THE economic team of the new administration once again defended President Rodrigo Duterte after he announced the cutting of ties with the United States during his state visit in China.
Budget Secretary Benjamin Diokno said Duterte is “not cutting ties with the US,” contrary to the President’s earlier announcement in China.
Former Foreign Affairs Secretary Albert del Rosario said the declared shift in foreign policy casting aside a long time reliable ally to hastily embrace an aggressive neighbor that vehemently rejects international law is both unwise and incomprehensible.
“We must be with responsible nations with whom we share our core values of democracy, respect for human rights and the rule of law. To stand otherwise, is not what Filipinos are; it is not what we do; it is not what is right,” he said in a statement.
“What is unfolding before us must be considered a national tragedy which does not need to happen. It is our earnest hope that this most unfortunate declaration will be corrected.
“In fact, he’s committed to honor all contracts, foreign or domestic, all he means what he says [is] he’s opening up the Philippines to all countries that want to invest in the country, old and new.”
Before members of the business community in China, Duterte had announced that he would cut off ties with the United States, not only in the military aspect but also in economic activities.
“America, they just lost me. I realign myself in your ideological flow and maybe, I will go to Putin and there are three of us against the world–Russia, China and the Philippines,” Duterte said in a speech during his third day state visit.
“I announce my separation with the United States. Both in the military and in economic [aspects] also,” Duterte added.
Two more members of the economic team, Socioeconomic Secretary Ernesto Pernia and Finance sectary Carlos Dominguez III, also clarified the statement of the President saying the Manila will still continue its strong ties with the West.
“President Rodrigo Roa Duterte and his Cabinet will move strongly and swiftly towards regional economic rebalancing for closer integration in Asia,” Pernia and Dominguez said in a join statement.
The Philippines, as one of Asean’s founding members, has committed to join the Asean Economic Community (AEC), an economic bloc designed to create a single market and production base in the region.
Asean groups the Philippines with Malaysia, Singapore, Brunei, Thailand, Indonesia, Laos, Cambodia, Myanmar and Vietnam.
The AEC will allow for the free movement of goods, services, skilled labor, and investment among the 10 Asean member-nations and to facilitate the freer flow of capital.
Unlike the European Union, the AEC aims for economic integration without a monetary union or political integration.
Dominguez and Pernia said the regional integration envisioned by the Duterte administration “is similar to what has been done in the EU, Nafta (North American Free Trade Agreement) in North America and Mercosur (Mercado Común del Sur) in South America.”
“The Philippines is integrating with Asean, China, Japan and South Korea,” said Dominguez and Pernia.
They pointed out that Asian economic integration is “long overdue” compared to the other regional trade blocs earlier forged by other economies across the globe.
Meanwhile, BMI research, the research arm of the global debt watcher Fitch, said Duterte’s foreign relations pivoting to China a “dramatic” move and may create numerous economic opportunities for the country.
“President Duterte’s visit to China on October 18 to 21 marks a dramatic reversal in the Philippine’ foreign policy stance from one that is US-centric, to one that is pivoted towards China,” BMI said in its latest Daily Macro Alert on Asia Markets.
“We highlight that this will not only undermine Washington’s geopolitical influence in the region but will also create numerous opportunities on the economic, investment, and trade fronts between China and the Philippines,” they added.
The think tank also noted that Japan and Russia will likely see few changes in their bilateral engagement with the Philippines for now.
It said while the outcome of this meeting could provide a short-term boost to the Philippines economy, the longer-term benefits would largely depend on the progress of government reforms to improve the business environment and efforts to reassure investors with a lower risk tolerance.
Senate President Aquilino Pimentel III threw his support behind Duterte’s foreign policy.
“It’s very good that for the first time, we have a President who is now emphasizing that concept in our Constitution, that we must pursue an independent foreign policy,” Pimentel said.
He said the President’s pronouncement on his foreign policy “is the first step into having an independent foreign policy” and Filipinos “should realize that there are other powers, other points of view than the American point of view, which we should open ourselves too.”
“If we do not accept or realize that, we could never have an independent foreign policy because we will always toe the American line,” said Pimentel, a party mate of Duterte in PDP-Laban.
Amid the President’s fierce criticism of some Western nations, the Senate leader said for too long, the Philippines’ policies had been tied too closely to the Americans.
“It’s time to step back, but we are not picking a fight,” he said.
Asked if opening to other countries entailed moving away or antagonizing other nations, Pimentel replied, “No, let the Philippines be a friend to all nations.”
Pimentel’s remarks matched the statement of Duterte in China, who said, “There will be no military alliances entered into. There will be no military alliances broken. What I am just saying is that we are not interested in adding fuel to what is already a volatile world.”
Senate President ProTempore Franklin M. Drilon also said he supports the Duterte administration’s pursuit of an independent foreign policy, but he warned economic managers to put in place mechanisms to cushion the negative effects on the economy.
While he agrees with the Duterte administration’s push for a more independent foreign policy, he said the country cannot afford to lose the support of its long-time ally countries, especially in the economic and development sectors.”
He said the Duterte administration could pursue an independent foreign policy “without jeopardizing the billions worth of foreign assistance poured into the country annually.”
He also said the government should prepare for the negative effects brought about by the weakening of the peso against the US dollar, as this will affect the country’s financial portfolio.
Citing the country’s debt service burden–currently at almost P6 trillion or 43 percent of the gross domestic product–as an example, Drilon said that the P334-billion allocation for debt service for next year may not be enough due to the weakening of the peso
The senator said that among these is the possible reduction in the foreign aid contributions to the Philippines, currently at a whopping $3 billion.
“The government should take precautionary measures to cushion the impact once foreign aid contributions to the country are reduced, or should the United States and the European Union take the President’s challenge to withdraw foreign aid seriously,” Drilon said.
Drilon also feared that the country risks losing trade preferences, including those covered by the Generalised System of Preferences particularly in the EU member countries. The GSP allows local producers to export their products at either zero tariff or at a preferential tariff rate.
“If the GSP is withdrawn, then our products become expensive and non-competitive in the areas where these products are exported,” Drilon said.