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Asia Today ISSN 1861-4604 Sunday, December 17, 2017

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China Ramping Up Aid to Philippines as Both Pursue Deeper Relationship

Manila fight a Muslim rebel insurgency

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TAIPEI, TAIWAN - China is stepping up aid to the Philippines, including a proposal to seek oil together offshore and a gift of arms to help Manila fight a Muslim rebel insurgency, indicating that both sides want an extra-firm friendship despite an unsettled maritime dispute.

Three firms, including China's state-owned offshore oil driller CNOOC are awaiting Philippine President Rodrigo Duterte's signature to explore for fuel reserves under a 7,120-square-kilometer tract of water off the Philippine west coast.

Last week the Armed Forces of the Philippines said on its website China had donated 3,000 assault rifles, with 3 million rounds of ammunition, to help the military fight the ISIS-sympathetic Maute Group rebels in a war-torn southern city.

The transactions, alongside infrastructure aid from China, indicate that both countries want as much from each other as the other can accommodate. They made peace only in 2016 after four years of squabbling over maritime sovereignty.

China pursues an oil exploration partnership

Officials in China "would want as much they can get," said Ramon Casiple, executive director of the Philippine advocacy organization Institute for Political and Electoral Reform.

"I would say the Filipinos are very nationalist in their position, particularly with regards to the South China Sea, but then the friendship I think is well received here."

Beijing is chasing stronger alliances around Southeast Asia to ease hostility over its claims to nearly the whole South China Sea. A world arbitration court said in mid-2016 China lacked a legal basis to assert those rights.

The Chinese claim overlaps the exclusive economic zones of four Southeast Asian states including the Philippines. Those countries chafe at China's passage of ships and buildup of artificial islands for military infrastructure.

Chinese aid

China is offering aid and investment to rival claimants Brunei, Malaysia and Vietnam, as well as to the Philippines. But President Rodrigo Duterte in Manila welcomes China with special enthusiasm as part of his shift away from dependence on the United States.

Chinese success in exchanging aid for political tolerance anywhere in the Asia hinges on the other side's interest, said Song Seng Wun, Southeast Asia-specialized economist with the private banking unit of CIMB in Singapore.

"It is always a case of the other side (being) more welcoming," Song said. "On the case of the Philippines, obviously you have a president, and he really wants to do it, so you're talking about playing the Chinese off the Americans."

US / Philippines

The United States has been an ally of the Philippines since its colonization of the Southeast Asian country ended in 1946. China opposes the U.S. military presence near the disputed sea, however, while Duterte resents Washington's criticism of his deadly anti-drug campaign.

But Duterte swung back toward the United States last week with a pitch for more economic partnerships.

China may have donated the rifles, the second installment of its kind, to offset U.S. aid, analysts say.

The United States does joint naval patrols with the Philippines and since 2002 it has placed 50 to 100 special forces on the southern island Mindanao to help control violent rebels such as the Maute Group.

China becoming more popular

Filipinos' positive sentiment toward China has risen 17 percentage points since 2014, the Pew Research Center said last month. Positive sentiment toward the United States fell from 92 to 78 percent over the past two years, it found.

China pledged $24 billion in aid after Duterte visited Beijing in October. Three months later China and the Philippines agreed to $3.7 billion in Chinese investment covering 30 projects.

China competes as well with Japan for aid and investment in a $167 billion, five-year Philippine effort to modernize infrastructure. Japan, a U.S. ally that has its own political disputes with Beijing, is vying with China for alliances around much of developing Asia.

"If you look at the (official development aid), you're seeing more from the Japanese than the Chinese," said Jonathan Ravelas, chief market strategist with Banco de Oro UniBank in Metro Manila.

Philippines still wary

Filipinos want China's aid, an outgrowth of the $11.2 trillion Chinese economy, as long as it comes without political strings such as conceding disputed tracts of sea, scholars in Manila say.

Prior Chinese efforts at joint maritime oil exploration with Southeast Asian states have failed before because of questions about who would own any discoveries.

China's CNOOC owns 51 percent of the Calamian oil field being considered for joint exploration now, while Philippine National Oil Company has 28 percent. Jadestone Energy of Singapore has another stake.

China and the Philippines have discussed offshore oil cooperation since late last year.

"Everyone's waiting at the sidelines," Ravelas said. "It's really the devil is in the details. Basically, what would be the revenue share? What will China bring to the table?"

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