The Market Monitor Minding the Nation's Business
Early this month, almost unnoticed by the media, the Senate ratified the membership of the Philippines in the Asian Infrastructure Investment Bank (AIIB), which is seen as a potential instrument to enable the country to catch up with the infrastructure advances of its neighbors but which then-President Benigno S. Aquino III did not pursue vigorously in the final months of his administration mainly due mainly to apprehensions expressed by the United States.
Following the Senate move, the Executive branch now has the chance to access $500 million annually from AIIB to finance infrastructure projects in the country, said Sen. Alan Peter Cayetano who, together with Sen. Loren Legarda, sponsored the resolution ratifying the Philippines’ membership in the lending institution.
Cayetano said the amount is apart from over $20 billion that China said it was prepared to extend to the Philippines following President Duterte’s visit to China.
“AIIB’s role as a major player in infrastructure development in Asia in the future is inevitable, and the timing of our membership in AIIB cannot be more perfect, as the Philippines is at the point of development where increasing our infrastructure capacity can no longer be set aside,” Cayetano said. “As Asia’s fastest-growing economy, we surely cannot afford to pass up on this opportunity to be able to tap an additional fund source to help sustain the economic progress we have started to gain under the leadership of President Duterte.”
The Senate approved on final reading the ratification of the Articles of Agreement of AIIB last December 5. Senate Resolution 241 was passed on third reading with 20 affirmative votes, one negative vote from Sen. Risa Hontiveros and no abstention.
While Aquino finally approved the agreement for the country’s participation in the AIIB by the end of 2015, the Senate did not give its concurrence until events were overtaken by the national elections last May.
Mr. Duterte ratified the agreement last October 19 and accordingly submitted it to the Senate for concurrence.
Explaining her negative vote, Hontiveros, an Aquino ally, said Congress should first verify whether the loan agreements the Philippines has entered into with various institutions were in accordance with the principles on responsible sovereign lending and borrowing, as published by the United Nations Conference on Trade and Development.
“…Before joining another international financial institution, I strongly urge that the Congressional Oversight Committee on Overseas Development Assistance conduct a debt audit to verify whether the loan agreements our country has entered into are legitimate,” Hontiveros said.
Many noted that the point she raised was almost identical to the apprehension raised by the United States on the Chinese initiative in forming the AIIB.
The resolution that ratified the agreement said the Senate considered the importance of regional cooperation to sustain growth and promote economic and social development of the economies in Asia and thereby contribute to regional resilience against potential financial crises and other external shocks in the context of globalization.
The agreement “realizes that the considerable long-term need for financing infrastructure development in Asia will be met more adequately by a partnership among existing multilateral development banks and the AIIB,” the Senate resolution said.
The AIIB was formed by 57 founding member states, including China, India, Russia, France, Germany and the United Kingdom. The Philippines signed the Articles of Agreement of the AIIB on December 31, 2015, in China. Despite the late ratification of its AIIB membership by the Philippines Senate, the country is considered a founding member of the lending institution.
Cayetano said the Senate’s concurrence with the treaty formalizing the country’s membership in the China-led multilateral institution would allow the Philippines access to funds for major infrastructure projects to sustain the momentum of economic growth that was started by the Duterte administration.
“Any institution that will promote human development, accelerate economic and social progress, and further good relations with neighboring nations should be embraced and supported,” Cayetano said.
Cayetano said the Senate’s ratification of the agreement was facilitated by Finance officials, led by Secretary Carlos Dominguez III, and their counterparts in the Chinese government.
Cayetano said that like the Asian Development Bank (ADB) and the World Bank (WB), AIIB is a multilateral funding agency owned by sovereign member-countries, which specifically aims to promote economic development and strengthen regional cooperation and partnership in the Asian region.
“Our economy has been cited recently as the fastest growing in the Asian region. We posted a robust 7.1-percent growth in the third quarter are on target to achieving a 7-percent full-year GDP growth this year,” he said.
The Duterte administration plans to raise the government’s share in infrastructure spending to 7 percent of gross domestic product (GDP) within six years.
LUIS LEONCIO