Has our One China policy worked to our benefit?

Font Size

Numbers Don’t Lie

China flag

In 1975, the Philippines adopted a diplomatic statute called the “One China Policy” to govern its relations with China and Taiwan. At the heart of the statute is that the Philippines would only recognize one sovereign state called “China” (referring to the People’s Republic).

As such, diplomatic ties between the Philippines and Taiwan were severed and relations between the two have since been limited to cultural and economic affairs. The One China Policy further precludes the Philippines from cooperating with Taiwan on the realms of defense, diplomacy, and policy. It could, however, engage in trade, tourism, education, culture and technological exchanges.

Philippine-Taiwanese Affairs are managed by an administrative office called the Manila Economic and Cultural Office (MECO). MECO has offices in Taipei and Kaohsiung. MECO’s counterpart in the Philippines is the Taipei Economic and Cultural Office, based in Makati City. Both have been operational since 1975.

I recently enjoyed a long chat with MECO’s Chairman, Angelito “Lito” Banayo, who told me about the many projects MECO has initiated to deepen trade and cultural exchanges between Taiwan and the Philippines. It has been a very productive year for his office.

Thriving relations between Taiwan and the Philippines lead me to question whether our One China Policy has worked to our benefit after more than 42 years. I looked into the numbers and this is what I came out with.

Despite President Duterte’s efforts to reach out and strengthen eco-political ties with our neighbor to the north, China has so far failed to deliver on the three most important aspects of the relationship — investments, infrastructure, and trade.

The numbers speak for themselves.

Data from the Bangko Sentral ng Pilipinas shows that in terms of investments inflows, China invested an anemic $3.34 million in the Philippines between January to June this year. This is a pittance compared to the investments made by the Netherland, Singapore’s and Japan. Investments in the past four decades were nothing to brag about either.

China’s actual investments makes a farce of the $15 billion it promised President Duterte during his state visit to Beijing last October. Making the situation more acerbic is that China continues to invest heavily in Vietnam, Malaysia, and Indonesia, countries which have stood their ground in defending their sovereign rights against China’s creeping invasion in the West Philippine Sea.

In trade, China purchased a mere $3.296 billion worth of goods from the Philippines in the first semester of the year despite the spate of press releases declaring that it would buy more agricultural products from farms in Mindanao. Again, China’s numbers pale in comparison to Japan which purchased $4.937 billion and the US which purchased $4.525 billion from us. Mind you, China enjoyed a whopping $4.75-billion trade surplus from us in the process.

Many would say that the one positive result of President Duterte’s pivot to China is the much hyped $8-billion credit facility extended to the Philippines to finance our infrastructure needs.

Contrary to what many believe, the funds made available to us is not a grant — they are loans that must be repaid at interest rates substantially higher than those imposed by other lenders like Japan.

It further comes with the proviso that China’s relatively inexperienced construction firms, suppliers, and consultants be utilized to undertake infrastructure projects. Worse, some projects require the Philippine government to hire workers from the Chinese mainland, who, in effect, would take jobs away from Filipinos.

The credit facility is not a special accommodation to the Philippines as many would like to believe.

Fact is, China has been setting-up credit facilities across developing nations in Asia, the Americas, and Africa as part of its economic policy called the “Belt & Road Initiative.” This is a grand scheme to create a China-centered trading network that spans the globe. It is a money-making venture meant to fuel China’s future growth amid its decelerating domestic economy.

All things considered, the numbers suggests that the pivot to China has not paid the dividends we expected. It is a travesty since it comes at the cost of the Philippines’ staying mum on its sovereign claims for our territories in the West Philippine Sea.

China has manipulated us into giving-up a limb for a measly $3.3 million in investments and loans we must pay at high interest rates. It dangled the proverbial carrot in front of our faces but delivered a pittance, investment-wise.

Our relations with China is a one-way street where the Philippines is made the fool.

Our relationship with Taiwan is quite the opposite.

Taiwan, being the more affluent nation, has been a generous neighbor to the Philippines without demanding anything in return.

In 2016, Taiwanese President Tsai Ing-wen announced its “New Southbound Policy,” the republic’s loose equivalent to China’s Belt & Road Initiative.

Its objective is to wean its trade dependence on China and build a more extensive network of trade and cultural exchanges with ASEAN, South Asia, and Oceania. Taiwan has a war chest of NT$7.19 billion (approximately $24 billion) for its initiative.

The Philippines got a piece of the action by securing a net inflow of investments amounting to $25.99 million in the first six months of 2017. Mind you, this is nearly eight times more than what China contributed. What’s more, it comes with no strings attached.

The Taiwanese are seen to maintain its status as one of the Philippine’s top 10 investors next year as MECO’s investment promotions efforts bear fruit.

Earlier this year, Chairman Banayo’s team organized the Taiwan-Philippine Industrial Collaboration Summit and the Agriculture Business Matching Conference, both of which resulted in many new investment collaborations. The Taiwan Expo held at the SMX last September was equally successful.

In trade, Taiwan purchased $1.114 worth of products from the Philippines between January and June, while we imported $2.237 billion worth. Like China, Taiwan enjoys a trade surplus of $1.123 billion from us.

In tourism, Taiwanese visitors to the Philippines grew by 23% to some 114,000 last year on the back of MECO’s cultural and tourism promotions. On the other hand, Filipinos travelling to Taiwan jumped by 72% to 150,000. The recent visa-free status granted by the Taiwanese government to Filipinos will see these numbers grow in spades. Unfortunately, MECO cannot reciprocate the privilege as it relies on visa fees to sustain its operations.

Among MECO’s keystone projects is one to transfer Taiwanese agriculture technology to the Philippines.

As everybody knows, Taiwan is renowned for having one of the highest per hectare agricultural yields in the world. As such, programs have been established to train Filipino OFWs on fruit and vegetable farming as well as to establish Taiwanese demonstration farms in local universities so that Filipino students can witness, first hand, technology-assisted agricultural methods.

So going back to the question… has the One China Policy worked to our benefit? I realized that the question has become irrelevant. I say this because the entire premise of having diplomatic ties is that both countries recognize the sovereignty and nationhood of the other. It is a relationship among equals.

The fact that China continues to grab our territories in a bullying manner, unilaterally building military structures on it, and precluding our fishermen from harvesting the bounties of our own seas reek of disregard for the diplomatic relationship we supposedly have.

In the end, only China benefitted from our One China Policy.


Andrew J. Masigan is an economist.