Although tensions in the West Philippine Sea have yet to have direct effects on the economy, it seems businesses are growing concerned about the repercussions of a strained relationship with the Philippines’ biggest trading partner
MANILA, Philippines – Some of the Philippines’ biggest business groups have broken their silence and condemned the “continued harassment” of military personnel, hinting that businesses are beginning to worry about the potential economic spillovers of rising tensions with China in the West Philippine Sea.
“We deplore the continued harassment of the AFP (Armed forces of the Philippines), PCG (Philippine Coast Guard), and most of all, our people who are just trying to earn their livelihood,” the 17 business groups said in a joint statement on Friday, June 21, after another confrontation between the Philippines and China in Ayungin.
“The AFP and PCG play a critical role in achieving and sustaining a dynamic economy with widest participation of, and benefits for, Filipinos spanning all socioeconomic classes, economic sectors, geographic areas, and ethnic affiliations, under the rule of law in order to afford justice for all,” the business groups – which include the influential Makati Business Club and Management Association of the Philippines – said.
They further urged the Philippine government to prioritize the “necessary capacity-building measures” to modernize the AFP and PCG and transform them into a “self-reliant defense force.”
“We appeal for unity towards a nonviolent resolution that respects our rights as a peace-loving nation,” the statement read.
The business groups did not mention China, the West Philippine Sea, or any specific incident. However, days earlier, Chinese coast guard personnel boarded a Philippine government ship, brandished machetes and knives, deployed tear gas against Filipino soldiers, damaged navy boats, and took disassembled rifles.
Despite the aggression, Executive Secretary Lucas Bersamin said that the Philippines does not yet consider the incident as an “armed attack.” In order to invoke the Mutual Defense Treaty with treaty-ally the United States, an “armed attack” should happen against the Philippines.
Further conflict between the two countries would almost certainly devastate the deep economic ties that run between them.
In 2023, China was the Philippines’ top trading partner when considering both total imports and exports. According to data from the Philippine Statistics Authority, China was the Philippines’ second largest export trading partner behind the United States, with exports to China accounting for 14.8% ($10.93 billion exports) of the country’s total exports in 2023.
Meanwhile, China was by far the largest supplier of imported goods to the Philippines, accounting for more than 23% ($29.39 billion) of the country’s total imports in 2023. Indonesia, the Philippines’ second biggest import trading partner, only accounts for 9.1% of imports.
Given the trade relationship between the two countries, escalating tensions would likely impact major businesses in the Philippines.
“Since we need peace and security in building a stronger and more progressive Philippines, we call for a whole-of-nation approach in addressing the current threats to national sovereignty and security,” the business groups said in their statement.
So far, the tensions in the West Philippine Sea have yet to have direct effects on the economy. Officially, the stance of the Philippines is to “separate economy from politics.”
“Our position is that we do not impose unnecessary barriers to trade and investment to any country, including China,” said National Economic and Development Authority Secretary Arsenio Balisacan according to a report by Nikkei.
However, there have been signs that tensions are complicating business between both countries.
For instance, the Philippines has turned its back on loan negotiations with China for the funding of three major railway projects after talks continued to stall. Plans for these railways, along with other ambitious infrastructure projects, were dreamed up during the previous administration of Rodrigo Duterte, who took a friendly stance toward China. (READ: South Long Haul: How failing Chinese loan talks delay PNR’s railway dream)
The Philippines has also failed to attract Chinese tourists back to the country. Prior to the COVID-19 pandemic, China was the Philippines’ second biggest tourist market. Now, the Philippines is falling behind its Southeast Asian neighbors. Thailand, Malaysia, and Singapore have brought in millions of Chinese tourists after waiving visa requirements. But political tensions and a distrustful local populace will likely prevent the Philippines from taking the same step. (READ: Should the Philippines roll out the red carpet for Chinese tourists?) – Rappler.com
