The Market Monitor Minding the Nation's Business
The Duterte administration will tap the China-led Asian Infrastructure Investment Bank (AIIB) to fund a total of P61.22 billion worth of infrastructure next year.
AIIB President Jin Liqun has expressed enthusiasm in finalizing infrastructure deals for financing by the new multilateral lender after the Senate finally concurred in the ratification of the bank’s Articles of Agreement before the deadline at the end of 2016.
Jin confirmed that the initial two projects the AIIB will co-finance in the Philippines with other multilateral lending institutions are the Metro Manila Flood Management Project and the Edsa Bus Rapid Transit system.
“We are all very eager to finalize the infrastructure projects in your country … This time, we are very happy we can really talk about something to do in your country,” Jin said in a recent meeting with Philippines officials led by Finance Secretary Carlos Dominguez III.
The P23.46-billion Metro Manila flood-control project is also supported by the World Bank and is now being processed for project financing by the National Economic and Development Authority (Neda), which, according to National Treasurer Roberto Tan, has tapped the AIIB for co-financing of the project.
On the other hand, the P37.76-billion Edsa Bus Rapid Transit system is partly funded by the Asian Development Bank.
The ADB support for this land-transport project excludes the public-private partnership (PPP) portion of the project cost, which the Neda hopes would be backed by the AIIB.
In the meeting, Jin also thanked Dominguez for helping facilitate the speedy concurrence by the Senate of the ratification of the AIIB treaty.
Dominguez has strongly backed the country’s membership in the AIIB, which he said would provide the government “another source of long-term funding at very reasonable interest rates” for the Duterte administration’s unprecedented infrastructure buildup.
“Achieving full membership in the AIIB is a significant milestone. Completing our domestic procedures for ratification puts us in solidarity with 56 other countries,” Dominguez said.
President Duterte signed the instrument of ratification of the AIIB last Oct. 19, after which the Senate concurred in the ratification of the Articles of Agreement of the AIIB on Dec. 5.
“We’d like to thank you very much for speeding up the ratification so that we can start very soon. We believe there are so many that we can do in your country,” Jin told Dominguez during the meeting.
Also with Jin at the lunch meeting were Dr. Supee Teravaninthorn, AIIB director general; Najeeb Haider, principal strategy officer of the Bank; Yong Zhou, senior advisor to the AIIB president; and Huan Chen, Jin’s chief of office.
Representing the Philippine side were Dominguez, Sen. Loren Legarda, Budget Secretary Benjamin Diokno, Public Works Secretary Mark Villar, Neda Director-General and Socioeconomic Planning Secretary Ernesto Pernia, Finance Undersecretary Antonette Tionko, Finance Assistant Secretary Edita Tan, and BTr chief Tan.
Jin recalled that the previous administration barely beat the Dec. 31, 2015, deadline to make the Philippines a founding member of the AIIB.
He said the Philippines could have also joined at a later date if it had failed to beat the deadline at the time but would have lost voting privileges given only to founding members.
Under the Articles of Agreement of the AIIB, the Philippines as a founding member will get an allocation of 600 founding-member votes on top of its basic votes and share votes.
In the meeting held at the Ayuntamiento building of the Bureau of the Treasury, Jin briefed Dominguez and the other Philippines officials on the AIIB’s ongoing projects, which covers infrastructure projects in Oman, Pakistan, Myanmar, Bangladesh, Tajikistan and Indonesia.
Jin said the AIIB focuses more on infrastructure and other productive sectors rather than on direct poverty-eradication initiatives as the bank believes that “poverty reduction is the derivative of economic development.”
“This is our difference. We may finance other productive sectors, not just infrastructure. (That includes) industrialization and manufacturing because we believe developing countries need to move up on the value chain. And if you help them, then you can help them to be able to generate income,” Jin said.
Jin said that besides moving faster than the World Bank and ADB in terms of project approvals, the AIIB also offers cheaper financing terms.
“Compared to ADB and World Bank, it will take less than half a year in AIIB to process loans,” Jin said.
The AIIB, he said, also offers technical assistance to less developed countries.
The AIIB is a multilateral bank owned by 57 sovereign-member countries with a total capitalization of $100 billion.
Its member countries include Australia; China; South Korea; United Kingdom; the Asean countries of the Philippines, Malaysia, Thailand, Singapore, Brunei, Indonesia, Laos, Myanmar, Cambodia and Vietnam; European states such as Austria, France, Germany, and Italy; as well as Brazil, Russia, India, and South Africa.
Out of the 57 members so far, 37 are from Asia and 20 are non-regional members. Luis Leoncio