2019/61, 18 July 2019
For the last three decades, successive Philippine governments have considered but not started constructing a Mindanao Railway System to link the urban centres of the country’s poorest and most troubled major island. Under President Duterte, the first president from Mindanao, this massive but commercially doubtful 1500km project has gained much greater political backing and urgency. It has become a test for both China and the Philippines of their new-found “friendship” as the Duterte administration expects China to provide the majority of financing for this project and 80-85% of its first $83 billion peso stage covering about 105 kilometres.
For the Chinese government, the Mindanao Railway System poses a serious test when the commercial viability of the gargantuan Belt and Road Initiative is coming into greater question. On 16 July, the Philippine Department of Transportation reported that the 2017 feasibility study by two local consulting firms for the first and most commercially viable stage of the Mindanao Railway System was inaccurate. The estimated cost of this stage is now 131% greater despite it being downgraded from a dual track electric railway to a dirtier single track non-electric one. One reason this politically attractive infrastructure project has remained an aspiration for decades is because its commercial viability is doubtful. Were Chinese state-owned banks to finance it in the service of China-Philippine relations, their exposure to questionable overseas infrastructure projects would grow.
For President Duterte it is a test of the promised benefits of his warm and unpopular embrace of China. The president contends that only China has the money to support his ambitious Build Build Build infrastructure strategy; and that deferring to China in the West Philippine Sea will deliver major economic benefits to the Philippines. Yet, half-way through his term, the boon in Chinese infrastructure financing is still more a promise than a reality. If Chinese financing is not provided for the Mindanao Railway System, then the project is likely not feasible and this lack of Chinese support would be a major blow.
The Mindanao Railway System may be a test that failed for both the Build Build Build strategy and the current China-Philippine friendship.
Dr Malcolm Cook is Senior Fellow at the ISEAS – Yusof Ishak Institute.
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