Taking stock of PHL-China economic relations - Eaglewatch by Dr. Fernando T. Aldaba
November 11, 2016
The recent visit and pronouncements of the President on a pivot to China raised concerns on its likely benefits or losses to the Philippine economy. Answering this question requires an assessment of the current state of Philippines-China economic relations, particularly in the areas of tourism, international trade, foreign direct investment (FDI) and official development assistance (ODA).
In the area of tourism, the Department of Tourism (DOT) web site reports that for August 2016, South Korea was still the top-spending market with an estimated expenditure of P102.88 million. Visitors from the US remained at second place, with receipts amounting to P42.84 million. Trailing behind the US was Japan, with a recorded spending of about P42.01 million. Taiwan settled at fourth place, with estimated receipts of P17.09 million, while Canada entered the top 5 spending markets with a reported figure of P14.29 million. Although its expenditure was not explicitly mentioned in the latest statistics article of the DOT, an accompanying chart showed that China actually came at sixth place, with a recorded level close to that of Canada.
In terms of per-capita tourism expenditure, China was not even in the top 12 markets. It was Canada that registered the highest per-capita expenditure for August 2016 with about P66,015.34. Saudi Arabia came at second place with P54,236. Germany trailed behind with P50,409.68. Rounding up the top 6 were Spain’s P46,651.74, India’s P42,528.84 and Australia’s P40,072.32.
In terms of tourist arrivals, monthly historical data from the DOT show that from January 2014 to August 2016, China was actually the third-largest source of visitors with an accumulated number of 1,370,359. The top source was South Korea, with 3,491,649, followed by the US, with 2,081,116. Trailing behind China were Japan and Australia, with 1,326,550 and 626,987 tourist arrivals, respectively.
In the area of international trade, statistics show that in 2015, Japan was the largest trading partner of the Philippines, with $19.2 billion ($12.4 billion in exports, $6.8 billion in imports, $5.6 billion in trade surplus), followed by China’s $17.9 billion ($6.4 billion in exports, $11.5 billion in imports, $5.1 billion in trade deficit). The US came at third place, with $16.4 billion in total trade ($8.8 billion in exports, $7.6 billion in imports, $1.2 billion in trade surplus). Trailing behind the US were Singapore’s $8.5 billion ($3.6 billion in exports, $4.9 billion in imports, $1.3 billion in trade deficit) and Hong Kong’s $8.1 billion ($6.2 billion in exports, $1.9 billion in imports, $4.3 billion in trade surplus).
In the area of FDI, data from the Bangko Sentral ng Pilipinas show that in 2015, China was not even in the top 10 sources; in fact, it was at 24th place with a net FDI inflow of $0.57 million. The US was actually the largest country source for the Philippines, with a net FDI inflow of about $732.52 million. Rounding up the top 10 were Japan, with $394.91 million; the United Kingdom, with $384.31 million; the Netherlands, with $361.20 million; Singapore, with $166.15 million; Hong Kong, with $82.63 million; Germany, with $68.39 million; British Virgin Island, with $57.55 million; Taiwan, with $35.61 million; and Spain, with $23.40 million.
In the area of ODA, the World Bank had the largest share in the 2014 loans portfolio with $4,453.27 million. At second place was Japan, with $3,159.11 million, followed by the Asian Development Bank’s $2,231.70 million, South Korea’s $524.75 million and France’s $436.95 million. At sixth place was China, with $115.33 million. As for grant assistance, the top 5 providers to the Philippine government in 2014 were the US, with $1,148.56 million; the UN System, with $608.48 million; Australia, with $587.02 million; the European Union, with $174.55 million; and Japan, with $166.55 million. At 12th place was China, with $5.70 million.
Clearly, the reviewed data suggest that there is plenty of room for the Philippines to improve its economic relations with China, particularly in the four areas mentioned. For quite some time now, the Philippines has largely been excluded from the financial resources that China has been pouring upon the rest of the region and the world. Even tourism has taken a blow since the Chinese government issued a negative travel advisory against the Philippines (this has been lifted during the recent visit of the President).
Indeed, this pivot to China could likely bring huge rewards for the Philippine economy, although it would be naïve to assume that all other factors will simply stay the same, since strategies and payoffs could likely change altogether, as explained in last week’s game-theory analysis. Nevertheless, when risks are high, rewards are also high, so one should definitely hope that the country hits the jackpot.
Dr. Fernando T. Aldaba is dean of the School of Social Sciences at Ateneo de Manila University.