Geo-Politics

Geopolitical Ramifications of Taiwan’s Independence!

The prospect of Taiwan declaring independence is a geopolitical tinderbox with potential to ignite a cascade of global consequences. Drawing uncomfortable parallels to historical flashpoints like the Cuban Missile Crisis, such a move could trigger military aggression from China, endanger regional stability in East Asia, and rattle the foundations of international organizations like the United Nations. Beyond the military realm, the economic repercussions could echo the 1973 oil crisis, disrupting global trade and technology sectors. As we delve into these intricate scenarios, we start with the immediate and unsettling question: What would a Chinese military response look like?

The Consequences:

Chinese Military Response:

If Taiwan were to declare independence, the geopolitical tension with China could escalate into unprecedented aggression, with a palpable risk of military conflict that could engulf not only the Taiwan Strait but potentially draw in global superpowers. The simmering tension is already observable on the frontlines, such as the island of Kinmen, which carries the scars of historical conflict with China. Recent Chinese claims of “sovereign rights” over the Taiwan Strait have already obliterated its neutral, international status, and a declaration of independence would likely be the tipping point for a full-scale military response. In a show of increasing American support, high-profile visits like that of House Speaker Nancy Pelosi have been met with aggressive Chinese military exercises, including missile tests and air incursions, aimed at wearing down Taiwan’s military and morale. In this highly charged atmosphere, even a minor miscalculation could trigger an unintentional escalation. Taiwanese authorities are thus caught in an intricate balancing act, wanting to deter Chinese advances while not alarming their populace or inciting further aggression. U.S. officials, meanwhile, worry that Taiwan’s traditional military strategies are not sufficiently agile to fend off a well-prepared Chinese offensive, and they also fear that China is gradually gaining the upper hand, developing capabilities that could make American intervention ineffective. In such a scenario, the balance of power in the Pacific would shift dramatically, weakening U.S. influence and potentially transforming Taiwan from a democratic stronghold to a cautionary tale of unyielding geopolitical might.

Strategic Involvement:

Historically, the very core of Beijing’s stance towards Taiwan revolves around the “One China” policy, and any departure from the status quo would likely be viewed as a direct threat to China’s territorial sovereignty and integrity. Given past warnings and military postures, such a declaration would likely elicit a forceful, possibly military, response, leading to a significant geopolitical crisis. The U.S., having maintained a policy of strategic ambiguity with regards to Taiwan, could find itself in a precarious situation, especially in light of incidents like Gen. Mark Milley’s communications with his Chinese counterpart in 2020. Any miscalculation or aggressive posturing could then entangle multiple global superpowers in the conflict, further complicating an already volatile situation.

Moreover, China’s desire to reclaim Taiwan is not merely symbolic; Taiwan’s strategic location and economic significance, especially in microchip manufacturing, make it a prized asset. In the shadow of China’s assertive moves in the South China Sea and its observed responses to events like Russia’s invasion of Ukraine, Beijing’s reactions can be inferred to be calculated and aggressive. China’s efforts to dominate the Indo-Pacific region, especially through maritime strategies and the establishment of anti-access/area-denial zones, indicate that any move by Taiwan towards independence would be countered with vast military and strategic might. In such a high-stakes environment, even minor provocations could ignite a full-blown crisis, forcing global superpowers to reconsider their positions and strategies in the Indo-Pacific region.

Regional Security:

If Taiwan declares independence, triggering unprecedented aggression from China, the ripple effects would likely reverberate throughout the region, compromising the security balance in East Asia. Japan, which has a Self-Defense Force of approximately 247,000 active-duty military personnel and a strategic alliance with the United States. Japan might find itself drawn into the conflict either directly or indirectly. Article 5 of the U.S.-Japan Security Treaty states that an armed attack against either country would act as a catalyst for mutual defense, and any military clash near Taiwan could imperil Japan’s Senkaku Islands, which China also claims as the Diaoyu Islands. South Korea, with its own geopolitical complexities including North Korea and an alliance with the U.S., could also be ensnared in the conflict. South Korea’s military, one of the largest in the world with over 600,000 active-duty personnel, could be torn between its U.S. alliance obligations and its significant economic ties with China, which is its largest trading partner as of 2022.

Moreover, such a scenario would have dire consequences for regional stability, putting at risk major global shipping routes like the Strait of Malacca through which about 40% of the world’s trade passes. Within the intricate tapestry of the South China Sea, the territorial disputes involving nations such as Vietnam and the Philippines are poised to become even more labyrinthine as China’s military assertiveness continues to surge. This escalation not only amplifies the complexity of these disputes but also adds a layer of uncertainty to their resolution.

Moreover, the ripple effects extend beyond the immediate stakeholders. Smaller nations nestled within the Association of Southeast Asian Nations (ASEAN), a collective with a combined GDP that reached approximately $3.11 trillion in 2019, stand at the precipice of economic ramifications and heightened Chinese influence. This dual threat, economic and political, casts a shadow over the stability of the entire region, unsettling its delicate equilibrium.

In this climate of heightened tensions, regional security platforms like the ASEAN Regional Forum (ARF) and the East Asia Summit find themselves facing a formidable test. The countries involved are now confronted with the daunting challenge of preserving a semblance of equilibrium and tranquility in an environment that seems increasingly precarious.

Alliance Realignment:

The far-reaching consequences of these developments could extend their grip across the globe, ensnaring countries in a web of intricate challenges, potentially prompting a substantial reshuffling of alliances and partnerships on an unprecedented scale. Take, for instance, the European Union (EU), whose economic ties with China ran deep, with a trading volume surpassing 649.5 billion euros in 2020, establishing China as its largest trading partner. This pivotal relationship would place the EU in a precarious position, caught between conflicting interests. On one hand, EU member states share longstanding transatlantic bonds with the United States, firmly anchored through NATO, an alliance boasting a combined military budget that exceeded a staggering $1 trillion as of 2021. This alliance has historically underpinned European security. Thus, as the global geopolitical landscape evolves, the EU faces the challenging task of navigating the intricate maze of diplomatic relations, trade dynamics, and security commitments. The decisions made in this complex quandary could herald a new era of global partnerships and realignments, with far-reaching implications for nations worldwide. On the other hand, the economic stakes with China are incredibly high. This could strain relations and force hard choices, compromising collective policies like the European Union’s 2019 “Strategic Outlook” paper, which referred to China as a “systemic rival.”

Likewise, countries in the Indo-Pacific region that have significant economic relations with both the U.S. and China would face particularly acute dilemmas. Australia, for instance, had a two-way trade value of 252 billion Australian dollars with China in the 2020-2021 fiscal year but also has a robust military alliance with the U.S. through the ANZUS Treaty. Similarly, India, which had a trade volume of 87 billion dollars with the United States, and 77.7 billion dollars with China in the 2019-2020 fiscal year, would also be at a crossroads. These countries might have to recalibrate their alliances, choosing between economic benefits and security commitments, thereby creating an unpredictable and possibly unstable new global geopolitical landscape.

Global Institutions:

Should Taiwan declare independence, thereby triggering an aggressive military response from China, the ripple effects on global institutions could be considerable, most notably affecting the United Nations. Currently, the United Nations recognizes the People’s Republic of China as the legitimate government of China and does not recognize Taiwan, in line with the One-China Policy. As of 2020, China contributes about 12% of the UN regular budget and roughly 15% of the UN peacekeeping budget, making it the second-largest contributor to the UN after the United States. The aggressive stance taken by China in the hypothetical situation of Taiwanese independence could polarize member states, compelling them to take sides on whether to continue recognizing Beijing’s One-China Policy or to question it in light of aggressive actions.

This division within the United Nations could extend to other international bodies in which China plays a significant role, such as the World Health Organization (WHO) or the World Trade Organization (WTO). A geopolitical event of this magnitude could paralyze decision-making processes and cast doubt on the effectiveness of these organizations. This could remind us about the déjà vu images of the aftermaths of World War 1 situation where countries started to oppose the international order by defying the principles of the League of nation and the world plunged into another Great War, the World War 2. Countries opposing China’s aggressive measures might push for sanctions or diplomatic isolations via these platforms, leading to counter-moves by countries aligned with China. A sharp division among the 193 UN member states over Taiwan’s independence and China’s hypothetical military aggression could undermine the core tenets of international cooperation and compromise the effectiveness of global institutions.

Economic Disruption:

Likewise, in the wake of an aggressive military response from China over Taiwan, the fallout would reverberate through multiple facets of the global economy. To start with the semiconductor industry—Taiwan is home to TSMC, the world’s largest contract chipmaker, which is a key supplier to companies like Apple, Qualcomm, and Nvidia. A conflict in Taiwan could effectively freeze production or shipment, causing widespread disruption. To put it in numbers, Taiwan’s semiconductor industry generated about $115 billion in revenue in 2020. A halt or even a slowdown in this output would lead to electronics shortages, soaring prices, and a stunted pace of technological innovation worldwide.

Beyond technology, the Taiwan Strait is one of the world’s busiest waterways. According to the U.S. Energy Information Administration, over 16 million barrels of crude oil passed through the strait each day in 2018. Any military conflict in the strait would likely disrupt these shipments, causing global oil prices to spike. Countries like Japan and South Korea, which import most of their energy needs, would be especially hard-hit, leading to increased costs for heating, electricity, and transportation. This could stoke inflationary pressures at a time when economies are still recovering from the pandemic, leading to a rise in living costs for millions of people.

Nuclear Risks and Global Arms Race:

If Taiwan were to declare independence and China responded with unprecedented military aggression, the specter of nuclear warfare could become an alarming concern. China, which possesses a nuclear arsenal estimated to include about 320 warheads as of 2020, has a no-first-use policy. However, the severity of a conflict over Taiwan, a territory China has vowed to reclaim, could place tremendous pressure on this policy, although the use of nuclear weapons would be an exceedingly drastic step. In a scenario of such gravity, the repercussions would unfurl on a truly global scale, unleashing a cataclysmic wave of consequences that would reverberate across the environmental, economic, and human dimensions. This multifaceted catastrophe, both immediate and enduring, would cast its ominous shadow far and wide, leaving no facet of our world untouched.

Furthermore, within this tumultuous narrative, the United States, a formidable nuclear power and staunch ally of Taiwan, would enter the fray, introducing the ominous specter of a full-blown nuclear showdown. Such a perilous escalation could become the catalyst for an all-encompassing conflagration, drawing other nations into the maelstrom and casting a pall over the stability of our global security architecture.

Yet, the tendrils of turmoil would not end there; they would extend to spark a resurgence in the specter of a global arms race, a harrowing prospect that looms ominously on the horizon. Nations, spurred by the urgency of the moment, would race to bolster their military arsenals, channeling resources into the development of cutting-edge, and perhaps even unconventional, weaponry. Consider that in 2020, the Stockholm International Peace Research Institute (SIPRI) recorded a staggering $1.98 trillion in global military expenditures, a testament to the ominous potential of such an arms race.

As the drums of militarization beat ever louder, the delicate fabric of arms control initiatives like the Treaty on the Non-Proliferation of Nuclear Weapons (NPT) and the Comprehensive Nuclear-Test-Ban Treaty (CTBT) would fray at the seams, their efficacy undermined by the relentless march toward greater firepower.

Simultaneously, the gravitational pull of militarism would divert crucial resources away from pressing global imperatives such as poverty alleviation, healthcare access, and the fight against climate change. In this tumultuous realignment of priorities, nations worldwide would find themselves at a crossroads, their choices impacting the intricate equilibrium of global power in ways as unpredictable as they are profound.

Humanitarian Crisis, Impact on Global Democracy and the Rise in Nationalism:

If Taiwan declares independence and China responds with military aggression, the humanitarian implications would be immense. According to a 2021 estimate by the International Institute for Strategic Studies, China’s People’s Liberation Army (PLA) has an active-duty military force of roughly 2 million, while Taiwan has around 140,000 active-duty troops. A full-scale conflict could produce casualties in the tens or even hundreds of thousands. Additionally, Taiwan’s dense population centers, like Taipei, which houses over 2.6 million people, would be vulnerable to aerial bombardment and missile strikes. If we consider historical precedents such as the Yugoslav Wars or the Syrian conflict, large numbers of civilians would become refugees almost overnight. The global community would face the pressure of a new refugee crisis comparable to the Syrian crisis, which has displaced more than 6 million people according to UN HCR figures.

In the ideological domain, Taiwan stands as a democratic model in East Asia, scoring 93 out of 100 in Freedom House’s , Freedom in the World twenty twenty one report. A forced unification with authoritarian China, which scores just 9 in the same report, could demoralize democratic movements globally. For example, pro-democracy protests in places like Hong Kong or Belarus could lose momentum or international support, fearing a similar fate. In terms of nationalism, the use of military force in a Taiwan scenario would likely surge nationalist sentiment in China, possibly strengthening President Xi Jinping’s position but also raising the specter of ultranationalism. This could mirror situations like Putin’s Russia after the annexation of Crimea, where nationalist pride swelled but also led to more autocratic governance. This heightened nationalism emboldened Russia’s courage to invade Ukraine, thus, potentially destabilizing the entire region.

In conclusion, the prospect of Taiwan declaring independence will have repercussions that would reverberate from the military theater to global economies, alliances, and even the integrity of international institutions. As we’ve seen, the stakes are extraordinarily high, touching on core interests of major world powers and risking a destabilizing chain reaction that could reshape the global landscape for decades to come. Therefore, the pragmatic way forward necessitates nuanced diplomacy, engagement, and multilateral dialogue. It is imperative for all parties involved to exercise restraint, pursue open communication, and consider the profound global ramifications before taking unilateral actions.

Analysis

Is Philippines the Next Japan?

Manila has long cast a longing glance at Tokyo. Japan’s post-World War II economic miracle—a phoenix rising from ashes—is a tale etched into the annals of global capitalism. Now, the Philippines, a nation of 118 million, is attempting its own ascent. But can it replicate the Japanese magic formula?

The archipelago’s economy has been on a tear. Growth rates have outpaced most of Southeast Asia, sustained by a burgeoning call center industry, remittances from overseas Filipino workers, and a growing consumer class. Infrastructure projects, once the stuff of political promises, are now breaking ground. The question is: is this a sustainable boom, or a mirage shimmering in the tropical sun?

I. Economic Growth

The Philippines’ recent economic trajectory contrasts sharply with Japan’s post-World War II economic miracle. Japan’s rapid economic growth from 1945 to 1991, known as the “Japanese Economic Miracle,” was characterized by disciplined fiscal policies, deliberate industrial development, and significant infrastructure investments. This period saw Japan’s economy grow at a rate twice as fast as the prewar average every year after 1955, achieving a peak last seen in 1939 in less than ten years.

Japan’s unique political structure, characterized by strong centralized authority, social consensus, and a long-term perspective, fostered an environment conducive to implementing consistent and far-reaching economic policies. This, coupled with deeply ingrained cultural values of respect for authority, discipline, and collective good, contributed significantly to the nation’s rapid post-war recovery. Ezra Vogel, in his seminal work “Japan as Number One: Lessons for America,” highlighted how Japan’s economic policies were marked by a “remarkable coherence and stability.”

In contrast, the Philippines has struggled to achieve steady economic growth despite having abundant natural resources and a youthful labor force. The Philippines’ efforts to emulate Japan’s swift rise have been impeded by policy changes, political unpredictability, and infrastructure deficiencies. While Japan’s economic policies were marked by stability and continuity, the Philippines has faced a more fragmented political landscape, making long-term planning more challenging.

Despite all these challenges, The Philippines’ real GDP is projected to grow by 0.2 percentage points annually between 2024 and 2029, reaching 6.4 percent by 2029. In 2023, approved foreign investments in the Philippines amounted to roughly 889 billion Philippine Pesos, with the power, gas, steam, and air conditioning sectors receiving the largest share. However, no foreign investments were made in the public sector that year, particularly in defense and administration, including mandatory social security. In May 2024, the Philippines’ trade balance showed a deficit of USD 4.6 billion, slightly down from the previous month’s deficit of USD 4.7 billion. The main economic sectors of the Philippines are manufacturing, agriculture, private services, and trade, with agriculture, forestry, and fishing contributing 8.6% of the GDP in 2023.

The construction industry is also a significant player in the Philippines’ economy, with a projected contribution of 7% to the GDP in 2023. The national government’s infrastructure initiative has generated employment opportunities for thousands of Filipinos and attracted foreign investments worth around 14.2 million Philippine Pesos.

The services sector, comprising business process outsourcing, retail, real estate, and tourism, has been a key driver of the Philippine economy. Despite global challenges such as climate change and economic volatility, the country has made progress in poverty reduction, with rates declining from 23.3% in 2015 to 18.1% in 2021.

Economic growth in the Philippines is expected to accelerate to 5.8% in 2024, up from 5.5% the previous year, and reach 5.9% in 2025.

The medium-term economic projection is expected to be sustained by healthy domestic demand, driven by a strong labor market, ongoing public investments, and potential benefits of recent revisions to investment policy that may encourage private investment. With sustained recovery and reform initiatives, the nation is regaining momentum toward its goal of becoming an upper middle-income country, with a gross national income per capita of US$4,230 in 2023.

II. Political Landscape

Japan is seen as having a parliamentary system, whereas the Philippines is a presidential one. The Japanese political system is a bicameral parliamentary constitutional monarchy with a dominating party system. The Emperor serves as the head of state, while the Prime Minister leads the government and the Cabinet, which oversees the executive branch.

The Philippines is a democratic nation with a president who is chosen directly by the populace to fulfill the dual roles of head of state and head of government. The president is a significant political person who leads the executive branch. When assessing the influence of stability and governance on economic growth, Japan and the Philippines offer significant insights. Although Japan’s economic dominance has been bolstered by stability, the democratic administration of the Philippines provides opportunities for response to public demands and participatory decision-making.

III. Infrastructure Development

Underdeveloped infrastructure is a significant obstacle to the Philippines growth. Congested roads, inefficient ports, and unreliable power supply constrain economic activity and deter foreign investment.

The “Build Better More” program, which replaced the “Build! Build! Build!” initiative, aims to improve the country’s infrastructure. According to data from the National Economic and Development Authority (NEDA), as of April 2024, out of the 185 projects that were identified, 35% were still in progress, and less than 1% had been finished since 2022. The primary sources of project funding for this nine-billion-peso project are public-private partnerships (PPP), official development aid (ODA), and the General Appropriations Act (GAA).

Japan’s post-war infrastructure development was pivotal for its economic growth. Investments in manufacturing and heavy industries necessitated rapid urbanization and infrastructure development, creating a solid foundation for industrial growth. “Japan’s development strategy was heavily dependent on infrastructure investments, which became the backbone of its industrialization policy,” wrote Chalmers Johnson in his book “MITI and the Japanese Miracle.”

Japan’s industrialization policy was largely dependent on its infrastructure investments, which enabled effective connectivity and logistics to promote export-oriented companies and economic growth. While promoting economic development through infrastructure investment is a similar objective of both Japan’s post-World War II infrastructure projects and the Philippines’ Build, Build, Build program, they differ in scale, breadth, and historical context.

IV. Industrial Policy and Innovation

Japan’s post-war industrial policy emphasized key industries such as steel, automotive, and electronics. The Ministry of International Trade and Industry played a crucial role in guiding industrial development through subsidies, tax incentives, and preferential financing. Japan also heavily invested in technological innovation and R&D, fostering a skilled workforce capable of driving industrial growth.

In comparison, the Philippines has faced challenges in establishing a robust industrial base. While the country has seen growth in industries such as electronics, business process outsourcing (BPO), and agriculture, it has yet to achieve the same level of industrial diversification and technological advancement as Japan. The Philippine government has recognized the need for industrial policy reforms and increased investment in innovation to drive sustainable economic growth.

The Philippine Development Plan 2023-2028 outlines strategies to enhance industrial productivity, including improving the regulatory environment, fostering innovation, and promoting technology adoption. The government aims to develop a competitive industrial sector by supporting micro, small, and medium-sized enterprises (MSMEs) and attracting foreign direct investment (FDI). Additionally, initiatives to enhance education and skills training are underway to build a workforce capable of supporting a modern industrial economy.

V. Human Capital Development

Human capital development has been a cornerstone of both Japan’s and the Philippines’ economic strategies, albeit with differing approaches and outcomes. Japan’s post-war economic miracle was significantly aided by its investment in education and workforce training. The Japanese government prioritized universal education, with a strong emphasis on science, technology, engineering, and mathematics (STEM). This created a highly skilled and disciplined workforce that could meet the demands of rapidly advancing industries.

Japan’s cultural values, such as diligence, teamwork, and respect for authority, further reinforced its human capital development efforts. The Japanese education system and corporate culture emphasized lifelong learning, continuous improvement (kaizen), and innovation. These factors contributed to a workforce that was not only technically proficient but also adaptable and committed to excellence.

In the Philippines, human capital development is recognized as a key driver of economic growth. The government has made strides in improving access to education and healthcare, which are essential components of human capital. However, challenges remain, particularly in terms of education quality, skills mismatch, and underemployment.

The Philippine’s government is working to align educational curricula with industry needs, promote technical and vocational education, and expand access to higher education. Efforts to improve healthcare services and social protection are also part of the broader strategy to build a healthy, educated, and productive workforce.

The Philippines’ young and growing population presents both opportunities and challenges. With a median age of around 25 years, the country has a demographic dividend that can drive economic growth if properly harnessed. Investing in education, skills development, and health services is crucial to maximizing the potential of this demographic advantage.

VI. Trade and Foreign Policy

Japan’s economic success was supported by a pragmatic approach to international relations, focusing on economic cooperation and regional integration. The United States played a significant role in Japan’s recovery, providing financial aid and access to the American market. This fostered a strong trade relationship that was pivotal to Japan’s export-oriented growth.

Strong exports of machinery, electronics, and cars characterize Japanese trade, which has helped the nation achieve a positive trade balance. Japan has pursued free trade agreements (FTAs) to expand its access to international markets and promote economic growth. By promoting trade and fostering economic cooperation, these accords with nations in the Asia-Pacific area, North America, and Europe have been essential in boosting Japan’s economic development.

In comparison, the Philippines has faced a more complex geopolitical landscape. While the country has made progress in establishing trade agreements and regional partnerships, it has had to navigate tensions in the South China Sea and shifting global trade dynamics. The Philippines’ strategic location in Southeast Asia presents both opportunities and challenges for its trade and foreign policy.

The Association of Southeast Asian Nations (ASEAN) plays a significant role in the Philippines’ trade strategy. ASEAN’s economic integration initiatives, such as the ASEAN Free Trade Area (AFTA) and the Regional Comprehensive Economic Partnership (RCEP), aim to enhance regional trade and investment flows. The Philippines has also pursued bilateral trade agreements with key trading partners, including the United States, Japan, and the European Union.

Efforts to diversify export markets and reduce reliance on a few key trading partners are part of the Philippines’ trade strategy. The country aims to enhance its competitiveness in global value chains by improving trade facilitation, infrastructure, and logistics. Additionally, initiatives to promote exports of high-value goods and services, such as electronics, garments, and IT services, are being implemented to boost trade performance.

VII. Challenges and Obstacles

The Philippines’ economic journey is not without its challenges and obstacles. Political instability, corruption, and bureaucratic inefficiencies have hindered the country’s progress. Environmental issues, such as natural disasters and climate change, pose significant risks to sustainable development.

Political instability has been a recurring issue in the Philippines, affecting investor confidence and policy continuity. Frequent changes in leadership and political turmoil have created an unpredictable business environment. Corruption remains a major challenge, with the country consistently ranking low on Transparency International’s Corruption Perceptions Index. Addressing these issues is crucial for creating a conducive environment for economic growth and development.

Environmental challenges also pose significant risks to the Philippines’ economic prospects. The country is highly vulnerable to natural disasters, such as typhoons, earthquakes, and volcanic eruptions. These events can cause widespread damage to infrastructure, disrupt economic activities, and exacerbate poverty and inequality. Climate change further amplifies these risks, with rising sea levels, increased frequency of extreme weather events, and changing weather patterns affecting agriculture, fisheries, and coastal communities.

The Philippine government has recognized the need to address these challenges and has implemented various measures to mitigate their impact. Efforts to strengthen disaster preparedness and response capabilities, improve governance and transparency, and promote sustainable development are underway. The government is also working to enhance climate resilience through initiatives such as reforestation, coastal protection, and sustainable agriculture practices.

End Note:

The Philippines stands at a critical juncture in its economic journey. While it has made significant progress in recent years, achieving sustained and inclusive growth remains a formidable challenge. The experiences of Japan offer valuable lessons and insights that can guide the Philippines in its quest for economic transformation.

Japan’s post-war economic miracle was built on a foundation of strong governance, strategic industrial policy, investment in human capital, and international trade. While the Philippines faces a different set of challenges and opportunities, it can draw inspiration from Japan’s experience and adapt these lessons to its unique context.

To realize its full potential, the Philippines must prioritize good governance, political stability, and policy continuity. Strengthening institutions, improving transparency, and reducing corruption are essential for creating a conducive environment for investment and economic growth. Additionally, investing in infrastructure, education, and healthcare will be crucial for building a resilient and productive workforce.

The Philippines’ young and dynamic population presents a unique opportunity for demographic dividends. By investing in human capital development, promoting innovation, and fostering a competitive industrial sector, the country can unlock new sources of growth and development.

While the road ahead is challenging, the Philippines has the potential to become a major economic player in the region. By learning from Japan’s experience and implementing bold and visionary policies, the Philippines can chart a path towards sustained and inclusive growth, realizing its aspirations of becoming the next economic miracle in Asia.

Analysis

Will China and the Philippines adhere to their most recent “Arrangement”?

“China-Philippines Most Recent ‘Arrangement’ Has Nothing to Address the Root Cause of Tensions in the South China Sea”

The Philippine government has announced that China and the Philippines have reached an agreement to ease tensions over the disputed Second Thomas Shoal in the South China Sea. This agreement, negotiated by Chinese and Filipino diplomats in Manila, outlines temporary conditions for resupplying Filipino troops stationed on the shoal. Both nations claim sovereignty over the shoal, which has been the scene of frequent confrontations between their forces. The Second Thomas Shoal, also known as Ren’ai Jiao in China and Ayungin Shoal in the Philippines, lies roughly 1,000 kilometers from China’s southern Hainan Island and the western Philippines Island of Palawan. It has been a flashpoint in recent months, culminating in a violent incident on June 17. During this confrontation, Chinese forces rammed and boarded two Philippine navy boats attempting to deliver supplies to Filipino personnel on the shoal. The Chinese forces seized control of the boats, damaged and took several M4 weapons along with other supplies with them. The clash, which resulted in injuries to Filipino navy officers, was captured on video and in photographs. Both China and the Philippines blame each other for the conflict, asserting their respective claims over the strategically significant shoal. The South China Sea is a crucial global trade route with rich fishing grounds and underwater gas reserves.

In addition to China and the Philippines, other nations with territorial claims in the South China Sea include Vietnam, Malaysia, Brunei, and Taiwan. The region is a sensitive area and a potential flashpoint in the US-China rivalry. While the recent agreement between China and the Philippines marks a step towards reducing immediate tensions, it does not address the underlying causes of the broader South China Sea disputes.

Significance & Background of the South China Sea Dispute

The South China Sea is an incredibly productive area, serving as a major fishing ground for China, Vietnam, the Philippines, and other claimant states. The region’s continental shelf harbors significant natural gas and petroleum reserves. The abundance of marine life in the South China Sea is due to the large-scale drainage of nutrient-rich waters from land and the upwelling of water in specific maritime regions. This heavily fished area is a primary source of animal protein for the densely populated Southeast Asian region, with prevalent species including shrimp, shellfish, anchovies, croaker, mackerel, and tuna. Most of the catch, whether fresh or preserved, is consumed locally. The Philippines, in particular, is a major fish-producing nation.

Furthermore, the South China Sea holds tremendous geopolitical significance in the context of global politics. Its strategic location at the intersection of major maritime routes connecting the Indian and Pacific Oceans makes it a focal point for international powers and their interests. The region is critical to the world economy, facilitating the annual flow of goods worth trillions of dollars. Nearly one-third of global trade, including vital energy resources such as oil and natural gas, passes through these waters. Any attempt by China to disrupt this trade would harm the global supply chain and the economies of other countries. Consequently, the South China Sea has become a focal point for the ambitions and rivalries of major powers, including the United States, China, Russia, and Japan.

Ayungin Shoal, also known as Second Thomas Shoal, is a contested reef claimed by the Philippines, China, Brunei, Malaysia, and Vietnam. The Philippine military ship Sierra Madre, intentionally grounded in 1999 to counter China’s territorial claims, is manned by a small contingent of Philippine Marines. For years, these nations have been embroiled in disputes over the territorial status of various islands and reefs like the Ayungin Shoal in the South China Sea. This region, which includes Whitson Reef, the Paracel Islands, Thitu Island, Scarborough Shoal, and the Spratly Islands, is believed to hold significant oil and gas reserves.

In July 2016, the Permanent Court of Arbitration in The Hague ruled against China’s territorial claims in the South China Sea in a case brought by the Philippines. Recently, the Philippine Foreign Ministry announced that the Philippines and China have agreed on guidelines for de-escalating tensions in the South China Sea to facilitate the transfer of personnel and supplies to the BRP Sierra Madre stationed at Ayungin Shoal. The ministry’s statement outlined that both nations have reached an understanding of principles to prevent misunderstandings and miscalculations during the Philippines’ lawful and routine rotation and resupply missions to the shoal.

This agreement was the result of productive discussions during the 9th Bilateral Consultation Mechanism on the South China Sea, held in Manila on July 2, 2024. Despite this progress, China has refused to acknowledge or recognize the court’s ruling, which states that the islands do not form an exclusive economic zone or disputed territory. The Philippine Foreign Ministry affirmed that Manila will continue to uphold its rights and authority over Ayungin Shoal, in accordance with the UN Convention on the Law of the Sea.

Clauses of the Recent Arrangement

According to Manila, China and the Philippines have reached a ‘provisional deal’ for resupply missions in the South China Sea.

The Philippines and China have reached a provisional arrangement for resupply missions to the beached Filipino naval ship, Sierra Madre, on the Second Thomas Shoal, according to a statement from Manila’s Department of Foreign Affairs (DFA). The DFA did not provide specifics about the resupply missions but emphasized that the arrangement followed “frank and constructive discussions” during the Bilateral Consultation Mechanism earlier this month. Both sides acknowledged the need to de-escalate the situation in the South China Sea and manage their differences through dialogue and consultation, agreeing that the arrangement would not prejudice their respective positions in the area.

The Chinese foreign ministry confirmed the temporary arrangement and reiterated its demand for the Philippines to tow away the Sierra Madre and restore the shoal to its original, unoccupied state. A Chinese spokesperson expressed China’s willingness to allow humanitarian resupply missions to the ship’s occupants if necessary before the vessel is removed. However, China firmly opposed any transfer of substantial building materials or attempts to establish fixed facilities and permanent outposts on the shoal, vowing to resist such actions to safeguard its sovereignty.

Despite an offer of assistance from the United States, Philippine security authorities announced that they would conduct the resupply missions independently. White House National Security Adviser Jake Sullivan had stated that the US would do whatever necessary to support its treaty ally in resupplying the Sierra Madre. However, Eduardo Año, his Filipino counterpart, confirmed that the resupply operations would remain “a pure Philippine operation,” indicating no need for direct US involvement at this time.

Analysis of the Arrangement

Concerns of a military conflict at the Second Thomas Shoal, potentially involving the United States, loom large as tensions between China and the Philippines escalate in the South China Sea. Despite these worries, there are strong reasons to believe that both Beijing and Manila will strive to avoid a military clash. Chinese officials must weigh the regional geopolitical implications and the significant distraction from their current focus on domestic socioeconomic issues. Manila faces an immediate constraint due to an unfavourable military power balance compared to China. Many questions remain about how the United States, the Philippines’ ally, will respond if a naval confrontation occurs in the South China Sea. A critical issue is how Manila and its allies will eventually address China’s gray zone operations, which have proven challenging for regional entities and their supporters, influencing the outcome of current tensions between Beijing and Manila.

Beijing appears ready to seize what it perceives as a favorable moment to capture the Second Thomas Shoal. It has employed water cannons to prevent Filipino vessels from transporting construction materials to repair the BRP Sierra Madre. The Philippines has a strong incentive to strengthen the BRP Sierra Madre to maintain control of the feature long-term. During the prolonged dispute, Manila has sent survival supplies to its marines on the ship, which Beijing claims to have allowed for humanitarian reasons. The Philippines may have covertly supplied limited construction materials to the ship, but there are concerns that the vessel will disintegrate if not significantly strengthened.

The goals of the two countries appear incompatible, and conflict is likely to escalate. From another perspective, China may continue to employ gray zone tactics, gradually depleting Manila’s resources and policy options, enabling Beijing to achieve its short-term objectives. Chinese officials recognize these geopolitical constraints but aim to increase China’s presence and influence in the South China Sea. In the ongoing dispute, Beijing heavily relies on gray zone measures, hoping to ensure the eventual failure of the Filipino vessel on the Second Thomas Shoal. When the warship fails, the shoal might swiftly fall under Chinese control. Beijing expects this strategy to help avert the worst-case regional geopolitical repercussions of a direct military conflict. Many Chinese policy elites believe that the gray zone approach is the best way to address this geostrategic challenge. For more than a year, China has effectively blocked the Philippines’ resupply sorties and prevented ship repairs using these tactics.

As a result, the Philippines is forced to choose between responding to China’s blockade and retaining control of the Second Thomas Shoal. A power imbalance and logistical challenges limit the Philippines’ ability to counter China’s strategy. In the worst-case scenario, Manila may take military action or seek military assistance from non-regional states to resist China’s activities. If this occurs, China is likely to retaliate with substantial military force, citing retribution and self defense.

Root Causes of the Tensions

China’s assertiveness in the South China Sea has steadily intensified, escalating tensions with Southeast Asian claimant nations, particularly the Philippines, near the Second Thomas Shoal in the Spratly Islands. China’s sweeping claims to sovereignty over the sea—and its estimated 11 billion barrels of undiscovered oil and 190 trillion cubic feet of natural gas—have angered rival claimants Brunei, Indonesia, Malaysia, the Philippines, Taiwan, and Vietnam. Countries began staking claims to islands and zones in the South China Sea as early as the 1970s, including the resource-rich and strategically vital Spratly Islands. The inability of Chinese and Southeast Asian authorities to resolve these disputes diplomatically risks undermining international maritime law and encouraging destabilizing military buildups.

China insists that international military forces are not permitted to conduct intelligence activities, such as reconnaissance flights, within its claimed exclusive economic zone (EEZ). The United States, however, maintains that under the United Nations Convention on the Law of the Sea (UNCLOS), claimant countries should have freedom of navigation through EEZs and are not required to notify claimants of military activity.

Recent satellite data reveals China’s growing efforts to expand its territorial control in the South China Sea by physically enlarging existing islands or creating new ones. Beyond adding sand to existing reefs, China has built ports, military stations, and airstrips, especially on the Paracel and Spratly Islands, where it maintains multiple outposts. Notably, China has militarized Woody Island, deploying fighter jets, cruise missiles, and a radar system.

To protect its regional political, security, and economic interests, the US has challenged China’s assertive territorial claims and land reclamation projects through freedom of navigation operations and increased support for Southeast Asian partners. In response to China’s aggressive stance, Japan has provided military ships and equipment to the Philippines and Vietnam to bolster their maritime security and deter Chinese aggression.

Philippine President Ferdinand Marcos Jr., who took office in June 2022, has taken a firmer stance against China compared to his predecessor, Rodrigo Duterte. The Philippines’ most contentious disputes with China center around the Second Thomas Shoal of the Spratly Islands, which lies within the Philippines’ 200-mile EEZ.

Ferdinand Marcos has agreed to increase base access, joint exercises, and weapons exchanges with the United States. In March 2024, US Secretary of Defense Lloyd Austin affirmed that the United States’ Mutual Defense Treaty with the Philippines covers both countries’ armed forces, public vessels, and aircraft in the South China Sea. Meanwhile, Japan has also enhanced its influence by supplying military weapons to the Philippines and Vietnam to enhance maritime security.

End Note

Beijing may wish to refrain from using overt force against Manila in order to resolve territorial and maritime conflicts due to its previous policy preference, regional strategic interests, and the effectiveness of gray zone tactics. Beijing does not, however, intend to forgo using military action as a means of settling conflicts. There is a chance of an armed conflict, especially if Manila takes more drastic measures to make China’s “gray area” strategy ineffectual. The best measures to keep tensions and conflict from turning into war would be to defuse the South China Sea crisis and reopen bilateral talks between Beijing and Manila. Together, Beijing and Manila’s policymakers should take into consideration the ambitious but intriguing idea of creating a maritime park at Second Thomas Shoal with the goal of advancing environmental preservation, scientific study, and cooperative fisheries. For the past ten years, experts from China and Southeast Asia have discussed this topic on occasion, but at the official level, it has not yet been addressed. This possibility might have a favorable effect on regional peace and stability if China and the Philippines give it some thought.

Analysis

Philippines President Vows not to Yield Despite New Provisional Deal with China

zIn a firm assertion of the Philippines’ territorial rights, President Ferdinand R. Marcos Jr. declared that the country would not yield or waver in its stance on the West Philippine Sea. During his 3rd State of the Nation Address (SONA) on July 22, 2024, Marcos emphasized the importance of maintaining the nation’s sovereignty and expressed gratitude for the sacrifices made by the Armed Forces of the Philippines (AFP), the Philippine Coast Guard (PCG), and the fishing communities.

“The West Philippine Sea is not a mere figment of our imagination. It is ours. And it will remain ours as long as the spirit of our beloved Philippines burns bright,” he asserted, drawing a standing ovation from the audience.

The President highlighted the increased strategic efforts to enhance aerial and maritime domain awareness, reaffirming the government’s relentless endeavor to increase the country’s defensive stance through self-reliance and partnerships with like-minded nations. “Laws governing our Maritime Zones and Archipelagic Sea Lanes will ensure that this intergenerational mandate — this duty — takes deep root in the hearts and minds of all our people,” he stated.

A significant development followed the President’s address, as the Philippines and China announced a provisional deal to manage tensions at the contested Second Thomas Shoal. This deal, reached after a series of diplomatic discussions, aims to prevent further clashes in the disputed South China Sea.

Philippine Foreign Affairs Secretary Teresita Daza announced that the agreement signifies both nations’ commitment to de-escalate tensions and manage differences peacefully. “In our desire to de-escalate the situation in the South China Sea to manage differences in a peaceful manner, we emphasize that the agreement was done in good faith and the Philippines remains ready to implement it,” Daza stated.

China’s Foreign Ministry confirmed the arrangement, reiterating its demand for the Philippines to tow away the grounded warship, Sierra Madre, from the Second Thomas Shoal. However, China expressed willingness to allow humanitarian resupply missions to the personnel stationed on the ship if informed in advance.

Despite this, the Philippines maintained its stance against prior notification to China about resupply missions, asserting the missions’ lawfulness and the necessity of preserving national sovereignty. “The principles and approaches laid out in the agreement were reached through a series of careful and meticulous consultations between both sides,” Daza emphasized.

The deal comes after a series of violent confrontations between Filipino and Chinese forces at the shoal, which both nations claim. The Second Thomas Shoal, known as Ayungin Shoal in the Philippines and Ren’ai Jiao in China, has been a focal point of these clashes, sparking fears of a broader conflict involving the United States due to its mutual defense treaty with Manila.

The most severe confrontation occurred on June 17, when Chinese forces repeatedly rammed and boarded Philippine navy boats to prevent supplies from reaching the Sierra Madre. This incident resulted in injuries to Filipino personnel and heightened tensions between the two countries.

The United States and its allies, including Japan and Australia, condemned China’s aggressive actions and called for upholding the rule of law and freedom of navigation in the South China Sea, a crucial global trade route with rich fishing areas and undersea gas deposits.

In response to the tensions, Washington reaffirmed its commitment to defend the Philippines under the 1951 Mutual Defense Treaty. National Security Adviser Jake Sullivan stated, “The US will do what is necessary to ensure its treaty ally can resupply the Sierra Madre on the Second Thomas Shoal.”

Philippine National Security Adviser Eduardo Año confirmed that the resupply missions would remain a “pure Philippine operation,” turning down offers of direct US involvement. “There is no need at this time for any direct involvement of US forces in RORE – resupply mission,” Año said.

The provisional agreement reached by the Philippines and China seeks to manage their maritime differences while preventing future clashes. Both nations recognize the need to de-escalate the situation and manage their differences through dialogue and consultation.

This rare deal with the Philippines could spark hope for similar arrangements between China and other claimant countries in the South China Sea, including Vietnam, Malaysia, Brunei, and Taiwan. However, the successful implementation and longevity of the agreement remain to be seen.

Chinese Foreign Ministry spokesperson Mao Ning emphasized that the temporary arrangement for the delivery of humanitarian supplies reflects China’s goodwill. However, China stood firm on its territorial claims and demanded that the Philippines refrain from fortifying the Sierra Madre with building materials.

The Philippines has consistently rejected such conditions, and the final deal does not include them. Philippine officials stated that the agreement was reached after careful negotiations, excluding prior notification and inspection demands from China.

The Second Thomas Shoal, located about 200km from the western Philippine island of Palawan and over 1,000km from China’s Hainan island, has been a site of repeated confrontations. Both countries assert their sovereign rights over the shoal, which is strategically important and resource-rich.

Manila deliberately grounded the Sierra Madre on the shoal in 1999 to reinforce its claims, maintaining a small contingent of sailors aboard the vessel who require resupply missions that China has repeatedly attempted to block.

The Department of Foreign Affairs in Manila reiterated that the agreement would not prejudice each side’s national positions in the South China Sea. “Both sides continue to recognize the need to de-escalate the situation and manage differences through dialogue and consultation,” the DFA stated.

China’s Ministry of Foreign Affairs confirmed the arrangement, highlighting the mutual understanding to manage the situation at Ren’ai Jiao and ensure humanitarian resupply of necessities to the personnel on the Sierra Madre.

The agreement between the Philippines and China marks a significant step towards managing maritime disputes in the South China Sea. It reflects both nations’ willingness to engage in dialogue and find peaceful solutions to their differences, despite the complex and contentious nature of their territorial claims.

As the Philippines and China implement this provisional arrangement, the international community will closely watch how both nations navigate this delicate situation. The success of this deal could serve as a model for resolving other maritime disputes in the region, contributing to regional stability and cooperation.