas said in an interview this week. These projects were earlier planned for 2011.

Holcim Philippines Inc., the nation’s biggest cement-maker, dropped 5.2 percent today, while Southeast Asia Cement Holdings Inc. fell 1.4 percent.

“It’s becoming more disappointing already,” said Euben Paracuelles, a Singapore-based economist at Nomura Holdings Inc. “Without new investments coming in, the pent-up investments we saw earlier this year will start to weaken. Coupled with the fiscal situation, investors will increasingly see this as a worry as growth may suffer.”

Growth in the $200 billion economy slowed for a fourth straight quarter to 3.4 percent in the three months through June, compared with a 4.6 percent gain in the January-to-March period. The government plans to narrow the budget deficit to 2.6 percent of gross domestic product, or about 286 billion pesos, in 2012, from a target of 3 percent, or about 300 billion pesos, this year.

Rating Upgrades

Aquino has won credit-rating upgrades for the Philippines after increasing revenue and controlling spending. Fitch Ratings raised the country’s debt to one step below investment grade in June, the same month that Moody’s Investors Service upgraded the Philippines to the highest rating since the start of 2005.

While the government has delayed offering projects to investors, it is planning to bring forward some spending set for 2012 to this year to help boost the economy. Government spending in the first eight months of 2011 fell 8.1 percent from a year earlier.

The administration intends to increase expenditures by accelerating existing projects and spending on additional projects “allowed by the available fiscal space,” Budget Secretary Butch Abad said in August.

The peso gained today, snapping four days of losses, according to Tullett Prebon Plc. The local currency fell more than 3 percent in September, its worst monthly loss since May 2010.

“We remain positive on the Philippine peso amidst the recent government’s strategy to bring forward some of the 2012 infrastructure spending to boost second-half growth and the resilient domestic spending engine in supporting the economic growth,” Malayan Banking Bhd. analysts led by Saktiandi Supaat, head of foreign-exchange research in Singapore, said in a report today.

--With assistance from Cherian Thomas in Bangalore and Abhay Singh in New Delhi. Editors: Shamim Adam, Brendan Murray

To contact the reporter on this story: Karl Lester M. Yap in Manila at

To contact the editor responsible for this story: Stephanie Phang at

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