FUNDING FOR RP PROJECTS SLASHED
MANILA, AUGUST 8, 2008 (STAR) By Marianne Go - The International Finance Corp. (IFC), the World Bank’s investment arm, may cut its allocation for Philippine projects this year to $300 million from last year’s $564 million.
In an interview with The STAR, IFC resident representative Jesse Ang explained that the $300 million is not yet final and that the IFC is still looking for “opportunities” in infrastructure, finance, petroleum, agriculture, and mining. IFC’s next fiscal year is from July 1, 2008 to June 30, 2009.
“We will do more (lending) if we see an opportunity,” Ang said.
IFC’s exposure in the country as of June 30 this year stood at $904 million.
Ang admitted the bulk of IFC’s lending this year might go to infrastructure, particularly the power sector.
Ang said IFC is also looking for opportunities in the agriculture and mining sectors, although he admitted the two sectors are the most difficult to finance.
The difficulty in financing agriculture projects is that “you have to talk to a lot of players.”
“Before there were plantations and you only had to talk to one entity. With agrarian reform, you now have to work with several farmers who were given land and it becomes more difficult,” Ang said.
Mining ‘very challenging’
He described the mining industry as a “very challenging sector” with potential investors having to deal with risks such as expropriation issues, currency transfer restriction, and even social unrest.
Ang voiced his observations at a presentation during yesterday’s Sustainable Mining Exploration and Investment Conference at the Crown Plaza Galleria.
The IFC, Ang pointed out, can help mitigate some of the political risks through intermediate equity investment, export credit facilities, political risk insurance, financing from multilateral development institutions and provision of government guarantees.
Ang acknowledged that IFC is very careful in providing financing for mining projects.
He said the last time IFC funded a mining project in the Philippines was way back in 1981 through a loan to the then state-owned Philippine Associated Smelting and Refining (Corp.) or PASAR.
At the time, IFC deemed the project deserving of assistance because it would create a much needed copper smelting and refinery for the Philippines.
However, it took the government almost two decades to comply with the condition for the granting of the loan, which was the privatization of PASAR. The firm was privatized in 1997.
Ang said IFC is now keen on helping “junior miners” who are more willing to do the initial “dirty work” of exploration.
Ang said IFC’s role is to give the project a “stamp of approval” to help it attract more investors.
But Ang clarified IFC provides intermediate financing and not start-up capitalization and that it ensures that the project adheres to strict social and environmental standards that also benefit the local community.
“If the community wants you, they become your best protectors,” Ang pointed out.
Chief News Editor: Sol Jose Vanzi
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