The Philippines and China papered over their word war over disputed territories in the Spratly Islands in the South China Sea (called by Manila West Philippine Sea) with a $60-billion economic cooperation agreement on Wednesday, during President Aquino’s state visit to Beijing.
The agreement was signed by Foreign Secretary Albert del Rosario and his Chinese counterpart following a meeting between the President and China’s President Hu Jintao at the Great Hall of the People. The two countries agreed on a five-year development program for trade and economic cooperation that is touted to generate $60 billion in bilateral trade by 2016.
They signed a package of agreements that include: (1) a memorandum of understanding (MOU) on “strengthening cooperation”; (2) a cooperation agreement between People’s Television Inc. and China Central Television; (3) an MOU on the assignment of an investment officer who will promote the Philippines among Chinese investors; (4) an MOU between the Presidential Communications and Operations Office and the Chinese State Council Information Office; (5) an MOU on sports cooperation between the two countries’ sports agencies; and (6) a program implementing the MOU on tourism and cooperation. The economic and trade substance of the numerous agreements was not detailed, leaving the public to wonder what is in this package.
Having failed to quantify the benefits the Philippines expect to derive from the accords, Mr. Aquino gave his meetings with China’s leaders a domestic political spin. He urged Chinese business leaders to invest in the Philippines, assuring them that his government would guarantee them a “level playing field.”
In a speech at the Philippines-China Economic and Trade Forum, the President contrasted the business environment during his administration with that of his predecessor. “The biggest change between the Philippines under this administration and under the previous government is change in mindset,” he said. “We will not take short-cuts in order to close deals; we will follow the correct procedures.”
He was referring to controversial deals between the Arroyo administration and Chinese firms. These deals include the cancelled $330-million contract with China’s ZTE Corp. to set up a nationwide broadband network and the Chinese-sponsored construction of the Northrail. The Arroyo administration cancelled the broadband deal in 2007 following allegations of overpricing and payoffs to President Arroyo’s husband. The Northrail project, whose cost rose from an initial $503 million to about $2 billion, is being reviewed by the Aquino administration.
Mr. Aquino said his government was instilling “a culture of transparency and integrity in government.”
What this means, he said, “is that investors will not anymore have to rely on connections in order to set up shop; the rules will not be circumvented and the law will be followed, creating an environment that is stable and predictable, and therefore one that is conducive to profit.”
Based on this promise, the government expects between $2 billion and $7 billion in Chinese investments that are still up in the air. But there is a problem over whether these sanctifying words would generate this scale of investments. Before the investments start rolling in, the administration would still have to demonstrate that, first, it is capable and has the political will to establish this business environment and, secondly, it must present concrete programs on specific projects.
The President carried out his China visit, the most important so far since he took office a year ago, amid rocky Philippine-China relations over territorial disputes and following rising tensions during the past few months over the harassment by Chinese naval vessels of Philippine vessels conducting exploration for rich mineral and oil resources believed to lie underneath the South China Sea, over which China claims sole ownership.
Chinese officials have exhibited belligerence toward Philippine and Vietnamese protests over the harassment and intimidation by Chinese vessels. There is little to show that the Aquino visit and the emphasis being laid on its economic aspects have calmed down the tensions.
Shortly before Mr. Aquino undertook the visit, tensions had heightened with the arrival in Manila on Aug. 17 of its newly acquired warship, BRP Gregorio del Pilar, from the United States. The Philippines purchased the former US Coast Guard cutter to beef up its naval forces. The warship, the Philippine Navy’s flagship, is being deployed to protect the country’ natural gas and oil exploration projects off Palawan amid incursions of Chinese vessels in areas being claimed by the Philippines.
The President hailed the arrival of the warship as a symbol of the country’s determination to defend its claims in the disputed area. Matching China’s gunboat diplomacy with a Philippine show of force, the President said: “This is just the beginning. Expect more news because we will not stop at one ship.” The new warship would help protect the country’s exclusive economic zone and its oil and gas exploration activities in the contested sea, Mr. Aquino said. “This will upgrade our capability to guard our exclusive economic zone.”
A few weeks earlier, China’s first aircraft carrier, refitted from a former Soviet aircraft carrier in the Ukraine, made a port of call in Singapore in a display of China’s growing naval might.
The Spratlys dispute was glossed over in the talks between Mr. Aquino and Chinese leaders. The trade talks swept under the carpet the most dangerous issue in Southeast Asia.