Government News Analysis

Who was on that plane and why?

What Philippine President Rodrigo Duterte discussed with his opposite number in Indonesia, Joko Widowo, over the past two days, can pretty well be worked out by looking at the Cabinet team he flew in with. Most significant, The Volatilian™  believes, is the inclusion of Defence Secretary, Delfin Lorenzana. This particular portfolio is not routinely found in the entourages of presidential visits. On this one, however, he had to be there.

Philippine-Indonesia relations are arguably the best of any within the 10-state Association of Southeast Asian Nations (Asean) which they helped to co-found. They have a long history of trading and cooperation and are rarely at loggerheads. That is until recently.

The increased activity by Abu Sayyaf Group terrorists, based in southern Mindanao – acts of piracy in the Sulu Sea that separates the two neighbours, involving the abduction and ransoming of Indonesian fishermen and barge workers in particular – has caused relations to sour, with Jakarta claiming that the Philippines has not been doing enough to either dismantle this group, or to keep the waterways safe.

In June, this came to a head when seven Indonesian crew were snatched from a tugboat and a barge delivering coal to the Philippines. It was the third incident in a year and as far as Jakarta was concerned, it was the final straw.

Uncharacteristically, Indonesian Foreign Minister, Retno Marsudi, publicly challenged Manila to deal with these incidents. Making it clear that the abductions cannot be tolerated, she said that her government “condemns the repeated kidnappings of Indonesian citizens by armed groups in the southern Philippines … The Indonesian Government asks the Philippines Government to ensure the safety in the waters of the southern Philippines so that the economy in the region will not be disturbed”.

But the region’s economy has been disrupted. Indonesian coal exports to the Philippines were immediately suspended following the last abductions and will remain so until Jakarta feels confident that its merchant vessels can travel safely through the Sulu Sea. This is a big blow for the Philippines – Indonesia supplies 70% of all the coal needs of its electricity-generating industry; 42.8% of electricity production in the Philippines is from coal-fired plants. The longer this embargo persists, the more stretched the country’s power grid will be.

This is definitely one reason, then – and probably the biggest one – why Lorenzana was on the plane.

Maritime issues are likely to have been raised by Trade Secretary, Ramon Lopez, who was also among the presidential party that flew into Jakarta on Wednesday night. One of these could involve the long-delayed sea-connectivity agreement which would link the Philippine cities of Davao and General Santos to the Indonesian city of Bitung in northern Sulawesi. This has been in the works since 2012. Regulatory challenges, apparently, are what have becalmed the agreement’s passage.

Known as the DGB agreement, it is an initiative of BIMP-EAGA – a sub-Asean trade and cooperation block, the East Asean Growth Area, centred on certain territories: the whole of Brunei; Kalimantan, Sulawesi, Maluku, West Papua and Papua in Indonesia; Sabah, Sarawak and Labuan in Malaysia; Mindanao and Palawan in the Philippines. The designated sea routes, once established, will provide delineated shipping lanes between the three port cities; first for cargo vessels and then for passenger services.

Lopez will likely also press for a re-energising of BIMP-EAGA, which serves a population of around 60 million people across 618,000 square miles. Faced with falling trade volumes, Lopez is looking to expand existing markets and find new ones for Philippine goods. And shipments of Indonesia could certainly do with a boost. In 2015, Indonesia was the Philippines’ eight largest import partner, while in terms of Philippine exports, Indonesia ranked 13th.

Last year, just 1.1% of Philippine products, US$628.3 million worth, ended up next door in Indonesia – 0.1% more than Liberian products performed. Non-BIMP-EAGA Asean states, Singapore and Thailand shipped considerably more – 10.5% (US$6.2 billion), and 3.9% (US$2.3 billion) respectively.

Commercial initiatives aside, what is clear is that until the problems coming from the troubled waters that lie between their lands are resolved, Philippine-Indonesia trade relations will continue to flounder and foreign relations will hit the rocks more and more.

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