Chinese President Xi Jinping (L) and Philippine President Rodrigo Duterte (R) toast during a state banquet at the Malacanang Presidential Palace in Manila, November 20, 2018. Photo: AFP/Pool/Mark R Cristino

MANILA – When will Philippine President Rodrigo Duterte’s China-friendly foreign policy start to pay dividends?

It’s a question making the rounds in Manila these days as Beijing’s promised bounty of infrastructure investments, energy deals and financial aid persistently fail to arrive.

Upon winning power in mid-2016, Duterte took a notably softer stance on maritime disputes with China in the South China Sea, presumably in exchange for deeper commercial and financial ties.

But nearly four years since China’s initial pledge of US$24 billion in investments, not a single big-ticket infrastructure project has broken ground. That includes a promised railway project for Duterte’s home island of Mindanao. 

At the same time, China has expanded its military footprint and militia deployments in contested waters, much to the chagrin of the Philippine defense establishment.

Now, as the Philippines grapples with arguably the worst economic crisis in its history, there are new concerns over what some perceive as Beijing’s “bargain-hunting” investments, as Chinese companies and enterprises zero in on distressed assets across a variety of strategic sectors.

Depending on what deals are allowed, there is a risk that Chinese acquisitions could compromise and even jeopardize security cooperation with key allies such as the United States, which is deeply worried over espionage risks posed by Chinese telecommunications infrastructure.

To date, the bulk of Chinese investments in the Philippines have been concentrated in shadowy online casinos and symbolic, small-ticket projects such as the Pasig River bridge grant, all of which have been overwhelmingly dominated by Chinese companies and workers.

Chinese President Xi Jinping shows the way to Philippine President Rodrigo Duterte in a file photo. Photo: AFP

It’s unclear how much the Covid-19 crisis and Beijing’s recently announced “dual circulation” policy emphasizing more domestic, and presumably less foreign, sources of economic growth.

Given the tainted history of Chinese investments in the Philippines, Duterte’s top technocrats have also put in place certain safeguards against potentially questionable projects.

In the past, two major Chinese-led projects, namely the NBN-ZTE national broadband internet network project and the Northrail railway project, were scuttled over massive corruption scandals and bidding anomalies.

Duterte’s top technocrats, namely Finance Secretary Sonny Dominguez, have introduced safeguards including competitive bidding and prioritization of joint projects with other investors and multilateral agencies to prevent overdependence on China

That’s likely one, though not the only factor, in the yawning gap between China’s massive multi-billion dollar pledges and paltry actual deliverables in the Philippines.

Now, as Duterte desperately seeks new investments amid an unprecedented economic crisis at home, Chinese state-affiliated companies are making commitments with potentially major security implications for the Philippines.

In what some have described as an “economic cabbage strategy”, Beijing-backed companies are seeking access to sensitive projects in critical infrastructure, including in telecommunications and port facilities. 

They are also reportedly pursuing ventures in sensitive locations, especially those close to major Philippine military command centers. That trend has been seen previously with Chinese-invested casinos in the capital Manila, many of which are situated close to police and military facilities.  

Chinese casinos situated next to the Philippine Air Force’s headquarters in Manila. Image: Facebook

In recent weeks, at least two major Chinese-backed projects have raised alarm bells in the Philippines.

The Philippines Navy chief Vice Admiral Giovanni Carlo Bacordohas recently raised concerns over the location of a Chinese-led multi-billion-dollar project which he said lies dangerously close to and could even crowd out a naval command-and-control center.

The China-financed Sangley International Airport project, which could see the reclamation of almost 75% of the Canacao Bay, is being led by an affiliate of China Communications Construction Co (CCCC). The company was recently blacklisted by the US for its involvement in “illegal” reclamation activities in the South China Sea.

Canaco Bay, meanwhile, is crucial to Philippine naval operations including in the contested South China Sea. Given the sheer scale of the project, it could force the Philippine naval facilities out of the area. 

At the very least, Chinese involvement could also pose risks to the integrity of Philippine military communications, especially in the event of a contingency, some officials say.

“It (naval base) is guarding the entrance to Manila Bay and ­Manila Bay is the center of gravity of the national government. If Manila falls, the whole country falls,” complained Vice Admiral Bacordo, emphasizing the serious national security risks posed by the project.

“All the more we want to remain there so to ensure that there are no security violations,” added the navy chief, insisting on maintenance of Philippine military facilities in the area. 

Chinese companies have also recently sought investments close to shores of Taiwan in the north, strategically-located military facilities in Subic and Clark, the former site of America’s largest overseas military bases and close to the contested Scarborough Shoal, as well as Bautista Airbase in Palawan, which is near the contested Spratly Islands in the South China Sea.

Earlier this month, the Philippine military finally approved following a year-long delay the request by the newly-established  Dito Telecommunity (Dito) to “build facilities in military camps and installations” on communication towers located within military properties.

The new telecommunications company, a joint venture with state-owned China Telecom and a staunch Duterte business ally, is highly reliant on Chinese investments and engineering.

An internal military report, reported in the local press, allegedly rang alarm bells of potential Chinese espionage risks. Earlier, US Secretary of State Mike Pompeo warned that intelligence-sharing and security cooperation could suffer over communications safety concerns.

“[There is a risk] that America may not be able to operate in certain environments if there is Huawei technology adjacent to that,” the US diplomat warned last year, urging allies to shun Chinese telecommunications investments. Huawei is a major supplier of China Telecom. 

A Philippine naval officer stands guard during the arrival of American missile destroyer USS Chung Hoon before US-Philippine joint naval military exercises in a file photo. Photo: AFP/Noel Celis/Getty Images

To date, Duterte has willingly offered geopolitical concessions to China, from denying American military access to key bases near the South China Sea to his refusal to actively invoke the 2016 arbitral tribunal at The Hague against China’s South China Sea claims, to improve ties and lure infrastructure investments.

At the same time, the Philippines has failed to secure any major concessions from China in the South China Sea. Earlier proposals for mutual disengagement from and establishment of a marine sanctuary in the hotly-contested Scarborough Shoal, which is currently under Chinese coast guard’s control, have fallen through.

So have plans for joint energy exploration activities in the area. Instead, China has stepped up its militarization of the contested islands while deploying an armada of militia forces around Philippine-occupied features, including the strategic Thitu Island where Manila maintains troops.

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