The Philippines’ infrastructure landscape has seen reforms in the realms of public-private cooperation and innovative financing vehicles, boosting project pipelines and mobilising private capital. It faces challenges around lengthy right-of-way processes and environmental compliance, with better coordination needed between national and local actors. Through the adoption of QII principles, it can unlock more private investment to build sustainable infrastructure.
Addressing Legal and Regulatory Barriers to Quality Infrastructure Investment in India, Indonesia and the Philippines
Abstract
Good Practices of the Philippines
National Economic and Development Authority (NEDA) ensures a bottom-up approach to project development and a comprehensive planning framework centred on the Philippine Development Plan (PDP) and its supporting documents: the Public Investment Programme (PIP) and Results Metrics.
Line ministries now collaborate with local governments to streamline land acquisition and compensation processes. This localised approach aims to expedite expropriations when needed and enhance communication with affected parties.
Recommendations for the Philippines
The Philippines should accelerate efforts to streamline processes and enhance private sector confidence in PPPs and attract both local and international investors and advance implementation of the new PPP Code. Acquiring permits, particularly Environmental Compliance Certificates (ECCs), remains a challenge and discussions on adopting a one-stop-shop model could provide better clarity to investors. Such measures would be consistent with the QII Principle 6 on strengthening infrastructure governance, which underscores the importance of transparent and predictable processes to enable private investment.
Capacity disparities between national and local governments should be improved, as well as poor coordination between government levels which can lead to procurement delays and mid-tender structural changes. Strengthening these areas would align with the QII Principle 6 on infrastructure governance, which emphasises the importance of capable and coordinated institutions to ensure effective project delivery.
Right-of-way acquisition, fair market value appraisals involving multiple entities, and time-consuming land conversion procedures should be addressed in terms of land acquisition for infrastructure projects with multiple government agencies being involved. Addressing these barriers would align with QII Principle 6 on strengthening infrastructure governance and also bolster Principle 2 on economic efficiency.
Feasibility studies must include risk assessments related to Indigenous Peoples' land rights, in support of QII Principle 5 on integrating social considerations into infrastructure investment, which stresses the importance of inclusiveness and respect for human rights.
The government should consider permitting higher stakes and returns by private investors, in line with QII Principle 2 on raising economic efficiency to ensure value for money over the project life cycle.
The government may wish to reconsider the limitations included in the Foreign Investment Negative list relating to infrastructure procurement projects. This could encourage more foreign private sector involvement in infrastructure financing in the Philippines, in line with QII Principle 2 on raising economic efficiency to ensure value for money over the project life cycle.
NEDA might need to explore strategies like project bundling or regional collaboration to create larger investment opportunities that align with local development goals and attract major institutional investors. Such approaches would be consistent with the QII Principle 1 on maximising the positive impact of infrastructure for sustainable growth, which calls for infrastructure investment to support broad-based development outcomes. This would also reinforce Principle 2 on economic efficiency through returns to scale from bundling.
Greater consideration should be made to ensure that the Maharlika Investment Fund's implementation adequately addresses fund management, corruption, and rule of law enforcement in the country's financial sector. Pursuing these measures would support QII Principle 6 on strengthening infrastructure governance, which underscores the importance of transparency, accountability, and sound institutions in infrastructure investment.
Further integrating ESG factors should be discussed by the government to ensure alignment with the various factors necessary to attract both ODA and foreign capital. This would be consistent with the QII Principle 3 on embedding sustainability into infrastructure investment to meet international investor expectations.
5.1.1. Infrastructure institutional landscape
Philippine administrations in the past decade have prioritised infrastructure development to align with regional progress. The Duterte Administration (2016-2022) initiated the “Build! Build! Build!” program to stimulate economic growth and enhance infrastructure, particularly in transportation. This sector has been instrumental for addressing the country's developmental lag, marked by severe congestion in Metro Manila's road and rail systems and outdated airports that hinder tourism (Public-Private Partnership Center, 2019[1]).
The Marcos Jr. Administration (2022 to present) continues the "Build! Build! Build!" (BBB) program, emphasising local financing and loans from multilateral development banks. Most BBB projects are funded through domestic banks, ADB, and World Bank concessional loans, with additional support from Japan and Korea (International Trade Administration, 2022[2]).
The Philippines’ National Economic and Development Authority (NEDA) is the chief national socioeconomic planning and development institution and is regarded as the reference authority to provide policy analysis and research in three areas of responsibility (NEDA, 2020[3]):
Coordinating activities to efficiently set the broad parameters for national and sub-national development.
Review, evaluate, and monitor infrastructure projects identified under the Comprehensive and Integrated Infrastructure Program to foster investment spending to meet quality infrastructure demand.
Undertake short-term policy reviews to provide analyses of development issues and policy alternatives to decision-makers.
The NEDA Board, chaired by the President of the Philippines, prioritises a comprehensive PPP approach. The NEDA Director-General serves as CEO and leads the Secretariat, overseeing the technical evaluation and consolidation of proposals. Regional Development Councils composed of local officials identify and endorse regional infrastructure priorities. (NEDA, 2024[4]).
The NEDA Board, comprising key Cabinet members and officials, works with the Investment Coordination Committee to review manor capital projects, while the Infrastructure and Committee (INFRACOM) focuses on broader policy matters related to infrastructure development. Its governance and decision-making framework are defined by Executive Order (EO) No. 230, s. 1987, and was recently reinforced by EO No. 82, s. 2025. The NEDA Director-General, who also heads the NEDA Secretariat, acts as the Board's Chief Executive Officer, overseeing the technical evaluation and consolidation of infrastructure proposals. At the subnational level, Regional Development Councils (RDCs) identify and endorse regional infrastructure priorities. These priorities are reviewed by the NEDA Secretariat and relevant inter-agency committees before being elevated to the NEDA Board for final approval. This governance structure ensures alignment between regional needs and national strategic priorities, supporting a comprehensive and inclusive infrastructure planning process. (NEDA, 2024[4]). NEDA also collaborates with international organisations and donor agencies to secure foreign assistance for priority development initiatives (NEDA, 2020[5]).
NEDA remains the key approving body for major projects in the Philippines, with tenders requiring approval through a multi-stage process involving inter-agency committee coordination. Projects are first submitted by implementing agencies to the NEDA Secretariat, which conducts an initial review. They then proceed to the Investment Coordination Committee-Technical Board (ICC-TB) for technical evaluation, followed by the ICC-Cabinet Committee (ICC-CC) for endorsement. Final confirmation is provided by the NEDA Board, chaired by the President, before projects move forward to implementation and tendering. Its leadership in provides alignment of the country’s priorities in terms of sector, investment expectations and real development needs. The most important projects emanate from regional priorities, showing the prevalence of a bottom-up approach in project prioritisation (Public-Private Partnership Center, 2022[6]).
NEDA employs a comprehensive planning framework centred on the Philippine Development Plan (PDP) and its supporting documents: the Public Investment Programme (PIP) and Results Metrics. The PIP, updated annually, outlines priority programs for PDP implementation over six years, considering budget estimates for the next five years.
When projects are submitted for ICC processing, NEDA evaluates projects for feasibility, viability, and social impact, often in collaboration with development partners (NEDA, 2020[3]). This evaluation is a separate process focused on assessing feasibility, viability, and social impact. It involves rigorous technical assessments, often in coordination with relevant implementing agencies, to determine a project’s readiness for ICC deliberation. The NEDA Secretariat ensures that projects meet all necessary criteria before they are presented to the ICC for decision-making.
Infrastructure projects stem from existing master plans, with implementation subject to agency priorities and budgets. The enactment of the new Public-Private Partnership (PPP) Code of the Philippines (RA No. 11966) in 2023 established a unified legal and regulatory framework for PPPs, streamlining processes and addressing prior legal fragmentation. The PPP Centre provides feasibility study grants, acting as a project preparation facility. This creates a dynamic balance between public planning and private initiative in infrastructure development. Notably, it resolves fragmentation in the legal framework governing public asset procurement through PPP arrangements, promoting a unified, cohesive approach to project delivery. It also devolves authority to implementing agencies (IAs) for PPP projects below PHP 15 billion, empowering them to approve and procure projects more independently while reinforcing accountability through structured guidelines on review, approval, and procurement procedures.
The emphasis on PPPs in the Philippines has shifted with changes in the NEDA board and government administrations. The Aquino administration was known for promoting more PPPs, while recent governments have initiated fewer large-scale projects due to concerns about project bankability and government termination payments.
Efforts are underway to streamline processes and enhance private sector confidence, and the domestic market now has enough liquidity to support various project sizes, attracting both local and international investors, especially in sectors like telecommunications and data centres. However, acquiring permits, particularly Environmental Compliance Certificates (ECCs), remains a challenge. To address these challenges, the government issued Executive Order (EO) No. 59 (2024), which introduces significant reforms to expedite approvals for Infrastructure Flagship Projects (IFPs). Key features include:
Reducing licensing agencies involved in IFP approvals from approximately 30 to 12-18 agencies, simplifying the process.
Streamlining procedures for both national government agencies and local governments, requiring them to revise Citizens Charters to remove unnecessary steps, limit signatories to three, and allow the use of electronic signatures.
Establishing one-stop-shops within agencies for IFPs and designating dedicated IFP account officers to coordinate permit processing.
Enabling simultaneous processing through affidavits of undertaking and enforcing automatic approvals if agencies fail to act within prescribed timelines under the Ease of Doing Business Act (3-7-20 days rule).
Supporting the implementation of the PPP Code by aligning approval processes for faster project delivery.
Promoting digitalisation and data sharing among agencies to improve efficiency and coordination.
These provisions align with international best practices and address key bottlenecks, creating an efficient and investor-friendly ecosystem for infrastructure development (Republic of the Philippines - Department of Energy, 2024[7]).
The Philippine Public-Private Partnership (PPP) Centre streamlines and enhances PPP processes, ensuring efficient and transparent implementation of public-private collaborations (Public-Private Parnership Center, 2023[8]). It develops policies, assists in project identification and assessment, builds government capacity, coordinates stakeholders, monitors projects, and promotes private sector participation in PPP initiatives.
Recommendation: Philippines should accelerate efforts to streamline processes and enhance private sector confidence in PPPs and attract both local and international investors and advance implementation of the new PPP Code. Acquiring permits, particularly Environmental Compliance Certificates (ECCs), remains a challenge and discussions on adopting a one-stop-shop model could provide better clarity to investors. Such measures would be consistent with the QII Principle 6 on strengthening infrastructure governance, which underscores the importance of transparent and predictable processes to enable private investment (G20, 2022[9]).
Philippine officials view PPPs as valuable for delivering infrastructure and services beyond government capacity, particularly post-pandemic. PPPs help mitigate debt risks and provide alternative financing amid inflation and fiscal constraints, enhancing infrastructure development and economic resilience (NEDA, 2023[10]).
The PPP Centre’s website lists Philippine PPP projects in three categories: national, local, and agency priority. Projects are categorised by procurement stage, from conceptualisation to award. This comprehensive list covers projects under management, development, and conceptualisation across all stages of the PPP process (Public-Private Partnership Center, 2023[11]).
The PPP Center plays a key role in implementing the country’s PPP program by providing comprehensive support to national and local implementing agencies (IAs) throughout project preparation. Its key initiatives include capacity-building activities, managing the Project Development and Monitoring Facility (PDMF), and offering technical assistance for the development and implementation of critical infrastructure and other development projects. (NEDA, 2023[12])
The PPP Centre facilitates project preparation and procurement, but capacity disparities between national and local governments hinder effective delivery. Devolved infrastructure responsibilities create alignment challenges. Poor coordination between government levels leads to procurement delays and mid-tender structural changes (NEDA, 2023[12]).
Recommendation: Capacity disparities between national and local governments should be improved, as well as poor coordination between government levels which can lead to procurement delays and mid-tender structural changes. Strengthening these areas would align with the QII Principle 6 on infrastructure governance, which emphasises the importance of capable and coordinated institutions to ensure effective project delivery (G20, 2022[9]).
5.1.2. Laws and regulations impacting infrastructure development
The coordination of infrastructure regulations between central and local governments in the Philippines follows a multi-layered framework. Since 1990, regulations like the Build-Operate-Transfer (BOT) Law have enabled local governments and private investors to implement infrastructure through PPPs (Farrands et al., 2023[13]). Presidential decrees set national standards that local governments must incorporate into their regulatory implementation, often supplemented by memorandum circulars for additional guidance.
The Public Service Act (Commonwealth Act no. 146), as amended by Republic Act No. 11659 (Republic of the Philippines, 2023[14]), redefines public services in the Philippines. The updated law aims to encourage private enterprise by ensuring effective regulation, establishing foreign equity rules, providing reasonable returns, and implementing national security processes (Republic of the Philippines, 2023[14]).
The Department of the Interior and Local Government (DILG) oversees infrastructure project implementation, supported by laws and civil society. Executive Order 93 establishes multi-level monitoring committees. Jurisdictional issues often cause bottlenecks, with national agencies responsible for overall progress and local governments handling on-site implementation. DILG facilitates coordination between government levels.
In 2012, new Implementing Rules and Regulations for the BOT Law (Republic Act No. 6957) were introduced, and in 2013, Executive Order 136 attached the PPP Centre to the NEDA. The 2022 amendment (Republic Act No. 7718) aimed to enhance the country's appeal for foreign investment in infrastructure by introducing flexible financing schemes and expanding government support and guarantees to improve the financial viability of BOT projects for private investors (Public-Private Partnership Center, 2022[15]). The 2024 PPP Code further refines the framework for private investment, particularly in the transport and energy sectors.
From pure BOT schemes to more complex arrangements involving government subsidies, the updated regulation benefits sectors where high construction and maintenance costs may act as deterrents (Republic of the Philippines, 2022[16]). The schemes are as follows:
Pure BOT Scheme: the private sector handles design, construction, operation, and maintenance, before transferring the asset to the government. The government provides right-of-way acquisition but no subsidies.
BOT Scheme with government subsidy: selected primarily for projects with lower financial viability (i.e. when the project’s IRR is lower than the weighted average cost of capital (WACC)). In this case, the government may shoulder up to 50% of the total cost to fill the viability gap. The private sector remains responsible for the design, construction, operation, and maintenance of the asset.
Segment Dividing Type: a portion of the project is constructed using regular funds or ODA, and the extension is developed through PPP which handles both the operation and management.
Service Payment Scheme: the government paying the private sector for construction while retaining operational control. Regular payments (monthly or yearly) are made to the private counterpart during operation.
Lease-type arrangements: the private sector constructs the asset, and the government then leases the asset from the private developer.
The amended BOT law streamlines project approval processes, introduces alternative dispute resolution, and expands the definition of infrastructure projects to include privately operated ones. It also mandates sustainability requirements, including adherence to project specifications, Environmental Management Plans, and Environmental Compliance Certificate conditions. All projects must comply with the Environmental Impact Statement law and Natural Resources standards (Republic of the Philippines, 2022[16]).
The BOT Law amendments offer transport sector investors enhanced security through a structured approach to toll road project proposals. Key provisions include operation and maintenance monitoring, and multiparty systems to ensure ongoing environmental compliance (Republic of the Philippines, 2022[16]). This balanced framework promotes private sector involvement while addressing sustainability concerns in transport infrastructure.
The BOT Law amendments expand private sector participation in power generation, shifting capital-intensive projects from public control (Republic of the Philippines, 2022[16]). This has prompted the Department of Energy to streamline processes for energy projects. The law's impact is evident in the public sector's adaptability to diverse energy needs, particularly in isolated areas, while the National Power Corporation maintains control over existing government projects.
5.2.1. Land acquisition, asset ownership, right of way, and project implementation
Land acquisition for Philippine infrastructure projects faces significant hurdles due to complex processes and agricultural land classifications. Challenges include tedious right-of-way acquisition, fair market value appraisals involving multiple entities, and time-consuming land conversion procedures. Developers often form partnerships or preliminary agreements with landowners to navigate these restrictions, but the process involves multiple government agencies, adding layers of bureaucracy and potential delays.
The recent enactment of the Real Property Valuation and Assessment Reform Act (RPVARA, RA No. 12001) in 2024 aims to address these issues by standardising valuations through the Schedule of Market Values (SMVs) and enhancing transparency via the Real Property Information System (RPIS) under the Bureau of Local Government Finance's (BLGF) guidelines.
Proposed amendments aim to address the bottlenecks by aligning the ROW framework with recent reforms, including the Real Property Valuation and Assessment Reform Act (RPVARA) and the PPP Code. The ROW framework’s pending status in the Senate (SB 2821) reflects the Philippines’ ongoing efforts to strengthen legal frameworks for infrastructure delivery. A more unified and modern legal framework would strengthen the capacity of agencies like the DPWH to deliver infrastructure projects efficiently and in line with public needs. The amendments are recognized as a priority legislative measure under the Philippine Development Plan (PDP) 2023–2028 and were listed as a top priority in the Common Legislative Agenda (CLA) by the Legislative-Executive Development Advisory Council (LEDAC) in June 2024.
Indigenous Peoples' land rights and unclear tenure systems create complexity, potentially causing disputes and delays. Projects on indigenous lands must comply with NCIP laws, requiring certifications and consent. Displacement and resettlement issues can lead to resistance, while communities may request additional infrastructure, impacting project costs. Indigenous tribe cooperation varies, requiring thorough impact consultations. Landowner compensation faces valuation challenges, potentially leading to cost escalations and alternative compensation negotiations. Public opposition, stemming from poor communication and transparency, along with bureaucratic and environmental issues, further complicates land acquisition.
Land acquisition complexity encompasses legal, financial, and political factors. Feasibility studies must include thorough risk assessments. To streamline the process, local governments now handle acquisitions, leveraging their local knowledge and relationships. While this facilitates negotiations, it also introduces political considerations, as local officials may influence development decisions in their jurisdictions.
Line ministries now collaborate with local governments to streamline land acquisition and compensation processes. This localised approach aims to expedite expropriations when needed and enhance communication with affected parties. By engaging stakeholders directly at the local level, the government seeks to minimise delays and conflicts, ultimately improving project implementation efficiency.
Recommendation: While some reforms are underway, right-of-way acquisition, fair market value appraisals involving multiple entities, and time-consuming land conversion procedures should be addressed in terms of land acquisition for infrastructure projects with multiple government agencies being involved. Addressing these barriers would align with QII Principle 6 on strengthening infrastructure governance and also bolster Principle 2 on economic efficiency (G20, 2022[9]).
Government projects often resist private capital involvement. Investors seeking higher stakes and returns face challenges in forming local partnerships and navigating subnational government interactions. The debt market is controlled by local banks with strong PHP and USD balance sheets, outcompeting international banks on pricing. This enables local banks to take greater risks and offer more flexible terms on long-term projects than their international counterparts (NEDA, 2023[12]).
The equity market is primarily controlled by development and industrial conglomerates, protected by foreign ownership limits outlined in the Twelfth Regular Foreign Investment Negative List1. According to List A, foreign investors are restricted to 40% ownership in infrastructure projects, private land, or public utilities, as mandated by the Philippine Constitution (Republic of the Philippines, 2022[17]).
Recommendation: The government should consider permitting higher stakes and returns by private investors, in line with QII Principle 2 on raising economic efficiency to ensure value for money over the project life cycle (G20, 2022[9]).
Specifically relating to infrastructure procurement projects, the limitations included in the Foreign Investment Negative list apply to:
Partnership and corporations organised under the laws of the Philippines and of which at least 75% of interest of outstanding capital stock belong to citizens of the Philippines (Government Procurement and Policy Board, 2002[18]), and
Joint ventures formed of two or more foreign persons/entities where at least 75% of interest or ownership is held by a Filipino person/entity. Filipino ownership may be less than 75%, though never smaller than 25% if the Filipino entity lacks the technical and technological capacity to procure and develop the project (Government Procurement and Policy Board, 2002[18]).
In certain sectors, Filipino citizens and corporations with at least 60% Filipino ownership can own land in the Philippines. Foreign investors are restricted to leasing land under the Investor's Lease Act, which permits leases up to 75 years. Leased land, especially for agricultural purposes, faces additional restrictions under the comprehensive agrarian reform law. Local government regulations, such as permits for agricultural land reclassification, further influence land use. These constraints apply across all sectors, so even industries open to 100% foreign ownership under the Public Service Act must consider land-related limitations in infrastructure projects (Republic of the Philippines, 2023[14]).
Recommendation: The government may wish to reconsider the limitations included in the Foreign Investment Negative list relating to infrastructure procurement projects. This could encourage more foreign private sector involvement in infrastructure financing in the Philippines, in line with QII Principle 2 on raising economic efficiency to ensure value for money over the project life cycle (G20, 2022[9]).
The amended Public Service Act now allows 100% foreign ownership in select sectors like railways, airports, expressways, telecommunications, renewable energy, and construction. However, certain public utilities such as electricity distribution/transmission, seaports, and water distribution remain capped at 40% foreign ownership (Republic of the Philippines, 2023[14]).
The PPP Code allows foreign investors to propose projects, with restrictions under the Foreign Investments Act. It encourages Build-Operate-Transfer (BOT) contracts where assets eventually revert to government ownership (Republic of the Philippines, 2024[19]). This has improved transparency and opportunities for private investors, though some limitations remain in the Investors Negative List and the Public Service Act.
SOEs in the Philippines operate similarly to government agencies, participating in planning processes overseen by NEDA. They are involved in various aspects of infrastructure development and management, typically reporting to line ministries. While expected to contribute to infrastructure delivery, their financial autonomy is constrained by dividend laws and legislation governing their profit-making requirements. Foreign ownership and investments in SOEs are regulated, with some flexibility through the PPP Code (Republic of the Philippines, 2024[19]). SOEs can engage in financing activities, but foreign loans require government approval. Notably, financial viability may not be the primary consideration for SOE projects delivering public goods.
5.2.2. Innovative vehicles, strategies, and mechanisms to enhance infrastructure investment
From 2019 and prior, the Philippines government successfully closed 116 PPP projects worth nearly USD 44 billion across various sectors (NEDA, 2024[21]). While 39 projects had foreign sponsors, local banks provided most of the financing through infrastructure focused SPVs (NEDA, 2024[21]).
The infrastructure financing gap in the Philippines faces challenges for foreign and private investors due to issues with tender, preparation, and procurement processes. Institutional investors find the deal sizes in the Philippine market less attractive, expressing dissatisfaction with smaller tickets during the tender process that do not align with their investment rationale, cost of financing, and risk profile of their assets. Another deterrent for institutional investors, often linked to risk, is the lower levels of development and project preparation capacity in the country.
NEDA could support the project preparation for implementing agencies by coordinating larger, more attractive projects within the current regional governance structure, which has both opportunities and limitations. NEDA does not lead project preparation, procurement, or implementation, as these are the sole responsibilities of of the implementing agencies.
Recommendation: NEDA can support better coordination for project bundling or regional collaboration to create larger investment opportunities that align with local development goals and attract major institutional investors with the implementing agencies for projects. Such approaches would be consistent with the QII Principle 1 on maximising the positive impact of infrastructure for sustainable growth, which calls for infrastructure investment to support broad-based development outcomes. This would also reinforce Principle 2 on economic efficiency through returns to scale from bundling (G20, 2022[9]).
Regional governments, through development councils, ensure project alignment with regional plans but lack implementation authority and budget control, acting mainly as endorsers and planners. Project execution is managed by subnational offices of central agencies. This decentralised approach aids regional planning but complicates scaling projects to meet institutional investor preferences. NEDA might need to explore strategies like project bundling or regional collaboration to create larger investment opportunities that align with local development goals and attract major institutional investors.
The Philippine PPP Centre established the Project Development and Monitoring Facility (PDMF), a USD 98.77 million revolving fund, to enhance infrastructure project affordability and value. The PDMF supports planning, development, and monitoring of infrastructure, social services, and economic development projects. It provides procurement advisory services and funds various project aspects, including feasibility studies and consultant engagement (Public-Private Partnership Center, 2023[22]). Under the new PPP Code, the PDMF can now support projects from evaluation to implementation, enhancing the government's ability to prepare and execute bankable infrastructure projects across various stages.
The Maharlika Investment Fund (MIF), approved in August 2023, is the Philippines' first sovereign wealth fund, modelled partly after Indonesia's INA. It aims to attract foreign investment and stimulate growth (Quitzon, 2023[23]) by investing in sectors such as agriculture, climate resilience, and energy. Managed by the Maharlika Investment Corporation (MIC), the fund has an USD 8.9 billion in capitalisation and can issue preferred shares and bonds to raise capital. It focuses on assets including foreign currencies, bonds, real estate, and infrastructure projects (Quitzon, 2023[23]), balancing national development with financial returns. The Implementing Rules and Regulations were approved in November 2023, allowing the MIF to function as a strategic investment vehicle that combines public and private sector participation to support economic growth and infrastructure development.
The effectiveness of sovereign wealth funds typically relies on stable, long-term capital from national commodities like oil or gas, as exemplified by Norway's GPFG. However, the Philippines lacks such resources and faces fiscal challenges, including a growing deficit and a 60.9% debt-to-GDP ratio (Trading Economics, 2022[24]). Additional risks to the Maharlika Investment Fund's implementation include concerns about fund management, corruption, and rule of law enforcement in the country's financial sector (Department of Finance, 2023[25]).
Recommendation: Greater consideration should be made to ensure that the Maharlika Investment Fund's implementation adequately addresses fund management, corruption, and rule of law enforcement in the country's financial sector. Pursuing these measures would support QII Principle 6 on strengthening infrastructure governance, which underscores the importance of transparency, accountability, and sound institutions in infrastructure investment (G20, 2022[9]).
The Philippines has developed long-term investment vehicles and financial tools to support sustainable infrastructure development. In 2022, the government issued two sustainability bonds worth JPY 70.1 bn (USD 536 billion) and USD 1 bn, respectively (Asian Development Bank, 2022[26]), with proceeds allocated to assets outlined in the sustainable finance framework, enhancing the country's sustainability bond market. The Sustainable Finance Roadmap, created by the interagency working group, offers strategic guidance for policy, investment, and financing in sustainable finance.
The PPP Code and recent IRRs in the Philippines aim to align alternative financing methods with international standards, explicitly recognising options like green and blue financing (Republic of the Philippines, 2024[19]). This approach integrates resilience, sustainability, and gender considerations into infrastructure projects. The country is developing a sustainable finance framework to define these concepts and leverage existing financial instruments for climate and environmental risk mitigation. These reforms demonstrate the government's commitment to aligning infrastructure development with global sustainability goals, potentially attracting ESG-focused investors and diversifying capital sources for projects (Climate Bonds Initiative, 2020[27]).
Reliance on official development assistance (ODA)
The Philippines primarily relies on official development assistance (ODA), including grants and concessional loans, for infrastructure financing. As of September 2023, 78 of the 197 projects included in the IFP List are funded by ODA; representing 52.6% of total IFPs cost for the Philippines (NEDA, 2023[28]). This is partly due to ODA agencies' early involvement in project planning. Large-scale projects are typically national, reflecting the country's fragmentation. Despite some international investor involvement, project sizes are generally kept small to manage risk.
The Philippines has shifted its PPP financing approach from ODA and appropriation-based models to a more balanced mix of 60% local funding, 20% PPP, and 20% ODA. This change, initiated under the Duterte administration, has improved efficiency, and enabled the identification of development gaps. It has also increased private sector participation, particularly in resilience-focused projects, by involving non-traditional implementing agencies and exploring innovative financing mechanisms.
The Philippines is integrating blended finance into its development strategies by combining ODA with private sector funding. It is proposing amendments to the ODA Act to facilitate blended finance implementation. Infrastructure projects, such as expressways, have been financed through loans from institutions like JBIC, with repayments structured around revenue sharing (OECD, 2021[29]).
The PPP Code's Implementing Rules and Regulations (IRR) only define blended finance without further integrating it, despite the Philippines' extensive PPP experience. This suggests that while blended finance instruments exist and have shown effectiveness, their full potential in Philippine development financing strategies remains unrealised.
Reliance on a complex network of infrastructure long-term development plans
The Philippine Development Plan (PDP) 2023-2028 aims to boost economic growth, reduce poverty, and promote job creation. It aligns with President Marcos Jr.'s 8-point Socioeconomic Agenda, AmBisyon Natin 2040, and lessons from COVID-19 (NEDA, 2023[12]). The plan emphasises inclusive growth through government collaboration and private sector partnerships, supported by recent amendments of the Foreign Investment Act and Public Service Act (Republic of the Philippines, 2023[14]) to facilitate foreign investment in strategic industries, including infrastructure.
Chapter 12 of the PDP 2023-2028 seeks to identify critical infrastructure transformation to be expanded and/or upgraded to achieve better energy, transport, and digital connectivity to individuals, businesses, and civil society. Despite an increase in infrastructure investment, Philippines infrastructure remains inadequate and inefficient. The PDP 2023-2028 will contribute to developing sectoral master plans to identify priority areas and encourage the use of PPP schemes to close the existing infrastructure gap.
The Philippines has developed a strategic set of tools to promote sustainable finance as it pertains to socioeconomic development and investment in infrastructure. Namely, these tools are the Bangko Sentral ng Pilipinas (Central Bank of the Philippines) Sustainable Finance Roadmap and the Sustainable Finance Guiding Principles:
The Roadmap outlines a comprehensive strategy to integrate sustainable finance across key economic sectors, including infrastructure. It guides government agencies in developing a pipeline of sustainable investments that address the Philippines' economic, social, and infrastructure resilience needs. The plan emphasises aligning projects with net zero targets and addressing climate and natural disaster risks in (Bangko Sentral ng Pilipinas, 2022[30]).
The Principles establish a shared understanding of sustainable finance across stakeholders in key sectors. They encompass seven guidelines, primarily addressing environmental concerns, climate change, and risk mitigation. Notably, the fifth principle emphasises "Sustainable and Resilient Infrastructure for Inclusive Growth and Poverty Reduction," promoting investments in infrastructure that reduce costs, increase capacity, and improve market connectivity and access to essential facilities (Bangko Sentral ng Pilipinas, 2022[31]).
The Philippine PPP Centre has prioritised resilient and sustainable infrastructure development through its "PPP Talk: Climate Resilient Infrastructure" report and alignment with Roadmap's Pillar C. In collaboration with international partners like ADB, the Centre is developing a risk resilience roadmap focusing on key areas such as local water supply, waste management, and urban development. Similarly, the Board of Investment (BOI) and Department of Education (DepEd) have created roadmaps for infrastructure, telecommunications, and ICT sectors (Bangko Sentral ng Pilipinas, 2022[32]).
The Infrastructure Flagship Projects (IFPs) is a NEDA-curated list of high-priority, high-impact infrastructure projects crucial for the Philippines' economic development. It serves as a signalling tool for government agencies and the private sector, highlighting critical investments for focused implementation (Business World, 2024[33]).
Source: (NEDA, 2024[21])
The identification and classification of projects, and the updating of the list is led by the National Economic and Development Authority (NEDA). Projects are classified by implementing agency, fund source, region, and sector. The current list includes:
Priority infrastructure projects of previous administrations that have not been completed.
Major priority projects costing over USD 45.1 million and submitted to NEDA.
PPPs monitored by the PPP Centre.
There are 197 infrastructure projects registered as IFPs in the Philippines, including 40 PPPs. The primary funding source is ODA, supporting 76 projects. Most projects focus on transport (122), water (44), and agriculture (15). Despite regional energy trends, only one energy project is an IFP. The transport sector dominates infrastructure development in the Philippines, accounting for 119 out of 194 IFPs as of August 2023 (NEDA, 2024[21]). This represents over 60% of key projects, aligning with the infrastructure push outlined in the Philippine Development Plan 2023-2028. Adding new projects to the IFP list involves a four-step process:
1. Implementing agency endorsement
2. NEDA Secretariat processing of IA request
3. Approval of IFP list
4. Monitoring and progress report
The Philippine Development Plan (PDP) 2023-2028 outlines specific strategies for each objective, with explicit goals and actions demonstrating a commitment to integrating ESG considerations:
The Strategy Framework to Promote Trade and Investments aims to position the Philippines as a leading destination for ESG investments, focusing on reforestation, food security, and sustainable livelihoods (NEDA, 2023[12]). To achieve this, an ESG Investments Task Force will be established, comprising members from NEDA, the PPP Centre, various ministries, academia, and the private sector. This task force will develop transparent and credible standards and certification schemes.
The Strategy to Accelerate Climate Action and Strengthen Disaster Resilience aims to align ESG measures and investments with local adaptation and risk reduction priorities (NEDA, 2023[12]). The government plans to collaborate with private partners to harmonise their ESG targets and investment plans with local objectives. Capacity building for this initiative will be conducted through the DBCC SC-SDG under the NEDA Board.
Recommendation: Further integrating ESG factors should be discussed by the government to ensure alignment with the various factors necessary to attract both ODA and foreign capital. This would be consistent with the QII Principle 3 on embedding sustainability into infrastructure investment to meet international investor expectations (G20, 2022[9]).
The Philippines incorporates social and environmental safeguards into PPP project evaluations, with the PPP Centre supporting climate-friendly and disaster-resilient projects through technical assistance and international partnerships. Recent efforts focus on aligning with global ESG standards to attract foreign investment, including plans for an intergovernmental ESG agency (Asian Development Bank, 2021[20]). The central bank is developing a climate-focused taxonomy for supervised entities. While progress is being made, there's potential to further integrate ESG factors into project cost-benefit analyses and sensitivity studies.
The Philippines PPP Centre integrates ESG and climate resilience considerations throughout the PPP process. Environmental studies and sustainability concerns are mandatory in feasibility studies. The approval process evaluates environmental impact, climate safeguards, gender responsiveness, cultural heritage preservation, and cybersecurity. Indigenous peoples are consulted when relevant (Asian Development Bank, 2021[20]).
Recommendation: Feasibility studies must include risk assessments related to Indigenous Peoples' land rights., in support of QII Principle 5 on integrating social considerations into infrastructure investment, which stresses the importance of inclusiveness and respect for human rights (G20, 2022[9]).
ESG considerations in Philippine PPPs are evolving, with private entities often incorporating international standards into contract negotiations due to limited local ESG regulations. The banking sector is driving ESG adoption by implementing stricter requirements for project financing, offering more favourable capital requirements for sustainable finance (Climate Bonds Initiative, 2020[27]). This approach incentivises private sector participants to prioritise ESG criteria in PPP projects and gradually pushes both public and private entities towards stronger ESG compliance, despite the lack of comprehensive local legislation.
Banks and investors are increasingly adopting ESG-focused sustainable finance frameworks, driven by regulations and market demand. This trend has expanded funding opportunities for companies like AIC, with some banks offering more favourable terms for sustainable projects. However, implementation varies among institutions, with some conducting internal due diligence while others require third-party evaluations, influencing project financing decisions (Climate Bonds Initiative, 2020[27]).
In 2016, ADB supported the issuance of the Philippines' first peso-denominated green project bond for refinancing the Tiwi and Makiling–Banahaw geothermal facilities (NEDA, 2023[12]). ADB's recent survey indicates growing interest from institutional investors in the Philippine green bond market, which has potential for growth in sectors like renewable energy, green buildings, sustainable agriculture, and water management. While investors prefer smaller green projects under USD 10 million, underwriters and advisors favour larger deals exceeding USD 100 million (Asian Development Bank, 2022[26]).
A significant barrier to green bond market growth is the limited understanding of their advantages over conventional bonds, stemming from insufficient awareness among institutional investors and underwriters. There's also a misalignment in priorities: investors focus on integrating SDGs, while underwriters prioritise attracting new investors through green bond issuance (Asian Development Bank, 2022[26]).
ESG criteria have expanded beyond environmental safeguards to include climate risk assessments. Projects now face rigorous ESG compliance checks at the feasibility stage. There's an increasing focus on sustainable technologies, such as electric vehicles in urban areas, solar power integration, and energy-efficient airport operations. Companies are also aligning their practices with the ESG standards of tenants and partners in economic estates, reflecting a broader sustainability shift across the value chain.
The Department of Public Works and Highways (DPWH) in the Philippines integrates climate risk considerations into project planning and preparation, including mitigation measures in environmental management plans. The DPWH is working with the Asian Development Bank (ADB) to secure funding from the Global Environment Facility (GEE) to update its Design Guidelines, Criteria and Standards (DGCS) 2015 Edition, including other policies and guidelines such as its Social and Environmental Management Systems (SEMS) Operations Manual, to incorporate updated climate data and improve the integration of climate considerations. Audits during project implementation ensure adherence to these plans and guidelines, though comprehensive results evaluation are not yet a standard practice. Adaptation is primarily addressed by enhancing the resilience of public infrastructures and facilities through its Flood Management Program, Asset Preservation Program, Bridge Program, as well as the Network Development Program and Convergence (Climate Bonds Initiative, 2020[27]).
The Philippines, recognising its vulnerability to climate risks, has implemented comprehensive resiliency measures in the energy sector to attract investors. An energy resiliency policy requires facilities to develop compliance plans, while collaboration with USAID has led to the creation of resilience scorecards. Practical improvements include enhanced standards for electricity infrastructure and a "building back better" approach to development. Additionally, site-specific studies are being conducted to optimise the placement of renewable energy sources like solar and wind. Resiliency standards for transmission and distribution infrastructure are already in place to ensure rapid service restoration after disasters. Collectively, these efforts demonstrate the Philippines' commitment to reducing climate-related risks and enhancing the energy sector's appeal to investors.
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Source: Adapted from OECD (2021[34]) and Asian Development Bank Institute (2019[35]) policy reviews, UNCTAD Investment Policy Monitor
← 1. Executive Order 175 of 2022