Reboot: The Philippines as strategic global player

my Trade Tripper column in the 24-25 September 2016 issue of BusinessWorld:

From the looks of it, indeed the Philippines seems like a gateway or staging point depending on how one views the map. Yet, the thinking seems based on the idea of transport vis-à-vis military mobility, of the need for air and naval bases. Unfortunately, technology seemingly diminished that aspect of the Philippines, what with missiles moving warfare away from the traditional kind and hence not necessarily tied to a location.

And yet the Philippines retains options that could keep it relevant. And interestingly, location has nothing much to do with them.

We presently have around 2 to 2.4 million Filipinos working abroad as OFW’s in various locations around the world. And while indeed, the same represents around P1.2 trillion annually in remittances, nevertheless the huge potential of OFWs remain untapped.

As a marketing avenue, political lobby force, and information network, the OFW population represents an opportunity to push the Philippines forward strategically. Not only do they represent a huge diaspora, the same is virtually a cost-cutting resource in terms of people and equipment that can be relied upon whenever the Philippine government or businesses has a need to move around in or know about other countries.

Another unexploited avenue that could elevate the Philippines’ importance is its peculiar history and culture. This was something that Singapore unfortunately took away from us. But the Philippines -- with its English speaking population and quite remarkably cosmopolitan outlook -- should have been the natural gateway of the West to Asia and vice versa.

And I’m not talking here merely of tourism but rather in terms of political and foreign relations clout. Had we played it right, we could have served as the deciding vote in any international gathering, and the natural guide and partner whenever a Western country is seeking trade, security, or international agreement with a (at the least) Southeast Asian country.

Then, there is trade.

Looking at 2015 figures, one sees the following: Japan, China, the US, Singapore, and Hong Kong (in that order) remain our top trading partners. They account for more than half (53.8%) of our trade. If one also considers the rest of the top ten partners, including the EU, South Korea, ASEAN, the level of trade would reach 78.5%.

If that doesn’t give a clear enough picture, the top ten exports account for 83.5%, while the top ten imports 74%. They revolve around electronics and other manufactured goods, transport, furniture, wiring sets, chemicals, apparel, and mineral and metal components.

A narrow bench on trade if there ever was one.

And while increase in FDI for the past few years has been lauded, the same is still lower than the major ASEAN countries and, ironically, lower than that of the 1980’s and 1990’s (OECD Investment Policy Review: Philippines, 2016)

The huge missed opportunity was the inability to transform the Philippines into an air transport and maritime hub, particularly after 9/11 and definitely during the first decade of 2000.

The Philippines could have made itself a vital and necessary player in the Asian supply chain, particularly as our islands constitute natural (and suitably secure) processing zones.

Another should have been the bulking up of the workforce of the Department of Trade and Industry, as well as Customs, as preparation for the various necessary free trade agreements that the Philippines could have contemplated joining in.

Longtime readers of this column are quite familiar already with the wary stance we take regarding FTAs (free-trade agreement).

But that wariness rests on three things: the resources with which brings the ability to negotiate a trade deal beneficial to the Philippines (and not merely wishing that merely opening up of industries will magically transform the Philippine economy), the resources with which to execute the agreement (including the bureaucracy to catch violations of the rules of origin), and third was the hope that the World Trade Organization could still finagle a deal revitalizing the multilateral trading system (an eventuality that now appears to need considerable time to happen).

Fast-forward a decade later and we still haven’t moved beyond those three factors. And yet, we now are faced with around 11 FTAs that are already effective, signed but awaiting implementation, or to be negotiated (i.e., ASEAN-Hong Kong, China FTA, Philippines-EU FTA, Regional Comprehensive Economic Partnership, Philippines-European FTA, ASEAN FTA, ASEAN-Australia and New Zealand FTA, ASEAN-India Comprehensive Economic Cooperation Agreement, ASEAN-Japan Comprehensive Economic Partnership, ASEAN-People’s Republic of China Comprehensive Economic Cooperation Agreement, ASEAN-[Republic of] Korea Comprehensive Economic Cooperation Agreement, Japan-Philippines Economic Partnership Agreement).

And the forgoing doesn’t even yet include the massive Trans-Pacific Partnership.

Compare our attitude, flexibility, and sophistication on this matter with China, which currently is the top trade partner of around 120 countries. And we wonder why we have difficulty in getting traction on our West Philippine claim!

To paraphrase one foreign affairs thinker: the Philippines should mentally rearrange the world and determine its own place in it, rather than obediently see the world as international law tells it to.

Our China policy: separating movies from reality

my Trade Tripper column in the 11-12 June 2016 issue of BusinessWorld:

An interesting phenomena common enough in politics is the difficulty people have with differentiating reality from wishful thinking. True and without fault, everyone would like the world to be something better. But it is one thing to work towards an objective, and another mistaking a hoped for ideal as the present state and then proceeding as if the illusion were true.

The same goes for foreign policy.

Because no matter how developed our talent for imagination may be, we simply do not have the capability and resources, including military strength necessary, to back up our declared policy objectives.

Our aerial territory is open to any foreign plane whizzing by (detected or not), the waters we claim are plugged with enough holes that to declare archipelagic sea-lanes is almost comical, and our official borders are so dysfunctional that drugs, other contraband, and even illegal aliens can go in and out at will.

These are some of the parameters hedging the Philippines in when dealing with China, which the US military recently described (US Department of Defense, Military and Security Developments Involving the People’s Republic of China 2016) as having improved: “its ability to fight short-duration, high-intensity regional conflicts at greater distances from the Chinese mainland.”

Furthermore, “China demonstrated a willingness to tolerate higher levels of tension in the pursuit of its interests, especially in pursuit of its territorial claims in the East and South China Sea.”

Unfortunately, the excessively belligerent attitude (frankly, by all sides) raised the possibility of armed conflict all too sadly real.

The US Council for Foreign Relations (Contingency Planning Memorandum No. 14, April 2015) thus warns of a possible “conflict between China and the Philippines over natural gas deposits, especially in the disputed area of Reed Bank, located eighty nautical miles from Palawan. Oil survey ships operating in Reed Bank under contract have increasingly been harassed by Chinese vessels. Reportedly, the United Kingdom-based Forum Energy plans to start drilling for gas in Reed Bank this year, which could provoke an aggressive Chinese response. Forum Energy is only one of fifteen exploration contracts that Manila intends to offer over the next few years for offshore exploration near Palawan Island. Reed Bank is a red line for the Philippines, so this contingency could quickly escalate to violence if China intervened to halt the drilling.”

Simply put, “the United States could be drawn into a China-Philippines conflict because of its 1951 Mutual Defense Treaty with the Philippines.”

Publicly, the US has been declaring repeatedly its refusal to take any side in the ongoing territorial dispute in the region.

Couple that with the US Defense Department’s recognition that “China still seeks to avoid direct and explicit conflict with the United States.”

Unfortunately, not many in the Philippines are taking the hint regarding this, a foolishness ironically forcing everybody’s hand in the matter.

So, despite the US’ utter good sense, perception-wise its “failure to respond would not only set back US relations with the Philippines but would also potentially undermine US credibility in the region with its allies and partners more broadly. A US decision to dispatch naval ships to the area, however, would risk a US-China naval confrontation.”

A quite key consideration is that China’s ambition to be the respected primary world leader hinges on possessing secure economic dominance. Which, had there been no problems, needed a half century more of peaceful co-existence with other countries.

Note that trade in the West Philippine Sea/South China Sea region is almost $6 trillion, nearly a fifth of that generated by the US.

Certainly, the Philippines may have its allies, particularly in trumpeting the virtues of the “rule of law.” But also do remember that our ASEAN partners, as well as Japan and South Korea, are getting closer to economic dependence on China than they have ever been before.

Unfortunately, China’s economy is suspected of being on the back heel.

The Economist (The Coming Debt Bust, 7 May 2016) pointing out that “the country’s debt has increased just as quickly over the past two years as in the two years after the 2008 crunch. Its debt-to-GDP ratio has soared from 150% to nearly 260% over a decade, the kind of surge that is usually followed by a financial bust or an abrupt slowdown. China will not be an exception to that rule.”

So to put it mildly: the possibility of China’s dreams being dashed because of an economic cock-up could motivate the latter to induce everybody into a scenario that no sane country could want.

All the more if a country (i.e., the Philippines) is nowhere near physical and mental readiness for it.

What’s interesting about the foregoing is that you can be sure both China and the US know this. And you can also be sure that both countries know there is a one in four chance things could go deadly wrong.

Gratifyingly, the incoming administration seems to know it as well.

For a strategic, coherent Philippine foreign policy

my Trade Tripper column in this 28-29 May 2016 issue of BusinessWorld:

For foreign policy, perhaps it’s time for a reset. And resets need a plan. And plans involve a consideration of where one is and going to. That is why international relations fundamentally should be conducted in complete unity with the identity and values of the Philippines.

Or put another way, our foreign policy should be but the mere extension of our domestic, also recognizing that these are matters strategically, patiently, and deliberately played out in decades, and that there is more to foreign relations than just facilitating the documentation and regulation of our overseas workers.

For a start, this means a healthy regard for the rule of law. This is particularly true as we are pushing that principle in relation to China and the West Philippine Sea. If extra-judicial measures are resorted to, even de facto, as domestic policy, we can’t reasonably expect the Chinese to do the same.

It also means respecting human rights, particularly freedom of expression and religion. Considerably so, when there’s around 2.5 million of our countrymen abroad who we do not want discriminated against for being Filipinos (or acting or speaking or believing as they do).

This includes not raising the issue of the death penalty at this time, with about 80 Filipinos on death row overseas. It’s simply incongruous to request clemency for fellow Filipinos when we are putting them to death ourselves.

Going back to China, the incoming administration’s declared policy of reaching out and focusing on the positives of our relationship with it is the correct step.

Discussions and agreements should be hashed out allowing for mutual exploration and use of the disputed areas and resources, without necessarily prejudicing sovereignty claims at a more opportune future time.

Enhanced trade arrangements should be raised, particularly with the Philippines supporting and joining the Regional Comprehensive Economic Partnership agreement led by China. Along with the Silk Road aspirations of the latter.

Preferably, all that be at least initiated before the Hague arbitral tribunal releases its decision in our case against China.

As for Mindanao and the ongoing Bangsamoro issue, one fundamental change that should definitely be done is to overtly and declaratively categorize the same as a domestic matter. This includes having the Department of the Interior and Local Government leading negotiations from now on.

Further on that: revival of the BIMP-EAGA is a definite priority, along with a viable transport system among the trading countries. Long-term investment and tax incentives should be given, encouraging Filipino businesses from all over the country and overseas to set up in the area.

We need to strengthen our relationship with Russia. Trade between our two countries hovers around $1 billion, with around 4,500 overseas Filipinos working there (mostly in Moscow). Even adding tourism in, the economic aspect of the relationship is quite anemic considering that we are the closest tropical country to Russia (at least its eastern part) and pales in comparison with other APEC countries (of which Russia is a part of).

Nevertheless, the Philippines and Russia have always been generally in good terms: the former being the first democratic country to reach out to the then Soviet Union during the Cold War (the effort led by then Executive Secretary Alex Melchor and then Major Joe Almonte). In 2012, Russian naval vessels made a goodwill visit to the Philippines, signifying the potential for a deepening of relations between the two countries.

Also suggested are acquiring defense pacts with our longtime trading partners: Japan, Australia, New Zealand, and South Korea.

The Philippines and Australia already have a working arrangement on protection of our transport systems; we have an understanding with Japan on maritime security; and our military history with South Korea peaked with the 1950’s Philippine Expeditionary Forces to Korea.

Incoming president Duterte did well to reiterate the strong relationship the Philippines has with the United States. The shared political and cultural values are too embedded for us not to do so.

Though we should definitely join the Trans-Pacific Partnership, we must also encourage the US to commit itself to leading a revived multilateral trading arrangement through the World Trade Organization.

Furthermore, we should also realize that historically and geographically, we have the potential to play a significant role similar to that of Great Britain vis-à-vis the US and Europe. Perhaps more so.

Our location in the Pacific is not only strategic but also freed us from the various intra-continental conflicts between Vietnam, Thailand, Malaysia, Singapore, and Indonesia. This makes us not only the perfect conduit for the US towards Asia but also a pragmatically objective mediator for our neighbors.

Finally, even in diplomacy, talk is futile unless one has the muscle and will to back it up. Our foreign policy must be partnered with a strong, robust military.

Indeed, increasing defense spending and reviving mandatory military service for all college-age students is ironically a good first step towards a coherent, strategic foreign policy.

No tango in Belgium and lessons for the Philippines

was my Trade Tripper column in the 1-2 April 2016 issue of BusinessWorld:

Perhaps what’s really tragic about the recent slaughter in Brussels is the fleeting idea that it could have been avoided. That the Belgian police could have previously arrested one of the suicide bombers, that they were aware of the terrorism records of the other two. That there should have been no 35 deaths to mourn, and more than 300 injured to console. But that is, indubitably, all hindsight.

For the Philippines, blithely shuffling its way to being a terrorist hotbed, there are lessons shrieking to be learned. For one, it is the importance of having the determination to deny the demands of one group if such contradicts the fundamental values and principles of the country.

And, like Belgium, a significant factor is territory.

As discussed by Jeff Jacoby (“Why there are Muslim ghettos in Belgium, but not in the US”, March 2016), “Last November’s horrific slaughter in Paris was masterminded by a Belgian radical, Abdelhamid Abaaoud, and at least four of the men who carried out those attacks were from the Brussels district of Molenbeek.”

Indeed, “for Islamist imams and terrorist ringleaders, such neighborhoods -- heavily Muslim, densely populated, with high unemployment and crime rates -- have proved fertile territory for recruiting violent jihadists.”

“Molenbeek”, according to Feargus O’Sullivan (“How a Brussels Neighborhood Became a Breeding Ground for Terror”, November 2015), “may be a new name for the international media, but the inner-city neighborhood has been linked to a string of terror attacks dating back years.”

Put another way: radical Islam’s internal logic, which is to wage war against and eliminate a democratic way of life founded on individual freedoms, directs isolation for its adherents rather than opportunities for assimilation.

This should commonsensically lead us to questioning the propriety of the Comprehensive Agreement on the Bangsamoro, of which last Easter was the second anniversary of its signing.

As this column kept pointing out: for two years now, with the tacit agreement of this government, we have in de facto existence another State carved out of a territory of the Philippines. And an entity that surely could pose serious security problems for the country.

Yes, as Jacoby is quick to clarify, it is true that “Muslim communities are not inherently predisposed to violence” and that there is a far larger -- and peaceful -- Muslim community in the United States.

But the US has been quite successful in assimilating not only Muslims but most other migrants into mainstream society. Again, Jacoby: “There are no Muslim ghettoes here like those in Molenbeek or the Paris suburbs, where authorities turn a blind eye to antisocial behavior and aggressive incitement by radicals preaching jihad.” Instead, US Muslims’ participation “in various everyday American activities -- from following local sports teams to watching entertainment TV -- are similar to those of the American public generally. Half of all Muslim immigrants display the US flag at home, in the office, or on their car.”

In short, political correctness (so far) has not undermined the equal application of the rule of law in the US.

And the traditional values (not the vices) exhibited by mainstream Americans have proven attractive enough for other migrants to generally feel welcome and join freely.

The difference in policy and attitude -- and hence, results -- between the US and the Philippines could not be more obvious. Our country bizarrely adopted a “historical baggage” mentality that resulted in a guilt-ridden, appeasement policy direction for the Philippines. This must stop.

Finally, we must re-visit the efficacy of our security apparatus.

Or, to be precise, we should stop the inane (and expensively futile) delusion of matching militarily whatever hostile State there may be and instead -- for now -- focus on eliminating threats of an internal or asymmetric nature.

We must set aside progressive political correctness, confidently assert our sovereignty, and better equip our intelligence services in securing our borders from smuggled goods or individuals. The government itself admitted that there are more than a million undocumented or illegal aliens freely lurking around the country.

We must also have an effective surveillance program on communities that potentially serve as breeding grounds or shelter for Islamic terrorists.

Such security measures are not only constitutionally proper. It is actually the constitutional duty of government to do so.

But inevitably and unfortunately, one suspects the capability of our intelligence services when the intelligence fund of the Office of the President (P500 million) is ridiculously far bigger than that of the National Intelligence Coordinating Agency (in 2015, somewhere around P21 million).

In fact, the OP’s intelligence fund is bigger even than of the Armed Forces of the Philippines (P270 million) or the Philippine National Police (a little over P300 million).

Why would the President need such humongous intelligence funds? Why does he even have intelligence funds? Can’t he rely on the information provided by intelligence professionals doing their lawful duty?

Because, ultimately, the lesson of Belgium is this: politics should never get in the way of combatting terror.

War is what we make of it

my Trade Tripper column in the 4-5 March 2016 issue of BusinessWorld:

Something that needs to be said repeatedly, hoping the next president of the Republic takes it to heart: “The prime duty of the Government is to serve and protect the people.” Simply put, to defend the State is his main job. If he fails in that, nothing else matters. Any talk of social justice is useless if the Philippines can’t protect and keep its people and territory from both internal and external threats.

Unfortunately, defense has been woefully neglected the past few years. The 2015 budget’s 4.4% for the military is scandalous. This all the more when one considers the territorial dangers, conventional and asymmetrical, faced by the country. And while the 2016 budget’s P117.521 billion is an improvement, in relative terms it still falls behind in priority compared to Education, Public Works, Local Government, and Health. Defense and education spending should always be at the top.

The next administration is strongly encouraged to commit thoroughly to reviving the Self-Reliant Defense Posture of the Marcos years (as well as Ramos’), implemented through Presidential Decree 415, amended by PD 1081.

The SRDP program, “initiated in 1974, took the development of a domestic defense industry as its objective. Defense officials contracted SRDP projects with the government arsenal and local manufacturers, encouraging the use of indigenous raw materials and production capacity. Projects included domestic production of small arms, radios, and assorted ammunition. One of the most significant SRDP operations was the manufacture of the M-16A1 rifle under license from Colt Industries, an American company. According to a 1988 statement by the Philippine armed forces chief of staff, the SRDP not only increased Philippine self-reliance, but also cut costs, provided jobs, and saved much-needed foreign-exchange funds.” (see photius.com, citing the Library of Congress Country Studies and CIA World Factbook)

The policy is practically a neglected tradition for the country. Danilo Lazo and Juanita Mercader (“The AFP Self-Reliant Defense Posture (SRDP) Program: Leading The Nation Towards A New Direction”; Asian Studies, 1989) point to traces of the self-reliant defense posture in “Commonwealth Act No. 138, otherwise known as the Flag Law,” requiring preference for locally manufactured items in government procurement.

Furthermore, considering the much talked about Filipino talent in computer programming, then the same should be harnessed for the country’s defense. Interestingly enough, Filipino hackers have been reportedly retaliating, with some degree of effectiveness, against countries hostile to the Philippines. Defense planning from now on should include creating an actual contingent within the AFP whose sole purpose is to defend the country from cyber attacks.

The foregoing has to be coupled with upgrading our reserve corps, including the revival of compulsory military service by making such a requirement for all graduating college students. With 70% of the population under 30 years of age, this would definitely help in our national development. Note that under the Constitution, “citizens may be required, under conditions provided by law, to render personal military or civil service.”

Finally, we must develop a comprehensive national defense strategy. Because, believe it or not, we don’t have one.

That fact also probably explains our somewhat puzzling recent buying pattern of foreign military hardware. The purchase of sophisticated aircraft is actually futile because warfare essentially boils down to mathematics, i.e., who has more of what. And as far as external threats go, that is a contest we can’t win. The only people benefiting from our recent spending habits are Western defense companies able to offload their products to poor countries like us.

No. If we do buy weaponry from abroad, then the same should be done solely with the focus of neutralizing efficiently any internal threat at hand (including being able to guard against smuggling and fisheries poaching). For such purposes, hi-tech (thus expensive) weaponry is not necessary. Functioning workhorse type aircraft, speedboats, and land-armored vehicles should be enough.

For external threats, it is simply non-sensical to even try matching the military resources of those countries challenging the Philippines.

But what the Philippines does have are thousands of islands, an abundance of forests, caves, and miles and miles of confusing streets.

At this stage of our country’s development we can’t fight a war hoping to beat the other country. This includes not making our defense strategy hinge on the assistance of allies. We shouldn’t waste spending and the developing of our plans on such thinking.

What we can do is build our national defense strategy around the idea of attrition and guerilla warfare: to make going to war against the Philippines an island per island matter, complicated, never-ending, so costly in terms of human and material resources that it would practically outweigh any benefit -- that any country would have to think twice if it’s worth attacking us at all.

In the end, diplomacy is always the best option for everyone. And our national defense strategy should be built around the idea that countries are better off talking to us rather than shooting us.