Territorial and maritime disputes in the South China Sea have been a major irritant in Philippines–China relations. When Rodrigo Duterte became president in 2016, a policy decision to underscore pragmatism in relations with China and opt for a moderated approach to dispute settlement in the South China Sea became clear. In November 2018, China and the Philippines signed a Memorandum of Understanding on Cooperation in Oil and Gas Development, raising the prospect of an eventual joint development agreement (JDA) in the South China Sea.
It is widely presumed that the area around Reed Bank is being considered for a JDA, although other possibilities include waters off Northwest Palawan, West Balabac, and West Calamian. All would be within the Philippine exclusive economic zone and China’s nine-dash line.
However, things are easier said than done. Media narratives, public opinion, the state of political ties, and nationalist sentiment in both countries are all crucial variables for reaching a JDA. One major political risk for pursuing an agreement with China is the country’s unfavorable image in the Philippines. There are four key reasons why Filipinos mistrust and have negative perceptions of China with respect to the South China Sea: (1) the restriction of Filipino fishing activities by the China Coast Guard; (2) the commission of illegal fishing activities (e.g., destruction of coral reefs and harvesting of endangered species) by Chinese fishers; (3) interceptions of Philippine supply vessels and patrol aircraft; and (4) the reclamation and militarization of maritime features in the Spratlys.
Along with this, Philippine domestic politics and political capital figure in the success (or failure) of Chinese projects in the Philippines. For example, after then-president Gloria Macapagal-Arroyo won re-election in 2004, her entire term was hounded by questions of legitimacy due to alleged electoral fraud and corruption. This caused the public and her political foes to be vigilant of her every move. When the Joint Marine Seismic Undertaking (JMSU) with China and Vietnam was signed in 2005, there were widespread protests by political forces antipathetic to Arroyo. Notably, in the wake of the JMSU, Arroyo cancelled the China-funded National Broadband Network-ZTE and Northrail Project due to alleged irregularities and kickbacks. Arroyo arguably did so as damage control while beset by political scandals.
The enduring questions associated with JDAs have always been about which laws apply. The Philippine Constitution and the 2016 arbitral award pose twin legal hurdles in finalizing a JDA with Beijing. For Manila, a JDA is only possible if it is in accordance with Philippine law and grants the government “full control and supervision” as required by the constitution. The conventional wisdom is therefore that the memorandum of understanding signed in 2018 cannot be instituted as a government-to-government agreement and should be in conformity with the existing Philippine Service Contract system wherein foreign partners operate as subcontractors to Philippine corporations. This would undoubtedly be unpalatable for China since it would imply that the Philippines has sovereign rights over Reed Bank. Meanwhile, the arbitral award specifically affirmed that there are no legitimate overlapping claims with China in the areas being considered for joint development. This makes cooperation more difficult than in the period before the ruling.
In this context, clearing the obstacles facing a Sino–Philippine JDA will require a multifaceted approach. The South China Sea is not just a resources issue, but also encompasses environmental, legal, political, and strategic concerns. If only one problem is targeted (e.g. hydrocarbon resources), other issues would remain, creating mistrust and leading to “dysfunctional” cooperation.
It is in this regard that China should endeavor to maintain the status quo and refrain from further reclamation of maritime features and militarization of already occupied man-made islands, as these cause profound uneasiness on the part of smaller claimant states. Similarly, if the finalization of the China-ASEAN Code of Conduct in the South China Sea is prolonged, doubts about Beijing’s intentions and sincerity will amplify. There is also a serious need to improve the strategic communications strategies of both the Chinese and Philippine governments. China has to manage its political messaging for its internal and external audiences: the strong rhetoric that uses for its domestic audience has adverse implications for its relations with neighbors. The Philippines, in order to avoid triggering domestic opposition to a JDA, should desist from making fatalistic statements so that the deal with China will not be perceived as lop-sided or a concession of sovereign rights.
Even more importantly, a JDA will not be possible without proper legal cover. This is the most complex part of the JDA, as a legal framework should not be in violation of Philippine law. This could only be done if there is a bilateral treaty that would serve as legal basis for a JDA. As a time-honored legal maxim goes, “everything which is not forbidden is allowed.” Notably, the treaty needs to address various contentious issues: governing labor laws, tax laws, contract laws, the operating authority, profit-sharing terms, transparency, and the dispute settlement mechanism.
Lastly, since negative perceptions on the South China Sea issues are deeply embedded among the Philippine public, an agreement or mechanism for marine environmental protection in Scarborough Shoal is imperative in order to allay concerns over illegal/destructive fishing practices. Addressing these challenges jointly will create a more conducive environment for a Sino-Philippine JDA.
This piece was adapted from the author’s upcoming chapter in Cooperative Development in the South China Sea: Policies, Obstacles, and Prospects (London and New York: Routledge, 2021) which will be published this month.