Finance Secretary Carlos Dominguez. INQUIRER FILE PHOTO
The Duterte administration wants the Philippines to formally join the Asian Infrastructure Investment Bank (AIIB) in time for the President鈥檚 trip to Beijing this week to erase the massive public works gap that has hobbled the local economy.
Finance Secretary Carlos G. Dominguez III said membership in the China-led multilateral lending agency, an international treaty that requires the ratification of the Senate, would unlock financing potential for the long pipeline of infrastructure projects President Duterte hopes to build during his term.
鈥淲e have a lot of projects,鈥� Dominguez said in an interview last week. 鈥淚n the six years [Mr. Duterte] will be in office, we think we will be spending around P8 trillion for infrastructure.鈥�
The AIIB is an international financing agency launched by China in 2014 and is headquartered in Beijing.
Senate approval
Largely seen as China鈥檚 political and economic counterweight to the US-led World Bank and the Japan-led Asian Development Bank, the AIIB was founded by 57 member nations. Philippine participation came a day before the deadline on Christmas Day of 2015.
The country鈥檚 formal membership in the AIIB, however, must first be approved by the Senate.
鈥淭hat鈥檚 why I am trying to get the AIIB through the Senate already,鈥� Dominguez said, expressing the hope that lawmakers can tackle and approve the treaty this week.
鈥淚 was speaking with Senator [Alan Peter] Cayetano and he says he hopes he can do it. The documents are already with them since, I think, [Wednesday] afternoon. That for me [already] signals [an] achievement,鈥� Dominguez said.
The finance chief, the de facto head of the Duterte administration鈥檚 economic team, said membership in the AIIB would unlock funding for all other projects that the government would want to undertake鈥攚hether they be a new rail project, an expansion of the country鈥檚 aging road network or new airports.
PPP 鈥榬ethink鈥�
At the same time, Dominguez revealed that the administration was in the process of implementing a major rethink of the public-private partnership (PPP) program鈥攖he economic centerpiece of the previous administration that was criticized for its turtle-paced implementation of critical infrastructure projects.
鈥淲e are changing the way we are looking at PPPs,鈥� he said. 鈥淭he past administration used to use PPP to raise money by charging [an upfront fee from prospective private sector partners]. Frankly, I don鈥檛 think that鈥檚 fair because that鈥檚 like taxation without representation.鈥�
This scheme, in which the party that pays the government the highest up-front fee for the right to build and operate a project, is to the detriment of the public, which will ultimately shoulder the cost, Dominguez explained.
Borrowing cost scenarios
鈥淲ho else will pay for it?鈥� he said. 鈥淚t looks good [on the government鈥檚] balance sheet, but someone will have to pay for it.鈥�
Dominguez added that the previous administration also used incorrect borrowing cost scenarios for evaluating PPP projects, including the assumption that private sector firms would be able to fund infrastructure project more cheaply because of efficiency considerations.
鈥淭hey were always assuming that the private sector will be 15-percent cheaper than the government,鈥� he said. 鈥淲hy should that be?鈥�
The finance chief cited the instance of a 28-kilometer road that the previous administration wanted to widen through the PPP scheme, with the rationale that a private proponent would implement it more efficiently.
He pointed out, however, that the project could have been built more cheaply if it was funded by the national government, whose funding costs are lower than any other Philippine private firm.