HSS: Sinews of Politics: The State Grid Corporation of China, Rent-Seeking, and Investment Coalitions in the Philippines

Why do some foreign direct investment projects (FDI) reach completion when opposition occurs while others have been unable to do so? Using an original dataset alongside in-depth interviews with investors, politicians, and social movement leaders, I argue that the completion or cancellation of FDI projects depends on the type of investment coalition that foreign investors form with host state actors. In states with high-levels of elite conflict and weak FDI regulatory institutions, foreign investors need to form an “investment coalition” with the host state actor in order to protect their investment. However, forming an investment coalition with one set of host state actors can still generate contention from others, whose oppositional efforts will typically continue unless their rent demands are met. I suggest that when opposition forces block FDI projects, the investment coalition can convince these actors to back down through one or more of the following mechanisms: (1) the sufficiency of the coalition’s power resources; (2) the willingness and capacity of the foreign investor to pay economic rent; or (3) the type of power resources that the host state partners embody. Empirically, I demonstrate the argument in the case of State Grid Corporation of China (SGCC)’s joint venture during Gloria Arroyo’s (2001-2010) term in the Philippines, which was the only successful Chinese market-making investment despite the attempted overture of more than 20 major investments from the People’s Republic of China (PRC).