The Danger of China-Philippines South China Sea Joint Development

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The Danger of China-Philippines South China Sea Joint Development

Immediate opportunities mask serious risks related to the past, current context, and the near future.

The Danger of China-Philippines South China Sea Joint Development
Credit: Presidential Communications Office

While the attention in the Philippines was centered on President Rodrigo Duterte’s second State of the Nation Address (SONA) on July 24, the headline item ended up being his suggestion at a press conference following his remarks that Sino-Philippine joint exploration in the South China Sea could be underway soon. Despite Duterte’s optimism about immediate opportunities, which was echoed by visiting Chinese Foreign Minister Wang Yi during his trip to Manila this week, this masks serious risks related to the past, current context, and the near future.

As I have noted before, the idea of jointly exploring and exploiting resources is not new to the Sino-Philippine relationship (See: “The Danger of Duterte’s South China Sea Approach”). Indeed, Chinese interlocutors are fond of reminding observers that former Chinese leader Deng Xiaoping had wisely proposed this formulation to the Philippine government as early as the 1980s, including during a meeting with then-Philippine President Corazon Aquino back in 1988.

There is also no surprise as to why the idea of China-Philippines joint development continues to be periodically resurrected despite the challenges it has confronted, including under the current Duterte government. Simply put, it does offer immediate opportunities that can be seized for both sides.

For the Philippines, it would finally give it a way to secure its energy needs. These needs are especially dire as the Malampaya gas field – which supplies nearly a third of the electricity demand of Luzon, the country’s largest island – will run out in a decade or so, and Manila has been unable to pursue new sources such as in Reed Bank (Recto Bank) unilaterally due to Chinese opposition. Though Duterte has a rather shaky relationship with the truth, his suggestion that Chinese President Xi Jinping had threatened war if the Philippines exploited resources unilaterally tracks with official Chinese rhetoric, which Wang Yi repeated this week.

More broadly, as part of the warming of Sino-Philippine ties underway since Duterte came to office, the Duterte government hopes it could also lead to more Chinese investments into the Philippines to boost the economy, whether these be in a bilateral form or as part of wider initiatives like the much-ballyhooed Belt and Road Initiative (See: “The Real Trouble With China’s Belt and Road”).

For China, in addition to capitalizing on the dramatic turnaround in its ties with a U.S. treaty ally, it also offers a way for Beijing to maintain its uncompromising stance that it still has sovereignty over most of the South China Sea at other claimants’ expense while also securing a partner as well as a market for resource exploitation.

More generally, in China’s eyes, it would also add some credence to the idea – or, as I’ve termed it, the illusion – that there is indeed a cooling down period at play in the South China Sea, which allows Beijing greater room to restrict what other claimants, non-claimants, and other extraregional actors do to counteract its own moves in the South China Sea, which have quietly continued (See: “Beware the Illusion of South China Sea Calm”).

But the trouble with China-Philippines joint development in the South China Sea is not that these immediate opportunities do not exist for these respective parties. Rather, it is that these immediate opportunities mask, and are outweighed by, the massive risks related to the past, current context, and near future, and the Duterte government has not done near enough to prove otherwise.

China-Philippines joint development in the South China Sea has been tried before, and the results were quite disastrous. Under former Philippine President Gloria Macapagal-Arroyo, the Philippine National Oil Company (PNOC) and the China National Offshore Oil Cooperation (CNOOC) inked the controversial Joint Maritime Seismic Undertaking agreement (JMSU) in 2005, only to see it quickly unravel by 2008. The deal, which was seen as inimical to Manila’s interests, was cut in exchange for Chinese-backed infrastructure projects that ended up being embroiled in one of the largest corruption scandals in Philippine history.

Following the deal’s demise, the Philippines found it difficult to get other foreign companies to help it explore and exploit these resources, in part due to Chinese intimidation, which included not just diplomatic pressure but even interdicting survey vessels. Joint development quickly gave way to unilateral assertiveness. In last year’s historic arbitral tribunal ruling on the Philippines South China Sea case against China, China was found to have violated Philippine sovereignty by interfering with resource exploitation at Reed Bank, which lies within Manila’s 200-mile exclusive economic zone (EEZ) but is nonetheless claimed by Beijing.

Duterte is not Arroyo. But the bitter aftertaste from that period remains, as do the structural constraints. Under the Philippine constitution, any formal agreement or even striking resource-sharing or joint-exploration deals in areas within the Philippines’ exclusive economic zone, such as the resource-rich Reed Bank which would be a candidate for joint development, would run contrary to the Philippine law. State-to-state joint development with China (as opposed to the kind done with foreign companies) would not work since that would involve sovereignty issues, and the Constitution also requires that the Philippines retain 60 percent of the stake. Given these conditions, getting any joint development done would require some delicate needle-threading.

Apart from this poor historical record, the current context is also far from favorable. By being so bullish about Sino-Philippine ties so early on with little to show for it so far, the Duterte government has only made itself more vulnerable to the charge that it is not getting the best deal that Manila could get from Beijing. Though officials continue to cite some temporary gains, such as access for fishermen to Scarborough Shoal and a Chinese pledge not to reclaim there, the reality is that these are pretty minor compared to the big compromises the Philippines has made, including setting aside a ruling that was in its favor and presiding over an embarrassingly weak joint statement as ASEAN chair back in April (See: “The Truth About Duterte’s ASEAN South China Sea Blow”).

Given these conditions, if Duterte does move forward with joint development later on in his single, six-year term, the risk is that the level of domestic criticism for compromising the country’s sovereignty will only grow, and it could be a weak point that his opponents will look to then exploit. While his popularity remains high for now, as I have pointed out before, it is typical for Philippine presidents to see a slow downward slide in these metrics over time (See: “The Truth About Duterte’s ‘Popularity’ in the Philippines”). And though the South China Sea issue itself is unlikely to be the Duterte administration’s death knell, it can form part of a broader narrative used to damage its credibility, be it corruption or not being strong enough on preserving national sovereignty.

The risks also extend to the near future. In particular, beyond Duterte’s own domestic position, it is important to keep in mind that even if some sort of agreement goes through initially, there is no guarantee that it will last. As I have detailed repeatedly, the pattern of Chinese behavior over the past few years in the South China Sea suggests that Beijing tends to calibrate its maritime assertiveness with alternating periods of charm and coercion, taking into account varying factors ranging from its own domestic politics (and rarely those of other ASEAN claimants) to the degree of regional pushback (See: “Beware the Illusion of ASEA-China South China Sea Breakthroughs”).

Given this proven track record, even if China is willing to do things like push forward on what is at best a skeletal code of conduct and be more receptive to joint development during a period of charm, there is a risk that it could quickly switch back to a more coercive mode, whether it be following the 19th Party Congress later this year or, as Beijing has at times done, in response to alleged ‘provocations’ by other actors. It is worth recalling that till this day, China officially still maintains that previous joint development failed to occur because of lack of willingness to cooperate from Manila, while being silent on the coercive and unlawful actions it took thereafter.

If domestic politics in the Philippines leads to some lagging on the deal, and China decides to press the issue, it can bring to bear its military might on Manila, either directly in the area where joint development is occurring or indirectly with other assertive actions, like reclaiming Scarborough Shoal or declaring an air defense identification zone (ADIZ) in the South China Sea.

And should those tools prove too blunt to be used at all or exclusively, given the Duterte administration’s growing reliance on better economic ties with China, Beijing could also use economic coercion as well. Here too, Beijing’s track record is pretty clear when it comes to using coercion in disputes, whether it be the rare earth export ban to Japan in 2010, restrictions placed on Philippine bananas in 2012, or even the economic reprisals against South Korea for the recent deployment of the Terminal High Altitude Area Defense (THAAD) system.

To be sure, it is still early days. So far, despite sporadic references to the idea, the specifics of Sino-Philippine joint development are still rather unclear. Although Duterte’s suggestion earlier this week that the Philippines already has a partner for joint exploration, and that, when China starts “excavating the gas and all…it’s going to be just like a joint venture” is good headline material, it leaves out the details that will eventually matter such as the where and when of it all. Similarly, Philippine Foreign Secretary Alan Peter Cayetano’s less hyperbolic remark that the two sides were “talking about principles” or framework of a potential agreement raises more questions than it offers answers.

In his remarks during a brief press conference for Wang Yi’s recent visit to Manila, Cayetano said that he hoped that this generation of leaders on both sides would have the wisdom to find a way for the natural resources will benefit their peoples. Given the gamble both sides appear to be taking on joint development, one hopes that this wisdom will not be limited to just seeing immediate opportunities, but keeping in mind the risks inherent in them in the past, current context, and foreseeable future.