Philip­pines has most to gain from China’s ‘Belt’

Business World - - FRONT PAGE - — Melissa Luz T. Lopez

THE PHILIP­PINES has the most to gain from China’s Belt and Road Ini­tia­tive (BRI) by way of in­fras­truc­ture in­vest­ments, a global bank said, even as it cau­tioned that geopo­lit­i­cal tensions and con­struc­tion de­lays could weigh on ben­e­fits to the coun­try.

In an April 16 re­port, ti­tled: Belt and Road: Glob­al­iza­tion China Style, No­mura said the Philip­pines and Malaysia have the most to gain from warmer ties with Bei­jing, with the Belt and Road agenda ex­pected to sup­port the am­bi­tious in­fras­truc­ture de­vel­op­ment plan of the gov­ern­ment of Pres­i­dent Ro­drigo R. Duterte.

At the same time, No­mura economists cau­tioned that it could take long for China-funded projects to go from blue­print to ac­tual roll­out, cit­ing the track record of con­struc­tion firms.


“As men­tioned, progress of China-funded in­fras­truc­ture projects is un­likely to be smooth sail­ing as is ev­i­dent in de­lays of even the smaller projects,” No­mura said in the re­port which it re­leased on Tues­day.

“Most of the big-ticket mul­ti­year projects in the pipe­line are still un­der con­sid­er­a­tion and may there­fore be sus­cep­ti­ble to the risk of an­other pivot when a new pres­i­dent takes over in 2022, un­less they get un­der way soon.”

China has pledged around $ 7.34 bil­lion in soft loans and grants for the Philip­pines over the next two years, ac­cord­ing to the Depart­ment of Fi­nance. The Duterte ad­min­is­tra­tion is count­ing on such easy fi­nanc­ing to sup­port its am­bi­tious “Build, Build, Build” in­fras­truc­ture pro­gram that needs some P8 tril­lion un­til 2022.

No­mura noted that Bei­jing’s in­vest­ment pledges ac­count for 10.5% of gross do­mes­tic prod­uct.

Mr. Duterte an­nounced a “pivot to China” dur­ing his first visit to Bei­jing as pres­i­dent in Oc­to­ber 2016, ini­tially shock­ing the Philip­pines’ tra­di­tional part­ners and rev­ers­ing decades of US-aligned poli­cies.

Last week saw the Philip­pines sign six agree­ments at the Boao Fo­rum in China, which in­clude a $62-mil­lion credit line for the Chico River Pump Ir­ri­ga­tion Project and a 500- mil­lion ren­minbi eco­nomic and tech­ni­cal co­op­er­a­tion grant to fi­nance in­fras­truc­ture and other projects.

Other big-ticket projects eyed for Chi­nese fund­ing are the P10.9bil­lion New Cen­ten­nial Wa­ter Source-Kaliwa Dam Project and the P151.3-bil­lion Philip­pine Na­tional Rail­way South Com­muter Line.

How­ever, No­mura flagged that un­re­solved mar­itime tensions be­tween the two na­tions could af­fect the fu­ture of in­vest­ment com­mit­ments and fund­ing.

“[A] lot will hinge on whether tensions in the South China Sea re­main con­tained, which in turn may also de­pend on the next ad­min­is­tra­tion,” No­mura added.

“Even to­day — amid Pres­i­dent Duterte’s high pop­u­lar­ity rat­ings — there are grow­ing con­cerns about the mis­match be­tween the speed with which China has built

struc­tures on dis­puted is­lands and how lit­tle progress has ac­tu­ally been made on in­fras­truc­ture projects or the FDI in­flows that the Philip­pines has re­ceived from China so far.”

China has been build­ing struc­tures ca­pa­ble of ac­com­mo­dat­ing war­planes and war­ships in a dis­puted area in the South China Sea even af­ter the Per­ma­nent Court of Ar­bi­tra­tion in July 2016 junked Bei­jing’s claims to much of the wa­ters as be­ing with­out le­gal ba­sis.

On trade, the global bank said Philip­pine trade links to the Main­land will likely re­main lim­ited.

“[ T] here are no ma­jor port de­vel­op­ment projects — which would have been more in line with the BRI’s thrust of in­creas­ing re­gional con­nec­tiv­ity and al­low the Philip­pines to be linked to the Mar­itime Silk Road — and as such we be­lieve the project will ac­tu­ally some­what limit the prospects of new trade link­ages,” No­mura said.

China (ex­clud­ing Hong Kong) was the fourth-big­gest mar­ket for Philip­pine goods in 2018’s first two months af­ter the Japan, the United States and Hong Kong, as well as the Philip­pines’ big­gest source of im­ports in the same pe­riod, ac­cord­ing to lat­est avail­able Philip­pine Sta­tis­tics Au­thor­ity data.

For­eign di­rect in­vest­ments from China nearly tripled to $ 28.79 mil­lion in 2017 from 2016’s $10.77 mil­lion. The fig­ure soared to $151.27 mil­lion in Jan­uary alone to ac­count for 16% of the $919.22-mil­lion in­flows that month.

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