“Philippine Critical Infrastructure and China” by Malcolm Cook

2019/102, 2 December 2019

On 20 November, National Transmission Corporation President Melvin Matibag testified in the Philippine Senate that the State Grid Corporation of China may be able to turn the power off in the Philippines. In 2009, the administration of President Macapagal-Arroyo privatized the national grid monopoly and granted it to the National Grid Corporation of the Philippines (NGCP). The State Grid Corporation of China owns 40% of the NGCP and is the single largest owner.*
NGCP’s CEO, Anthony L. Almeda, has queried Matibag’s claim, contending that the State Grid Corporation’s role is as a technical adviser to NGCP. On 27 November, the Chinese Ministry of Foreign concurred with Almeda and dismissed the concerns as ‘completely groundless.’ On 29 December, the Philippine Secretary of Energy Alfonso G. Cusi publicly criticised NGCP for continuing to deny the National Transmission Corporation, a government agency wit oversight of NGCP, access to its transmission centres. The Philippine Senate is planning to investigate Matibag’s claim. The Department of Energy supports a Senate inquiry stating that “Given that there are aspects in the existing franchise agreement with the NGCP that seem inimical to the best interests of the national government, and more importantly, the Filipino people, both the DOE and Transco continue to call for, and are fully supportive of the Senate’s interest to take a closer look at the administrative, operational and procedural structures existing within the NGCP.” 

A year ago, the Philippine Senate probed the national security concerns of awarding the third national telecom license by the administration of President Rodrigo Duterte to a consortium in which China Telecom, a Chinese state-owned firm, has a 40% share and is the single largest owner. Worries about China Telecom’s new role in the Philippines’ critical infrastructure deepened in September this year when the Armed Forces of the Philippines announced a memorandum of agreement with this consortium to place their towers and other infrastructure in armed forces bases and “help design, develop, and upgrade” the armed forces’ own information systems. President Duterte dismissed these fears as “bordering on paranoia.” The Secretary of National Defense Delfin Lorenzana noted at the time of the AFP announcement that he had not approved this agreement.
These two deals show that the Macapagal-Arroyo and Duterte administrations have taken a more relaxed approach to potential Chinese influence over critical infrastructure than many other Asian states from India to Vietnam and Japan, and the Philippines’ only security ally, the USA. The Philippine Senate has been less sanguine.

* The National Transmission Corporation is the government agency, and former monopolist, that now oversees NGCP’s operations and owns the power transmissions assets it uses. Foreign ownership of any public utility in the Philippines including power transmission is capped at 40% and the head of the utility must be a Filipino citizen. The Duterte administration is seeking to raise this ceiling on foreign ownership to encourage more foreign investment in public utilities.

Dr Malcolm Cook is Senior Fellow at ISEAS – Yusof Ishak Institute.

The facts and views expressed are solely that of the author/authors and do not necessarily reflect that of ISEAS – Yusof Ishak Institute.  No part of this publication may be reproduced in any form without permission.