Japan in $1.97bn development loan to Filipino railway project

The Japan International Cooperation Agency (JICA), the country’s development agency, has agreed to lend up to JPY242 billion (€1.86 billion; $1.97 billion) for the North-South Railway project, set to be the Philippine’s largest railway network. 

JICA’s loan will help the Filipino government construct the first phase of the project, a circa 38-kilometre commuter line from Malolos, the capital city of Bulacan Province, north of Metro Manila, to Tutuban, in the City of Manila.

It will be payable for 40 years with a 0.1 percent annual interest rate for the project and 0.01 percent per annum for consulting services, inclusive of a 10-year grace period. Proceeds will be allocated to civil works, including elevated railway tracks, station buildings, a depot, the procurement of electrical and mechanical systems, the purchase of 104 trains, as well as consulting services.

The PHP170.7 billion (€3.42 billion; $3.62 billion) second phase of the project, to be procured as a public-private partnership (PPP), will connect Metro Manila to Legazpi City, Albay, plus a number of existing and proposed branch lines totalling some 653 kilometres.

According to the government, the submission of qualification documents for the PPP project has been postponed to 1 December, upon bidder requests. Filipino conglomerates including Metro Pacific Investments Corporation, San Miguel Corporation, and Ayala Corporation, have reportedly expressed interest in the deal. 

Set to become operational in 2020, the project should be awarded on 27 April 2016. 

Apart from JICA’s project-oriented loan facility, the Manila-based Asian Development Bank (ADB) also approved $600 million of loans last week to support the Filipino government on PPPs and financial reform. 

The first $300 million loan aims to promote expanded private participation in infrastructure investment through PPP projects. The second portion of the funds will support policy changes to encourage non-bank financial institutions to provide more long-term private funding for infrastructure in areas like the bond market and insurance code revisions. 

“These loans will help the government pursue policy reforms clearing obstacles to PPPs and increasing long-term private sector finance for them,” said Juan Luis Gomez, ADB’s principal public management specialist at Southeast Asia department. 

ADB sees underdeveloped infrastructure as a drag on the economy, with the country ranked at 95 out of 144 countries globally for infrastructure quality, according to the World Economic Forum’s Global Competitiveness Report 2014-2015.