Aquino Seeks $60B, Oil Resolution on China Trip

   Date:2011/08/31

Philippine President Benigno Aquino arrived in China on his first state visit to the country, aiming to win as much as $60 billion in investments and resolve tensions over oil exploration in the disputed South China Sea.

Aquino’s arrival in Beijing last night to head a trade delegation of about 250 businessmen follows months of sparring with China over rights to exploit energy resources in waters they both claim. The Philippine leader yesterday said he’ll discuss how to end the conflict, which was rekindled in March when Chinese vessels chased away a Forum Energy Pcl survey ship.

Disagreements over the South China Sea have sparked verbal clashes between China and the U.S., which has a defense treaty with the Philippines. Aquino has sought to balance reliance on the U.S. for security with the need for closer ties to China, his nation’s largest trading partner and potential source of funds for the roads, ports and other infrastructure needed to revive economic growth.

“The Philippines is badly in need of foreign direct investments, particularly in infrastructure,” Jose Camacho, Asia vice chairman at Credit Suisse Group AG and a former Philippines’ finance minister, told Bloomberg Television today. “The best result for President Aquino is a general good feeling between the Philippines and China so we can then start seeing investments of Chinese companies in the Philippines.”

China, which claims almost all of the South China Sea, has resisted U.S. efforts to broker a regional solution. Secretary of State Hillary Clinton last year declared a national interest in the waters, a statement the Foreign Ministry in Beijing called “virtually an attack on China.”

‘China Can Help’
“The Philippines needs America for security and at the same time it’s aware that China can help the Philippine economy,” said Benito Lim, a political science professor at Ateneo de Manila University. “It appears Mr. Aquino considers other issues more important than the differences in the South China Sea.”

Aquino will meet with President Hu Jintao, Premier Wen Jiabao and Vice Premier Wang Qishan during the five-day visit. He is also due to meet officials from State Grid Corp. of China and $410 billion sovereign wealth fund China Investment Corp. After Beijing, he travels to Shanghai.

“We will not pass up on this opportunity to meet with businessmen in China,” Aquino told reporters in Manila yesterday before heading to Beijing, according to a copy of his remarks sent to reporters. “Our country is open for business.”

Aquino is making the first state visit by a Philippine leader since Gloria Arroyo’s in 2004, which paved the way for an agreement on joint seismic surveys in disputed waters between the Philippines, China and Vietnam. That accord was abandoned on concerns it may have been unconstitutional.

A Senate probe of a $329 million contract Arroyo awarded to Shenzhen, China-based telecommunications company ZTE Corp. (000063), prompted her to cancel the project.

‘Corruption Allegations’
Arroyo “put the South China Sea issue on the backburner in return for these huge infrastructure and investment deals from China, all of which collapsed under the weight of corruption allegations,” said Ian Storey, a fellow at the Institute of Southeast Asia Studies in Singapore. “Aquino will be very keen to avoid a repeat of that.”

The Philippines may secure as much as $60 billion in Chinese investments under a five-year plan to be signed during Aquino’s stay, Christine Ortega, assistant secretary for foreign affairs, told reporters in Manila on Aug. 24. This trip alone may bring $7 billion in commitments, Trade Undersecretary Cristino Panlilio told reporters in Beijing yesterday.

“We try our best to reach the investment audience, but there’s nothing like a presidential trip,” he said.

Ricky Carandang, Aquino’s spokesman, yesterday said the investment projections were “rough figures” and the final number remained unknown.

‘Ready and Willing’
China is “ready and willing to add power to the winds” of the Philippine economy, Chinese Ambassador Liu Jianchao told reporters in Manila on Aug. 24. Philippine exports to China have more than doubled since January 2009. Two-way trade, including Hong Kong, reached $16.1 billion last year, eclipsing Japanese and U.S. commerce with the Philippines, government statistics show.

Aquino is counting on investments to boost economic growth that slowed for a fourth straight quarter. Gross domestic product increased 3.4 percent in the three months through June from a year earlier, from a revised 4.6 percent in the first quarter, the National Statistical Coordination Board said today.

Lagging Investments
Net foreign direct investment in the Philippines fell 13 percent to $1.7 billion in 2010 from a year earlier, the central bank said in March. Between 1970 to 2009, the country lured $32.3 billion in FDI, compared with $104.1 billion for Thailand, according to United Nations data.

Higher returns on investments will come from resources “that have been untapped for such a long time,” Aquino said in an Aug. 18 interview, citing plans to explore for energy in the South China Sea. Two of 15 blocks put out for tender in June are in waters China claims.

The Philippines plans to boost hydrocarbon reserves by 40 percent in the next two decades. Mineral fuels accounted for 17 percent of total monthly imports on average last year, from 11 percent in 2000, data compiled by Bloomberg show.

“We want to resolve the conflicting claims so that we can have our own gas,” Aquino said Aug. 29. “Once we have our own, we will not be affected by events in other parts of the world.”

Source:bloomberg

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