Philippines-China Relations: A Deepening Partnership

by Aaron Jed Rabena / March 14, 2017 / Originally posted at Sina.com

Early in his term as Philippine President, Rodrigo Duterte already made clear his penchant for an independent foreign policy. Parenthetically, part of this foreign policy thrust is the desire to have a soft landing in managing differences with China and the strategic recognition of China’s growing geoeconomic profile. This was manifest when Duterte quickly appointed a special envoy to China and made Beijing his first official state visit destination in October of last year. In his visit, Duterte announced that the 「spring time」 has come about in Sino-Philippine relations.

Since then, there have been three significant positive achievements of both leaderships: the South China Sea (SCS) tensions have de-escalated, the overall bilateral relations have been normalized, and China has become more involved in Philippine domestic and socio-economic agenda. In fact, Duterte’s state visit saw commercial, corporate, public, and people-to-people diplomacy in full swing.

First,both nations are on track toward restoring political mutual trust after years of diplomatic rancor. For instance, a modus vivendi at Scarborough Shoal was reached as Filipino fishermen now have unfettered access to the area. More importantly, a Joint Coast Guard Committee (JCGC) on Maritime Cooperation and a Sino-Filipino Fishery Training Exchange had also been established.

Second, high-level diplomatic meetings and economic bilateral mechanisms such as the Philippines-China Trade and Investment Forum and the Joint Commission on Economic and Trade Cooperation (JCETC) have been reinstituted. Similarly, restrictions on the import of Philippine agricultural products and travel advisory to the Philippines have both been lifted. In fact, as of January this year, the number of Chinese citizens applying for Philippine visa has already tripled, while the volume of Philippine agricultural exports to China have also doubled.

Third, China is becoming a partner in the provision of Philippine domestic public goods. This should not come as a surprise, as according to Credit Suisse, China has almost doubled?its foreign direct investment in the six largest economies of the Association of Southeast Asian Nations (ASEAN) and continues to gain a reputation for major infrastructural projects. This is evident in the planned construction of the 414-km China-Laos railway, 150-km Jakarta-Bandung high-speed railway, 845-km China-Thailand high-speed railway, and the Kunming-Singapore railway (Pan-Asia Railway Network), among others.

Bilateral and Multilateral Cooperation

Duterte’s deeper engagement and constructive approach towards China has already started to yield economic dividends: bilaterally, multilaterally, and institutionally. Bilaterally, as a result of President Duterte』s state visit to China, the Philippines was able to secure $24 billion worth of financial assistance and investment pledges ($15 billion in business deals and $9 billion in official development assistance). Part of this is a $3 billion poverty relief credit access that will be made available to Philippine micro, small, and medium enterprises (MSMEs).

During the visit of a high-level delegation of Philippine economic managers to Beijing in January, 40 「large」 and 「small」 infrastructure projects were proposed for financing to the Chinese government. Of these, three major projects have been identified and are set to be launched this year: the Chico River Pump Irrigation Project in Cagayan and Kalinga ($53.6 million); the New Centennial Water Source – Kaliwa (Hyrdoelectric) Dam Project in Quezon ($374.03 million); and the 653-km South Line of the North-South Railway from Manila to Legaspi City/Bicol Region ($3 billion).

Of the 25 submitted for feasibility study support, nine projects ($1 billion) aim to link the country’s main islands (Visayas and Mindanao), increase tourism, build a flood-control system, and ensure a steady power source in Mindanao. Also lined up for consideration to the Chinese government are smaller projects such as building bridges along the Pasig River to ease the notorious traffic congestion in Metro Manila. Energy cooperation, particularly LNG, renewables and nuclear power, and prospects of a joint industrial park in the Philippines are likewise in the works.

In terms of security, China has thrown its full support behind Duterte』s war on drugs and anti-terror campaign. In one of the major bilateral agreements signed (Agreement on Economic and Technical Cooperation), Beijing will provide Manila with $14 million for anti-illegal drugs and law enforcement projects.

Multilaterally, China’s regional initiatives, particularly the Asian Infrastructure Investment Bank (AIIB/亞洲基礎設施投資銀行) and the One Belt One Road (OBOR/一帶一路) initiative, are added centers of convergence between the Philippines and China. As an emerging economy, the Philippines has a lot to gain from the AIIB and OBOR, which both intend to improve developing nations’ physical infrastructure and economic conditions.

For the Philippines, the AIIB is one added credit facility given the country’s urgent need for infrastructural upgrade. As a matter of fact, the Philippines’ finance department already plans to loan $300-500 million for this year, which includes two projects in Manila, namely, the EDSA Bus Rapid Transit (BRT) system project and the Metro Manila flood control project.

As for the OBOR, being an intercontinental and trans-regional supply chain designed to connect over 60 over countries in Eurasia and parts of Africa, the Philippines’ infrastructural ambitions will certainly receive economic backing. This is because the OBOR, through the Silk Road Fund (絲綢基金) and other Chinese financial institutions, seeks to achieve infrastructural connectivity through the creation of power stations, bridges, seaports, airports, roads, railways, and telecommunications; policy coordination; financial and regional economic integration; and expanded people-to-people exchanges.

Consequently, not only will the Philippines-China economic and social interdependence be deepened, but also that between the Philippines and other OBOR states. Duterte’s upcoming visit to China in May for the Belt and Road Forum for International Cooperation will likely formalize the Philippines’ inclusion in the grand Chinese initiative.

Sino-Philippine Relations Going Forward

The two Chinese-led multilateral regimes will be integral in realizing the 「Philippine dream」 of greater industrialization and China’s vision of a stable periphery. First, the Duterte administration’s plan to achieve a more inclusive growth through a 「golden age of infrastructure」 (“iconic” projects) perfectly integrates with China’s desire for additional markets to channel industrial overcapacity – via OBOR – and demonstrate the policy principle of 「South-South Cooperation」 (南南合作). Second, China’s multifaceted assistance is well aligned with Duterte’s 10-point socio-economic agenda and the Philippine Development Plan (PDP), particularly the reduction of poverty incidence to 14 percent and the advancement towards the ranks of high middle-income countries by 2022.

For China, more economic investments and projects would open opportunities to showcase Chinese competence in infrastructural development, remove old Philippine images of China as a producer of low-cost consumer goods, defuse negative perceptions related to the SCS, and enable Chinese engagement in the Philippines’ development strategy. This is especially because the previous National Broadband Network (NBN)-ZTE deal?and North-Rail project, which were marred with corruption allegations during the time of then President Gloria Macapagal-Arroyo (GMA), left a negative impression of China on many Filipinos.

In the area of defense and mil-to-mil ties, humanitarian assistance and disaster relief (HA/DR) cooperation similar to the annual China-Malaysia military exercise 「Peace and Friendship」 may serve as a model framework. Furthermore, to mitigate strategic mistrust and propensities for miscalculation, both countries may look into the possibility of having a Procedures for Unexpected Military Encounters (PUME), Code for Unplanned Encounters at Sea (CUES), and an Army-to-Army Dialogue Mechanism (AADM), such as what China agreed to have with the Japanese Self-Defense Force, the United States Navy, and the United States Army, respectively.

In the socio-cultural and people-to-people relations, both countries could initiate a mechanism similar to the China-US Consultation on People-to-People Exchange so as to ensure the steady expansion of academic, think tank, tourism, and youth exchanges. In terms of efforts to bolster diplomatic relations, the two countries may consider elevating the level of bilateral ties to 「strategic partnership,」 similar to those that China has with Vietnam and Malaysia.

China’s charm offensive and desire to win the goodwill of the Filipino people could not come at a better time because the sitting president continues to be popular and endowed with sizable political capital, illustrating the situational difference when then President Arroyo opted to engage with China.■

Aaron Jed Rabena is an Associate Fellow at the Philippine Council for Foreign Relations (PCFR) and a member of the Philippine Association for Chinese Studies (PACS). The views expressed are the author’ s own and do not reflect that of his affiliations. He can be contacted at aaronrabena@gmail.com.

The views expressed are the author’s own and do not reflect that of his affiliations.

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