Joining China-led bank will benefit PH

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IF PNoy really wants to do well by his fellow Filipinos during the final year of his term, he should resist the pressure being exerted by the United States and set aside his narrow-minded anti-China stance by signing up for the Asian Infrastructure Investment Bank (AIIB) organized by China. The way we see it, the country’s membership in the newly-established multilateral lending bank will be beneficial to the country in the long run.

With an authorized capital of $50-billion (to be raised eventually to $100-billion), the AIIB will provide a new source of funding to build much needed infrastructure in poorer parts of Asia, including the Philippines, to help meet our region’s enormous infrastructure needs. The Asian Development Bank (ADB) has previously estimated that developing Asian countries have an infrastructure demand of about $8 trillion over the ten years to 2020.

At present, however, the current crop of multilateral development banks cannot fill Asia’s enormous infrastructure funding gap. The ADB has a capital base of just over $160 billion while the World Bank has $223 billion. Moreover, big institutions like the ADB and World Bank are spread too thinly, giving out loans around the world on everything from environmental protection to gender equality. In contrast, the AIIB will concentrate its financial muscle on infrastructure and only within the Asian region.

With $3.8 trillion in foreign currency reserves, China is well-positioned to take a leading role in the world’s newest multilateral development bank. As the biggest shareholder in AIIB, China can extend its influence in the region with its “soft power” as one of the top three major industrial economies in the world.


This is why the United States has been lobbying its allies not to join the China-led bank, which is seen as a direct challenger to the Washington-based World Bank and the Japan-dominated Asian Development Bank. Although the US says it welcomes new multilateral financial institutions, it has covertly been putting pressure on countries around the world, the Philippines included, to keep away.

Notwithstanding America’s backdoor efforts, several of its key European allies like the United Kingdom, Germany, France and Italy have joined as founding members of AIIB. Our Asia-Pacific neighbor, Australia, also joined the new multilateral bank as the bank’s sixth largest investor with its $719 million initial contribution. Even Asean economic powerhouse Singapore signed on as an AIIB founding member.

The Philippines, which is locked in a territorial dispute with China, is still hemming and hawing on whether to join the AIIB. PNoy says the country needs to be “very, very cautious” about becoming a member of the China-organized bank saying that the funding extended by AIIB could be used as a political tool by China. He cited how Export-Import Bank of China (China Eximbank) called in the loan on the Northrail project (the rail line project to Clark) after the incident in Scarborough Shoal crisis of 2012 where

But PNoy wasn’t being entirely truthful. What prompted China’s Eximbank to call in the loan was the nullification of the Northrail contract by the Supreme Court, which said that the award of the Northrail project to China’s Sinomach without competitive bidding was against the law. Northrail then notified Sinomach of its inability to carry out the agreement, prompting EximBank to declare a default event.

PNoy should also stop using our conflict in the Spratlys to justify our non-participation in AIIB. If the conflict in the Spratlys were to define our relationship in AIIB, why did Vietnam – which is also at odds with China over latter’s incursion into the areas being claimed by Vietnam in the Spratlys – sign up with the AIIB as founding member?

Although China has the biggest stake in the AIIB, it cannot afford to run the bank like its personal fiefdom, especially with member-states like Australia who joined on the assurance that China would run the bank with “appropriate transparency and accountability.”

The AIIB will be a test of China’s capability to run an international financial institution at par with the likes of ADB and WB. China can ill afford to lose any member-state on account of its shoddy governance since that would deal a severe blow to its credibility.

The way we see it, the biggest plus to the country’s membership in the AIIB is that it will cut down government’s over-dependence on public-private partnership (PPP) schemes to finance infrastructure projects.

For the past two decades, PPP projects have only increased the costs of public services for ordinary consumers. This outcome is inevitable because private companies must maximize its profits to survive. But the focus on profits is fundamentally incompatible with government’s obligation to provide cheap, affordable and universal access to basic public services.

Besides, public finance (or government borrowing) is cheaper than PPP funding. Governments can almost always borrow money more cheaply than private companies because there is very little risk of defaults.

It’s time the government stopped passing the financial burden of expensive and bloated PPP projects to our countrymen. That’s not only unfair, that’s also anti-Filipino.

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7 Comments

  1. This Attorney is too naive.Not sure whether you are well versed on the topic that you are advocating. There is free lunch in this world. Everyone has its onw interest to protect. Do you thinks it’s beneficial? Maybe, if you maintain the utang mentality or AID mentality. We Pilipino can think better and do better than others, even this Attorney.

    What is needed is strong leasership in the country that will set a clear direction for the nation, jail all corrupt politicians, government officer, bribers and even journalist who spread lies and rumours.

    Let’s pray that the day will come for Philippines to prosper.

  2. Why China had to get out from Spratley ? territorial dispute had nothing to do with AIIB more than 57 nations already join the AIIB even without Phil. participation does not matter at all.

  3. Why China had to withdraw from Spratley? AIIB had nothing to do with territorial dispute . More than 57 countries already join the AIIB even without Phil. joining does not matter at all .

  4. Noy, ang WB, IMF, ADB are also used to influenced the poor countries needing loans, so what is so different even if AIIB should become just like them?

  5. Dominador D. Canastra on

    This is v ery sound advice, as usual, from Mr. Dulay. Thank you, sir.
    To Manila Times: Why is there no Facebook box for Like above? There are only the Share and Tweet boxes.

  6. Before Philippines join China led bank, Communist China should get out from Bajo de Masinloc and the Spratley Islands. It’s useless and nonsense affiliating to be on the side of Communist China when you know for a fact the 9-dash line ownership of the entire sea of Southeast Asia is full of absurdity and lies. What is happening in Masinloc, Zambales probably is not your concern. Patriotic Filipinos prefer to oust Communist Chinese in Bajo de Masinloc so fishermen from Zambales and Pangasinan would have their livelihood recovered. Materialism is not the answer. It is honor, decency, dignity, and moral values Filipinos would like to uphold. Life is too short to live in dignity.

  7. Remember when you are indebted to somebody. You pleased him as much as you can right? They also sue you when defaults happen.