Government News Analysis Trade

Oceans of potential

Philippine exports need a major shot in the arm to jolt the industry from its present torpor. Certainly, trade deals gained during the past few weeks from President Rodrigo Duterte’s trips around the region will help; and they should kick-in fairly soon. But the big one – the one that could restore the Philippines’ role as a leading Asian entrepôt – has yet to be landed.

That big one is the inclusion of the Philippines on the map of the romantically named 21st Century Maritime Silk Road – China’s ambitious sea-trade route from the Orient to Europe.  Presently, the map shows it bypassing the archipelago. The reason for this, sadly, was (though its never been clearly stated), the bitter standoff between the Philippines and China which started in 2012. For one year later, when the maps were produced, the country’s isolation from a trade path which took in the rest of Southeast Asia stood out in stark relief.

This can now be revisited. The row over China’s occupation of the disputed Scarborough Shoal – a group or rocky islets in the South China Sea – which resulted in the Philippines being left off the map, is now over. That row raised tensions to the level of an international crisis as former president, Beningo “Noynoy” Aquino, revved up the rhetoric which led to an increased US Naval presence in the area and Aquino slapping a writ on China at a European arbitration court. This unfortunate undiplomatic handling of the incident cost the Philippines dearly in trade terms with the Mainland.

But now it’s behind them, there’s no reason why that map cannot be redrawn to include the Philippine ports. And we know there will be willingness on the Chinese side to do that. Even during the course of the heated exchanges between the two countries, Mainland officials never said that the Philippines could not be connected to the trade route.

In fact, they held out hope that it would be. “With the future development of the 21st Century Maritime Silk Road, I think that there will be more opportunities for both sides to have future developments,” said one official in 2014. More pointedly, he added: “If you [the Philippines] want to join in and put more passion and attach more importance to it, I think that depends on your government, because China is open to all countries who are ready; who prefer to join the initiative”.

Obviously, this was an attempt to get Aquino to soften his stance – which he didn’t – but it also shows that the prospects are there for the Philippines to be part of this. Put it another way; if the Scarborough Shoal incident had never happened, there’s every likelihood that the trade route would have embraced the archipelago. Frankly, there’s no reason why it wouldn’t have. And there’s certainly no reason why it shouldn’t now.

The Maritime Silk Road is the sea component of China’s over-arching “One Belt, One Road” project; the land-based component is the Silk Road Economic Belt which traces an ancient trading route from China to Europe dating back to the Han dynasty period (207BC to 220AD). The Silk Road Fund, with some US$40 billion pledged by the Chinese Government, will provide the initial financing of a project which is expected to cost in excess of US$1 trillion.

The maritime route, however, is not simply to provide China with an oceanic platform from which to dominate international shipping; it will do that, but there’s more. According to a report produced by the Netherlands Institute of International Relations, it is also part of “a highly ambitious long-term programme for economic integration of a vast zone … on the basis of infrastructure development”. And that – right there – is precisely why the Philippines must be included on this map.

If it’s not, it will lose out to every other member state in the Association of Southeast Asian Nations (Asean). If that happens it won’t just be isolated on an ocean chart, it will be cut-off from its peers in Asean and be deprived of participating in what could be the most comprehensive trading alliance and logistics network ever put together. And this isn’t just about shipping goods; it’s also about gaining much-needed infrastructure investment for port development and transport links. Politics has had its moment of fame in that unfortunate two-year spat; now it’s the turn of economics to claim its moment.

And the Philippines doesn’t just have geographical claims to be part of all this; it has historic claims as well. Chinese silk and porcelain were being shipped from the islands to the West as far back as 1571 in the Spanish colonial era. Armadas of junks would bring the goods from China to the port in Manila and then be transshipped to markets in Spain, other parts of Europe and Mexico. And so, if it proved its worth as an entrepôt of the 16th Century Maritime Silk Road, there’s no reason to suspect it can’t do the same as an industrious trading post for the 21st Century Maritime Silk Road.

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