Philippines urges US, allies to increase foreign investment to counter China

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Philippines urges US, allies to increase foreign investment to counter China

The Philippines is pressuring the United States and its allies to boost trade and investment in the country, as escalating tensions between Manila and Beijing raise fears of broader economic fallout.

Economic security should become a central part of the strategic relationships the Philippines builds with its allies, Alfredo Pascual, Philippine Secretary of Trade and Industry, said in an interview with the Financial Times.

“This is important because if we are economically secure, we could also afford to strengthen our defense capabilities. If you are not economically secure, you cannot divert or use resources for defense,” he told the Financial Times. “We must have credibility in our defense posture,” he said.

The contentious South China Sea has become a major flashpoint between the Philippines and China, its largest trading partner. In recent months, Chinese coast guard ships have fired water cannons at Philippine boats and injured Filipinos, stoking tensions.

The Philippines, which has lagged behind its Southeast Asian counterparts for more than a decade in attracting foreign investment, is seeking funds to strengthen its infrastructure and manufacturing capacity, and develop key industries of minerals and clean energies. Although China is not a major source of foreign direct investment, its financial firepower is considerable, and as President Ferdinand Marcos Jr seeks to attract more foreign funds, his administration is calling on allies to intervene.

A diplomat from a Philippine ally said building economic resilience would ensure the country does not become dependent on China. “If the economy is weak, you may have to compromise. Security and the economy are closely linked.

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Under Marcos, the Philippines took an assertive stance in the South China Sea to counter a coercive Beijing. It has pledged to develop military outposts in disputed waters and strengthened defense partnerships with allies. Manila has also made a habit of publicizing Chinese intrusion into waters it claims as its own, in a reversal from the previous administration of Rodrigo Duterte, which downplayed Beijing’s maritime activity and established closer ties with China.

While the United States has increased its military engagement with the Philippines, its oldest ally in Asia, Manila is keen to become more involved on the economic front amid growing tensions. “We also view this issue in the context of our vulnerability to economic coercion from China,” a senior Philippine government official said.

“You say we’re on the battlefield and we’re on the front lines, so you have to walk the talk in terms of the economy,” he said, referring to the United States.

Even though the United States is the largest source of FDI in the region, with net investments of $36.9 billion among ASEAN countries in 2022, its absence in multilateral trade agreements and what Analysts say a disproportionate focus on security has undermined their credibility as an economic partner. – not just in the Philippines but also in Southeast Asia. The Philippines has stepped up calls for a free trade deal with the United States, although Manila notes that President Joe Biden’s administration is reluctant to pursue that path in an election year.

“The United States is an important security partner for many countries in the region, but this focus on security can make its bilateral relationship appear unbalanced and aggressive,” said Kevin Chen, a research associate at the S . Rajaratnam School of International Studies (RSIS). ) in Singapore.

“Meeting the specific economic development needs of its partners would also demonstrate the value Washington places on its relationships, rather than simply meeting its own strategic needs. »

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An April survey by the Iseas-Yusof Ishak Institute showed that China had overtaken the United States to become the preferred alignment in Southeast Asia among the two superpowers, compared to last year.

“China remains undisputed as the most influential economic power in the region and also continues to be considered the most influential political and strategic power, far surpassing the United States in both areas,” the survey notes.

The United States withdrew from the Comprehensive and Progressive Agreement for Trans-Pacific Partnership under President Donald Trump and is not part of the Regional Comprehensive Economic Partnership, a trade pact led by China.

Instead, Washington is pursuing the Indo-Pacific Economic Framework for Prosperity, a Biden initiative for economic engagement with the region. Through the G7, the United States is also offering the Global Infrastructure and Investment Partnership (GIIP) to developing countries as an alternative to China’s Belt and Road Initiative.

The United States, alongside Japan, supports the development of the Luzon Economic Corridor in the Philippines, the first major infrastructure project. At the recent Indo-Pacific Business Forum in Manila, the United States promised to mobilize public and private financing for the corridor, which involves railways, ports, semiconductor factories and energy projects. clean energy.

“We hope this will become a model that we can use in the region,” Helaina Matza, acting special coordinator of the PGII, told the Financial Times.

“It is not too late” for the United States to counter Chinese dominance in the region, she said. “That will take time.”

RSIS’s Chen said the Luzon corridor was not enough to answer questions about U.S. engagement in the region. “Convincing Southeast Asian countries that Uncle Sam remains a reliable economic partner will be a difficult task.”

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