China promised Duterte US$9 billion. He’s had only US$924 million in loans and grants. Why?



China and the Philippines signed six deals last week that boosted Beijing’s funding for the Southeast Asian nation to a total of US$924 million, but the amount is a long way from the US$9 billion pledged in 2016.

The discrepancy has left critics asking what Philippine President Rodrigo Duterte has to show for his policy pivot to China, which he previously touted as a boon for trade and tourism.

The latest agreements included feasibility studies for two construction jobs tied to Duterte’s Build, Build, Build programme, an infrastructure initiative he promised would spur economic growth.

The projects – a 27.1 billion peso (US$530 million) bridge linking Panay and Guimaras islands in the central Philippines, and a 25.6 billion peso expressway in Duterte’s southern home city of Davao – are in the “advance stages of planning”, according to public works secretary Mark Villar.

Chinese Vice-Premier Hu Chunhua, who witnessed the signing of the deals in Manila on Thursday, later met with Duterte and stressed that Beijing had an interest in integrating its Belt and Road Initiative, the country’s global trade strategy, with the Philippines’ own infrastructure aims.

“We should … fast-track our cooperation on important projects, and in this way we can harvest more substantial fruits of cooperation,” Hu said.

But Duterte’s detractors have questioned why, midway through his term, the amount supplied by Beijing in loans and grants is a far cry from the US$9 billion Beijing floated in October 2016.

Back then, the president, fresh off his election victory, met with Chinese counterpart Xi Jinping and the two sides signed 27 deals. It marked the start of Duterte’s bid to boost ties, with the Philippine leader going as far as backing a joint oil and gas exploration deal in the South China Sea, which is the subject of a territorial dispute between the two nations.

An international tribunal ruled in 2016 that Beijing’s claim over the waterway was without basis, but Duterte later said he would ignore the ruling in favour of joint extraction projects, though he has since walked back on the comment in the face of a public backlash.

While Duterte has positioned his pro-China policy as a win for the economy, trade flows remain largely lopsided. Imports from China rose to US$22 billion last year, while exports to China from the Philippines were worth only US$8.8 billion.

Of the projects being financed with Chinese cash, only the US$62 million Chico River pump irrigation job in the northern Philippines, funded with a soft loan, and two bridges in Manila, paid for with grants, have actually seen construction begin.

Alvin Camba, a doctoral student at Johns Hopkins University, previously said a number of the projects included in Beijing’s US$9 billion pledge could have been delayed due to “procedural factors rather than wilful withholding”.

Bidding for China-funded railway in Philippines to start soon under Duterte’s infrastructure build-up
Cancellations, modifications or delays in foreign direct investment and memorandums of understanding on aid were not unique to China, he added.

Wilson Lee Flores, a Filipino-Chinese entrepreneur, said senior government officials had explained to him the underlying causes of bottlenecks in loans and aid from Beijing.

Flores, who chairs the Anvil Business Club, an association of young entrepreneurs of Chinese descent, said “our Philippine system requires loans and projects to be transparent. Everything has to be vetted and scrutinised so these are not immediately approved”.

Second, “the previous government was very negative towards China, so there were no talks, no negotiations and no feasibility studies before. So when the president came in, everything had to start from scratch”, Flores said.
In contrast, extensive feasibility studies had already been done for Japan-backed projects so these could be approved quickly, he added.

The China-backed New Centennial Water Source-Kaliwa Dam project northeast of Manila, a centrepiece of Duterte’s Build, Build, Build programme, has demonstrated how slow construction can be.

It was first pitched to private bidders in 2012. In 2017, Duterte offered it to Chinese state-owned firms, and in November 2018 the Export-Import Bank of China signed a preferential buyer’s credit loan agreement with the Metropolitan Waterworks and Sewerage System, the state water regulator for Metro Manila.

On the eve of Hu’s visit to the Philippines this week, the project in the city of Tanay in Rizal province received its environmental compliance certificate.

The final hurdle remains a nod from the National Commission on Indigenous Peoples since the dam would submerge ancestral homeland belonging to the Dumagat tribe.

National Economic and Development Authority director general Ernest Pernia on Thursday said the Philippines and China were discussing ways to speed up the implementation of their projects.

He admitted in a Senate hearing in August that the government would shelve some Build, Build, Build projects due to feasibility concerns, but said none of these would be China-funded jobs.

A Subic-Clark railway, Manila-Bicol rail line, Mindanao railway and Davao City expressway would all proceed as planned, Pernia said.

The four other agreements signed during Hu’s three-day visit covered trade, customs and communications.

China donated broadcasting equipment to the Presidential Communications Operations Office that included FM and medium-wave broadcast transmitters as well as other equipment for live broadcasts.

Also sent over were two sets of CT scanning equipment used to stem smuggling.

Documents were signed by the China International Development Cooperation Agency to build a 6,504 square metre (70,000 square foot) sports complex with a seating capacity of 1,000, as well as a 7,148 square metre (77,000 square foot) public market in the city of Marawi, which lies in ruins after Islamic terrorists occupied it for five months last year.

Chinese customs authorities also made progress with Philippine agricultural bosses on requirements for the export of fresh avocado. Last August, Xi promised to buy more goods from Manila.

Flores, who also owns a bakery which regularly hosts forums on Philippine-Chinese relations, described Hu’s visit as a “good sign”, and not just because Beijing wanted to keep Manila in its orbit amid power plays from Russia, Japan and the United States.

“We have become a normal, friendly country to China, which wants to make sure the normalisation is continuous,” he said.

“They want an environment that is peaceful and stable. You cannot be prosperous unless your neighbours are peaceful and friendly.”