Why Philippine membership of AIIB is full of twists and turns

This was reprinted and/or republished in Xinhua, People’s daily, Global times and many other media portal in China, and “lianhe zaobao” from Singapore put this article in their website. Professor Lucio Pitlo III’s analysis is attracting many interests. It coincided that Global time also published an editorial commenting the Manila AIIB membership. Its general tune is positive, and describes it as “the road to happiness is full of hardships”.

Why Philippine membership of AIIB is full of twists and turns
Professor Luico Pitlo III. January 2016.

On Dec 30, 2015, just before the deadline of qualification as a founding member of AIIB, the Philippines hit a buzzer beater and announced its joining. Looking back at the process of Philippines membership of AIIB, It is really full of twists and turns. Philippines were among the first batch of 21 countries who had the intention to become the founding member of AIIB. However, when a big number of major western powers joined the bank one by one, Philippines instead hung back. At the time the public almost forgot the issue of Philippines membership, Philippines caught the last train to the surprise of many.

Why did the Philippines “start early, finish late”? Lucio Blanco Pitlo III, a scholar from De La Salle University Philippines, elaborates the reasons behind.


On Oct 24, 2014, DOF secretary Prisima signed the memorandum on the founding of AIIB in Beijing. The Philippines thus became one of the first countries to support the founding of AIIB. For this action of Manila, Pitlo viewed that:“The Philippine government’s decision at that time was motivated by a strong economic impetus.” Based on the 2014-2015 Global Competitiveness Report , the Philippines was ranked poorly in relation to infrastructure – 91^st out of 144 economies surveyed, far lag behind its neighboring ASEAN states like Malaysia, Thailand, Indonesia and Vietnam etc. To facilitate the infrastructure construction is where the value of AIIB lies. AIIB membership could provide extra funds for the infrastructure projects in the Philippines, the upgrade of which will attract more foreign investments, and contribute to the sustainable economic development. What’s more, the Philippines government also did not want to pose itself as an obstructionist who simply “dismisses any initiative from the Chinese side regardless of its merits”. Based on the reasons above, while many other countries were still hesitating or “waiting and seeing”, Philippines signed up relevant documents with resolution.

But the passion of Philippines towards AIIB did not last long. When manila saw its western allies U.S and Japan openly blaming AIIB with various reasons, its attitude became ambiguous. Pitlo explained that:“the Philippines is historically connected to US and Japan-led global and regional financial regime and it is not easy to challenge this longstanding foundation.” As early as 1944, The Philippines (then a Commonwealth under the US) took part in the Bretton Woods Conference that established the postwar international monetary and financial order. In 1966, the Japan-led ADB even established its headquarter in Metro Manila. “Philippine being the host country of ADB, there are more sensitivities to join AIIB. Philippine leadership may not want to be seen as being too proactive and forthcoming in pushing for AIIB.” It is worth mentioning that, seemingly returning the compliments, in July 2015, ADB dramatically increased its lending to the Philippine. To some, this could be signalling ADB's intention to offset whatever gains Philippines stands to lose if it fails to be part of AIIB.

However, by Sept 2015, there was a subtle change. ADB and AIIB had began discussing co-financing projects. In the observation of Pitlo, this signals possible realization on the part of both regional banks to see one another not as competitors, but rather as partners in spurring development across Asia. This may have prompted the Philippines to seriously reconsider its membership in AIIB.

Even so, Philippine did not announce its joining of AIIB right away. Pitlo gives out several reasons: 1) the country is preferring instead to wait and see the effects of new regional arrangements before deciding to join; 2) there seems to be no clear comparative difference between being a provisional founding member and a post-founding member moderating the impetus to rush and; 3) finally, the country in fact is not lacking of financial resources. Its true problem rooted in bureaucratic inefficiency.

As all the other 56 founding member formally joined AIIB in succession, as the questioning of AIIB becomeing weaker and weaker, Philippine finally decided to join before the deadline. Pitlo commented that:“Philippines' membership in AIIB has immediate and long term gains. A new additional lending facility is always welcome. AIIB membership can ensure continuity in terms of funding key infrastructure projects even with the onset of economic woes which may impact on the country's ability to self-finance its infrastructure development.

Pitlo viewed that AIIB membership can also improve Philippines-China bilateral relations. “It shows that the Philippines can compartmentalize its territorial and maritime disputes with China so it would not spillover and affect bilateral economic engagement. “ He also points out that, AIIB membership is a Philippine contribution in cementing ASEAN-China economic solidarity and cooperation since all ASEAN 10 members are now on board.