RENEWED tensions in the West Philippine Sea may prompt the Philippines to seek funds for infrastructure projects from Japan instead, according to a Fitch-owned think tank.
BMI Research on Monday said the recent order by President Rodrigo Duterte for the Philippine Navy to occupy islands within the 200-nautical-mile exclusive economic zone in the disputed waters raises political tensions between the two countries and “which poses a downside risk for China’s previously proposed investments in Philippine infrastructure projects.”
The Philippine government signed $24 billion in project financing deals with China in October last year.
“Although we believe that most Chinese-backed projects will be unaffected, we note that the current situation could help Japanese companies win contracts from a warier government and public,” BMI said.
The geopolitical tension is a potential opening for Japanese companies to increase their stakes in the Philippine infrastructure sector.
While China is involved in nine Philippine projects valued at $1.3 billion, the Japanese government announced it would finance 14 major infrastructure projects in the country estimated at $8.9 billion, including three rail projects in Metro Manila, BMI said.
Japanese companies are involved in at least 21 ongoing infrastructure projects in the Philippines worth more than $16.7 billion, based on the BMI Key Projects Database.
“While the value of proposed investments from Japan is lower than those from China, Japanese companies currently have more ongoing projects in the Philippines than Chinese companies,” BMI noted.
The Fitch-owned company said it was keeping a positive outlook for the Philippine construction industry.
“We maintain our positive outlook for the Philippines’ construction industry to grow by 12.4 percent in 2017, and note that unlike other regional emerging markets, it is not as singularly dependent on Chinese investment,” BMI said.