Is China withholding funds from Duterte?
Beijing's pledge to deliver US$24 billion in aid and investment to the Philippine leader's government and hometown has failed to come to fruition
Philippine President Rodrigo Duterte’s hometown of Davao City on the southern island of Mindanao is still waiting for China to fulfill its vow to provide billions of dollars of aid and investment under its “One Belt, One Road” initiative.
A year ago, Duterte drastically shifted Philippine foreign policy when he announced his government’s “separation” from the United States, Manila’s long-time treaty ally, during a milestone four-day state visit to China.
Beijing has since aimed to adopt Manila as its new “little brother” in reciprocation of Duterte’s pivot, underwritten by a rich pledge to provide over US$24 billion in development aid and investment largely for infrastructure development.
A Philippine Department of Finance report on the pledge said that China will provide US$9 billion in soft loans, including a US$3 billion credit line from the Bank of China, while economic deals including infrastructure investments would amount to about US$15 billion.
Those include promised rich outlays earmarked for the president’s hometown, Davao City, Mindanao’s bustling economic hub with an estimated population of around two million. The city is currently governed by Duterte’s daughter, Sara Duterte; the elder Duterte served as governor for over two decades before his election to the presidency in mid-2016.
Chinese Vice Premier Wang Yang visited Davao City in March this year to assure Duterte that Beijing is keen on fulfilling its pledge to a city that markets itself under the slogan “Life is Here.” That trip was followed by a goodwill visit a month later by Chinese warships to Davao which Duterte personally greeted.
Wang said China’s assistance would come either in the form of low interest loans or by encouraging Chinese investors to plow into the Philippine government’s Public-Private Partnership (PPP) scheme, according to a Davao City information office report.
Things looked upbeat for Davao until the Islamic State-aligned Maute Group laid siege to Marawi City. In June, Beijing responded to the threat by donating high-powered firearms worth US$7.2 million for use by troops to flush out the terrorists and more recently through dozens of heavy construction machines for the shattered city’s rehabilitation.
While Marawi surely needs massive resources for rehabilitation, initially estimated by the government at around US$1 billion but likely to cost much more, Davao City officials are still optimistic China will not waver from its initial pledge to develop the city’s infrastructure.
Yet it remains unclear why Beijing has tarried in making actual outlays while other One Belt, One Road initiatives are steaming ahead in other Asian countries. Some analysts suggest Beijing may be withholding the funds until the bilateral relationship is more firmly consolidated, including in regard to unresolved territorial disputes in the South China Sea.
Duterte has drifted back strategically towards the US to provide assistance in combating a rising transnational terrorism threat in the country. It’s a development China is no doubt watching closely and may have factored into the tardy release of promised aid and investment, some analysts suggest.
Five big ticket projects for Davao City were presented to local economic officials during Wang’s March visit, based on a document furnished to Asia Times by the regional office of the National Economic and Development Authority (NEDA).
The projects include the Davao City expressway project spanning 23.3 kilometers at a cost of 24.5 billion pesos (US$477 million), the Davao City coastal road project worth 15 billion pesos (US$292 million), the Davao coastline and port development project for 39 billion pesos (US$759 million), the 445.3 billion pesos (US$8.7 billion) Mindanao Railway Project, and the development, operations and maintenance of the Davao City airport for 40.57 billion pesos (US$790 million).
In September, Department of Public Works and Highways (DPWH) Secretary Mark Villar and Embassy of China in the Philippines Economic and Commercial Counsellor Jin Yuan signed an agreement for the conduct of a feasibility study on the Davao City expressway project.
“The DPWH and Chinese Project Team will be working together for the prompt realization of a comprehensive feasibility study so that we may soon reap the thousand-fold socio-economic benefits of this expressway,” Villar vowed.
The expressway is expected to alleviate clogged traffic, ease access to Davao’s Sta Ana Port and other suburban areas in the city.
Maria Lourdes Lim, NEDA director for the Davao Region, said they are also pushing for China to prioritize the long sought-after Mindanao Railway Project, which will connect Davao City with other key areas in the southern Philippines spanning a circumferential length of 830 kilometers and another 702 kilometers of spur lines for other areas.
The first phase involving the Tagum-Davao-Digos segment costing 37.29 billion pesos (US$726 million) has already been approved by NEDA’s board and is targeted to start construction in 2018 and finish in 2022. The development of the Mindanao Railway system has been proposed since the administration of the late Philippine dictator Ferdinand Marcos.
Lim also said they hope China will give priority funding to the Davao City coastal road project, whose acquisition of the right-of-way component has already commenced. “The development of sustainable and improved infrastructure facilities and services shall support Davao region’s growing economy, expanding population and rapid urbanization,” Lim said.
The Philippines, including Davao City, are on China’s development assistance radar largely due to the rise of Duterte and his cultivation of close ties with Beijing, according to Finance Secretary Carlos Dominguez, Duterte’s former classmate and long-time friend.
“This is the time to move decisively. Fortunately, we have a leader capable of much audacity,” Dominguez said in a speech at a ‘Duternomics’ forum earlier this year. “We have a leader of vision and intense love of country. All the favorable factors are present. It is time now for a breakout.”
According to a Finance Department report, China’s unprecedented pledges of aid and investment “reflect[s] the strong confidence of the international community in the Duterte administration’s capability to sustain the Philippines’ high growth path and realize its inclusive growth agenda.”
Duterte has vowed to preside over a “golden age of infrastructure” under his ambitious “Build, Build, Build” program that will be funded largely by overseas development assistance and foreign loans, mainly from China but also as much as US$9 billion from Japan.
During his first state visit to China last October, Duterte declared that the Philippines and China were now “besties”, or the best of friends. But for the presidential hometown of Davao City that closer relationship has yet to build a single Chinese-funded pillar, road or railway.