Despite a dispute with China over territories in the South China Sea, the Philippines government has decided this issue isn’t so important that it should scuttle access to Chinese-sponsored loans that could be used to build out the country’s infrastructure.
The Philippines on Wednesday said it was ready to join the China-backed Asian Infrastructure Investment Bank (AIIB), describing it as a “promising institution” that could help accelerate economic growth.
“President (Benigno) Aquino approved the recommendation of the DOF (department of finance) that the Philippines join the Asian Infrastructure Investment Bank,” said presidential communication secretary Herminio Coloma.
Proposed in 2013 and launched in October, the AIIB is an international financial institution that plans to fund the building of infrastructure in the Asia-Pacific region. Created by the government of China, and supported by 37 regional and 20 non-regional Prospective Founding Members (PFM), the Philippines are the last member to agree to sign the Articles of Agreement that will form the legal basis for the proposed bank.
The AIIB, expected to begin operations next year, is considered one of China’s biggest foreign policy successes.
Seen as potential rival to the US-run World Bank and Asian Development Bank, many US allies such as Australia, Britain, Germany, Italy and South Korea have joined the AIIB over Washington’s opposition.
For the Philippines, the AIIB “will augment and complement existing multilateral institutions in accelerating economic growth,” Finance Secretary Cesar Purisima said in a statement. “AIIB is a promising institution addressing investment needs, and will help close financing gaps in many countries.”
Purisima added that the Philippines was confident the bank was committed to “transparency, independence, openness and accountability.”
Chinese Foreign Ministry spokesman Lu Kang said he needed to verify whether the Philippines was indeed joining, but if it was true, it was a good thing, reported Reuters.
Founder members will initially pay 20% of AIIB’S $100 billion authorized capital. The Philippines’ indicative paid-in capital is $196 million, the Department of Finance said.
The Philippines is the fifth-largest economy in Southeast Asia. It will need $127 billion from 2010 to 2020 to finance its infrastructure needs, the Asian Development Bank has projected.
That’s a 647% rate of return for the Philippines if the AIIB gives it all $127 billion.
The Philippine has challenged Beijing before the arbitration court in The Hague over a territorial dispute involving islands in the South China Sea. Beijing has not recognized the case.
Reuters asked Lu whether the South China Sea dispute could affect the Philippines’ membership or ability to get funding from the AIIB, Lu said: “The AIIB’s operations will follow the charter agreed on by all AIIB members by consultation.”