MUMBAI, India—Finance Secretary Carlos Dominguez III has underscored the urgency of modernizing transport infrastructure systems in Asia’s emerging economies to boost economic expansion and increase incomes, along with improving cross-border connectivity to accelerate efforts in building a common market in the region.
Dominguez said developing transport infrastructure is critical among the island and archipelagic economic of Southeast Asia such as the Philippines, where travel and the delivery of goods and services to remote populations continue to face challenges.
“Transport infrastructure is clearly our most urgent need. It immediately contributes to economic expansion and broadens the revenue base of countries. Businesses are able to improve productivity dramatically and households are able to improve incomes with the modernization of transport infrastructure,” said Dominguez during the Asian Infrastructure Investment Bank (AIIB) Governors’ Business Roundtable held at the Regal Room of the Trident Hotel here.
For the Philippines, the big-ticket projects under its massive “Build, Build, Build” program that the Duterte administration is now implementing to bring both an immediate and strategic impact on economic growth have long gestation periods and require long-term financing, which is why the support of development partners such as the AIIB is “indispensable” to this program’s success, Dominguez said. ‘’
The “Build, Build, Build” program consists of 75 flagship projects, of which 35 have already hurdled the approval process and are ready for execution. Ten of these projects will move to the construction stage this year.
“To be sure, strategic infrastructure projects are costly. We are building a strong basis for our infrastructure program by modernizing our revenue systems, pursuing financial sector reforms intending to broaden participation and strengthening our banking system to enable capital accumulation,” Dominguez said. “But we will rely heavily on our development partners for strategic financing support.”
He said institutions like the AIIB can enable shorter tenors for the Philippines’ key projects and “superior cost advantages” over commercial funding sources by ensuring longer maturity and more favorable financing terms.
The Duterte administration plans to increase infrastructure investments from 6.3 percent of the gross domestic product (GDP) in 2018 to 7.3 percent by 2022 through its 75 flagship projects.
“It will greatly benefit emerging economies such as ours if our development partners are able to include a grant element of 25 percent and superior access to knowledge, experience, and technology,” Dominguez said.
Dominguez said recipient economies expect development institutions like the AIIB to help them obtain the best advantage by expediting the processing of financing packages without compromising the quality of project preparation and implementation.
“We look to the AIIB for more immediate and longer-term financing that will guarantee the success of our infrastructure investment program and the strong expansion of our domestic economies,” he said.
As of April 11 this year, the AIIB Board of Directors has approved 26 infrastructure projects across Asia to be financed by the bank amounting to around $4.52 billion.
In the Philippines, the Metro Manila Flood Management Project Phase 1 (MMFMP1), is the first project co-financed by AIIB with the World Bank. It was signed in December last year and declared effective on March 15, 2018.
The AIIB, which has its main headquarters in Beijing, commenced operations in January 2016 and has now grown to 86 approved members from across the globe. The bank’s mission “is to improve economic and social development in Asia by investing in high quality, financially viable and environmentally friendly infrastructure projects.”
Its first Annual Meeting was held in Beijing, China in 2016, while the second one was held in Jeju Island in South Korea in 2017.