Last 29 January 2010, we gave a briefing at the General Membership meeting of the Philippine Contractors Association. Part of our briefing was to stress that since 1999, the savings rate of the Philippine economy was higher than the investment rate.

We were quite surprised that this strategic structural change was not widely known to our Philippine contractors. This has significant implications for them. In the past up to the present, the premise of the Philippine government agencies such as NEDA is that our large infrastructure projects have to be funded by foreign loans whether multilateral, bilateral or commercial. The implication for the Philippine contractors is that foreign lenders insist on hiring foreign contractors who then subcontract the work to the local contractors. The local contractors end up doing all the work and the foreign contractors getting most of the profits.

We argued before the body that they must convince the Philippine government agencies as well as our domestic banks that our large infrastructure projects can be funded locally.

Our banks should be interested in funding these large infrastructure projects as they are awash with cash. Banks have about P 600 billion parked in the Central Bank as Special Deposit Accounts.

The Word Bank has reported that the lending growth of the banks has slowed.

The end result of course is a long-term decline in interest rates.