China's steel industry to benefit from PH's infra program – study

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Metro Manila (CNN Philippines, November 22) — The Chinese steel industry stands to benefit from the Philippine government's Build, Build, Build program, according to a study conducted by the Ateneo Policy Center.

Based on the "Mining through the National Security Lens" working paper of economist and policy expert Dr. Ronald Mendoza, Prinz Magtulis and Jerome Patrick Cruz, the Philippines' demand for steel will increase by 1018 percent because of the lined-up infrastructure projects.

From the 6.5 million metric tons of steel imported in 2016, the Philippines' ₱8.44 trillion Build, Build, Build program alone would need 73 million metric tons of steel.

Mendoza said, China will likely benefit most as it is the biggest foreign steel supplier in the Philippines nowadays.

China's increasing imports

For the past 6 years, China has been the leading source of imported goods in the Philippines. From supplying just about 5 percent of imported products in 2003, China's percentage share of imports to the Philippines reached over 17 percent in 2015 to 2017.

 

In September 2018 alone, their import bills reached USD1.8 billion, or 19 percent of the Philippines' total import for the month. The top three commodities from China are iron and steel (12.7 percent), mineral fuels (10.9 percent), and semiconductors (8.2 percent).

 

Meanwhile, Philippine products exported to China in September are only valued USD722.62 million.

 

Budget secretary Benjamin Diokno said the Philippines' importation grew because of the need for construction supplies for the infrastructure project. China, he said, offers the cheapest price of steel and cement.

"If I remember it right, around 70 to 80 percent ng mga import natin ngayon ay construction-related. So hindi naman masama 'yun," Diokno said. "Ang pag-import natin ngayon, ginagamit natin ito ngayon para mas lumaki ang ating ekonomiya no?"

[Translation: If I remember it right, around 70 to 80 percent of our imports are constructrion related. So that's not bad. Our importation is useful to boost our economy.]

Mendoza also sees no problem if the country would get materials from abroad, especially if this is for economic gain. But he also warns the government against too much dependence on China, when it comes to supplies to complete infrastructure projects. The economist and policy expert said, the Philippines should also take supply from another country, or better yet, develop the local steel industry as a contingency. He reminds the government of the still unsettled Chinese claims on the Philippine islands in the West Philippine Sea.

"What we have to make sure is that we have alternatives. Alternatives could come in importation from other countries, in the case that, let's say, the relationship with china does not develop well or something disturbs it, so we should have other options," Medoza said. "If we bring in more products in ways that are not strategic, in ways that could weaken some of our industries, that could have been further strengthened, then I really think we should take a step back and analyze this properly and make sure we are doing the right thing."

Aside from steel shipments, China has a bigger role in the Build, Build, Build, program. Diokno said a third of the infrastructure programs rely on Chinese loans and grants.

Amid the supposed help from China, Mendoza said the Philippine government must thoroughly weigh how the country will benefit from the trade agreements.

This, amid issues that Chinese laborers will be hired for the infrastructure projects.

"This becomes less of a benefit to us in a sense that we also have access to other finance, so the other benefits could be in the form of technology, in the form of technical assistance. This is the kind of assistance that we hope working with Chinese could benefit us," Mendoza said.

"Basically sourcing labor from China, then it produces less of a footprint for the Philippine economy. It's something that we have to think about na it's not the kind of support that we want since we have a younger ones who need a job too. If the importation of these imports will create infrastructure boost," he added.

The Build, Build, Build program is expected to create around a million jobs every year. Diokno confirmed Chinese specialists are needed for the construction because they know how to operate the machines. Labor Secretary Silvestre Bello, meanwhile, assured Chinese will be hired "only if the work that they will do or render cannot be done by Filipino".

Meanwhile, Mendoza also reminded the government to look at trade agreements with national security in mind, especially if the other country or foreign corporation is set to handle key infrastructures.

"So if you're thinking of let's say, a big project in telecommuniciations…think about national security implications. Because you do not just let another country or foreign corporations get into your country without having gone through some kind of critical thinking analysis and vetting and oversight so that…these types of economic ties do not necessarily expose you to national security risks and certainly telecommunications, because of its sensitivity to our growth and development and importance to our economy this is something we should study well," Mendoza said.

"They're going to handle data, they're also going to have control parts of other industries that depend on that kind of service," he added.