Implications of China’s Belt Road Initiative on the Philippines

Rationale for revitalizing the ancient Silk Road 

In revitalizing the ancient Silk Road that flourished from 200 BC – 16th C, China decided to undertake measures to link up countries through infrastructure on land and sea.

 

 

 

The Belt Road Initiative (BRI) entails the building of  roads, highways, bridges, railways, harbors, airports and supporting facilities such as telecommunication and navigational  networks, warehouses, fuel depots, etc. Hopefully, these measures will not only facilitate travel, exchanges of goods and services but also stimulate innovative local production and employment. Similar to the ancient Silk Road, the Belt Road Initiative (BRI) infrastructure almost always brings along and stimulates different and new technologies, ideas, and  values.

 

The numerous way stations on land and sea were trading hubs (such as Dunhuang in Gansu and  Mel;aka on the Malay Peninsula) where merchants, travelers could stop over either proceed further or return home. The ancient Silk Road ushered in advances in technology together with larger scale production of   – silk and other textiles, ceramics, paper, metallurgy, animal husbandry, weaponry, standards of weights and measures. currency, medicines writing systems and literacy.

 

Most importantly, the Silk Road facilitated transmission  of philosophical and religious ideas and values – Buddhism, Zoroastrianism, Manichaeism, Christianity, Islam that inspired a kind of syncretism that we may call Asian ecumenism (from the Greek word oikoumene, meaning shared beliefs, values and practices). Of all religious-philosophical tenets, it was Buddhism, the monks and monasteries served as havens for travelers, the ailing, the impaired. Buddhist monks were the exemplars of moral and non-violent behavior. Buddhist teachings was the framework of Asian ecumenism. It is one of the cultural consequences in the search for peaceful transactions and tolerance among very diverse peoples. (See: Aurora Roxas-Lim, “China’s Vision of the New Silk Road.”)

 

The Belt Road Initiative is the outcome of a long sequence of various  Chinese efforts to bring together as many of the countries of the world for the main purpose of trade and economic development. For this purpose China organized the Asian Infrastructure Investment Bank (AIIB)  and invited countries to contribute to the fund. The AIIB is an ambitious economic project to finance vital infrastructure to link together as many countries of the world to facilitate travel and trade.  So far 56 countries joined as founding member with 24 more expressed intention to join bringing a total of 80 countries. The US and Japan did not join.   AIIB started operations on December 25, 2015. In the meantime, China fostered good relations with countries along its immediate borders bilaterally and multi-laterally with Russia, Mongolia, Kazakhstan under the Shanghai Cooperation Organization (SCO). China forged bilateral relations with Pakistan. Negotiated with India to temporarily set aside  border issues while improving trade and economic relations. China strengthened ties with the ASEAN countries, with Japan, North and South Korea, with Africa (through the Organization of African Unity OAU (Instead of supporting liberation movements as in the 1950’s to 1960’s.

 

China has been investing and building infrastructure in Africa),   China capitalizes on its long trade and cultural ties with Iran so that it is a key mediator  on the peaceful use of nuclear energy. China has good relations with the Middle East via OPEC countries (including Israel even though China sympathizes with the displaced Palestinians. China forged ties with the Latin America and the Caribbean  countries (Comunidad de los Estados Latino Americano y Caribeno - CELAC) especially with long-term allies Cuba and Venezuela. China’s trade, economic, socio-cultural relations with the   USA and with the EU are deep rooted and remains vibrant despite political differences.   

 

Eastern Europe and the Balkan states are viewed by China not as mere appendages and pawns of the Big Powers but like China  as developing countries in transition still striving towards equitable economic prosperity and political stability. China is able to bring together far flung countries from three continents under BRICS – Brazil-Russia-India-China-South Africa. China as one of the members of the UN Security Council and a big contributor to the World Bank and International Monetary Fund  moderates big power pressures that impinge not only on China’s national interests but also on the developing countries. China seeks reforms in the decision-making process of the United Nations and its many agencies by giving more voice to the developing countries.

 

Funding the Belt Road Initiative 

China pledged  $113 billion as initial capital during the meeting held in Beijing on May 14-15, 2017 attended by 70 countries. China hopes to increase funding and expressed the need to formulate rules, regulations and administrative structure when the next meeting will be held in 2019.  China’s vision of the  One Belt One Road or Belt Road(OBOR) or Belt Road  Initiative (BRI)  is envisioned  by President  Xi Jinping – “What we hope to create is a big family of harmonious co-existence.” 

 

First proposed in 2013, the One Belt On Road or Belt Road Initiative (BRI) is an ambitious project to link Africa-Asia-Europe and the Americas with vital infrastructure (roads, bridges, railroads, airports, harbors, installations for energy, fuel, warehousing, repair and maintenance depots etc.) estimated to cost  $5 to $8 trillion by the Asian Development Bank. China stresses that this globalization project is inclusive, open and hospitable to all especially to developing countries and must be mutually beneficial and equitable among participating countries. China offers a new model for international relations.

 

The basic principles are – peaceful negotiations, dialogue and cooperation not hostile confrontation; avoid the use of force. Negotiations should be among equal partners to reach consensus that is mutually beneficial. This is in contrast to US President Donald Trump whose policy is ”America First.”  There is no mention of prerequisites based on social-political ideology but emphasizes raising people’s livelihood by stimulating innovative economic production and employment, lessen trade and investment barriers, ensure stability and safety of investments and above all raise people’s livelihood.    

 

So far 65 countries confirmed membership, 20 sent  their heads of State (among them Philippine President Rodrigo Duterte). International organizations like the UN and ADB expressed willingness to participate. So did Prime Minister Shnzo Abe of Japan. However. France, Germany, United Kingdom sent low-ranking officials. India absented  itself in opposition to the China-Pakistan close relationship. The North Koreans boycotted the forum since China expressed concern over the launching of nuclear missile test on May 14, 2017. The USA openly opposes the project.

 

Where is the money coming from? Apart from the initial capital of $113 billion, there is also the $ 40 billion Silk Road Fund. Probably, China will supplement funds from several other sources such as the  Shanghai-based New Development Bank that  allotted $ 50 billion in 2016, and AIIB approved $ 1.7 billion for loans to developing countries. China Commercial Bank and Import-Export Bank are expected to contribute their share. Gov. Zhou Xiaochuan said that the Central Bank of China appropriated $130 billion for loans to developing countries.

 

There are no specific details yet on what projects are planned, priorities, cost and terms of implementation and payment of loans. Gov. Zhou appeals to participating countries to contribute to the fund. Furthermore, State Owned Enterprises are also expected to contribute to the Silk Road Fund. How China will coordinate the use, allocation and management of various sources of funds has yet to be threshed out. This issue awaits the formation and institutionalization of rules, regulations. the administrative and managerial structure of the Belt Road Initiative global economic project.

 

What have been accomplished so far since its inception?

  1. The development of China - Mongolia – Russia road and railroad system.

  2. China – Pakistan road infrastructure all across the Pamirs that will help open access to land-locked Afghanistan and Nepal and access to the Indian Ocean at Gwadar port.

  3. China – Central Asia- West Asia economic corridors.

  4. Construction of China – Laos highway this will ease transport needs of land-locked Laos.

  5. China – Thailand railway that will link China directly to mainland Southeast Asia north to south; east to west.

  6. Jakarta – Bandung high speed railway in Indonesia.

  7. Cooperation Agreement with Hungary Serbia railway as first step to build China – Europe land-sea expressway up to the Mediterranean.

  8. Agreements for industrial capacity cooperation with 20 countries that will ensure preparedness for industrial production in Africa, Asia, Eastern Europe and Latin America including the Caribbean countries. 

  9. Feasibility studies on the Twin Ocean Railway also known as the Trans-AmazonianRailway in Brazil.

  10. Free Trade Agreements were signed with Australia and Republic of Korea.

  11. Negotiations for upgrading China-ASEAN Free Trade Area for Regional Comprehensive Partnership (RCEP).

  12. Negotiations are being undertaken for the China – Japan – Republic of Korea Free Trade Area.

  13. Bilateral investment treaties are being negotiated with the USA and EU.

  14. China has negotiated to have the renmenbi(RMB) as part of the Special.

  15. Drawing Rights (SDR) of the IMF making the RMB on par with the US $ as global currencyChina offered interest-free loans to developing countries that are land-locked, isolated tiny island threatened by climate change; plagued by health (Ebola virus) and environmental hazards (earthquakes, typhoons, tsunami).

  16. The ASEAN countries proposed a regional infrastructure project to facilitate and ensure accessibility of sources of energy by submitting the Trans ASEAN Gas Pipeline (TRAGP) to be funded by the AIIB.

Criticisms of the Belt Road Initiative (BRI)          

 There are many criticisms leveled at the China Belt Road Initiative, (BRI) also termed One Belt One Road (OBOR). The critics say that it is too ambitious since it covers one half of the globe that possesses 75% of the world’s resources and 40% of the world’s GDP. It intends to traverse some of the world’s most difficult terrain.

 

On land it will go through high, rugged mountains, deserts, large rivers with many tributaries, harsh climate not to speak of the need to obtain free transit and pacify hostile populations along the way. No less daunting is the Maritime route that is subject to typhoons, tsunamis, earthquakes plus the need to negotiate with countries along the maritime route. Not only is the project vague, it has not yet come up with detailed feasibility studies on the technical, engineering requirements of the land and maritime routes.  With regards to financing, if China intends to extend loans to developing countries in need of advanced infrastructure the critics warn China that most of these countries will most certainly default on the loans.

 

They foresee that the new advanced infrastructure  may not generate enough revenue to meet interest payments much less proper maintenance. They pointed to countries like Mongolia, Kirghizstan, Tajikistan, Laos, Cambodia and Sub Sahara African countries. Critics are wary that since the project  is China’s initiative, most of the construction projects will be monopolized by Chinese construction firms. They believe that China is actually interested in getting access to vital raw materials such as oil, natural gas, minerals, etc. and local markets. Behind Chan’s benign expressions of peaceful and harmonious co-existence among equal partners, they suspect China’s true intentions. Because China  claims sovereignty over the South China Sea, her military and naval build-up in the Indian Ocean provide reasons for suspicion. Lastly, the critics claim that China’s real intention is to be the world’s dominant power to replace the USA. This is dangerous to the world  since China is not a “democratic” country.

 

So far, I have not yet found Chinese reply to these criticisms. Apparently, the Chinese prefer to undertake measures to address economic – social issues rather than engage in polemics. 

 

Implications of the BRI on the Philippines

Our country will surely benefit from the BRI if we negotiate keeping in mind our own national priorities beneficial to the majority of our citizens many of whom are poor and lacking in the necessary skills to cope with the demands of  fast changing world.

 

Up till 2015, our relations with China was hostile due to our territorial dispute on the West Philippine Sea (South China Sea) With the change of our government’s policy towards China under President Rodrigo Duterte, relations improved by temporarily shelving sovereignty claims of the disputed areas. Instead President Duterte focuses on improving trade, economic, educational, social and cultural exchanges. Some of the bilateral projects such as agreements on civil aviation, cooperation on information technology, extradition  treaty of fugitives from justice (human and drug trafficking), joint surveillance and cooperation to suppress terrorism and extremism, food and product safety of imports and exports, sports and other educational and cultural cooperation and exchanges. These  are carry-over from previous agreements. What is  new is emphasis on building infrastructure in Mindanao and other parts of our archipelago. Philippine-China relations were smoothened out beginning with the attendance of President Xi Jinping at the APEC meeting on November 17-19, 2015.

          

China Development Assistance to our country between 2002-2013 amounts to $1,272 billion. Chinese investments   in 2015 - $ 1,455 billion. Proposed infrastructure projects according to NEDA Director Ernesto Pernia in the meeting held in Davao (August 14 and 17, 2017),  the Philippines negotiated with China represented by the Chinese Secretary of Commerce Zhong Shan  for a six-year (2017 – 2022) infrastructure development program to be guided and implemented by the Joint Economic and Trade Cooperation Commission. Among the priority projects are:

  • East-West  railway in Mindanao

  • Two bridges across the Pasig River

  • Bridge in Panay-Guimaras-Negros Island

  • A loan of $53 million to improve the Chico River dam in Cagayan and Kalinga area

  • $ 374 million loan to build the Kaliwa dam and Irrigation project  in Quezon Province.
     

  • Construction of North-South railway to be funded with a loan of $ 3.01 billion.
     

  • Other projects being proposed are: capacity building  program for rice and aquaculture; establish  alert mechanisms in the detection and control of plant and animal diseases; gasification of waste; ship repair and ship building as well as iron and steel  facilities and establishment of Industrial Parks for manufacturing. Both sides also expressed the desirability of involving private businesses in all these projects. No details about costs, mode of  implementation, interest payments, etc.  have yet to be worked out. .

Tentative conclusion

The BRI can surely benefit our country by the provision of funds in the form of loans for vital infrastructure. We must prepare very thorough and detailed feasibility studies and  negotiate very hard to  obtain the most beneficial terms Although President Duterte gives priority to the economic development of Mindanao, the proposed projects cover the entire archipelago.

 

The gasification of waste is part of the environmental protection program of our government; ship building and ship repairing is one of the most important means of improving transportation needs of our archipelago; and putting up iron and steel facilities are essential to beefing up our industrial capability.

 

Forging closer links with China also entails keeping good relations with all countries of the world particularly with the technologically more advanced countries like the USA, European Union, Japan, South Korea, Russia, etc. Most importantly, our country will benefit from the BRI by linking us with countries we are as yet unable to reach on a regular basis such as Africa, CELAC, Central Asia, and Eastern Europe.  Closer  ties with China through the BRI ought to widen the range and scope of our economic and cultural relations with as many countries of the world  to enhance Philippine national interests.             

 

 Prof. Aurora Roxas-Lim is the former dean of UP Asian Center. She is currently a lecturer in the Ateneo de Manila Chinese Studies Program.  She has written extensively on Asian politics and society and Philippines China relations.

Bibliography 

  • Breughel Newsletter, reports by Alice Garcia Herrero, in Global Economics and Governance, Brussels, May 12, 2017; and report by Marek Dabronski, Davos Meeting, April 25, 2017.

  • Denver, Simon, China Bypasses American “New Silk Road,” with two of its own, October 14, 2013. http://www.washingtonpost.com/world/asia_pacific/china-bypasses-american-new-new-silk-road-with-two-of-its-own/2013/10/14/49f60c-3284-11e3-ad100-ec4c6b31cbed_story.html>   accessed September 25, 2014

  •  “Fitch  Warns on Expected Returns from OBOR,” Financial Times, Jan. 26, 2o17.

  • "Getting Lost in One Belt One Road, “ Hong Kong Economic Journal. April 1-2. 2017.

  • New York Times, “”What’s Behind China’s  $ 1 trillion Plan?” May 13, 2017.

  • Official website of the Philippine Embassy, Beijing

  • Philippine Star, Business  News, August 14, 2017; August 17, 2017.

  • Roxas-Lim Aurora, “”China’s Vision of the New Silk Road,”” paper presented at the     National Conference on Philippine-China Relations, Asian Center, University of the     Philippines, July 24-25, 2015.

  • Tiezzi, Shannon “China Pushes Maritime Silk Road,” China Daily, pril, 201.

  • Tiezzi, Shannon, “”China’s New Silk Road:  Vision Revealed, May 9, 2014. http://thediplomat.com/2014/05/chinas-silk-road-vision-revealed/ > accessed September 20, 2014

  • World Bank, Annual GDP Growth by Country, 2013. http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZD > accessed October 8, 2014

  • http://www.ft.com/content/18db2e803571.//e7-bcc4.902318cOfd2e

  • Website of the Ministry of Finance of China   

  • Various issues of the Beijing Review, China Morning Post and the China Daily.

  • Various issues of the Wall Street Journal

  • Website of the Bank of China, report of Governor Zhou Xiaochuan

  • Website of the Ministry of Foreign Affairs report of Foreign Minister Wang Yi

  • www.cnbc.com

 

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