Promises of a significant economic boost from the Duterte administration’s pivot to China and Beijing’s ambitious Belt and Road Initiative (BRI) remain just that, given current realities, Japan’s Nomura indicated.
In a report titled “Belt and Road: Globalization, China style” released on Tuesday, Nomura tagged the Philippines, along with Pakistan, Bangladesh and Malaysia, as likely gaining the most in terms of infrastructure-related investments.
“The Belt and Road Initiative, China’s infrastructure push spanning over 80 countries and worth over USD1.5 trillion over ten years, will have significant economic, geopolitical and investment implications for China, but likely even more so for BRI-recipient countries,” it noted.
For the Philippines alone, Nomura said that BRI-related investment pledges were equivalent to 10.5 percent of gross domestic product (GDP), of which 1.3 percentage points are in infrastructure projects already underway.
“In the Philippines, President [Rodrigo] Duterte’s so-called ‘pivot to China’ is paving the way for a slew of proposed China-funded infrastructure projects and investments at a time when the government is pushing a ‘golden age of infrastructure’,” it said.
Nomura noted that about $4 billion (1.3 percent of GDP) in the form of Chinese official development assistance (ODA) was in the infrastructure pipeline.
The projects include the construction of the Binondo-Intramuros and Estrella-Pantaleon bridges in Manila, which will help ease congestion in the metropolis, and the much larger South Long Haul Railway that will connect ports and special economic zones.
Nomura, however, highlighted the absence of major port development projects that “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.”
It pointed out that the main port project on the overall ODA list, which is a new $200-million international container port in Cebu, would be funded by Korea. A plan to develop the coastline and port of Davao, meanwhile, remains at a standstill despite China expressing initial interest.
Nomura also believes that China-funded projects in the Philippines are at risk of delays because of domestic political struggles and a change in administration by 2022.
“As mentioned, progress of China-funded infrastructure projects is unlikely to be smooth sailing as is evident in delays of even the smaller projects,” it said.
“Most of the big-ticket multi-year 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 underway soon,” it added.
The projects would also hinge on the developments in the South China Sea claims, which will depend on the next administration’s stance.
“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 (foreign direct investment) inflows that the Philippines has received from China so far,” it said.
Nomura added that FDI inflows from China had remained tiny at just $30 million in January to November 2017, albeit up from $10 million in 2016.