Bank of America (BofA) has issued a warning that “any deterioration in Philippines-China relationship could exert greater drags” on our economic growth this year – citing the potential impact on trade, tourism, and investments. In its latest report, BofA pointed out that “China is still the Philippines’ largest trading partner and was the largest source of tourists pre-COVID.”
This came amid escalating tensions between the neighboring countries regarding the West Philippine Sea. Over the weekend, Chinese embassy officials in Manila disclosed that the Armed Forces of the Philippines (AFP) Western Command (Wescom) has recently entered into an agreement with China on a so-called “new model” to manage disputes over the Ayungin Shoal. This agreement was supposedly approved by Filipino officials from the National Security Council and the Department of National Defense (DND).
The embassy revealed that all “communication and negotiation on this subject matter is kept on record in every detail by the Chinese side,” emphasizing that these “are facts, not narratives or inventions.” Its statement further claimed: “Thanks to the ‘new model,’ frontliners of both sides had guidance to follow on how to interact with each other, which made the resupply mission last February 2 a smooth one.” One of those resupply missions was reportedly described by the AFP Wescom spokesperson as “flawless” following the implementation of the new model.
National Security Adviser Eduardo Año reacted by stating: “No one in the Philippine government is, nor have been, empowered nor authorized to enter into or commit to any sort of agreement, understanding, or arrangement – more so informal ones, by our President.” He labeled the embassy’s claim as “fake news” and “disinformation.”
DND Secretary Gilbert Teodoro also denied that the Philippines is a party to any new arrangement with China in relation to the disputed shoal. His curiosity was piqued as to why the disclosure came right after a quadrilateral meeting with the defense ministers of Australia, Japan, and the US that he attended in Hawaii last week.
It may be recalled that Chinese Ambassador to the Philippines Huang Xilian paid a courtesy call on Teodoro at Camp Aguinaldo in Quezon City when the latter assumed the DND’s top post in July 2023. Teodoro insisted though that there was no discussion or briefing on this new model or even the “gentlemen’s agreement” between former President Rodrigo Duterte and Chinese President Xi Jinping in 2016.
Both Duterte and the Chinese Embassy have confirmed the existence of the gentlemen’s agreement. According to the embassy, the Philippines agreed not to deploy any of its aircraft or vessels beyond 12 nautical miles of Scarborough Shoal or its corresponding airspace, and would limit the fishing area of Filipino fisherfolk.
Embassy officials said they have been wracking their brains because of more and more questions, such as: “Why does the Philippine administration keep denying and resisting the understandings and arrangements? Why does the DND refuse to properly manage maritime differences through dialogue and negotiation?”
After admitting that the gentlemen’s agreement was reached during the previous administration of Duterte, the embassy claimed that the new model was agreed upon during the incumbent administration of President Ferdinand Marcos Jr.
So, who is telling the truth here? Does the DND have evidence to refute the allegations? Will the embassy release the transcripts of the discussions that led to the formulation of the new model?
Meanwhile, all parties concerned should seriously consider the BofA’s forecast that the trade imbalance between the Philippines and China could worsen if their diplomatic relationship deteriorates further. Hopefully, cooler heads will prevail and trust could still be rebuilt between our two nations.
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J. Albert Gamboa is a Life Member of the Financial Executives Institute of the Philippines (FINEX) and Vice-Chair of the FINEX Ethics Committee. The opinion expressed herein does not necessarily reflect the views of these institutions and the Manila Bulletin. #FinexPhils www.finex.org.ph