Philippine stands to benefit from China’s OBOR

Carlo S. Lorenciana (The Freeman) - April 14, 2018 - 12:00am

CEBU, Philippines — China's One Belt, One Road Initiative (OBOR) is seen to benefit the Philippine economy, including Cebu, which is deemed a potential market for Chinese investments, Colliers International said.

In its latest radar report entitled “China’s One Belt One Road: The Dragon Spreads Its Wings over Asia”, the property management and consulting firm said China's OBOR coupled with its firm economy and strong renminbi will drive Chinese investment in emerging Southeast and South Asian markets including the Philippines.

Colliers believes that although the Philippines does not lie directly on the two major routes in China’s OBOR initiative, there appears to be plenty of room for cooperation that would benefit the Philippines.

In fact, the warmer relations between the Chinese and Philippine governments have been benefiting the Philippine economy with growth trickling down to property segments such as office, residential, hotel, and industrial.

""A more active participation of China into the Philippines’ ambitious infrastructure development program should help sustain growth in the local property sector over the medium to long term," Colliers said.

In recent years the BPO sector has accounted for 60-70 percent of total office space demand. That abruptly declined to about 25 percent to 30 percent last year. The drop in BPO transactions was covered by higher demand from offshore gambling firms, which accounted for 35 percent of total office space transactions in 2017.

Chinese offshore gambling firms have started to open shop in Cebu, accounting for almost 25 percent of recorded transactions last year.

China’s USD1 trillion OBOR project intends to get about 60 economies to invest in infrastructure to develop land and maritime routes which comprise the old Silk Road network that once connected Beijing to Central Asia and European economies.

Chinese tourists have also been growing. In 2017, the Philippines welcomed more than 960,000 visitors from China, up 43 percent compared to the previous year.

China is now the Philippines’ second largest tourist market after South Korea.

Likewise China is Cebu's fastest growing tourist market.

Colliers believes that the influx of more Chinese visitors will play an important part in sustaining hotel occupancy of between 65 percent and 70 percent across Metro Manila, Cebu, Bacolod, and Iloilo, three of the most visited destinations outside the capital.

The Philippine and Chinese governments had signed a memorandum of understanding (MOU) on industrial park development.

Chinese industrial park developers are aware of the rising demand for industrial space in the Philippines given the country’s expanding manufacturing and export base.

Data from the Philippine central bank reveal that foreign direct investments (FDIs) from China more than doubled to USD28.8 million last year from USD10.8 million in 2016.

While still not among the major sources of foreign inflows, Colliers believes that the country’s improving stature as an ideal investment destination should encourage more Chinese firms, including those into property development, to aggressively invest in the Philippines in the next few years.

This was evident on the sidelines of the Boao Forum for Asia in China where President Duterte witnessed the signing of USD9.5 billion worth of investment deals with Chinese businessmen.

Colliers believes infrastructure implementation and decentralization should provide a favorable backdrop for a thriving Philippine property market, and this should benefit urban areas outside of Metro Manila such as Cebu, Clark Bacolod, Davao, Iloilo, and Cagayan de Oro.

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