In the Field: Exploring new opportunities in the Philippines and Thailand

The OPEC Fund is stepping up its efforts to re-engage with the Philippines, where it has been 15 years since the institution last approved a loan agreement. Following a series of bilateral meetings, including by President Abdulhamid Alkhalifa at the World Bank/IMF Spring Meetings in Washington, DC, Public Sector Country Manager Driss Belamine visited the Philippines for a fact-finding mission. 

His goal was to gauge the potential for co-financing a Public Financial Management Reform Program through policy-based loans together with the Asian Development Bank (ADB). The program is a critical fiscal strategy for the government and aims to transform fiscal resources into sound fiscal management and macroeconomic stability, as envisaged in the Philippine Development Plan 2023-2028. 

Mr. Belamine explains: “Despite a forceful recovery from the COVID-19 pandemic, the Philippines is still in a transition phase, where the country faces serious challenges in achieving the Sustainable Development Goals (SDGs) on eradicating poverty and reducing inequalities. While growth of 6-7 percent in recent years has made the country one of the fastest expanding economies in Asia, these gains have hardly been inclusive. Inadequate public service delivery exposes the poor and underprivileged groups to high and rising levels of insecurity, inequality and informality.” 

The government’s fiscal reform program, articulated around three reform areas, represents a major step forward to enhance efficient and inclusive national and local public service delivery. It aims to, first, improve the efficiency of the national public financial management system through digitalization and, second, foster private sector participation in public service delivery. Decentralization is the third important aspect to boost the delivery of public services at local level together with measures to attract local investments in climate resilience and readiness. 

The reform also addresses the needs of the Bangsamoro Autonomous Region in Muslim Mindanao in order to foster fiscal autonomy and trust between citizens and the authorities. The region was severely affected by decades of armed conflict. A governing political entity was established in 2019 following a referendum. Home to some four million people, the post-conflict area has the highest poverty rates in the country. 

During his visit Mr. Belamine met with representatives of the central government, local authorities and ADB colleagues at their headquarters in Manila. The OPEC Fund is considering supporting the reform program with two loans of US$150 million each, with a first consideration by the Governing Board potentially envisaged before the end of 2024. The ADB as a co-financing partner has been requested to provide two US$500 million loans, and the institutions are closely coordinating their steps. 

Mr. Belamine arrived in the Philippines from Thailand where he had attended a workshop on resettlement for the “Lower East Chao Phraya Irrigation System Improvement – Climate Adaptive Strengthening” project. The operation is part of the multi-billion dollar “Chao Phraya 9 Plans” of comprehensive water management investments to provide flood protection for the country’s most important river basin, which is the source of half its agricultural production and economic life. 

Floods are the country’s greatest natural hazard in terms of socio-economic impact. According to the European Union INFORM risk index, Thailand is ranked 9th among countries most at risk of flooding. In 2011, a flood crisis swept the country, impacting 13 million people, killing hundreds and causing damage equivalent to 12.6 percent of GDP. Severe floods in October 2022 resulted in government relief spending of US$663 million. 

Addressing climate-induced flood and drought vulnerabilities, the project aims to modernize and transform the existing irrigation canals into dual climate-resilient flood mitigation and irrigation assets. The OPEC Fund is already supporting the project with a US$500,000 technical assistance grant to co-finance preparatory activities. The World Bank, ADB and other multilateral lenders have also expressed interest in supporting the project. The OPEC Fund is considering additional co-financing through two US$150 million loans. 

Thailand has launched a bio-circular-green economy program and the OPEC Fund and ADB are supporting this transition to the self-proclaimed “Thailand 4.0” value-based economy with technical assistance as a potential first step. Mr. Belamine says: “The bio-circular-green economy program is a very ambitious plan, which will bring fundamental changes to all areas of life. Our task now is to translate intentions into impactful investments.”