ADB loan to fund tech-driven business environment reform 

A new $400-million (over P22-billion) loan to be greenlit by the Manila-based Asian Development Bank (ADB) for the Philippines aims to enhance its host country's business environment through technology, according to a report by Manila Bulletin.

An ADB concept note dated May 31 showed that the fact-finding mission for the Business Environment Strengthening with Technology Program (Subprogram 1) is ongoing this month. This policy-based lending (PBL) is scheduled for approval by the multilateral lender’s board in October this year, with loan signing slated for December.

The Department of Finance (DOF) will borrow on behalf of the Philippine government. The financing will be jointly implemented by the Anti-Red Tape Authority (ARTA), the Department of Trade and Industry’s (DTI) Board of Investments (BOI), and the Department of Information and Communications Technology (DICT).

“The proposed program will support and strengthen the government’s efforts to enhance and improve the business environment, to achieve higher business formation and investment rates. This will boost competitiveness and private sector development, stimulating job creation and expanding economic opportunity,” the ADB said.

Specifically, “the program will reduce regulatory burden and increase transparency, facilitate investment in sectors with strong development impacts, and advance the transition to digital government,” the ADB added.

According to the ADB, enhancing the business environment would facilitate increased downstream investments in the digital infrastructure and renewable energy (RE) sectors.

The ADB cited that the Philippines has experienced robust economic growth in recent years, with the private sector being a key driver—accounting for over 90 percent of employment and gross domestic product (GDP).

However, “the enabling environment for the private sector is weak, and the country underperforms in several global measurements of ease of doing business,” the ADB lamented, citing the Philippines’ low rankings in the latest World Competitiveness Ranking, World Bank B-READY, and The Economist Business Environment Rankings.

“In a 2024 survey, 63 percent of firms identified regulatory burden as a challenge. Furthermore, potential investors experience difficulty in navigating the investment approval process, such as accessing information on the required licenses and permits and the processes that need to be followed. Fragmented digital systems and a siloed approach to digital government increase costs and deter investors,” the ADB noted.

As such, “the Philippines attracts only five percent of Southeast Asia’s net foreign direct investment (FDI) inflows from 2014 to 2023, despite accounting for 11 percent of regional GDP and 16 percent of the region’s population in 2023,” it pointed out.

In particular, the ADB highlighted challenges posed by the complex and overlapping regulatory structure, cumbersome investment approval processes, as well as fragmented digital systems and a siloed approach to digital government service delivery.

In this regard, the ADB loan would support government reforms in the pipeline, namely: reducing regulatory burden and increasing transparency; facilitating investment in developmentally important sectors; and deepening digital government services.

In all, the ADB said it “seeks to invigorate the private sector as an engine of growth in the Philippines.”

“The program’s development impact is to foster an enabling business environment to allow job-generating businesses and industries to grow. The expected outcome is to improve legal, regulatory, and institutional frameworks to make the country’s enabling environment more conducive for businesses,” it said.

It disclosed that the forthcoming regular loan requested by the Philippines “will have a 15-year term, including a grace period of three years; an interest rate determined in accordance with the ADB’s flexible loan product; [and] a commitment charge of 0.15 percent per year.”

“Based on the annuity method, the average maturity is 12.1 years, and there is no maturity premium payable to the ADB,” it added.

The ADB sees no risks to lending to the Philippines, citing that “the country’s debt composition remains favorable, with two-thirds denominated in pesos, and debts are mostly medium- to long-term.”

It also noted that out of the Philippine government’s $43.8-billion total gross borrowing requirement for 2025, $5.3 billion would be sourced from bilateral and multilateral development partners, including the ADB.