The Market Monitor Minding the Nation's Business
The Duterte administration awaits promising development and financing cooperation with the Asian Infrastructure Investment Bank (AIIB) to help fund the country’s big-ticket infrastructure projects, according to National Treasurer Roberto Tan.
Tan said that following last week’s ratification by the Senate of the Articles of Agreement formalizing the Philippines’ entry as a founding member of the AIIB, the government may now request that AIIB send a mission to the country to discuss the proposed list of projects prepared by the National Economic and Development Authority (Neda).
The National Treasurer said the Edsa Bus Rapid Transit project and the Metro Manila flood control project would be among the first to be presented to the AIIB for possible funding.
“These are the projects that are the most prepared in terms of government approvals, feasibility studies and other requirements, and are already in the pipeline. So these projects can be processed most expeditiously for co-financing by AIIB,” Tan said.
Finance Secretary Carlos Dominguez III has said that the BRT is also supported by the Asian Development Bank, while the Metro Manila flood control project is being backed by the World Bank.
Dominguez has strongly backed the Philippines’ membership to 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.
“AIIB serves as the only multilateral development bank that focuses on infrastructure. The operations and policies of the Bank are designed to be lean, clean and green. It is committed to principles of transparency, independence, openness and accountability,” he added.
Tan said the Philippines is “looking at $300 million to $500 million for the initial year,” as financial window that it can tap from the AIIB.
“Funds from AIIB will serve as an additional source of concessional financing to support our growing infrastructure requirements. Its terms and conditions are comparable to those of other multilateral development banks,” Tan said.
The Senate, voting 20-1, ratified last Dec. 5 the Philippines’ entry into the AIIB, beating the Dec. 31, 2016 deadline set by the bank for members to submit their respective “instruments of ratification.”
In its briefing paper, the DOF said “AIIB can provide financing to major capital investments of the government and the private sector. AIIB can support the government in reducing the infrastructure gap in the Philippines and accelerating annual infrastructure spending to account for 5 percent of GDP (gross domestic product).”
The AIIB is owned by 57 sovereign-member countries with a total capitalization of US$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; and European states such as Austria, France, Germany, and Italy; Brazil, Russia, India, and South Africa.
Out of the 57 members, 37 are from Asia, and 20 are non-regional members.
The AIIB became operational on Jan. 17, 2016. To date, the Board of Directors of the Bank has approved six infrastructure projects totaling to US$829 Million.
According to Dominguez, the Duterte administration needs at least P8 trillion to close the infrastructure gap over the next six years.
“AIIB can contribute in closing the country’s infrastructure gap for the next six (6) years, which is estimated at P8 trillion. The funding that we can tap from AIIB will support the infrastructure priorities under the Duterte administration’s 10-Point Socio-Economic Agenda,” Dominguez said.
Dominguez said an initial list of 18 big-ticket items worth P427.5 billion combined have already been approved by the NEDA for this unparalleled infrastructure buildup.
The government is financing its infra program through a mixture of soft loans, grants, official development assistance (ODA) and the public-private partnership (PPP) program, Dominguez said.
The Duterte administration’s approved major infra projects, so far, include the improvement of the Ninoy Aquino International Airport (NAIA), South Line of the North-South Railway Project, Metro Manila Bus Rapid Transit, Metro Manila Flood Management Project, New Cebu International Container Port, and the Panglao Airport, Dominguez said.