Event

On his first official visit to China as President, Mr. Duterte declared that the Philippines was to pivot away from its traditional US ally and to choose instead for China as main partner. He also said to be ready to overlook the recent UNCLOS tribunal’s ruling on maritime rights in the South China Sea (S-C Sea) as it risks poisoning relations with Beijing. It is unclear what it will all mean in practice to the US cooperation beyond the announced end of joint military exercises. Beijing has already rewarded Mr Duterte’s choice by lifting existing trade restrictions on Philippines fruit exports, signing USD 15 billion investment deals in infrastructure, promoting reciprocal tourism and committing to frequent discussions and cooperation on maritime matters.  

Impact on country risk

In line with his unpredictable style, Mr. Duterte’s 360° potential reversal of foreign policy is a major blow to the US as the Philippines is a key ally in its “pivot to Asia” policy and might weaken the US strategy in the region. The latest declaration is even more surprising that cooperation has tightened in the past years under the previous administration in front of the growing Chinese assertive policy in the S-C Sea. Now, it remains to be seen which implication it will have for their defence treaty (active since 1951) and US military bases. Besides major economic benefits from getting closer to Beijing, Mr Duterte’s decision has been taken on the back of nationalism and old antipathy towards the ancient colony, and has probably been inflamed by recent US criticism at his national violent war against drug dealers. This change is a godsend for Beijing after the adverse legal ruling on its maritime rights last July and might have a significant impact on future developments in the S-C Sea, not least on the international rule of law to tackle conflictual claims in the area. Many in Manila are probably annoyed by this “separation” from a long-standing ally that benefited from a broad domestic support. Still, Mr Duterte’s popularity, boosted by a merciless anti-drug war, remains intact. In the short term, opening to China should allow bilateral tensions to recede as a consequence. However, in the medium to long term, this strategy could be questionable if the Philippines face renewed bold moves by China around the disputed Spratly islands, particularly around the further building of artificial islands. Therefore, as China’s increasing physical presence in Philippine water areas could affect the President’s popularity, he is expected to run a balanced and pragmatic foreign policy. Meanwhile, Mr Duterte’s eccentric style risks not only deteriorating the Philippines’ image and diplomatic relations but also possibly hitting the (robust) economy over time.

Analyst: Raphaël Cecchi, r.cecchi@credendogroup.com