Philippines and ADB

ADB's Work in the Philippines

Prior to the coronavirus disease (COVID-19) pandemic, the Philippines’ economic growth had averaged 6.4% annually from 2010 to 2019, with private consumption, investment, and services as major growth drivers. In 2020, however, gross domestic product fell by 9.5% and the country registered its first recession since the Asian Financial Crisis in 1998. The Asian Development Bank (ADB), which is headquartered in the Philippines, is one of the country’s largest sources of official development assistance, with average annual lending of $1.9 billion over the 5 years to 2020. The bank’s support is aligned with the Philippine Development Plan 2017–2022 and the Government of the Philippines’ Long-Term Vision for the Philippines (AmBisyon Natin 2040).

Ortigas Center is a financial and central business district located at the boundaries of Pasig, Mandaluyong, and Quezon City in the Philippines.

Since 1966, ADB has committed public sector loans, grants, and technical assistance totaling $26.4 billion to the Philippines. Cumulative loan and grant disbursements to the Philippines amount to $20.12 billion. These were financed by regular and concessional ordinary capital resources, and other special funds

A $500 million loan was committed in 2020 to expand ADB’s long-term support for the country’s conditional cash transfer program, which is helping millions of Filipino families send their children to school and keep them healthy. ADB also provided $500 million to allow the Philippines quick access to emergency financing in the event of disasters triggered by natural hazards or public health emergencies.

A reformed school curriculum extending the pre-university education from 10 to 12 years, known as K to 12, is helping Filipino students find jobs.

Overall, ADB’s annual lending to the Philippines reached a record high of $4.2 billion in 2020. This included policy-based loans to support infrastructure financing generated by capital markets, expand financial inclusion, and raise the agriculture sector’s productivity and competitiveness. Project investments to advance local governance reform, construct elevated pedestrian walkways in the capital’s main thoroughfare, and secure Metro Manila’s water supply were also part of the 2020 lending program.

Electronics students at the Laguna Polytechnic State University (LSPU) in San Pablo City, Laguna, Philippines

Nonsovereign Operations

As a catalyst for private investments, ADB provides financial assistance to nonsovereign projects and financial intermediaries. Total commitments in loans and equity investments from ADB’s own funds in 2020 amounted to $1.4 billion for 38 transactions in economic and social infrastructure, finance sector, and agribusiness. ADB also actively mobilizes cofinancing from commercial and concessional sources. In 2020, ADB mobilized $1.9 billion of long-term project cofinancing and $3.3 billion of cofinancing through its Trade and Supply Chain Finance Program and Microfinance Program.

Total outstanding balances and commitments of nonsovereign transactions funded by ADB’s own resources stood at $14.3 billion as of 31 December 2020. Total outstanding balances and commitments of ADB’s nonsovereign transactions in the country as of 31 December 2020 was $246.6 million representing 2% of ADB’s total nonsovereign portfolio.

Financing Partnerships

Financing partnerships enable ADB’s financing partners, governments or their agencies, multilateral financing institutions, and commercial organizations to participate in financing ADB projects. The additional funds are provided in the form of loans and grants, technical assistance, and other nonsovereign cofinancing such as B loans, risk transfer arrangements, parallel loans and equity, guarantee cofinancing, and cofinancing for transactions under ADB’s Trade and Supply Chain Finance Program and Microfinance Program.

ADB began cofinancing operations in the Philippines in 1972. Since then, sovereign cofinancing commitments for the Philippines have amounted to $7.91 billion for 62 investment projects and $104.19 million for 68 technical assistance projects. Nonsovereign cofinancing for the Philippines has amounted to $961.26 million for 11 investment projects and $1.13 million for three technical assistance projects.

In 2020, the Philippines received a total of $1.53 billion loan cofinancing from the Asian Infrastructure Investment Bank, the Association of Southeast Asian Nations Infrastructure Fund, the Japan International Cooperation Agency, and the World Bank for three investment projects.

A summary of projects with cofinancing from 1 January 2016 to 31 December 2020 is available at Cofinancing: Philippines.

Operational Challenges

ADB’s annual lending to the Philippines has increased in recent years, mainly due to the bank’s support for the government’s BBB infrastructure program.

Government spending on infrastructure reached nearly 5% of gross domestic product in 2018. Despite the impacts of the COVID-19 pandemic, the government expects to keep infrastructure spending close to the 2018 level over the next few years. Given the wide array of infrastructure projects under the BBB program, government agencies’ capacity to roll out such large and complex plans will need to be further strengthened. ADB is supporting the government in this area through loans, grants, and technical assistance. The bank is working closely with the government to enhance the technical and institutional capacities of national and local agencies and staff; improve interagency coordination; and strengthen partnerships among the government, private sector, and development partners.

Future Directions

ADB’s country partnership strategy for the Philippines, 2018–2023 supports infrastructure investment, local economic development, and increased social investments in the bottom 40% of the population.

ADB will focus investments on infrastructure, health, and employment recovery to help the government address the impacts of the COVID-19 pandemic. Under its country operations business plan, 2021–2023, ADB will help the government reinvigorate the private sector and the labor market, accelerate economic recovery, and expand access to public health services. More than 52% of projected financing will be invested in transportation projects, while about 12% will help expand the public health system. The business plan also includes support for youth school-to-work transition and skills development, environmentally sustainable projects that increase local economic activity, expanded social protection, increased agriculture competitiveness, better public sector management, and more developed capital markets.

A rendering of the Malolos–Clark Railway Project. Photo courtesy of JICA.