Could a China-Philippine joint development deal be the way forward in the South China Sea?

An agreement on offshore oil and gas exploration could pave the way for greater cooperation across the disputed waterway, Richard Heydarian writes

PUBLISHED : Sunday, 01 April, 2018, 11:03am
UPDATED : Friday, 13 April, 2018, 7:27pm

In a remarkable reflection of the blossoming Philippine-China relationship, the two neighbours have signalled their commitment to sharing contested resources in the South China Sea. Both are determined to ensure common interests, rather than disputes, define the overall texture of their relationship.

During his recent visit to Beijing, Philippine Foreign Secretary Alan Peter Cayetano raised the prospect of a joint development agreement (JDA) with China.

Hailing a “golden period” in relations, he expressed Manila’s wish that “South China Sea disputes will no longer block the development of bilateral ties” but instead, “be turned into a source of friendship and cooperation between our two countries”.

His Chinese counterpart, Wang Yi, said the two neighbours were considering a JDA “in a prudent and steady way” to “advance cooperation on offshore oil and gas exploration”. If successful, a Philippine-China JDA could pave the way for a broader set of cooperative arrangements across the South China Sea basin.

What is at stake is the effective and peaceful management, if not permanent and just resolution, of one of the most intractable and high-stakes maritime disputes of the 21st century. In the meantime, however, the Philippines and China will have to overcome significant legal and political hurdles in their quest for a “win-win” solution.

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Since last year, Philippine President Rodrigo Duterte has repeatedly expressed his preference for resource-sharing arrangements with Beijing to facilitate the resolution of the decades-long spats in the South China Sea.

To be fair, there is nothing new in his proposal. Former President Gloria Macapagal Arroyo, who is the chief foreign policy adviser to Duterte, has been a strong advocate of joint exploration and development schemes in the South China Sea.

Currently the deputy speaker of the House of Representatives, and seen as a potential prime minister under a proposed new constitution, Arroyo has fully backed a JDA with Beijing.

In a recent interview with local media, she said, “the policy of President Duterte today” was “very similar to mine”. She argued that “China is not a rival”, but instead “a market, an investor [and] a donor” to the Philippines.

Other influential advocates of a modus vivendi in the disputed water include former speaker of the house, Jose de Venecia, currently a special envoy to the Asia-Pacific Economic Cooperation (APEC) organisation.

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During Arroyo’s long presidency (2001-10), she oversaw a rapid thaw in bilateral relations with China. It opened up the space for big-ticket Chinese infrastructure projects, namely in the telecommunications and public transport sectors.

Crucially, the Philippines, together with Vietnam, also negotiated and signed the Joint Maritime Seismic Undertaking (JMSU) in the South China Sea. Under the deal, China’s energy giant China National Offshore Oil Corporation (CNOOC) was tasked with seismic exploration in overlapping areas of claim.

The Philippine National Oil Company (PNOC) and PetroVietnam, meanwhile, were tasked with interpreting and processing the data.

Arroyo’s short-lived “golden age” tryst with China, however, was undermined by a series of corruption scandals, which eventually derailed both Chinese investments and the JMSU. This time, however, Duterte and China want to get it right.

But an actual JDA, whereby the two countries divide resources within areas of overlapping claims, will have to overcome seemingly impossible legal and political hurdles.

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The Philippine constitution bars joint exploration and development within the Philippines’ exclusive economic zone (EEZ) with another sovereign entity that does not recognise Manila’s claims.

The 2016 arbitration award ruling at The Hague, constituted under the United Nations Convention on the Law of the Sea, nullified China’s nine-dash line claim, thus the absence of any overlapping EEZs – and area of claim – between Manila and Beijing.

Acting Supreme Court Chief Justice Antonio Carpio has openly opposed any such arrangement in the disputed waterway as unconstitutional. He warned that it could even serve as grounds for impeachment against the president, while violating the arbitration ruling.

Despite warming bilateral ties, much of the Philippine public and defence establishment remains sceptical of any resource-sharing agreement with China.

A more likely option is for the two countries to explore an arrangement similar to that in the Camago-Malampaya project, where Chevron and Shell are lead foreign investors.

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For instance, Manila could subcontract a Chinese company to explore and develop energy resources right outside the Philippines’ exclusive economic zone but not within Beijing’s nine-dash line area of claim.

That way, both sides would be able to transcend the sovereignty issue as well as legal obstacles to any resource-sharing agreement.

In fact, currently there is a proposal for PNOC to partner with and subcontract China’s CNOOC to explore and develop resources in the Calamian project off the island of Palawan, which falls beyond the nine-dash line.

The other option is for the two neighbours to establish a marine and ecological sanctuary in the contested Scarborough Shoal and other areas of overlapping claim.

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Such confidence-building measures could generate much-needed trust as well as momentum for more high-stakes and sensitive cooperative arrangements in the South China Sea.

Thus, both sides will have to learn the right lessons from the past and, accordingly, explore arrangements that are viable and mutually beneficial.

Richard Heydarian is a Manila-based academic and author of several books, including Rise of Duterte: A Populist Revolt Against Elite Democracy