Marcos must tread cautiously as US and China seek to reset ties with the Philippines
- The US is likely to dangle greater defence cooperation and capital, while China will pledge continued support for the Philippines’ infrastructure plans
- Advancing defence ties with Manila’s treaty ally, but avoiding antagonising its largest trade partner, will be a difficult balancing act for the Marcos administration
Manila is Washington’s longest-tenured treaty ally in Asia, and the 70-year alliance remains a pillar of its external defence. The US is also a major market for the Philippines’ burgeoning business process outsourcing industry, and Manila is keen to attract more American and foreign capital diversifying away from China or expanding into Southeast Asia.
The US is likely to dangle greater defence cooperation and capital, while China will pledge continued support for the Philippines’ infrastructure build-up and pour in more investment.
To forestall Chinese interest, US private equity firm Cerberus Capital Management in April took over the ex-Hanjin shipyard in Subic – a US$300 million deal billed as the biggest public-private partnership in the 75-year history of Philippine-US relations. Facing the South China Sea, Subic is a former US naval base, a bustling free port, special economic zone, and a new base for the Philippine Navy. An American defence firm, Daycraft Systems Corporation, also partnered with a local firm to operate a weapons assembly plant in neighbouring Bataan province.
China, in turn, is delivering on its infrastructure pledges and hoping to complete projects reached with the previous Duterte government. A month before the presidential election, a second Beijing-donated bridge that spans the Pasig River was opened in Manila. Five days before Marcos Jnr’s inauguration, the Chinese-financed Chico River pump irrigation project in northern Luzon was also inducted into service. The project was a key piece in the Duterte government’s flagship Build, Build, Build infrastructure programme, which Marcos Jnr has pledged to continue.
Early this year, a Chinese consortium also sealed a contract to design and build a railway to southern Luzon. The Philippine National Railways (PNR) Southrail, a US$2.8 billion project, is the highest funded government-to-government undertaking between the two countries. Work will begin this year on the first phase – 380km of the total 560km railway– and the railway is expected to run by 2025. Last Tuesday, China’s ambassador to the Philippines Huang Xilian confirmed the signing of a commercial contract for a Chinese-funded river bridge in Davao, expected to be completed in two years.
China is also set to submit a shortlist of design-build contractors for another rail line in Mindanao, the first such project in the Philippines’ second-largest island. Beijing is also involved in the Subic-Clark railway project, which would link two vibrant economic zones in central Luzon, and in the Kaliwa Dam project, which will enhance Metro Manila’s water security.
AC Energy Corporation of local conglomerate Ayala also tapped Chinese construction firms to build the country’s largest solar farm in San Marcelino, Zambales, which is slated to operate late this year.
Pragmatism vs wariness
Pragmatism makes the Philippines welcoming of economic overtures, but the growing US-China gulf may make security deals more delicate.
It remains to be seen whether Marcos will seek such concurrence given his concerns about the Philippines’ competitiveness and the deal’s impact on sensitive sectors like agriculture, which he is temporarily heading.
As the US-China rivalry heats up, with the South China Sea and the Taiwan Strait becoming arenas for great power muscle-flexing, the Philippines is increasingly squeezed in between.
The restoration of the US-Philippine Visiting Forces Agreement and the holding of one of the largest joint annual military drills in years may energise defence ties and fuel momentum for the implementation of the Enhanced Defence Cooperation Agreement.
Washington may push for greater access to more Philippine bases to better respond to regional contingencies. This, however, may place its junior ally in a bind, especially if the US prepositions missiles that put Chinese targets within range.
In 2017, South Korean tourism and businesses in China bore the brunt of great power enmity, when Seoul hosted US-made Terminal High Altitude Area Defence (THAAD) missiles. The move infuriated Beijing, which saw the anti-ballistic missile defence system as inimical to its security interests.
That provides a cautionary tale for Marcos Jnr. Advancing defence cooperation with its treaty ally, but avoiding antagonising its largest trade partner, will be a difficult balancing act.
Lucio Blanco Pitlo III is a research fellow at the Asia Pacific Pathways to Progress Foundation