DOF: PH set for a winning streak in China-led AIIB gamble
The Philippines stands to gain a huge return on investment from its contribution to the capitalization of the Asian Infrastructure Investment Bank (AIIB) once it becomes a member of the China-led multilateral lender.
According to a briefing paper from the Department of Finance (DOF), the Beijing-based AIIB “can provide an annual financing window to the Philippines of about $200 million to $500 million, representing a 400-1,150 percent return on investment of our required paid-in capital of $200 million in five years.”
The financing that can be provided by the AIIB easily dwarfs the $11.56-million in investments the country needs yearly to narrow the infrastructure gap until 2020, as earlier projected by the Manila-based Asian Development Bank (ADB).
“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 documents read. The Duterte administration targets to achieve a 5.4-percent infrastructure spending-to-GDP ratio next year, which will then be moved up to 7.2 percent by 2022.
The DOF said the Philippines also stood to benefit from the AIIB in terms of increased jobs for Filipino contractors, manual laborers and professionals who would have more opportunities for projects not only in the Philippines but also abroad; reduced trade costs of about 15.6 percent of trade value and a gain in real income of $220 billion; and increased competitiveness and productivity, on top of improved market connectivity and enhanced economic opportunities for both urban and rural areas of the country.
The Senate had already committed to swiftly ratify the country’s AIIB membership, through which the government was eyeing to partly finance the Edsa bus rapid transit (BRT) and Metro Manila flood control projects.
During a hearing of the Senate committee on foreign relations last Nov. 10, Sen. Loren Legarda said she would work to secure her colleagues’ concurrence to complete the ratification of the Philippines’ membership within the month, ahead of a Dec. 31 deadline.
“I assure you, this will be passed,” she said.
The Philippines announced early last year it would be joining the AIIB. Today, however, the country remained one of nine prospective members that have yet to deposit the instruments of ratification, National Treasurer Roberto B. Tan said. Forty-eight countries in and around Asia are already AIIB members.
While the country may request from the AIIB more time to firm up its membership beyond the deadline, Tan said it would be more beneficial for the country to become a member as soon as possible.
“Based on the track record of the AIIB, it already approved financing for six projects—quite a remarkable speed to approve projects,” Tan said of the lender that formally commenced operations early this year.
Upon AIIB approval, the Edsa BRT as well as the $400-million Metro Manila flood control project may be pitched for co-financing with the ADB, Tan said. “Those are the projects most ready for rollout,” he told reporters.
National Economic and Development Authority Director Jonathan L. Uy said about 31 projects were in the pipeline for financing by the Chinese government.
To become a full-fledged member, the Philippines must shell out P1.86 billion before yearend, an amount which Department of Budget and Management director Rolando Toledo said can be sourced from savings upon the approval of Budget Secretary Benjamin E. Diokno.
The second and third installment payments worth a total of P3.72 billion were already included in the proposed 2017 national budget.
The Philippines’ indicative paid-in capital contribution totals P9.3 billion, payable in five tranches until 2019.
The country will have total voting power of 12,821 votes or 1.1 percent of the total voting power across all members. It will also join the proposed constituency comprised of Bangladesh, Malaysia, Maldives, Nepal and Thailand.
