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Manila may look to Beijing for economic growth

Sunday,Jul 03, 2016

From: Global Times

Philippine president-elect Rodrigo Duterte and his economic cluster cabinet proposed a 10-point agenda to ensure inclusive economic growth during a workshop in Davao City earlier this month.

At the two-day workshop co-organized by the Philippine Chamber of Commerce and Industry, Inc. and Mindanao Business Council last week, the incoming president highlighted recommendations including ease of control on foreign investment and rise in infrastructure spending. Will these initiatives help open a new chapter in Sino-Philippine economic cooperation?

Duterte attaches enormous importance to Chinese investment. To begin with, he needs to fulfill his pledge he made in the presidential elections. He vowed to build railroads on many occasions during and after the campaign.

At the Davao workshop, he further displayed his willingness to accept China’s assistance in constructing railways, telling Filipino businessmen, "Can you match the offer? Because if you cannot match the offer, I will accept the goodwill of China."

Duterte wants to spur economic growth by ramping up infrastructure construction. In recent years, the Philippine economy has achieved relatively fast development, which could partly be attributed to its government’s increasing investment in infrastructure.

It is estimated that the country’s economy will grow by 6.8 to 7.8 percent in 2016. To achieve this target amid worldwide economic stagnation, the Philippines has to enhance investment in infrastructure. The new administration badly needs assistance from organizations such as the China-led Asian Infrastructure Investment Bank and strategies like the "Belt and Road"(B&R) initiative.

In addition, Manila needs foreign capital to boost its economic development. The loosening control on foreign investment will likely lift the 40-percent cap on foreign ownership, thus creating a more relaxing environment for foreign investors.

Meanwhile, Beijing also needs to ramp up trade cooperation with Manila, an important market of ASEAN. Despite the political stalemate between the two sides on the South China Sea issue, their trade volume has been steadily increasing. The Philippines has enjoyed an annual economic growth rate of more than 6 percent since 2010, ranking among the best economic performers among ASEAN members. China has no reason to ignore a market with such colossal potential.

Since China introduced the "B&R" idea, it has yet to launch substantial collaboration with the Philippines. The inauguration of Duterte will provide a critical opportunity to implement the grand vision in this nation.

Economic and trade cooperation can help promote political dialogues. Duterte has demonstrated different attitude from the incumbent Benigno Aquino administration toward the South China Sea contention with Beijing.

He has revealed on various occasions the intention to attract more investment from China in a bid to ease tensions in the territorial deadlock. Beijing can offer more investment and assistance to Manila at the opportunity of the 10-point economic agenda.

In general, Beijing-Manila cooperation has a bright prospect. However, China must reinforce risk control during the process of investing in the Philippines. First of all, the country used to have a bad record. In 2015, it expelled 16 Chinese experts in the National Grid Corporation of the Philippines jointly operated by China and the Philippines in the name of national security. Therefore, China must clinch legally binding agreements with the Philippines prior to investing in relevant projects.

Another reason lies in social instability in the Philippines. The three forces of secessionism, terrorism and extreme nationalism, or anti-China sentiment, pose a threat to the country’s stability. And how the new Philippine government handles the South China Sea conundrum will become a key element to its foreign policy, especially policies on foreign investment.

Therefore, we should anticipate the opportunity to improve Sino-Philippine ties while prudently evaluating possible risks to make full preparation for any contingency. (By Huang Rihan, a research fellow at the Center for China and Globalization).

From Global Times,2016-6-28

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