Japan Extends USD 202 Million Loan for Road Projects in Mindanao, Philippines

Jun 2019

As part of the current Philippine government’s ambitious USD 156 billion accelerated Infrastructure spending and development until 2022, the country recently secured a USD 202.04 million loan  from Japan to fund the Road Network Development Project (RNDP) in conflict-affected areas in Mindanao. In particular, the RNDP funding would cover consulting services and civil works involved in the construction and improvement of about 176.6 kilometers of access roads in the region, including 19.8 kilometers of the Marawi Ring Road, 23 kilometers of the Marawi Trans-Central Road and several road sites in the Bangsamoro Autonomous Region in Muslim Mindanao. 

Potential challenges have been identified for the project, such as the possible presence of IEDs (improvised explosive devices).Thus, a full-blown feasibility study masterplan is being funded too and to be implemented on full blast by July.

Mindanao has been neglected for long, and Infrastructure projects are viewed as a key to uplifting the region’s economy and diminishing inequality, by linking conflict-affected areas to Mindanao’s trading centers and mainstream economies, thus improving accessibility and facilitating the flow of goods and services to and from these areas. 

Notably, aside from being a long-time contributor of official development assistance (ODA) to the Philippines, Japan remained the top provider of ODA loans to the Philippines, topping in value ODA’s from the multilateral institutions, namely, the World Bank, Asian Development Bank, and the China-based Asian Infrastructure Investment Bank, as well as from countries such as the United States, South Korea, Australia, France, European Union and United Nations. As of the end of December 2018, Japan contributed USD 6.13 billion, or almost 50% share of the Philippines’ total ODA loans. In addition, Japan is also the 5th top provider of ODA grants amounting to USD 106.76 million for the same period (about 5% share of the total ODA grants to the Philippines). 

Others in the pipeline which the Philippine and Japanese government officials are working on for signing this year, are loan agreements for funding of the following projects:

The ongoing Davao City Bypass Construction Project
New Mactan Bridge Construction Project in Cebu 
The second phase of the Metro Manila Priority Bridges Seismic Improvement Project
Second tranche of the loan for the first phase of the Metro Manila Subway Project
Feasibility studies on the Dalton Pass East Alignment Alternative Road Project, subject to certain requirements, and the Circumferential Road 3 Project Missing Link Project will be done later this year.

Japan’s massive funding support for Infrastructure in developing countries such as the Philippines, is part of its Special Terms on Economic Partnership (STEP) funding program, which is extended to projects for which Japanese technologies and know-how are substantially utilized. What makes the STEP funding attractive is it allows for very generous terms, such as less than 1% in interest rates, about 40 years in repayment period and 12 years of grace period. Once the Philippines reaches an upper middle-income country status, the country will no longer qualify for the STEP funding.

(Sources: BusinessWorld, Inquirer.Net, MSN, Japan International Cooperation Agency)

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