Duterte Money: Geoeconomics, America, and the Philippines

Michael Green

“I announce my separation from the United States, both militarily and economically” proclaimed Rodrigo Duterte in mid-October to an audience of Chinese businesspeople. “America has lost.” Having called Obama a “son of a whore” - among numerous other disparaging remarks about America and its president - Duterte has launched an ostensible rebalancing towards China. He speaks of “realigned… in your ideological flow “. This constitutes a drastic break from the policies of his predecessor, Benigno Aquino III, the pro-American foreign policy of whom was epitomised by pursuing a case against China in the Permanent Court of Appeals for UNCLOS. What does this rejection of American security cooperation mean for US policy in Asia? How should the State Department regain favour with the erstwhile linchpin of its much-vaunted ‘pivot’?

Before formulating a prognosis, it is important to note the prior advantages possessed by the US in terms of relations with the Philippines. 90% of Filipinos view the US favourably, there is a millions-strong diaspora therein, and America is its second largest trading partner. Colonial links stretch back decades. There is a longstanding security relationship, including five bases and an American program to help train Philippine forces against insurgents on the southern region of Mindanao. Indeed, the Filipino establishment is outraged by the apparently reckless behaviour of Duterte, and even dignitaries within the government explicitly downplay Duterte’s iconoclasm. In the words of Trade Minister Ramon Lopez, “the statement the President made maintains the relationship with the West”. The US-Philippines alliance is unlikely to disintegrate any time soon.

Nevertheless, overtures to China are clearly being made. This is for two reasons: firstly, Duterte’s brutal and merciless anti-drugs campaign has flagrantly contravened commitments to Human Rights and the Rule of Law, both championed by the US and ignored by China; secondly, and perhaps more importantly, Duterte feels that the economic benefits to be gained by alignment with China outweigh the geopolitical costs. The US thus faces the challenge, without abandoning its values, of convincing ordinary Filipinos that the fruits of pursuing quasi-suzerain obeisance towards China will not match the largesse of the United States.

The US already provides over $40 million per year in military aid to the Philippines, but this is not felt by average Filipinos. Given the already overwhelming military superiority of the US armed forces in the region, there is scope for replacement of some of this military aid with direct investment in development and infrastructure. Certainly, the US already provides significant non-military aid to the Philippines ($150 million in 2012), and is a massive contributor to multilateral institutions like the Asian Development Bank that attempt to achieve these aims. Even so, in order to pre-empt geostrategic realignment on the part of the Philippines, the US could transition into providing a greater amount of more visible non-military aid. Although unable to emulate the Chinese by using State-owned Enterprises to build infrastructure, the US can encourage investment through various incentives, including giving greater support to providers of FDI. This, in conjunction with augmentation of extant aid, can increase both economic ties and American soft power. Tax incentives could even play a part. With enough trade and investment, Filipinos might be convinced of the relative gains of siding with the US. Duterte may have announced separation from the United States, but American munificence could lead to rapprochement.