Infrastructure Investment News Analysis

Money talks in Tokyo

A high-level Philippine Government delegation – among it, no fewer than five Cabinet ministers – will be in Tokyo tomorrow to thrash out and prioritise a ledger’s worth of infrastructure projects in search of Japanese funding. They’ll be large; they’ll cover a number of industrial sectors and seek also to address a number of the Philippines’ pressing social and environmental problems.

These meetings – the first to be held by the Joint Committee on Philippine-Japan Infrastructure and Economic Cooperation – are to take place in the Japanese capital on Monday and Tuesday and promise to be among the most wide-ranging of any government-to-government investment talks conducted so far by the administration of President Rodrigo Duterte.

The Japanese side will be represented by high ranking officials from a host of government ministries and agencies who, along with their Philippine counterparts will not just look at funding possibilities for the projects but also in some cases at the joint-implementation of them.

The ministerial-level Tokyo talks are a follow-on from Duterte’s state visit to Japan in January when he met with Japanese Prime Minister Shinzo Abe, and a reciprocal visit to Duterte’s home city of Davao, at which Abe committed Yen1 trillion (PHP450.76 billion) in the form of a five-year direct government investment and assistance package to the Philippines. And so, how that funding should be spent is, in part, what these meetings are about.

Among those on the Philippine side of the table will be Finance Secretary Carlos Dominguez III, who is leading the delegation; department secretaries, Mark Villar, Public Works and Highways; Alfonso Cusi, Energy; Ernesto Pernia, the National Economic and Development Authority (NEDA), and Benjamin Diokono, Budget and Management. Also present will be Vivencio Dizon, President and CEO of the Bases Conversion and Development Authority; Cesar Chavez, Undersecretary, Department of Transportation; Eduardo Martin Meñez, Philippine Charge d’Affaires to Tokyo, and Senator Alan Peter Cayetano, likely the Philippines’ next Foreign Secretary.

Japan will be represented by high-ranking officials from Japan’s Foreign Affairs; Health; Labor and Welfare; Finance; Economy, Trade and Industry; Internal Affairs and Communications; Agriculture, Forestry and Fisheries; and Land Infrastructure, Transport and Tourism ministries, as well as from the Japan International Cooperation Agency (or, JICA) which provides a conduit for technical cooperation and assistance from the Japanese Government to the Philippines.

Dominguez who will co-chair the meetings with Abe’s Special Advisor, Dr. Hiroto Izumi, will set out the Philppines Development Plan 2017-2022 which was approved by NEDA in late February. Broadly, its aims over the next five years are to strengthen gross domestic product at around 7-8%; reduce the national poverty rate from the present 21.6% to 14%, with a marked 10% poverty decline in rural areas (from 30% in 2015), and get unemployment levels down to 3-5%.

Secretary Pernia summed up the plan’s aims like this: “We want the Philippines to be an upper-middle income country by 2022. With the right policies and with mutual trust between government and the citizenry, this is very possible”.

Infrastructure projects are likely to seek the lion’s share of funding. One area of infrastructure where the Japanese are particularly interested is transport. For example, Tokyo has stated that it’s ready to assist in formulating a master plan for a national highways network and provide technology and expertise to “support the early implementation” of the Manila subway system.

Other sectors seeking financial assistance will include agriculture, the energy industry and information technology. But funding approval will also be sought to meet environmental targets and to assist in minimising damage to life and property caused by natural disasters. This is a huge bill in human and dollar terms which the Philippines pays out every year as the archipelago is blasted by typhoons and tropical storms – a bill that could be cut back by implementing better preventative measures.

But there’s another area in need of finance – Duterte’s wars; the expanding counterterrorism effort and the anti-narcotics campaign. Both these are in danger of becoming cash-strapped; they’re expensive, requiring more and more human resources as well as additional advanced and sophisticated military hardware. These items come with a big price tag but without them, defence chiefs and military planners know that their efforts are seriously compromised. These wars can’t be fought on the cheap; in fact, even just containing the enemy is expensive.

Support for development projects in Mindanao, the country’s southern island region where Islamic terrorism is rooted, is also on the list. The plight of this region has been highlighted by Duterte’s presidency. As a native of the island, he understands Mindanao’s problems and potential better than any of his predecessors. He is, after all, the first occupant of Malacañang to come from Mindanao.

And he’s been able to focus a great deal of foreign interest there. And not just from the Asian region – China, Japan, South Korea and a number of Southeast Asian countries have increasingly been establishing projects in Mindanao in areas such as agriculture and alternative energy for example – but from father afield.

At the end of January, for example, Australia’s Ambassador to the Philippines, Amanda Gorely, announced a major nine-year education development programme for the island. “We are already doing a lot in Mindanao,” she said, “but now, with this administration, the focus has shifted already more to that part of the Philippines … And we are also looking for more commercial opportunities and ways that we can support economic development there”.

Last week, Australian Foreign Minister, Julie Bishop, pledged US$40 million over six years for a number of Mindanao projects including improved water facilities.

The Joint Committee was set up following Abe’s January visit with the express purpose of coordinating assistance and to “steadily implement cooperation that engages the public and private sectors for state building…” The Yen1 trillion comprises official development assistance and Japanese private-sector investment and is one of the largest aid packages Japan has ever given to a single country.

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