Pernia sees China-Japan rivalry for Philippine infrastructure push

MANILA, Philippines — China and Japan are competing in terms of funding projects in the Philippines, which is enjoying a construction boom brought by President Rodrigo Duterte’s P8.44-trillion infrastructure program, Manila’s socioeconomic planning chief said Wednesday.

As he charts an “independent foreign policy” while lessening his country’s dependence on traditional treaty ally the US, Duterte has courted regional rivals China and Japan to help him bankroll his ambitious infrastructure plan.

Asked why China is now a “favorable” development partner of the Philippines considering the two nations’ rough ties in the past, National Economic and Development Authority Director-General Ernesto Pernia said Manila should be “friends with all other countries.”

However, Pernia admitted that when it comes to lending costs, Chinese soft loans are more expensive with 2-3 percent interest rate, while Japanese loans only have a rate of 0.25-0.75 percent.

“The thing about Japanese loans is that our partnership with Japan is a longstanding partnership and we’ve had good relations with Japan,” Pernia said in a forum organized by Makati Business Club.

“The only problem we’ve had with Japan is the slowness in the processing of their project,” he added.

“But because of the aggressiveness of China, Japan has also come forward to say that we will be faster this time [and] we don’t want to be left behind by this speed in which China is moving.”

The Department of Finance early last year reported that China and Japan’s combined investments and development assistance pledges to the Philippines reached a record $33 billion, the highest amount that Asia’s two biggest economies had directed to a single country.

Despite Duterte’s warm relations with China, the Philippines has a long history of mistrust of it as the two countries continue to spar over the resource-rich South China Sea.

Citing data from BMI research, Bloomberg early this month reported that since the 2000s, Tokyo’s infrastructure investment in the Philippines stood at $33.54 billion. On the other hand, Beijing-backed projects in the Philippines totaled $3.18 billion.

But China is stepping up its game with its ambitious Belt and Road initiative, which aims at reviving an ancient Silk Road trading route that would connect Asian markets with economic circles in Europe. Chinese President Xi Jingping last year hosted a summit on the New Silk Road plan, which Duterte attended.

Asked how the Philippines would benefit from Beijing's Belt and Road program when the Southeast Asian nation is detached from the mainland, Pernia said his country could tap funds from the China-championed initiative.

“There’s also a BRI fund that we can access. So I think that’s one major possible advantage but you’re right, I’ve been wondering how we can be on the Silk Road when there’s no road to connect us, except if they will connect the islands,” Pernia said.

“BRI fund is at conceptual stage. But there’s a potential there,” he added.