With its foreign-policy pivot towards China, the Philippines looks to have secured extensive mainland investment in its own ambitious infrastructure-redevelopment programme as part of President Xi Jinping's far-reaching Belt and Road Initiative.

Reflecting on change: Manila Bay girds itself for a major infrastructure upgrade.

By pivoting his foreign policy towards China, Rodrigo Duterte, the President of the Philippines, has cannily delivered a huge fillip for his administration's Philippine Development Plan (PDP) – a strategic infrastructure roadmap designed to reinvent the country's economy. At the heart of the PDP are seven massive infrastructure projects, together representing an investment of some P270 billion (US$5.36 billion). Following the President's tactical realignment, it is now expected that China will play a key role in delivering a number of these projects as part of its ambitious Belt and Road Initiative (BRI).

Signalling the start of this China-Philippines infrastructure initiative, the Philippine government and a number of public and private Chinese agencies recently signed a Memorandum of Understanding (MoU). This commits the various parties to a far-reaching infrastructure-development programme, one designed to improve mobility and development across the various regions of the country with a particular focus on the island of Mindanao. Among the priorities identified are enhancing ship-passenger connectivity and cargo handling, providing solutions to Metro Manila's worsening traffic situation and helping to remedy the country's current internal transport problems.

According to Ning Jizhe, Deputy Chairman of the National Development and Reform Commission of China (NDRC), China is fully behind Duterte's 10-point socio-economic agenda, especially where it overlaps with the objectives of the BRI. Speaking after the signing of the MoU, he said: "We hope both sides can nurture these plans and that Chinese business will now be keen to invest in the Philippines."

The eagerness of China to invest in the country was underlined by the recent visit to Manila by a number of senior mainland officials. It is believed that the delegation – which included a Vice-governor of the state-owned China Development Bank and a Vice-president of the similarly state-owned China National Technical Import and Export Corporation – discussed the possibility of developing the port facilities of Manila, Cebu and Davao. The latter is one of the principal cities of Mindanao and was Duterte's former mayoral seat.

The delegation also reviewed proposals for the expansion of the Manila Harbour Centre, allowing it to handle larger vessels. The P7.4 billion project would require the reclamation of 50 hectares of Manila Bay in addition to the 79 already reclaimed to facilitate the development of the Manila North Harbour Centre, the country's largest international commercial port for bulk and break-bulk cargoes.

Commenting on the success of the visit, Red Romero, the Vice-chairman of R-II Builders, the Manila-based construction company that manages the Centre, said: "While this is not the first time we have entertained a Chinese delegation, this group was far more enthused about the project than any previous Chinese visitors."

In other moves, the Philippine government has already green-lit work on a US$183 million container port in Cebu. In order to deliver the project, Mega Harbour Port and Development, the lead contractor, has partnered with China Communications Construction Co (CCCC) Dredging, the world's largest dredging company.

The new facility – billed as Cebu International Port – will extend across an 85-hectare expanse on the shores of the town of Consolacion. Among its proposed resources is a 1,200-metre-long berthing facility.

Explaining the need for the new facility, Edmund Tan, the Cebu Port Authority's General Manager, said: "The proposed new Cebu International Port is expected to provide a lasting solution to the congestion problems at the existing Cebu port as well as the shallow water depth of the Cebu international container berths."

In terms of added connectivity, the Cebu Provincial Government has announced it is seeking Chinese backers for its Trans-axial Highway Project. As well as a 280-kilometre road connecting the northern and southern tips of Cebu, the project's remit extends to a seven-kilometre-long seaport, a 550-hectare reclamation project for Talisay-Minglanilla-Naga and four economic zones in Cebu's Second to Fifth districts.

Expanding upon his plans for the province, Hilario Davide III, the Governor of Cebu, said: "As Chinese financiers are looking to invest in the province, we have pitched the Trans-axial Project to them."

For China's part, its interest in the Philippines was rekindled only after Duterte's administration softened its stance over the controversial South China Sea issue. While the administration may still not view China as an entirely friendly neighbour, it is clearly eager to benefit from its largesse as the Philippines looks to develop its own local infrastructure.

It is not all just about investment dollars, however. A recent joint statement by Dr Zhang Yuyan of the China Academy of Social Sciences and Dr Federico Macaranas of the Asian Institute of Management (AIM) suggested that the Philippines should also take advantage of China's huge expertise in the field of infrastructure construction. Speaking during a recent AIM forum in Makati City, Zhang said: "There is huge, huge room for co-operation."

Geoff de Freitas, Special Correspondent, Cebu

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With its abundant natural resources and its unmatched geographical advantages, Myanmar could benefit hugely from the Belt and Road Initiative, but only if it can secure the massive investment needed for its required infrastructure upgrade.

Can Belt and Road investment trigger a new dawn for Myanmar's infrastructure upgrade?

The benefits Myanmar could receive as a consequence of China's Belt and Road Initiative are potentially massive, not least because of its strategic location. The country, after all, sits between southern China and the massively populous markets of Bangladesh and India. Myanmar also has ports on the Bay of Bengal, which – if they were to be made more accessible – could offer China substantially shorter shipping routes to the West. To cap it all, Myanmar is also rich in raw materials – oil, gas and hydropower – all of which are in relatively short supply in China.

It was back in 1999 that the idea of a Bangladesh-China-India-Myanmar (BCIM) Economic Corridor was first put forward, though it was not until 2013 that all four nations truly embraced the project. In August last year, an official statement was released reaffirming the overall commitment to the project following a state visit to China by Aung San Suu Kyi, Myanmar's State Counsellor. Unequivocally committing her country to the project, the statement read: "Myanmar welcomes China's Belt and Road Initiative and the move to establish the Bangladesh-China-India-Myanmar Economic Corridor."

Essentially, the BCIM is a multi-modal, 2,000km infrastructure project designed to link the southern Chinese city of Kunming with Mandalay, one of Myanmar's key economic hubs. Along the way, it would run through Dhaka, the capital of Bangladesh, before ultimately terminating in Kolkata, India's second largest city.

Although the project is still at the planning stage, it is widely expected that Myanmar would benefit immensely from the enhanced regional connectivity. Set at the veritable crossroads of India's Look East and China's Go West policies, Myanmar is the gateway to a staggering 2.3 billion potential consumers in its neighbouring countries. There is even the possibility of luring substantial trade away from Singapore as China looks to implement trade and energy routes beyond the Strait of Malacca.

Assessing the country's potential to rewrite the global trade rulebook, Andre Wheeler, Chief Executive of Asia Pacific Connex, an Asia-Pacific-based specialist oil and gas consultancy, said: "Myanmar – together with what is happening in Europe and in Baku [the capital of Azerbaijan] – is about to totally change the logistics balance that has dominated East-West trade for the past 40 years. It will allow manufacturers in once-isolated, low-cost production areas to access rail links for the first time. Studies have already shown that rail freight will be considerably cheaper than using the existing maritime routes."

It is a sentiment endorsed by Mark Rathbone, Asia-Pacific Capital Projects and Infrastructure Leader for PwC Singapore. Addressing the issue, he said: "Myanmar's geographical proximity to Kunming could also contribute to its shipping business. The Yunnan capital would be able to use Myanmar's existing ports to transport goods to Africa and the Middle East."

The big 'if', though, that brings this all into question is the country's lack of infrastructure and the financial resources required to implement any required upgrade. In 2015, the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) deemed Myanmar to have the largest infrastructure deficits in the region, while The World Economic Forum ranked Myanmar 141 out of 148 countries in its 2013-2014 Global Competitiveness Report. In concrete terms, as it were, in 2015 only 38.9% of the country's roads were paved, while its overall road density was among the lowest in the region.

Historically, China was Myanmar's largest investor during its years of international seclusion, supporting a number of strategic infrastructure projects, including oil and gas pipelines, ports and dams. Since the country began its opening-up process in 2010, investment has accelerated.

In the 2015-2016 period, the country received US$9.4 billion in FDI, $8 billion in 2014-2015, and $4.1 billion in 2013-2014. In the past fiscal year, the oil and gas sector attracted the biggest investment, followed by transport and communications, then manufacturing. Singapore topped the list of foreign investors, having provided $4.3 billion across 55 projects. China, Myanmar's biggest trading partner, was in second place, having invested $3.3 billion.

Despite these sizable sums, this is still seen by ESCAP as representing only a fraction of what is truly required. The country's largest cities, for instance, require an investment of $146 billion in the years running up to 2030 just to meet the infrastructure requirements of their existing populations and expected new arrivals. According to figures from the Asian Development Bank, the country still needs to find $80 billion if it is to meet its 2030 development targets.

Among the major projects already under development is Hanthawaddy International Airport, one of the most ambitious infrastructure projects ever undertaken in the country. When completed, it will be Myanmar's largest airport, replacing Yangon Mingalardon Airport as the primary gateway to the country. Changi Airport Group, a Singaporean consortium, has won the $1.5 billion bid to implement the first phase, with the Myanmarese government having secured a 40-year loan from the Japanese government to fund the project.

An artist’s impression of Hanthawaddy International Airport, the proposed new gateway to Myanmar.

In terms of the country's other priority projects, the Dawei Deep Sea Port and Special Economic Zone is envisioned as Myanmar's largest industrial and trade zone. Thailand is a major partner in the project and the Japanese government has again shown interest in providing the financing.

Another major initiative is the Myitsone Dam, a $3.6 billion hydroelectric power project located at the junction of the Mali and N'Mai rivers and the source of the Irrawaddy River. Once completed, the dam will form part of the Myitsone Hydroelectric Project and be the largest of seven dams planned along the rivers, with a joint installed capacity of 13,360 MW.

The dam is expected to be completed in 2019 and will be the 15th-largest hydropower station in the world. The project has been undertaken by Upstream Ayeyawady Confluence Basin Hydropower, a joint venture between the China Power Investment Corporation, the Asia World Company of Burma and Myanmar's Ministry of Electric Power.

Geoff de Freitas, Special Correspondent, Yangon

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Over recent years, Thailand has emerged as a highly attractive investment destination. In 2015 alone, according to figures from the United Nations, the flow of investment into Thailand increased by more than 200%. This has been facilitated by the country’s consistent and well-defined investment policies, increased regional connections and its government’s determination to improve transportation infrastructure. There has also been a widespread expectation of a long-term stability in its political and economic environment.

Well-defined Investment Policies

As part of the strategy to attract foreign investment, the 2013 reduction of its corporate income tax level to 20% saw the country’s corporate tax rate become the second lowest in the ASEAN bloc, behind only Singapore.

Two years later, in 2015, Thailand’s Board of Investment (BOI) announced a seven-year investment promotion strategy. This had a specific focus on investments intended to enhance national competitiveness, as well as activities that were environmentally friendly, energy saving or using alternative energy. It also looked to boost clusters that created an investment concentration based on regional potential, while strengthening the value chain. In particular, it aimed to nurture investments in the border provinces of southern Thailand, which could develop the local economy, as well as special economic zones capable of fostering economic connectivity with nearby countries. Additionally, it outlined plans to attract overseas investment in order to enhance the competitiveness of Thai businesses, while boosting the country’s role within the wider global economy.

Japan has long been a major investor in Thailand.

Among the incentives on offer to help realise these strategic goals are a number of tax concessions, land ownership deals, and streamlined investment procedures, as well as import duty exemptions/reductions relating to activities that meet national development objectives. Additionally, any manufacturing company in receipt of investment promotion privileges is exempt from both foreign equity restrictions and local content and export requirements.

According to the BOI, the total value of approved foreign investments in Thailand in 2016 was 358.11 billion baht (US$10.1 billion). Overall, Japan was the largest investor, accounting for 22% of the total. However, funding from Australia, Cayman Islands, China and South Korea recorded substantial increases. In 2016, China became the second largest investor in Thailand, accounting for 15% of the overall total.

In terms of individual sectors, services and public utilities accounted for the largest share of investments during 2016 (87%), followed by chemicals, plastics and papers, agriculture and agricultural products, and metal products, machinery and transport equipment. Significant growth was seen in investment into agriculture and agricultural products, and chemicals, plastics and paper.

The Logistics Sector: Set to Benefit from Increased Regional Connections

Within Southeast Asia, Thailand is situated at the strategic centre of the Indochinese peninsula. It borders Myanmar to the west and north, Laos to the northeast, Cambodia to the east and Malaysia to the south. Unsurprisingly Thailand’s border trade is growing steadily, driven by the development of its neighbouring countries and the establishment of the ASEAN Economic Community (AEC), a body dedicated to fostering regional integration. According to the country’s Foreign Trade Department, Thailand’s border trade value was estimated to be worth 1.47 trillion baht in 2016, an increase of 2.8% year-on-year. In 2017, it is expected to grow by a further 3%.

Against this backdrop, one of Thailand’s key development strategies is to establish 10 Special Economic Zones (SEZs) over the short-term. These zones will be contiguous to Myanmar at Tak and Kanchanaburi; Laos at Mukadahan, Chiang Rai, Nong Khai and Nakhon Phanom; Cambodia at Sa Kaeo and Trat, and Malaysia at Songkhla and Narathiwat.

Developments such as these as seen as demonstrating the considerable potential of Thailand’s logistics and services sectors. The country already has in place extensive and well-equipped transportation networks, capable of serving as the region’s logistics and services hub and meeting the growing demand from neighbouring countries. This demand includes an enhanced requirement for consumer and business services, including finance, logistics, regional training centres, health care and several other lifestyle-related sectors.

Historically, inadequate infrastructure has impeded Thailand's economic development. In order to tackle this particular problem, the Thai government has drawn up plans for a radical expansion of the county’s railways, highways and other core infrastructure sites over the next few years. Ultimately, this should lower logistics costs and make the country still more appealing to investors.

Major Infrastructure Projects 

In 2016, the Thai government approved 20 infrastructure projects, all intended to bolster the country’s long-term competitiveness. At the same time, these projects should create enormous investment opportunities in the country’s construction and engineering sector.

In an additional move, at the end of 2016, Thailand's cabinet approved an infrastructure action plan for 2017, said to be worth some 896 billion baht. Under the terms of the plan, 35 infrastructure projects, relating to rail, road, air transport and ports throughout Thailand, are to receive funding. The projects will be financed by borrowing 576 billion baht (64%) and through public-private partnerships (197 billion baht - 22%). Further funding will come from the government budget (74 billion baht - 8%) and the Thailand Future Fund (45 billion baht - 5%) with the remainder coming from the private companies behind the projects.

Traffic is always heavy in Bangkok.

In Thailand, domestic transport is heavily reliant on the road network, which meets some 90% of the country’s transportation requirements and, as a result, is constantly congested. In a bid to relieve this problem, work has been green-lit on the re-development of the Greater Bangkok electric train network. This would allow the national capital to extend its reach and enhance its connectivity with nearby provinces. The Thai government also plans to promote railway transportation as a means of reducing logistics costs and improving efficiency. Currently, most of Thailand's railway network is single-track, though a dual-track system is currently under construction. A second phase – consisting of seven double-track rail projects spanning 1,439 kilometres and worth 292 billion baht – is now being considered by the cabinet.

Another current priority is a major redevelopment of the country’s airports. Billed as the Airports of Thailand initiative, this envisages 194 billion baht being spent over the next 15 years on expanding six of the country’s airports – Suvarnabhumi and Don Muang in Bangkok, as well as the existing sites in Hat Yai, Chiang Mai, Chiang Rai and Phuket. Collectively, these six airports handle about 90% of Thailand’s air traffic. By 2030, these principal airports will be capable of serving 150 million passengers every year, more than twice the current capacity.

Sino-Thai Relations Under the Belt and Road Initiative

The Belt and Road Initiative – also known as the Silk Road Economic Belt and the 21st Century Maritime Silk Road – is a wide-ranging development strategy launched by the Chinese government. Its stated intention is to promote economic co-operation between countries along the proposed Belt and Road trading routes.

To date, this initiative is seen as having strengthened Sino-Thai relations, especially with regards to infrastructure development. Perhaps the primary example of this is the Sino-Thai Railway project, part of the Pan-Asia Railway Network's central route, which will connect China, Laos, Thailand, Malaysia and Singapore. For many, this is the most potent symbol of co-operation between China and Thailand for a considerable number of years.

In the most recent development, the Thai government announced plans to fund this project itself, although the trains and signalling systems will be bought from China. According to Arkhom Termpittayapaisith, the Thai Transport Minister, construction could begin as early as March this year, with bidding for the work to be concluded in February [1]. Upon completion, the train service is expected to be able to reach speeds of 250km an hour. It is expected that this high-speed connection will take Sino-Thai relations to a whole new level, particularly with regard to economic and trade co-operation.

[1] Source: “Work on High-speed Train Projects to Get 2017 Start”, Bangkok Post, 3 January 2017.

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