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Construction

China's island builder has US embassy in Manila surrounded

China Harbour Engineering wins contract for 360-hectare reclamation project

A conceptual drawing of New Manila Bay City of Pearl: China Communications Construction oversaw the building of Chinese outposts in the South China Sea. (UAA Kinming Group Development)   © UAA Kinming Group Development

MANILA -- China Harbour Engineering has clinched a contract for a $1 billion land reclamation project to extend SM Prime Holdings' Mall of Asia complex in the Manila area, with construction greenlighted to begin next year.

The company is among a group of Chinese construction businesses working on at least five separate land reclamation projects in Manila Bay that will in effect leave the U.S. government's bayside embassy in the Philippine capital surrounded by reclaimed land.

China Harbour will partner with Dutch company Royal Boskalis Westminster for the 360-hectare project, according to Alexander Pomento, vice president for investor relations at SM Prime Holdings, the Philippines' largest real estate company by market value.

China Harbour Engineering, which figured in a bribery scandal involving a Bangladesh highway project last year, is a subsidiary of infrastructure giant China Communications Construction Co., which oversaw the transformation of a handful of rocks and reefs in the South China Sea into a chain of Chinese maritime and military outposts.

"The company has finalized a selection of consultants and contractors from a roster of reputable companies with proven global reclamation and dredging experience to ensure proper and responsible implementation of the project," SM Prime President Jeffrey Lim said on Friday.

While Beijing's militarization of the South China Sea has raised regional tensions and undermined relations with Washington, Philippine President Rodrigo Duterte has downplayed the issue in return for closer ties with China and less reliance on the U.S.

The reclaimed land around Metro Manila is set to host a series of new shopping centers, hotels, offices and entertainment facilities in the chronically gridlocked capital, which has struggled to accommodate a growing economy as well as a recent surge in Chinese tourism and a flourishing online casino industry that has attracted hundreds of thousands of Chinese workers.

Twenty-three reclamation projects, many of them in the Manila Bay area, have been proposed as of March, according to the Philippine Reclamation Authority.

According to the World Bank, sustained average annual growth of 6.3% covering 2010 to 2018 has the Philippines poised to leap from a lower middle income country with a gross national income per capita of US$3,660 in 2017 to an upper middle income country with a per capita income range of $12,055.

SM Prime said the Mall of Asia project, first proposed in 2013, had received a formal "notice to proceed" from the Pasay City local government recently. Reclamation work is expected to be completed within three years, with two more years needed for land development, Royal Boskalis said.

SM Prime also has two other Manila Bay reclamation proposals pending approval: a 300-hectare project in Paranaque City and another 335-hectare project in Pasay, according to Philippine Reclamation Authority records.

The company has yet to appoint dredgers for the twin projects, but Royal Boskalis and China Harbour's current contract with SM Prime could give them an advantage.

China Harbour has also partnered with the Udenna group, which is controlled by Mindanao-based tycoon Dennis Uy, who has enjoyed a meteoric rise under Duterte, for a 265-hectare reclamation project near the SM Prime site. The 62 billion peso ($1.2 billion) project, first proposed in 2017, awaits local government approval.

In 2009, the World Bank banned China Harbour's parent company CCCC and all its units from road projects financed by the bank for eight years due to alleged "fraudulent practices" in a Philippine road project. The company had denied the allegations and is now looking to make a comeback amid the Philippines' infrastructure buildup.

CCCC is also one of the interested investors in the $10 billion airport project being proposed by the province of Cavite, south of Manila, provincial Gov. Jonvic Remulla said in October.

China Harbour, meanwhile, is also helping to craft a feasibility study for a railway project that will connect Subic and Clark, two former U.S. military hubs north of Manila. Such study is usually a steppingstone for contactors to secure an actual deal.

Meanwhile, UAA Kinming Group Development, a consortium of Filipino and Chinese companies, has also teamed with the City of Manila for two reclamation projects: a 407-hectare City of Pearl Reclamation Project worth 43.7 billion pesos proposed in 2017 and a 40-hectare Baseco Reclamation project in 2016.

Despite their controversial record, Chinese companies have become more careful in their dealings overseas as President Xi Jinping seeks to win backers for his controversial Belt and Road Initiative infrastructure program, according to Gong Xue, a research fellow at the S. Rajaratnam School of International Studies in Singapore.

"However, China is really careful of what its [state-owned enterprises] are doing overseas nowadays," said Gong, who has studied Chinese economic diplomacy in the region. "The behavior is closely related to the image and credibility of China's leadership, who claims to build a clean, green and lean Belt and Road Initiative."

Still, not all of Metro Manila's local governments appear enthusiastic about land reclamation. The new mayor of Manila, Isko Moreno, has said that reclamation projects proposed prior to when his term began in July, were currently "not a priority."

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