Develop municipal bond market
to finance infrastructures - Angara

Senator Edgardo Angara today suggested that a municipal bond market should be developed in the Philippines in light of the recent World Bank report placing the country 65th among 150 countries surveyed for their capacity to ship goods to international markets.

"We've got to be more creative in tapping resources for our infrastructures, especially since we are lagging behind compared to our neighbors in this area," Senator Angara said.

In the recent World Bank report titled "Connecting to Compete: Trade Logistics in the Global Economy", the Philippines' 65th ranking falls sharply behind other countries in Southeast Asia. Korea ranks at 25th, Malaysia at 27th, and Thailand at 31st. Indonesia and Vietnam landed at 43rd and 53rd respectively.

"This is one big reason why the Philippines will remain hard put expanding its export volume - the high cost of transporting goods pads the prices of our products. And when this adds to lack of access roads within and local ports between islands, an exporter indeed faces a daunting challenge," the senator said.

"Right now, the Philippines is undertaking a Php2 trillion infrastructure program, 60% of which will come from a combination of Official Development Aids (ODAs) and domestic revenues. But with ODAs steadily decreasing since 2000, we've got to find other ways to finance our infrastructure and developmental projects," Senator Angara said.

According to Senator Angara, developing a municipal bond market is one untapped source of funding for developmental projects. It can provide access to a large pool of LGU resources.

In a municipal bond market, bonds[1] issued by a Local Government Unit (LGU) are bought and sold.

"A municipal bond market will build the capacity of LGUs to leverage their assets, and finance more projects. Lenders ranging from financial institutions, to companies and individuals can invest in LGU bonds backed by the collateral of their Internal Revenue Allotment (IRA), which is now worth Php134 billion this year," asserted Senator Angara.

"Thus, the IRA usually spent on tractors, bulldozers and waiting sheds will be more productively spent on revenue-generating projects, thereby triggering a virtuous cycle of assets begetting more assets," the senator and chairman of the Senate Committee on Banks and Financial Institutions said.