PH better off with a ‘good neighbor’ than a ‘distant cousin,’ think tank says
The Philippines has reaped some economic gains from its improved relations with China in the last two years, suggesting that the country is better off dealing with a “good neighbor” than a “distant cousin.”
This is according to New York-based think tank Global Source, which said that while critics might describe the progress as “too little, too slow,” there had been advances for the Philippines on the economic front since the rekindling of its diplomatic ties with China.
“For now, the President’s high popularity, which will not be challenged in next year’s midterm elections, means he (Mr. Duterte) would probably get his way in dealing with China. China, on the other hand, has found in President Duterte a like-minded ally to whom it could open its doors wider to the Philippines through more trade, investments and people-to-people linkages. Will this friendship between the two nations stand the test of time? That, is certainly the hope,” said a research note dated Nov. 22 written by Global Source economists Romeo Bernardo and Marie Christine Tang.
With the renewed friendship with China, Global Source noted that Chinese tourists were arriving in droves, almost doubling from 490,000 in 2015 at the height of the diplomatic chill to close to 970,000 in 2017. This year, arrivals from the mainland have reached 870,000 in the first eight months, ranking second only to South Korea, and are expected to breach a million by yearend, the research noted.
Philippine-China bilateral trade has also expanded by almost 45 percent between 2015 and 2017, from $17.6 billion to $25.5 billion, and by another 16 percent in the first half, not counting supply chain trade that passed through third countries. Global Source noted that this had turned China into the country’s largest trading partner, accounting for more than 15 percent of total trade.
“In this, China is of course as much a winner as the Philippines, evident in annual import growth (over 20 percent) far outpacing export growth,” Global Source said, noting the 14 percent compounded annual growth from 2015 to 2017 and the 8 percent growth in the first half of this year.
Practically non-existent a few years ago, Global Source noted that foreign direct investments (FDIs) have trickled in from 2016 to August this year, summing up to $220 million.
However, Global Source also cited concerns that some of the funds were being invested in the gaming industry, whose sustainability was still under question. Another concern was that the Chinese funds may be “helping to fuel a real estate bubble especially with the increasing number of Chinese nationals entering and working in the Philippines.”
As to China’s multibillion infrastructure commitments, the research noted that only two grant-financed bridges valued at $112 million had started construction while one loan agreement for an $82-million irrigation project had been signed.
“Here, sentiments are mixed: one side criticizing the slow pace of implementation; the other side relieved at the slow pace seeing how other countries have fallen under China’s supposed “debt trap diplomacy,” Global Source said.
When President Duterte went to Beijing for a state visit in 2016, he brought home $24 billion worth of loan and investment commitments from mainland China.
Yet, Global Source noted that recent developments suggested that the two countries were ready to elevate their friendship. Shortly before President Xi’ Jinping’s state visit to the Philippines, the government awarded the rights to operate a third telecommunications company in the country to a consortium that included state-run China Telecom. On his first day here, President Xi also witnessed the signing of 29 cooperation agreements, including the P18.7-billion loan agreement for the construction of a dam to provide additional water supply for Metro Manila and a memorandum of understanding on joint oil and gas development in the West Philippine Sea.
“In Manila’s small business circle, one could easily hear grumblings about the first two deals. But the third (oil and gas exploration), despite providing only a framework, is perhaps the most controversial especially since President Duterte is not seen as being assertive enough about the country’s rights in the disputed waters. With it, many fear that the Philippines may play into the hands of China and validate the latter’s claims over the WPS/SCS (West Philippine Sea/South China Sea),” Global Source said.
