IN a recent interview with Bloomberg, the owner of the Philippines’ biggest shopping malls and largest lenders tells reporters that the escalating tensions in the South China Sea (SCS) between the Philippines and China could harm businesses in the Philippines.
Teresita Sy-Coson, the vice chairman of SM Investments Corp., is urging the government not to be hostile toward its neighbor and to steer clear of US-China competition.
Sy-Coson said: “China is very close to us; we can’t be too hostile. Although we know what is happening, I think we need to achieve it through more peaceful negotiations.” She added, “I think we have to look at our own position. We don’t want to get involved in the tensions between the US and China. We need to have peaceful discussions with them (referring to China) because, after all, we cannot change our neighbors. We just hope there won’t be any skirmishes in that area because whatever happens [there] will affect all of us.”
According to the Bloomberg article, this is thus far the first such remarks by an influential Chinese-Filipino tycoon, indicative that the intensifying and mounting tensions between the Philippines and China over the SCS dispute are causing uneasiness and anxiety in the corporate world.
Note that Sy-Coson is the owner of BDO Unibank Inc., the country’s largest lender. SM Prime Holdings Inc. is also owned by the Sy family, and it has shopping centers in China. Teresita’s brother, Henry Sy Jr., owns a stake in the company that operates the Philippines’ power transmission network, which is 40 percent owned by State Grid Corp. of China.
To the contrary, some so-called experts and academics are urging the government to consider stopping and annulling existing Chinese business operations in the country if China’s allegedly illegal and aggressive actions in the disputed SCS, or the West Philippine Sea, as it is known in the Philippines, continue.
Such a suggestion is akin to telling the Philippines to commit economic suicide. With such a suggestion coming from some academics and so-called experts, it begs to ask: Can the Philippines afford to cut and stop existing Chinese business operations in the Philippines? What are the repercussions of such a move? Are these so-called experts and academics aware that any decision to cut or stop Chinese business operations in the country would come with significant repercussions?
Hindsight and perspective
The trade relationship between China and the Philippines is important and crucial, with China as one of the country’s largest trading partners and a significant source of imports and market for exports. Note that China has been the Philippines’ top trading partner for seven consecutive years, with bilateral trade reaching $87.73 billion in 2022. In the first seven months of 2023, China jumped to become the largest export market for the Philippines. Thus, China remains the country’s vital economic and trade partner, and is still one of its top sources of investment. In terms of government-to-government cooperation projects, they have yielded fruitful outcomes, with nearly 40 projects carried out in recent years, 18 of which have been completed.
Apart from cash, rice, fertilizers and Covid-19 vaccine donations, an important highlight is infrastructure cooperation such as the construction of China-aid Estrella-Pantaleon Bridge, the Binondo-Intramuros Bridge, the Bucana Bridge project in Davao City, the Dangerous Drug Abuse Treatment and Rehabilitation Centers, the Chico River Pump Irrigation project, the three priority bridges project (North and South Harbor Bridge, Palanca-Villegas Bridge and the Eastbank-Westbank Bridge) and the Samal Island-Davao City Connector Project, among others.
As to technical cooperation, since 2003, the Philippine-Sino Center for Agricultural Technology-Technical Cooperation Program is a good example of the bilateral agricultural cooperation between the two countries.
Any decision to cut and stop Chinese business operations and ties in the country could disrupt this which would adversely affect the Philippine economy. Cutting business, trade and economic ties with China would not be beneficial for the Philippines for several reasons:
– Chinese investments provide necessary financial support for large-scale domestic infrastructure projects.
– China is the Philippines’ largest trading partner, the largest source of imports and a major export market. The bilateral trade between the two countries, with substantial imports and exports, contributes significantly to the Philippine economy. Cutting trade and economic ties could lead to potential economic instability for the Philippines.
– Chinese foreign direct investment (FDI) plays a critical role in various sectors of the Philippine economy, including infrastructure, trade and investment. A sudden severance of economic ties could lead to a sharp decline in FDI, affecting these sectors and possibly leading to job losses and economic downturns.
– Abruptly ending economic ties with China could strain diplomatic relations.
The geopolitical dynamics in Southeast Asia mean that maintaining a balanced relationship with China is of strategic interest to the Philippines. Diplomatic and economic engagements are part of this balance, and disrupting them could have wider geopolitical repercussions.
Within the Philippines, there’s a potential for domestic repercussions, including the displacement of workers, especially in sectors heavily reliant on Chinese investments.
The complexities of international trade and diplomacy suggest that any move to cut and stop existing Chinese business operations in the country would have to be carefully considered to avoid adverse effects on the Philippine economy and its global standing.
On the side of the Philippines, any decision to cut or stop existing Chinese business operations would need to weigh the potential economic impact against the geopolitical and national security concerns. The balance of national interests, economic gains and sovereign integrity should be the utmost consideration and should be at the center of the debate in this regard.
For developing countries like the Philippines, continuing to do business and forging strong economic cooperation and ties with China, which is the world’s economic powerhouse, is crucial for several reasons, and that includes:
- Access to capital: Through programs like the Belt and Road Initiative, China provides a source of investment capital for both soft and infrastructure projects, green technology, digital infrastructure, technology, and many more.
- Trade opportunities: China is a vast market with a burgeoning middle class. For developing countries like the Philippines, access to this market can lead to increased exports, which is vital for economic growth. China’s demand for commodities, electronics and other goods can drive growth in these sectors in the Philippines.
- Job creation: Chinese investments typically come with job opportunities for local populations. These jobs are not only in the construction phase of projects but also in the operational phase, which can help reduce unemployment and improve living standards.
- Economic stability and growth: Strong trade and economic relations with China can contribute to economic stability and growth. As the Philippine economy grows, its increased trade with China can support various sectors, such as manufacturing and services, thereby diversifying economic activities and reducing vulnerability to external shocks.
- Technology transfer: Engaging with a highly technologically advanced country like China can lead to technology transfer, which is critical for the modernization of industries in the Philippines. It can help improve productivity and competitiveness on a global scale.
- Infrastructure development: The Philippines, like many developing countries, lacks the infrastructure needed to support sustained economic growth. China’s investments in infrastructure can help bridge this gap, improving not only transportation and logistics but also access to digital and green energy technology, and infrastructure.
- Geopolitical considerations: For geopolitical stability and to have a balanced foreign policy, it is important for countries like the Philippines to maintain amicable relations with major world powers, including China. This can also give them more leverage in negotiations and international forums.
The economic relationship with China can offer a mix of economic opportunities and benefits for the Philippines. The benefits of engaging with the world’s second-largest economy which, who knows, in a matter of time could be the largest economy in the world, can be substantial for the Philippines’ economic development, growth and long-term strategic interests.
Source: The Manila Times