In response to the national "the Belt and Road" initiative, enterprises in the Mainland and Hong Kong are actively looking for investment opportunities in the countries along the route, and the neighbouring ASEAN countries have become the priority markets. Earlier, the TDC led a delegation of Hong Kong and Shanghai enterprises to Manila, the Philippines, for a business visit. After Philippine President Duterte took office, he focused on improving national infrastructure and mending relations with China. After the improvement of Sino-Philippine relations, local infrastructure has become a potential investment opportunity for Chinese enterprises. However, there are still restrictions on foreign investment. Therefore, experts suggest that mainland and Hong Kong enterprises should balance opportunities and risks before investing.
Philippine President Rodrigo Duterte has vigorously promoted the "Build, Build, Build" program, hoping to increase economic capacity and create more jobs through infrastructure projects, thereby increasing national income. At present, Philippine infrastructure lags behind other Southeast Asian countries, especially the lack of traffic connections between regions, and traffic jams plague the whole country. Duterte is aggressive on infrastructure investment, aiming to increase the ratio of infrastructure budget to GDP from about 5% to 7% by 2022. Infrastructure capital needs in the Philippines amount to US $171 billion, according to HSBC research.
Malawi Reconstruction Project to Chinese Capital
Due to the poor Sino-Philippine relations in the past, mainland and Hong Kong enterprises have less investment activities in the region. The Philippines has been developing special economic zones since 1995. According to the Philippine Economic Zone Authority, there are currently 366 economic zones in the country, with an investment of 235.7 billion Philippine pesos (about 36.07 billion Hong Kong dollars) last year. Over the years, Japanese-funded enterprises accounted for 27.8% of the total investment, followed by local enterprises in the Philippines, accounting for 22.8%. At present, there are a total of 4,147 enterprises operating in the economic zone, of which only 75 are Hong Kong-funded enterprises, mainly engaged in manufacturing and IT services.
On the other hand, Duterte has made great efforts to improve diplomatic relations with China. During his visit to Hong Kong last month, he made a formal apology for the Manila hostage incident in 2010, showing his sincerity in promoting Sino-Philippine relations. After the improvement of Sino-Philippine relations, under the "the Belt and Road" initiative, mainland and Hong Kong enterprises began to pay attention to investment opportunities in the Philippines, and it is expected that more Chinese enterprises will participate in local infrastructure investment in the future. Last month, the Philippine government announced that the reconstruction project in Malawi would be awarded to a joint venture between China and the Philippines. The city was severely damaged by armed conflict earlier. It is known that the total cost of the reconstruction project is as high as 49.8 billion Philippine pesos (about HK $7.56 billion).
Hong Kong businessmen are not familiar with local laws and regulations
In addition to infrastructure, the Philippines also has advantages in manufacturing and IT services. Lo Kangrui, chairman of the TDC, said that the average age of the Philippine population is 23.5 years old, which is younger than that of ASEAN countries. He has strong English skills and is easier to manage and communicate. He believed that Hong Kong businessmen could consider developing manufacturing industries there. However, he also agreed that the investment of Hong Kong enterprises in ASEAN countries started late. Compared with the Japanese and Korean enterprises that have invested for a long time in the region, it is more difficult for Hong Kong enterprises to strive for good projects. He suggested that when Hong Kong businessmen invest in ASEAN countries, they should give preferential treatment to their local partners. "It's not good to live in the sun, but it's good for everyone to make money."
Cai Guanshen, president of the Chinese General Chamber of Commerce of Hong Kong, said that in the past, due to poor relations between China and the Philippine government, as well as a number of kidnappings of Chinese businessmen in the Philippines, coupled with the Manila hostage incident, Chinese enterprises were generally more resistant to investing in the Philippines. However, since Duterte took office, efforts have been made to repair relations with China. Cai Guanshen believes that after the improvement of Sino-Philippine relations, mainland and Hong Kong enterprises have also begun to examine local investment opportunities, but because they are still not familiar with relevant laws and regulations, the participation of Hong Kong businessmen is still relatively small. He said bluntly: "Chamber of Commerce members in the Philippines to donate more money than to do business, afraid of investment but trouble."
Public Construction Amendment & emsp; Relax foreign ownership
In view of the huge funding gap for infrastructure projects, the Philippine government has actively liberalized the investment restrictions of private enterprises in infrastructure projects and encouraged foreign investors to participate in local investment in recent years. Jeffrey Manalo (see photo), director of the Center for Public-Private Cooperation in the Philippines, said that there are currently 16 national PPP projects under preparation, of which about three to four have foreign participation, including Indian and Korean enterprises.
With regard to the opening up of foreign participation, local laws stipulate that if the investment involves public equipment projects, foreign investors must abide by the "60-40 Code", that is, foreign investors must invest in partnership with local enterprises and can only hold 40% of the equity. The relevant restrictions make it impossible for foreign investors to gain dominance and reduce their desire to participate.
Jeffrey Manalo said that in order to encourage foreign investment, the government recently proposed an amendment bill to redefine public equipment projects. In the future, some projects, such as transportation equipment, will not be regarded as public equipment, and foreign investors will be able to invest in the form of wholly-owned ownership.
He said that the Philippines now plans to revise the relevant laws on PPP projects, including unifying the investment model of PPP projects and publishing the government's list of priority development projects to encourage private enterprises and foreign investors to make voluntary bids; At present, local governments are unable to approve projects of more than 300 million Philippine pesos (about 45.557 million Hong Kong dollars). After the amendment is passed, the limit will be raised to 5 billion pesos, allowing local governments to approve projects faster. The above amendments are expected to speed up the completion of more infrastructure projects. It is expected that the bill will be passed next year.
Hong Kong Enterprises Invest in New Manila Bay Project
In 2016, the local architect "HPA Ho Design" won the overall project of the "New Manila Bay International Community" project. The deputy managing director of the company, He Lizhi (see photo), said that the project is to build a smart and ecological city, covering an area of 407 hectares, and will build a number of supporting facilities such as residential, entertainment and commercial buildings; The project has been launched for more than a year, but it is still in the early stage of preparation, because public consultation is needed before the start of the project, and a number of approval documents are also needed. He said that the project had obtained relevant approval and planned to invite tenders for the reclamation project in July. The reclamation project will start as soon as the end of this year. The whole construction project will take 15 to 20 years.
He Lizhi said that the project was initiated by the Manila Municipal Government and the Philippine UAA Jianming Group is responsible for the project, while UAA Jianming is a joint venture between the Philippine Jianming Group and the New World (00017) family's Chow Tai Fook Enterprises.
As the project requires a large amount of capital and involves a number of projects, the local government has to attract private enterprises and foreign businessmen to participate. For example, UAA Kin Ming will be responsible for the reclamation and other construction costs. 55% of the reclaimed land will belong to UAA Kin Ming, while the government will own 45%.
He disclosed that the local infrastructure project will also be challenged by many people during public consultation, and the completion of the project will be greatly discounted compared with the previous planning. However, the Manila Municipal Government has promised to provide favorable policies such as tax incentives for foreign businessmen, hoping to have sufficient funds to complete the existing design.
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