President's Message
Atty. Benedicta Du-Baladad Message from the President:

Benedicta Du-Baladad

To FINEX members and friends,

PRESIDENT’S REPORT
July 2017 Issue

Last June 21, in celebration of the Philippine Independence, we had two of the country’s prime-movers of arts and culture. Arch. Paulo Alcazaren shared with us the relevance of national heritage conservation, and Direk Joel Lamangan on the state of the local film industry and how it is developing as an art. Our June GMM was a diversion from our usual topics.

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Private Money for P9-Trillion Infrastructure?
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Zoilo By: Zoilo "Bingo" P. Dejaresco III

MANILA BULLETIN (Business Option)
May 16, 2017

Private Money for P9-Trillion Infrastructure?

Business Option is a rotating column of members of the Financial Executives Institute of the Philippines appearing every Tuesday & Thursday in Manila Bulletin, business section.

Globally, the trend is ominous. Trillions are needed to build or rebuild infrastructure in countries like America, Canada and the EU. But more and more, these countries are realizing that public funds will fall short -and at full risk of excessive sovereign debt. Permutations are readied to invite private money to come in as equity and debt components of infrastructure projects ,sometimes with national government/LGUs/private investors in tandem.

America has a Trump infrastructure budget of US$1-Trillion and the EU has EU$15-Trillion over 20 years and Canada with huge requirements as well. On the other side, many institutional investors are punished by low bond yields and longer commitment of funds and other private investors would rather take a sovereign risk exposure than a fickle market-forces driven private risk. Humongous public sector projects funded by private money seems , therefore, to be the perfect fit?

In the Philippines, the ultimate target of bringing down the poverty level to 16% from 22% by 2022 is anchored on a "golden age of infrastructure" where spending on that will be above 7% of GDP from 2019-2022. The amount needed is P9-Trillion or about P1.5-Trillion a year average based on 55 mega projects , according to NEDA Director Ernesto Pernia. Given our P3-Trillion national Budget (though increasing), there is an obvious shortfall-which the private sector can fill in. There are coordinated efforts between the private sector (including the legal and financial experts in FINEX) and Congress to help fast track some of the legislation needed to build a huge private sector long-term capital base to get funding support.

In a consultative meeting with FINEX, the House Chair on Economic Affairs Rep Art Yap (3rd district Bohol) , it was gathered that some of these pieces of legislation are taking off the ground,namely, CISL (Comprehensive Investment Scheme Law), the REIT (Real Estate Investment Trust) and PERA (Retirement Fund). The CISL is estimated to grow from P1.5 Trillion to P3.0-Trillion potential over the next few years. The regulatory and tax arbitrage will be ironed out in the CISL with the SEC likely to capacitate itself as sole regulatory body.This is expected to be approved within the year.

World-wide massive infra projects are funded by Business Trust Units or its equivalent like the power and energy projects in India. On the other hand , mega projects like airports highways, seaports and malls are REIT-able projects where private investors will participate in the risk and reward of these enterprises. Hopefully, the REIT will see the light of day before the SONA (state of the nation address).

In America, there is a private sector initiative to reinvigorate the dilapidated highway plazas housing food stalls, supermarts and comfort lounges - a clear REIT-able project equivalent. PERA is in place with two commercial banks accepting P100,000 from local workers and P200,000 OFWS per year for additional retirement coverage than the usual sources.Self custodianship instead of a single bank owning up to it is being worked out. Rep Joey Salceda says "one of ten Filipinos" are gypped by investment scams every year resulting in a net loss of P25-Billion of hard-earned money.

This resulted precisely due to lack of investment opportunities for the private sector and its general lack of financial literacy. These potential sources of investment opportunities will address that lack and simultaneously aid a cash-strapped government into attaining its much needed infrastructure projects. If one speaks of hitting two birds with one stone- this is bingo!

(Bingo Dejaresco, a former banker , is a financial consultant and media practitioner. He is the Chair of both the Professional Development and Broadcast Media committees of FINEX . But his views here are personal and do not necessarily reflect those of FINEX. This e-mail address is being protected from spambots. You need JavaScript enabled to view it

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