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AIIB funds may be tapped for PPPs

Posted on January 05, 2016

THE PHILIPPINES may secure financing from the China-led Asian Infrastructure Investment Bank (AIIB) for projects proposed for public-private partnership (PPP), the country’s national treasurer said.

“I would look at mass transit, which is very important, water sector, probably some telecommunications projects -- which are mainly private -- and given that we are very much pushing public-private partnerships right now, the bank can also co-finance that,” National Treasurer Roberto B. Tan said in an interview yesterday over ABS-CBN News Channel.

The administration of President Benigno S.C. Aquino III has identified 55 projects that mostly involve infrastructure for implementation under the PPP scheme. The government has thus far contracts for 12 PPP projects cumulatively worth some P217.4 billion since the third quarter of 2010.

“The NEDA (National Economic and Development Authority) committees on investment, infrastructure and PPP are the interagency bodies that agree and line up infrastructure projects for implementation while the DoF (Department of Finance) assesses which would be the best financing source for these,” Mr. Tan said separately in a text message yesterday.

“It is through such process that proposals for financing and technical assistance can be developed and submitted for AIIB support.”

The government should also prioritize projects that would be “hard” to implement under the PPP setup, Cayetano W. Paderanga, Jr., a former NEDA director general, said in a phone interview.

Mr. Paderanga cited public roads and projects aimed at mitigating the impact of climate change on the farm sector, and efforts to protect the environment that do not offer guaranteed returns to private investors.

“The critical infrastructure projects, you can see them... You can see, for example, the traffic that we have to solve to tell our local and foreign investors that support services will be there,” the economist said.

“It is not difficult to decide which projects to prioritize,” Mr. Paderanga noted. “In fact, our problem is to make sure that we do not forget the soft infrastructure like education and health.”

Still, the Philippines will have to wait for some time before it can avail itself of financing from the new regional lender that is widely perceived to rival the World Bank and the Asian Development Bank which are led by the US and Japan -- both close strategic allies of Manila in its territorial row with Beijing over parts of the South China Sea.

The Philippines joined 56 other countries in signing the articles of agreement as a founding member last Dec. 31, the deadline to do so.

“We still have to ratify our membership this year so that is up to the Senate to decide,” Mr. Tan said when asked how soon the government plans to avail itself of financing from the AIIB.

The government has one year to secure ratification. “Domestic approval processes for our membership in AIIB requires only presidential ratification with Senate concurrence,” according to the Finance department.

AIIB will have an authorized capital stock of $100 billion, 20% of which will be paid-in. To join, the Philippines will have to contribute its share amounting to $196 million, payable in five years at $39 million annually.

“The benefits of course are several times more than this: we will be getting a lot of financing that will complement our other financing sources for infrastructure projects, particularly, which [in] the Philippines are very much wanting right now,” Mr. Tan said.

“Of course this will be blended with the other financing sources, including sources that we can generate commercially.” -- Keith Richard D. Mariano