PHL to join China-led Asian Infrastructure Investment Bank

The Philippines will sign the Articles of Agreement (AOA) of the Asian Infrastructure Investment Bank (AIIB), a multilateral institution aimed at boosting the infrastructure sector, before year-end, the Department of Finance (DOF) said on Wednesday.

"AIIB is a promising institution addressing investment needs, and will help close financing gaps in many countries," Finance Secretary Cesar V. Purisima said in a statement on Wednesday.

The development came months after President Benigno Aquino III expressed wariness in joining the AIIB. Aquino told Japanese reporters in Tokyo that he wanted to make sure the AIIB will not fall prey to conflicts between China and other countries.

China in 2014 launched the AIIB, which is seen to rival multilateral lenders such as the World Bank and the International Monetary Fund.

The Philippines and China are currently locked in territorial dispute over parts of the South China Sea. Manila has already sought international arbitration to resolve the sea row.

According to its website, the AIIB is a multilateral development bank (MDB) which will focus on the development of infrastructure and other productive sectors in Asia —energy and power, transportation and telecommunications, rural infrastructure and agriculture development, water supply and sanitation, environmental protection, urban development and logistics.

The AIIB will "address the daunting infrastructure needs in Asia," it said.

Purisima said the AIIB will augment and complement existing multilateral institutions in accelerating economic growth.

"Our shared pursuit of growth and development has only become more challenging as the global environment becomes increasingly complex. We thus welcome platforms where countries can work towards shared development goals in the spirit of partnership," Purisima said.

"In a globalized world, connectivity is the game," he added.

Citing data from Manila-based Asian Development Bank (ADB), the DOF said that the country's infrastructure financing needs was estimated at $127.12 billion from 2010 to 2020. This requires an annual investment of $11.56 billion.

"The Philippines, the ADB projects, stands to gain from closing this gap: accumulated reduction in trade costs is estimated to be at 15.6 percent of trade value and will result in a gain of about $220 billion in real income," the DOF said.

According to the department, the AIIB has a total capital stock of $100 billion—20 percent of which is paid-in. Meanwhile, the indicative paid-in capital of the Philippines is $196 million, payable in five year or $39 million per annum.

"We are confident that the bank's organization design and oversight mechanisms are committed to transparency, independence, openness, and accountability. We are likewise optimistic that AIIB's decision-making processes are geared towards making it a lean, clean, green institution run like a true multilateral," Purisima said.

After being granted full powers by Aquino on December 29, Purisima will sign the AOA on behalf of the country on December 31.

In case of his absence, Philippine Ambassador to the People's Republic of China Erlinda F. Basilio will take over.

"The Philippines stands to gain from signing on as a founding member. We can look forward to deepening our country's technical expertise in infrastructure as we expand bankable projects," Purisima said.

"Further, as the AIIB has no restriction on the procurement of goods and services from any country, we may foresee market expansion for infrastructure-related industries, widening job and business growth opportunities," he added.

AIIB's Board of Governors and Board of Directors will have their inaugural meeting on the third week of January 2016.

Members of AIIB will also have until December 2016 to complete the domestic ramification and other approval processes. They must also pay the initial tranche of the corresponding paid-in capital before then. —Jon Viktor D. Cabuenas/KG, GMA News