THE Philippines' biggest state pension fund has teamed up with the Asian Development Bank and two other institutions to create a $625 million fund to finance urgently-needed new infrastructure to boost growth.

The Government Service Insurance System (GSIS) is lead investor with a $400 million contribution. The ADB said it will contribute $25 million while the rest will be put up by a unit of Macquarie Group and Dutch pension fund APG Asset Management

The fund, to be managed by Macquarie Infrastructure and Real Assets (MIRA), has yet to name a specific venture it would invest in. But officials said it would target a portfolio of 5 to 10 infrastructure projects, each costing $50 to $125 million, to provide diversification.

"The economy is performing very well, but there is still a strong need for greater infrastructure, so this gives investors the confidence that there will be a robust pipeline of investments to be made," Frank Kwok, senior managing director of MIRA, Asia, told reporters, adding the government has made it a priority to support the private sector's involvement in infrastructure development.

The fund, called the Philippine Investment Alliance for Infrastructure (PINAI), will focus on core infrastructure projects such as toll roads, rail mass transit, renewable energy, water, gas, and potentially social infrastructure, Kwok said.

Constrained by a budget deficit estimated at 2.6 percent of GDP this year and pressing social spending needs, Manila is banking on public-private partnerships (PPP) to develop core infrastructure that it hopes will lift economic growth to 7-8 percent in the medium term from 3.9 percent last year.

Manila is aiming to roll out at least eight PPP projects this year worth more than P120 billion, including two expressways, an airport terminal, and an extension of the capital's 30-year-old elevated railway.

"I believe the Philippines is ripe for take-off," said Philip Erquiaga, ADB director general for private sector operations.

"Our economists are projecting another year of growth in 2012, and timely investment in infrastructure assets, together with continued reforms in fiscal consolidation, and focus on transparency, will provide policymakers and investors alike with opportunities not seen in many years," Erquiaga said.

Hans-Martin Aerts, head of infrastructure Asia at APG Asset Management said in a joint statement that it expects the fund to enjoy an early-mover advantage from being the first such pool in the country. He expected it would generate attractive risk-adjusted returns for APG's client base of pension funds in the Netherlands with combined assets of over 30 billion euro.

Manila is planning to spend a record P404.6 billion ($9.7 billion) on infrastructure next year, possibly more if proposed tobacco taxes are passed into law, generating more revenue. (Reuters)