‘I Need China’: Duterte’s Pivot to Beijing Shows Signs of Payoff
Rodrigo Duterte, the Philippines' president, walks off stage after speaking at the Boao Forum for Asia Annual Conference in Boao, China,“More than anybody else at this time of our national life, I need China,” Duterte said at a briefing on March 9, adding that China’s help is a “very important ingredient” in his $180-billion infrastructure push.
A five-minute speedboat ride from Luzon, Grande Island is one of the closest white sand beach resorts to the Philippine capital of Manila. Once part of a major U.S. naval base in the Pacific, it was handed back in the 1990s and taken over by the tourist trade.
Last year, the local investors who hold the lease on the island agreed a deal with Sanya Group, a Chinese resort developer, who pledged to invest $298 million to turn the 44-hectare island into Manila's answer to the Maldives. The deal was formalized in April, on the sidelines of China's Belt and Road summit in Beijing. A few weeks later, it all fell apart.
Sanya's proposal to build "80 ultra-high-end housing units perched on top of the water" would have flouted a law that limits the use of archipelagic waters exclusively to Filipinos. Furthermore, the deal had been sealed without the approval of the Subic Bay Metropolitan Authority, which has jurisdiction over the island. "There is bad faith," SBMA Chairwoman Wilma Eisma told the Nikkei Asian ReviIn a final blow, the defense establishment also raised objections to the project -- "We did not make an official statement, but individual officers, I believe, aired their concerns through the media," said a Philippine Navy official.
Sanya's proposed investment is not the only project to be thrown into uncertainty or fail in the face of military opposition. A $2 billion "smart city" proposed by Xiamen-based Fong Zhi Enterprise on the privately owned Fuga Island in the northern Philippines -- close to Taiwan -- is currently facing criticism over potential security issues. A Chinese bid to take over the bankrupt Hanjin shipyard in Subic Bay was effectively blocked earlier this year after the Philippine Navy raised concerns.
Grande Island, about 145 nautical miles from the disputed Scarborough Shoal. (Photo courtesy of Subic Bay Metropolitan Authority)The fate of these high-profile deals has exposed the limits of President Rodrigo Duterte's pivot to China. Three years ago, the Philippines' president announced his "separation" from the U.S., in exchange for Beijing's promise to invest in infrastructure and job creation. "I need China more than anybody else at this time of our national life," Duterte said in a public speech last year. "I need China."
Many in the Philippines do not agree. Distrust of China runs deep in the Philippines, particularly in military circles, where Beijing's motives are often seen in the context of the two countries' ongoing dispute over territory in the South China Sea. China-backed projects have faced stringent reviews, public backlash and cancellations, posing a challenge for Duterte as he tries to use Chinese money to build infrastructure, create jobs -- and to cement his legacy.
China's President Xi Jinping, left, and Philippine President Rodrigo Duterte toast during a state dinner in Manila in 2018. © Reuters"It might not affect Duterte's remaining days in office, but it would likely reinforce the perception that yielding too much to China doesn't pay at all," said Collin Koh, a research fellow at the Institute of Defence and Strategic Studies in Singapore. "And it could have a potentially adverse impact on the coming [2022] presidential elections and candidates, specifically those who may be campaigning on a pro-Beijing platform."
High hopes, stalled plans
Duterte's dramatic shift from the U.S., the Philippines' sole mutual defense treaty ally and major trading partner, came in October 2016. The president made his first state visit to Beijing to proclaim his new policy to an audience of Chinese investors, and returned, triumphant, with $24 billion in pledges of investment and credit lines.
The four subsequent visits, including two this year, in April and August, brought the total amount of committed investments to around $45 billion, covering steel mills, industrial hubs, railways, bridges and power plants. Those projects, if delivered, would be an enormous boost to the Philippines' $330 billion economy -- and to Duterte, whose flagship economic policy is a $180 billion infrastructure drive, "Build, Build, Build."
In 2015, before Duterte took office, actual Chinese foreign direct investment into the Philippines was just $570,000, according to the Philippine central bank. By last year, it had surged to nearly $200 million. Total trade between the two countries during the same period jumped from $17.65 billion to $30.83 billion in 2018, when China also beat Japan for the first time in decades as the largest importer of Philippine bananas, a major industry in Duterte's home region of Davao in the south.
