ANALYSIS: This Philippine project will soon get AIIB funding

Jose M. Galang

Posted at Apr 20 2017 01:32 PM | Updated as of Apr 20 2017 11:57 PM

None of the big ticket infrastructure plans paraded in this week’s Dutertenomics “Build Build Build” Forum will take the honor of becoming the first Philippine project to get financing from the China-led Asian Infrastructure Investment Bank (AIIB).

If current plans are not derailed, a project to modernize drainage facilities and solid waste management in Metro Manila will secure AIIB credit support when the Beijing-based financial institution’s board of directors holds its next annual meeting in mid-June.

The possible loan approval will follow President Duterte’s expected appearance at a Belt and Road (B&R) Forum next month (May 14-15) in Beijing. China’s President Xi Jinping has invited heads of state and government leaders of 28 countries, including the Philippine president, for a “round table summit” to discuss recent achievements on the B&R initiative that China launched in 2013 as a scheme to connect economies around Asia to much of Eurasia, East Africa and Latin America. The AIIB is seen by analysts to provide much of the funding for the attainment of the B&R objectives.

Flood Management Project

If approved by its board of directors on June 16, the AIIB, jointly with the World Bank and the Global Environment Facility (GEF), will provide financing for the Metro Manila Flood Management Project to help mitigate the Philippine capital’s vulnerability to natural disasters caused by the large number of typhoons that hit the country each year.

The country, the AIIB said in documents related to the project, is struck by 20 cyclones every year causing widespread flooding across the country including Metro Manila. The Philippine government, which is the borrowing entity in the AIIB loan project, has actually started implementing a master plan for the national capital area but these activities “need to be scaled up and some of the larger and more complicated priority structural and non-structural measures have to be taken up with the support of development partners,” the AIIB said.

The AIIB and the World Bank will each extend financing worth $150 million each, with the GEF providing another $7.4 million. As the borrowing entity, the Philippine government will shoulder $192.6 million of the remainder of the total project cost of $500 million.

The project is scheduled to be started in July 2017 and targeted for completion by December 2023. The AIIB has actually agreed on the project concept as early as February of this year, more than a year after then-president Benigno Aquino III formally approved the country’s participation in the AIIB.

The planned project’s objective is to improve flood management in selected areas in Metro Manila, said one AIIB document. “This will be achieved by constructing new and modernizing existing selected pumping stations and their supporting infrastructure, by improving solid waste magement practices within the vicinity of drainage systems served by the selected pumping stations, and by supporting the resettlement of project-affected people,” it pointed out.

About 56 potentially critical drainage areas over an area of some 11,100 hectares, or about 17 percent of the total land area of Metro Manila, will be the focus of the project. Included in the project is a 2,900-hectare area covered by new pumping stations with an estimated 210,000 households (or about 970,000 individuals) affected.

Project components

There are indications that some Metro Manila residents could be dislocated during the project implementation, with issues on such matters as right-of-way challenges and resettlement efforts possibly arising.

This could be seen in the project’s four key components:

1. Modernization of Drainage Areas: The project targets the modernization of about 36 existing pumping stations and the construction of some 20 new pumping stations in “areas where the population has grown rapidly over the past few years.” The related infrastructure such as flood gates, trash racks, drainage channels and other mechanical equipment will either be new constructed or rehabilitation.

2. Minimizing Solid Waste Dumped in Waterway: The project aims to improve solid waste management practices in selected drainage areas. The collection and disposal system in the vicinity of pumping stations as well as in the upstream catchment areas will be strengthened, the AIIB said.

3. Participatory Housing and Resettlement: The project will also support land acquisition, site development, housing construction, upfront capital subsidy, rental support (for transitional period, as needed), livelihood assistance programs, and various technical assistance and capacity-building activities that will help strengthen the communities and implementing agencies.

4. Project Management and Coordination: The AIIB said management support will be provided to the implementation units for “timely and effective delivery” of the project, including monitoring and evaluation, procurement, financial management, and safeguard monitoring, among other measures.

The Metro Manila Food Modernization Project, if finally approved, will only be the 23rd project to gain AIIB financing support. The China-led financial institution has approved as of the end of March 2017 a total of $2 billion in loans to bank members.

The latest approvals included $125 million for a project to improve a dam in Indonesia to boost the safety and functionality of water supply in affected areas. Another $100 million was granted for an Indonesian project to improve access to infrastructure finance for regional Indonesian governments.

A $100 million loan for the Bangladesh Natural Gas Infrastructure and Efficiency Improvement Project, the latest to be approved by the AIIB, seeks to address a gas supply deficit and boost the South Asian country’s energy security and overall economic growth, the AIIB said.

In June, the Philippines will join the developing economies in Asia to get a slice of AIIB financing. It could further bolster China’s maritime ambitions in the resource-rich waters around Southeast Asia close to the Philippines.