AIIB lines up infra projects for PH

The China-led Asian Infrastructure Investment Bank (AIIB) is lining up several sustainable infrastructure projects that they could finance for the Philippine government.

AIIB officials recently met with the Department of Finance (DOF) and the National Economic and Development Authority (NEDA) to talk about projects that the government wants financed over the medium term.

According to AIIB’s Laurel Ostfield, head of communications and development, the multilateral bank’s vice president and chief investment officer, D. Jagatheesa Pandian already met with DOF and NEDA officials earlier this year to plan out more financing proposals.

Ostfield said that as they begin their first project in the country, which is the $500-million flood management project co-financed with the World Bank, they are “committed to building on its (current project) work by financing other sustainable infrastructure projects in the Philippines, according to set criteria and subject to government requests.”

“Fundamental to AIIB’s investment priorities is to support sustainable infrastructure as a means of driving Asia’s socio-economic development, creating better lives and futures for billions of people,” said Ostfield.

Possible local projects that could be included in the pipeline are green energy infrastructure such as solar, windfarm, or hydro, said Ostfield. Green transport projects will also be considered such as metro, bus rapid transit (BRT), intelligent transport systems and “urban development as part of a focus towards creating sustainable cities.”

The Duterte government requires a funding of more than $10 billion per year to pursue its ambitious infrastructure development. For 2018, it has alloted $12.5 billion.

To finance various regional and local projects, AIIB plans to tap the global debt market.

For now, Ostfield said, AIIB has adequate funds for its cross-border projects. “AIIB is a young multilateral development bank in its third year of operations and, for the time being, AIIB has the capacity to support US dollar operations.”

When asked if AIIB will also consider local-currency bond issuance to finance its projects, Ostfield said this is part of the plan for the next three years.

“AIIB has plans to expand the operations it can support by analyzing, piloting, and building up local currency capabilities, both in terms of cross-currency swaps as well as capital market borrowings,” said Ostfield. “This will be delivered on a client demand basis, as well as by putting in place sufficient staffing resources and relevant treasury, risk, and control frameworks.”

AIIB has co-financing projects with both the World Bank and the Asian Development Bank (ADB). The flood management project in the Philippines is funded by both AIIB and the World Bank with near $208 million each, while the government will spend almost $85 million for the project.

Ostfield said AIIB is already in discussion with both ADB and the government on

possible co-financing projects.

“The Philippines is currently one of the most dynamic economies in the South East Asia region. However, the relatively less developed infrastructure has become a bottleneck to its rapid economic development as well as its increasing urbanization need,” noted Ostfield. “We are willing to provide financial support to infrastructure development in the Philippines and believe the country will also provide AIIB with huge investment opportunities.”

Ostfield said the flood management project – which will improve flood and drainage facilities – will affect and benefit a higher number of Filipino households or about 370,000 households compared to previous estimates of 210,000.

The total population of those who will benefit has also increased to 1.7 million compared to earlier estimates of 970,000.

“Flooding has a severe impact on people’s incomes by impacting livelihoods, businesses and commerce. The (AIIB) project will help to reduce negative impact on commercial activities by, for example, reducing lost workdays,” according to Ostfield.

AIIB will begin the six-year project with five drainage areas in Manila, Pasay and Taguig. A total of 56 drainage areas within 11 local government units will be built over time.

“As the project follows a programmatic approach, this means that new localities will be selected during implementation and their selection will be based on an objective set of technical, economic and social criteria,” said Ostfield.