The Market Monitor Minding the Nation's Business
By Rowena C. Ocfemia
After more than six months of vacillation, the government has officially signed an agreement to join the China-led Asian Infrastructure Investment Bank (AIIB).
Solicitor General Florin Hilbay, member of the Philippines panel in the arbitration case on the maritime dispute with China pending in the United Nations tribunal in the Hague, said the Philippines’s membership in AIIB would not affect the territorial row. “Economic cooperation between the Philippines and China is not incompatible with the resolution of our maritime disputes,” Hilbay was quoted as having said.
Philippines Ambassador to China Erlinda Basilio signed the articles of agreement of the China-led Asian Infrastructure Investment Bank (AIIB) last Friday, Jan. 1, in Beijing, making the Philippines the 57th founding member of the newly created lending institution. President Aquino gave the go-signal to join the bank just three days earlier, the culmination of more than six months of government “study,” but which critics described as “more of vacillation.”
The President’s decision, according to sources, was apparently prompted by a “strong recommendation” from Bangko Sentral ng Pilipinas Governor Amando M. Tetangco Jr., Finance Secretary Cesar Purisima and SoocioEconomic Planning Secretary Arsenio Balisacan, who is concurrent director-general of the National Economic and Development Authority (Neda).
AIIB is a multilateral development bank (MDB) similar to the World Bank and the Asian Development Bank.
It aims to provide lean, clean and green financing: lean, with a small efficient management team and highly skilled staff; clean, meaning an ethical organization with zero tolerance for corruption; and green, meaning an institution built on respect for the environment.
The AIIB also aims to put in place strong policies on governance, accountability, financial, procurement and environmental and social frameworks. It will complement and cooperate with the existing MDBs to jointly address the daunting infrastructure needs in Asia.
Chinese President Xi Jinping and Premier Li Keqiang announced the AIIB initiative during their respective visits to Southeast Asian countries in October 2013. The bank is envisaged to promote interconnectivity and economic integration in the region and cooperate with existing multilateral development banks.
Citing ADB figures, the Department of Finance (DoF) said the Philippines’s infrastructure financing needs from 2010 through 2020 are estimated at $127.12 billion, which would require an annual investment of $11.56 billion.
The Association of Southeast Asian Nations (Asean), of which the Philippines is a founding member, has a financing gap of $1.08 trillion through the decade.
In all, there are 51 members of AIIB, including the Philippines. The US is not a member but many of its allies are, such as Australia, Germany, France South Korea, New Zealand, Saudi Arabia, and the United Kingdom
The creation of the AIIB is also seen as part of China’s efforts to deepen its role in the region, particularly within Asean, which became an economic community last December.
Explaining why the Philippines finally decided to join the AIIB, Finance Secretary Cesar Purisima said the bank will help boost economic growth not only in the country but also in the region.
“Our shared pursuit of growth and development has only become more challenging as the global environment becomes increasingly complex. We, thus, welcome platforms where countries can work toward shared development goals in the spirit of partnership,” Purisima said. “In a globalized world, connectivity is the name of the game,” he said.
But last June, he told a conference in Washington of the US think tank Center for Strategic and International Studies that the Philippines had “concerns about the governance of the AIIB.” But he expressed hope at the same time that “the AIIB would function based on purely financial basis and not political.”
At the time, the brewing maritime tension between the Philippines and China was at its height, prompting former Budget Secretary Benjamin Diokno to say that politics was behind the delay in the country’s joining the bank.
“I think it’s more politics than economics. The relations between the Philippines and China relations are strained under the Aquino administration,” Diokno said.
It was also hinted that the Philippines at the time was just following the lead of the United States, which, together with some of its allies, had snubbed the AIIB. The United States earlier expressed support for Manila in its row with Beijing over some is
lands in the South China Sea.
Diokno said the AIIB has the potential to be more effective than its multilateral rivals — the International Monetary Fund (IMF) and the Asian Development Bank (ADB), both of which as initiatives of the US and its allies.
“AIIB is an initiative of China and will probably be better funded than the alternative funding institutions,” Diokno said.
Purisima now says the AIIB “is a promising institution that addresses investment needs and will help close financing gaps in many countries.”
He also said he sees the China-led bank as “a chance for greater collaboration with member countries, especially with Asean, on regional infrastructure goals.”
The AIIB was established in October 2014. On June 29, 2015, officials from 50 countries, excluding the Philippines, signed the AIIB’s AOA.
The AIIB has total capital stock worth $100 billion, 20 percent of which is paid-in.
“We can look forward to deepening our country’s technical expertise in infrastructure as we expand bankable projects. Further, as the AIIB has no restriction on the procurement of goods and services from any country, we may foresee market expansion for infrastructure-related industries, widening job and business growth opportunities,” Purisima said.