GUANGZHOU, China—An emerging mega trade deal among 15 Asia-Pacific countries will be a “gamechanger” for closer economic integration between China and the member-states of the Association of Southeast Asian Nations (ASEAN) that is crucial to the region’s collective quest for steady high growth and accelerated poverty reduction for its peoples, Finance Secretary Carlos Dominguez III has said.
Dominguez said the Regional Comprehensive Economic Partnership (RCEP) will not only spell greater synergy for China-ASEAN cooperation but will also ensure that the region continues being a growth leader in the face of increasing trade protectionism in the West that threatens global prosperity.
“The RCEP, which we support with vigor, will be the centerpiece of our collective efforts to build beneficial multilateral partnerships. The well-developed relationship between China and the ASEAN form the core of this emerging partnership,” Dominguez said at the session of the International Finance Forum (IFC) on National and Regional Cooperation: China-ASEAN Financial Cooperation held here over the weekend.
Under the Duterte administration, Dominguez said the Philippines has adopted a more forward-looking policy towards China because the government “understand(s) the great synergy that will be generated by the closer partnership between our two countries,” Dominguez said.
“The opportunities that unite us are far greater than the issues where we might have some differences,” he added.
Dominguez said ASEAN and China continue to show resilience and dynamism in the midst of a global economic slowdown, owing to a broad consensus among these economies that free trade and the efficient movement of capital, goods and services is "the correct way to go" in ensuring that the region continues to be among the world’s growth leaders.
Poised to become the world’s largest trade agreement when plans proceed to formalize it next year, the RCEP involves the 10 ASEAN members—the Philippines, Malaysia, Thailand, Singapore, Brunei, Indonesia, Laos, Cambodia, Vietnam and Myanmar—and its five major trading partners, namely, Australia, China, Japan, New Zealand and South Korea.
“We look forward to the finalization of agreements for the RCEP. With this framework for enhancing trade and investment, the development of the economies of the region will be further enhanced. We will be able to build a sanctuary for free trade and investment cooperation against the forces of protectionism elsewhere. This will be a major force shaping the development of the world’s economy,” Dominguez said.
“The prosperity and well-being of billions of people in our region will depend on how we can foster growth through increased connectivity and increased integration of our economies. Enhancing our cooperation with China is essential in ensuring the region’s vibrant economic future and achieving our shared-goal of dramatically reducing poverty among our peoples,” Dominguez said.
He said the Duterte administration appreciates China’s support for building institutions for open trade and investments in ASEAN--as demonstrated by the signing of the ASEAN-China Free Trade Area, one of the first free trade pacts that the regional bloc had signed with its major trading partners.
The success of this free trade deal is proven by the fact that for 10 consecutive years, China has emerged as the ASEAN’s biggest trading partner, with total trade growing at an average of 10 percent per year since 2009, Dominguez said.
In 2018, ASEAN’s total trade with China reached US$483.14 billion, which is 10 percent higher than the 2017 level.
Dominguez pointed out that as a result of this warming of relations between the two countries on the Duterte watch, China has become the Philippines’ biggest trading partner and largest tourism market.
Since 2016, the Philippines’ total trade with China increased at an average of 15 percent annually, he said. Last year, total trade with China reached US$52 billion, which is 15 percent higher than the 2017 level.
Chinese tourist arrivals in the Philippines, meanwhile, grew at an average of 27 percent per year since the start of the Duterte administration. It reached 1.63 million arrivals in 2018, or 23 percent higher than the visits recorded in 2017.
Moreover, the Philippines obtained the best terms—a very tight spread of 32 basis points over the benchmark—for its maiden and subsequent "Panda" bond issuances in the Chinese market.
The China Lianhe Credit Rating also rated the Philippines’ Panda bond issuances as Triple A, which is its highest rating, he said.
“The synergy created by closer Philippines-China economic cooperation is true for all the rest of the region. This is the reason we see even closer economic integration between China and the ASEAN economies,” Dominguez said.
During the forum, Dominguez reiterated the Philippines’ full support for China’s Belt and Road Initiative (BRI), which, he said, will open the vast economic potentials of all countries in the region.
“Improved infrastructure will enhance trade among our economies. Enhanced trade will encourage more efficient investment flows. Improved connectivity will enhance the inclusiveness of our growth patterns. We have everything to gain from this,” he said.
Dominguez noted that the Philippines also has its version of the BRI dubbed the “Build, Build, Build” program, which involves 100 highly strategic infrastructure projects as well as thousands of infrastructure and logistics improvements all over the country.
This infrastructure modernization strategy--aimed at lowering the Philippines’ poverty incidence from 27.6 percent in the first half of 2015 to just 14 percent by 2022—will lower the costs of moving people and goods, bring remote communities closer to the economic mainstream, and "create numerous investment opportunities that will unleash the latent strengths of our economy," Dominguez said.
“We are relying on this program to induce internally generated growth that will enable us to expand despite a challenging global environment brought about by protectionist policies in the West,” he said.
China has committed official development assistance (ODA) to this infrastructure modernization program in the amount of US$9 billion, of which US$493.08 million has been extended so far through three highly concessional loan agreements to fund the construction of a dam, an irrigation system, and a railway.
Another US$430.82 million in grants has been extended by China since 2016 to finance the construction of iconic bridges and drug rehabilitation facilities, and conduct several feasibility studies on “Build, Build, Build” projects, among other forms of assistance.
To enhance economic cooperation between the Philippines and China, Dominguez said the two countries are now putting in place payments and settlement arrangements that are designed to improve the efficiency of using their respective currencies for financial transactions.
Last year, 13 local mainstream commercial banks along with a local branch of the Bank of China entered into a memorandum of agreement (MOA) for the creation of the Philippine Renminbi Trading Community, which is expected to significantly reduce the cost of doing business across the Philippines and China.