Senate approves PHL membership to AIIB

The Senate has ratified the Articles of Agreement covering the Philippine membership to the Asian Infrastructure Investment Bank (AIIB), with 20 senators voting to approve the resolution.

Senator Loren Legarda, chairperson of the Senate finance committee, said the AIIB would help the Philippines achieve its growth targets through accelerated infrastructure spending.

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

The AIIB, like the Asian Development Bank (ADB) and the World Bank, is a multilateral lending institution, owned by sovereign-member countries. It aims to promote economic development in Asia.

Budget Secretary Benjamin M. Diokno said earlier the government has started setting aside money for the AIIB membership.

The Senate approved last month an additional budget of P1.86 billion for the Department of Foreign Affairs' 2017 budget to cover the partial payment for the $1-billion membership equity bank.

Legarda noted the AIIB membership would bring a host of benefits such as additional source of financing to implement better and resilient infrastructure and support rural and value chain developments to increase agriculture and rural enterprise productivity and rural tourism.

It would accelerate the annual Philippine infrastructure spending to account for 5 percent of GDP, or even higher, and improve competitiveness through better infrastructure facilities that will attract investment into the country.

Under the AIIB lending policy, the private sector can also use the services or products of the bank such as guarantees, private equity investments, and co-financing with private banks.

Last year, the Department of Finance signified the country is joining the AIIB with a paid-in capital of $196 million payable in five years or $39 million a year. The AIIB has a total capital stock of $100 billion.

The articles of agreement were signed by Philippine Ambassador to the People’s Republic of China, at that time, Melinda F. Basilio on December 29, 2015, in place of former Finance Secretary Cesar V. Purisima.

The Philippines is expected to also realize other benefits from its membership in the AIIB, such as:

• Increased opportunities for Filipino contractors and professionals for infrastructure projects in the Philippines and abroad

• More employment opportunities for Filipino workers due to heightened infrastructure spending

• Reduced trade costs of about 15.6% 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

AIIB members have until December 2016 to complete their respective domestic ratifications and other approval processes, and pay the first tranche of the corresponding paid-in capital. — With Ted Cordero/ALG/VS, GMA News