In October 2016, Philippine President Rodrigo Duterte visited China and Japan, two of the country’s important economic partners. His high-profile and much-publicized trips earned the Philippines millions of dollars’ worth of Chinese and Japanese loans and investments. These financial commitments underscored the strategic value of the Philippines for both countries. Conversely, these consecutive visits also indicated the motivations behind Duterte’s heightened economic ties with China and Japan, and how they differ from each other. By renewing and strengthening these relations, Duterte essentially reveals his shrewd motives and strategic approach that are expected to resonate in the Philippines’ overall foreign policy and external relations.
Chinese Investments to the Philippines
Despite looming maritime issues, Duterte’s policy of engagement provided a reset in the overall relations between the Philippines and China. During his state visit to Beijing, he announced that the Philippine victory in the arbitration case against China on the South China Sea would “take a back seat.” He also implied that the territorial disputes were a “small part” of their multifaceted bilateral relations. Because of his conciliatory tone, he was able to obtain significant trade deals from the Chinese government and receive an impressive amount of investments from Chinese firms.
Duterte brought home a total of USD 24 billion worth of financial commitments from China. From this amount, a total of USD 9 billion from Chinese credit facilities is allocated to benefit the Philippines’ growing economy. Duterte also secured another USD 15 billion worth of investment projects from China. These credit facilities and investments are projected to fund the development of various sectors in the Philippines such as agriculture, renewable energy, tourism, food, manufacturing, telecommunications, and infrastructure. These economic deals are expected to generate two million jobs in the country over the next five years.
Japanese Investments to the Philippines
From Japan, Duterte obtained USD 1.85 billion worth of investment commitments from private companies and another USD 162 million worth of loans and grants from the Japanese government. These investments, forged through Memorandums of Understanding and Letters of Intent, are in the automotive industry, egg-laying technology, optical imagery, and biofuels, among others. In addition, the Japanese conglomerate Marubeni Corporation pledged USD 17.2 billion worth of investments to the Philippines, which would fund highways, electrical power, and mass transit projects in the country.
Meanwhile, the Japanese government made another financial commitment to the Philippines when Prime Minister Shinzo Abe visited the country in January 2017. It pledged another USD 8.7 billion worth of business opportunities and private investments in the Philippines. The Japanese government also granted USD 5 million for patrol boats and other counterterrorism equipment for the Philippine Coastguard to boost its capacity for search and rescue operations and law enforcement.
The Motives behind the Money
Duterte’s consecutive economic engagements with China and Japan have, as expected, generated comparative assessments, the most apparent of which is the more substantial amount of Chinese investments compared to the Japanese. This is unsurprising considering that territorial disputes have stalled economic ties between the Philippines and China in recent years. But with Duterte taking a “less antagonistic” stance towards China compared with the previous administration of President Benigno Aquino III, the Chinese government appears to be “rewarding” the Philippines for its “good behaviour.” The huge amount of investments to the Philippines reflects how China is willing to renew economic ties on a grand scale in exchange for the Philippines toning down its statements regarding their territorial disputes.
Unlike the Philippines’ economic interaction with China, which appears to be contingent on amiable political relations, its commercial ties with Japan are based on a strong political partnership. While its relations with China have soured in recent years, the Philippines has been in close cooperation with Japan for over 60 years. Without any security issues looming in the background (notwithstanding Japanese war atrocities in the Philippines), their economic relations have deepened with extensive bilateral trade and increasing financial aid. In terms of investments, Japan is thus considered more of a long-term investor and its funded projects in the country will be more sustained. The Japanese government will not try to surpass China’s offer of aid and investments, since it has already built on its more established track record as a reliable development partner to the Philippines.
For Duterte, economic development in the Philippines is an important foreign policy goal of his administration.
The political motivations of China’s financial investments in the Philippines also differ from Japan’s. For the Chinese government, reactivating economic ties would be an effective means to persuade the Philippine government to downplay the maritime issues in the South China Sea. By fostering cordial relations, China is re-establishing its positive image by putting a good smile after it lost “face” in the international community, especially after the Philippines pursued the arbitration case and scored a victory. Through its generous investments, China may also be seeking to further promote its benevolent and paternal facade, not only towards the Philippines, but also to the rest of ASEAN. And with its renewed ties with the Philippines, which it once dubbed as a “troublemaker,” China is poised to solidify its regional influence now with less hostility and much goodwill among its neighbors.
Meanwhile, Japan’s political motivations behind its investments to the Philippines offer a different perspective. Aside from further promoting and safeguarding the interests of its long-established companies in the Philippines, Japan is also using its aid and investments as tools to reassert its diplomatic significance despite its domestic economic slowdown. The Japanese government may also be seeking to neutralize China’s growing influence, not only in the Philippines but also in ASEAN. Moreover, in case Duterte exhibits his resentment against the US again (brought about by American criticism against his “war on drugs”), Japan would have to earn and use its political capital to act as the pro-Western partner that it hopes the Philippines will listen to.
Duterte’s Drive for Development
The generous investments by China and Japan can be attributed to Duterte’s shrewd and pragmatic approach in conducting Philippine bilateral relations. For Duterte, economic development in the Philippines is an important foreign policy goal of his administration. With China, Duterte believes that the Philippines will not gain anything beneficial by flaunting its arbitration win, except the ire of the Chinese government. And despite the Philippines’ legal victory, he fully recognizes the difficulty in implementing the decision and in preventing China from its maritime activities in the South China Sea. Thus, he would rather shelve discussions on the territorial disputes, in exchange for a revitalized partnership and tangible economic gains that would benefit the country. With Japan, Duterte seeks to continue profiting from Japanese aid, investments, and loans that have long been instrumental in the Philippines’ economic development. And despite his re-engagement with China, Duterte cannot afford to ignore Japan, which is still a vital economic partner for the Philippines, especially after he got a diplomatic cold shoulder from the US for his fiery rhetoric against the Obama administration.
Duterte’s consecutive visits to China and Japan reflect his desire not only to reinvigorate both partnerships, but also to elevate bilateral ties. This is especially apparent in Duterte’s actuations during his meetings with his Chinese and Japanese counterparts. His high-level visit to China and his meeting with Chinese President Xi Jinping generated global attention not only as a showcase of a revitalized partnership after years of bilateral standstill. The hype was also due to his controversial “declaration of the Philippines’ separation from the US and his realignment with China and Russia.”
Meanwhile, Duterte’s folksy meeting with Japanese Prime Minister Shinzo Abe, in which he personally invited Abe to his modest and private home in Davao City, made headlines. Such a venue was symbolic of how Duterte regarded Japan as “a special friend closer than a brother.” Despite his infamous profane rhetoric and notorious foul mouth, Duterte apparently knows when to mind his manners and what to say to the right people. Elevating these bilateral ties, through his official meetings and personal statements (which are music to the ears of his counterparts) demonstrate how far Duterte will go to earn the goodwill and gain the trust of China and Japan (which incidentally distrust each other).
Duterte’s high regard for these countries, which rewarded him with millions of investments for the Philippines, may seem opportunistic but it is undoubtedly pragmatic. The importance placed on China and Japan reveals his economic priorities, which consequently results in the diversification of the Philippines’ foreign relations. For Duterte, the Philippines’ over-attachment to the US in its foreign policy must be minimized, not only to assert the country’s sovereignty, but to also gain more benefits for the country through other partnerships. Thus, reinvigorating relations with other major powers, rather than merely relying on just one superpower, ultimately serves Philippine interests.
How Duterte cleverly manages ties with these states may very well serve as a preview of his strategic and utilitarian approach in promoting the Philippines’ external relations and in implementing its foreign policy. This is particularly important to highlight as the Philippines assumes the ASEAN Chairmanship this year, which will be an important platform for the Duterte administration to display its skilful diplomacy. Following his “successful” engagement with the major powers, much is expected from Duterte as he leads an organization of small states. And as the Philippines has earned a lot of financial incentives and revelled in diplomatic esteem by elevating ties with China and Japan, much responsibility and propriety is expected of the country under Duterte as it internalizes its growing strategic worth and influence in the region.