DEVELOPMENT BANK OF THE PHILIPPINES' NEW ROLE
MANILA, January 12, 2005 (STAR) HIDDEN AGENDA By Mary Ann Ll. Reyes - Not many are aware about the new role that the Development Bank of the Philippines has adopted – that of helping improve the country’s infrastructure as an anti-poverty strategy.
The role will be undertaken mainly through the sustainable logistics and development program (SLDP) which has three main components: the creation of a road RORO (roll on, roll off vessel) transport system network, grains bulk handling chain, and the cold chain.
(DBP by the way is also assisting several other priority projects including those on environmental protection and management (sanitary landfills, eco tourism, watershed and forest management), power services (such as the mini-hydropower project in Sibuyan Island, Romblon), water services, housing, education, health care, SMEs and micro-financing.)
But why infrastructure? DBP chairman Vitaliano Nañagas explains that the bank had a difficult time in the past identifying its role in the economy that it decided to focus on the logistics chain.
Here are some statistics to show how important logistics development is, particularly in the agricultural sector. For instance, about P30 billion annually is lost because at least 40 percent of the country’s agricultural produce is spoiled even before it reaches the market. This figure is based on a 1993 study which means that the loss could be double by now. Around 20 percent of our corn production is lost due to spoilage and spillage.
The SLDP basically aims to bring down to zero the amount of spoilage, reduce freight and handling costs, and improve transport safety.
Let me discuss the RORO component which has been the subject of controversy among people in the shipping industry who think that the DBP wants to monopolize the sector.
Maritime Equity Corp. of the Philippines or MECP was created under the National Development Co. (NDC) with an initial equity funding from the NDC of P100 million. The MECP is basically a maritime leasing acquisition. DBP will lend to MECP which will in turn acquire RORO vessels to interested parties who want to lease and operate the vessels. Actually, it’s the other way around. The initiative comes from the private sector party who goes to the MECP for the leasing of a second hand internationally classed RORO vessel. MECP in turn borrows money from DBP to finance the acquisition.
According to Nañagas, they have identified 49 routes all over the Philippines where trade and tourism can be enhanced and where the operation of ROROs could be made profitable. It will be a lease although there would be no stopping a party from entering into a lease-purchase agreement with MECP. The program is of course in addition to DBP’s shipping modernization program which is an outright loan.
Aside from the RORO component, there is the grains highway component which will focus on DBP financing the setting up of grains bulk handling facilities by the users such as feed millers, etc.
The last component of course is the cold chain wherein DBP will finance the acquisition of refrigerated vans that will allow agricultural producers to increase the shelf life of their products.
Nañagas, who sits in the board of advisers of MECP (the board of directors of MECP has the same composition as the board of NDC and therefore includes representatives from the Departments of Finance, Environment and Natural Resources, Energy, Budget and Management, Trade and Industry, NEDA, Bangko Sentral ng Pilipinas, and economist Bernie Villegas as independent member), says they have had serious inquiries for the RORO leasing programs in at least nine routes, many from professionals such as former ship captains who want to have their own vessels. Nañagas emphasizes that DBP will ensure that only private companies with good track record and management (including existing shipping companies) are eligible to participate in the development of the road-RORO system.
MECP shall serve as an investment vehicle of the government to fast-track private sector participation in the RORO project, especially in so-called ‘not so missionary routes.’ According to Nanagas, it is not the government that is taking the lead in providing these services. Rather, the strategic partners are the local government units that are willing to put up the necessary port facilities and support infrastructure in the identified ‘missionary routes.’ But DBP is also willing to finance the putting up of ferries, terminals and access routes.
With the Land Bank of the Philippines taking care of financing agricultural production and DBP the post-harvest logistics side, there might be hope for our agricultural sector after all.
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Reported by: Sol Jose Vanzi
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