The Market Monitor Minding the Nation's Business
The 10 members of the Association of Southeast Asian Nations (Asean), the United Kingdom and other industrialized nations were among the 50 countries that signed last Monday the Articles of Agreement of the China-led Asian Infrastructure Investment Bank (AIIB).
The Beijing-based bank is being set up to finance investments in infrastructure, including railways, cargo ports and other trade links. It is part of China’s efforts to gain a bigger role in global financial plays that are currently dominated by the United States and Europe.
The Philippines, although originally expressing interest in the aims of the AIIB, sadly lacking in infrastructure networks as it does, does not appear eager to join the bank.
“We have until December to decide,” said Edwin Lacierda, the President’s spokesman. “We will continue to study the matter.”
The US is not keen on the AIIB either; in fact, the US believes the Chinese initiative would undercut existing institutions like the World Bank by allowing looser lending standard, and is reported trying hard to convince its allies to follow suit. But France,
Australia, South Korea and New Zealand were among those who signed the agreement.
There are speculations that the US position on AIIB is partly influencing Philippines’ indecision, especially now that the Philippines appears to be mainly relying on the US for support in its ongoing row with China over disputed territories in the South China Sea (West Philippine Sea). Japan, which, like the Philippines, also has a territorial rift with China, has also kept away from AIIB.
Among the founding members of the AIIB are India, South Korea, the 10 Asean members, Germany, France, Italy, Australia, New Zealand, Turkey, Saudi Arabia, Brazil and South Africa. But among those who have not signed were Denmark, Kuwait, Malaysia, Polad, South Africa and Thailand.
The Department of Finance, in a statement, said the country “remains a prospective founding member” of AIIB.
“As the deadline to sign is on December 2015, the Philippines is taking the time given to prudently consider its membership,” it said.
“Not signing [the Articles of Agreement] does not preclude us from signing before the aforementioned deadline,” it added.
The AIIB would be joining the International Monetary Fund (IMF) and the Asian Development Bank (ADB) as funding sources of nations that want to improve their infrastructure networks.
The AIIB has vowed to adopt loan terms that would be different from those of the IMF and the ADB, which it said were choosy with their clients.
“China does not have much say in the ADB, that’s why it is now creating its own bank,” said a Chinese finance official. A check with the memberships’ hold at the ADB confirmed that China only has a 5.47-percent voting right at ADB while the US and Japan have 13 percent each.
Investment banker Renato Diaz said may be politics behind the refusal of the Philippines to join the AIIB.
“Why don’t we join if the IMF allows no exclusivity in joining any bank outside of them?” Diaz, former chairman of the House ways and means committee, said.
Although no government official has categorically said that joining the AIIB was more of a political than economic step, many critics said US pressure could be the reason the Philippines has not yet joined the bank.
Aside from the Philippines, other nations perceived to be under US pressure not to join AIIB are South Korea and Australia.