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‘The clouds are fading away’: President Rodrigo Duterte shakes hands with Chinese Ambassador to the Philippines Zhao Jianhua. Photo: EPA

The Philippine pivot: Duterte readies huge business delegation for Beijing visit

About 250 Philippine business executives will visit Beijing with President Rodrigo Duterte next week as he puts aside years of hostility to seek a new partnership with China at a time when tensions between Manila and its traditional ally, the United States, are mounting.

There has been no announcement about the delegation, but business groups and government officials said registration to join Duterte on his October 18-21 visit had been oversubscribed. Filipino executives are eager to talk with Chinese business leaders and government officials about deals in a range of sectors, from rail, and construction to tourism, agribusiness, power and manufacturing, the sources said.

Initially only about two dozen Philippine entrepreneurs were to accompany Duterte but the number had ballooned to about 250, Trade Undersecretary Nora Terrado said. “I understand there are 100 more wanting to go,” Terrado said, adding the size of the delegation was unusual because the two sides agreed on the visit only about one month ago.

Philippine President Rodrigo Duterte has taken aim at a potential new foe: the United States. File photo: AP
We do have a very popular president and the president decided that he wanted to have a better relationship with China
Francis Chua, chairman emeritus of Philippine Chamber of Commerce and Industry

The trip could signal a transformation in a relationship dogged in recent years by mistrust over rival territorial claims in the South China Sea, and could upset strategic alliances in a region growing wary of China’s influence and military might and where the United States has a strong presence.

An arbitration court ruling in the Hague on July 12 that said China had breached the Philippines’ sovereign rights in the South China Sea had threatened to lead to a further deterioration in ties between Manila and Beijing.
But Duterte, who took office on June 30 after winning an election in May, has instead aggressively courted China and said he wants to reduce the nation’s dependence on the United States. He has said he will hold talks with China on the South China Sea dispute.
His promises to engage with China have in large part come in a near-daily barrage of hostility against Washington, raising questions about whether his overtures carried weight, or were simply aimed at boosting his profile at home by espousing a “pro-Filipino” foreign policy.
In recent days there have been clear signs of improving business ties. On Saturday, Philippines Finance Minister Carlos Dominguez said in an interview in Washington that Duterte would seek billions of dollars in infrastructure investments from China in coming months. And Philippine Agriculture Secretary Emmanuel Pinol said on Sunday that China would lift a ban on fruit exports by 27 Philippine firms as a “gift” to Duterte.
A blimp with a banner supporting Philippine President Rodrigo Duterte flies along Manila Bay. Duterte’s approval rating among Filipinos is soaring. Photo: EPA

And the size of the delegation going to China and early comments from senior government officials in Manila signal a new and potentially much deeper economic relationship with Beijing than there has ever been before.

“We do have a very popular president and the president decided that he wanted to have a better relationship with China,” said Francis Chua, chairman emeritus of Philippine Chamber of Commerce and Industry.

“We are neighbours...this is actually what the president is thinking: instead of fighting, why don’t we just become friends?”

Beijing on Wednesday confirmed Duterte’s visit, which was made at the invitation of Chinese President Xi Jinping, Foreign Ministry spokesperson Lu Kang said.

Beijing’s ambassador to the Philippines, Zhao Jianhua, has been lyrical in welcoming the transformation in relations. “The clouds are fading away. The sun is rising over the horizon, and will shine beautifully on the new chapter of bilateral relations,” he said at a Chinese National Day reception in Manila last month.

Discussions between officials of the two governments would be held on the first day of the visit and on day two about 600 representatives of private firms from both countries would be addressed by Duterte and Xi, several sources said, citing a tentative programme.

While no concrete deals have yet been finalised, several Filipino businessmen said exploratory talks would be held on cooperating in a range of sectors including industry, finance and low-cost manufacturing.

AChinese H-6K bomber patrols the islands and reefs in the South China Sea. China is pitted against smaller neighbours in multiple disputes over islands, coral reefs and lagoons in waters crucial for global commerce and rich in fish and potential gas and oil reserves. File photo: AP

“We have members who are looking for some tie-up with their like in power, agriculture, financing facilities and joint ventures,” said Sergio Ortiz-Luis, president of the Philippine Exporters Confederation. “They (China) might be offering certain packages, grants on the table.”

Trade Minister Ramon Lopez said on Monday that Chinese manufacturers could benefit from low manufacturing wages in the Philippines, which could vie with Vietnam for some investments.

Some Chinese companies have already indicated interest in new projects in the Philippines.

China’s CRRC-Dalian Co., Ltd, a unit of China’s CRRC Corp , said in a statement on Monday it had “solid intent” to modernise the antiquated railway system in the Philippines.

And while there has been no firm talk of defence deals, Duterte said last month the United States had refused to sell some weapons to his country but he didn’t care because Russia and China were willing suppliers.

US officials said they were doing their best to ignore Duterte’s hostile rhetoric and taking comfort in the fact that he had yet to translate his words into less military cooperation.

A closer Philippines-China relationship, analysts say, could jeopardise regional efforts to forge a unified position on how to handle China’s assertiveness in the South China Sea.

By engaging with China, Duterte could improve his chances of tackling urgent issues at home, such as weak infrastructure, unemployment and energy security as domestic natural gas reserves run out.

There are oil and gas reserves off Palawan island and at the Reed Bank in the South China Sea but the Philippines lacks the expertise to exploit them. State-run Philex Petroleum has not ruled out resuming stalled joint surveys with China National Offshore Oil Corporation (CNOOC) at the Reed Bank.

Undersecretary Terrado, who heads the trade ministry’s industrial promotions department, said it would be businesses setting the agenda themselves next week, free of government intervention.

“We are allowing market forces to just get it on,” said Terrado.

US and Philippine marines push their vehicle after it was bogged in sand at the start of live fire exercise as part of the Philippines-US amphibious landing exercise. Photo: AFP

Q&A: Duterte can cut US defence ties, but it would take awhile

While Obama administration officials have repeatedly stressed the strength of the relationship with the Philippines, here’s a look at what it would take for Duterte to follow through with his threat to “break up with America.”

What official defence agreements are in place?

Three of them: the Mutual Defence Treaty signed in 1951, the Visiting Forces Agreement signed in 1998 and the Enhanced Defense Cooperation Agreement signed in 2014.

The Mutual Defence Treaty came into force after the US granted the Philippines independence, and has been at the centre of defence relations ever since. The eight-article pact - one of seven collective U.S. defence treaties - calls for each side to help build the ability to resist armed strikes, and “meet the common dangers in accordance with its constitutional processes“ if either side is attacked.

The Visiting Forces Agreement is a longer, more detailed pact that spells out the legal details for U.S. military personnel operating in the Philippines. It covers everything from passport regulations to procedures for importing military equipment to criminal jurisdiction.

The most recent agreement is the Enhanced Defence Cooperation Agreement, which was reached between the Obama administration and President Benigno Aquino, Duterte’s predecessor. The pact allows for a greater US presence at Philippine military bases and the construction of new facilities within those bases.

What are Duterte’s issues with the agreements?

Duterte has questioned whether the U.S. would defend the Philippines if China seizes disputed shoals and reefs in the South China Sea - scepticism that has persisted in the Southeast Asian nation for decades. It’s unclear what would happen if the U.S. Congress fails to approve a military response, and whether contested territory is covered. A U.S. diplomatic cable from 1976, since declassified, states that treaty does not cover disputed areas such as the Spratly Islands.

Could Duterte end the agreements, and what’s the procedure?

He could, but it would take awhile. The Mutual Defence Treaty, ratified by the Senate in each nation, may be terminated one year after notice has been given to the other party. What counts as “notice“ is unclear.

The Visiting Forces Agreement is seen as an official treaty in the Philippines because it was approved by the Senate, and as an executive agreement in the U.S. Either side can terminate it with 180 days notice given in writing to the other party.

The Enhanced Defence Cooperation Agreement is considered an executive agreement by both sides. It has an initial term of 10 years, though it will remain in force unless either side terminates it with a year’s notice given in writing to the other party.

Do Philippine lawmakers need to sign off?

Not necessarily. While the Philippine Constitution requires at least two-thirds of senators to approve an international treaty, it is silent on ending them. Pacifico Agabin, a constitutional expert and former dean of the University of the Philippines College of Law, said the decision to end a treaty is “completely within the discretion of the president.”

Has this happened before?

The Philippines has periodically reassessed its defence relationship with the U.S., which ruled the nation as a territory for nearly 50 years until independence.

The Military Bases Agreement reached in 1947, originally a 99-year deal, was revised several times to give the Philippines increased economic compensation or sovereignty, including one amendment that called for it to expire in 1991.

In the early 1990s, leaders from both countries sought to extend the pact to allow the Americans to keep what was their largest military outpost in the Western Pacific. Yet an upswell of anti-colonial sentiment prompted the Philippine Senate to reject a fresh agreement, and the U.S. closed all of its bases by 1992.

Additional reporting by Bloomberg