The Philippine Strategic Associates (PSA), a private intelligence, business risk, and security consultancy firm, said brewing tensions between China and Taiwan, as well as the continuous dispute in the South China Sea, will bring massive and potentially harmful economic and trade consequences to the Philippines.
Quoting Tim Moe, chief Asia equities strategist at Goldman, in an interview with Financial Times, a Chinese assault on Taiwan is still considered a “tail risk” among investors.
However, the rising concerns about an attack are underscored by a Goldman Sachs index tracking tensions across the Taiwan Strait, which recently hit a record high.
PSA Director of Operations Sam Ramos-Jones said: “While we currently do not believe that there is a high likelihood of conflict breaking out over Taiwan in the near-term, we are concerned about the possibility for unintentional conflict arising from maritime mis-encounters in the disputed areas of the South China Sea. We believe it is important for both the public sector and private sector to be aware of these dynamics and prepare for various contingencies.”
He said the PSA report takes into account three scenarios and provides the potential impact as a result of unintentional conflict, miscalculation, or an accident in the South China Sea between China and the Philippines, a war between China and Taiwan with the Philippines remaining neutral to the conflict, and war between China and Taiwan with the Philippines drawn into the conflict.
PSA sees that for any issue that involves an incident in the South China Sea between China and the Philippines, the impact will be a decrease in trade, investment, and tourist flows between the two countries in the medium run.
For the second scenario, “We foresee a massive disruption to international trade and supply chains, potential food and energy shortages, and some threats to the stability of the internet for Philippine users,” said PSA Director of Business Intelligence Greg Wyatt.
And for the third scenario where the country is drawn to any conflict involving Taiwan and China, PSA sees increased disruptions to air travel, increased disruptions to the internet for Philippine users, and potential military targeting of certain airports, seaports, and military installations within the Philippines.
The PSA report emphasized that the Philippine business community can begin to think about how a potential conflict in the region would impact businesses and could collectively examine how to make the business community more resilient.
The best practices to mitigate the potential impacts of conflict in the region have not yet been developed, and they can be developed collectively.
The PSA further said that at the corporate level, if the propensity for conflict continues to escalate, the report foresees that it may become best practice for more companies to diversify their operations into multiple parts of the world outside of Asia.
Third, at the operational level, the PSA report further argues that having some sense of the foreign conflict risk in the region is now relevant to business continuity managers in a way that was largely a distraction in previous decades.
