18/06/2013: Worldfolio: Philippines look to UN for settling Scarborough Shoal disagreement
Over the years, territorial disputes have long divided countries that lie in the South China Sea, posing as unmovable obstacles towards the greater development of regional relations. With the Philippines having recently taken China to an unprecedented UN Arbitral Tribunal, the Ambassador of the Philippines to the US, H.E Jose L. Cuisia Jr., tells United World that the legal proceedings can finally help facilitate a peaceful resolution to the matter, emphasizing Washington´s support for the tribunal, as well as the important impact of the US naval pivot to Asia.
Much of the trade between Europe and the Middle East and East Asia passes from the Indian Ocean through the Malaka Strait, then up to the West Philippines Sea to China and South Korea, and Japan. There are also thought to be vast oil and gas reserves in the disputed territories. An expert on international marine environmental law gave a lecture recently arguing that the maritime boundary problem has been addressed in a vacuum, as if it exists solely and separately, without regard to its potential impact on other national interests and relations with other nations. How important is the West Philippines Sea in your opinion in terms of Philippines international affairs and the country’s relations with other ASEAN countries?
Firstly, let me start by saying that the West Philippines Sea is not the South China Sea. The West Philippines Sea is just part of the entire South China Sea. What we refer to as the West Philippines Sea is part of our exclusive economic zone. As you said earlier, the West Philippines Sea is a very crucial sea lane that international trade passes through. I guess the second reason is that in our economic territory and our exclusive economic zone, which is part of the Philippines territory, there are of course what we believe to be substantial oil and natural gas deposits, which we hope to be able to develop for our economic interests.
There are companies that are interested in exploiting these rich resources, and we of course would like to be able to develop this as early as possible. But to some extent, that development has been hampered because of these disputes that are on-going right now.
What is the actual status of the dispute, and how is the Philippines proposing to resolve it?
We tried to resolve this dispute diplomatically. We have had various conversations with the Chinese authorities as well as other countries that have overlapping claims on our own territory. We have time and time again stressed that we want to settle these disputes peacefully, and we want a just and enduring solution to this dispute. We have tried to do this diplomatically over the years and we have also tried to use ASEAN as a forum to try to resolve this dispute. But we have not gotten very far. This is why we had to resort to the legal track. We have decided to bring a claim against China to the Arbitral Tribunal under the UN Convention on the Law of the Sea. Unfortunately, China refused to participate, and then has advised the Arbitral Tribunal that they are not willing to participate in this arbitration.
We have of course made it clear to China as well as the US and other countries that this arbitration is a peaceful means of settling the dispute. We also believe this tribunal should be able to settle issues that will clarify not just our own maritime entitlements, but also the maritime entitlements of other countries, using the UN Law of the Sea as the basis.
We have said time and time again that we believe this dispute should be settled in accordance with the rule of law, and that we should use international law, specifically the UN Conventions on the Law of the Sea as the basis for settling this dispute.
What is the US’ stance towards this?
Secretary Kerry has voiced the US’ support for the arbitration proceedings. They again believe that this is a peaceful way of resolving this long-standing dispute. Other countries have also expressed their support for the Philippines going to the UN to get this dispute resolved. The US is not taking any position with regard to the claims of any of the claimant countries, but they are suggesting that this dispute be settled peacefully. They believe that arbitration is one way of doing this.
What is your general message from the Embassy to the US public?
It is to the interest of the US that this issue be settled peacefully. The US has expressed its support for the principles of freedom of navigation and unimpeded lawful commerce in the South China Sea. However, recent pronouncements by China about boarding any vessels that “illegally” pass through the South China Sea would of course be in contravention of the Freedom of Navigation principle. We are calling the attention of the US to the pronouncements of China. They recently sent a number of ships around the South China Sea, as if to delineate the territory, which of course is a violation of the Freedom of Navigation.
AT the forum that was held at the Stimson Center last Monday, Professor John Moore from the University of Virginia, an expert on the Law of the Sea in fact said that China’s nine dash line as the basis for their claiming territories that they believe are part of China has zero basis under international law. He said that the nine dash claim is preposterous, and it is to China’s interest that they stop using the nine dash claim as a basis for their claims.
The Arbitral Tribunal has been completed, and the five judges have already been appointed by the President of the International Tribunal of the Law of the Sea, and we hope that they will start their deliberations on our claim. We believe that it will be to the benefit of not just the Philippines and China, but also to the rest of the international community if this claim is resolved in accordance with the rule of law, and using international law or UNCLOS as a basis for resolving the dispute.
Even though it is affecting the economy in the Philippines a little, it is not that apparent.
In fact, economic relations with China are continuing, and we are of course very happy about that. China continues to be our fourth largest trading partner, and we have stated many times that we want to have good economic relations with them. ASEAN is also China’s substantial trading partner, and we are part of that. We want to retain good relations between ASEAN and China. ASEAN is pushing for a code of conduct, which we are also very supportive of. But we have said that while we support the code of conduct, our claim must continue in the Tribunal. We believe that both can go on simultaneously.
On the other hand, the Filipino economy is one of the few countries that avoided recession in 2009 and went on to stage a strong recovery in 2010, with its economy growing by 7.3%. The new Aquino administration had a clear fiscal strategy for the medium-term, and the Government’s commitment to enforcing tax collection is already paying dividends.
I do not know where you got this 7.3% from, because that is not an accurate figure. We can have that verified. But for 2012, it was 6.6%, which was the highest in Southeast Asia, second only to China in the whole of Asia.
(At the time of interview, Q1 figures were not yet available. The Philippines registered 7.8% GDP growth, the highest in Asia in the first quarter of 2013 as reported on 30 May 2013 by the National Statistical Coordinating Board.)
President Aquino’s strategy has actually evolved into securing economic growth, as demonstrated by last year’s figures. Public debt has also reduced. I would like to discuss regional competition amongst ASEAN countries, and the Philippines’ unique selling points to attract foreign investment.
Our public debt has been coming down as a percentage of GDP quite significantly. This is one of the very positive developments that we can demonstrate. This is why we got our investment rating upgraded just recently by Fitch. Let me just correct the figure you cited regarding our GDP growth rate - it was 7.6% in 2010, 3.9% in 2011 and 6.6% in 2012. So if you average that from 2010 to 2012 that is about 6%, which is in fact very good. We are looking ahead and we are confident that we can achieve 7% growth in 2013, partly because of the mid-term elections on May 13th, so there is a lot of expenditures by candidates, which will increase consumer spending further.
The Filipino government is also increasing its investments on infrastructure and overseas remittances from Filipinos working abroad remains very robust. These factors are continuing to boost GDP.
I would like to discuss the success behind the growth of the economy under the Aquino Administration, because I do understand that before this administration, the Filipino economy was considered to be corrupt. But that has changed thanks to the ‘reform boom’.
That is correct. President Aquino’s commitment to good governance is one of the major factors. As you probably recall, he ran for the Presidency on a program of good governance and he won a landslide victory, because people were tired of rampant corruption. The past administration was viewed as being corrupt not just by international investors, but also by local investors, and people wanted a change. The President has had a strong commitment to good governance and anti-corruption, transparency and accountability and greater citizen participation. He is serious about serving the people.
There is clearly greater optimism and confidence in the Filipino economy under the leadership of President Aquino, because I believe that international investors have seen how serious the Government is about good governance. The educational reforms that have been undertaken by the Government as well as healthcare reforms have also sent very good messages. There have been huge increases in the budget set aside for education. We finally moved from a ten year basic education cycle to a twelve year cycle. We were one of just three countries with a ten year education cycle – everyone had moved to a twelve year cycle many years back. We tried to do this with previous administrations, but we were not successful. But the administration had the political will to push through this very significant reform in the education sector.
The President of the Chamber of Commerce mentioned the other day that there needs to be a new wave of reforms.
There are challenges, like poverty. This is why the president has been emphasizing that our growth has to be inclusive – in other words, it has to trickle down to the masses, and we have not seen that so far. But as Dr Bernie Villegas (top Filipino economist) said in the investment roadshow that we had recently in LA, Chicago and Boston, these reforms take a long time. We have had reforms over the past 25 years, and we are starting to see some of the benefits of those reforms. But bringing down poverty incidence is going to take much longer. You have to be growing from 7 to 10%, and not for just one year – it has got to be for a period of at least ten years, and even better if it goes on for twenty years. He (Dr. Villegas) is optimistic that we will achieve 7 to 9% growth over the next twenty years.
One of our challenges is to amend the economic provisions in the Constitution, which impose restrictions on ownership by foreign companies in certain sectors, such as education, publishing, shipping, banking etc. Again, we have said that we are committed to undertaking these reforms, making it easier for foreign businesses to come in, and we want to be able to attract more manufacturing firms into the Philippines.
A third challenge would be the cost of power, which is very high in the Philippines, second only to Japan. That is why it is important that we undertake structural reforms in the energy sector. This is why we are undertaking PPP (public-private partnership) programs to encourage more investment in infrastructure (power, water, highways and so on). Unfortunately the Philippines has lagged behind. When you look back at the amount of investment in relation to GDP, in 2010 it was 1%. In 2012 it was up to 2.6%. That is still below the ASEAN norm of 5%. So our neighbors have been investing as much as 5% of their GDP in infrastructure. We are behind, admittedly. But President Aquino has already instructed his cabinet to have infrastructure investment go up to 5.2% of GDP. We are optimistic that by 2016, we will see that level achieved.
What are the advantages of the Philippines? Fortunately, we have a young population, where the median age is 22.2 years. This is younger than the other countries. When you look at Japan and even China, they have ageing populations and we are fortunate that we do not. We have a labor force of about 41 million people and we have literate, bilingual, skilled workers. This is what we offer to companies that are willing to look at our country as an investment destination. We have over 10 million Filipinos working abroad, many of whom are medical professionals. This is why we are also promoting medical tourism in the Philippines. We can attract more of these professionals to come back to the Philippines and offer high-quality medical care at a more reasonable cost than you can get in the US or in Europe. We are trying to generate jobs in the Philippines so that they can come back here.
The relations between the US and the Philippines have never been better than they are today. In a recent meeting between Philippine Secretary of Foreign Affairs Albert del Rosario and US Secretary of State John Kerry, Secretary Kerry mentioned this fact. Our economic relations have also been better as evidenced by the Partnership for Growth (PFG), which is a White House initiative (of which the Philippines is the only Asian country involved) to enable the country to achieve optimum and inclusive economic growth. There are about fifteen US agencies and six Philippine Departments that have sat down together to try and identify the hindrances to optimum growth.
They have focused on three principal areas – regulatory quality, the rule of law and anti-corruption measures, and fiscal space. Fiscal space involves enhancing tax revenues. I think one of the reasons why our credit rating was upgraded was that these ratings agencies always pointed towards the Philippines’ weak tax revenues. And that was true – over the past ten years, our tax revenues were very low. But over the last two years, there has been significant double digit growth rates in income tax revenues. We are lagging behind in terms of revenues from customs and duties, but again, this is why they are revamping the customs bureau.
The Philippines has a great role to play in terms of defense cooperation, manufacturing and industry and foreign policy diplomacy, and education cooperation. How can the Philippines stand as the key ally within the pivot towards Asia?
We of course support the pivot towards Asia, and I think most ASEAN countries have indicated that they do welcome the US rebalancing to Asia. We stand to benefit from it as we are a treaty ally of the US and we have a strong military and security alliance, which has been reaffirmed by Secretary Clinton when she went to Manila to celebrate the sixtieth anniversary of the signing of the Mutual Defense Treaty in November 2011. We have had bilateral strategic dialogues with the US to discuss how we can further strengthen that alliance. There was a two plus two meeting between Secretary Clinton and Secretary Paneta, with their two counterparts, Secretary del Rosario and Secretary Gazmín. These dialogues will continue and in fact we had a third dialogue in Manila in December 2012, and we hope to see the two plus two meetings continuing on a more regular basis. When President Aquino met with President Obama in June 2012, again they discussed how they could deepen the strategic military and security cooperation. As you said, the US has expressed its satisfaction over the role that the Philippines has been playing in maintaining peace and stability in the region.
They have also been very supportive in terms of building our capacity in maritime security and maritime domain awareness. They have supported us with the two US coastguard cutters that have been transferred to the Philippine Navy, which have of course strengthened our naval capabilities. We ourselves are setting aside a significant budget in addition to what has already been released by the Philippine Government for the upgrading of the capabilities of the Armed Forces - the Air Force, the Navy and the Army.
The US and many Asian countries are forming different alliances, like APEC and the US-ASEAN Council. How is the Philippines mingling with these?
As we are part of ASEAN, we are very much involved in all of these discussions. We continue to see how we can continue to strengthen and deepen the US-Philippines alliance and we have the ASEAN mechanisms, such as the ASEAN Regional Forum (ARF) and the East Asia Summit, which President Obama participated in last year. Last year the Philippines was the coordinator for the US-ASEAN relationship, and this year it is Myanmar.
We have also been very active in discussions within APEC, the East Asia Summit, and the ASEAN Regional Forum, promoting ASEAN centrality and unity. Even during discussions with China on the South China Sea, we have emphasized the need for ASEAN to remain united and cohesive, because that is what will ensure the future success of ASEAN.
As you know, the Philippines is hosting APEC 2015. In 2015 we hope to see the integrated ASEAN Economic Community (AEC) in place. We are all getting prepared for that of course. We hope that the Philippines can be viewed by American companies as a gateway to ASEAN because of our longstanding friendship. Many American companies have operations in the Philippines and are doing very well. Our pitch to them is to use the Philippines as a gateway to the much larger ASEAN community of 600 million people with their increasing purchasing power. When I go around and talk to them about ASEAN and the Philippines that is what I pitch to them. It is a much larger economic community that they can access.
I think you said that there is a renaissance in terms of the relationship between the US and the Philippines. What should we communicate to the audience?
The Philippines is an emerging tiger in Southeast Asia.