Finance Secretary Carlos Dominguez III is looking into the possible makeover of the Development Bank of the Philippines (DBP) into an infrastructure bank to help effectively carry out the Duterte administration’s high–and inclusive–growth agenda anchored on an ambitious spending program that aims to close the country’s decades-old infrastructure gap.
Dominguez briefly mentioned his plan to high-ranking officials of the Daiwa Securities Group, Inc., led by its president and chief executive officer Seiji Nakata, after the latter had informed him of Daiwa’s collaboration with the DBP on investment banking advisory services.
“We are very happy about your good experience with the DBP. We want to improve the DBP. Our plan is to make it the Philippines’ infrastructure bank,” Dominguez said. “The DBP, in my view, lost its way for a few years so we want to redirect it like the Development Bank of Japan (DBJ Inc.).”
DBJ Inc. pioneered project financing in Japan, specifically in the sectors of energy and infrastructure.
The meeting with Nakata and other Daiwa executives was held recently in Yokohama, Japan on the sidelines of the 50th annual meeting of the Asian Development Bank (ADB).
Dominguez is the new chairman of the ADB Board of Governors.
Also present at Dominguez’s meeting with Nakata were Keio Tashiro, Deputy Head, International Operations; Hironori Oka, Chairman & Regional Head of Daiwa Capital Markets Hong Kong Ltd.; and Kenji Nakanishi, President & CEO, DBP-Daiwa Capital Markets Phils Inc.
Daiwa and DBP established a joint venture, the DBP Daiwa Capital Markets Philippines, in 1995. As a result of this successful team-up, DBP and Daiwa later on expanded their collaboration to include investment banking advisory services.
The DBP currently supports the government’s infra program by assisting Public Private Partnership (PPP) projects at the national and local government levels.
The bank’s priority lending areas, aside from micro, small and medium enterprises, include infrastructure and logistics, social services, and protection of the environment.
It recently granted a P550-million term loan to the Camarines Sur provincial government to finance the province’s various infrastructure programs and has advised the Department of Transportation in the structuring, tendering and eventual award of the PPP contract for the P65 billion LRT 1 Extension, Operations and Maintenance Project.
Dominguez said that the DBP as an infra bank can help its clients raise funds for projects by tapping the capital markets “and that’s where Daiwa can help, in the capital market side.”
Nakata welcomed Dominguez’s proposal, saying that “we are more than happy to help you through the DBP.”
Dominguez told the Daiwa officials that the government on the Duterte watch will invest heavily in infrastructure, within and outside Metro Manila, not only to strengthen the Philippines’ poor infra backbone, but also to create jobs and connect communities in the countryside.
“As we progress especially in the area of infrastructure, we will make more people financially inclusive,” said Dominguez, as he pointed out that 85 percent of Filipinos are currently unbanked.
In the meeting, Dominguez also briefly mentioned the impending merger of the Philippine Stock Exchange and the Philippine Dealing & Exchange Corp. and asked Daiwa’s support for this move, particularly in persuading stock brokers to abide by the 20 percent limit for PSE ownership.
Dominguez also discussed with Daiwa the government’s modified hybrid PPP formula to help implement the Duterte administration’s P8.4 trillion infra agenda dubbed the “Build, Build, Build” program.
Under the hybrid PPP mode, the government would build the infrastructure projects and later bid out the operation and maintenance to the private sector.
This system, Dominguez said, will speed up the implementation of projects, as a traditional PPP usually takes an average of 29 months before it can take off.
The “Build, Build, Build” program was recently presented to the public “DuterteNomics” forums, one of which was attended by some of the Philippines’ biggest names in the business sector, among them Jaime Zobel de Ayala of the Ayala Group, Tessie Sy Coson of SM Investments Corp., Danel and Sandro Aboitiz of Aboitiz Equity Ventures, Edgar Injap Sia II of Double Dragon Properties Corp.; Kevin Tan of Megaworld Corp.; and Michael Tan of the LT Group Inc.
“DuterteNomics,” is President Duterte’s economic strategy to dramatically raise funds–in large part through his proposed Comprehensive Tax Reform Program (CTRP)–and spend big on infrastructure, human capital formation and social protection to sustain the growth momentum, attract investments and create jobs, achieve economic inclusion and transform the Philippines into a high middle-income country by 2022, by which time poverty incidence will have been reduced to 14 percent.
If “DuterteNomics” is sustained over the medium term, the government envisions the Philippines to be a high-income economy in one generation or by 2040.
