DOF eyeing DBP to be an infrastructure bank

May 21, 2017

The state-run Development Bank of the Philippines (DBP) may be transformed 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, the Department of Finance (DOF) said. The DOF, in a statement, said Finance Secretary 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 infrastructure 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 infrastructure 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.” The DOF, quoting Nakata, welcomed Dominguez’s proposal, saying that they were "more than happy to help you through the DBP.” Dominguez told the Daiwa officials that the Duterte government will invest heavily in infrastructure, within and outside Metro Manila, not only to strengthen the Philippines’ poor infrastructure 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 infrastructure 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. DMS