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World Bank: Fix your China ties

Without categorically saying so, the World Bank’s most recent (August 2014) economic update on the Philippines pointed out that China has such a crucial role in Philippine economic development that we should develop a healthy relationship with that superpower.

That can be the only explanation why the World Bank update, for the first time in all its many analysis of the country since the 1970s, devoted several pages to the role of another country in our development. This was in its section entitled, “Special Focus: China’s slowdown and rebalancing — How the Philippines can still benefit.”

Careful not to be seen meddling in our foreign affairs, the World Bank’s ostensible reason for discussing Philippine-China economic links was that after an unprecedented pace over the last three decades, “China’s economic growth has begun to slow down,” which would affect many countries including ours.

Only the obtuse or terribly uninformed, though, would not realize that the more important “slowdown” in the relations between China and the Philippines has been the result of our territorial dispute over the Spratly Islands and Scarborough Shoal, especially President Benigno Aquino’s move to file a case against China’s claims in an international court—the first such suit filed against it.

The World Bank’s analysis is the first I’ve read by an international agency on how important China’s economy is for the Philippines.

The study pointed out:

Accounting for just 1.3 percent of our exports between 1978 and 2000, China since 2002 has risen to become among our top five export markets, absorbing P6 billion or 12 percent of our total exports in 2013.

Our exports have shifted from low-value mineral fuels in 1995 to high-value electronic products, and now account for 50 percent of our total exports to China.

Our imports have similarly increased, by an average of 20 percent between 2001 and 2010, and in 2012 China became our second largest import market next to the US. The share of mineral fuels to total imports had reached a high of 91 percent between 1977 and 1978, but declined in recent years that last year, such imports accounted for just 10 percent. Our imports from China are mainly manufactured goods, machinery and transport equipment.

“China is fast becoming a major source of foreign tourists for the Philippines,” the World Bank study pointed out. “Tourist arrivals from China increased exponentially from 14,724 in 2000 to 243,137 in 2011. Beginning 2006, it has been one of the top tourism markets for the Philippines, along with Korea, the US, Japan and Australia.

The study’s only reference to our territorial dispute with China is in its discussion of the tourism industry:

“The latest data [May 2013] show that tourist arrivals from China accelerated by 108 percent, despite prevailing territorial disputes. This marked improvement was due to the expansion of flights between China and the Philippines, as well as increased cruise ship calls to the Philippines. The estimated amount of revenues from Chinese tourist arrivals is around $218 million in 2013.”

The only aspect of our relationship with China that is unimportant is its foreign direct investments (FDI), as well as OFW remittances from that country, which are both miniscule.

But we are missing out on the flow of Chinese capital abroad. The low level of Chinese FDI to the Philippines, the study emphasized, is “in contrast to other Asean countries, which have been receiving significant FDI from China.” The highest FDI from China was recorded at $216 million way back in 1998.

‘Between 2009 and 2012”, the study pointed out, “net FDI from China turned negative.” That is, Chinese capital left the country mostly under Aquino’s watch.

The study pointed out opportunities for the country in China in the coming years:

“As China rebalances toward consumption-led growth, the Philippines could expand its export portfolio to China from capital goods and parts to consumer goods. At present, Philippine exports to China are heavily concentrated on capital goods, and electronic parts and components. To take advantage of this opportunity, Philippine exports need to diversify into the production of final goods that will cater to China’s rising consumption requirements,” the World Bank study pointed out.

The World Bank, which seems to have typecast us as a labor-exporting country, even cited opportunities for Overseas Filipino Workers. “Likewise, in the medium term, China’s aging population could provide opportunities for professional and skilled Filipino workers,” it pointed out. “Both jobs in China and outsourced jobs in healthcare, education, information technology, financial services, can be highly demanded.”

What does the World Bank prescribe for us to take advantage of the Chinese market? “The Philippines needs to improve its competitiveness,” it says, and rattles off its usual prescription of lowering costs of business and power, lifting restrictions on foreign ownership etc, etc.

That is its diplomatic way of telling us: Guys, you better fix your ties with China. You just can’t ignore China, it’s a major trading partner.

I’m risking a cyber-mob going after me, since the current administration has successfully stoked the hate flames against China. The level of public discourse on the China issue has gone down to gutter language and racist taunting that modern societies do not undertake anymore. I was surprised that a well-educated classmate of mine from Ateneo has even started calling the Chinese the pejorative “intsik.” On the other side, in China’s much, much bigger social media, Filipinos are becoming hated villains.

Rational voices that try to call for open communications and negotiations with China are shouted down as “traitors” or “anti-Filipino.” I have never seen our level of diplomacy sink so low as it has in the past four years.

Nearly a fourth, or 25 million of Filipinos are poor, and living the most miserable lives. Their number will be growing every year since we do not have a population-control program. We need all the help we can extract from such an economic superpower as China.

Can we just let, as Deng Xiao Ping suggested to Marcos in the 1970s, future generations settle our territorial dispute, maybe when our country has become rich so that we can really buy state-of-the-art naval power to defend our claims, instead of begging the US and even Korea for hand-me-downs?

I don’t know how in a few short years, China has suddenly emerged as our enemy in the East when it was one of our strongest partners since its emergence from its communist past. In the past, we have enjoyed a healthy relationship with China even as we asserted our rights over our land and territories.

The richest Filipino, Henry Sy, now has billions of pesos in investments in three malls in China, and will soon be in the housing market there. Twenty-fifth richest Filipino (going by the Forbes’ listing) Carlos Chan’s Oishi snack foods are becoming ubiquitous in China’s main cities.

A senator had told me, providing data to prove his point, that somebody very influential in Aquino’s Cabinet has been deliberately aggravating our dispute with China over the Spratly islands in order to favor, in a convoluted way, the interests of an Indonesian-controlled firm.

The senator was so certain over his allegation that he even said that this Cabinet official has committed treason. “He should be shot by a firing squad,” he said passionately.

I really don’t know what to make of that claim.

There’s also that other, broader conspiracy theory: the Cabinet official is deliberately driving China away from us and toward Indonesia, home country of a conglomerate he had shepherded into our country.