Philippine President Rodrigo Duterte is on a diplomacy roll and maybe a bank roll too. During his trip last week to China, the source of a tense maritime sovereignty dispute, the 71-year-old newcomer to his country’s national politics agreed to economic deals worth $24 billion and some expect that stack to grow. The sum covers $9 billion in soft loans and $15 billion in economic deals. Agreements involving Chinese companies will help develop energy, mines, ports and railways in the Philippines.
Duterte is wrapping up a visit to Japan today. Japan wants to keep up ties with the fellow democratic Asian country and traditional U.S. ally (despite harsh anti-American comments from Duterte), a measure to help resist Chinese expansion. Japan has own maritime disputes with Beijing.
But can Tokyo match Beijing’s aid and economic development offer to the largely impoverished Southeast Asian country? The answer is yes and probably exceed it. Japan already helps economically through a diverse slew of channels, from aquaculture to patrol ships. It shows all signs of continuing to support the Philippines just as it does with much of developing Southeast Asia. That support effectively counters China’s efforts to win favor with the same countries through its own brand of economic aid.
Japan’s financial backing just won’t make the same splash as China’s economic aid announcement last week because it’s already embedded in the Philippine economy and will simply sustain, though possibly at a quickened pace.
“Japan has been a big investor in the Philippines,” says Trinh Nguyen, an economist at French investment bank Natixis in Hong Kong. That said, “I doubt that (Duterte) will get the pledges such as the one he got in China, as Japan is more of a long-term investor,” she says. “For example, the Asian Development Bank has increased its funding for the Philippines. Also, Japanese firms have been investing in the Philippines. The aid and funding from Japan will be less flashy than the figure from China but likely more sustained.”
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The Manila-based Asian Development Bank has lent the country an average $745 million per year for poverty reduction since 2006. Japan had contributed about $23 billion in capital subscription to the bank as of December. Separately, the government-funded Japan International Cooperation Agency calls the Philippines “among the largest recipients” of Tokyo’s official development assistance. That assistance totaled $272 million in 2006, making the Philippines the third largest recipient after Indonesia and Vietnam.
In July shortly after Duterte took office, the Japanese prime minister offered a loan for 10 coast guard patrol ships, probably a way of countering Chinese maritime expansion in Southeast Asia. China and the Philippines are still locked in a maritime sovereignty dispute and Beijing has not been tipped to help improve the relatively weak Philippine military. During Duterte’s upbeat visit to China last week, Beijing and Manila agreed to talk about that dispute later. In a joint statement Wednesday, Duterte and Japanese Prime Minister Shinzo Abe “welcomed” a loan for two patrol vessels and “steady progress” in providing the other 10. They also lauded arrangements for the transfer of training aircraft.
Japanese companies have also invested in the Philippines, including in parts of the archipelago overlooked by other countries. For example, they invest in aquaculture on the sometimes unstable southern island Mindanao, where Kawasaki Steel Corp. has also operated a plant. Direct investment from Japan to the Philippines totaled about $10 billion at the end of 2011.
Officials in Tokyo also were tipped to offer $48 million in loans this week and announce $2 billion in trade deals.
“Tokyo seems to understand that outbidding Beijing is not an option. Therefore, Japan will not try to top China’s offer of aid and investment,” says Fabrizio Bozzato, associate researcher specialized in international affairs at Tamkang University in Taiwan. “But, when it comes to competing with China for Duterte’s benevolence, Tokyo will go for an asymmetric strategy. Tokyo’s strategy builds on Japan’s long-time record as an established and reliable development partner of the Philippines.”