China's ‘Silk Road’, seen to fund Philippine infrastructure, hits snags — report

MANILA, Philippines — Philippine President Rodrigo Duterte attended the China-sponsored “One Belt, One Road” Summit in Beijing last year, signalling Manila's interest in the multibillion-dollar fund earmarked by the Asian power for the infrastructure initiative aimed at linking Asia, Africa, and Europe.

But there’s one problem: China’s ambitious plan to revive an ancient “Silk Road” is reportedly facing a serious financing obstacle, while attracting private investors to take part in the initiative remains a challenge.

According to a report by the South China Morning Post dated April 16, funding infrastructure projects along countries in the Silk Road would be a hurdle, as these nations' debt levels are “far above recognized safety levels.”

“It would be a tremendous task to raise funds for the countries’ development,” Li Ruogu, the former president of Export-Import Bank of China, was quoted as saying by SCMP.

In 2015, state-run China Development Bank announced it had set aside $890 billion for more than 900 projects across 60 countries. Meanwhile, the Export-Import Bank of China said it would finance 1,000 projects in 49 countries.

But despite being financed by key financial institutions, "major problems" such as narrow financing platforms and low profitability levels remain for the Belt and Road program, said Wang Yiming, deputy head of the Development Research Centre of China’s State Council.

Wang then flagged the limited participation of private investors, whom Li said were often discouraged by the "complexity" of having to deal with domestic fiscal policies of Belt and Road host countries.

“Countries involved in Belt and Road projects have low financial capabilities and high liability ratios,” Wang was quoted as saying by SCMP, noting that the Belt and Road program has an annual funding deficit of up to $500 billion.

“It is important to encourage financial innovation to raise funds to support the development of the belt and road,” he also said.

‘I simply love Xi Jinping’

From Pakistan to Tanzania to Hungary, projects under President Xi Jinping’s signature “Belt and Road Initiative” are being canceled, renegotiated or delayed due to disputes about costs or complaints host countries get too little out of projects built by Chinese companies and financed by loans from Beijing that must be repaid.

In some places, Beijing is suffering a political backlash due to fears of domination by Asia’s biggest economy.

As he charts an “independent foreign policy” while lessening his country’s dependence on traditional treaty ally the US, Duterte has courted regional rivals China and Japan to help him bankroll his P8-trillion infrastructure plan.

READ: Pernia sees China-Japan rivalry for Philippine infrastructure push | For friendship's sake: Philippines falling into China's debt-trap?

“More than anybody else at this time of our national life, I need China,” Duterte said last week, as he also professed his love for Xi.

Although it is still unknown how the Philippines—a Southeast Asian nation that is detached from the mainland—could benefit from the China-championed initiative, Socioeconomic Planning Secretary Ernesto Pernia earlier said Manila could tap what he called “BRI fund.”

“BRI fund is at the conceptual stage. But there’s a potential there,” Pernia said. — with a report from the Associated Press