MANILA, Philippines - Finance Secretary Cesar Purisima hopes that the China-led Asian Infrastructure Investment Bank (AIIB) won’t be used by the world’s second largest economy to advance its own economic or strategic agenda.
At the fourth annual Euromoney Philippine Investment Forum held in Makati yesterday, Purisima said the AIIB should not be used as a political tool to push for China’s unpopular loan or procurement decisions.
The AIIB is an initiative by China intended to help fund Asia’s massive infrastructure needs, which the Asian Development Bank estimates will reach $8 trillion by 2020.
While China has promised that the new bank will be “open, inclusive, transparent and responsible,” Purisima said concerns about capitalization, governance structures and processes must be addressed.
Standards and regulations governing the AIIB also pose a challenge.
The United States has frowned on the proposed bank, arguing it would undermine the existing multilateral institutions that support development infrastructure like the World Bank and the Asian Development Bank.
Purisima, however, believes the China-sponsored bank will complement rather than compete with established lenders.
Despite its territorial dispute with China, the Philippines will have to weigh the future economic benefits of investing in the AIIB.
Purisima said the bank would help address a backlog of unfunded road, rail, port and other construction projects in Asia.
Last October, the Philippines together with 20 other countries signed a non-binding agreement to become a founding shareholder of the regional bank.
The real test of China’s intentions will be its willingness to accept a significantly reduced role in the bank as more and more nations sign up. China’s stake in the bank would be diluted depending on the number of countries that would join and how much capital they would invest.
The participation of a vast number of countries in the bank ensures that China can not on its own make unethical lending decisions.
The AIIB is expected to be formally established by the end of this year. It will have an authorized capital of $100 billion, or about two-thirds the size of the ADB.
Despite the obstacles, China is expected to pursue the AIIB as it stands to benefit from it. This initiative is seen to create an international environment that is more conducive to its interests.
It will also broaden Beijing’s investment portfolio and democratize international economic order,.
At least 35 countries are expected to participate in the China-led bank by the deadline of March 31.
The latest to have signified interest in joining the bank are Indonesia, New Zealand, and India.
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