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Improved China ties raise capital flow

A sea change in the country’s economic relations with its Asian neighbors primarily China resulted in the opening of the investments tap in 2017 following President Duterte’s foreign policy rebalancing towards Asia.

Aid, concessional financing, and investment pledges made by China after its top leaders met with President Duterte in 2016 have materialized through agreements, several of them to help fund the government’s “Build, Build, Build” infrastructure modernization program and its war against illegal drugs.

Moreover, China was among the first countries to pledge assistance in helping rebuild Marawi City in Mindanao after President Duterte declared it free of ISIS-inspired extremists last October.

“The unprecedented pledges of assistance from China that President Duterte had generated for the Philippines in 2017 make up the initial investment dividend from his prescient foreign-policy rebalancing toward Asia,” Finance Secretary Carlos Dominguez III said.

China is now among the Philippines’ closest allies, with the country delivering swiftly on its respective pledges of assistance to help fund the government’s “Build, Build, Build” and Marawi reconstruction programs, Dominguez said.

According to the International Finance Group (IFG) of the Department of Finance (DOF), China has so far committed an estimated $7.34 billion in soft loans and grants to the Philippines for the implementation of 10 big-ticket projects, the construction of two bridges in Metro Manila and two drug rehabilitation facilities in Mindanao, and aid to rehabilitate Marawi City.

Premier Li Keqiang, who was among the world leaders who took part in the 31st ASEAN summit and its Related Meetings hosted by President Duterte last November in Manila, extended his stay here for an official visit, becoming the first Chinese premier in 10 years to visit the Philippines, after Premier Wen Jiabao who attended the Second East Asia Summit in Cebu in 2007.

During Li’s visit, Mr. Duterte said “mutual trust and confidence-building have led to increased interaction on many levels of our two governments. Practical cooperation in many areas is bringing in an early harvest of tangible benefits.”

Li, for his part, observed that relations between the Philippines and China are now as warm as Manila’s weather.

“Winter has come to the Northern Hemisphere but the temperature in Manila is still running pretty high. I think that somewhat reflects the temperature of Philippine-China relations, which is also going pretty high on the basis of the positive improvement of the relations between the two countries,” Li said then.

Last October, during the four-day state visit of President Duterte to China, he harvested a total of $24 billion in investment and aid pledges. Of this amount, $9 billion are grants and other forms of assistance.

The 14 accords forged between Manila and Beijing during Premier Li’s visit partly fulfills this commitment from China.

Dominguez, on behalf of the Philippines had signed four of these 14 agreements.

Topping this list is a financing cooperation agreement signed by Dominguez and Liu Liange, president of the Export-Import Bank of China, for two of the Philippines’ flagship infrastructure projects—the New Centennial Water Source-Kaliwa Dam Project of the Metropolitan Waterworks and Sewerage System (MWSS) and the Chico River Pump Irrigation (facility) Project of the National Irrigation Administration (NIA)—that will cover 85 percent of the total contract amounts of the projects.

China will provide soft loans estimated at $234.92 million for the Kaliwa Dam Project and $72.49 million for the Chico River Pump Irrigation (facilit y) Project under the first basket of infrastructure projects presented by the Philippines for possible Chinese financing, according to the Department of Finance-International Finance Group (DOF-IFG).

Dominguez also inked a memorandum of understanding (MOU) with China Vice Commerce Minister and International Trade Representative Fu Ziying to “jointly identify and study” an indicative list consisting of the second basket of key infrastructure cooperation projects for possible Chinese financing.

Among the proposed projects under the second basket are the development of the Subic-Clark Railway, Davao City expressway, and Panay-Guimaras-Negros Inter-Island Bridge.

He and Bank of China chairperson Chen Siqing also signed a renminbi bond issuance underwriting agreement in preparation for the Philippines’ planned Panda bond float in 2018.

An agreement on Economic and Technical Cooperation (grant agreement) on providing a 150-million renminbi (approximately $23 million) Chinese grant to aid the Philippine government’s quick recovery and reconstruction program for Marawi City was also signed by Dominguez and Vice Minister Fu.

The other agreements signed were the:

1) Exchange of Letters on Projects of Dangerous Drugs Abuse Treatment and Rehabilitation Centers, 2) Exchange of Letters on Project of Two Bridges Across Pasig River; 3) Memorandum of Understanding for Cooperation on Industrial Parks Development; 4) Memorandum of Understanding on Jointly Promoting the Philippine National Railways South Long Haul Project; 5) Implementation Framework for the Memorandum of Understanding and Development of Project List for Cooperation in Production Capacity and Investment; 6) Memorandum of Understanding Concerning the Provision of Goods for Addressing Climate Change; 7) Memorandum of Understanding on Defense Industry Cooperation; 8) Memorandum of Understanding on Cooperation in the Field of Intellectual Property; 9) Memorandum of Understanding on Strengthening Youth Cooperation; and 10) Memorandum of Understanding between the Bases Conversion and Development Authority and China Development Bank.

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