Configuring Philippines-China ties under Marcos, Jr.; Philippine Development Plan and controversial funds

December 2022 Monthly Political Analysis
Posted 13 January 2023

Philippines-China ties

The first six months of the Marcos, Jr. presidency ended in December 2022 with all its long holiday breaks and Filipino overseas workers traveling home for a reunion with families. For the Marcos government, the momentum of foreign trips appeared to be bullish as it prepared for an important state visit by the president to start the year 2023. The trade and industry department, In a year-end report, reported that Marcos’ last quarter visits to Indonesia, Singapore, the U.S., Cambodia, and Thailand yielded $23.6 billion of investment pledges. The trips signaled the government’s aggressive campaign to attract more foreign investments in the Philippines. What better way to kick this off than the Marcos state visit to economic giant China scheduled on January 3-5.

Government preparations in December for the state visit revealed high expectations that the diplomatic event will help strengthen Philippines-China economic cooperation in trade, investment, tourism, infrastructure building, and other industries. The Department of Foreign Affairs (DFA) announced earlier that 14 bilateral agreements will be signed during the Marcos visit capped by bilateral meetings with Chinese President Xi Jinping (习近平) and Premier Li Keqiang (李克强).

Among the agreements to be signed is a deal that would establish direct communication lines between both countries’ foreign ministries, said Neal Imperial, DFA Assistant Secretary for Asian and Pacific Affairs. The direct communication involves maritime issues in the South China Sea, Imperial said, “…to avoid miscalculation and miscommunication in the West Philippine Sea.”

The DFA assistant secretary assured in a press briefing that the president will raise contentious issues, especially on the West Philippine Sea / South China Sea. As explained by previous administrations, however, he qualified that maritime disputes do not define the totality of the country’s relations with China.

Other agreements are on tourism, nickel processing (China imports 70 percent of its nickel ore requirements from the Philippines), a possible RMB1.5-billion grant for the Philippines, as well as finalizing the framework agreement for three bridge projects. Other bilateral deals are on renewable energy, digital cooperation, exchange of best practices, and capacity building. Imperial also said the Philippines will renew an agreement on participating in China’s Belt and Road Initiative (BRI) which is expected to help Manila forge closer ties with Beijing and other countries linked by the BRI.

Like many countries, the Philippines’ economy is tightly intertwined with China’s. China is Manila’s largest trading partner, the largest source of imports, and the second-largest export destination. As of 2021, bilateral trade between the two countries is pegged at $38.35 billion with Philippine exports at $11.55 billion, while imports amounted to $26.8 billion. The Philippines’ top exports to China include nickel, cathodes, manufactured goods, and fresh bananas while top imports from China are mineral fuels, lubricants, iron, steel, and other industrial machinery and equipment.

The Philippines, for decades now, has defined its relations with China with the main goal to help strengthen the country’s economy, particularly on trade, investment, agriculture, and infrastructure building. Last July, Chinese Ambassador to Manila Huang Xilian assured newly-elected President Marcos, Jr. that China is ready to support the government’s infrastructure projects saying that the two sides were negotiating technical issues and made progress to move the projects forward. Previously, the country’s transportation undersecretary said the Philippines was looking forward to billions worth of ODA assistance from China for at least three major projects – the P142 billion (roughly $2.5 billion) Calamba to Bicol railway, the P51 billion ($918 million) Clark to Subic train system, and the P83 billion ($1.5 billion) Mindanao Railway - which had been earmarked by the previous government of Rodrigo Duterte. Ambassador Huang said 17 projects have been completed and more than 20 projects are under implementation or due for completion.

Leading members of the Filipino-Chinese community, who will send a delegation parallel to Marcos’ state visit, note that the two countries’ bilateral talks bode well for deeper economic cooperation. Chinese officials, however, are expected to be judicious in dealing with the Marcos government. Under American pressure since July last year, Marcos, Jr. acceded to tightening the country’s security alliance with the U.S. including opening up six military facilities for U.S. military logistical requirements as well as prepositioning forward deployed forces. It appeared that the U.S. is using as a pretext for this expanded alliance the claimed threats posed by China against the maritime rights of the Philippines and other claimants in the South China Sea, the militarization of the SCS itself, as well as tensions over the Taiwan Strait that would supposedly threaten peace and stability in the region. (China has accused the U.S. of violating the One-China principle for continuing official contacts with the Taiwan government as well as extending military aid. The U.S. has vowed to extend support to Taiwan if attacked by China.)

That said, Marcos’ visit in China as well as bilateral talks will set the tone of future Philippines-China relations under his watch. Just as the Philippine president aims to draw the roadmap of such relations in line with the country’s economic priorities the Chinese will take a calibrated approach to forestall Marcos’ security alliance with the U.S. from being used against Beijing. At the very least, the Philippine president has said a number of times that his country will pick no sides amid the increasing tensions between the two powers.

As the world approaches a global economic recession, China, with all its resilience and potential, is expected to bring certainties and further play a more important role. Amid the recession and geopolitical turbulence, some major powers like Saudi Arabia, Germany, and France are developing closer ties with China, experts say. A positive signal is that the U.S. is seeking more communications with Beijing to manage current tensions following a consensus reached by President Xi Jinping and U.S. President Joe Biden on the sidelines of the G20 Summit in Bali, Indonesia to bring bilateral ties back on track. U.S. Secretary of State Antony Blinken is expected to visit China early this year.

Philippine Development Plan (PDP) 2023-2028

In January, the Philippine Development Plan (PDP), approved by Marcos last November, will take effect to guide the country’s socio-economic development over the medium term, 2023-2028. Socioeconomic Planning Secretary Arsenio Balisacan said the PDP envisions, among others, a digital transformation agenda in order to curb opportunities for corruption as well as more partnerships with the private sector to reduce inequalities.

President Marcos, Jr. also signed the P5.268 trillion national budget for 2023. The new budget, which puts more emphasis on agriculture, restored controversial confidential and intelligence funds (CIFs) of the Department of Education (DepEd) and Office of the Vice President (OVP) – both headed by Vice President Sara Duterte. Another litigious item - the P10 billion budget of the National Task Force to End Local Communist Armed Conflict for 2023 - was restored despite public protests over renewed attacks on activists, journalists, and rights defenders.

Maharlika Wealth Fund (MWF)

For weeks, taxpayers and other stakeholders hounded Congress over House Bill No. 6398 which sought to create the Maharlika Wealth Fund (MWF) with billions of resources to be pooled from the Government Service Insurance System (GSIS), Social Security System (SSS), Land Bank and Development Bank of the Philippines (DBP). (Maharlika or “Freeman”) The House bill was jointly filed by House Speaker Martin Romualdez (presidential cousin) and Rep. Ferdinand "Sandro" Marcos III (presidential son). With the originally targeted funds being public money, the bill generated broad negative feedback which led to its amendment in the House of Representatives by dropping the GSIS and SSS as sources of funds. However, the projected funds will still be sourced from the Land Bank and the DBP and also from no less than the Bangko Sentral (Central Bank of the Philippines). The MWF has been renamed Maharlika Investment Fund (MIF).

From another perspective, a sovereign wealth fund if well-conceived and properly managed can also be an instrument of industrial policy for supporting necessary manufacturing and infrastructure projects, and if successful, as an additional source of funds for critical social services. However, the current Philippine situation militates against this proposal because of the absence of any specific record of successful governance in this regard. The country’s technocrats and some private sector managers who will play key management roles in the proposal are subservient to the far more powerful elected politicians and oligarchs in the country with enough clout to call the shots in reality.  Moreover, the proposed sovereign fund also seeks to use precious government funds from banks at a time when the country faces a severe fiscal and debt crisis. In contrast, the successful cases of sovereign wealth investment initiatives in some countries sourced their funds from revenue surpluses of the government which were then managed under the most stringent vetting and auditing protocols and well-established institutional mechanisms of accountability. Unfortunately, these enabling conditions are not present in the Philippines.

Human rights

On the occasion of Human Rights Day, Dec. 10, over 60 organizations from across the globe called on President Ferdinand “Bongbong” Marcos Jr. and his administration to commit to “respecting the right to defend human rights.” “President Marcos Jr. should cease the threats and attacks against rights defenders and ensure the protection of their rights, including the rights to life, freedom of expression, and freedom of peaceful assembly,” the groups said in a statement. Among others, the statement was signed by the Anti-Death Penalty Asia Network; the Asia Pacific Forum on Women, Law, and Development; Canada-Philippines Solidarity for Human Rights Canada; Front Line Defenders International; IBON International; some chapters of the Malaya Movement and Migrante; as well as individuals Bronwyn Dudley, Emile Kinley-Gauthier, and Florfina Marcelino.”

In a similar move, at least 12 nations raised concerns about the human rights situation in the Philippines during the fourth cycle of the Universal Periodic Review of the country at the United Nations Human Rights Council after thousands of people were killed in the "war on drugs" with authorities claiming that the majority of drug suspects violently resisted arrest. Representatives of Argentina, Australia, Austria, Brazil, Canada, Chile, Czech Republic, Estonia, France, Germany, Iceland, and Ireland suggested that the Philippines take action to ensure that those responsible for extrajudicial and summary killings related to the "war on drugs" are held accountable.

For decades, the Philippine government’s human rights record has come under close scrutiny by the UN and other rights watchdogs over its failure to end extrajudicial killings victimizing social activists as well as drug suspects. There is, under Marcos’ watch, no end to the killings especially in light of the current president’s directive to state security forces to carry out their tasks to go after communist rebels, non-inclination to the resumption of peace talks with the leftist underground movement, and the drugs campaign.