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Malaysian firms seeking to participate in building program

MALAYSIAN businesses are hoping to play a role in the government’s infrastructure program, the country’s Trade Minister Mustapa Mohamed said, with some firms already with their foot at the door in the airports segment.

“Some companies are interested… in the development in the new airport in Manila,” Mr. Mustapa, who heads the Ministry of International Trade and Industry, told reporters on the sidelines of the Malaysia Business Forum held Monday in Makati.

He said some Malaysian companies are planning their engagement, which is now “in progress.” He declined to indicate which projects have attracted their interest.

Ninoy Aquino International Airport has attracted to bids for rehabilitation. One is by seven-group consortium of Aboitiz InfraCapital, Inc.; Ayala-controlled AC Infrastructure Holdings Corp.; Andrew L. Tan’s Alliance Global Group, Inc.; Lucio C. Tan’s Asia’s Emerging Dragon Corp.; Filinvest Development Corp.; JG Summit Holdings, Inc.; and Metro Pacific Investments Corp..

The other is the partnership of Megawide Construction Corp. and India’s GMR Infrastructure Ltd.

Mr. Mustapa also would not comment when asked about Malaysian interest in San Miguel Corp.’s P700-billion Bulacan airport project proposal.

He noted that several Malaysian companies remained optimistic about investing in the country “in almost every sector.”

Department of Trade and Industry (DTI) Secretary Ramon M. Lopez noted that the Philippines-Malaysia bilateral trade relationship was worth $5.20 billion in 2017, with two-way trade running in Malaysia’s favor.

Exports to Malaysia rose by 30.63% to $1.58 billion in 2017, while imports increased by 6.82% to $3.62 billion.

Malaysia is the country’s number 10 trading partner. It is the 11th-largest export destination, and the 9th-largest source of imports. — Janina C. Lim

Fuel prices set to decline amid weaker international prices

OIL companies are rolling back the price of petroleum products this week after two straight weeks of increases.

Gasoline retail prices will decline P0.35 per liter, diesel will fall P0.55 per liter will kerosene will retreat P1.20 a liter, the companies that sent their price advisories said.

Seaoil Philippines, Inc. will be among the first to roll back prices at 12.01 a.m. on Tuesday, March 13.

“This is to reflect movements in the international petroleum market,” Seaoil said.

The rest will be cutting prices at 6 a.m. on Tuesday.

Last week, gasoline, diesel and kerosene prices moved up by P0.50, P0.30, P0.80 per liter, respectively. — Victor V. Saulon

Tax amnesty to widen the tax net

The term “tax net” refers to “the mechanism for ensuring that people and companies pay their taxes.” A wider tax net means better revenue for a government to support its projects and improve its public services. But achieving a wider net is always a challenge, especially for developing countries.

Widening the tax net may be achieved by implementing a simplified taxation system, having efficient and effective tax enforcement, and building trust in the government, among others. A tax amnesty program may also help widen the tax base, if it is implemented properly.

A tax amnesty is a general pardon or the intentional overlooking by the State of its authority to impose penalties on persons otherwise guilty of violating a tax law. Amnesty involves an absolute waiving its right to collect what is due and giving tax evaders who wish to relent a chance to start with a clean slate. (G.R. No. 178797, Aug. 4, 2009)

A tax amnesty program is now being pushed for legislation in order to raise P26 billion in revenue to support infrastructure projects. Both the House of Representatives and the Senate are now drafting the Amnesty Bill.

One of the draft bills on tax amnesty in the Senate covers all national internal revenue taxes, including value-added and excise taxes collected by the Bureau of Customs (BoC), for the taxable year 2017 and prior years. The amnesty amount is 5% of net assets as of Dec. 31, 2107 or the minimum amount which ranges from P40,000 to P250,000 for individuals and P120,000 to P500,000 for corporations, whichever is higher. The proposed Amnesty Bill, however, shall not cover withholding agents with respect to their withholding tax liabilities; those with pending cases with the Presidential Commission on Good Government (PCGG); those with pending cases with Sandiganbayan involving unexplained or unlawfully acquired wealth under the Anti-Graft and Corrupt Practices Act; and those with pending cases in appropriate courts involving violations of the Anti-Money Laundering Law, among others.

Tax amnesty programs are not new to the Philippines. There have already been several tax amnesty programs implemented during previous administrations.

During the Marcos administration, there were 10 Presidential Decrees (PDs) issued on tax amnesty. Six of these PDs were issued for previously untaxed income and wealth. The total collection for all these PDs amounted to P1.88 billion. (NTRC Tax Research Journal, Vol. XXVIII.5, September-October 2016)

In 1986, Executive Order (EO) No. 41 was also issued to grant a one-time tax amnesty covering unpaid income taxes for the period 1981 to 1985. Another EO was issued to expand the coverage of the said amnesty to include estate and donor’s taxes. The total revenue collected from this program amounted to around P1.3 billion. (NTRC Tax Research Journal, Vol. XXVIII.5, September-October 2016)

The last general tax amnesty was on May 24, 2007 under Republic Act (RA) No. 9480, otherwise known as the “Tax Amnesty Act of 2007.” RA No. 9480 provided amnesty on all unpaid internal revenue taxes for the taxable year 2005 and prior years, and covered income tax, estate and donor’s tax, capital gains tax, value-added tax, other percentage taxes, excise taxes, and documentary stamp taxes. The total collections from this amnesty amounted to around P5.9 billion. (NTRC Tax Research Journal, Vol. XXVIII.5, September-October 2016)

While previous amnesty programs helped the government raise the needed revenues to fund its projects, the question is, “Did the government capture and process the information of the taxpayers who availed the programs and ensure their compliance going forward?”

The objectives of the tax amnesty programs are to improve tax compliance by giving errant taxpayers the opportunity to comply with tax laws and enter the tax system on a clean slate, to reduce the administrative backlog of tax enforcement agencies, to increase the level of public tax consciousness, and consequently, to raise additional revenue. Such a program should widen the tax net as tax evaders are brought into the tax system.

In a paper on “Best Practices in Tax Amnesty and Repatriations Programs” released by International Transparency, it is suggested that, in implementing a tax amnesty, tax authorities should be adequately equipped to handle tax cases professionally and expeditiously. This is to ensure that tax investigations and enforcement of tax laws are not tainted. The government should also have a robust data management system to capture and analyze information received during the amnesty period. Such information should also be used to determine noncompliant taxpayers. It is also important that, after the amnesty period, tax authorities should strictly enforce tax laws and impose higher penalties to tax evaders who did not avail of the program.

Moreover, the amnesty program should not be regularly implemented, as this may result in a decrease in the level of compliance of taxpayers who expect the government to offer another amnesty. Tax amnesty programs should be the exception rather than the norm, because they may negatively affect revenue collection and compliance in the long run.

Implementing a tax amnesty program this year may be helpful to both the government and the taxpaying public. A tax amnesty would help the government raise the needed revenues to fund its Build, Build, Build program and, at the same time, put to rest any unresolved issues that taxpayers may have in previous years. The amnesty will also give taxpayers more time to focus on the impact the TRAIN law has on their business operations. Lawmakers, however, should ensure that the amnesty law includes provisions that will attain its objectives, i.e., it should improve tax compliance by giving errant taxpayers the opportunity to comply with tax laws and enter the tax system on a clean slate, reduce the administrative backlog of tax enforcement agencies, increase the level of public tax consciousness, and consequently, raise additional revenue through the widening of the tax net.

 

Edward L. Roguel is a partner of the Tax Advisory and Compliance of P&A Grant Thornton. P&A Grant Thornton is one of the leading audit, tax, advisory, and outsourcing services firms in the Philippines.

Dynasty

Just exactly do we mean when we talk about dynasties? Far from what we read in myths and legends, and see in the movies, dynasties are machineries of power that seek to perpetuate their own bloodlines and expand their reach.

They thrive on inequalities and present themselves as naturally superior to the common people they rule or dominate. Dynasties look upon marriages as ways of forging alliances with other dynasties, thereby expanding and extending their hold.

Two deans of Schools of Governance, Ronald Mendoza (Ateneo de Manila University) and Julio Teehankee (De La Salle University) point out the dangers posed by dynasties to development and good governance. They not only limit voters’ options but also hinder local government units from reaching their full potential. Where dynasties reign, the typical results are lower standards of living (as measured by average income); lower human development (as measured by the Human Development Index); and higher levels of deprivation (as measured by poverty incidence, gap and severity).

Political dynasties — characterized as families that dominate their local jurisdictions through politically and economically coordinated efforts — have long been a fixture in Philippine politics. Used as a base to gain national prominence and positions of national political importance, a family dynasty allows its members to lead or represent their areas for successive generations either successively or simultaneously.

The 1987 Constitution bans political dynasties but subject to an enabling law by Congress. Congress, which is dominated by political dynasties, has failed to pass an enabling law defining a political dynasty since that time. While there were attempts in the past to define a political dynasty such as the Anti-Dynasty Bill, the attempts miscarried and ended in failure.

As a way out, retired Supreme Court associate justice Vicente Mendoza proposes that the 1987 Constitution, should it be amended, must have a self-executory anti-dynasty provision that directly prohibits political dynasties. The degree of consanguinity must also be precisely defined and determined. The PDP-Laban Federalism Institute version concurs that an amended Constitution should have a self-executory provision. Their draft is currently under review.

I really think it is important that we remove dynasties from the equation if we are to shift to a federal form of government. Dynasties have kept society divided, mercenary and parochial. Federalism may be stillborn if dynasties remain a fixture in Philippine politics and governance. Federalism is seen by its supporters as a fresh start to catapult the country toward real change. It cannot start on the wrong foot, corroded and weighed down from the start by the rust and barnacles of the old order. Here’s why.

Patterns of political dynasties offer a very sobering view of political inequality. A 2012 study of the 15th Congress (2003–2007) suggests that about 80% of dynastic legislators experienced an increase in their net worth. Dynasties in Congress also tend to dominate the major political parties, comprising anywhere from 60–80% of each of the major parties (see Figure 1).

Dynasties In Political Parties

At the Senate hearing this February, Dean Mendoza cited studies that fat political dynasties are behind worsening poverty in the poorest areas of the country. He also repeated this in my DZRH TV-radio-online show Thinking Out Loud with Raffy Alunan on Saturday. Fat dynasties have more than two family members simultaneously occupying government positions (sabay-sabay), while thin political dynasties have members succeed each other in office (sunod-sunod).

From 2007 to 2016, Mendoza said the powerful clans per position rose from 75% to 78% among congressmen; from 70% to 81% among governors; and from 58% to 70% among mayors. There is definitely a correlation between the poorest areas in the country and the concentration of dynasties there. The Ampatuan clan in Maguindanao, the second poorest province in the country, is a good example — more than 20 relatives in local government units.

Prof. Amado Mendoza (University of the Philippines) cites a socioeconomic reality: “The poor need a ‘padron (patron)’ which explains why dynasties thrive.” They’re the ones the poor run to when they need money, or during natural calamities, or be their godparents in weddings and baptisms. The debt of gratitude or “utang na loob” keeps them on top. This cultivated dependency entrenches the political dynasties.

Dean (Ronald) Mendoza adds that democracy is endangered because most voters don’t have the power to choose wisely and freely. Checks-and-balances don’t work, resulting in impunity and corruption in governance. Mendoza’s 2012 study correlated poverty to fat political dynasties. His findings identified 10 provinces with the largest dynastic representation as the following: Maguindanao, Apayao, Sulu, Tawi-Tawi, Ilocos Norte, Abra, Negros Occidental, Ilocos Sur, Quirino, and Cebu. The Philippine Statistics Authority’s 2012 official poverty statistics revealed that six of these provinces were among those with very high poverty incidence.

Dynasties in provinces

The poor under the dynasties do not have the capacity to challenge them. Fat dynasties maintain their power through webs of patron-client relations that enforce their hold through a combination of coercion and suasion. They disempower the citizenry from appropriately and adequately responding to socioeconomic problems; compromise the common good for self-serving interests; and thwart the deserving from government service. And they operate at strategic levels that lead to “state capture” hijacked by the elite to further their interests.

But are political dynasties necessarily all bad, Lila Ramos-Shahani asks? Those who defend dynasties argue that they provide strong and capable leaders, well-known and respected in their regions, who are in the best position to promote positive development outcomes and pursue long-term, continuous structural reforms. Political dynasties can thus produce qualified and dedicated officials. True, but, unfortunately, exceptions are not the general rule, not by a long shot.

In the main, dynasties have held a stranglehold on the Philippines political and economic landscapes. There is a correlation between our state of poverty and underdevelopment to the dictates of those who continue to dominate our lives. The time has come to break through. Onward to real change!

 

Rafael M. Alunan III served in the Cabinet of president Corazon C. Aquino as secretary of Tourism, and in the Cabinet of president Fidel V. Ramos as secretary of Interior and Local Government.

rmalunan@gmail.com

map@map.org.ph

http://map.org.ph

Nationwide Round-Up (03/13/18)

DeLima-AFP-080317
In this photo taken on February 16, 2017, Senator Leila de Lima arrives at the Senate session hall in Manila. — AFP

De Lima, Roque exchange rants

“MY POINT was, people who have a democratic mandate deserve respect especially from those without a mandate.” This was the response of Presidential Spokesperson Herminio Harry L. Roque, Jr.’s to Senator Leila M. De Lima, who described the former as a fake human rights lawyer following his remarks against United Nations (UN) High Commissioner for Human Rights Zeid Ra’ad Al Hussein.

“Enjoy the rest of your life in jail!” Mr. Roque said. Ms. De Lima has been incarcerated for more than a year now on drug-related charges filed under the Duterte administration. — Arjay L. Balinbin

Faeldon released from Senate custody

Former Customs chief Nicanor E. Faeldon — PHILSTAR

SENATOR RICHARD B. Gordon has ordered the release of former Customs chief Nicanor E. Faeldon today, March 12, after being detained for six months on contempt charges in connection with the Senate Blue Ribbon committee’s investigation into the illegal drug shipment that slipped past the Bureau of Customs (BoC) in May 2017.

“The committee chair hereby orders your release from incarceration,” he told Mr. Faeldon during Monday’s Senate hearing after securing a commitment from the former Marine captain to stop “talking back.” Mr. Faeldon was detained at the Senate last September and was transferred to Pasay City Jail last January. Within this period, he was appointed deputy administrator of the Office of Civil Defense (OCD), five months after he resigned as BoC commissioner. — Camille A. Aguinaldo 

Roque confirms Bong Go might run for Senate

Special Assistant to the President
(SAP) Christopher “Bong” T. Go
(in shades) was President Rodrigo ​R.
Duterte’s​ executive assistant while mayor​
of Davao City. — ​PHILSTAR

SPECIAL ASSISTANT to the President (SAP) Christopher “Bong” T. Go will heed President Rodrigo R. Duterte’s advice on whether he should run or not for a seat in the Senate in the 2019 midterm elections, Presidential Spokesperson Herminio Harry L. Roque, Jr. said. “The President has broached it to SAP Go, and it’s something that they are discussing between the two of them,” Mr. Roque told reporters in a press briefing at the Palace on Monday, March 12, when asked about the possibility of Mr. Go’s senatorial candidacy.

The spokesman added: “The position of SAP Go is he will heed whatever the President wishes him to do. He has said that personally he would not run, but if the President asks him to, he will.” — Arjay L. Balinbin

The tale of two Mindanao regions

This article will examine the progress of two key regions in Mindanao: Davao and the Zamboanga Peninsula. Davao, in the east, faces the Pacific Ocean with Davao City as the center. Zamboanga, in the west, faces the Sulu Sea with Zamboanga City as center. The two regions were chosen as they have similarities in economic base, extensive coastlines, as well as contrasting geographic locations.

Davao City is the main trade center of the Davao Region, together with southern Caraga, southern Bukidnon, and Socssksargen region. Meanwhile, Zamboanga City serves Zamboanga Peninsula as well as western ARMM (Autonomous Region in Muslim Mindanao).

The metrics are: (a) population, land area and poverty; (b) gross regional domestic product and components; and (c) agriculture and fishery, and agri-manufacturing.

Population Land & PovertyPOPULATION, LAND AREA, AND POVERTY
Davao is 35% bigger in population and 19% larger in land area than the Zamboanga Peninsula. Its poverty incidence is 12 percentage points lower.

However, there are inter-provincial extremes in poverty. Davao del Sur has a poverty incidence of 15.6% in 2015 as compared to Davao del Norte’s 33.2%. Note: Davao del Sur includes Davao City which has very low poverty.

By contrast, Zamboanga del Norte has a poverty incidence of 51.6%; Zamboanga Sibugay, 31.7%. Farmers’ poverty is far lower in Davao than Zamboanga.

From 2010 to 2015, Davao’s population grew by 9.9% (an in-migration area) versus Zamboanga’s 1.2% (an out-migration area).

GROSS REGIONAL DOMESTIC PRODUCT (GRDP) AND GROWTH
Davao is two times larger in GRDP compared to Zamboanga. The former posted a growth of 9.4% in 2016, twice that of the latter’s 4.7%. Structurally, Davao has bigger agriculture and industry sectors.

AGRICULTURE, FISHERY, AND AGRI-INDUSTRIES
The Zamboanga Peninsula has a bigger farm area than the Davao region. However, Davao agriculture is more diversified.

Of the total crop area, 78% were occupied by palay, corn, and coconut in Davao as compared to 85% in Zamboanga. Low-yield coconuts account for 46% of harvested area in Davao, and 50% in Zamboanga. Too glaring is the high poverty of Zambo del Norte (51.6%) compared to its neighbor, Zambo Sibugay (31.7%). Low farm productivity is the main culprit.

Agriculture

Perhaps the most distinguishing feature is that Davao has more commercial crop exports in high-value Cavendish banana, desiccated coconut, coco sugar, and cacao. Zamboanga has large areas of rubber but productivity is low.

Davao also has bigger livestock and poultry production. By contrast, Zamboanga has a larger production of fishery and aquaculture.

Davao possesses more diversified agri-industries spurred by its wide base of agriculture raw materials and, perhaps, entrepreneurs.

GLOBAL CONNECTIVITY
Davao has an international airport with connections to Singapore and Kuala Lumpur. In 2016, Davao airport hosted 3.6 million passengers. The country’s most modern international container port at Panabo City hosts global shipping lines such as Maersk Lines and APL.

Zamboanga has an international airport but no global connections. In 2016, 980,000 passengers used the airport. Tourism appears robust in Davao and undeveloped in Zamboanga. Zamboanga City has to develop its brand.

TAKEAWAY
There is tremendous potential in the two regions. Davao is on the verge of investment takeoff. The construction of the first phase (100 kilometers) of the Mindanao Railway connecting Digos and Tagum will begin in 2018.

Zamboanga, meanwhile, will have to address its peace and order image, poor power supply, and entrepreneurial drive, among others. Zamboanga del Norte’s poverty is among the highest in the country.

Admittedly, it is a challenge comparing two regions. There are statistics, but there are also crucial social and cultural factors of development. The quality of governance institutions differs, too.

This article reflects the personal opinion of the author and does not reflect the official stand of the Management Association of the Philippines or the MAP.

 

Rolando T. Dy is the Chair of the MAP AgriBusiness and Countryside Development Committee, and the Executive Director of the Center for Food and AgriBusiness of the University of Asia & the Pacific.

map@map.org.ph

rdyster@gmail.com

map.org.ph

Charges to be filed vs killer of Surigao journalist ​Lozada​

THE Presidential Task Force on Media Security (PTFoMS) on Monday, March 12, said it is set to file criminal charges against the main suspect in the killing of radio broadcaster Christopher Iban Lozada.

Witnesses, PTFoMS Undersecretary Joel Sy Egco said, have identified the suspect as Rolly Mahilum, who is allegedly a “driver   and close aide of the family of Bislig City Mayor   Librado C. Navarro.”

Presidential Spokesperson Herminio Harry L. Roque, Jr. said the PTFoMS will initiate the filing of appropriate charges against the suspect who remains at large.

“He (Mr. Lozada) was killed last Oct., 24 (2017) while he was driving home along with his live-in partner Honey Faith Toyco in his own barangay in the City of Bislig, Surigao del Sur. Lozada died on the spot, while (Ms.) Toyco sustained a gunshot (wound) and was rushed to Andres Soriano Hospital for treatment,” narrated Mr. Egco.

On Nov. 7 last year, the PTFoMS coordinated the implementation of two search warrants by a team of the Philippine National Police (PNP) at the residences of Felixberto Villosino ,Jr. and Rolly Mahilum who were named by sources as suspects in the shooting incident.

In the same month, Mr. Egco said, the PTFoMS “received a report from Senior Superintendent Francisco Dungo, Jr. OIC of the PNP-PPO, Surigao Del Sur” indicating that Mr. Lozada was facing a libel case filed by the Bislig City mayor.

The police investigation also found that Mr. Lozada had been receiving threats through text messages from an unidentified sender.

Further police probe later discovered that the suspected getaway vehicle used in the Lozada shooting, a Toyota Hi-Ace Van with plate number SFJ 951, is registered as a property of the Bislig City government.

Mr. Navarro has yet to respond to a police request for a check and verification of the vehicle.

“So our next step is that, we are going to file appropriate charges against Rolly Mahilum. We cannot give you the other details about out next steps, because we don’t want to telegraph our punches to the other side. And rest assured that we are doing this, because we are sincere, the government is sincere in running after anybody or anyone who maims, who threatens and who even kills journalists, especially during the time of President Rodrigo R. Duterte,” Mr. Egco said. — Arjay L. Balinbin

Cebu could soon be tagged ‘Seoul of the Philippines’ 

CEBU CITY may soon earn the tag “Seoul of the Philippines” with the growing number of Korean tourists visiting the country’s Visayas hub, according to the Department of Tourism (DoT).

Shalihmar Hofer Tamano, DoT-Central Visayas regional director, attributed the constantly increasingly influx of Koreans to Cebu’s richly diverse tourist attractions, cuisine, peace and order situation, and hospitality. “More than anything else, it’s the unique and genuine Filipino hospitality and the Cebuano charm that attract Koreans, Japanese and Chinese visitors to the region,” Ms. Tamano said in a statement.

The DoT regional office met last week with officials of the Korean Consulate and members of the Korea Travel Agencies Association (KOTAA). In 2016, more than 840,000 tourists from South Korea arrived in the region, mostly staying in Cebu City and other parts of Cebu province, particularly Bantayan, Mactan, Camotes, Oslob and Malapascua. Ms. Tamano said while full-year 2017 data is still being collated, it is likely that Korean arrivals in the province hit one million. “I wouldn’t be surprised if Cebu would soon be known as Seoul of the Philippines, Koreans’ home away from home,” he said.

49 agrarian reform beneficiaries in Rizal get land certificates

THE Department of Agrarian Reform (DAR) has awarded 47 land ownership certificates to 49 agrarian reform beneficiaries in four municipalities in Rizal province, Malacañang said on Monday, March 12.

“These are the municipalities of Tanay, Morong, Baras and Antipolo,” Presidential Spokesperson Herminio Harry L. Roque, Jr. said in a press briefing at the Palace. “The Duterte administration is indeed doing its best to provide support and assistance to Filipino beneficiaries through proper and immediate implementation of land distribution under its continuing agrarian reform program,” he added. — Arjay L. Balinbin

French visitors

FRENCH NAVY frigate Vendemiaire prepares to dock while a Philippine flag flutters at the international port in Manila on March 12. FNS Vendemiaire, a Floreal class light surveillance frigate, commissioned in 1993, is here for a five-day goodwill visit.

Drinking along sidewalks, other public spaces now banned in Davao City

THE Davao City council has passed on third and final reading last week a “sobriety ordinance,” which prohibits “drinking or consuming of alcoholic beverages in public streets, sidewalks, public parks and playgrounds and other public areas.”

Councilor Ma. Belen S. Acosta, chair of the committee on peace and public safety and proponent of the ordinance, said, “The ordinance seeks to regulate the drinking or consuming of alcoholic beverages which include any drink which contains alcohol as an active agent.”

Violation is punishable by a fine of P3,000 for the first offense, P5,000 and/or imprisonment of three months for the second time, and P5,000 and/or imprisonment of one year for the third offense. Exempted from the prohibition are customers of any establishment whose business is authorized or permitted by the city government to use a portion or part of the street, sidewalk or public area. It also exempts special occasions or festivities that shall be authorized or permitted by the city government or barangay. The city also has an existing liquor ban under an earlier ordinance, which “prohibits selling, serving, drinking and consumption of liquors and alcoholic beverages from   1 a.m. to 8 a.m.” — Carmencita A. Carillo

Post Arbitration: Duterte’s joint development and other policy approaches to the West Philippine Sea

Recently, the Philippines under President Rodrigo R. Duterte announced its plan to pursue “co-ownership” or, more accurately the joint exploration, of portions of the South China Sea (also known as the West Philippine Sea) with China, a year after the Permanent Court of Arbitration (PCA) awarded the Philippines with the ruling that invalidates China’s nine-dash lines and artificial island construction. Proposed areas for exploration include the west of the Calamian Islands and Reed Bank, off the waters of Palawan.

Unlike the Calamian Islands which are not claimed by China, Reed Bank, which lies within the Philippine Exclusive Economic Zone (EEZ) as far as the PCA ruling is concerned, is contested by China. Also known as Recto Bank, this maritime feature became well known when it was mentioned in former president Benigno S. C. Aquino III’s quotable SONA of 2011 — “What is ours is ours; setting foot on Recto Bank is no different from setting foot on Recto Avenue,” he said.

Asserting state jurisdiction in the maritime domain is more problematic than on land. In referencing UNCLOS (the United Nations Convention on the Law of the Sea), Professor Sam Bateman highlights that dissimilar attributes of land and water domains result in different modes of jurisdiction. Because fixity is absent in the maritime domain, the state exercises sovereignty over the territorial sea but it should not impede other states’ rights to innocent passage. By contrast, the state exercises sovereign rights to explore, exploit, conserve, and manage the resources in the EEZ, where state jurisdiction is far less absolute than in the territorial seas.

Economist Elinor Ostrom offers a relevant perspective using the commons theory. The “commons,” such as public goods, are universal access goods. Excluding persons from accessing values such as justice, security, and health is difficult if not impossible. The world’s coastal and marine fisheries, forests and airspace, on the other hand, are differentiated as common pool resources (CPRs). Unlike public goods, the utilization of CPRs, if unsustainable, leads to degradation or depletion and subtracts future benefits from potential users. High subtractability of benefits and non-excludability of users, thus, are two of the important features of the global maritime commons including the EEZ.

Given the above, it seems that joint development of the South China Sea common pool resources is the next best option for the Philippines. At the height of the Philippines-China conflict over Scarborough Shoal in 2012, no less than Law of the Sea specialist Jay Batongbacal emphasized how crucial cooperation is among littoral states that border enclosed and semi-enclosed seas such as the South China Sea. Academics then proposed cooperative measures as a de-securitizing action to lower tensions and of downplaying nonnegotiable territorial sovereignty claims. Joint resource development concretizes maritime states’ cooperation in resource utilization and exploitation, most crucially in cases of overlapping EEZs and where maritime boundary delimitations do not exist between or among concerned states. As non-absolute sovereignty zones, states, according to the UNCLOS, are duty bound to cooperate in the use of EEZs.

Joint development that is constitutional is a pragmatic counterpart response to the continuing power asymmetry in the South China Sea. To date, the Asia Maritime Transparency Initiative has captured images of the continuing fortification of Fiery Cross, Mischief, and Subi reefs — as China’s and ASEAN foreign ministers agreed to resume talks on the much needed framework for a code of conduct. Indeed, while post arbitration has created a situation that is less tense, the same set of geopolitical variables govern the South China Sea and Philippine-China relations.

Given this context, two other elements in addition to joint development characterize President Duterte’s multilayered response. After choosing to shelve the PCA ruling for a year, Mr. Duterte has obviously moved towards bilateralism. Bilateralism is reflective of his pivot to China and is the latter’s preference, but also reflects ASEAN’s inability to mobilize multilateral support for the 2016 ruling. Alongside bilateralism, the Philippines has taken part in the 2017 negotiations for a multilateral framework for a code of conduct along with ASEAN and China. This is said to have introduced a relevant institution for preventing incidents at sea, considered by navies as one of the more efficient confidence-building measures in the maritime domain. However, what makes this a weak form of multilateralism are the greater trust issues that outweigh the operationalization of confidence-building measures.

In choosing to take these policy directions, President Duterte’s government has to hurdle specific constitutional requirements. And just as challenging, it should learn to address the realpolitik and trust challenges of dealing with China in the context of the post arbitration ruling.

 

Alma Maria O. Salvador, PhD, is an Assistant Professor of Political Science at Ateneo de Manila University.

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