Benefitting from China’s ‘One Belt, One Road’ initiative

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group of social scientists from the Ateneo de Manila University is currently in China to understand better the “One Belt, One Road” (Obor) initiative. Coming from the recent Obor Summit held on May 15 and 16 in Beijing and attended by President Duterte, this trip is expected to provide academics a deeper perspective of how the Philippines stands to benefit or lose in this East-led development agenda. Midway into our visit, we had the opportunity to listen and exchange views with academics from the Sun Yat Sen University (SYSU) on Obor.

The main objective of China in pursuing Obor is to improve ties and stimulate growth and development along its geographic periphery. It means that it will essentially connect Asia to Europe and Africa by tracing the historical Silk Road and providing a maritime counterpart. This initiative will cover about 60 emerging markets/economies, 4 billion in population, 65 percent of land trade and 30 percent of water trade with a total value of $21 trillion. Early gainers from this is Kenya, which just opened its first fast train service from the capital Nairobi to its Mombasa port. China funded its construction cost of $3.8 billion (through a loan with China Exim Bank), which will eventually connect to other countries in East Africa. The project was completed six months ahead of schedule with construction completed in two-and-a-half years covering 610 kilometers. Within China, Obor has now become the core economic development strategy, as guidelines to promote it across the country has been released. According to our SYSU colleagues, in terms of scope and significance, Obor is now similar to the 1978 economic reforms of opening China to the world.

By the sheer size and expanse of this initiative, it seems logical for the Philippines to take advantage to be part of this. According to our SYSU counterparts, China currently has surplus of capital and is experiencing industrial overcapacity. It also has rich experiences in infrastructure construction. These mean that it has the resources (financial and engineering) to assist developing countries in their infrastructure development. With the Philippine Development Plan focused on massive infrastructure development, these resources are available for the country to consider. Furthermore, with the US foreign policy shifting to a protectionist stand, there seems to be a rebalancing of economic power toward the East. Germany and the European Union are currently exploring more trade with China in the light of President Donald J. Trump’s tirades against its trade imbalances with Germany. Obor seems to provide a workable trade alternative against the emerging protectionism of the US.

Notwithstanding these positives, our exchanges with our SYSU counterparts reveal that Obor is not without challenges. In particular, it is unclear how much China will be able to afford, considering that a number of developing countries across the Obor path may be willing to tap its expertise and finance. This is a challenge, because within China itself, there remains a huge income imbalance and inequality between the richer coastal eastern provinces and the poorer central and western provinces. It is also unclear what kind of institutional arrangements will form bases of the Obor and its relationship with other trade arrangements, such as the Asia Pacific Economic Cooperation and the Regional Comprehensive Economic Partnership with the Asean and its various free-trade agreements with different countries. China may have the resources, but it may lack the institutional experience and capacity to implement a full Obor.

With these observations and current developments in the Philippines, taking part in the Obor initiative requires both pragmatism and prudence. Pragmatism because the global economic order is shifting, and we need to be open to other trading partners in finding new markets and new value chain linkages for our economy. Also, the current challenge in Mindanao, particularly in Marawi, will require huge rebuilding and reconstruction finance that is not factored in the present government budget. Despite the possible approval of the tax-reform package, the government will require more resources than what it has originally programmed for the next years of the development plan. Prudence is needed, in such a way that the country should separate the benefits that will be gained from Obor from that of the existing challenge in the West Philippine Sea. This is a balancing act that needs a careful evaluation beyond economic benefits, from trade and investments to internal benefits that the country could not access, and from present gains and future gains. To do this, the country should also work within the soft component of the Obor. This is essentially the cultural exchange component to deepen understanding within the two countries beyond economics and more into how China and the Philippines can foster the “Huang Pu” spirit. Huang Pu is the military camp jointly established by the Nationalists and the Communists to help unite China in 1924. It implies the spirit of cooperation despite having differing opinions and ideologies in achieving a common goal. In this case, China and the Philippines can cooperate despite having differences into the common goal of inclusive and sustainable development for both nations.



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