Senate ratifies Philippine participation in AIIB

MANILA, Philippines – The Philippines has tapped another possible source of major foreign funding for infrastructure projects, as the Senate concurred on Monday with the executive branch’s agreement with the Asian Infrastructure Investment Bank (AIIB), a multinational lending institution like the World Bank and the Asian Development Bank (ADB) spearheaded by China.

Twenty-one senators voted in favor of the resolution seeking the Senate’s concurrence with the AIIB Treaty, as sponsored by Sen. Loren Legarda.

Sen. Risa Hontiveros voted against concurrence.

Legarda hailed the Senate’s approval of the agreement, stressing that the Philippines’ membership in the AIIB would help achieve its growth targets through accelerated infrastructure spending. 

“Infrastructure bottlenecks have stifled our growth potential for many years,” Legarda said. “More investment is required not only to build new projects, but also to maintain existing infrastructure. The AIIB can broaden our infrastructure funding sources.” 

Like the ADB and World Bank, the AIIB is a multilateral lending institution, owned by sovereign-member countries, which aims to promote economic development in Asia. 

The World Bank estimates that a 10-percent increase in capital investment in infrastructure projects contributes to a one-percent growth in gross domestic product. 

Proponents expect the AIIB membership to bring in a host of benefits, such as additional source of financing to implement better and more resilient infrastructure and to support rural and value chain development to increase agricultural and rural enterprise productivity and rural tourism of the country. 

They also expect the treaty to accelerate the Philippines’ annual infrastructure spending to account for five percent, or even higher, of GDP and improve competitiveness through better infrastructure facilities that would attract investments into the country. 

The Philippines is also expected to reap other benefits from its membership in the AIIB, including increased opportunities for Filipino contractors/professionals for infrastructure projects in the Philippines and abroad; more employment opportunities for Filipino workers due to heightened infrastructure spending; and reduced trade costs of about 15.6 percent of trade value and real income gain of about $220 billion.

The AIIB can provide an annual financing window to the Philippines of about $200 million to $500 million. 

Under AIIB’s lending policy, the private sector can likewise avail itself of services or products from AIIB, such as guarantees, private equity investments and co-financing with private banks.