‘PH-China to benefit mutually from closer ties’
The Philippines’ move to mend and strengthen ties with China—which yielded $24 billion worth of loans and investment pledges after President Rodrigo Duterte’s trip this week—will create more opportunities for both countries, Fitch-owned BMI Research said.
Duterte wrapped up a four-day state visit to China on Friday, during which he announced his administration’s intention to separate from the US and forge closer ties with Beijing.
But his economic managers said the Philippines will keep its good relations with Western countries, and will forge stronger alliances with Asean, as well as with Japan and South Korea.
“In the short-term, we expect that that this could be beneficial for the Philippines economy, which will stand to gain from an increase in Chinese tourism, similar to trends seen in Malaysia and Thailand, more infrastructure investment, as well as an increase in bilateral trade,” BMI said in a report released Friday.
The President’s visit yielded $15 billion in investments including deals forged between local and Chinese companies, Trade Secretary Ramon Lopez said. The Philippines will also get $9 billion worth loans including $3 billion credits from mainland private lenders.
The two countries also signed seven joint agreements including a memorandum of understanding on tourism that is expected to help boost Chinese arrivals in the country.
Beijing has likewise lifted its travel ban to the Philippines, a move the tourism department said will encourage more Chinese tourists to visit the country.
The travel ban was imposed in 2012 after a naval standoff at the Scarborough Shoal.
Chinese tourists are the third biggest visitors in the Philippines, next to those from South Korea and the US. Last year, tourists from China rose 24.25 percent to 394,951.
Reversal in foreign policy
The relationship between the Philippines and China soured due to rival claims over the resources-rich West Philippine Sea, which prompted Duterte’s predecessor, President Aquino, to file an arbitration case in January 2013. The Permanent Court of Arbitration in The Hague ruled in favor of the Philippines in July this year, a month after Aquino left Malacañang after Duterte’s win in the May elections.
Malacañang said Duterte’s visit to China was intended to “repair strained ties” between the two countries resulting from the territorial dispute.
Duterte’s China pivot “marks a dramatic reversal in the Philippine’ foreign policy stance from one that is US-centric,” BMI said.
“This marks a complete reversal of the Philippines’ diplomatic stance under Duterte’s predecessor,” it said, “and we highlight that this will have important ramifications for the US’s geopolitical strategy in Asia, as well as economic, investment, and trade opportunities between China and the Philippines.”
As a result, the US will likely have to increasingly cultivate Vietnam as a regional security partner to partially offset the withdrawal of the Philippines from an informal US-led bloc of Asian nations aimed at counter-balancing China’s rise, it said.
But while forging better ties with China could provide a short-term boost to the local economy, the longer-term benefits would largely depend on the progress of government reforms to improve the business environment and efforts to reassure investors with a lower risk tolerance, BMI said.
Stronger Asean alliance
The Philippines also aims to pursue stronger alliance with its neighbors in Asean, while maintaining good relations with Western economies, the country’s economic planning and finance chiefs said in a joint statement.
“We will maintain relations with the West but we desire stronger integration with our neighbors. We share the culture and a better understanding with our region,” said Finance Secretary Carlos Dominguez and Socio-economic Planning Secretary Ernesto Pernia, who both accompanied the President to China on October 18-21.
Duterte has also directed his cabinet to move “strongly and swiftly” to strengthen alliances not only with Asean and China, but also with Japan and South Korea, which will give the country access to a lucrative 1.8 billion market across the region, the statement said.
After China, Duterte is set to visit Japan in the last week of October.