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China's US$24b pledge to Duterte still has not materialised

Singapore

ALMOST two years after China pledged US$24 billion in investment to the Philippines, barely any projects have materialised, prompting deepening concerns that President Rodrigo Duterte has undermined the country's sovereignty with little to show in return.

Of the 27 deals signed between China and the Philippines during Mr Duterte's visit to Beijing in October 2016, China originally agreed to provide US$9 billion in soft loans, including a US$3 billion credit line with the Bank of China, with a further US$15 billion worth of direct investments from Chinese firms in railway, port, energy and mining projects. It didn't specify a timeline.

Since then, the Philippines has completed only one loan agreement with China worth US$73 million to fund an irrigation project north of the capital, Manila, according to Economic Planning Secretary Ernesto Pernia. Two bridges in Manila to be funded with Chinese grants worth up to US$75 million were inaugurated last week.

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The process of securing loans from China "seems to be moving slower" compared to getting assistance from other countries such as Japan, Mr Pernia said at a briefing earlier this month.

Mr Duterte has repeatedly touted China's financial help as a key reason for pivoting away from the US and Europe, which he says haven't produced material gains for the Philippines. Yet while Beijing remains the Philippines' largest trading partner, when it comes to foreign direct investment, China is outranked by Japan, the US, the Netherlands, South Korea and Singapore.

As the Philippines' only treaty ally, the US also remains a key security partner, providing crucial assistance to the country's armed forces last year as they struggled to defeat hundreds of Muslim militants who had laid siege to the city of Marawi.

China's Ministry of Foreign Affairs disputed the assertion that it had not followed through on its investment commitments in the Philippines, pointing to the bridge and irrigation projects. "China-Philippines relations are continuously strengthening and deepening," it said in an e-mailed statement. "China attaches great importance to friendly cooperation with the Philippines and enthusiastically supports President Duterte's 'Major Construction, Strong Construction' plan."

Mr Duterte's visit to Beijing in 2016 served as a turning point for his administration, reinforcing his "separation" from the US and cementing his shift towards China. His critics have accused him of failing to respond forcefully after Beijing landed bomber aircraft on territory claimed by the Philippines and asserted its presence at Sandy Cay in the Spratly Island chain.

"Under Duterte, the Philippines has forward deployed its geopolitical concessions," Richard Heydarian, non-resident fellow at ADR-Stratbase Institute, a think-tank, said in an interview. "We have been used by China."

China's popularity has suffered in the Philippines, with net trust in the country plummeting to its lowest since April 2016, the month before Mr Duterte was elected president, according to a Social Weather Stations survey of 1,200 voters conducted over the last weekend in June. Almost nine in 10 said they wanted the Philippines to assert its claims against China in the South China Sea.

For Alvin A Camba, a doctoral candidate at Johns Hopkins University, timing isn't the issue. The real measure is the annual foreign direct investment from China and Hong Kong, which has already reached US$800 million, nearly two-thirds of what it was during the previous administration, he said. "There shouldn't be any expectations for these deals to be completed, or to be close to completion," Mr Camba, who has written extensively on Chinese investment in the Philippines, said. "Opening the economy to Chinese FDI was the correct move." Still, many of the biggest deals don't seem to be happening at all.

Mindanao-based Greenergy Development Corp signed an agreement to develop a US$1 billion, 300-megawatt hydropower plant with Power China in October 2016. When the Chinese firm asked for the initial project deadline to be extended several times through January last year, Cerael Donggay, CEO of Greenergy, agreed. "The last extension was in February 2017 and still nothing happened, so we terminated the agreement," he said, adding that his company was now in talks with a Hong Kong-based company to try to complete the project.

One of the Philippines' largest nickel miners, Global Ferronickel, signed an agreement with Baiyin Nonferrous Group in October 2016 to explore the construction of a stainless steel plant in the Philippines for up to US$700 million. "It was put on hold," its president Dante Bravo said, as the government was yet to lift an executive order banning new mining projects.

Another agreement signed in October 2016 was a US$780 million plan to raise three islands from a waterlogged area of Davao, Mr Duterte's hometown. That was cancelled in July last year after the city's mayor and the president's daughter, Sara Duterte-Carpio, said a review of the project found that it was not commercially viable.

"After the wave of euphoria which greeted those announcements in 2016, we realise now that those Chinese investment claims were hugely inflated," said Mr Heydarian. "Looking forward, I expect Japan, the US and other partners in Europe to remain the main suppliers of foreign investment to the Philippines." BLOOMBERG