The government sees the insurance companies’ investments in infrastructure – newsdubai

By Diego Gabriel C. Robles

The MARCOS administration is eyeing investments from public and private insurers to support its ambitious infrastructure program amid a fiscal crisis, the country’s finance chief said.

Finance Secretary Benjamin E. Diokno said the government needs to increase infrastructure spending in the next 20 years, especially in the energy and transportation sectors, as the Philippines remains a laggard in Southeast Asia.

“We want to maximize the use of long-term money for quality infrastructure … e.g. [if] the return on infrastructure would be 20% and [insurance companies] will pay at least 12% — against investments that yield only 5-6% — it’s a win-win situation,” he told reporters at a Bangko Sentral ng Pilipinas (BSP) event on Friday.

Last July, the Government Service Insurance System (GSIS) already signaled its intention to continue investing in government and private infrastructure projects.

“Public or private sector, we will look at it. What is important is the safety of our members’ money and the returns these investments would yield,” GSIS President and Director General Jose Arnulfo A. Veloso said earlier. “We want to increase our funds while helping the country.”

Aside from the GSIS, Mr. Diokno that the administration is also seeking to attract the Philippine Health Insurance Corp., the Home Development Mutual Fund (Pag-IBIG Fund) and the Social Security System to invest in infrastructure projects.

“We will not give a mandate. But we will give them the opportunity. It is up to the individual boards to make a decision,” said Mr. Diokno.

In 2018, the Insurance Commission (IC) issued Circular Letter No. 2018-74, which set guidelines for insurance and reinsurance companies to “invest in debt and/or equity security instrument for infrastructure projects under the Philippine Development Plan” to help them “meet the minimum net worth requirement ” determined by the supervisory authority.

The circular said that insurers are required to submit the accounts of the infrastructure projects so that the IC can determine the risk impact on the insurer’s capital.

“We’ll fix that. There’s a bill pending in Congress right now,” Mr. Diokno said, referring to House Bill No. 1787 and Senate Bill No. 425, both of which aim to reorganize the IC.

“I think the composition of the commission will be expanded. Because right now it looks like it’s not a commission. It will be placed under the central bank or [will get] closer supervision. Perhaps its mandate will also be changed,” he added.

The Marcos administration aims for infrastructure spending to be 5-6% of gross domestic product (GDP) by 2028.

“With higher interest rates, it may be attractive for both government and private insurers to enter the bond market to finance public infrastructure projects,” said Terry L. Ridon, a public investment analyst and convener of the InfraWatch PH think tank.

“However, the government must curb this appetite to take on more loans at higher interest rates given our limited fiscal space and our actual debt load that is rising faster to P13 trillion,” he added in an email.

The government’s outstanding debt rose to a record P12.89 trillion at the end of July. It is expected to increase to P13.43 trillion by the end of the year.

“IC has been very responsive in allowing its regulated entities to diversify their portfolio, which now includes foreign currency-denominated instruments, and without limitation, whether debt or equity securities,” Mr. Ridon.

“As such, there should be no obstacle to infrastructure projects being financed under the current regulatory environment for insurance companies or through other forms of financing.”

INFRASTRUCTURE EXPENDITURE
In the first half of the year, spending on infrastructure and capital expenditures reached P477.9 billion, a 12% increase from the P426.7 billion spent in the same period last year, recent data from the Department of Budget and Management showed.

This was attributed to payments made for completed and partially completed infrastructure projects of the Department of Public Works and Highways (DPWH), settlement of accounts payable for procurement of agricultural equipment and machinery under the Rice Competitiveness Enhancement Fund and Department of Education’s Basic Training Facilities (BEF) and implementation of capital expenditure projects under Revised Armed Forces of the Philippines Modernization Program (RAFPMP).

Despite the increase, the six-month figure is below the P529.3-billion program due to the electoral ban on certain public expenditures and public works.

For the month of June, infrastructure spending increased by 51.9% to P143.4 billion from P94.4 billion year-on-year due to the disbursements by the DPWH for its completed infrastructure projects. The June figure is also 78.2% higher than the P80.5 billion spent on infrastructure in May.

NATIONAL ID
Meanwhile, Mr. Diokno said identification cards for insurance memberships such as GSIS and SSS will eventually be integrated into the National Identification System as part of the government’s initiatives towards digitization.

“The national ID will be required for everyone and then maybe in the end there would only be three IDs – your national ID, your driver’s license and your passport. So [the national ID] will be your Senior ID, Voter ID, SSS etc,” said Mr. Diokno in a mix of Filipino and English.

He also envisions the pairing of the national ID with the use of artificial intelligence to collect and disseminate data on a person’s income responsibilities in an effort to reduce leaks and redundancies, particularly with the distribution of cash assistance and taxpayer identification numbers, respectively.

But Mr. Diokno criticized the Philippine Postal Corp. (Philpost) for its inefficiency in distributing the National ID.

“They (Philpost) are slow. It’s funny how the cost of delivery is more expensive than the cost of printing per ID. We print it on BSP… It shouldn’t be like that. For efficiency, you should just pick it up where you have registered you,” Mr. Diokno said.

“I don’t know why the Philippine Statistics Authority still entered into a contract with Philpost.” — with Keisha B. Ta-asan