Closer ties between the Philippines and China will infuse more vitality into the Duterte government’s drive to build more infrastructure facilities throughout its six-year term, Fitch-owned BMI research said.
“We expect President Rodrigo Duterte’s tilt toward friendlier relations with China will provide a boost to the Philippines’ infrastructure industry as Chinese construction and financing agreements help fulfill his plans for a ‘Golden Age of Infrastructure’ in the country,” BMI said in a report released Wednesday.
BMI pointed out that both countries have clear incentives for closer ties: China sees befriending the Philippines as a way of reducing the influence of the US in Asia; while the Philippines seeks to gain access to China’s generous infrastructure investment packages, already enjoyed by its peers in Southeast Asia.
President Duterte’s government aims to spend at least P7 trillion or $144 billion on infrastructure through 2022, and having China as an ally will help the administration finance this ambitious target, BMI said.
The government’s infrastructure pivot will fire up the country’s construction sector, which BMI expects to grow at an average of 8.2 percent in 2016 to 2020.
But BMI cautioned political uncertainty may hamper the entry of more Chinese investments in the country.
“Although Duterte has taken a less confrontational approach to the South China Sea dispute, there is the risk his position could change in future given his unorthodox political style and populist politics, which would then place into question any China-backed infrastructure projects in the pipeline,” it said.
“We further highlight that public opposition to Chinese construction projects could derail projects in the Philippines,” BMI said.
For instance, BMI said the a string of accidents in 2015 at the Ha Dong-Cat Linh elevated rail project site–for which China Railway was the main contractor–in Vietnam, resulted in government officials criticizing Chinese contractors of having poor safety practices, a concern that may be present in other markets.
Duterte is in China this week for a four-day state visit.