The Market Monitor Minding the Nation's Business
By Luis Leoncio
A Chinese state-owned metal producer is expected to set off the stream of new Chinese investments in the Philippines with a $700-million project that is part of the $13.5-billion commitments obtained during President Duterte’s recent four-day state visit to China.
China’s Baiyin Nonferrous Group Co. plans to set up a local stainless-steel plant that could cost as much as $700 million.
The state-owned firm will look at various local resources projects under a memorandum of understanding (MOU) signed with Global Ferronickel Holdings Inc., the local producer said in a report to the Philippine Stock Exchange (PSE) last Friday.
Under the deal, Baiyin may also provide trade financing to Global Ferronickel’s Ipilan mine in Palawan, it said.
“We recognize the importance of promoting close cooperation with China to spur economic growth in the country,” Global Ferronickel Chairman Joseph Sy said in a statement.
“We see Baiyin as a strong partner that will play a vital role with us in creating greater value added in the nickel value chain.”
Global Ferronickel jumped as much as 8.7 percent on the PSE after a one-hour trading halt.Other miners, including Marcventures Holdings Inc., have expressed interest in expanding their operations to nickel processing with Chinese partners, as Mr. Duterte looks forward to forging closer ties with China to replace a longstanding alliance with the US.
The stainless-steel plant would cost $500 million to $700 million, with an annual capacity of one million metric tons using local ore, according to Global Ferronickel, the nation’s second-biggest producer.
The potential investment comes amid an environmental audit instigated by Mr. Duterte that threatens to shutter some nickel mines, which are the biggest suppliers of ore to China’s stainless-steel industry.
The two companies are seeking to “promote closer industrial and commercial cooperation,” given China’s large and growing demand for the ore used in stainless steel, coins, rechargeable batteries and special alloys, according to the statement.
China is the world’s largest nickel user, accounting for about half of total consumption.
Two key members of Mr. Duterte’s economic team said the President’s directive to his Cabinet to move “strongly and swiftly” toward the Philippines’s economic integration with its fellow-members in the Association of Southeast Asian Nations (Asean), along with China, Japan and South Korea, opens the country to a lucrative market of 1.8 billion people across the region.
Finance Secretary Carlos Dominguez III and Socioeconomic Planning Secretary Ernesto Pernia, who were part of the Philippines delegation that accompanied the President on his four-day state visit to China, said that while the Duterte administration will maintain its good relations with Western economies, it will now push for “stronger integration” with its neighbors in the region.
“The President just gave a very important speech (during his state visit to China). The Cabinet will move strongly and swiftly toward regional economic integration. This is why the President prioritized foreign trips to Asean and Asia,” Dominguez and Pernia said in a joint statement.
“As a result, the Philippines has now opened its opportunities for trade and investment to a market of 1.8 billion people across the region. Asean economies have expressed interest in integration. China has committed to open its capital markets,” they added.
The Philippines, as one of Asean’s founding members, has committed to join the Asean Economic Community (AEC), an economic bloc designed to create a single market and production base in the region.
Asean groups the Philippines with Malaysia, Singapore, Brunei Darussalam, Thailand, Indonesia, Laos, Cambodia, Myanmar and Vietnam.
The AEC will allow for the free movement of goods, services, skilled labor, and investment among the 10 Asean members and to facilitate the freer flow of capital. Unlike the European Union (EU), the AEC aims for economic integration without a monetary union or political integration.
The Duterte administration plans to ramp up spending on infrastructure up to 5.4 percent of gross domestic product (GDP) next year, and maintain or even increase this in the succeeding years to sustain the country’s high growth and create jobs outside Metro Manila, in line with its 10-point socioeconomic agenda on inclusive growth.
During the President’s state visit to China, Dominguez signed three key agreements with top Chinese officials.
In simple rites held at the Great Hall of the People here, Dominguez and Sun Ping, vice president of the Export-Import Bank of China (China Exim) signed the memorandum of understanding (MOU) on Financing Cooperation, which signifies the intent of the bank to provide funding for Philippines projects in infrastructure, agriculture and energy, among other priority sectors, through concessional loans and other preferential financing facilities.
A separate MOU signed by Dominguez and Chinese Commerce Minister Gao Hucheng provides Manila with financing support from Beijing in conducting feasibility studies for the Philippines government’s major projects in infrastructure, agriculture and rural development, among other priority areas.
Dominguez and Gao also signed the Agreement on Economic and Technical Cooperation, which states that in accordance with the needs of the Philippines, China agrees to provide the Philippines with a grant of 100 million yen, “which shall be disbursed to implement the projects for anti-illegal drugs and law enforcement security cooperation.”
The $13.5 billion worth of deals signed between the Philippines and China during the Duterte visit will generate some two million jobs, according to Trade and Industry Secretary Ramon Lopez said.
“The $13.5-billion investment agreements would translate to an expected two million jobs in the next five years,” he said. Lopez, who joined the President in his state visit to China, said the agreements cover investments, financing deals, and memoranda of agreement that are being signed between the two parties on Thursday and Friday.
The local sectors that will benefit from these deals include manufacturing, agribusiness, trade, finance, tourism, transportation, telecommunication, economic zones and industrial parks, and infrastructure.
The renewed friendship has opened huge opportunities for the Philippines’s trade and investments in China and the Asean market of 1.9 billion people across the region, the trade chief said.