Japan to loan nearly $2bn for Philippine rail project

Passengers wait for their train at a crumbling station in Manila: a $3.75-billion privately financed upgrade of the oldest railway system in Southeast Asia should get under way next year. (Photo by Jilson Tiu)

MANILA -- The Japanese government is readying to lend some 240 billion yen ($1.94 billion), one of its biggest single outlays of development aid ever, for a railway line designed to relieve traffic congestion here in the Philippine capital.

     This financing will mark the first splash of what Prime Minister Shinzo Abe hails as a stream of "quality" infrastructure investment by Japan across Asia. Abe has announced plans for $110 billion in Japan-backed infrastructure investment in Asia from 2016 to 2020, 30% more than in the preceding five years.

     The Philippine loan, which would be disbursed through the Japan International Cooperation Agency, will cover 80% of the costs of the roughly 40km rail link between Manila and the city of Malolos to the north. The Philippine government will bear the remainder of the costs, which will total the equivalent of 300 billion yen.

     The two governments aim to make the loan official at the Asia-Pacific Economic Cooperation summit in November. Such so-called yen loans generally feature low interest rates and long repayment periods. In this case, the financing is likely to be "tied," meaning it comes with provisions requiring the Philippines to buy Japanese for the project, which is expected to generate orders for rolling stock and other related equipment and facilities.

     Infrastructure building in the Philippines has failed to keep pace with economic growth -- a problem common to Southeast Asian nations. With buses offering the only transportation option for many commuters, Manila is plagued by traffic jams and air pollution. The capital badly needs rail links to outlying bedroom communities.

http://asia.nikkei.com/Japan-Update/Japan-to-loan-nearly-2bn-for-Philippine-rail-project