By Bloomberg News
Aug. 31 (Bloomberg) — Philippine President Benigno Aquino and Chinese counterpart Hu Jintao signed an agreement targeting $60 billion in trade and investment as the Philippines played down a dispute over the South China Sea.
Aquino told Hu the conflict over oil and gas in the contested waters “requires a regional solution,” Edwin Lacierda, Aquino’s spokesman, told reporters in Beijing after the meeting. The South China Sea issue “is not the be-all and end-all of Philippine-China relations,” he said. China, which claims almost all the sea, has opposed moves to broker a regional accord and prefers to negotiate with individual claimants.
The two leaders met today after months of sparring over rights to exploit energy resources in waters they both claim. Aquino is seeking closer ties on his first trip to China, his nation’s largest trading partner and potential source of funds for the roads, ports and other facilities needed to revive economic growth that slowed for a fourth straight quarter.
“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.”
The two countries set a target to boost two-way bilateral trade to $60 billion, Lacierda said today. Two-way trade, including Hong Kong, reached $16.1 billion last year, eclipsing Japanese and U.S. commerce with the Philippines, government statistics show.
‘Change in Mindset’
Aquino will also meet with Premier Wen Jiabao during the five-day visit. Earlier today he met officials from State Grid Corp. of China. The nation’s biggest power distributor is “looking for projects,” Energy Secretary Rene Almendras said today in Beijing. After Beijing, Aquino travels to Shanghai.
“The biggest change between the Philippines under my administration and under the previous government is a change in mindset,” Aquino told businessmen in Beijing. “We will not take shortcuts in order to close deals; we will follow the correct procedures.”
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. prompted her to cancel the project.
Arroyo “put the South China Sea issue on the back burner 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.”
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.
Aquino is counting on investment 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.
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 where Chinese vessels chased away a Forum Energy Pcl survey ship in March, rekindling tensions.
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.”
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.”
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