Senate Concurs Ratification of AIIB Treaty

The Senate has concurred in the ratification of the Articles of Agreement of the Asian Infrastructure Investment Bank on 5 December 2016. The Committee Report on the AIIB Treaty was sponsored by Senator Loren Legarda.

According to the [Senate Resolution No. 241] (SRN-241), the President of the Philippines has ratified the Agreement on 19 October 2016 and has submitted it to the Senate for concurrence. Also according to SRN-241, the Senate Committee on Foreign Relations, chaired by Senator Alan Peter Cayetano, conducted a hearing on 10 November 2016 wherein the following government agencies endorsed the concurrence to the ratification of the Agreement:

1. Department of Foreign Affairs
2. Department of Finance
3. Department of Budget and Management
4. Department of Justice
5. Bangko Sentral ng Pilipinas
6. Bureau of Treasury
7. Bureau of Internal Revenue
8. National Economic Development Authority

There were twenty senators who voted to approve the resolution seeking the Senate’s concurrence in the AIIB Treaty. Only Senator Risa Hontiveros voted against Senate Resolution No. 241, saying a “debt audit” should be conducted first before the country joins another international financial institution. Hontiveros said, “it is imperative that we do this, considering that our country has accumulated a substantial external debt burden, for which we are compelled to set aside a substantial portion of our annual budget pursuant to Section 26(B), Book VI of the Revised Administrative Code.”

Senator Legarda said, “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.”

According to the Senate report Senator Legarda explained that the “AIIB membership would bring in a host of benefits such as additional source of financing to implement better and resilient infrastructure and to support rural and value chain development to increase agricultural and rural enterprise productivity and rural tourism of the country. It will also accelerate the Philippines’ annual infrastructure spending to account for 5% of GDP, or even higher, and improve competitiveness through better infrastructure facilities that will attract investments into the country.”

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

• 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

• Reduced trade costs of about 15.6% of trade value and real income gain of about US$220 billion

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

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

Links:

World Bank research on Infrastructure and Growth, published June 2010