Philippines seeks funding for South Long-Haul, Mindanao rail projects

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Highlights

Philippines Department of Transportation is in talks with Indian and French governments, plus multilaterals, for funding South Long-Haul and Mindanao Railway projects.
Asian Development Bank expressed readiness in May to finance the P83 billion Mindanao Railway Project after China withdrew funding support.
Mindanao Railway phase one aims to serve 122,000 passengers/day and cut Tagum-Digos travel times from three to one hour, while South Long Haul project cost stands at P175 billion.

Funding push for stalled rail lines

As reported by BusinessWorld Online, the Department of Transportation is in talks with the Indian and French governments on possible funding for the South Long-Haul Railway and the Mindanao Railway project.

Acting Transportation Secretary Giovanni Z. Lopez says the agency is pitching the Bicol South Long-Haul line and the Mindanao Railway to potential investors through bilateral or government-to-government arrangements. He also says other possible funding sources remain open, including the World Bank, the Asian Development Bank, and the Japan International Cooperation Agency.

In May, the ADB said it is ready to finance the Mindanao Railway Project after China withdrew funding support. The multilateral lender says it can provide official development assistance loans or public-private partnership advisory services to help bring in investors.

Project scale and financing backdrop

The financing effort follows the Philippines' 2023 decision to withdraw its request for official development assistance loans from China for the first phase of the Mindanao Railway Project, the South Long-Haul railway, and the Subic-Clark railway. The withdrawal came after a lack of progress toward a financing decision by Beijing.

The first phase of the Mindanao Railway Project is valued at P83 billion and is set to run between Tagum in Davao del Norte and Digos City in Davao del Sur. The line is expected to carry 122,000 passengers a day and reduce travel time between Tagum and Digos from three hours to one.

The Philippine National Railways' South Long Haul project is estimated to cost about P175 billion. It covers about 557 kilometers between Sucat and Matnog, Sorsogon.

In our earlier article on Philippine sovereign bond reforms and planned index inclusion, we explained that standardizing peso government bond pricing and joining a major emerging-market bond index could broaden the investor base and support liquidity. We also noted that cheaper borrowing and stronger inflows are not automatic, and that the real payoff depends on fiscal credibility and whether any added fiscal space is directed to well-executed, productivity-boosting projects such as infrastructure.

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