Wednesday, September 19, 2018
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The Long View

Beijing’s belated benevolence

In 2016, Sinomach issued a press release trumpeting that it was the “only non-military out of the eight major state-owned enterprises” forming a military and civilian integration development fund. A reminder that it isn’t just any state-owned enterprise, but rather, a very important one indeed.

There is a Chinese proverb that goes, “Let him who tied the bell on the tiger take it off.” Last November, China decided to stop punishing the Philippines for the unpardonable conceit of having upheld Philippine laws by calling for a rebidding of the Northrail project, which had led to China calling in the loan it extended. Sinomach also filed the case for arbitration. In February 2016, Northrail had lost the first phase of the arbitration proceedings in Hong Kong but by January 2017, Beijing knew Manila was in its pocket, so Sinomach began talks to settle the problem. The case was now declared settled out of court, a $100-million gift in saved potential fines, and Sinomach was announced as the Philippine government’s partner in building a new railway from Manila to Legazpi City.

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The other day, some people on Twitter noticed a video of the controversial Dalian trains being taken through their paces on the MRT 3 line. The videos were posted by a certain Baifeng Wang, who commented, “there’s no problem in the train in Dalian. The ATP signal system is now fully in line with the current line of operation.” This is no different from what Chu Huan, project manager of China’s CRRC Corp. Ltd., said on camera to Bloomberg TV early in February: The trains are safe. The report mentioned that Bombardier of Canada had certified the trains’ signaling system. The Department of Transportation, however, pointed out both safety and Bombardier certifications were provided by Dalian so they need a third-party certification first. This is obviously meant to save face for the department, as well as to head off domestic political opposition to the trains coming from both the owner of the system and political players.

A Chinese saying goes, “Large chickens don’t eat small rice.” Dalian is another state-owned enterprise, and it always seemed to me that sooner or later, domestic politics would collide with Philippine-China relations with regard to these trains. If, as some playing to the gallery wanted it, the government would reject the trains on the basis of the government having been sold overweight, unsuitable trains, it would be an assault on the competence of Dalian and a cause of friction between the two governments. Politicians could make noise, but Beijing would insist on compliance with the sale — or else, see what happened to Northrail. It seems the time for compliance is here. It wouldn’t be surprising if the chairperson of CRRC doesn’t show up in Manila to see President Duterte, who could then announce it was all a misunderstanding.

Yet as a Chinese proverb puts it, ambitious plans can end up a case of “tiger head, snake tail”—starting out big, ending up small. Beijing talks big, but it is Tokyo that’s going beyond talk. Sinomach had to drop its suit—but couldn’t regain the Manila-Clark project which went to Tokyo. Dalian may get paid for its trains but it is Tokyo fixing the MRT 3. BMI Research in Singapore quantifies Chinese infrastructure investments in Southeast Asia at $155 billion, while Japan’s has amounted to $230 billion. In January 2017, Japanese Prime Minister Shinzo Abe announced an $8.66-billion five-year infrastructure deal, the biggest Japanese aid commitment to any single nation. The Chinese gestures of benevolence concerning Northrail that began that same month has to be understood in this regard. While China has pledged far more money, and the Philippines — responding to what it thought was a bidding war between the two nations — shifted its policy from fostering public-private partnerships to government-to-government schemes, all plans stay on paper so long as the Philippines’ bureaucracy ends up with indigestion — awash in pledges and homegrown budgets for projects which the government lacks the expertise to roll out, or the skilled labor to construct.

And here, Japan enjoys an edge. An example is how earlier this month, a 50-man team from Japan is conducting an audit of the entire MRT 3 system, ahead of the Japan International Cooperation Agency, or Jica, nominating a maintenance provider in May. For all the homegrown headaches caused by the Sobrepeñas’ war of attrition against all administrations and the lack of bureaucra-tic competence, it is Japan that’s in a position to save the Filipinos from themselves, while China’s train supplier is only slowly transitioning away from being a political football.

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TAGS: China-Philippines relations, Manuel L. Quezon III, Maritime Dispute, The Long View
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