IX. Sources of Financing for the Philippine Environmental Market
This chapter provides a summary listing of major sources of financing for both U.S. firms and prospective Filipino buyers. These sources include the multilateral development banks, bilateral (U.S.-Philippines) sources, and the two Philippines state-owned development banks, the Development Bank of the Philippines and Landbank.
Multilateral Development Banks Asian Development Bank U.S. Commercial Liaison
6 ADB Avenue U.S. Commercial Service
Mandaluyong City U.S. Embassy, Manila
0401 Metro Manila, Philippines
APO AP 96515
Tel: +632-632-4444 Tel: +632-890-9364
Fax: +632-636-2444 Fax: +632-890-9713
North American Office
1730 Pennsylvania Avenue, NW, Suite 975
Washington, DC 20006
The Asian Development Bank (ADB) is headquartered in Mandaluyong, Metro Manila. It makes loans and equity investments for the economic and social advancement of its developing member countries, including the Philippines. In addition, the bank provides technical assistance for the preparation and execution of development projects and programs and advisory services. Last, it promotes the investment of public and private capital for development purposes, and responds to requests for assistance in coordinating the development policies and plans of developing member countries. The bank publishes the monthly ADB Business Opportunities that summarizes upcoming loan and technical assistance projects open to U.S. and foreign bidders. The ADB is currently financing several technical assistance projects in the Philippine environment sector, including the Pasig River Rehabilitation Project and the Review of Environmental Quality Standards Project.
The Global Environment Facility (GEF) is a multilateral lending organization managed by the World Bank for the United NationsÆ Environment Program. The GEF provides grants and funding to recipient countries for projects and programs that protect the global environment and promote sustainable economic growth. Countries may be eligible for GEF funds in one of two ways: 1) if they are eligible for financial assistance through the financial mechanism of either the Climate Change Convention or the Convention on Biological Diversity, or 2) if they are eligible to borrow from the World Bank or receive technical assistance grants from United Nations Development Program through a country program. GEF projects must be country driven, incorporate consultation with local communities, and, where appropriate, involve nongovernmental organizations in project implementation.
The International Finance Corporation (IFC) provides both loan and equity financing to private sector projects that are unable to obtain financing from other sources on reasonable terms. It also offers quasi-equity and financial risk management products. IFC raises additional funds from foreign commercial banks through its loan participation program. It helps individual corporations from emerging markets to tap the international capital markets. IFC also raises funds from institutional investors through underwriting arrangements for public offerings or the private placement of shares, debentures, and other corporate securities.
The Multilateral Investment Guarantee Agency (MIGA) was established in 1988, as part of the World Bank Group, to encourage the flow of foreign direct investment in developing member countries. The Guarantees Program provides investment guarantees against the risks of currency transfer, expropriation, and war and civil disturbance (political risks). MIGA also provides investment guarantees against certain noncommercial risks (i.e., political risk insurance) to foreign investors in developing member countries. The program is designed to complement national and private investment insurance schemes. The Investment Marketing Services Department is MIGA's principal instrument for providing technical assistance in investment promotion to member countries. It helps to promote foreign direct investment and disseminate information about investment opportunities in developing and transitional economies.
The World Bank U.S. Commercial Liaison
1818 H Street, NW Office of the U.S. Executive Director
Washington, DC 20433
Tel: 202-458-5454 Tel: 202-458-0120
Fax: 202-522-1500 Fax: 202-477-2967
The World Bank is the multilateral development banksÆ largest financier of water and wastewater projects. It also publishes numerous publications, including Environment Matters, which summarizes its environmental operations. The World Bank conducts one-day seminars on upcoming business opportunities developing within the bank. The program includes strategies on how to keep informed about projects, upcoming contracts, and how to pursue foreign investment opportunities. The World Bank publishes: Facing the Global Challenge: A Progress Report on the World Bank Global Environment Operations, which summarizes its portfolio of environmental projects. In the Philippines, the World Bank is financing a number of environmental technical assistance and loan projects, including the Metropolitan Environmental Improvement Program and the development of water and wastewater treatment infrastructure at the Subic Bay Freeport. Trust funds are available from the bank to finance feasibility studies, and their preparation and appraisal activities. The release of these funds for projects must be country driven; individual firms cannot request the use of funds.
The Export Import Bank of the United States (Ex-Im Bank) provides guarantees of working capital loans for U.S. exporters. It guarantees the repayment of loans or makes loans to foreign purchasers of U.S. goods and services. Ex-Im Bank also provides credit insurance that protects U.S. exporters against the risks of nonpayment by foreign buyers for political or commercial reasons. Ex-Im Bank does not compete with commercial lenders, but assumes the risks they cannot accept. It must always have a reasonable assurance of repayment. The Ex-Im Bank also has several programs to help small businesses. It has designed a special Environmental Exports Program that will provide enhanced levels of support for a broad range of environmental exports. The program demonstrates Ex-Im BankÆs resolve to reach out to small and large exporters of environmental products and services. The major features of the program are:
* A short-term Environmental Export Insurance Policy. It provides enhanced short-term, multibuyer and single-buyer insurance coverage for small environmental exporters. The program features policies that deliver 95 percent commercial coverage and 100 percent political coverage with no deductible.
* Enhanced medium- and long-term support for environmental projects, products, and services. This enhanced support, which is reflected in Ex-Im Bank loan and guarantee programs, includes: local cost coverage equal to 15 percent of the U.S. contract price, capitalization of interest during construction, and maximum allowable repayment terms permissible under guidelines of the Organization for Economic Cooperation and Development. Ex-Im Bank has a broad portfolio of projects in the Philippines.
The Overseas Private Investment Corporation (OPIC) finances medium- to long-term investment projects through loan guarantees and direct loans. Direct loans are geared for small businesses or cooperatives and usually range between $2 million and $10 million. Loan guarantees range between $10 million and $100 million, but in certain instances can be as high as $200 million. OPIC also sponsors growth funds that cover Africa, Asia-Pacific, Russia, Poland, Israel, and the environmental sector. OPIC protects U.S. business activities in emerging markets, including the Philippines, through its investment insurance programs against 1) currency inconvertibility (the inability to convert profits, debt service, and other investment remittances from local currency to U.S. dollars), 2) expropriation (loss of investment due to expropriation, nationalization, or confiscation by a foreign government), and 3) political instability due to war, revolution, or civil strife. The insurance programs also can be used to cover expanding investments. Through its investment missions, OPIC promotes U.S. business by bringing groups of U.S. executives to a selected number of countries to meet with host country government officials, local business leaders, and potential joint venture partners. Reverse missions bring foreign government officials and local business leaders to the United States to meet with their counterparts.
United States-Asia Environmental Partnership
1133 20th Street, NW US-AEP Technical Representative
Suite 300 US-AEP/Philippines
Washington, DC 20036 2/F, Thomas Jefferson
Tel: 202-835-0333 Cultural Center
Fax: 202-663-2760 395 Sen. Gil Puyat Avenue
Tel: (632) 896-5128
Fax: (632) 890-9361
The United States-Asia Environmental Partnership (US-AEP) was established in 1992 to address issues of environmental degradation and sustainable development in the Asia-Pacific region by matching Asian environmental needs with U.S. environmental experience, technology, and practices. US-AEP works with 34 Asian/Pacific nations and territories, and partners with 25 U.S. federal departments and agencies, state and local entities, environmental businesses, nongovernmental organiz-ations, and Asian counterparts. Its strategies for implementation include: developing networks and long-term relationships, stimulating direct technology transfer, creating innovative financial access, and disseminating information. Some of its ongoing programs include:
* The Environmental Technology Fund: provides matching grants to small and medium-sized U.S. firms to demonstrate appropriate environmental technologies in Asia.
* The Environmental Technology Network for Asia: disseminates trade leads from Asia, including the Philippines, to U.S. environmental firms registered in its database. For information, contact: Tel: 1-800-818-9911.
* The Professional Organizational Development program: matches U.S. environmental professionals with foreign counterparts.
* The US-AEP Environmental Technology Representatives: help U.S. firms target preliminary market opportunities, make key contacts, and provide local businesses with information on U.S. technologies. Additionally, US-AEP assists the U.S. Environmental Training Institute with teaching environmental courses for professionals from developing countries. For more information, contact: Tel: 202-338-3400, Fax: 202-333-4782. US-AEP is very active in the Philippines, with Manila serving as a regional field headquarters for the program. U.S. firms are strongly advised to contact the US-AEP Technical Representative in Manila for information about upcoming trade shows and for assistance with marketing environmental technologies and services to prospective buyers in the Philippines.
The U.S. Trade and Development Agency (USTDA) is an independent federal agency with over $40 million dedicated to assisting U.S. companies on overseas business opportunities in developing countries and responding to foreign competition. It sponsors feasibility studies, definitional missions, and desk studies for major public and private sector projects to promote the usage of U.S. goods and services in project implementation. Funding from the agency usually ranges from $150,000 to $750,00 for public sector projects. USTDA also finances technical assistance grants that support activities to foster the usage of U.S. technical assistance in projects. Other funds available for feasibility studies and other project development-related activities include technical assistance trust funds available through the World Bank and the International Finance Corporation. USTDA sponsors conferences and reverse trade missions (called orientation visits) that put U.S. industry representatives in contact with key in-country decisionmakers. In addition, it publishes TDA Pipeline, its biweekly newsletter, which highlights new definitional missions; feasibility study opportunities (also advertised in Commerce Business Daily, produced by the U.S. Department of Commerce); USTDA/World Bank Project announcements; and upcoming orientation visits and conferences. USTDA only considers projects that have the potential to mature into significant business opportunities for U.S. companies. It is currently funding an inventory of major industrial sources of pollution in Metro Manila. It hopes the study will identify bankable emissions control projects for international or local development bank financing.
Local Sources of Financing
Development Bank of the Philippines
Environmental Management Unit
9th Floor, DBP Building
Sen. Gil Puyat cor. Makati Avenue
Makati, Metro Manila
Tel. (632) 812-8088
Trunk line: (632) 818-9511, local 2920
The Development Bank of the Philippines (DBP) is one of two national, state-owned development financing institutions in the Philippines. It channels money from foreign donor agencies to target borrowers through special concessional credit facilities. Two of these facilities are set up for financing environmental projects:
* Environmental Infrastructure Support Credit Program: This facility is funded by the Japan Overseas Economic Cooperation Fund (OECF). Eligible projects include investments in pollution control, waste minimization, and/or clean technologies. Priority borrowers and projects include: borrowers belonging to the ôFilthy Fifteenö or other such list published by the Department of Environment and Natural Resources (DENR), small and medium-sized enterprises, common waste treatment facilities, facilities for the treatment and disposal of hazardous wastes, projects adopting innovative clean technologies, and projects with potential for replication in other facilities. The credit terms include an interest rate of 11 percent and a 3-15 year repayment period with a 5-year (maximum) grace period.
* Bilateral Tied Credit Facilities: There are several bilateral credit facilities that finance equipment (including environmental) imports from European countries. These include the $25 million Norwegian Mixed Credit Facility, the KfW (German) Long-Term Export Financing Facility, and the $25 million Danish Tied Credit Facility. These facilities cannot be used to finance the purchase of U.S.-sourced equipment.
Program Lending Group
319 Sen. Gil Puyat Avenue
Makati, Metro Manila
Tel. (632) 818-9411 to 25
Landbank is currently developing its environmental credit policy for retail and wholesale credit operations. Although it does not have a specific environmental credit facility like the Development Bank of the Philippines, environmental investments are eligible under the Countryside Loan Fund II financed by the World Bank. This fund provides low-interest peso credits for initial and working capital (including funds needed to implement pollution prevention and treatment programs), fixed assets (including pollution control systems and equipment), and receivables financing. Eligible borrowers are Filipino companies (at least 70 percent Filipino-owned) in the agriculture, food processing, manufacturing, and service sectors. Landbank also provides credits to local government units for environmental infrastructure finance through an OECF-financed yen facility.
In addition to the credit programs, Landbank has signed a memorandum of understanding with DENR in which the bank commits to help DENR with scoping and public hearings for environmental impact assessments (EIAs), while DENR in return commits to speed processing of EIAs for Landbank-financed projects. It also conducts employee environmental awareness training, and is in the process of developing an environmental credit risk assessment training course for its lending officers and staff from other banks participating in the bankÆs wholesale credit facilities. Last, Landbank served as the financial intermediary for a grant from the World Bank to finance the phase out of ozone-depleting substances at 16 industrial facilities.