US private firms to take part in Philippines' China-backed infrastructure programme

US private firms to take part in Philippines' China-backed infrastructure programme

Philippines infrastructure
Vehicles stuck in traffic in Manila. (Photo: AFP)

MANILA: Philippine and United States envoys announced on Tuesday (Jul 16) fresh US involvement in the Philippines' ambitious infrastructure-building programme, which also has projects financed through Chinese loans and grants.

The announcement made on the concluding day of the US-Philippines 8th Bilateral Strategic Dialogue (BSD) is the latest sign of a continuing China-US power struggle in the Southeast Asian state. 

It comes more than a month after the release of the first Indo-Pacific Strategy Report by the US Department of Defence, which calls China a "revisionist power" and highlights China's "use of economic inducements" to "persuade other countries to comply with its agenda”.

The Build, Build, Build programme is Philippine President Rodrigo Duterte's strategy to accelerate public spending on infrastructure, which the government said is targeted to reach between US$157 billion and US$177 billion from 2017 to 2022.

"We understand and applaud the Philippines government focus on infrastructure development, and we want to support that effort as much as possible,” US ambassador to the Philippines Sung Kim said in a press conference.

“Primarily, I think it would be through private sector participation in major Build, Build, Build projects.”

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At least two loan deals with China have been signed for the Build, Build, Build programme, with more under way – as critics point out their relatively higher interest rates compared to loans offered by alternative sources such as Japan.

In a statement released on Tuesday, newly confirmed US Assistant Secretary of State for East Asian and Pacific Affairs David Stilwell welcomed progress on "legislation which could provide more opportunities for US companies, especially in infrastructure, as part of the Build, Build, Build programme".

Philippine ambassador to Washington Jose Manuel Romualdez specifically cited US involvement in the building of the New Clark City, an envisioned green city north of capital Manila.

The US emphasis on private sector participation in the Build, Build, Build programme is also in sharp contrast with the involvement of China's state-owned enterprises in Philippine infrastructure projects.

State-owned HBIS Group Co Ltd, dubbed as China's second-largest and the world's third-largest steelmaker, is involved in the development of a 305ha iron and steel production base in Mindanao. 

The US$4.4 billion project will reportedly generate tens of thousands of jobs during its construction and subsequent phases. 

DEBT TRAP? 

With Mr Duterte being the first Filipino president from Mindanao, the Build, Build, Build projects are focusing on the long-neglected group of islands that houses the country's poorest provinces.

Since he took power in 2016, Mr Duterte has embarked on what his aides call an independent foreign policy that is generally referred to as a pivot to China. 

Mr Duterte has secured multi-billion dollar loan and trade pledges from China, as well as a framework for potential oil and gas exploration signed during Chinese President Xi Jinping's visit to Manila late last.

In late 2018, state-owned Export-Import Bank of China signed a loan agreement to finance a controversial dam seen to alleviate water woes of Metro Manila's eastern areas and outskirts but feared to worsen conditions in the volatile Sierra Madre mountain range, which is a key biodiversity area.

The Philippine government has dismissed concerns of a possible debt trap, saying commercial loans still have higher interest rates than loans offered by China. 

China-funded infrastructure projects have at least a 10 per cent rate of return that can cover projected interests based on simulations, the government said.

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FOREIGN POLICY

The Philippines' warmer ties with Beijing comes despite a longstanding maritime dispute over the South China Sea and a 2016 international arbitral tribunal ruling largely in favour of the Philippines' claim on the disputed waters. 

Beijing rejected the said ruling by the Permanent Court of Arbitration, which invalidated the economic giant's encompassing nine-dash-line claim. 

In March, Chinese vessels were reportedly swarming around Philippines-held Thitu Island.

Mr Duterte warned of sending Philippine troops on what he said were missions bound to fail if China dared touch the island, which is also claimed by Taiwan, Vietnam and China but is occupied by a Filipino civilian population.

Last month, a Chinese fishing vessel abandoned 22 Filipino crewmen at sea after it hit the Filipino fishermen's stationary boat.

The Philippines has been issuing what supporters call calculated responses to these issues, criticised in certain quarters for being too tempered.

Despite the Philippines' friendlier ties with China, the US is still the only country the Philippines has forged a military alliance with.

In 1951, the two countries signed a Mutual Defence Treaty, which stipulates that both countries would come to each other's aid following prerequisites established in their respective constitutional processes in case of an armed attack on either state's territory.

A joint statement by the US and the Philippines released after the BSD said that both countries recalled a commitment made by US Secretary of State Mike Pompeo during his visit to Manila last March, when he clarified that this stipulation in the 1951 treaty will be triggered if an armed attack targets the Philippine armed forces, public vessels and aircraft in its recognised territories in the South China Sea.

Mr Pompeo had said in an interview with CNA at that time that China cannot claim an entire ocean, a sentiment later on echoed by Mr Duterte. Both countries also reaffirmed their commitment to freedom of navigation and overflight in the South China Sea. 

The US-Philippines military alliance boasts of a long history, which includes an enhanced defence cooperation agreement that allows US military facilities on Philippine military bases for the common use of both countries and a yearly series of joint military drills dubbed Balikatan, or shoulder-to-shoulder. 

Source: CNA/rw

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