Government News Analysis Trade

Rough rocks with a silk lining

With characteristic calmness, elder statesman and former president, Fidel V. Ramos, is smoothing the waters between the Philippines and China coasts, to establish a common beach head from which the two sides can attack one of the most complex and bi-nationally emotive issues the region has ever faced – how to resolve their dispute in the South China Sea.

These will be tough, rough negotiations by any standards and the last thing they need right now is for third parties to be interjecting their own terms and conditions. And so, as the heated rhetoric of the past four and a half years subsides, both governments are seeking a more conciliatory approach to the large looming questions that surround a collection of ocean-swept rocks; the Scarborough Shoal.

Manila and Beijing are attempting to give it less public exposure as private talks between their respective negotiating teams take over. This is not about making clandestine deals in dark, smoke-filled rooms – we can hear the critics already – this is about establishing an atmosphere of calm, away from the glare, so that the two sides can focus on finding solutions to a Chinese puzzle that is as tangled as it is sensitive. The time of drum-thumping is over; the time to listen to the other side has finally arrived. Scarborough Shoal – now for the real business.

They will deal first with the things they can agree on, leaving the thornier issues to be hammered out later. Common fishing rights would seem to fit the former category; sovereignty over the rocks will most certainly be in the latter. And Ramos, one of the best and most respected presidents the Philippines has ever produced, will provide a very safe pair of hands.

One thing, however, that he will almost definitely be mentioning to his counterparts in China’s Foreign Ministry is for the Philippines to have a more active role in the Maritime Silk Road (MSR) – irrespective of whether this is part of any future islands’ deal or not. The MSR and the Silk Road Economic Belt form China’s Belt and Road initiative – a vast land and ocean enterprise that seeks to connect the entire Asia region to Europe through a collaboration of trade, technology exchange, people-to-people cooperation and infrastructure building.

And the Philippines is well positioned to be a significant player along the silk sea route. It sits at the cross flows of the South China Sea and the Pacific Ocean; US$5.3 trillion-worth of goods pass through the close-by shipping corridors each year; by language and culture the Philippines is practically a living embodiment of the East-West linkage that the Belt and Road is seeking to achieve.

Moreover, like most of its regional peers, the Philippines is a fully paid-up member of the Asian Infrastructure Bank (AIIB) – the China-led global financial institution which is capitalised at US$100 billion and which, along with the US$40 billion Silk Road Fund, will be driving the MSR projects.

The Philippines became an AIIB member on 31 December 2015 with 9,791 shares, holding one millionth of total shares, giving it 1.11% voting rights. And while that appears small in the overall scheme, in the context of Southeast Asia, it isn’t. In fact, the Philippines is the largest stakeholder of any country in the Association of Southeast Asian Nations after Indonesia, 3.42% shares, 3.17% of the vote, and Thailand, 1.45%, 1.50%. The others are: Brunei, 0.05%, 0.31% Cambodia, 0.06%, 0.32%; Laos, 0.04%, 0.30%; Malaysia, 0.11%, 0.36%; Myanmar, 0.27%, 0.49%; Singapore, 0.25%, 0.48%; Vietnam, 0.68%, 0.84%.

Along this section of the Maritime Silk Road, Manila’s AIIB investment should produce good returns – and that’s definitely something which should be factored into the future plans of foreign investors to the Philippines.

So while talks over the disputed islands are likely to be rocky for Ramos and his team, by contrast, any discussion about the Philippines’ MSR expectations should be as smooth as silk.

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