World Bank supports Philippine to boost environmental protection, climate resilience

The World Bank’s Board of Executive Directors has approved new financing support for the country’s policy reforms aimed at boosting environmental protection and climate resilience, as the country strives to accelerate economic recovery and boost long-term economic growth.

The US$750 million Philippines First Sustainable Recovery Development Policy Loan (DPL) supports ongoing government reforms to attract private investment in renewable energy; enhance plastic waste management through reduction, recovery, and recycling; promote green transport, including the use of electric vehicles; and reduce climate-related fiscal risks from the agriculture sector.

“The Philippines has tremendous potential for renewable energy generation, especially in solar and wind. Government actions to encourage investments in this sector, such as promoting foreign direct investments and streamlining the permitting process, could unlock this potential,” said Ndiamé Diop, World Bank Country Director for Brunei, Malaysia, Philippines, and Thailand. 

“Renewable energy can help the Philippines mitigate climate change and bring numerous benefits, including enhanced energy security, the creation of green jobs, and improved access to electricity. It is a crucial step towards a more sustainable and resilient future for the country.”

The Philippine government has set an ambitious target of 50 percent of renewable energy (RE) in total power generation by 2040 and has started to pursue reforms to implement it, supported by this financing operation. This increased focus on RE is pursued in parallel to slowing the expansion of coal-fired power generation capacity from 2026 onwards. Achieving these targets will require a significant increase in investments in solar and wind technologies and a strong policy environment conducive for investment in RE.

This financing program also supports the introduction of new insurance products suitable for vulnerable smallholder farmers and strengthens the coverage and operations of the Philippine Crop Insurance Commission. The aim is to help mitigate climate-related disaster risks to the country’s budget and the farming sector. If properly designed and targeted, crop insurance can help stabilize farm income, reduce poverty, and provide a climate safety net for food producers.

The Philippines, along with China, Indonesia, Thailand, and Vietnam, accounts for 55 to 60 percent of the plastic waste that enters the ocean. Approximately 1.7 million tons of post-consumer plastic waste is generated in the Philippines annually, with an estimated recycling rate of only 28 percent for recyclable plastic waste. The remaining balance either leaks into the environment or is disposed of as part of the mixed waste stream.

To help address this challenge, this financing supports the implementation of the Extended Producer Responsibility Act mandating large enterprises to recover up to 80 percent of plastic packaging waste by 2028. Under the EPR Law, the financial burden of waste management is shifted to business enterprises, which will reduce the need for public money to pay for the collection, segregation, disposal, and cleanup of packaging product waste created by these enterprises.

This is a development policy loan (DPL) which provides assistance to countries undertaking reforms to address development constraints. DPLs typically support policy and institutional changes needed to create an environment conducive to sustained and equitable growth as defined by borrower-countries’ own development agenda.

This financing support addresses constraints such as, limited market competition in several key sectors as regulations create high barriers to market entry; underinvestment in infrastructure; and low foreign direct investment (FDI) resulting in part from regulatory restrictions.

“Advancing economic reforms to transform the economy remains imperative, not only to accelerate, but also to sustain the economic recovery and boost long-term growth,” said World Bank Senior Economist Ralph Van Doorn. 

“The Philippines has rebounded strongly from the pandemic but continues to face serious challenges, including high global commodity prices, disruptions in global supply chains due to the Russian invasion of Ukraine, weaker exchange rates, and high inflation. Reforms aimed at attracting private investments in public service sectors can open up new sources of economic growth and quality jobs.”

Among the reforms supported by this financing operation are amendments to the Public Service Act, allowing up to 100 percent foreign ownership in domestic shipping, air transport, land transport, express parcel and delivery, telecommunication, water supply, and toll roads. Increased foreign participation in these industries can improve the quality of service, enhance connectivity, and lower operational costs for businesses, making them more competitive.

Photo credit: iStock/ vladoskan

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