Diplomatic ties between the Philippines and United States (US) could improve on the back of US President-elect Donald Trump’s “apparent lack of concern over human rights” but the territorial dispute over some islands in the South China Sea remains as an uncertain variable, Fitch-owned BMI Research said.
“Manila and Washington DC could see an improvement in diplomatic ties due to the Trump administration’s apparent lack of concern over human rights,” BMI said in a report released over the weekend.
BMI recalled that ties between the two countries have been increasingly strained following the Obama administration’s criticism of President Rodrigo Duterte’s war on crime and drugs, prompting the latter to reinvigorate relations with China instead.
“Duterte appears to have taken a more conciliatory stance towards Trump, which could see a thawing of currently cool ties,” BMI observed.
However, BMI believes that the South China Sea will remain a geopolitical flashpoint and could cast a pall of uncertainty over Philippine-US ties.
“While Trump has advocated a more robust US foreign policy, the President-elect has also been extremely vocal about only advancing US foreign policy interests,” it said.
As such, a decision by the US to pull back from its activities in the South China Sea could see an increase in Chinese activity in the contested areas, it pointed out.
“On the other hand, Trump might view Chinese activities in the South China Sea as an affront and decide to take a more confrontational stance in the region. If this were to happen, the Philippines could decide to recalibrate its current rapprochement with China as Manila would be assured of the US’s commitment to defend its sovereignty in the South China Sea,” BMI explained.
It said the biggest impact of the Trump presidency on the Philippines will be economic, with Trump’s “America First” policies likely to lead to a more challenging operating environment for Manila.
“For one, Trump’s proposed immigration curbs could pose considerable risks to the Philippine economy that is reliant on remittances from overseas workers to boost economic growth (with remittances accounting for 10.3 percent of GDP [gross domestic product], according to World Bank),” BMI said.
The US hosts approximately 35 percent of all overseas Filipino workers, who remit about 31 percent of the total worker remittances to the Philippines.
Furthermore, BMI said the Philippines’ business process outsourcing could come under pressure following Trump’s pledge to bring jobs back to the US, noting that the industry caters mostly to US companies, employs approximately 1.2 million Filipinos and generates more than $20 billion in revenue annually (about 9 percent of GDP).
“The outsourcing industry could thus see a decline in American investment under a Trump presidency,” it said.
This may lead to a decline in foreign direct investments as well as exports (particularly services exports) with the US being one of the Philippines’s largest export destinations (13.9 percent of exports in 2015).