Strategic Insight 2018 SELECTED COMMENTARIES on PHILIPPINE FOREIGN RELATIONS and REGIONAL AFFAIRS

ASIA PACIFIC PATHWAYS TO PROGRESS Strategic Insight 2018 SELECTED COMMENTARIES ON PHILIPPINE FOREIGN RELATIONS AND REGIONAL AFFAIRS

What to make of the Philippines-China “Comprehensive Strategic Cooperation”? By Lucio Blanco Pitlo III President Xi Jinping’s two-day state 2 visit to Manila (November 20-21) was considered a milestone in Philippines- China relations. While depth still requires more work, the increasing breadth of the ties was demonstrated with 29 cooperation documents signed ranging from trade, investment and economic cooperation, infrastructure, agriculture, finance, information and communications technology, education, and culture…

Indomalphi: From state actions to ASEAN maritime security regime By Grace Guiang The launching of Indomalphi 3 Trilateral Maritime Patrol (TMP) in July 2017 was a celebrated milestone on security cooperation among the three neighbors Indonesia, Malaysia, and the Philippines. Patterned from the Malacca Strait Patrol (MSP) such that it has also three components…

After Marawi: advancing Australia-Philippines The Balangiga Bells and the strategic relations By Ben Schreer and Ian Hall Philippines-US alliance By Julio S. Amador III …The Asia Pacific Pathways to 5 Progress Foundation and the Griffith In his speech marking the return of the Balangiga bells, United States Asia Institute co-hosted a Philippines– defense secretary, Jim Mattis emphasized the need to deepen the Australia Track II dialogue in Manila, “respect” between the two allies, the Philippines and the United States. focusing on the security dimension of the Seen as either war booty or as relics of a bloody period, the return of the relationship. It brought together bells mark an end to a heavily disputed period between the allied academics, analysts and practitioners to countries. President Rodrigo Duterte of the Philippines has used the bells talk about the security challenges facing to needle the Americans, going even so far as asking for their return in his both countries, as well as their policy State of the Nation Address in 2017. responses. A key message for Australia was Continued on page 2 the need to think about…

Asia Pacific Pathways to Progress Strategic Insight 2018 criticisms from members of the US Senate. The Balangiga Bells and the While low in alliance priorities now, the West Philippine Sea Philippines-US Alliance will remain to be the bigger issue between the allies. The US (Continued from Page 1) still refuses to clarify whether it will protect Philippine- occupied features in the area in case of attack. Still, clarity on Under Duterte’s presidency, the Philippines maintains US commitment would help mollify certain sectors of the a two-tier approach to the alliance. The president is Philippine government, which have been ill at ease with Washington’s ambivalent attitude on the issue. free to annoy or lambast the US while his diplomats Contrary to any notion that the Philippines left the US camp, and generals maintain the military and other security the past two and a half years have shown that it will take more aspects of the relationship. For instance, his own than a president to remove the former from the latter’s national security policy recognizes the US presence in sphere of influence. Continuous lobbying from the Philippines, the region as a “stabilizing force” and emphasizes its boosted in part by its president’s refusal to back down from critical role as the Philippines “sole defense treaty ally.” publicly calling out the US on historical and other policy Two critical areas where the alliance will probably be grievances, has resulted in the return of the bells of Balangiga. maximized, albeit in a low-key manner, are internal Should the US continue to be understanding of its ally’s security operations, and the Armed Forces of the unorthodox approach to alliance management, it will satisfy Philippines’ modernization program. The Philippines’ the Philippines’ approach of working “closely with the US on a number of significant security and economic issues.”v national security apparatus has refocused its priorities

by ranking internal security as its primary goal. Terrorism, insurgency, subversion, transnational Published December 20, 2018 at https://bit.ly/2rOvehQ crimes, criminality and illegal drugs abetted by graft Julio S. Amador III is a Fellow and Program Convener at and corruption rank above the West Philippine Sea in Pathways to Progress. terms of strategic consideration. Duterte has already requested the Congress to extend What to make of the Philippines-China martial law in Mindanao, which has been generally “Comprehensive Strategic welcomed in that island, but reviled in Manila and Cooperation”? other parts of the country. The US has been active in helping rebuild Marawi and so far has given US$ 60.5 By Lucio Blanco Pitlo III | (Continued from Page 1) million for community development projects to This provides much of the substance behind the elevation of respond to economic, social, health, and education the ties to a “Comprehensive Strategic Cooperation.” The needs of the local communities in the affected area. It visit reinforced continuity, downplaying of disputes and is in the US interest to help the Philippines stem expansion of practical areas of cooperation. It also saw both terrorism and violent extremism in Mindanao and countries’ attempt to remedy setbacks in some earlier agreed projects. programs designed to prevent violent extremism will Despite domestic hurdles to Beijing-backed public work be useful to both governments. projects, China’s impact already made its presence strongly The AFP’s military modernization recently earned a big felt in trade, tourism, investments and employment. push with the decision to purchase Black Hawks for Alongside welcoming other regional connectivity utility helicopters. This is a major win for the US as this undertakings, both sides agree to cooperate in shows that the Philippines will not cross the line on US implementing the Belt and Road Initiative. Nevertheless, sanctions on Russia, which was ready to sell Mi-171s at despite the hype it is getting, relations remain a matter of a cheaper price. Doing so would have incurred economic convergence rather than political alignment. repercussions from the Americans, and defense Furthermore, China is also a late player catching up with decision-makers were prudent enough to take this into Japan in terms of providing aid and economic goods and with the United States in terms of providing market access consideration. and security goods. Thus, China’s learning curve in Nevertheless, the US would need to be more careful in effectively working with the Philippines is still in its nascent how it presents its assistance in the AFP’s stage relative to that of the country’s established partners. modernization program; in August, Duterte criticized Bumps are not unexpected. his country’s ally, noting that while it offers its Sustaining the momentum assistance, there is no assurance that the Philippines Twenty-four of the 29 cooperation documents signed during will get any weapons that it wants to purchase as an Xi’s visit correspond to seven of the 13 cooperation earlier attempt to do so were suspended following documents earlier signed during Duterte’s October 2016 state visit to Beijing. A 2016 Memorandum of 2 231

Asia Pacific Pathways to Progress Strategic Insight 2018 Understanding (MOU) for Developing Cooperation on agreed infrastructure projects. This case applies regardless of Production Capacity and Investment was followed through by the donor, funder or contractor. To address these, a 2016 a Program for Cooperation on Industrial Parks Development Memorandum of Understanding (MOU) between the and a Framework Agreement for an Industrial Park between Philippines’ Department of Finance (DOF) and China’s Ministry the Philippines’ Bases Conversion and Development Authority of Commerce Supporting the Conduct of Feasibility Studies for and Wuhan-based construction and engineering group Major Projects was reached. As a follow through, a similar Gezhouba. An MOU on Transportation Infrastructure MOU was inked between DOF and China’s newly-established Cooperation Project List was followed through by an International Development Cooperation Agency during Xi’s Infrastructure Cooperation Program, an MOU on Jointly visit. Two feasibility study implementation agreements for the Promoting Cooperation in Key Infrastructure Projects in Davao Panay-Guimaras-Negros Island Bridge and the Davao City Region, and Exchange of Letters for two projects - the Davao Expressway Project were also signed. In addition, government River Bridge Project (Bucana) and the China Aid Bridge and is in a tight bind balancing the desire to fast track project Road Project in Marawi. A project management consultancy implementation, especially as the Duterte administration contract for the Philippine National Railways South Long Haul enters midway into its term, with the need to observe Project (North-South Railway Project) was also signed. While deliberative processes, such as stakeholder consultation, and existing special economic zones enjoy an advantage, other adhere to required safeguards. local government units can also vie to host proposed industrial In recent years, Beijing had employed various terms to parks especially if they are properly positioned and can offer describe its burgeoning relations with an increasing number of attractive incentives. countries. China had entered into “comprehensive strategic Manila formalized its participation in Beijing’s Belt and Road cooperative partnership” agreements with Cambodia, Laos, Initiative with an MOU. Duterte also accepted the invitation to Myanmar, Thailand, Vietnam, Senegal and Namibia; “strategic attend the second Belt and Road Forum in Beijing in April and cooperative partnership” with Afghanistan, Brunei, India, 2019. The mercurial leader was among the 30 heads of state South Korea, and Sri Lanka and; “comprehensive strategic that attended the first Belt and Road Forum back in May 2017. partnership” with diverse countries as Germany, UK, France, Mindanao, especially the Davao region, is expected to corner Australia, New Zealand, Kazakhstan, Malaysia, Indonesia, more investments because of its great potentials and Mexico and Brazil, among others. But the use of perceived policy continuity post-2022 with many local leaders “comprehensive strategic cooperation” to describe supportive of the engagement policy. The establishment of a Philippines-China relations is unprecedented. Whether that third Chinese consulate in Davao will help facilitate greater suggests exceptional importance attached to the renewed ties tourism and capital flows to the country’s second largest with Manila or a consideration of the archipelagic country’s island. unique domestic dynamics and geopolitical setting is up for In response to a 2016 Action Plan on Agriculture (2017-2019), debate. For now, what is certain is that both sides appear to an MOU on Strengthening the Building of Agricultural take a more forward-looking approach in their relations. v Cooperatives was reached. Furthermore, a Protocol of Published December 11 2018 at https://bit.ly/2BdMx0b Phytosanitary Requirements for the export of fresh young *Lucio Blanco Pitlo III is a research fellow at Pathways to Progress. coconuts and frozen fruits was signed which would facilitate greater Philippine exports of these two agricultural Indomalphi: From state actions to commodities to China. China had ramped up purchase of ASEAN maritime security regime Philippine farm products. Local growers, in fact, faced By Grace Guiang | (Continued from Page 1) difficulty catching up with demand volume. Last year, export The launching of Indomalphi Trilateral Maritime Patrol (TMP) of Philippine bananas and pineapples to China increased by in July 2017 was a celebrated milestone on security more than 50 percent. However, low level of mechanization, cooperation among the three neighbors Indonesia, Malaysia, weak state support and fragmented landholdings limit and the Philippines. Patterned from the Malacca Strait Patrol economies-of-scale cultivation, thus constraining production. (MSP) such that it has also three components, the maritime In finance, a 2016 MOU on Financing Cooperation was patrol was followed shortly by introduction of air patrol and followed through by an MOU on Panda Bonds Issuance and an intelligence sharing. Since then, meetings and patrols have MOU on RMB Clearing Arrangement. A yuan-peso exchange periodically convened, with each party rotationally taking trading market was also established allowing entrepreneurs turns in hosting the operations. and tourists from both sides to transact directly without A sustained and institutionalized Trilateral Cooperative incurring potential exchange rate losses from using a third Arrangement (TCA) can become one of Southeast Asia’s currency. A Preferential Buyer's Credit Loan Agreement for the security regimes. New Centennial Water Source-Kaliwa Dam Project was also International relations scholar Robert Keohane defines inked. This project which has been proposed since the 1970s regimes as “institutions with explicit rules agreed upon by the will boost Metro Manila’s water security. governments that pertain to particular sets of issues in Addressing roadblocks international relations”. In this case, Indomalphi addresses Gaps in Philippine absorptive capacity and bureaucratic overlapping transnational crimes including kidnapping, piracy, bottlenecks constitute the major culprits behind the delays in 3 23

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smuggling, and terrorism. In order to be effective, regime intelligence shared among the three countries preceding the policies and practices need to be incorporated into state-level exercise at sea. According to Indonesian Defense Minister institutions and strategies. Ryamizard Ryacudu, there was a plan to build a land patrol A year ago, I argued on how such a bottom-up minilateral training component aside from the maritime command approach advances ASEAN security. More recently, we are centers and intelligence-sharing. Moreover, a cultural seeing not only the improvement and seriousness of tri-border exchange program was held to promote better understanding cooperation but also how individual state-member have and to build trust among the neighbors. begun to incorporate relevant practices into national efforts. Discussions remain vague regarding such expansion and On the other hand, we cannot ignore ASEAN’s role. How can whether there should be a role for major powers, or how to go existing ASEAN mechanisms contribute to “security about TCA’s cooperation with any regional partner. minilateralism” when these mechanisms themselves On 12 to 23 March 2018, the Philippines’ Western Mindanao are challenged by the lack of institutionalization, legalization, Command (WesMinCom) hosted air patrols with Malaysia as harmonization, and coordination? Who will learn from whom? part of the TCA over the common area of maritime interest. In With its member-states’ diversity in geography, priorities, and a separate cooperation between the Philippines and Australia, goals, can ASEAN itself develop into a maritime security the Naval Forces of WesMinCom and the Royal Australian regime? Naval Forces conducted the second Maritime Security Engagement from 13 March to 2 April in the waters of Basilan, Year One Sulu, and Tawi-Tawi. This displays two separate patrols that During the Trilateral Intelligence Exchange (Intelex) meeting in may potentially collaborate in the absence of formal Manila in August 2017, the group collectively agreed to arrangements for regional partnership. Collaboration could designate a point of contact from each state’s combination of also save time and resources. military and police personnel to facilitate the intelligence- However, to recall, one of the catalysts of the TCA was when sharing. A newly rehabilitated border post on Balut Island in Duterte invited China to patrol the Sulu-Celebes Seas, Sarangani Province was to function as an inter-agency prompting Indonesia and Malaysia to expedite launching as monitoring station on the Celebes Sea; while Malaysia and they oppose direct participation by external powers. Indonesia were to establish five command posts along the In sync with national efforts Sabah, Sarawak and Kalimantan borders. Philippine President Such multinational efforts should complement and be in sync Rodrigo Duterte even looked into the possibility of creating a with maritime security strategies and practices at home. For task force, which Asian security observer Prashanth example, the Philippine Coast Guard deployed sea marshals to Parameswaran argued “would represent quite a dramatic accompany cargo vessels from Cebu and passenger ships from acceleration in sub-regional cooperation”, as this would entail Manila to Zamboanga and Moro Gulf, as requested by more coordination among government agencies. shipping lines. A new coast guard ship sailed to critical sea The launching of the air space surveillance component lanes: the Sibutu Passage, Basilan Strait, and Moro Gulf. followed in October 2017. All three air forces committed on During the first quarter of 2018, the Philippines finalized plans deployment schedule of air assets adopting a monthly to construct a new naval station in Barangay Bual, Luuk, a rotation. For instance, Malaysia led the joint air patrol in town in Sulu. The current administration is taking this seriously November 2017, which involved the aerial monitoring of since the attacks in Marawi challenged this entire region. 17,000 nautical miles and eight transit corridors, covering the Maritime piracy exacts high human cost especially for a waters of the three countries. seafarer-exporting country like the Philippines. Of the 1,150 In November 2017, the first port visit was held in Tawi-tawi, total seafarers who were exposed to piracy and armed Philippines. The second followed in April 2018, with joint robbery incidents in 2017, nationalities of the 661 were warship exercises in the waters off Tarakan, Indonesia. verified and 43% were Filipinos. During the third maritime patrol in early September 2018 in Despite such efforts and the fact that the numbers of Sandakan, the Royal Malaysian Navy identified ‘rat-routes’ in transnational crimes are decreasing, criminals are still at large the Sulu and Sulawesi seas where criminals enter Sabah and there is still much to do. A kidnapping incident took place illegally and undetected. Such information was based on the in January 2018, with the three Indonesian hostages rescued 4 412

Asia Pacific Pathways to Progress Strategic Insight 2018 in Sulu on 15 September. There were also attacks in Surabaya, Indonesia in May 2018. Evolving into a maritime security regime At the level of ASEAN, there are several mechanisms against maritime and transnational crimes. For example, the ASEAN Defense Ministers Meeting-Plus and ASEAN Regional Forum can facilitate military exercises and may provide financial assistance for security cooperation respectively. However, these mechanisms are also being criticized for the lack of institutionalization, harmonization, and coordination. ASEAN never runs out of ideas and approaches in cooperation, but implementation is a complicated story. Despite having a comprehensive plan of action for counter-terrorism—which includes assimilation of academic research into policy, economic initiatives, religious dialogue, public participation, engagement of rural communities—the regional block lacks a unified ASEAN position on national counter-terrorism strategies. Ideally, the TCA can fill in gaps on institutionalization and coordination of ASEAN. It is however still too early to proclaim success like the MSP, but the TCA deserves credit for a productive first year. On the other hand, the TCA may not be as comprehensive as ASEAN mechanisms and action plans, thus ASEAN’s role is still relevant especially in stressing the sociocultural aspect in addressing security. Second, ASEAN mechanisms provide platforms for external partners when the TCA has still no definite plans for expansion. Through subregional maritime cooperation, ASEAN can develop into a security regime by making use of these grounded cooperation as well as retaining efficient and inclusive measures at the regional level. The block must positively contribute rather than be another cause of challenges for the TCA. Moreover, the stability in this side of the region will elevate the chance of prosperity in the economic front such as economic zones and corridors in southern Mindanao and the BIMP-EAGA. v | Published November 23, 2018 at https://bit.ly/2IdQusB *Grace Guiang is a research analyst at Asia Pacific Pathways to Progress.

After Marawi: advancing Australia- The geopolitical significance of the Philippines in our region is clear. Despite the depredations of the authoritarian Philippines strategic relations populism of its current president, Rodrigo Duterte, the By Ben Schreer and Ian Hall | (Continued from Page 1) country remains one of Asia’s largest democracies. It has a burgeoning, young and increasingly better-skilled population of over 100 million people. It’s also one of Southeast Asia’s best-performing economies, alongside China and Vietnam, with GDP growth predicted to remain above 6.5% out to 2020. Moreover, it’s a ‘frontline state’ in the emerging competition for the SCS because of its close proximity to some disputed islands and features. It sits in what some in Beijing term the ‘first island chain’ off China’s east coast. Its location makes the country a potential ‘barrier’ against a future bout of Chinese military expansionism and a putative ‘springboard’ for US-led operations against China’s People Liberation Army (PLA). As Stephen Biddle and Ivan Oelrich point out, Philippine territory could be utilised to deny the PLA control over parts of the SCS by establishing …options for further strengthening our strategic ties with this an ‘anti-access/area denial’ perimeter. important Southeast Asian state beyond the battle for Marawi. Like Australia, the Philippines doesn’t want to live in a The terrorist siege in that southern Philippine city provided China-dominated order. Notwithstanding Duterte’s recent Canberra with an opportunity to boost defence relations by friendly overtures to Beijing, as Peter Chalk’s recent ASPI supplying much-needed assistance. The provision of surveillance report points out, the Philippines hasn’t walked away from support to the Armed Forces of the Philippines, in the form of AP- the US alliance. Many in the political elite in Manila (as well 3C Orion aircraft, was particularly valued. Since then, the as in the bureaucracy, the military and the wider Australian Defence Force has stepped up its engagement by population) continue to be deeply opposed to China’s training Philippine soldiers in combined urban operations to encroachment on what they consider sovereign Philippine enhance their capacity to address similar scenarios in the future. territory at Scarborough Shoal, seized by Chinese forces in While cooperation on counterterrorism will continue to be an 2012, and to the continued harassment of Philippine important aspect of Australia–Philippines defence relations, it fishermen by China’s coast guard and maritime militia. should be embedded within a broader strategic relationship. In Driven by these concerns, the AFP is investing—albeit particular, the two countries need to work together to manage a slowly—in territorial defence, with a long-term objective of bigger strategic challenge: China’s quest for regional dominance acquiring a deterrent capability against China. The and its ongoing efforts to turn the South China Sea (SCS) into a Philippine government just announced a record budget of Chinese ‘lake’. 5 312

Asia Pacific Pathways to Progress Strategic Insight 2018 US$5.6 billion for the five-year ‘Horizon 2’ defence modernisation International Narcotics and Law Enforcement (INCLE) program, with the lion’s share earmarked for air and naval funds to counter transnational crime. The security capabilities. The future ‘Horizon 3’ program is likely to include assistance funding will cover projects in Bangladesh, more money for further upgrades, including the acquisition of Indonesia, Mongolia, Nepal, the Pacific Islands, the submarines. These investments are very modest from a regional Philippines, Sri Lanka, Vietnam and others. perspective, and defence spending remains well below 1% of Philippine GDP. But they signal an important, if incremental change Recipient countries would share a common in the country’s defence policy. interpretation that this new security funding will be Australia doesn’t take sides in territorial disputes in the SCS. But beneficial to each country and to the region as a Canberra has repeatedly stated its deep concern about China’s whole, resting on the assumption that the US is attempt to change the territorial status quo in the region and to doing this out of benevolence. A more realist challenge the wider ‘rules-based order’, as both the 2016 Defence perspective, however, would give a different White Paper and 2017 Foreign Policy White Paper make clear. interpretation, arguing for the realpolitik goals of US. In this context, investing in strategic ties with the Philippines must These intended goals are usually implied and be a key priority for Canberra. Australia should offer to upgrade sugarcoated by focusing on the positive outcomes of bilateral ties to a ‘strategic partnership’ akin to the one just such ‘donated’ security funds. concluded with Vietnam, and ensure high-level dialogue is Prior to the said announcement in August, the US maintained, with regular visits by senior ministers and officials. Australia should also explore opportunities to include the National Security Strategy was published in Philippines in trilateral security or defence dialogues, involving December 2017, wherein the US outlined (albeit in Japan, Singapore, the Republic of Korea and the United States. vague terms) the US Indo-Pacific Strategy, with the These moves would send an important signal to the region about aim of including India in the regional cooperation Australia’s willingness to play a more active role in shaping the and the larger leadership role of Japan. Mention was security of Southeast Asia and about the Philippines’ geopolitical made that “in Southeast Asia, the Philippines and significance in the region. Thailand remain important allies and markets for At the same time, Canberra should seize the opportunity and offer Americans”. assistance to strengthen the Philippines’ territorial defence As clarified by US Deputy Assistant Secretary Alex capabilities, including in hard-edge areas such as air defence and anti-submarine warfare. It could also explore the possibility of Wong, the US interest in a “free and open Indo- more regular sharing of strategic assessments of Chinese Pacific” means: a) the nations are free from intentions and capabilities, and information about the disposition coercion, b) societies are progressively free in terms of naval and coast guard assets, as well as other fishing vessels. of good governance and fundamental rights c) open Enhancing the strategic relationship in these ways would be sea lines of communication and open airways, d) important steps in pushing back against Beijing’s revisionist claims open logistics particularly in infrastructure, e) open and its attempt to establish effective control over the SCS. v investment, and f) open trade. Published on July 2, 2018 at https://bit.ly/2E7ZnQ5 Based on recent policy statements of the United *Benjamin Schreer is head of the Department of Security Studies States government, there is a shift from President and Criminology at Macquarie University and Ian Hall is a professor Trump’s early protectionist stance to a current in the School of Government and International Relations at Griffith comprehensive global engagement. This is in line University. with the national interest of the United States. For instance, under the National Security Strategy 2017, American Security Funding for Southeast Asia: approved and signed by President Trump in US Motives and Implications for the December 2017: Philippines The United States must tailor our approaches to By Anna Patricia Saberon different regions of the world to protect US national interests. We require integrated regional strategies United States Secretary of State Michael Pompeo that appreciate the nature and magnitude of threats, announced that US$ 300 Million will be allocated for the the intensity of competitions and the promise of Indo-Pacific region, as part of their commitment to available opportunities, all in the context of local advancing regional security. This assistance includes $290.5 political, economic, social and historical realities. million in Foreign Military Financing (FMF) to strengthen Moreover, the US Department of Defense (DoD) maritime security, humanitarian assistance/disaster relief, remains to be in a more aggressive stance as and peacekeeping capabilities, and $8.5 million in indicated in their National Defense Strategy. For the DoD, “the central challenge to U.S. prosperity and

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security is the reemergence of long-term, strategic competition by what the National Security Strategy classifies as revisionist powers.” 3 The said revisionist powers are China and Russia that advocates for a world consistent with their authoritarian model. America’s general defense strategy includes the priority to strengthen alliances and attract new partners. Additionally, the concept of shared responsibility and interoperability are crucial to the DoD’s operations in various parts of the world. The DoD works with the Congress and the State Department to prioritize requests for US military equipment sales, accelerating foreign partner modernization and ability to integrate with US forces. According to DoD, “enduring coalitions and long-term security partnerships, enabled by capable US alliances and partnerships and reinforced by US allies’ own webs of security relationships, will underpin the Department’s efforts to build a more lethal force.” The Defense Security Cooperation Agency (DSCA, under the DoD) is the main US government agency responsible for international defense cooperation programs, such as the Foreign Military Sales (FMS), Excess Defense Articles (EDA) and the FMF. The FMF is made possible through the US Arms Export Control Act (AECA), as amended [22 U.S.C. 2751, et. seq.], which authorizes the US President to finance procurement of defense articles and services for foreign countries and international organizations. FMF is deemed important as it provides opportunities for eligible partner nations to purchase U.S. defense articles, services, and training. The US State Secretary determines recipient countries, while the US Defense Secretary executes the program. FMF is a source of financing and may be provided to a partner nation on either a grant (non-repayable) or direct loan basis. On the other hand, the Bureau of International Narcotics and Law Enforcement (INL) belongs to the US State Department, in charge of monitoring and countering international crime, illegal drugs and instability outside of the US territory. It helps countries deliver justice and fairness by strengthening their police, courts and correction systems. For both FMF and INLE funds, the question of how much is given to which country is a decision that are usually based on roles these countries play in facilitating US interests. Note that FMF is focused on eligible partner nations. Eligibility criteria may include the current political situation of the country, e.g. number of civilians killed through extra judicial killings and human rights violations committed by the state. The South China Sea Maritime Security Initiative (SCS MSI) likewise bears noting in this discussion. Its main purpose is to conduct partner capacity building in the South China Sea (SCS) region. This was an initiative of the Obama Administration in anticipation of the ruling on the case between Philippines and China regarding maritime claims in the SCS. The US government approved funding for SCS MSI under FY 2016 National Defense Authorization Act Section 1263, which expires on 30 September 2020. Five SCS MSI nations were specified by the NDAA for assistance and training: Indonesia, Malaysia, Philippines, Thailand and Vietnam; with a specific provision that allows incremental expenses for personnel from Taiwan, Singapore and Brunei to participate in training. These countries are geographically located in the region and many of them have claims to the South China Sea. In 2015, the PH Government was informed that US will give a big chunk of the SCS MSI to the Philippines. Another approach to understand the motive behind the security assistance funding is by looking at the US military’s current capabilities. The Heritage Foundation claims that the US’ military posture is marginal and weak. Is it indeed a possibility that US military is getting weaker? Will the US government utilize their security partners and allies to help effectively defend US national interest? If the answers to these questions are in the affirmative, then interesting things are in store for us in the Indo-Pacific region. In practical terms, this new security funding from the US presents an opportunity for the region as a whole. The US$ 300 million will of course, be divided among the countries in the region. There is a lot of uncertainty at this point, nevertheless it remains an opportunity that our government officials particularly our diplomats may want to take advantage of. Looking at the possible US motivations and current strategy, I continue to wonder on the following questions: (1) How much will the Philippines actually get? (2) Is the US$300M security funding part of the South China Sea Maritime Initiative in which the Philippines was set to receive a lion’s share? (3) Or is this an entirely new fund that is intended for the implementation of the US Indo-Pacific strategy? With regard to Philippine foreign policy, I ask: Will President Duterte accept this security assistance from the US? The security funding that the Philippines may receive is not limited to the improvement of the military but will most likely include civilian security forces such as the Philippine National Police (PNP) and the PH Coast Guard (PCG). The

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Asia Pacific Pathways to Progress Strategic Insight 2018 PNP and PCG similarly needs improvement in their equipment, facilities and training to counter transnational crimes including drug trafficking. The current realities of PH security forces show that modernization is long overdue as we need to enhance capabilities to keep up with our neighbors and the advancing threats as well. Notwithstanding the mandate of the PH government to address internal problems, the urgent need to boost our security forces compels the Philippines to accept assistance from allies and partners. It may well be in our national interest to accept the security assistance funding being offered by the US government. v Published October 3, 2018 at https://bit.ly/2I9MV6A Anna Patricia L. Saberon is currently a faculty member at the Ateneo De Naga University.

Lessons for Manila from Sri Lanka’s “debt-trap” experience By Darren Lim and Victor Ferguson

In recent months there has been significant debate regarding the merits of Chinese infrastructure financing. Chairman Xi Jinping’s signature Belt and Road Initiative (BRI) promises to reshape Eurasia and cement China’s great power status. But despite an obvious needed for infrastructure investment in the region, the downsides of such rapid and large financial flows are becoming apparent, posing a tricky challenge for debtor governments in balancing the significant opportunities against equally large risks. As part of a broader trend towards warmer ties, Manila has increasingly looked to Beijing to fund the Duterte administration’s signature USD $180 billion ‘Build, Build, Build’ spending program designed to overhaul the nation’s infrastructure. China has proven a willing lender, offering more than $7.3 billion in financing for major projects including the USD $3 billion southern line of the North-South Railway, “Debt-trap diplomacy” USD $374 million Kaliwa Dam Project in Quezon province, and The debate is not unique to the Philippines. Those more USD $53.6 million Chico River Pump Irrigation Project among skeptical of China’s growing power, especially analysts based others. However, this assistance has not come without in the US and India, argue that the pattern of BRI lending—the controversy. offering of large ‘soft’ loans for infrastructure projects in Although better than the rates available from commercial strategically located developing countries, before leveraging banks, commentators have noted that Chinese loans come that debt for concessions when countries are unable to meet with high interest rates (2-3 percent “at best”) relative to the terms of repayment—belies a broader geopolitical loans available from other willing lenders such as Japan (0.25- strategy. Others instead see China pursuing a domestically- 0.75 percent). Others have raised concerns about a lack of focused agenda that is more chaotic than coordinated. While competitive tendering. These worries have been amplified BRI beneficiary states do tend to adopt policy positions more after Filipinos witnessed the fate of other nations that had friendly to China, such as supporting Beijing in multilateral received Chinese infrastructure financing—unable to repay forums (e.g. Cambodia’s blocking of anti-China resolutions in loans on rushed projects that have not proven commercially ASEAN), and ceding control over strategic infrastructure (as viable, various governments have come under pressure to seen in Pakistan, where a Chinese firm recently secured a make concessions to Beijing such as exchanging their debt for contract to manage the Gwadar Port for 40 years), it is difficult Chinese equity in natural resources or strategic assets. to attribute these actions to BRI-related leverage as opposed These developments have generated anxiety on both sides of to independent decisions regarding the general national Filipino politics. Describing China as a “merciless loan shark”, interest. Further insight will likely come in the future from opposition lawmaker Rep. Gary Alejano has frequently warned governments as dispersed as Myanmar, Tonga and Djibouti. against the risks of uncontrolled borrowing from Beijing, and The Sri Lankan experience Vice President Leni Robredo has explicitly stated that the What lessons can the Philippines learn from other countries’ government fears it “might get stuck in a debt trap”. In a worst experiences? Under what conditions will a government be case future scenario where Manila is unable to repay Chinese more or less vulnerable to Chinese “debt traps”? To answer loans, Filipinos worry they may have to forego disputed these questions, we consider the case of Sri Lanka as an territory in the West Philippine Sea in exchange for debt relief illustrative example of the process whereby Chinese debt can from Beijing. translate into strategic concessions.

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Asia Pacific Pathways to Progress Strategic Insight 2018 The basic lesson from Sri Lanka is simple. Needing to kick-start investments influences politics and elections. Filipino debt- its economy following a long civil war, the then government of levels are currently sufficiently low to provide future President Mahinda Rajapaksa eagerly accepted Chinese governments much more scope to extract themselves from financing for a number of infrastructure projects. Between potentially bad Chinese debt than the Sri Lankans had in 2015. 2005-2017, Chinese investment in the country totaled close to The newly elected Malaysian government’s moves to suspend USD $15 billion. The central problem was that a number of the three China-backed projects and renegotiate a fourth due to projects—most famously a port and airport in Rajapaksa’s concerns about debtsustainability are instructive. home district of Hambantota—failed to generate sufficient These factors will prove important moving forward. The revenues to cover debt repayments. The long-term nature of Philippines’ infrastructure requirements are significant, with infrastructure projects makes them especially tricky the Asian Development Bank recently estimating Manila will investments to price and plan, and the subsequent lack of need to spend over USD $127 billion over the next decade. commercial viability raised many questions regarding a lack of China could prove a valuable partner in covering these costs— transparency in the decision-making process and the the challenge for policymakers will be ensuring that loans

possibility that decisions to “build bridges where there were target viable projects and debt remains sustainable. v

not rivers” were made instead for personal or political Published July 10, 2018 at https://bit.ly/2RWXycF reasons. Rajapaksa lost a surprise election in early 2015, in part Darren Lim is a Lecturer and Victor A. Ferguson is a PhD because of corruption allegations. The new government candidate in the Australian National University’s School of commenced promising to reverse and renegotiate some of its Politics and International Relations. predecessor’s worst decisions but, facing a deteriorating macroeconomic situation and dearth of alternative financing sources, ultimately had little choice but to cede control of a Will soft-power save the rules-based order? strategic asset—the Hambantota Port—in return By Mark Manantan for debt relief. While the government insists that the port will never be used for military purposes, others around the Since the aftermath of World War II, international politics has region are not so sure. Meanwhile, India remains actively been governed by this so-called rules-based order. engaged in its traditional sphere of influence to counter rising It is a set of rules, norms and institutions which has guided Chinese influence, which does suggest some scope exists for how states behave and interact with one another. Founded by smaller states to play the two sides off against each other. western powers led by the United States, the rules-based Looking forward order enshrined in the United Nations Charter affirmed the Turning to the Philippines, there are, perhaps, grounds to be sovereignty of states, encouraged cooperation, and advocated optimistic. First, in contrast to Sri Lanka under Rajapaksa, for peaceful resolution of conflict. there is reason to believe that government officials are paying But as the international system undergoes transformation close attention to the risks that could come with Chinese facilitated by rapid globalization and the emergence of new loans. Most recently, Socioeconomic Planning Secretary major powers, the continuing relevance and legitimacy of the Ernesto Pernia declared that the government is being “extra rules-based order is intensely debated. Its erosion has become careful” to ensure that Chinese loans do not more imminent with the relative decline of US influence and become debt traps. This scrutiny appears to be flowing into the rise of China. Filipino laws, such as the inclusion of a provision enabling China’s peaceful rise is no longer warranted given its defiance Congress to demand documents and information on foreign of international law as evidenced by its expansive loans being negotiated by the executive in the federal militarization in the South China Sea. Such deliberate effort of constitution currently being drafted by the Consultative transgressing the International convention on the law of the Committee. sea, indicates its long-term ambition to advance its own Second, recent reports indicate that Manila is seeking to version of world order: a new set of arrangements fueled by secure loan assistance for infrastructure projects through China’s historic claim of its destiny as a global power. the Asian Infrastructure Investment Bank (AIIB) rather than The erosion of the rule of law, is further exacerbated by directly from China. Regardless of the fact that the AIIB is led potential signs of abandonment and isolation from its key by China, because its loans will rely on international capital purveyor—the US. markets rather than Beijing’s pockets they are likely to feature It can be argued that mitigating the relative decline of the US- much higher standardsof transparency and accountability. led rules-based order will require more than just strategic Pursuing future projects in this way is a wise strategy because might premised on hard power but on the legitimacy of ideas higher levels of transparency will increase the likelihood that and values that creates the overall narrative. This is a projects are commercially viable and thus capable of complicated task that could be addressed ultimately through generating the revenue necessary to fund loans. the instruments of soft power. Third, democratic checks and balances may also mitigate risks, Soft power especially if popular discontent with the impact of Chinese Soft power is the ability to influence others through

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persuasion and attraction of ideas which leads to Trump’s America First policy, intelligence and military power— acquiescence. It aims to co-opt behavior and shape the not diplomacy—are the primary tools in pursuing US foreign preferences of others to achieve desired outcomes. policy. Applied in this context, the endurance of the rules-based On the other hand, China is reportedly spending order will depend upon the belief and confidence by the approximately $10 billion per year for its public diplomacy leaders and citizens particularly in the Indo Pacific region. programs alone, through the Confucius institutes, educational More than just an abstraction or a rhetorical devise, the rules- exchanges and even international media. Although, it is hard based order must create a powerful story that reflects the to verify Chinese spending on its soft power engagement, it is growing needs and desires in the region. crucial to recognize China’s aspiration for soft power to Simply put, let the rules, standards and norms underpinned by complement its economic and military strength. the rules-based order highlight the shared values and common It would be an overstatement to expect soft power as the only interests to bring peace and prosperity in the Indo Pacific. It tool that could save the rules-based order from eroding. But it becomes imperative that the purveyors of the rules-based is a crucial element in the entire equation along with hard order must reiterate why it remains relevant to be the power. governing standards in regional and international politics. The US and its allies must accommodate the rise of China and In addressing Chinese aggression in the South China sea, the understand that the post-World War II rules-based order must US along with its allies, sail and fly to assert freedom of also be refashioned to adapt to the needs of the changing navigation and overflight. In soft power currency, this tactic times. Perhaps, through an approach that emphasizes the role yields short-term gains and limited returns. To a certain of soft power in managing China’s rise, China can learn how to extent, it even carriers the risk of an outright conflict if understand the limits and boundaries of its new-found status. miscalculations occur. Through continuous dialogue, China can be led into Soft power seeks the long-term view—the weaving of a harmonizing its interests with the international system. A powerful narrative that avoids the use of force and coercion, harmonious co-existence between two superpowers will be but instead, utilizes inducement. Its approach is not only the most ideal scenario and for us to get there, both China and focused on might versus might of geopolitics but capitalizes on US must first take their seats at the table.v international attractiveness or appeal of ideals and values. Published August 31, 2018 at https://bit.ly/2TQwmhq Countries who wields soft power can influence others to *Mark Manantan is a research affiliate of Asia Pacific emulate or believe in it. And in the long run, those who Pathways to Progress consent to it will protect and contribute to the maintenance and exercise of such norms and ideas. The 2017 Australian Foreign Policy But soft power goes beyond affinity to cultural and economic influence engendered by pop culture references such as White Paper: A Critique McDonalds, Apple, Hollywood, NBA or New York. Soft power is By Charmaine Misalucha-Willoughby rooted in public diplomacy cultivated through decades of constant interaction and cooperation between countries and In 2017, Australia released its Foreign Policy White Paper, its people. Its common forms include joint-development which offers a comprehensive framework to uphold Australia’s projects, educational exchanges, and leaders and government security and prosperity. It reiterates the country’s officials participating in annual summits and forums. commitment to continue engaging its partners and as such, is US and China: Soft power game hinged on an outward-looking perspective and a preference The area of soft power is an arena where the US has proven for a rules-based region. This overarching thrust is concretized track record since the end of World War II in the Indo Pacific in five objectives: to promote an open, inclusive, and region. Through its development aid programs, it has prosperous Indo-Pacific, to create business opportunities and supported civil society movements, including a strong, open stand against protectionism, to ensure the safety of and free press which advocate for democratic values and the Australians, to promote and protect international rules, and to rule of law. step up support for the Pacific countries. US Foreign aid programs have huge impact in poverty Experts are quick to identify the implications of the White reduction, humanitarian interventions as well as fostering Paper on bilateral and regional relations. A task like this people to people linkages through cultural exchanges and usually calls for a temporal scope that begins with the now educational scholarships and trainings. and towards the future, and whose spatial horizon is centered But in recent years, the US government’s investment on its on Australia and outwards. I will upend this logic. Instead of soft power initiatives has undergone a downward trend. looking forward, I will look back in order to uncover what For its 2019 budget proposal, the Trump administration only needed to be in place for Australia to construct such a vision allocated a combined $39.3 billion for the state department of the present and, consequently, of the future. Similarly, and the United States Agency for International Development. instead of looking outwards, I will highlight how Australia’s This figure is a sharp contrast to military and defense spending view of the region is in itself a reflection of its own which received a dramatic boost of $686.1 billion. Thus, in understanding of its place in international relations. Temporally and spatially, therefore, the White Paper 10 2

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About APPFI Asia Pacific Pathways to Progress Foundation, Inc. is an independent think tank that aims to promote peace, development and cultural understanding for peoples of the Philippines and the Asia Pacific, embodies certain presuppositions that needed to exist and to be present in order for through research, international dialogue and cooperation. Australia’s comprehensive framework to make sense and ultimately, to guide the

country’s actions. So in view of this, I argue that the implications of Australia’s 2017 PROGRAMS Foreign Policy White Paper can only be determined if we are able to tease out the CHINA PROGRAM – The China foundations on which it stands. In this regard, I offer three underlying conditions that Program stands on two pillars: (1) form the backdrop of the White Paper and that color Australia’s onward and outward promoting better understanding path. among Philippine stakeholders of the First, Australia’s White Paper is premised on the continuing presence of a neoliberal implications of China’s emerging role order, which is known widely as giving preference to markets over government, in East Asia and the world, and (2) incentives, and private entrepreneurship. Of course, if the science is separated from strengthening academic and civil the ideology, there is nothing wrong with market efficiency, the invisible hand, and society linkages and Track Two comparative advantage, but neoliberalism’s unwavering faith in the logic of diplomacy efforts between these two competition and the tandem developments of financialization and globalization neighboring countries produced a host of negative trends, including growing economic insecurity and REGIONAL SECURITY ARCHITECTURE inequality, the loss of political values, and the resurgence of nationalist and populist – The program conducts studies and backlash. Indeed, the White Paper acknowledges, albeit implicitly, that many of the convenes dialogues among experts problems that pervade everyday life these days – from the financial crisis of 2008, the and stakeholders to arrive at a better increasing reliance on offshore wealth, the collapse of public health and education and understanding of the evolving the attendant rise of child poverty, the destruction of ecosystems, even the epidemic security environment, the role of of loneliness – all have in common the major role played by neoliberalism. Two of multilateral and other forms of Australia’s objectives in the White Paper are clearly dependent on the continuing security associations, and institutional functioning of the neoliberal order. The creation of opportunities for smoother and developments affecting Philippine easier business transactions can indeed lessen the chances of protectionist policies, and regional security. but neither can neoliberal policies nor a unilateral decision to keep markets open REGIONAL INTEGRATION AND guarantee the effective and long-lasting elimination of barriers to trade. If that were CONNECTIVITY - promotes a critical so, then the United States’ abandonment of the TPP and later its proposed tariffs on understanding of the political steel and aluminum imports would have been an unthinkable response to, say, economy of regional development, Canada’s dairy tariffs. Neither would trade wars be more than mere figments of our and of economic trends and issues imaginations. In fact, one can even make the argument that it is precisely because of that affect Philippine national and our – and not just Australia’s – undying confidence in deregulation, liberalization, and regional interests. privatization that has led to divisions, stalemates, and positions that are best captured MARITIME DEVELOPMENT AND by photographers of the latest G7 summit: with Merkel and the rest of the “crew” SECURITY – explores how the standing over a seemingly obstinate Trump. Philippines can enhance the The achievement of another objective in the White Paper likewise remains conditional advantages and minimize threats and on the continuing operation of the neoliberal order. Stepping up support for the small risks arising from its maritime island nations in the Pacific is altruistic, to say the least. Australia, after all, is in a environment, looking toward both position to extend help. It is also practical to do so because the more stable they are, the internal and external dimensions. the more secure Australia is. No matter the motive, however, the notion of help or aid

is fraught with power relations that are formed in and institutionalized by the

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Asia Pacific Pathways to Progress Strategic Insight 2018 neoliberal order. To explain this point, let me go back to neoliberalism’s defining characteristic: competition. In this worldview, people are seen as rational consumers who exercise their democratic choices not necessarily by voting, but by going shopping. The market, where people can engage in buying and selling, rewards merit and punishes inefficiency. Inequality, therefore, is inherent and is a function of the system. Not only is it institutionalized, but it is also the alter ego of competition. Hence, while boosting support to the Pacific countries and to Timor-Leste is humanitarian, and by no means am I saying that we should stop extending a helping hand altogether, it is important to note the nuances of our actions and the ingrained power relations that we may unknowingly be perpetuating. If anything, we should be asking what we are doing to close the inequality gap. Apart from a continuing reliance on a neoliberal framework, the second foundation on which the White Paper stands is the existence of a rules-based international order. The belief in the deterrent effect of a rules-based international order stems largely from the neoliberal idea of reducing the domain of the state. Transposing this logic to the international level of analysis, we come to the conclusion that since there is no overarching authority above states, then faith must be placed on a series of regularized interactions that can regulate behavior. Two of the White Paper’s objectives – ensuring the safety of Australians and promoting and protecting international rules that support stability and prosperity – are contingent on the existence of a rules- based international order. Again, I am not saying here that we should all go rogue and do away with rules. What I am saying is that we should interrogate what we mean by a rules-based international order. Whose rules matter? Who rules over these rules? Who is the keeper of these rules? The third foundation on which the White Paper is hinged on is its objective of promoting an open, inclusive, and prosperous Indo-Pacific. Incidentally, the term Indo-Pacific these days is understood as part of the newly improved US strategy involving the Quad, a loose security dialogue between and amongst the United States, Australia, Japan, and India. Hence, Australia’s promotion of the Indo-Pacific is aligned with or subsumed under the aegis of the United States’ Asia strategy. This is not an Australian strategy, therefore. It is an American strategy that Australia is riding with and as such, logic dictates that the success of the US’ Asia strategy also spells the success of Australia’s promotion of an open, inclusive, and prosperous Indo-Pacific. To add to this complexity, the White Paper is explicit in arguing that the stability in the Indo-Pacific depends as much on US-China relations. There is truth to this, that is undeniable, but it does make for a rather disempowering strategy because it relies heavily on variables that Australia has no control over. In sum, the comprehensive framework set out in the 2017 Australian Foreign Policy White Paper is contingent on the continuing functioning of three things: (1) a neoliberal system that props up (2) a rules-based international order and with the (3) United States at the center. Australia’s optimism is warranted, given that these are the constant variables for the past couple of decades. At the same time, however, this same optimism is suspect because the conservatism that is deep-rooted in the 2017 White Paper hopes that things will not change despite evidence to the contrary. This pro-status quo strategy will make it challenging for Australia to deal with countries that have expressed an unwillingness to subscribe to a US-led neoliberal and rules-based international order. Likewise, it will be tough to convince regional groupings of Australia’s role, given that Australia remains unclear about its own role in these arrangements. This calls for something major. The solutions that we have depended on and that have worked in the past no longer serve their purpose today, so we need not a reboot of the system, but an upgrade. An introspective examination of Australia’s identities, interests, and roles can play a critical role in improving relations with others and with the rest of the world. v Published June 26, 2018 at https://bit.ly/2EbH5h1 *Dr. Charmaine G. Misalucha is currently an Assistant Professor in the International Studies Department of De La Salle University and a research fellow at Pathways to Progress.

STRATEGIC INSIGHT 2018 CONTACT US Asia Pacific Pathways to Progress Strategic Insight is a collection of original commentaries by APPFI’s in- Unit 17-E One Burgundy Plaza 307 Katipunan house analysts covering 2018 Avenue Barangay Loyola Heights, Quezon City developments in Philippine foreign MOBILE: (+63) 920 977-4558, relations. The essays, and many (+63) 977 649-9856 more, have been published and may LANDLINE: (+632) 251 67 93 be accessed on our website: E-MAIL: [email protected] http://appfi.ph/resources/newsletter WEBSITE: www.appfi.ph