Friday, 6 July 2001
Subic-Clark toll road needs $425 M
The government may have to secure additional sources of financing for the huge $425 million Subic-Clark toll road project, which will link developments of the two former U.S. military bases, once it exceeds the sovereign guarantee limit.

Subic Bay Metropolitan Authority (SBMA) chairman Felicito C. Payumo told reporters the Department of Finance is still determining whether the amount of loans being applied by the government-owned Bases Conversion Development Authority (BCDA) under the Japan Bank for International Cooperation (JBIC) does not exceed the sovereign guarantee limit.

"It looks like there is no more hitches but we just want to be sure the project does not exceed the sovereign guarantee limit thus the need for a review by the DOF," he said.

If the project exceeded the limit, Payumo said, BCDA has to look for additional financing.

It is necessary to ensure the project did not exceed the sovereign guarantee limit because under the national budget, the government was allowed to extend guarantees to a certain extent only.

This limitation on sovereign guarantee was imposed under the budget because of the government's widening fiscal deficit. In case of default, the government as a guarantor will have to assume payments of the loan incurred by BCDA. This will in turn add up to the government's contingent liability.

In trying to trim down the budget deficit, the government also wants to program its contingent liabilities. The tollroad project is not a programmed contingent liability.

This was also echoed by Payumo as he stressed "we have to be prudent based on our deficit and the project's capability to pay for itself." The JBIC loan under the Special Yen Loan package has a 40 year repayment period including a ten year grace and a concessional one percent interest rate.

But if the project is within the limit, the BCDA has to be covered by a sovereign guarantee agreement, Payumo said. The BCDA is the implementing agency of the Subic-Clark Alliance Development (SCAD) program which identified the tollroad as one of its priority projects.

According to Payumo, the BCDA is ready with its P3 billion or $63 million counterpart funding which is equivalent to the cost for the acquisition of right of way, administration and tax and duties on the importation of capital equipment.

The BCDA has already secured the project approval from the National Economic and Development Authority (NEDA).

A formal signing of the loan agreement between BCDA and JBIC will be scheduled after both countries have signed the exchange of notes on the project.

The toll road project stretching a total of 92 kilometers, which is expected to spur commerce between the two bases, is expected groundbreak by the second quarter next year.

The first leg of the tollroad will be completed by end of 2004 to 2005 coinciding with the completion of the first berth of Subic's container port terminal while the second leg to be completed between 2006-2007 to coincide with the completion of Subic's second berth of container terminal.

Payumo explained the completion of the port and toll road must be in tandem because neither one is a stand alone project. The toll road is meant to facilitate access to the Subic port and the port is built to accommodate increased cargoes from Clark's export-oriented enterprises.