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PHILIPPINES: Strong pro-Beijing, anti-US rhetoric but terms of the separation still unclear

October 6, 2017
By Bob Herrera-Lim

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The president’s trip to China will strengthen the perception that he wants to push the Philippines closer to Beijing and further away from Washington. Encouraging Chinese economic cooperation will, however, be easier than formally cutting ties with the United States. The risks from this policy shift lie more in the medium term.

President Rodrigo Duterte’s pro-China and anti-US rhetoric was clear during his four-day trip to China this week, where he was accompanied by about 400 members of the Philippine business community. The following are likely to be the main perceptions generated by his visit:

  • The president’s announcement of his further pivot away from the United States, “both in military and economics.”
  • Growing economic ties with China, potentially in tourism and private sector joint ventures, will be the first beneficiary. Infrastructure will also be a focus. (According to official reports and statements)
  • The territorial dispute will be less of a focus, because “it is not the sum total of the bilateral relationship” (Chinese Foreign Minister Liu Zhenmin).
  • The president has some form of personal enmity towards the United States, and that he views Americans as “loud, sometimes rowdy” and that their “larynx is not adjusted to civility.”

The reality

Surveys consistently show that Filipinos still value the relationship with their traditional ally, and that the president’s recent foreign policy goes against the popular grain. According to one poll 76% of adult Filipinos have “very much" trust in the US, against the 22% for China. Filipinos may be willing to explore new economic relationships with China, but will also be reluctant to formally end long-standing agreements or institutional ties with the United States. Thus any official action to end relations with the US on military or economic matters may generate more public and institutional scrutiny domestically than the administration has so far experienced. Once this reality hits, it could cause Duterte to pull back on his more aggressive rhetoric. There is some domestic debate that Duterte could trying – even if amateurishly – to play the major powers against one another, and that he is therefore less serious when it comes to real implementation of his rhetoric.

The president’s nominee for Secretary of Defense even confirmed before the Senate that the cabinet had not been consulted prior to Duterte’s announcement that he would end military cooperation with the US. There have been other instances domestically when other members of the cabinet have revealed their surprise following one of the president’s policy outbursts—indicating that many of the announcements have been done on a whim.

  • The details of the USD 24bn worth of deals supposedly signed in Beijing will first have to be revealed for a more reliable assessment to be made of how quickly these may become real projects. Some may have already been in the pipeline even before the trip, while others may prove infeasible.  Supporting private sector investment and encouraging tourists to come to the Philippines will be the easiest of the goals, since there is a substantial local Chinese business community in the Philippines that can act as effective conduits or partners for these ventures.
  • Participation in the infrastructure build-up will be more difficult, especially in new public-private partnership projects. The Chinese will encounter many of the same risks that foreign investors broadly encounter in the Philippines, from weak bureaucratic at the national and local government levels, to implementation and regulatory risks. Duterte may push the bureaucracy to facilitate these investments, but many of his key appointees are likely to be less familiar than the previous administration with the processes needed to see these projects through. Therefore, this aspect of the relationship may take time to develop.
  • Insofar as cutting existing relationships with the US, Duterte may encounter more political and social resistance if he attempts to formally end agreements such as the 2014 Enhanced Defense Cooperation Agreement or the 1951 Mutual Defense Treaty. His government may, therefore, approach existing military cooperation with the US more passively over the course of the next year, rather than an aggressive effort to coordinate joint activities. A trip to the United States seems unlikely in the near term, in contrast with his predecessors, however.

The risks and potential longer-term consequences

For now, Duterte can push against the US and in favor of China despite domestic sentiment to the contrary because of his significant overall level of local popularity and political capital, as reflected in the high trust ratings in his government over the past few months. The public is, in general, willing to give him the benefit of the doubt as long as his actions do not threaten to inflict immediate economic pain.

Economic growth over the next 12 months will likely be good, due to sustained worker remittance, existing momentum and the government’s expansive budget. However, any slowing of the economy, even though it may be independent of his policy actions, could eventually be blamed on his anti-Western rhetoric, especially if the Chinese investment and infrastructure projects lag and western investment drops.

If there is any short term risk, it could manifest if the president actually believes that he has to cut military ties with the US sooner than later, by formally ending military agreements. This could provoke resistance from within Congress or significant segments of the middle class that benefit from economic ties with the US, such as the business process outsourcing sector or those with relatives working in the United States, or even lead to discontent within the military, which is suspicious of China and has long-standing ties with the United States. What remains unclear is how the president would react if faced with more formal opposition, and whether he would in fact push through with such a plan and potentially galvanize a real political challenge to his administration.

The views and opinions in these articles are solely of the authors and do not necessarily reflect those of Teneo. They are offered to stimulate thought and discussion and not as legal, financial, accounting, tax or other professional advice or counsel.

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