In a telling sign of the dramatic turn in Philippine-China relations, the two nations recently agreed to pursue joint development agreements (JDA) on hydrocarbon deposits in the South China Sea. During his late March visit to Beijing, Philippine foreign secretary Alan Peter Cayetano hailed a “golden period” in Philippine-China relations, and reiterated his country’s commitment to ensuring disputes in the South China would not derail ties with Beijing.
Instead, the Filipino diplomat expressed his hopes that the maritime spats “will be turned into a source of friendship and cooperation between our two countries.” Specifically, diplomats discussed the possibility of an “offshore oil and gas exploration” scheme based on a “suitable legal framework” that circumvents sovereignty disputes and provides a mutually-beneficial outcome.
Chinese foreign minister Wang Yi, however, tried to reassure everyone that any resource-sharing deal would be pursued in “a prudent and steady way” so as to secure its viability. During his early April visit to China for the Boao Forum, Philippine president Rodrigo Duterte also discussed joint-development plans with his Chinese counterpart, Xi Jinping, who underlined his commitment to ensure “the task of this year shall be upgrading the relationship.”
The problem, however, is that so far there are no specific details as to the location, modality and conditions for a proposed Philippine-China JDA in the South China Sea.
Moreover, there isn’t a single encouraging precedent, as recent history is replete with proposed resource-sharing agreements between China and its neighbors going astray. Crucially, an actual JDA in accordance with the provisions of the United Nations Convention on the Law of the Sea (UNCLOS), may violate both the Philippine constitution and the 2016 South China Sea arbitration award ruling.
Leap into Unknown
Over the past year, President Duterte has repeatedly expressed a preference for “co-ownership” of disputed hydrocarbon and marine resources with Beijing. Placing normalization of bilateral ties with China at the heart of his foreign policy agenda, Duterte appears determined to bolster ties with the Asian powerhouse, even if it means dialing back his country’s legitimate sovereign rights and interests in the South China Sea.
In particular, the Filipino leader is betting on a huge inflow of Chinese investments as a reward for adopting a more acquiescent position on the maritime disputes. Over the past two years, China has dangled $24 billion in trade and investment deals in the Philippines to sweeten any potential deal.
The latest data, however, show that traditional allies like Japan, the United States, and Europe lead the investment landscape in the Philippines. During Duterte’s first year in office, Japan’s investments climbed from $490 million in 2016 to $600 million in 2017, an increase of 23.79 percent. American investment dropped by almost 70 percent, but still amounted to $160 million. In contrast, Chinese investment in the period went from only $27 million in 2016 to $31 million in 2017. Japanese investment was more than 23 times that of China.
As far as Duterte’s “build, build, build” infrastructure plan is concerned, Japan is by far the leading foreign partner to the Philippines. China has yet to secure and invest in any big-ticket infrastructure project. But the Filipino president still hopes to lock down large-scale Chinese participation in mega-railway, dam and bridge projects across the country.
His chief foreign policy adviser is no less than former president Gloria Macapagal Arroyo, who oversaw a short-lived “golden age” in Philippine-China relations. She has proudly touted the fact that during her long presidency (2001-2010), the Philippines “focused on developing closer economic and business ties with China” and how this is the “policy of President Duterte today, very similar to mine.”
For her, “China is not a rival”, but instead a key “market, an investor (and) a donor.” The problem, however, is that her tenure also saw massive corruption scandals which hounded her big-ticket infrastructure project deals with China.
Uncertain Path Ahead
Arroyo’s resource-sharing agreement with China and Vietnam in the South China Sea also came under attack for potentially violating the Philippine constitution and compromising the country’s sovereignty.
The 2005 Joint Maritime Seismic Undertaking (JMSU) was shrouded in secrecy, and risked legitimizing China’s nine-dash line claims. Under the deal, which expired in 2008, China National Offshore Oil Corporation (CNOOC) was effectively in the lead, taking charge of conducting seismic exploration of hydrocarbon resources in areas where the countries’ claims overlapped.
Petrovietnam and Philippine National Oil Company were left only with processing and interpreting the eventual data. Domestic political pressure—especially in the Philippines—and deteriorating diplomatic ties between China and Vietnam, however, derailed the renewal and extension of the agreement.
Meanwhile, China’s maritime delimitation and resource-sharing agreement with Vietnam in the Gulf of Tonkin in 2002 has yet to be implemented in good faith. The 2008 JDA scheme in the East China Sea between China and Japan suffered a similar fate, as Beijing began to unilaterally explore resources in the area and coercively challenge Tokyo’s claims in the Senkaku, or Diaoyu, island group.
It’s not clear how the new proposed Philippine-China resource-sharing agreement will have a different outcome from the JMSU. In international law, a JDA is the preferred solution when two countries have overlapping maritime entitlements. But based on the 2016 arbitration award ruling at The Hague, which nullified the sweeping claims of China’s nine-dash line, the Philippines and China have no overlapping claims in the areas believed to hold significant hydrocarbon deposits; they fall entirely within the continental shelf of the Philippines.
More crucially, the Philippine constitution bars any joint exploration and development scheme with a foreign entity which refuses to acknowledge the Philippines’ absolute sovereign rights within its EEZ. Thus, a JDA by its very nature could run afoul of both the Philippine constitution and the final and binding arbitration ruling by a tribunal constituted under the UNCLOS.
Acting Supreme Court Chief Justice Antonio Carpio has unequivocally warned the Duterte administration that any resource-sharing agreement with China within the Philippine EEZ is unconstitutional.
What seems more likely to occur is that Manila will subcontract a Chinese company to explore and develop energy resources in Philippine waters, but outside China’s nine-dashed-line claims. There is currently a proposal whereby the Philippine National Oil Company will partner with and provide a service contract to CNOOC to explore and develop prospective hydrocarbon resources near the Calamian Islands, off the coast of Palawan, which lies outside China’s nine-dashed-line.
The energy-rich Reed Bank is also under consideration, but since it falls within both the Philippines’ EEZ and China’s nine-dashed-line, its political viability is in question. Ultimately, the mere discussion of a JDA with China risks legitimizing the expansive and excessive Chinese claims across the South China Sea basin, much to the detriment of smaller Southeast Asian claimant states and in violation of international law. If anything, Manila’s seeming strategic acquiescence could embolden China’s behavior in other adjacent waters, as seen in the Benham Rise area as well as Beijing’s continued reclamation of artificial islands across the South China Sea.