President Duterte watches a Filipino executive and his Chinese counterpart seal a deal with a
handshake in China in October.
For a country with a huge infrastructure backlog, lagging in foreign tourists despite its beautiful outdoors and really starving for foreign direct investments (FDIs), rekindling bilateral ties with China after a five-year diplomatic chill was a very attractive proposition. This was what President Duterte—who brought with him almost his entire Cabinet plus some 450 top businessmen—was set to accomplish during his state visit to China in October last year.
He didn’t come home empty-handed. This historic visit marked a “new stage of practical cooperation, bilateral commerce, trade and technology,” as China has proclaimed. He came home with some $24 billion worth of financing and investment deals—some of which may or may not materialize in a world where MOUs (memoranda of understanding) are a dime a dozen—and this made the Philippine stock market very happy. Stock market investors chose to ignore the anti-US rhetoric that escalated in China when Mr. Duterte announced a perplexing “military and economic separation from the US” and chose to focus on the positives, particularly on the tourism and infrastructure areas.
“I think this is positive for the economic development of the Philippines because in recent months, we have seen substantial improvement in China-Philippines relations and the emphasis attached by senior officials from both countries on bilateral, economic ties and economic collaboration will lead to an improved outlook of Chinese FDIs (foreign direct investments) in the Philippines, especially with the robust domestic-driven growth in the Philippine,” said Fan Cheuk Wan, head of investment strategy at HSBC Private Bank.
The tension in the West Philippine Sea has been immediately diffused, with Filipino fishermen finally able to fish along the disputed waters at marine resource-rich Scarborough Shoal without harassment from the Chinese navy. Shortly after Mr. Duterte’s inauguration as President, the Philippines, as a key legacy left by his predecessor Benigno Aquino, had already scored a major victory at the United Nation Tribunal, which concluded that there was no legal basis for China to claim historic rights to resources within the sea areas falling within the “nine-dash line.” Having found that none of the features claimed by China was capable of generating an exclusive economic zone, the tribunal found that it could—without delimiting a boundary—declare that certain sea areas are within the exclusive economic zone of the Philippines because those areas were not overlapped by any possible entitlement of China, the UN Tribunal said.
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But Mr. Duterte knew that it would be a meaningless victory without any international body with capability to enforce the UN ruling. Lacking in military might to safeguard its own borders compared to its gigantic neighbor, the Philippines’ then newly elected leader did not find enough assurance even from its long-time ally, the United States, that it could ward off China from the exclusive economic zone. Furthermore, Mr. Duterte was ticked off by US officials’ criticisms of human rights violations related to his all-out war on drugs, which to date has claimed the lives of more than 6,000 suspected drug users, pushers and even some innocent bystanders. Thus, the new CEO of the land chose a pragmatic solution: If you can’t beat them, join them.
Tourism accelerator
