The China-led Asian Infrastructure Investment Bank (AIIB) is looking into extending loans for two major road projects in the Philippines, according to the Department of Finance.
The AIIB was also considering a co-financing scheme with multilateral lenders for other infrastructure projects under the Philippines’ massive “Build, Build, Build” program, Finance Secretary Carlos G. Dominguez III said in a statement Thursday.
During a meeting with Philippine economic managers last week, the AIIB short-listed the following projects: the Camarines Sur Expressway (San Fernando-Pili Section) and the Pasacao-Balatan Tourism Coastal Highway, both in Camarines Sur province.
Dominguez also urged AIIB president Jin Liqun to explore flexible financing schemes amid the rising interest rate regime.
“We are quite sensitive to interest rates. Although they may seem small amounts, we do not want to reverse the trend of lowering our spreads. So it is very encouraging that you are considering variable spreads over the Libor [London Inter-Bank Offered Rate] facility. I was hoping for an update on it. We are happy about the local currency bonds as well,” Dominguez said. These would allow the country to obtain a respectable rate at the lower end of an interest spread.
In response, Jin told Dominguez the AIIB was “highly responsive to the needs of its borrowers, which is why it is willing to study flexible financing schemes in extending loans for infrastructure projects.”
“We explore other possibilities and we are looking at the possibility of variable interest rate. We are looking at the possibility of local currency financing,” Jin added.
In September last year, AIIB said it was cofinancing the $500-million Metro Manila Flood Management Project, its first deal for the Philippines.
The AIIB board had given its go-ahead for a $207.63-million share in financing the project aimed at improving flood management in the National Capital Region.
The World Bank would also lend another $207.63 million, while the remaining $84.74 million would be shouldered by the national government, AIIB documents showed.
According to the AIIB, this project “will focus on about 56 potentially critical drainage areas with an approximate land area of 11,100 hectares, or over 17 percent of the total area of Metro Manila.”
“This will include an area covered by new pumping stations of about 2,900 hectares, with a total population of about 970,000 people, or about 210,000 households,” according to the AIIB.
Aimed for completion in May 2024, the project will be jointly implemented by the Department of Public Works and Highways and the Metro Manila Development Authority, with support from the National Housing Authority and the Social Housing Finance Corp.