Philippines Announces “Repatriation” of Chinese SOE Employees Operating Power Grid over National Security Concerns

On February 25, the Philippine Secretary of Energy, Jericho Petilla, announced that 16 Chinese technicians working for the National Grid Corporation of the Philippines would be “repatriated” to China in July 2015 for, among other reasons, national security concerns.  China’s state-owned State Grid Corporation of China (SGCC) holds a 40% stake of the Philippine company, which they reportedly acquired in 2007 for $4 billion.  That acquisition gave SGCC operating rights of the company over a 25-year period.  SGCC has also reportedly assisted the Philippine National Grid Corporation with the adoption of new technology into the country’s electricity transmission infrastructure and operations.

Secretary Petilla was asked if the repatriation was due to national security concerns, and he reportedly responded in the affirmative — acknowledging connectivity between this decision and government concerns and the worsening disputes over territory in the South China Sea.  As Philippine personnel have been trained to operate the system independent of direct Chinese operational support, this move is deemed a prudent step to take.  SGCC will keep its ownership stake, however, and will continue to have two Chinese representatives on the company’s Board of Directors.

This decision follows comments made a week ago by Philippin Senator Miriam Defensor-Santiago, when she spotlighted the fact that the country’s national power grid was under foreign control and alleged that the power industry had been infected by a national security virus.  These concerns over SGCC’s role in the country’s power infrastructure are not new.  On November 6, 2012, there was a report that the Philippines had cancelled the visas and work permits of 28 SGCC technicians due to related concerns.

Given the scale of the Chinese investment in this company (i.e., $4 billion in 2007) and the precedent that this decision could set for the region (and beyond), it is likely that this decision will be the cause of some diplomatic dispute between Beijing and Manilla.  For example, Secretary Petilla openly wondered why other countries were not similarly concerned, stating “If we are paranoid about it, I am not sure why Australia and the others are not.”