NEDA: ‘Sizeable impact’ on PH economy in 2017 if China delivers on pledges

MANILA, Philippines – China’s over $20-billion investment and aid pledges to the Philippines may have a “sizeable impact” on the economy by next year if they materialize and are screened properly, Socioeconomic Planning Secretary Ernesto Pernia said on Thursday, November 3.

“I think if China comes through with its commitments it will have a sizable impact next year,” the National Economic and Development Authority (NEDA) chief said at a  briefing on Thursday.

The commitments were made during President Rodrigo Duterte’s state visit to China last month.  The trip yielded 13 memoranda of agreement (MOAs) worth around $16 billion, and $6 billion in official development assistance (ODA) pledges. (READ: What Duterte accomplished in China)

Pernia also pointed out that the Bank of China has promised a $3-billion credit line that will be mostly directed towards Philippine micro and small enterprises (MSMEs).

He added that the President’s recent official trip to Japan, which secured $19 billion in pledges from both government and private sector, would also help.

Screening for quality investments

The pledged investments from China are in the areas of infrastructure, energy, and information technology.

Asked how the Philippines can weed out shady Chinese firms from participating in government projects, Pernia discussed the government’s plan to set up a screening process. (READ: ‘Shady track records’ hound PH-China infra firms)

“They’re offering [a lot of projects] but we want the projects to be demand rather than supply-driven. The Chinese are very aggressive, they’ll say, ‘You need this thing here or there,’ but if it is not demand driven, and not what we need, then we won’t do it,” Pernia said.

The plan, he continued, is to make the NEDA-Investment Coordination Committee (NEDA-ICC) the focal point for these infrastructure investments.

“We can set up the mechanism quickly. It’s just an Executive Order constituting the small ICC Cabinet committee as the one that screens private investors. We also asked the Chinese side to have a counterpart agency to accredit companies so that we don’t repeat the ZTE and Northrail debacles,” he said.

The Chinese side, he explained, will accredit the companies that it deems to be qualified. “Then we will choose from among the ones who are accredited,” he said.

“Even if they’re credited on the Chinese side, we will screen further to see who’s best suited for a particular project. Its like having two hurdles,” Pernia added. 

‘FDI from US on downtrend’

Duterte’s move to forge closer ties with China comes at the expense of the Philippines’ relationship with its oldest and most powerful ally, the US. This has prompted groups like the American Chamber of Commerce (AmCham) to warn about investments that have been put on hold. (READ: Duterte announces military, economic split from US)

Finance Secretary Carlos Dominguez III said at a Palace briefing on Wednesday that he has set a meeting with the AmCham on Saturday, November 5, so he can address all their concerns.

On Thursday, Pernia noted that “foreign direct investment from the US has gone down” and while FDI from China is on the rise, it is not yet enough to compensate for the former.

“China’s FDI has been picking up while the US has been on a downtrend….The FDI boost from China, however, hasn’t compensated for the loss of US FDI because it is coming from a low base. The US came from a much higher base of more than $500 million,” Pernia explained

Responding to questions, the NEDA chief said he believed that Duterte’s tirades against the US would not be reflected in the third quarter, and would likely be felt in the fourth quarter of the year.

The BPO sector, where there are many big US players, has been particularly worried  about the President’s anti-US pronouncements. Industry groups have already sought clarification of the new administration’s foreign policy stance.

Pernia downplayed the prospects of a BPO pullout “except if [Donald] Trump wins but that will happen next year if ever.” He added, however, that governments cannot compel businessmen from investing in profitable venture.

“Outsourcing is profitable for the private sector and the US government cannot compel the private sector,” Pernia said. – Rappler.com