PH wants politics-free lending by China-led bank

The Philippines is closely watching how the China-led Asian Infrastructure Investment Bank’s (AIIB) governance structure is shaping up before it commits to be part of the multilateral lender.

Speaking at the conference “Dynamic Philippine Economy: Growth, Reform and Looking Ahead” hosted by the Center for Strategic and International Studies (CSIS) in Washington, D.C. last June 24, Finance Secretary Cesar V. Purisima said the Philippine government had “concerns about the governance of AIIB” even as it also awaited the bank’s basis for granting loans.

“We do hope that AIIB will function based on purely financial basis, and not political,” Purisima said.

The Philippines and China are in a dispute over a number of islands and rocks lying in the South China Sea or what Manila calls West Philippine Sea.

Philippine officials had said that the territorial row should not be a hindrance as far as the country’s possible membership in AIIB was concerned.

Purisima told the CSIS forum that the Philippines has yet to commit to join AIIB, but was in the process of doing so.

Last October, the Philippines, through the Department of Finance, signed a nonbinding agreement to join discussions aimed at threshing out issues ahead of the bank’s formal establishment.

The China-backed lender is being positioned to become an alternative to the mainly US-backed multilateral financial institutions.

According to Purisima, the Philippine government was still looking closely at the composition of AIIB’s board of governors as well as the bank’s “fine print.”

The DOF had said that it recognized that the AIIB has “great potential to contributing to social and economic development in the region.”

An official familiar with AIIB negotiations earlier said that prospective member-countries have to commit to join no later than the end of this year.

Prospective members then have until next year to actually become a member by contributing to AIIB’s capital.

The Philippines may have to shell out about $900 million or more than P40 billion, about 1 percent of the $100-billion capitalization requirement for the bank.

The amount would be subscribed capital, of which only a fifth would be paid up, payable over five years, a source had said, citing proposals during recent meetings in China and Singapore.

The Philippines’ membership in AIIB would also be subject to the availability of budget for the contribution to the capital as well as Senate ratification.

China aims to start the lender’s operations in January next year, during which it must have more than half of the required capital.