Gov’t eyes insurance firms’ investments for infrastructure

The construction of a railway is seen in Balagtas, Bulacan, June 14, 2021. — PHILIPPINE STAR/ MICHAEL VARCAS

By Diego Gabriel C. Robles

THE MARCOS administration is eyeing investments from public and private insurance companies to support its ambitious infrastructure program amid a fiscal crunch, the country’s finance chief said.

Finance Secretary Benjamin E. Diokno said the government has to ramp up infrastructure spending in the next 20 years, particularly in the energy and transport sectors as the Philippines remains a laggard in Southeast Asia.

“We will maximize the use of long-term money for quality infrastructure… for example, [if] the return on infrastructure would be 20% and [insurance companies] will pay at least 12% — against investment that yields just 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 intent to continue investing in state and private infrastructure projects.

“Public sector or private sector, we will look at it. What’s important is the safety of our members’ money and the return that these investments would yield,” GSIS President and General Manager Jose Arnulfo A. Veloso previously said. “We want to ramp up our funds while helping the country.”

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

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

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

The circular said that insurers are required to submit the financial statements 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 seems like it’s not a commission. It will be placed under the central bank or [will get] closer supervision. Maybe its mandate will also be changed,” he added.

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

“With higher interest rates, entering the bond market to fund public infrastructure projects may be attractive to both state and private insurance companies,” said Terry L. Ridon, a public investment analyst and convenor of think tank InfraWatch PH.

“But the government must temper this appetite to incur more loans with higher interest rates given our limited fiscal space and our actual debt load climbing faster to P13 trillion,” he added in an e-mail.

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

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

“As such, there should be no obstacle for infrastructure projects to be funded under the current regulatory environment for insurance companies, or through other funding modes.”

INFRASTRUCTURE SPENDINGIn the first half, infrastructure and capital outlays spending reached P477.9 billion, up by 12% from 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), the settlement of accounts payables for the procurement of farm equipment and machineries under the Rice Competitiveness Enhancement Fund and the Department of Education’s Basic Education Facilities (BEF), and the implementation of capital outlay projects under the Revised Armed Forces of the Philippines Modernization Program (RAFPMP).

Despite the increase, the six-month figure is below the P529.3-billion program because of the election ban on certain government spending and public works.

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

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

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

He also envisions the pairing the national ID with the use of artificial intelligence to collect and disseminate data on a person’s income liability in a bid to reduce leakages and redundancies, particularly with the distribution of cash aid and taxpayer identification numbers respectively.

However, 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 at the BSP… It shouldn’t be like that. For efficiency, you should just pick it up where you registered,” Mr. Diokno said.

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

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