The scale of investment coming to the Philippines from new friend China and old friend Japan – countries with which President Rodrigo Duterte has expanded economic ties – is starting to take shape as the Department of Trade and Industry (DTI) reveals a raft of ventures from the world’s second and third largest economies worth close to US$14 billion.
The lion’s share of this – some US$10 billion worth – looks set to arrive from China. This investment will cover a range of projects across the aviation, energy and shipbuilding industries with a potential to create 15,500 new jobs. Interest here comes from five Mainland corporations – private and state-affiliated – all of which submitted their letters of intent to the Board of Investments on Friday.
These companies are, China International Aero-development Corporation (AVIC), an affiliate of state-owned Aviation Industry Corp. of China; Liaoning Bora Enterprise Group; private-equity firm, Huili Investment Fund Management, and Dalian Wanyang Heavy Industries and its affiliate, YDT International. Their respective interests are as follows.
AVIC. Aerospace-parts manufacturing, aviation maintainance and aviation training. While it’s seeking local partners in these areas, as yet there are no details for the dollar-value of this investment; nor the number of jobs to be generated. But AVIC, state-backed, is a huge corporation, so it can be assumed that both investment and job-creation will be sizeable.
Liaoning Bora. A US$3 billion joint venture with a Philippine partner to build and operate a retail network, an oil storage terminal, and refinery infrastructure. Liaoning Bora’s investment expects to create 3,000 jobs within the first two years of operation.
Huili Investment. A US$3 billion integrated steel mill aimed at making the Philippines’ a major producer of high-quality steel products by 2030. This is planned as a world-class facility and will be another joint venture project. Planned as a two-phase project; the first phase, scheduled for completion by 2022, is expected to provide 6,000 jobs.
Dalian Wanyang. A US$2.8 billion 4,000-5,000 tons waste-to-energy gasification project capable of generating up to 312 megawatts of power. Presently the company is conducting feasibility studies for the project. Preliminary results are expected by the end of the month,
YDT International. A US$1.5 billion JV to develop a shipbuilding and ship-repair facility with the capacity to handle vessels of up to 15,000 deadweight tons. Presently the subject of a feasibility study – the result of which should be known later this month – this facility is expected to be fully operational by 2022.
After giving details of the Mainland investment interests, DTI Secretary Ramon Lopez said: “China remains a strong investment partner of the Philippines, and we are positive that these letters of intent will sustain the level of interests and open up more business opportunities for Chinese investors”.
Meanwhile, Japanese investments focus primarily on the sectors of energy, transport (rail in particular) water-management and security. Projects that have been identified include: a coal-powered electricity-generation plant; multi-role response vessels for the Philippine Coast Guard, and a capacity build-out of mass-transportation infrastructure – specifically, for Light Rail Transit (LRT) Line 1 South extension, LRT Line 2 East extension, North-South Commuter Railway Project.
Interest has also been expressed in developing transit systems in the three island regions – at Davao in Mindanao, Cebu in the Central Visayas and Clark, Pampanga in Luzon – though the size of this potential investment for these is not known at this time.
Valued at US$3.94 billion, the announced projects come on top of the US$25 billion Japanese investment announced by Lopez last Thursday – Newsless ‘news’ and news.
Companies involved in the new tally of investments comprise Japan’s seven major trading houses – Mitsubishi, Mitsui, Sumitomo, Itochu Corp, Marubeni, Toyota Tsusho and Sojitz – a group known collectively as Sogo Shosha. The DTI expects these investments to come in between now and 2018.
Unveiling the projects, Lopez commented: “Japanese investor remains confident of business prospects in the Philippines. We urge Japanese investors to take the chance to invest in the Philippines as it experiences its momentous economic takeoff in the region”.
Combined, this multi-billion-dollar raft of funding, overtime, will bring tens of thousands of jobs to the Philippines, making what is probably the biggest job-creation initiative from foreign direct investment (FDI) ever achieved by a Philippine administration.
Hopefully – but some how we doubt it – this should quieten Duterte’s critics; particularly those who oppose his efforts to build a close relationship with China. The hard economic facts are that the Philippines – like every other member of the Association of Southeast Asian Nations (Asean) – cannot ignore the Mainland’s economic power; much less isolate itself from it as was tried by the previous administration of Benigno “Noynoy” Aquino.
Over four years, that policy saw Philippine trade with China flow to its Asean partners while Philippine exports to the Mainland were rejected. It left Manila outside China’s plans for its 21st Century Maritime Silk Road – a sea-trading route from the East Asia to Europe than runs right through the heart of Asean territories – and gave it a backseat in the China-Asean Maritime Cooperation initiative. In short, Aquino’s China policy isolated the Philippines from both Chinese investment and access to Chinese markets for Philippine goods.
And while the former president’s stance was applauded by then US president, Barack Obama, who seemed incapable of containing China by American means; and while increased China business – investments and trade – was gratefully accepted elsewhere in Asean, the Philippine economy paid a heavy price.
The re-coupling of relations between Manila and Beijing has now closed that unfortunate chapter; the investments just announced stand as proof that a new chapter has now been opened.
But Chinese and Japanese plans have done more than seek opportunities for their products and services in the Philippines – opportunities that will bring in much-needed funds to aid the country’s infrastructure and industrialisation programmes as well as countless jobs – they’ve also sent a very positive signal to the global investment community; that the Philippines is ripe for FDI.
As Lopez pointed out: “Together with further building the competitiveness of our local industries and our intensive investment-promotion efforts, international investors have gained greater awareness of our strong economy and the country’s competitive advantages”.