New PH-US defense pact seen to worsen PH-China ties

By Gigi Grande, ABS-CBN News

Posted at Apr 28 2014 08:16 AM | Updated as of Apr 30 2014 06:34 AM

First of 2 parts

Troubled relations between the Philippines and China are expected to worsen as the Philippines and US sign the Enhanced Defense Cooperation Agreement (EDCA) ahead of President Barack Obama’s arrival in Manila today, security and diplomatic experts say in an interview.

“Relations can further deteriorate in the context of territorial disputes,” says Rommel Banlaoi of the Center for Intelligence and National Security. “China is averse to any Philippine government initiative to involve the US in its security agenda. We are strengthening our relationship with the US at the expense of our relationship with China.”

The Chinese Embassy in Manila earlier said relations between the Philippines and China have been “seriously damaged” after government filed a memorial before a UN tribunal over the maritime dispute in the West Philippine Sea late in March. “We are deeply disturbed by and concerned with the consequence of such moves,” said Charge d’Affaires Sun Xiangyang.

PH “humiliates” China
From clothes to gadgets, furniture, apples, toys, and supplies, many inexpensive goods sold in the country’s malls are made in China. But China’s influence extends far beyond the malls.

Much of the LPG used for cooking and for running cabs are imported from China. Chinese firm Huawei built most cell sites in the country. China owns 40 percent of the National Grid Corporation of the Philippines (NGCP), which transmits electricity throughout the archipelago.

Over half a million dollars in remittances are received every year by Filipinos who depend on thousands of relatives working in Hong Kong, a Special Administrative Region of China. And no less than a quarter of Filipinos are believed to be of Chinese descent. Chinese culture is deeply steeped in Filipino traditions and beliefs.

Yet relations between the two countries have reached its lowest point. “When we filed a case, China considered it an unfriendly act,” explains Chito Sta. Romana, former Beijing bureau chief of American network ABC. “ They view this as an attempt to publicly humiliate China before the world, hence the Chinese anger.”


In December 2007, just days before government awarded a multi-billion dollar contract for the right to run the nation’s power grids, Bukidnon Rep. TG Guingona warned: “Whoever controls Transco must be loyal to the nation and the people.”
He said the National Transmission Corp. (Transco) wasn’t just the backbone of electric power transmission. It also had the potential for a communications broadband. “God have mercy on us if we make the mistake of turning over to an entity that has an agenda that is detrimental to our nation.”

Despite Guingona’s warning, the contract eventually went to a consortium in which the State Grid Corporation of China has a 40 percent stake; the consortium was eventually named NGCP.

China’s recent threats have raised concerns the power sector might be sabotaged.

But there are equal apprehensions too as to the vulnerability of the telecommunications industry.

Chinese firm Huawei is responsible for modernizing the biggest mobile networks in the country. As one telecom executive put it: “Huawei has left a footprint in all the players in the Philippine telecoms industry.”

But while possible, it’s not likely that China would sabotage its own investments and business interests in the country, says former UN Security Council President Lauro Baja Jr. “The Chinese tend to separate business from politics.”

Baja, however, agrees government must keep an eye on these sectors. “We’ve allowed the Chinese to enter vital sectors. The grid, telcos, even black sand mining. We’ve allowed them to have a run in this country.”

“Ang problema, kapag may ginawa ang China, sila rin masasaktan,” Sta. Romana says. “May masasaktan ding mga Pinoy. Pero gubyerno lang ang gusto nilang parusahan.”

“Mabuti ng lumabas yun para tayo ay handa at binabantayan natin. Pero dahil binabantayan natin, it becomes less likely,” he adds.

The Hong Kong Card

More than power or telecoms, Baja believes overseas Filipino workers (OFWs) in Hong Kong could be used to punish government for suing China and force officials back to the negotiating table.

There are an estimated 160,000 Filipino domestic helpers in Hong Kong. “Hong Kong is acting on cue from Beijing, and if things do not normalize, they will use the Hong Kong card,” he says.

But a senior government official disagrees, saying Hong Kong needs the Philippines more, not the other way around. “They threw the black travel alert at us, but did they ever threaten our OFWs? They never did, and never will. It will hurt them,“ says the source who requested anonymity.

Hong Kong’s travel sanctions against the Philippines were lifted on April 23 following a visit of Secretary to the Cabinet Rene Almendras and Manila Mayor Joseph Estrada. While viewed as a positive development, Baja says it’s hardly an indication the Philippines’ ties with China are normalizing.

“Our OFWs in Hong Kong will continue to be vulnerable to Beijing and Hong Kong machinations in pursuit of their national interests. We should continue to be alert, agile and aggressive,” Baja says.

Banlaoi, too, believes government must continue to be vigilant. “It's not enough reason to be complacent. China knows our vulnerabilities,” he says.

China Throws the Book

One other area feared to suffer repercussions from the fall-out with China is trade.

“Ang vulnerability natin ay imports ng machinery, electronic products,” says Sta. Romana. But he’s quick to allay fears. “Hindi yan gagawin ng Chinese kung masasaktan din sila. So bantayan lang natin yan. “

What’s more likely to happen, he says, is that China may throw the book particularly when it comes to Philippine exports.

“Halimbawa, sa bananas,” he says, referring to restrictions imposed by China on Philippine bananas in 2012 after the standoff in Panatag shoal. “Yung dating pwedeng palusutin, ngayon by the book.”

Damaged relations may also lead to delays in projects awarded to Chinese firms. “Kapag may bagong kontrata or bagong proyekto or existing contract biglang tumatagal yung delivery,” he says.

Chinese firm CNR Dalian Locomotive & Rolling Stock Co. Ltd. has won the contract to manufacture 48 new coaches for the MRT, which is expected to ease long queues. It is hoped the firm would deliver the new coaches in 18 months.

“Hopefully, within the term of the President, we can get the 48,” Transportation and Communication Secretary Jun Abaya said.

PH Is Punished

Since the arbitration case has not been resolved, Sta. Romana says the Philippines is not likely to feel the wrath of China yet. “Nag file tayo ng arbitration pero di pa tayo nananalo so baka maaaring i-reserve nila yan hanggang idaing yung desisyon.”

Still, China has already begun to demonstrate its displeasure over the Philippines’ move to take the dispute to arbitration.

China's Official Development Assistance (ODA) and investments to the Philippines have become meager since 2013.

“Mula ng sumama ang relasyon natin wala ng bagong Chinese aid program, walang bagong Chinese loan program,” Sta. Romana says. “Dati mga 1.8 billion dollars a year ang pangako ng China nung panahon ni GMA (Gloria Macapagal Arroyo). Huwag na tayo umasa dun. Investment has also diminished.”

There’s also an unofficial ban on top-level officials. “Meron silang decision sa loob ng gubyerno na di nila inaanunsyo. Hindi pwede bumisita ang President natin o matataas na opisyal habang nandun ang arbitration case,” Sta Romana adds.

The trade expo held in China in 2013 is a case in point. In August last year, President Aquino announced he would travel to Nanning for the ASEAN Expo, the Philippines supposedly the event’s “country of honor.” But hours later, the DFA announced China had asked Aquino “to visit at a more conducive time”.

“Sa ngayon, kasama ang Vice President sa ban. Undersecretaries and ambassadors ok, but no higher than that. The exception is the trade secretary kasi trade, mutually beneficial yan, ” says Sta Romana.

No high-level official from China is expected to travel to the Philippines either.

In March 2013, Malacanang invited President Xi Jinping to a State Visit to the Philippines. The invitation was reiterated in April that year, but to date Xi has not accepted.

Last July, Foreign Affairs Secretary Albert del Rosario also invited Foreign Minister Wang Yi to visit. Wang has not accepted the invitation.

As China is hosting this year’s APEC Summit, it remains to be seen if Aquino would be invited, although government officials say it’s not a matter for China to decide.

No Plan B

The Palace says it is prepared for consequences. “There probably are trade sanctions, immigration sanctions, visa sanctions and all that. A whole bunch of potential sanctions were discussed,” Almendras told ANC. On the possibility of sabotaging the grid, he said, “We have put in place certain mechanisms and safety features to protect our interests.”

But the senior government source says, beyond discussing potential sanctions, government has no concrete contingency plans. “There is no plan B because there seems to be no real threat,” the source says. “Let’s say I’m China and you’re the Philippines. Why should I embarrass myself in front of the international community? I’ll just wait ‘till 2016 (when a new Philippine president is elected)!”

Banlaoi says government must set scenarios in the event China makes good on its threats. “We really have to prepare for the worst because we don’t want to be caught flat-footed,” he says. “China’s influence around the world is so huge, but it also has political influence on major players in the Philippines, from the business sector to the political sector.”

“One of our major exports to China is electronic parts,” Banlaoi adds. “If China says, we found a cheaper source for electronic parts elsewhere, that can kill our electronics industry. We have to prepare for things like that.”

Battleground still in West PH Sea

Sta. Romana believes the real battleground will remain in the West Philippine Sea. “May nakikita na tayong (Chinese) coast guard presence. Mananatili yan at maaaring dumami,” he says.

Baja agrees. “Disputes are generational issues--it will take years before it’s decided. In the meantime, China will continue grabbing as fast as it can all these islets. There will be harassment. No shooting, just harassment.”

Which brings us back to the Enhanced Defense Cooperation agreement the Philippines and US will sign today.

Baja views this with skepticism. “ That we may have the benefit of a security shield against China is at best tenuous,” he says. “We expect that by embracing the pivot we can deter the so-called aggressive moves of China but so far, we haven’t been able to.”