NEWS

Traditional partner Japan meanwhile discreetly delivers as promised massive infrastructure development funds

By Prof. Richard Javad Heydarian

As Philippine President Rodrigo Duterte passes the midway point of his six-year term, questions are rising fast and furious about whether his government will deliver the Chinese aid and investment-led economic boom it has promised.

While not a single China-backed infrastructure project has broken ground under Duterte, the Philippines’ traditional and more discreet partner Japan has continued to support and finance major infrastructure developments.

Despite China’s highly touted Belt and Road Initiative (BRI), a US$1 trillion program to build infrastructure worldwide, Japan’s infrastructure-related investments ($230 billion) are still much larger than China’s ($155 billion) in Southeast Asia.

In the Philippines, Japan has pledged to spend as much as $43.5 billion on 29 different infrastructure projects. China, in comparison, has only eight projects considered in the pipeline worth a combined $7.4 billion, according to the data from Fitch Solutions.

Even Duterte’s top officials have started to raise critical questions about the non-materialization of China’s multi-billion dollar promises, first made during Duterte’s maiden visit to Beijing in 2016 and then in subsequent top-level bilateral meetings.

Chinese President Xi Jinping (L) and Philippine President Rodrigo Duterte (R) raise a toast during a state banquet at the Malacanang Presidential Palace, Manila, November 20, 2018. Photo: AFP/Pool/Mark R Cristino
On September 26, at an event organized by the Asia Society in New York, Philippine Foreign Secretary Teodoro Locsin said that “debt trap” fears and a trade war-driven outpouring of investment into the Philippines from China are misplaced.

“We signed up this and that [China] agreement, but they hardly materialized,” he said during a panel talk with Asia Society Policy Institute president and former Australian Prime Minister Kevin Rudd, a noted China expert.

“They hardly materialized, and if you were to compare it with Japanese investments and official assistance, nothing. It seems as if Japan, if there is such a thing as a rising China, apparently there’s a phenomenon…on a rising Japan. And we’re feeling that,” Loscin said.

His comments came amid festering territorial disputes between the Philippines and China in the South China Sea, which have escalated since a suspected Chinese militia vessel rammed and sank a Filipino fishing vessel at the sea’s Reed Bank in June.

National Security Advisor Hermogenes Esperon and Defense Secretary Delfin Lorenzana, meanwhile, have warned about the threat posed by a recent influx of hundreds of thousands of illegal Chinese workers into the Philippines.

Duterte has repeatedly defended China, which has been a staunch supporter of his controversial drug war in international fora. Most recently, Beijing opposed an Iceland-sponsored resolution at the United Nations Human Rights Council, which called for a UN-backed probe into Duterte’s anti-drug campaign.

Even so, China’s promise of an infrastructure investment bonanza, funds that were supposed to drive Duterte’s touted “Build, Build, Build” campaign, has not arrived, putting into doubt the wisdom of his mostly acquiescent policy in the South China Sea.

A Filipino road construction crew on the northern island of Luzon in a file photo. Photo: Twitter
The Filipino leader has repeatedly argued that a pragmatic approach to the sea disputes would be reciprocated with Beijing’s economic largesse.

Ahead of his election in mid-2016, he made it clear that he prefers warmer ties with China, because “We have to talk and what I need from China is not anger. What I need from China is help to develop my country.”

Just months into office, Duterte chose China as his first major state visit in October 2016, where he supposedly secured $24 billion in aid and investments, and declared his will to ‘separate’ from the United States, the Philippines’ mutual defense treaty ally.

Three years later, among China’s ten proposed big-ticket infrastructure projects, only the $60 million Chico River Pump Irrigation Project and another has apparently cleared the preliminary stages of implementation.

Yet even those projects have been hounded by controversies, with critics questioning the financing and repayment terms. Amid an outcry, Duterte recently called for a review of all Chinese projects under consideration.

Other Chinese big-ticket projects such as the Mindanao Railway and the billion-dollar Subic-Clark cargo train project are likewise yet to launch, with the former still at the bidding stage.

Meanwhile, the 29 deals signed during Chinese President Xi Jinping’s visit to the Philippines last November were almost entirely non-binding, leaving little indication of which will and won’t be implemented.

Last year, then-Budget Secretary and current Central Bank Governor Benjamin Diokno complained that China’s leadership should “put pressure on the speed of implementation of all these projects.”

Philippine Finance Secretary Carlos Dominguez III has admitted to several “roadblocks”, including China’s initial insistence on using renminbi in aid disbursement, heavy reliance on Chinese workers and managers, and an unwillingness to co-finance projects with other lenders such as Japan and the Asian Development Bank (ADB).

So far, China’s infrastructure development aid has been limited to two bridges across the Pasig River, totaling about $198.8 million. Critics, however, claim that the projects were either unnecessary or ended up benefiting only Chinese contractors.

Philippine President Rodrigo Duterte (L) shakes hands with Japanese Prime Minister Shinzo Abe in Manila, November 13, 2017. Photo: The Yomiuri Shimbun via AFP
Japan, still the Philippines’ leading source of development aid, has meanwhile continues to bankroll several major infrastructure projects, including the multi-billion dollar Metro-Manila subway metro project, the country’s first, and the North-South Commuter Railway project, which will connect industrialized regions in the northern island of Luzon.

More Japanese infrastructure funds could be on the way after the European Union and Japan signed an infrastructure development deal on September 27 to coordinate transport, energy and digital projects linking Europe and Asia as an alternative to China’s BRI. The new EU-Japan initiative will be backed initially with $65.5 billion in funds.

Philippine Presidential Spokesman Salvador Panelo has been quick to downplay concerns over the delay in Chinese investments, saying the problem is as much local as Chinese.

In response to recent queries, the spokesman said, “You know why? One time I talked to Ambassador Zhao [Jianhua] and he told me, ‘Your government requirements are stringent. There are a lot of processes.’”

“We have no problem on our side, they said. We are always okay, it’s you that are slow, that’s what it seemed to be,” China’s top envoy to the Philippines reportedly told Panelo.

Source: Asia Times