Sino-Philippine economic ties depend on consistency

By Liu Zhun Source:Global Times Published: 2016/6/23 0:38:00

As Philippine president-elect Rodrigo Duterte's inauguration ceremony approaches, his administration announced a 10-point economic agenda at a conference in Davao City on Monday, outlining what the new Philippine government will do to revitalize the emerging economy.

The objectives give priority to tax reform, ease of doing business and investment in infrastructure, which are essential to add incentives to the Philippine economy. Appealing for more foreign direct investment and security of land tenure, the agenda indicates a gesture of opening-up and welcome to external investors.

The new economic agenda is expected to give a boost to the economic relationship between the Philippines and China. These years have been marked by political squabbles and maritime disputes that keep upsetting Sino-Philippine ties, especially in economic cooperation. In 2015, direct investment from China to the Philippines was $23.71 million, a 58.9 percent decline compared to 2014. The trade volume was $45.65 billion, an increase of only 2.7 percent.

Although overshadowed by a political standoff, both countries are actually becoming increasingly complementary in economic terms. China's urgent need to transfer excessive capacity, especially in infrastructure, and well-developed technologies are what the Philippines badly wants.

Both countries are waiting for an opportunity to tone down the ongoing conflict and explore the potential of economic cooperation. Duterte's willingness to warm up a frozen Sino-Philippine relationship and his determination to revive the Philippine economy have created the chance.

Regardless of sovereignty issues, Duterte has on several occasions expressed his eagerness to attract Chinese investment. The Philippine media reported recently that China and the Philippines might be negotiating a rail project connecting Manila with Pampanga Clark. If true, this will be a turning point for the sluggish Sino-Philippine economic relationship.

However, whether the "new look" will herald a smooth way of cooperation is uncertain. Last year, China's State Grid encountered a major setback in the Philippines, when the National Grid Corporation reneged on an agreement due to "national security concerns," and stopped using Chinese engineers on a billion-dollar joint project. The Philippine Department of Energy even claimed that these Chinese engineers were no longer needed because their Philippine counterparts had acquired the needed technology. It is political struggle and partisan disputes that put a damper on the project. The political malady may impair the confidence of Chinese investors and drive the future Sino-Philippine economic relationship into a new quagmire. It is impossible to expect an improved Sino-Philippine economic relationship under those circumstances.

The Duterte administration's gesture has brought forth new possibilities for all-out Sino-Philippine economic cooperation, but he has to make sure his government sticks with the principles of business ethics and international norms. Fickleness will ruin the already vulnerable trust between China and the Philippines.

Posted in: Observer

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