Cashing in on China


Let’s face it. The government should be balancing its relations with all countries, especially the US and China. And since the government has special relations with the US that extends to economic, political, cultural and military control, the balancing between global superpowers means developing better closer ties with China.

Indeed, President Duterte has surpassed all previous Presidents in terms of his closeness to Beijing and has a better record compared to others, including Gloria Macapagal-Arroyo in terms of creating goodwill and attracting Chinese capital. He has already made three official visits to China, bringing with him a large entourage of businessmen and government officials, making him the most frequent traveler to China among all Philippine Presidents.

Expectedly, our traditional politicians are true-blue and die-hard supporters of the US. Thus, they criticize Duterte for his overtures to China. But Duterte loves Trump and the US, too. He may deny it, but he would also qualify as a staunch supporter. But at least he is balancing the relations between two powers. And there is a lot of ground to cover.

Duterte’s interest is not simply balancing relations. The Philippine government seeks China’s support for at least P738 billion worth of infrastructure projects accounting for almost half of the P1.5 trillion flagship projects under the Duterte administration’s “Build, Build, Build” program. To date, it has already identified P392 billion worth of projects for China’s consideration.

China’s portfolio in the Philippines includes: the PNR South Long Haul, Mindanao Railway, Subic-Clark Railway, Chico River Pump Irrigation Project, New Centennial Water Source-Kaliwa Dam, Ilocos Norte Irrigation, Pasig-Marikina River bridges, Davao-Samal bridge, Davao River bridges, Davao City Expressway, Panay-Guimaras-Negros bridge, Camarines Sur Expressway, Agus-Pulangui Hydroelectric Power and the Ambay-Simuai Rio Grande de Mindanao flood control project. It is also building the Philippine National Police, Bureau of Jail Management and Penology and Bureau of Fire Protection command centers in Metro Manila and Davao.

But there are many controversial issues that the government has to deal with properly. First of all, do these projects truly fulfill the needs of the masses or are they made to sacrifice their lands to give right of way only to favor big business, Chinese and Filipino alike?

China official development assistance has become controversial with its high-profile cases that stipulate the collateralization of resources and state assets should a country default on its loan payments and actually enforces its claim. The Sri Lankan government, for instance, was forced to lease its strategic Hambantota Port for 99 years to a Chinese company when it was unable to pay back its debt.

Such conditions are standard in the terms of reference in China loans and are included in the Chico River Pump Irrigation loan agreement. Additionally, these loans require that disputes in the agreement, as well as the rights and obligations of both parties, be put beyond the scope of Philippine laws and transparency in the public domain. Such disputes are to be settled at the China International Economic and Trade Arbitration Commission (CIETAC) and the agreement “shall be governed by and construed in accordance with the laws of China.”

There is a phenomenal increase in Chinese capital flowing into the Philippine economy. China has recently overtaken the US in terms of foreign direct investment (FDI) inflows and trade.

In the first semester of 2018, FDI from China amounted to $175 million as compared with Japan’s $154 million and US’s $84 million. From January to September, Philippine exports to China (including Hong Kong) amounted to $13. 9 billion compared to exports to the US worth $7.8 billion. This is just another aspect of rebalancing economic relations between the two powers.

Behind the reciprocal visits of heads of state and officials to cement diplomatic and political-economic cooperation is the target to become part of China’s Belt and Road Initiative which could otherwise bypass the Philippines. China already controls the disputed South China Sea/West Philippine Sea through the series of garrisons built on the islets and atolls to the actual loss of our claims.

In the end, it is important to remember that the US and Japan remain dominant in the Philippine economy. They hold the largest FDI stock in the country which is an important indicator of the extent to which foreign capital exploits Filipino labor, natural resources and markets and also points to how much of the country’s economic surplus is repatriated abroad.

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