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No Free Lunch

Friends with all

/ 05:30 AM February 23, 2018

Not a few are uncomfortable with President Duterte’s professed “independent foreign policy” most prominently marked by a partiality toward China and Russia, coupled with open antagonism toward some of the Philippines’ longstanding friends. The latter refers to the European Union and the United States, and, more recently, Canada as well, all being the subject of occasional diatribes by the outspoken President. He has his reasons, and one hopes there is method to the seeming madness that is not visible to the naked eye.

Members of the Cabinet, including the foreign secretary himself, have been more circumspect, publicly declaring that our independent foreign policy really means friendship with all, in seeming contradiction of their leader’s public posturing. They have to. They are clearly aware of what we stand to lose if we lose the goodwill and much of our economic ties with our traditional Western friends, even as we gain goodwill and boost economic ties with China and Russia. This is particularly critical at a time when our nation’s economic performance and the general wellbeing of our people hinge significantly on our external economic relations, via trade and tourism, investments, foreign employment, and development cooperation.

Let’s look at the numbers. I’ve gathered the data on our main economic linkages with our major foreign partners as of 2016 (the latest year for which full-year data are available). This should help us appreciate how important each economic partner is to us within the overall picture. On foreign trade, Japan is the top buyer of our exports, accounting for 21.4 percent of the total, followed by the United States (15.9 percent), Asean as a bloc (15.1), and the European Union (12.4). China comes in fifth with 10.1 percent, and far down the list is Russia, which took a mere 0.3 percent of our exports. On the imports side, Asean as a bloc is now the Philippines’ largest source with 26.4 percent, followed by China (18.4 percent), although there is likely to be significant undercounting here due to rampant smuggling. Next down the line are Japan (11.6 percent), the United States (8.7), and the European Union (8.0); Russia is farther down the list with only 0.5 percent.

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As for foreign direct investment inflows, the United States was our top source in 2014-2016, accounting for 31 percent, with Japan a far second at 11 percent. The European Union contributed 2.6 percent, while China officially recorded a mere 0.4 percent, or $53 million, over those three years. (There may be much more than is officially recorded, though. For example, an article in the Journal of Political Risk lists 25 Chinese mining firms known to have a presence in the country as of 2012, but under less than transparent circumstances.) For Russia, it was actually a net outflow in that period, with data showing net Filipino investments to that country amounting to $40,000. While there has so far been very little interest on both sides, there must be scope for much more.

Regarding remittances, The United States and Europe accounted for 33 and 14 percent, respectively, in 2016. China and Russia accounted for a paltry 0.6 and 0.2 percent. As for official development assistance, Japan continues to be our single largest donor with 36 percent of the total, exceeding the shares of the dominant multilaterals World Bank (20 percent) and Asian Development Bank (19 percent). The United States accounted for 8.6 percent, and the European Union, 1.4 percent. China, on the other hand, had 0.01 percent, and Russia, virtually none.

All together, the much smaller numbers for China and especially Russia might be taken to imply that there is wide potential for expansion of our economic links with them. Still, the sizes of their economies, at $11.3 and $1.3 trillion, respectively, as of 2016, pale in comparison with the United States ($18.6 trillion) and the European Union ($17.1 trillion), implying that overall opportunities are inherently far greater in the latter two. To spite them, thinking that China and Russia can make up for whatever we lose, looks rather misplaced, if not outright irrational.

It clearly is in our best interest to be friends with all, and that’s how our independent foreign policy ought to be defined and pursued.

cielito.habito@gmail.com

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TAGS: China and Russia, independent foreign policy, President Duterte
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