The China-led Asian Infrastructure Investment Bank (AIIB) will co-finance the Metro Manila Flood Management and the EDSA Bus Rapid Transit system projects with other multilateral lending institutions, the Department of Finance (DOF) announced Monday.
Finance Secretary Carlos Dominguez 3rd said AIIB President Jin Liqun met recently with Philippine officials, during which he confirmed that the bank has identified the flood control and the bus transit system as two infrastructure projects it wants to help finance.
“The Philippines’ membership to the AIIB would provide the government another source of long-term funding . . . for the Duterte administration’s unprecedented infrastructure buildup,” Dominguez said in a statement Monday.
The National Economic and Development Authority (NEDA) is now preparing the documentation of the P23.46-billion Metro Manila flood management system, which is already being supported by the World Bank, for project financing by the AIIB.
The other project, the P37.76 billion EDSA Bus Rapid Transit system, is being partly funded by the Asian Development Bank (ADB), but that does not include the Public-Private Partnership portion of the project cost.
The NEDA hopes that would also be backed by the AIIB, the DOF said.
“We are all very eager to finalize the infrastructure projects in your country,” Jin was quoted as saying during the meeting “This time, we are very happy we can really talk about something to do in your country.”
Jin explained that the AIIB would focus more on infrastructure and other productive sectors rather than on direct poverty eradication initiatives, as the Bank believes that “poverty reduction is the derivative of economic development.”
“This is our difference. We may finance other productive sectors, not just infrastructure. (That includes) industrialization, manufacturing – because we believe developing countries need to move up the value chain. And if you help them, then you can help them be able to generate income,” Jin said.
Besides moving faster than the World Bank and ADB in terms of project approvals, the AIIB also offers cheaper financing terms, he said.
“Compared with the ADB and the World Bank, it will take less than half a year for the AIIB to process loans,” Jin said, adding that the AIIB also offers technical assistance to less developed countries.
In a recent report, BMI Research, a unit of the Fitch Group, said that Philippine membership to the AIIB would firmly establish the role of Chinese companies in the domestic infrastructure sector for the long term.
Although the Chinese government has said AIIB’s activities will be non-political, the research unit of the US-based Fitch Group expects that many projects will nevertheless align with the objectives of China’s ‘One Belt One Road’ initiative.
BMI said while this would provide strong support for the Philippines’ infrastructure sector, it would also risk crowding out other potential participants in the country’s public-private partnership (PPP) program.
The AIIB was established by 57 sovereign-member countries with a total capitalization of $100 billion. It became operational on January 17 this year. To date, its board of directors has approved six infrastructure projects costing $829 million.
Philippine President Rodrigo Duterte has vowed to boost spending to address crumbling infrastructure, saying
he would seek funds from China as he pivots his nation’s foreign policy away from traditional ally the United States.
The Beijing-based AIIB has been viewed by some as a rival to the World Bank and the Philippine-based Asian Development Bank (ADB).
Over the weekend Duterte attacked Washington for deferring aid because of human rights concerns over his anti-crime crackdown.
The Philippines under the government of then president Benigno Aquino joined the AIIB last year despite conflicting territorial claims with Beijing over the South China Sea.
Duterte signed the treaty in October and the Senate approved its ratification on December 5, beating the December 31, 2016 deadline set by the bank for members to submit their respective “instruments of ratification.”