info@foreindia.com Wednesday 24th of July 2024





Militarization Could Erode Economic Futures Of Philippines And ASEAN
Dan Steinbock
2023-02-20
Region : Philippines, Economy,
Issue : Democracy, Politics,
The Marcos Jr. government is no longer a bystander between the US and China. The risk is that it is sleepwalking into military and nuclear minefields, while fragmenting the ASEAN.
After the recent Ayungin Shoal laser-shining incident, Philippine-Chinese tensions have escalated in the South China Sea, again.
Perceptive columnists, like Rigoberto Tiglao of the Manila Times, have connected dots: “[President] Marcos on February 2 agreed to allow the US to use as it pleases four more of our military camps (on top of the five existing ones]. The Ayungin incident occurred on February 6.”
One might add: Only days later, US Maj. Gen. Joseph Ryan declared that “US allies” are “battle-ready in Asia.” Ryan made his point in Manila where he was in talks with Philippine counterparts ahead of two annual large-scale live-fire combat exercises, with thousands of US and Filipino troops in March and April.
Not so long ago, President Marcos Jr used to say: “The Philippines shall continue to be a friend to all and an enemy to none.” Yet, it’s hard to reconcile such worthy goals with the taunting statements of foreign military leaders on Philippine soil.
Whether the recent incidents are manufactured, these dramas seem to be overdetermined and predictable:
• An “incident” takes place.
• The two sides have opposing views on what actually happened.
• Observers, think-tanks and policy authorities, often funded by the same interests that stand to benefit from such incidents, demand “tougher measures” to contain the “aggressive provocation.”
• Behind-the-façade, moves ensue for deeper alignments, which spark worse incidents to legitimize military measures.
• The latter steer funds away from development and welfare, yet bring neither peace nor stability, but more insecurity.
These dramas are designed to provoke vicious circles that, left unmanaged, will cause losses of human lives, and perhaps still another unwarranted war.
Enhanced military entanglements
In January, President Marcos Jr said that tension in the disputed South China Sea “keeps him up at night.” He said his nation was watching as a “bystander” whenever tensions rise after Chinese or US warships cross the region.
Yet, “balancing act” does not seem to be an apt description of the Philippine foreign policy as Manila is aligning itself in military and nuclear alliances in the region, unlike other ASEAN members.
The bilateral ties with the US rest on the Mutual Defense Treaty (MDT, 1951), and the Enhanced Defense Cooperation Agreement (EDCA, 2014). In March 2016, the two countries agreed on the 5 locations of military bases for the American troops. More recently, they signed the renewed Visiting Forces Agreement (VFA, 2021).
US sees the Philippines as a “major non-NATO ally.” The country is one of the largest recipient of US military assistance in the region. In war games, Australia and Japan provide base access and contribute forces to Taiwan, while US forces deploy the bases on the Philippines; the only major ASEAN member to become a geopolitical target.
Following the recent visit by Defense Secretary Austin, the US was promised access to four more locations under the 2014 EDCA. The two will also resume joint South China Sea (SCS) patrols.
As the EDCA bases will be effectively doubled, so will the targets.
The Biden administration is in a hurry to integrate its military alignments before the ASEAN and China finalize a code of conduct (COC) for the SCS. Peace and stability are not priorities. The containment of China’s rise is, even if it could devastate dozens of emerging and developing economies that have greatly benefited on China’s economic rise – including the Philippines.
The Japanese connection
In early February, Japanese Prime Minister Kishida Fumio and President Marcos Jr. agreed to strengthen economic and security cooperation. Marcos said he saw no reason why the Philippines should not have a Visiting Forces Agreement (VFA) with Japan if it would boost maritime security.
The timing is curious. In Japan, anger with the political scandals of the Liberal Democratic Party (LDP), the government’s mishandling of the pandemic, compounded by the tortuously slow vaccine rollout, have contributed to rising political volatility.
After the fall of the Suga cabinet and the assassination of Shinzo Abe, the performance of the Kishida government has been a déjà vu all over again. In early February, the cabinet’s approval disapproval rate was 62.2% (JNN), the highest ever since the inauguration of the administration.
To strengthen its defense capabilities, Japan has decided to increase its defense budget by 1.5 times to $320 billion over the five years from 2023. In the rapidly-aging nation with declining population, a majority opposes Kishida’s rearmament (48% vs 46%). And over 70% of Japanese “do not support” the Kishida’s cabinet. Most Japanese want peace, not war.
Debt spirals
As Manila is aligning with Washington and Tokyo, it will become increasingly exposed to their liabilities. In Japan, growth is expected to slow further to 1 percent in 2023. According to the Bank of Japan (BOJ), the wealth of every second Japanese slumped last year compared to 2021; the worst record in 13 years.
Recently, in Japan food prices rose on 10,000 food items over higher costs. The BOJ expects prices will continue to rise and has doubled its inflation forecast for the coming year to a record 10 percent. Hence, the frantic debt-taking. In Japan, it is the worst among all high-income economies; close to 265 percent, thanks to over two decades of secular stagnation. When Kishida’s new BOJ governor Kazuo Ueda will start hiking the rates, debt challenges will escalate.
In the US, the debt ratio has also doubled and is inching toward 140 percent. That’s over 20 percentage points higher than that of Italy amid Rome’s 2010 debt crisis.
Overall, US growth for 2022 slowed to 1.9 percent as substantial fiscal consolidation – worth about 5 percent of GDP – added to monetary headwinds. Worse, growth is projected to slow to recession level in 2023; the weakest performance outside official recessions since 1970.
Last week, the Congressional Budget Office (CBO) said the US could default this summer unless $31.4 trillion debt ceiling is raised. Otherwise, default could occur before July. Treasury Secretary Janet Yellen warned it would have “catastrophic” consequences.
Worse, US debt burden will rise $2 trillion per year over the next decade; that’s 2.5 times the entire Philippine GDP in 2022.
Demise of economic ties
In the past six years, Duterte’s recalibrated foreign policy allowed Manila to benefit from economic ties with China, despite Manila’s military ties with Washington.
In the coming years, such alliances may erode the bilateral ties:
• In the short-term, Manila could miss opportunities associated with China’s reopening, which will greatly benefit other ASEAN members.
• The anticipated inflows of Chinese mass tourism may not materialize.
• Philippines’ largest trading partner and largest source of imports could fade into history. And so could the country’s second-largest export market.
• Chinese investment is creating jobs and bringing capital that have greatly fostered development across Southeast Asia. But militarization will gradually end those opportunities in the Philippines.
• The military entanglements steer allocations away from peace and development to the military.
• Increasing economic dependence solely on the West, at the expense of China, could force Manila into more costly ecosystems, reduced consumer welfare, and more persistent inflation which any hostilities could compound; and ultimately into the repercussions of a debt crisis that’s already simmering in the West.
And there’s more.
Nuclear weapons
Philippines is no longer immune to nuclear scenarios either, thanks to policy plunders. Last fall, a new trilateral security pact (AUKUS) was launched between the US, the UK and Australia, Washington and London to “help” Canberra to develop and deploy nuclear-powered submarines.
Vehemently opposed by China, the highly controversial $66 billion deal has escalated arms races and nuclear proliferation in Asia. It also violates the Philippine constitution and the Southeast Asian Nuclear-Weapon-Free Zone Treaty (1995).
Yet, right after the AUKUS, when ASEAN began to build consensus against the nuclear pact, the Philippine then-foreign affairs secretary Teodoro Locsin Jr. “welcomed Australia’s decision to establish” the nuclear alliance. By contrast, both Malaysia and Indonesia warned of an impending arms race unleashed by AUKUS.
Today, the destructive power of these weapons is far greater, as stressed by the International Campaign to Abolish Nuclear Weapons (ICAN). In January 2021, Philippines ratified the ICAN’s legally-binding Treaty on the Prohibition of Nuclear Weapons. Yet, only months later, Locsin welcomed the AUKUS.
One country, two nuclear policies? Militarization will require schizophrenic policies as the gap between rhetoric and substance is bound to deepen.
Whose national interest
In his first state of the nation address, President Marcos stated that that “the national interest will be given priority in the foreign policy.” But what exactly is the Philippine national interest?
In the Philippines, the top-10% dominates over 50% of the (pre-tax) national income (wealth polarization is worse). Even the ultra-rich – the 1% – control 17 % of national income, while the bottom-50% account for barely 15%. Ironically, economic inequality peaked with the People Power movement in the late ‘90s.
Obviously, this is the great discrepancy that Marcos would like to overcome. But how can such goals be reached when the Philippine foreign policy becomes subject to US geopolitics in the region? And how can national interest be realized, when military objectives overrun economic priorities?
The choice is not between the US and China. It is between economic development and lethal geopolitics, which could bury the much-anticipated Asian Century.
Without peace and stability, there can be no sustained development. And it is only the latter that is in the long-term interest of the Philippines, China and the US, respectively.
Dan Steinbock
Dr Dan Steinbock is an recognized expert of the multipolar world. He focuses on international business, international relations, investment and risk among the leading advanced and large emerging economies.
This article originally appeared in the Eurasia Review
The views expressed above belong to the author(s)

Follow Us On Twitter
Articles




Visitors HTML Hit Counter