Japan Expected to Approve $2B from Miyazawa Fund

Business World

Wednesday, December 23, 1998

By MA. SALVE I. DUPLITO

Reporter

The Japanese government will announce in the next eight days its ap¬proval of a $2-billion medium-to-long-term loan for the Philippines under the Miyazawa Initiative, Finance Secretary Edgardo Espiritu yesterday said.

This developed after Japan recently announced that it has approved a $1.8-billion package for Malaysia and $1.5 billion for Thailand under the same program.

Mr. Espiritu said this does not include $150 million in financial assistance for Philippine Airlines (PAL) which the government is hoping will also be approved by Japan.

He said the Japanese government is waiting for the approval of the flag carrier's rehabilitation program, also a condition set by the Estrada administration's for its assistance.

“The approval of the rehabilitation program hinges on the consent of its creditors and professionalization of its management. That's also what we are waiting for,” Mr. Espiritu said.

"Without those elements, the government will not help PAL," he added.

Socioeconomic Planning Secretary Felipe Medalla, however, said tapping the Miyazawa Fund for PAL’s reha¬bilitation is not a good idea.

He said the move could send the wrong signals to the country's foreign creditors and that it would be better if the government seeks out private in¬vestors to save the debt-stricken airline.

If the government does use the Miyazawa fund to support PAL, how¬ever, it will not come from the P2-billion tranche the government is set to acquire, Mr. Medulla said.

He said financing for PAL's re¬structuring will likely come from the long-term package of the Miyazawa fund.

Mr. Espiritu, meanwhile, also noted that the government is trying to smoothen the National Government's plans for the issuance of a $500-million samurai bond by next year.

He said the Japanese government, through the Japanese Export-Import Bank, will buy half of the flotation while the rest will be sold to the market.

The issuance of the samurai bond constitutes medium-term loan for the government. Mr. Espiritu hopes that the terms for this loan will be lower than 0.75%.

The Finance Secretary also added that the government is eyeing an additional $1.002 billion from Japan through the 23rd Yen Loan Package, an annual list of project loans the Japa¬nese government extends to the government.

Finance Undersecretary Joel Bañares said these projects are mostly in the environment and the agriculture sector.

The Estrada administration has been searching for external financing that will enable it to pump-prime the economy, a vow it made when it started its term.

Loans front multilateral financial institution and bilaterally with Japanese government have been on the negotiating table since early this year.

Mr. Espiritu explained that these loans being concessional are very desirable because they reduce the ne¬cessity to borrow domestically.

The government has been able to keep domestic interest rates low for the past few months allowing more corporate sector restructuring.