Journal of Political Risk, Vol. 1, No. 3, July 2013.
Anders S. Corr, Ph.D.
Priscilla A. Tacujan, Ph.D.
The Philippine government is constitutionally required to craft an independent foreign policy, but it must accelerate cooperation with foreign powers to do so effectively. China’s growing militarization and energy consumption are fast out-pacing the meager military spending and energy consumption of the Philippines (See Figure 1). This makes China, more so than the Philippines, willing to risk military conflict over disputed energy resources, fishing areas, and transportation routes in the South China Sea.
Since the People Power Revolution of 1986, the Philippines has had a comparatively weak, and sometimes fractious, alliance with the United States, Japan and the Association of South-East Asian Nations (Asean). China, on the other hand, has increased its political influence in the Philippines over the last twenty-five years, through both economic means, and threatening military behavior. China would prefer prolonged bilateral negotiations with the Philippines, as with other small countries, while gradually encroaching on maritime territory. The minor concessions or royalty payments offered by China are in no way commensurate with the energy resources of the South China Sea (also known as the West Philippine Sea). The cheapest approach for China, though one costly in terms of reputation, has been to compromise individual Philippine politicians in exchange for turning a blind eye to encroachments. The belief of China is that such encroachments may cause minor discomfort in Chinese foreign affairs in the short-run, but will eventually be accepted and legitimized as fait accompli. Control over lucrative shipping, fishing, and energy fields will result.
The Philippines could extract far greater ownership rights and royalty payments on the international market by keeping Chinese corruption and military threats at bay. The latter strategy requires political fortitude and strengthened alliance cooperation with the United States, Japan, and Asean. The Philippines can become a leading partner in a developing Asian alliance system geared to contain China and safeguard an UNCLOS determination on the East and South China Seas, but to do this requires safeguards against Chinese influence in Philippine politics.
From an international law perspective, the Philippines, along with Malaysia and Brunei, have relatively reasonable South China Sea claims to parts of the Spratly Islands in the south. China, Vietnam, and Taiwan have clearly overexpansive claims to both the Paracels and the Spratlys (See Figure 2), though from a realist power projection perspective, China can potentially control and therefore claim the South China Sea by military fiat. China’s claim to the Spratly and Paracel islands date to 1949, when the Chiang Kai-shek regime drew 11 dashes on a map. Chiang Kai-shek saw Fascist Germany as a model for China, and admired Hitler’s concept of Lebensraum, or living-space. Chiang Kai-Shek sought to increase China’s living space in the South China Sea through the new 11-dash claim. The Chinese Communist Party claimed military victory over Chiang Kai-shek in 1949, and followed this in 1953 with a non-substantive revision of China’s South China Sea claim to 9-dashes. At least in part because of this tumult, the United States and the Philippines signed the Mutual Defense Treaty (1951), which provides for defense of Philippine islands from attack.
Japan is in a similar dispute with China over the East China Sea. India has territorial disputes with China. Taiwain is claimed in totality by China. All these countries are natural allies to the Philippines with respect to its maritime conflicts with China. Countries in conflict with China must agree on a common approach and multilateral bargaining strategy if they are not to be swept aside. Of particular interest to the Philippines, countries in conflict with China must seek the following: 1) an agreement of boundaries among themselves to strengthen their case with the international community; 2) hearings based on international law, including the United Nations Convention on the Law of the Sea (UNCLOS); and 3) a diplomatic and military coalition to defend the findings of international law against likely Chinese attempts at subversion. The only military power that can currently enforce UNCLOS in the South China Sea is the United States. Therefore, the only plausible alternative to non-Chinese claimants losing in the South China Sea is an enduring alliance that unifies the United States, Japan and claimant countries for the limited objective of enforcing UNCLOS and dissuading China from expansionist actions.
Otherwise, small countries will be overwhelmed singly through Chinese bargaining positions and the sum total of many small fait accompli encroachments. The fate of the Spratlys, or any other disputed islands or sea near China, will be a bellwether for the remaining areas. If China is successful in one location, it will seek the same through gradual encroachment and normalization in other locations. This Chinese tactic of gradual encroachment — called “salami tactics” by the famous military theorist Thomas Schelling, and “cabbage tactics” by some Filipinos — is obvious and well-worn in history. Hitler used the tactic in Czechoslovakia in 1938. France, Italy, and Britain so feared war that they appeased Germany and told Czechoslovakia to yield slices of territory. Appeasement only encouraged Germany to conquer more of Europe over the next few years. The parallels to China’s small encroachments are chilling. The threat is not limited to Scarborough Shoal, but extends to all of East Asia.
Effective military balancing by the Philippines against China will be difficult in terms of domestic Philippine politics, and will include some risk of war with China. It requires the following: vigilance against Chinese corruption and influence in Philippine politics; treaties among, and joint bargaining by, non-Chinese claimants to the South China Sea; laws and treaties to invite and incentivize the United States to permanently commit military personnel to the Philippines; a United States return to major strategic military bases in the Philippines, including the Naval Base Subic Bay and Clark Air Force Base; joint patrols of the South China Sea with United States and allied Asean countries; and joint military enforcement of UNCLOS findings, including a prohibition against Chinese vessels near Scarborough Shoal. Half-measures such as bilateral cooperation with the United States on terrorism and training, or temporary refueling rights for United States and Japanese naval vessels, will be insufficient to guarantee United States support of the Philippines in case of conflict with China, and therefore insufficient to deter China from progressive encroachments in the South and East China Seas.
With United States military bases and a prohibition on encroachment at the Scarborough Shoal come some risk of conflict with China, whether over trade, diplomatic issues, or otherwise. United States bases will also involve domestic controversies over the potentiality of nuclear weapons passing through, timelines for their withdrawal should the Philippines ask the United States to leave, and the sometimes negative interactions of soldiers with locals. In the past, social issues of human rights, exploitation of women by United States troops, and the killings of American soldiers by Filipino communists adversely affected the United States-Philippine relationship. The United States may need to make concessions here, including a willingness to negotiate on issues of nuclear weapon access, base contract cancellation procedures, and to what extent United States personnel should face Philippine justice, especially for proven felonies. In base negotiations, the United States at the very least should proactively advocate: 1) job opportunities inside US bases to be made available to Filipinos, 2) Philippine regulatory oversight of off-base entertainment to combat prostitution and drug-peddling, 3) open community town-halls and events on a regular basis to improve community relations, 4) a promise of judicious litigation of legal violations committed by United States troops, and 5) provision of medical and educational programs in communities near bases.
The Shift in Relative Power Between the Philippines and China
China’s reliance on international trade, and need for new energy resources, is increasing exponentially. While the most recent data is unavailable, the country’s annual energy use ballooned from 800,000 to 2,400,000 kilo tonnes (kt) of oil equivalent between 1989 and 2010 (see graph). The South China Sea has an estimated 28 to 213 billion barrels of oil, and 190 trillion cubic feet of natural gas (proved and probable reserves). The upper estimate of the oil would make it the third largest reserves in the world, after Saudi Arabia and Venezuela. It is enough to supply China for 60 years. The natural gas is 3% of proved global reserves. The extreme growth in Chinese energy demand leads China to aggressively diversify sourcing, including what many see as unwarranted and dangerous military measures in the South China Sea. The seas in dispute also see approximately USD $5 trillion in trade annually, which China could seek to tax given its claim of sovereignty.
The Philippines’ requirement for international trade volume and energy resources, and its military capacity to stake a claim to, and police, far-flung reaches of the South China Sea, are much less than that of China. Philippine energy use increased between 1989 and 2010 from 28,000 to only 40,000 kt of oil equivalent. China perceives its need for the South China Sea energy resources as greater than the need of the Philippines. It also perceives its much stronger military, including 1,483,000 military personnel in 2013, as giving it the means and the right to influence the outcome of the South China Sea dispute to its advantage. The Philippines and other claimant nations can only counter China through international law, backed by a credible alliance enforcement mechanism.
Key factors that impede the Philippines from achieving an enforceable international legal solution to the South China Sea dispute are certain clauses in the Philippine Constitution, excessive Chinese economic and diplomatic influence in Philippine politics, and reasonable caution on the part of the United States to committing to defend the South China Sea against China.
The People Power Revolution and Sovereignty Issues
While the Philippines needs the United States as a military ally in its dispute with China, it is jealous of its independence. Such independence is sufficiently important to the Philippines to have abrogated a 1947 Military Bases Agreement with the United States. This treaty provided rights to the United States to build and maintain military bases, including Naval Base Subic Bay and Clark Air Force Base, for 99 years. After the United States built the bases, the Philippines progressively withdrew those rights until Article 18, Section 25 of the Constitution of 1987 set legislative requirements for continuance that resulted in the bases’ closure. The wording of the constitutional clause follows.
After the expiration in 1991 of the Agreement between the Republic of the Philippines and the United States of America concerning military bases, foreign military bases, troops, or facilities shall not be allowed in the Philippines except under a treaty duly concurred in by the Senate and, when the Congress so requires, ratified by a majority of the votes cast by the people in a national referendum held for that purpose, and recognized as a treaty by the other contracting State.
Progressive abrogation of the treaty of 1947 damaged trust between the United States and the Philippines, but this trust can be rebuilt through diplomacy on the part of the Philippines, and understanding on the part of the United States. The constitutional language that expelled the United States in 1991 and 1992 was written shortly after the People Power Revolution of 1986. The revolution overthrew the autocratic rule of President Ferdinand Marcos. During the Cold War, President Marcos had extensive United States diplomatic and military support against Marxist guerrillas. He used the state apparatus against not only armed revolutionaries, but against peaceful social movements critical of his regime. The People Power Revolution of 1986 was in part a reaction against the United States, and as a result the leftist and nationalist lawmakers who took power in 1986 placed strictures in the Constitution on foreign military bases and foreign investment. They could not have foreseen the rise of China, or the importance of the South China Sea resources for the development of the Philippine economy in the 21st century.
True to the new constitution, the Philippines declined to renew leases for major United States military bases in the early 1990s. The United States duly ended operations at five military bases, including Clark Air Force Base in 1991. Despite the fact that President Corazon Aquino and the public supported continuation of the most important lease at Naval Base Subic Bay, the powerful 24-member Philippine Senate held a close vote against the agreement. Amid acrimonious debate that included calling the United States military presence a vestige of colonialism and an affront to Philippine sovereignty, the Philippine Senate rejected a proposed temporary agreement that would extend the lease for Naval Base Subic Bay for 10 years in exchange for $203 million in annual aid. The United States closed Naval Base Subic Bay in 1992 (see graph). The 7th Fleet, the largest forward-deployed in Asia, decamped to Singapore and thereby invalidated many of the sovereignty arguments made by nationalist Philippine opponents against the United States.
What makes the 1990 Philippine Senate decision to expel the bases particularly surprising from an American perspective is that they served key national interests of both the Philippines and United States. As premier global deep-water ports and facilities, they were the main location for repairs of United States naval ships operating in the Indian Ocean, South China Sea, and Japan. They served as a strategic counterweight to Japanese imperial expansion in the 1930s (but were overrun in 1942 by the advancing Japanese military). United States Marines trained there in counterinsurgency and jungle warfare. They served as key United Nations and United States staging areas for the Korean and Vietnam wars. After their post-war return facilitated by the Treaty of 1947, they secured the country against potential aggressors, especially Soviet forces stationed in Cam Ranh Bay, Vietnam, from the 1980s to the 1990s. They also provided the developing Philippine economy with an important source of hard currency. The Philippines received $408 million in aid for basing rights in the 1980s, in addition to the $344 million that Naval Base Subic Bay annually expended on Philippine goods and services. Given that the Philippines has very low foreign direct investment (FDI) compared to its neighbors in South East Asia, it cannot support current defense spending, much less a future defense architecture responsive to major security challenges in the region such as the South China Sea dispute. One would think this reason alone would be sufficient for the Philippines to consider changing its constitution to be more welcoming to military basing by friendly allies.
Some claim that the loss of the Philippine bases is catastrophic to United States influence in Asia. Masashi Nishihara, a professor at Japan’s top military institute and an analyst of security policy in the Pacific, claimed in 1991 that, “without the bases in the Philippines, I don’t think there is any question that U.S. influence in Asia will decline. If events occur in the South China Sea — a conflict between China and Taiwan, for example, or Hong Kong — the United States may have very little ability to change events.” A quarter-century worth of Chinese leadership may agree with Professor Nishihara, which would explain the country’s rapid military buildup after the United States bases in the Philippines were closed, and China’s subsequent military encroachments in the South China Sea.
While continuing United States military basing rights in Japan, South Korea, and Singapore, and a planned United States Marine base in northern Australia certainly play a major role in containing China, the lack of such bases in the Philippines degrades the country’s bargaining power with China over issues such as the South China Sea. War with China is unlikely, but at the cost of Chinese maritime encroachments. The Philippines no longer has the security guarantee of a United States base on its territory, making risk from a low-probability but catastrophic war with China too costly in expectation. In 1999, United States defense officials made it clear that there was no guarantee of United States support in case of a Philippines-China conflict over the South China Sea. Lacking the security it had prior to 1992, the Philippines will be less willing to risk conflict over South China Sea resources – a dynamic of which China is well aware. If the Philippines wants a strong United States ally committed to defense of UNCLOS findings in the South China Sea, the Philippines will need to incentivize a return of United States military bases, and greatly enhanced United States military personnel commitments. Attempting to find a diplomatic middle-path between China and the West simply encourages Chinese expansionism.
The South China Sea and Counter-Terrorism
China immediately took advantage of the lack of a United States military presence in the Philippines after 1992, and in 1995 built structures on Mischief Reef in the Philippine-claimed area of the South China Sea’s Spratly Islands. In reaction, the Philippines invited the United States to return on a limited basis. They negotiated the Visiting Forces Agreement, which was ratified in 1999, and since 2002 have made common cause against Islamic extremists. The United States in 2013 sought additional refueling, training, and basing rights near the South China Sea, but has repeatedly asserted that such rights would be only temporary.
Approximately 500 United States special operations forces have operated in the Philippines since 2002. The Philippines and United States maintain this agreement to bolster counter-terrorism and training of the Philippine military. Allowance of the US forces is in part compliance with the United States-Philippines Mutual Defense Treaty of 1951, activated by terrorist attacks of September 11, 2001 on the United States. Both countries have an interest in conducting operations against radical extremist groups in the southern Philippines, including the al-Qaeda-linked terrorist group, Abu Sayyaf. The scattered islands of southern Philippines, with relatively open and unrestricted ports, are attractive to international terrorists from Southeast Asia and the Middle East seeking safe haven. Counter-terrorism cooperation between the Philippines and the United States make this safe haven marginally more difficult for the terrorists.
Some Philippine politicians see even this small level of military cooperation against terrorism as a threat to Philippine sovereignty. In reaction to United States-Philippine cooperation during an Abu Sayyaf terrorism event involving a hostage with United States citizenship, Senate President Juan Ponce Enrile protested to the Senate of a “tendency to violate our constitution [and] to degrade our sovereignty and independence.” Senator Enrile and other left-wing lawmakers are wary of access arrangements designed to allow refueling of foreign military vehicles and aircraft on Philippine bases. Mr. Enrile claims that the United States can refuel in the Philippines but is prohibited by the Constitution from building its own refueling station. Mr. Enrile, who resigned as Senate President in 2013, has taken a strong stance against the United States on basing and military cooperation issues, but has been far more sanguine on China. When many in the Senate proposed that the Philippines reject a new Chinese passport that included the Spratly Islands in a map of China, Senator Enrile was quoted as saying that it was no big deal.
Representative Luzviminda Ilagan, of the left-wing Gabriela Party, also argues that temporary United States military personnel assignment to the Philippines is a “scheme … tantamount to setting up foreign military bases in the country.” Bayan Muna, another party-list, left-wing organization, through its representatives, Neri Colmenares and Carlo Zarate, indicated in a joint statement in June 2013 that it would be “a shameful act of national betrayal if President Aquino [would] overturn the 1991 historic verdict of the people and the Philippine Senate against the United States bases by turning Philippine bases and facilities into American military outposts.” The Communist Party of the Philippines has also weighed in, arguing that the United States presence would only complicate the maritime dispute as, “It is provoking China to be more aggressive in its defense of its territories and push beyond its sea borders.”
The appeasement and complaints of lawmakers cited above will not build trust between the Philippines and United States, and will likely encourage China in further encroachment. Abu Sayyaf is a terrorist organization named by the United Nations and linked to Al Qaeda. While Senator Enrile noted that the Abu Sayyaf terrorists were Philippine citizens, and that they should ideally be dealt with as an internal police matter, he should know that the United States has technological capabilities unavailable to the Philippine military. Senator Enrile’s resistance to cooperation with an ally will not help the Philippines garner support from the United States in the event of conflict with China. Complaints by the Communist Partyk could ironically be short-sighted appeasement of China that lead it to encroach with ever greater confidence.
Using the United States as a strategic counterweight against China, however, entails much less risk to sovereignty than does appeasement. Anti-foreign sentiment is driving some Philippine officials to adopt a hard stance against the United States presence even though America’s security interests do not conflict with the Philippines’ own security interests. The United States government and its allies would like to contain China’s militaristic and irregular South China Sea expansion for long-term strategic reasons, rather than for the short-term territorial aggrandizement that motivates China. The United States does not want appeasement of China in the South China Sea to embolden the country with respect to South Korea, Taiwan and Japan. Any attempt by China to encroach on the territory, energy resources, fishing waters, or transportation lanes of these allies could easily lead to a Pacific war that would be costly to the United States in lives and wealth.
Chinese Political Influence in the Philippines
There is a United States and a China camp in the Philippines. The sovereignty argument is used by both camps to impugn the other camp and its international support. However, no country exists in a sovereign vacuum. It bargains and cajoles on the international diplomatic market to obtain what it needs. In exchange, it must give to other countries what they need. These needs can include resource rights, freedom of passage for trade, or diplomatic support on unrelated matters through negotiated linkage. Individual politicians and businessmen can use this legitimate bargaining process for individual gain. In these instances, they obtain personal benefit in exchange for compromising the country’s best interests.
The virulence of Philippine critics of the United States adds evidence to the case that China is using its growing prestige and economic power to influence Philippine politics, including through individual incentives and with respect to the South China Sea, United States military bases, and military cooperation. State-sanctioned Chinese businesses regularly offer bribes to government officials in developing countries in order to obtain contracts, government licenses, and diplomatic support. The Philippines has been no exception, some elites of which have a history of opportunistically supporting rising powers.
The Philippine Elite
Internally, the Philippines is divided between an historically agrarian (and increasingly industrial and service-oriented) elite and others, including the middle-class, small-business owners, students, peasants, farm-workers, and factory-workers. The elite tends to ally with the predominant military and trade power in the region. This foreign military ally protects the elite’s status internally, but also protects them from foreign capture and ensuing transaction costs from shifting loyalty. In turn, the elite provides exports to the foreign military power, or under the relatively new free trade regime, to the open market.
In the early 1930s, when the United States appeared predominant in Asia, most of the Philippine elite strongly supported United States bases and trade relations. When Imperial Japan appeared ascendant in Asia following their 1942 capture of United States and British military bases in the Philippines and Singapore, most of the Philippine elite collaborated with the Japanese. After the United States recaptured Manila in 1945, the elites switched back to supporting the United States, claiming that their loyalty under Japanese occupation had always secretly been to the United States. Manuel Roxas, who had collaborated with the Japanese during their occupation of the Philippines, was elected to the Senate in 1945 and became President in 1946. He obtained these positions, ironically, with the blessing of the United States, which saw him and the collaborationist elite he led as a bullwark against Chinese Communism and the Hukbalahap peasant rebels. The year following, President Roxas signed the 99-year basing agreement with the United States.
Communist China was an obvious enemy of the Philippine elite from 1949 until the mid-1970s, during which time the two countries refused mutual recognition. Deng Xiaoping’s economic and political reforms included a turn towards capitalism, an end to support of Philippine Maoist guerrillas, and improved relations with the Philippine elite. President Marcos exchanged ambassadors in 1975. China’s economic reforms in the 1970s started rapid growth in its gross domestic product (GDP), and the relationship improved dramatically after the People Power Revolution of 1986. The two countries increased high-level visits in the early 1990s.
Claims by China to the South China Sea in 1992, and the occupation of Mischief Reef in 1995, cooled the relationship and caused the Philippines to try a middle path between China and the United States. The Philippines balanced the growing influence of China by increasing some military ties with the United States. But in a quiet and huge win for China, the Philippines smoothed over Chinese encroachments one year after the 1995 Mischief Reef incident. In 1996, the Philippine Government was back to accelerating diplomatic, commercial, and military ties to Beijing. The two countries exchanged military attachés, and engaged in official visits, People’s Liberation Army (PLA) ship visits, training exercises, commercial delegations, and even intelligence exchanges. Armed Forces Philippines (AFP) Chief of Staff Arturo Enrile, cousin of Corazon Aquino and Juan Ponce Enrile, visited China in 1996.
Bribery and the Arroyo Shift to China
Philippine President Gloria Macapagal-Arroyo executed a bait-and-switch on the United States in 2003 and 2004. The Philippines supported the United States war in Iraq in 2003 and thereby received a coveted Major Non-NATO Ally (MNNA) status from the United States, which under United States law confers extensive defense, aid, and training benefits. However, President Arroyo then shifted decisively towards China. She pulled troops from Iraq and conducted a major state visit to China in 2004. Shortly after signing a Memorandum of Understanding on Defense Cooperation with the Philippines that year, China donated to the Philippines RMB 30 million in military equipment and loaned the country $450 million for the North Luzon Railway System (North Rail). President Arroyo called on Asean nations to reduce economic ties to the United States in favor of China and the Asean-China free trade area. In 2005 she abandoned a critical multilateral negotiating stance through Asean on the South China Seas. Her Government and that of China agreed that the national oil companies of China, the Philippines, and (belatedly) Vietnam conduct joint oil exploration in the South China Sea through the Joint Marine Seismic Undertaking (JMSU). Remarkably, this included Chinese oil exploration between the major Philippine island of Palawan, and the disputed Spratly Islands. This was a major concession that increased the credibility of Chinese resource claims over the entire Philippine-claimed area of the South China Sea. Prominent Fiilipinos and opposition politicians accused President Arroyo of violating the Constitution by giving away Philippine territory. As recently as July and August 2013, Chinese officials used the JMSU agreement against the Philippines to buttress their South China Sea claims in the press and international fora. 
In 2007, President Arroyo utilized Cebu City in the Philippines to host Chinese Premier Wen Jiabao and the East Asian Summit, a Chinese-dominated international organization of states that is the first in the region to exclude United States participation. During the short trip, China and the Philippines signed 15 agreements, including trade and development deals worth billions of dollars.
The change of administration from President Arroyo to President Benigno Aquino III in 2010 unearthed major corruption used by China and explained President Arroyo’s surprising pro-China policies. The Government of the Philippines consequently turned away from China and towards closer alliance with the United States. Probably due to payments from China, former President Arroyo and her allies had turned a blind eye to China’s incursions in the South China Sea and provided China with preferential access to huge government contracts. In 2012, former President Arroyo, who has referred to China as Philippines’ “big brother,” was detained over allegations of election fraud and corruption. She and her husband are charged with accepting promises of USD $30 million in kickbacks from a Chinese company, Zhongxing Telecommunication Equipment (ZTE) Corporation, for assistance with a $329 million contract to implement a national broadband network. The Arroyo administration awarded the ZTE contract to ZTE despite an initial bid from a United States company of only USD $130 million. The Speaker of the House of Representatives Jose de Venecia Jr., his son, the Transport and Communication Secretary, and the head of the National Economic Development Authority were also implicated. The head of the Commission on Elections, tasked by the Constitution to ensure fair elections, was the conduit of bribes paid by the Chinese company to officials and businessmen who needed persuading. Key supporters of China during this period, some of whom were implicated in the ZTE scandal, include: Foreign Minister Alberto Romulo; Speaker of the House Jose Venecia, Jr.; head of Amsterdam Holdings Inc. and son of the speaker, Jose de Venecia, III (Joey); Manalac; and Chair of the National Commission on Elections (COMELEC) Benjamin Abalos.
Dr. Aileen Baviera of the Rajaratnam School of International Studies in Singapore has noted that Speaker de Venecia, Jr. played a major role in helping the Chinese Communist Party (CCP) establish networks with other Asian countries. As president of Lakas-Christian Muslim Democrats, the ruling political party of Arroyo, de Venecia founded the International Conference of Asian Political Parties (ICAPP) in Manila in 2000. He invited the CCP to participate, thereby providing it a forum and an opportunity to increase its legitimacy in Asia. According to Baviera, “ICAPP gave it [China] an opportunity to change the image of the CCP held by other political parties in the region, as one that was ‘peaceful, open, enlightened and progressive’.” Because of this, de Venecia was able to build powerful connections in China, making himself “the gatekeeper for major Chinese investment projects in the Philippines.” He consequently became “the staunchest defender of JMSU.”
Indeed, as recently as July 2013 the press quoted Mr. de Venecia as supporting a turn back to China. “Right now, nobody’s getting rich,” he was quoted as saying in the Washington Post. “Here, we are getting zero resources. And not only that, but also a lot of stress and problems.” Those who support Mr. de Venecia would apparently prefer joint development of the South China Sea, and a resumption of Chinese fruit imports, to the current conflict in which potential financial flows from the South China Sea are stymied.
The Philippine government also found irregularities and illegal procurement practices in the $450 million North Rail project, and invalidated the contract in 2012. As a result of the negative publicity that began with a parliamentary investigation prior to Arroyo’s departure, China hastily cancelled its tainted negotiations for an international airport contract at the former Clark Air Base, and replaced its Ambassador to the Philippines in September 2007. The Arroyo administration was implicated in supporting Chinese bids for a seismic exploration contract, in exchange for bribe-tainted loans, interfering with adoption of laws contrary to Chinese interests, including compliance with the 2009 United Nations Convention on the Law of the Sea (UNCLOS), and possibly accepting personal bribes.
Despite the stated attempts by President Benigno Aquino to decrease corruption in the Philippines, it has deep roots. As noted by Dr. Aileen Baviera, “The current president, Aquino III, campaigned and won on a platform of good governance, promising to stamp out corruption perpetuated by the Arroyo government, which itself came to power on the crest of a popular movement against the corrupt and inept former President Estrada.” She continues, “The struggle for clean government remains a challenge, as public office is still seen by many as a stepping stone to the accumulation of private wealth.”
Corruption in presidential and legislative politics in the Philippines is abundant. Political families are often dynasties with patron-client relations to decentralized landowning oligarchies. Legislative seats are fiercely defended because of the financial gains they provide, and the political power they confer both with the President, and with lower-level bureaucrats and representatives. Losing a legislative seat could cause retribution by the winning dynasty against the losing dynasty. Political influence is exercised through a plethora of kinship and business networks. From the 9th to the 12th Congresses (1992-2004), representatives with political ancestry occupied approximately 60% of House seats. The proportion of Senators with political ancestry was higher, at around 65-75%. Approximately 10% of representatives have kinship links to other representatives, and 5% are related to senators. During the 11th and 12th Congresses, approximately 16% of senators had kinship links to other senators, and approximately 40% had links to representatives. Approximately 20% of members shared business interests over the three congresses.
Gross domestic product per capita (GDP PC) in the Philippines was about $4,500 in 2012. Salaries are low for Presidents and Senators alike, amounting to just a few hundred US dollars monthly. Senators must fund their own campaigns, with no state-funding available, and are expected to provide for themselves and their families through business dealings. Some legislators are rarely heard from, except when the businesses of themselves or their campaign benefactors are concerned.
Presidential-level corruption is common in the Philippines, even in the post-Marcos era. In addition to the alleged compromise of President Arroyo by the Chinese, at least two presidents have been implicated in electoral fraud. The victory of President Elpidio Quirino’s of the Liberal Party was marked by excessive numbers of dead voters. President Ramos was repeatedly accused of electoral fraud in the 1992 elections. Presidential corruption can even become violent. A military vehicle, allegedly on orders of the President, rammed the vehicle of his primary accuser, Senator Defensor-Santiago, putting her in hospital. She was also indicted on criminal charges that were later found to be baseless and dropped after three years. In the 2004 Global Corruption Report of the UK-based Transparency International, former presidents Ferdinand Marcos and Joseph Estrada made it to the top-ten list of the most corrupt leaders in the last two decades. Ranked second after Indonesia’s Suharto, Marcos was alleged to have stolen a total of $5 billion to $10 billion, while Estrada ranked as the 10th most corrupt, allegedly plundering $78 million to $80 million dollars during his first three years in office. In 2007, Estrada was convicted of plunder and embezzlement and sentenced to life in prison after a six-year trial. After six weeks from the day he was convicted, then President Arroyo granted him pardon in order “to curry favour with the opposition and to deflect mounting charges of corruption within her own administration,” according to critics.
Chinese Economic Influence in the Philippines
Increasingly close economic ties between China and the Philippines, and the Philippines’ thirst for investment, has created plentiful opportunities for Chinese influence in the business and politics of the Philippines. China is the largest trading partner of the Philippines, when considering that Hong Kong is a territory of China. Trade between China and the Philippines increased from $18 billion in 2005 to $30 billion in 2007. In September 2011, President Aquino and 300 leading business executives visited China. They agreed to increase bilateral trade to $60 billion by 2016. By 2012, bilateral trade increased by 13% to $36 billion, more than double China’s overall growth of 6% in international trade. Smuggled goods between the Philippines and China, including agricultural goods, guns, and drugs, probably exceed official trade. By way of contrast, the bilateral trade of the United States with the Philippines was only $22 million in 2011.
In international trade, large volume buyers have immense influence over small-volume sellers. This is precisely the relationship between China and the Philippines. Chinese exports to the Philippines are negligible compared to China’s overall exports, but the Chinese market is a huge percentage of Philippine exports. In 2012, 21% of Philippine exports went to China and Hong Kong, 19% to Japan, and only 12% to the United States. China now has more economic influence in the Philippines, primarily through Philippine exporters, than does the United States. If recent history is any guide, China excels at leveraging that influence by exploiting corruptible Philippine officials, and through veiled economic threats against the Philippine Government. Unlike most of their developed-country competitors, China generally fails to prosecute Chinese businessmen who bribe foreigners in order to increase Chinese business.
Table 1: Discrepant Data on Imports from China to Philippines
|Bananas (Export, tons)||China
Philippine reporting on imports is less than Chinese reporting because 1) Chinese officials may be over-reporting productivity in order to impress their superiors, and 2) many Philippine importers under-report in order to avoid tariffs, taxes, and import fees. Importers and exporters — including smugglers — are likely to have the means and the motivation to influence Philippine senators to have a pro-Chinese stance, whether on United States military bases, the South China Sea dispute, or otherwise. Philippine importers and exporters have less motivation to support United States interests because: 1) trade is less with the United States than with China, especially considering the large amount of smuggling between China and the Philippines; and 2) the United States, which is publicly committed to free trade, would suffer more public relations costs from use of trade restrictions as a weapon against the Philippines, than would China’s use of trade restrictions.
A recent example of pressure felt by the Philippines to accommodate China occurred during the Scarborough Shoal conflict of 2012. The Philippine Navy caught Chinese fishermen near the shoal in April 2012, but were prevented by the Chinese Navy from apprehending them. A standoff ensued for months. Scarborough Shoal is a tiny island over 500 miles from the Chinese coastline, but only 123 miles from the militarily-strategic Subic Bay, on the Luzon coastline. A permanent Chinese military presence on the shoal is of major concern given its proximity to Subic Bay, an important naval base. The United States almost entirely vacated the base in 1992, but could return if invited by the Philippines.
China retaliated during the Scarborough Shoal dispute through economic measures. China is the fourth largest source of tourism to the Philippines, and most Chinese travel agencies suspended tours. Chinese airlines also decreased service to the Philippines. In May, China banned many fruit imports from the Philippines. One-hundred and fifty containers of Philippine bananas were left to rot in Chinese ports, and tons more were destroyed or distributed free in the Philippines for lack of the normal Chinese buyers. Banana industry officials estimated that 200,000 Philippine banana workers were affected. China also subjected Philippine pineapples to increased sanitary inspection, likely because of the Scarborough conflict. Finally, the Chinese Navy enforced a ban on fishing near Scarborough Shoal.
Despite China’s aggressive tactics, many politicians in the Philippines took pains to minimize China’s actions with respect to import restrictions. Philippine official statistics of a banana export increase from 2011 to 2012 of 18% were called “highly suspicious” by Dr. Rolando Dy, Executive Director of the Center for Food and Agribusiness at the University of Asia and the Pacific. According to Dr. Dy, they could have been manufactured by Philippine officials to decrease public concern over Chinese attempts at economic influence. Dr. Dy estimates that banana exports from the Philippines to China actually suffered a 40% decrease during this period, because of the Scarborough conflict.
The ethnic Chinese population of the Philippines is only 1.35 million in a country of 92.34 million, but they are the most politically and economically powerful group in the country. According to some admittedly controversial estimates, Chinese-Filipinos owned between 50 and 55% of Philippine market capital in 2006. Most trade between the Philippines and China occurs through major corporations with their headquarters in Manila, as well as China offices in Shanghai, Shandong, and Tianjin. However, smaller companies also have networks of trade, and these are often dominated by Chinese-Filipinos. Of the top twelve companies in Davao by imports from China between 2000 and 2003 (which account for almost 75% of imports), three were owned solely by Chinese, and the remainder frequently had major Chinese shareholders. Sixty percent of exports to China from Davao were controlled predominantly by Chinese. Other Philippine cities with major concentrations of interlinked companies doing business with China include Binondo, Tondo, Pasig, and Makati. The strength of Chinese commercial networks is historical, and caused anti-Chinese legislation, including the Import Control Act of 1950 (restriction of Chinese access to foreign exchange), the Rice and Corn Nationalization Act, and the Retail Trade Nationalization Act of 1954 (exclusion of Chinese from certain economic sectors).
Political and commercial power in the Philippines is often centered in prominent Chinese families. These families have mutually-reinforcing relationships with counterparts, as do most politically powerful families in the Philippines. Based on shared history, culture, and values, however, Chinese-Filipino families are more likely to have relationships with counterparts in China. These relationships are one avenue for Chinese influence in the Philippines. The Aquino family, for example, has produced two presidents including Corazon Aquino, who led the People Power Revolution, and her son the current President, Benigno Aquino. An example of China’s influence over Benigno Aquino came to light when three Philippine drug smugglers were arrested in 2008 and subsequently sentenced to death. President Aquino sent his Vice President to plead for clemency, and canceled his own trip to Norway to attend the granting of the Nobel Peace Prize to a Chinese dissident. President Aquino publicly explained that he canceled the trip to gain favor with China for the drug smugglers’ case. President Aquino also deported 14 Taiwanese to face fraud charges in China, which created a major upset in relations with Taiwan. Despite these overtures, however, China executed the smugglers in March 2011.
China can also use wealthy Filipino individuals who operate in China to influence Philippine politics. Philippines’ richest family is led by Mr. Henry Sy, who moved to the Philippines from China at age 12. In 2013 the Sy family was worth $13.2 billion. The Sy family owns 30% of the National Grid Corporation of the Philippines (NGCP), which controls electric power in the country. China owns a 40% stake in the company. The Sy family owns a majority stake in the China Banking Corporation, the fourth-largest bank in the Philippines. The Sy family founded the Mall of Asia in Manila through their real estate company SM Prime, which is capitalized at $14 billion. SM Prime has built five major malls in China, is currently building two more, is negotiating for an additional four, and is seeking to develop Chinese residential real estate. Chinese operations amount to 10% of the company’s profit. The Chinese government could attempt to influence Philippine politics through wealthy and influential businessmen, such as Mr. Ty, by threatening to cancel contracts in China.
While the Aquino and Sy families have not been implicated in corruption or influence-peddling in favor of China, it would be surprising if China did not attempt to use their frequent interaction with similar businessmen and politicans to advance Chinese interests. Doing business in China as an expatriate, even a Chinese expatriate, requires good contacts in the bureaucracy and the payment of bribes and kickbacks. Some of these bribes and kickbacks could be in the form of increased influence granted to China, through its Philippine contacts, in the Philippine Senate and Congress. To the extent that China does use its expatriate populations or business contacts to advance its interests, do not expect an obvious approach. When funding the New People’s Army (NPA), China is reported to have requested of an NPA delegation that they not involve the Chinese-Filipino population “too much” in revolutionary activities. China will likewise want to avoid any backlash against Chinese-Filipinos due to China’s current foreign influence campaigns.
The second richest man in the Philippines is Mr. Lucio Tan, who was born in China and moved to the Philippines when he was a child. He runs a multi-billion dollar empire in the Philippines, China, Guam (where he is dubbed as Guam’s biggest investor), Papua New Guinea, Canada, and the United States. His business interests span, among other investments, banking, tobacco, liquor, airlines, and real estate, totalling over $20 billion USD. The Lucio Tan Group (LTG) of Companies has vast holdings in China — about 40 billion yuan in real estate development alone. In China, the Eton Properties Group under LTG manages 8 real estate companies, 3 property management companies, and 2 hotel companies. In addition, LTG has business deals in brewery, aviation, and banking in different cities and provinces in China, including Beijing, Shanghai, Dalian, Shenyang, Xiamen, Shenzen, and others.
While Henry Sy is not as visible in the political scene, Lucio Tan appears to be deeply embroiled in Philippine politics. He made his fortune under the regime of former President Ferdinand Marcos, whom he befriended when he was employed in a tobacco factory and was assigned to buy tobacco leaves in an Ilocos province that Marcos was representing as a congressman. Mr. Tan took advantage of tax and other incentives that the Marcos regime extended to him. In exchange for these privileges and concessions, he gave Marcos Ph60 to Ph100 million a year. His influence continued through the Estrada regime, to which he contributed Ph1.5 billion in campaign contributions, according to well-placed sources at the Estrada camp.
As Mr. Tan took advantage of his political connections, his business holdings grew. The Allied Bank that he acquired for a bargain price became one of the top banks in the country. However, his businesses were also the subject of legal scrutiny for their questionable origins and tax evasions. In 1987, the Presidential Commission on Good Government filed a tax evasion case against Mr. Tan in the amount of Ph50 billion. In addition, the Philippine government wanted 60% of Tan’s holdings in companies that he held in trust for former President Marcos, which the government believed Marcos purchased with government funds. In 2011, one of his former employees, Mr. Danilo Pacana, filed tax evasion charges against some of Mr. Tan’s companies. Mr Tan was accused of creating dummy companies in order to avoid tax payments. Asian Alcohol had an estimated unpaid tax in the amount of Ph200 million and Allied Bank in the amount of Ph338 million, while Fortune Tobacco Corp. has continued its tax evasion practices despite having been charged with a Ph25.3 billion excise tax violation in the mid-90s. Another whistle-blower, Karen Hudes, former senior executive of the World Bank, accused Lucio Tan of “having taken $900 million that should have been used to fight poverty to pay for loans he had defaulted.”
Mr. Tan’s influence extends into the South China Sea issue. Among Philippine lawmakers who favor China in connection with the South China Sea dispute by preferring joint development of the disputed territories, the most prominent is Senator Antonio Trillanes IV, a former Navy Lieutenant known for leading a mutiny in 2007 to protest graft and corruption of the Arroyo government. In the midst of the Scarborough Shoal standoff, Senator Trillanes asked President Aquino to allow him to engage in “back door” diplomacy with China. While Aquino denied that Trillanes was sent as a special envoy, he did sanction the trip. In an open spat on the Senate floor, then Senate President Juan Ponce Enrile accused Trillanes of dealing with Chinese intelligence officials while making six trips to Beijing and holding approximately 16 meetings with unnamed Chinese officials. Enrile also said that Filipino-Chinese businessmen who have contacts in China arranged for these trips, which Trillanes did on his own without the official permission of the Senate President. During a press interview, Trillanes indicated that the Federation of Filipino-Chinese Chambers of Commerce and Industry (FFCCCI), a business association of Filipino-Chinese businessmen, asked him to play a mediating role over tensions in the Scarborough Shoal. Trillanes also said that Mr. Lucio Tan, who serves as Chairman Emeritus of the association, “sponsored his first-class trip to Beijing.” When China imposed restrictions on bilateral trade and travel due to the Scarborough Shoal standoff, Filipino businessmen relied upon Trillanes to smooth relations with Beijing.
Another Philippine senator who favors joint development with China over the disputed territory is Senator Jinggoy Estrada. During a speech at the 12th Filipino-Chinese Friendship Day sponsored by FFCCCI, Estrada praised the contributions of the Filipino-Chinese community to the national economy and expressed confidence that the conflict over the South China Sea would be settled amicably. One of the richest senators, Mr. Estrada is the son of former President Joseph Estrada who is a long-time friend of Mr.Tan. In his 2012 Statement of Assets, Liabilities, and Net Worth (SALN), Senator Estrada stated that P119.3 million of his P193.56-million total net worth is placed in various investments – S-E-N-J-I Corp., Lucky J4J Resto Inc., HK Choi Inc., and Choi Palace Inc.
Senator Ralph Recto, a senior member of both the Senate national defense and security and foreign relations committees, also favors an amicable resolution of the South China Sea dispute. In a statement similar to what former Speaker Jose de Venecia said during an interview (that was mentioned earlier in this article), Recto said, “Every stand-off, the territorial tension only escalates and we’re not gaining anything – zero. We could pursue a different tack by working out a possible joint exploration without impinging on our sovereignty.” Senator Recto’s favorable view of China may have something to do with his earlier dealings with the tobacco industry, specifically with the Fortune Company, which is owned by Mr. Lucio Tan. The Fortune Company has merged with Philip Morris Company and has a $300 million plant in Senator Recto’s province of Batangas.
The Federation of Filipino-Chinese Chambers of Commerce and Industry is an active player in the Philippine political scene. Filipino-Chinese businessmen control a large portion of the Philippine economy, and some of them have made it to Forbes 2012 billionaire list. Yet, in a speech delivered by President Aquino in March 2013, only 8% (16 out of 207 firms) of organizations listed as members of FFCCI paid taxes. The Philippine Bureau of Internal Revenue has discovered that a majority of these organizations have not applied for a Tax Identification Number (TIN). In terms of its individual members, only 354 out of 552 members (64%) paid taxes. Aquino also added that those who paid income taxes did not pay the full amount. This seeming lack of civic duty on the part of many in the Chinese business community may be mirrored in the non-Chinese Filipino community, but it also indicates a level of corruption that could facilitate Chinese government influence in Philippine politics.
The Future of the Philippine Relationship to the United States, Japan, and Asean
Corruption in the national government and political parties is perceived by the Filipino people as a serious problem, according to a 2013 report by Transparency International. The report states that 63% of Filipinos think corruption in the public sector is a “serious problem,” and 19% see it as a “problem”. Sixty-four percent of respondents see public officials and civil servants as corrupt or very corrupt. Fifty-eight percent of respondents see political parties as corrupt or very corrupt.
China has likely taken advantage of this corruption to worsen relations between the Philippines and the United States, and extend gains in the Spratly Islands. In just a single week of July 2013, the Philippine military recorded 61 Chinese vessels in the Spratly Islands. Mischief Reef is now a Chinese logistical base. Scarborough Shoal is under Chinese control since Philippine ships retreated from the 2012 standoff. It now has concrete posts, blocks and a rope barrier that exclude Philippine access to the rich fishing grounds of the lagoon.
But since China’s persistent naval incursions into the West Philippine Sea, the Philippines has begun to renew the partnership with the United States that has lagged since the mid-1980s. Since 1986, conflict with China has increased and fear of United States “imperialism” has decreased. The United States has proven to most Philippine lawmakers that they are an ally of independent democracies in general, and the Philippines in particular. The United States voluntarily left Panama and the Philippines when asked, and installed democracies in Iraq and Afghanistan. Those new democratically-elected sovereign governments requested that the United States disengage, and the United States is consequently in the process of doing so. It should be clear that United States military bases are not a threat to the sovereignty of nations in which they are found, but rather serve as protection from the encroachment of less principled neighbors. A 2013 Pew poll found that 85% of Filipinos have a favorable view of the United States, while only 48% favorably view China. Given the crisis in the South China Sea, the Philippines will need to abandon its diplomatic middle path between China and the United States, if it is to stop China’s expansion.
Due to increased appreciation in the Philippines for the security benefits of United States bases, increased threat from energy-hungry China, and belligerent Chinese activities in the South China Sea, in 2012 the Philippines invited the United States to return. But despite the Philippines’ strategic position, the United States 7th Fleet has not accepted. Transaction costs, constitutional issues, and the perceived instability of the Philippine commitment to the alliance inhibit the enthusiasm of their former close ally. Additionally, the 7th Fleet’s new home has advantages. Singapore is also strategically located. While it has less access to East Asia, it is optimal for protecting key shipping lanes in the Straits of Malacca. The United States may use Naval Base Subic Bay and Clark Air Force Base for refueling in the future, but as of late July 2013, even this low level of military cooperation is still under discussion. The United States needs to trust the Philippines to be a strong and unflinching ally if it is to spend the billions of United States taxpayer dollars necessary to return to the bases. Rebuilding trust with the United States could be achieved through closer diplomatic cooperation, increasing military training, and possibly even constitutional reform (known in the Philippines as “Cha-Cha” for charter change) of anti-foreign clauses, including on the issue of military bases and foreign direct investment (FDI).
Regardless of whether refueling is agreed, it and counterterrorism cooperation are unlikely to dissuade China from further military encroachment in the South China Sea. As an archipelago, with over 7,000 islands and a porous border to secure and protect, the Philippines is vulnerable to external aggression and encroachment. With the South China Sea dispute unresolved, the Philippine government will increasingly turn to the United States, Japan, and other allies for help. Philippine Defense Secretary Voltaire Gazmin argued for stronger military partnerships with allies in June 2013. “At this point, we cannot stand alone,” he said. “We need to form alliances. If we don’t, bigger forces will bully us, and that is happening now.” The bullying to which Secretary Gazmin refers is China’s expanding presence in waters claimed by the Philippines.
The Philippine Defense Secretary’s appeal for help became more urgent when China announced through the People’s Daily of a “counterstrike” against the Philippines if it continues to “provoke” Beijing. It accused the Philippines in June 2013 of “sins,” including “illegal occupation” of the Spratly Islands, invitations to foreign capital to engage in oil and gas development in the disputed South China Sea waters, promoting the “internationalization of the waters,” using the United States as a “patron,” and using its Asean partners as “accomplices.” Since Xi Jinping became President of China in March 2013, China’s military and mineral exploits have continued in the South China Sea. As China persists in claiming and enforcing expansive swaths of the South China Sea far from its shores, other claimant countries will increasingly side with each other and the United States to balance against China. Expect closer relations of the United States to the Philippines, Vietnam, and Asean in 2014 and 2015. Expect increasingly conflictual relations between the Philippines and China, until the South China Sea dispute is settled, either by force or through the United Nations Convention on the Law of the Sea (UNCLOS).
The Philippines will improve its claims to the South China Sea if lawmakers reject a hubristic nationalism that does not heed the realist necessity of interdependence and cooperation among allies. An otherwise positive nationalism can be dangerous when it slides into irrational sentiments like myopia and closed-mindedness. Countries like Japan and Singapore understand the strategic importance of coupling national security interests with international military alliances. Patriotic nationalism means positioning one’s country from a position of strength, taking what is necessary to promote its national interests, but giving what is necessary to build a more stable, secure, and peaceful world for itself and its alliance partners.
This requires a reasonable interpretation of laws that benefit the Philippine nation. Given that the Philippine government has been dealing with security issues posed by communist-inspired rebel groups, Muslim secessionist movements, international terrorists, and now an aggressive giant in the West Philippine Sea, its officials must decide whether they are willing to turn the Philippines into a strong regional player on the world stage, through more strongly binding itself to an alliance of friendly powers. It will require statesmanship of reasonable expectations, goodwill, and the wisest of judgments.
Perhaps because of overstretch in the Middle East, the United States and the international community have been too polite in the face of China’s expansionism. They’re taking a prudential stance for the sake of maintaining peace in the region, protecting economic interests, and keeping trade flowing. But China is not being polite, nor is it supporting international law. At some point the democratic-world’s prudence in the South China Sea will cross into appeasement, risking hubris followed by war.
Dr. Anders Corr has a Ph.D. from Harvard University in Government, and is the owner of Corr Analytics Incorporated. Dr. Priscilla Tacujan has a Ph.D. from Claremont Graduate University, and an A.B. from the University of the Philippines, Diliman, Quezon City. The Philippine Star published an editorial based on this paper on 8/16/2013.
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Reyes, Karl John. “Chinese military intel opened doors for Trillanes – JPE.” InterAksyon.com, September 24, 2012. http://www.interaksyon.com/article/43923/chinese-military-intel-opened-doors-for-trillanes—jpe. Accessed September 15, 2013.
Reyes, Karl John. “Trillanes China trip: no paper trail, no immigration stamps, likely tied to $70- loan – JPE. InterAksyon.com, September 21, 2012.http://www.interaksyon.com/article/43747/trillanes-china-trip-no-paper-trail-no-immigration-stamps-and-possibly-linked-to-70-b-loan—jpe. Accessed August 17, 2013.
Romero, Alexis. “‘Allies needed v. bullies’: They’re near our doorstep — DND chief.” Philippine Star, June 29, 2013.http://www.philstar.com/headlines/2013/06/29/959542/allies-needed-vs-bullies-theyre-near-our-doorstep-dnd-chief. Accessed July 23, 2013.
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Sayson, Ian and Cecilia Yap. “Tan’s Philippine Cigarette Venture Calls for Gradual Sin Taxes.” Bloomberg, October 30, 2012.http://www.bloomberg.com/news/2012-10-30/tan-s-philippine-cigarette-venture-calls-for-gradual-sin-taxes.html. Accessed August 17, 2013.
Sayson, Ian. “Billionaire Sy to Merge Real Estate Assets in SM Prime.” Bloomberg News, May 31, 2013, http://www.bloomberg.com/news/2013-05-31/sm-investments-orders-trading-halt-boosting-merger-speculation.html. Accessed July 20, 2013.
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Sun Star. “Enrile: China’s new e-passports not a big deal.” November 29, 2013.http://www.sunstar.com.ph/breaking-news/2012/11/29/enrile-chinas-new-e-passports-not-big-deal-255771. Accessed July 18, 2013.
Tacujan, Priscilla. “Protectionist Clauses in the Philippine Constitution Restrict Foreign Direct Investment.” Journal of Political Risk, vol. 1, no. 1, May 2013.http://www.canalyt.com/protectionist-clauses-in-the-philippine-constitution-chill-foreign-direct-investment/. Accessed July 17, 2013.
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Whaley, Floyd. “United States Negotiates Expanded Military Role in Philippines.” New York Times, July 12, 2013.http://www.nytimes.com/2013/07/13/world/asia/us-negotiates-expanded-military-role-in-philippines.html?ref=philippines&_r=0. Accessed July 18, 2013.
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 John Reed, “U.S. Deploying Jets Around Asia to Keep China Surrounded,” Foreign Policy, 7/29/2013, http://killerapps.foreignpolicy.com/posts/2013/07/29/us_deploying_jets_around_asia_to_keep_china_surrounded#.UfexHc-254U.email, accessed 7/30/2013.
 United Nations Division for Ocean Affairs and Law of the Sea. United Nations Convention on the Law of the Sea (UNCLOS), 12/10/1982, http://www.un.org/depts/los/convention_agreements/texts/unclos/UNCLOS-TOC.htm, accessed 7/25/2013; Ian Storey, “Slipping Away? A South China Sea Code of Conduct Eludes Diplomatic Efforts,” Center for New American Security, Washington, D.C., March 2013. http://www.cnas.org/files/documents/publications/CNAS_Bulletin_Storey_Slipping_Away_0.pdf, ,accessed 16 July 2013; Mohan Malik, “Historical Fiction: China’s South China Sea Claims,” World Affairs, May/June 2013, http://www.worldaffairsjournal.org/article/historical-fiction-china%E2%80%99s-south-china-sea-claims, accessed 7/31/2013.
 Alasdair Bowie and Danny Unger, The Politics of Open Economies: Indonesia, Malaysia, the Philippines, and Thailand (Cambridge: Cambridge University Press, 1997), p. 105.
 Gardener Harris and Edward Wong, “Where China Meets India in a High-Altitude Desert, Push Comes to Shove,” New York Times, 5/2/2013, http://www.nytimes.com/2013/05/03/world/asia/where-china-meets-india-push-comes-to-shove.html?_r=0, accessed 7/31/2013.
“Philippines ‘to take South China Sea row to court,’” BBC News Asia, 01/22/2013, http://www.bbc.co.uk/news/world-asia-21137144, accessed 7/23/2013.
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 For a similar assessment, see Zhoa Hong,“China-Philippines Relations Stunted by the South China Sea Dispute,” Institute of Southeast Asian Studies, Singapore, March 2013. http://www.britcham.org.sg/images/uploads/ISEAS_Perspective_2013_17_-_China-Philippines_Relations_Stunted_by_the_South_China_Sea_Dispute.pdf, accessed 16 July 2013.
 For background information on the Philippine-China relations and United States interests in the Philippines, see Thomas Lum, “The Republic of the Philippines and U.S. Interests,” Congressional Research Service, Washington, D.C., April 5, 2012, http://www.fas.org/sgp/crs/row/RL33233.pdf, accessed 16 July 2013. For stumbling blocks to the US-Philippine negotiations of 1991, see David Sanger, “Philippines Orders United States to Leave Strategic Navy Base in Philippines,” New York Times, 12/28/1991, http://www.nytimes.com/1991/12/28/world/philippines-orders-us-to-leave-strategic-navy-base-at-subic-bay.html?pagewanted=all&src=pm, accessed 7/26/2013.
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 Randy Fabi and Manuel Rogato, “Insight: Conflict Looms in South China Sea Oil Rush,” Reuters, 2/28/2012, http://www.reuters.com/article/2012/02/28/us-china-spratlys-philippines-idUSTRE81R03420120228, accessed 7/26/2013.
 “China ‘Reveals Army Structure’ in Defence White Paper,” British Broadcasting Corporation, 4/16/2013, http://www.bbc.co.uk/news/world-asia-china-22163599, accessed 7/18/2013, n.a.
 Constitution of the Republic of the Philippines. 1987. Republished by the LawPhil Project, http://www.lawphil.net/consti/cons1987.html, accessed 7/10/2013.
 In a 2013 article published by a Manila newspaper, Daily Inquirer, one of the leaders of the Filipino-American community in the United States, Loida Nicolas Lewis, was quoted as saying that she will now support a constitutional amendment lifting the ban on foreign bases, if that would bolster the Philippine position against China’s maritime claims. The constitutional section under which strictures on military bases falls is a section in the Transitory Provisions — provisions which were added to the main text of the Philippine Constitution as a way of legitimizing the transitory government of Corazon Aquino. These provisions were designed to be temporary, and one of the issues on the table was the Philippine-United States bases agreement. Jose Nolledo (one of the constitutional drafters) addresses the topic in his book, (Jose Nolledo, The Constitution of the Republic of the Philippines Explained (Manila: National Book Store, Inc., 1987, 217-18):
. . . The nationalists’ resolution to ban all kinds of military bases in the country after 1991 was rejected by the 1986 Constitutional Commission which gave the President the option whether or not to continue the bases agreement but under the condition that should such agreement be renewed, the same must be in the form of a treaty duly concurred in by our Senate and should the Congress require by law a national referendum, the same must be ratified by a majority of the votes cast by the people (the electorate) in said referendum. Thus, if there is no law passed by Congress requiring a national referendum, the concurrence by our Senate would suffice to give validity to the treaty. Moreover, it is required that such a treaty must be recognized as a treaty by the other contracting party. Incidentally, the RP-US Bases Agreement was ratified by our Senate by an 8-0 vote but it was never ratified by the US Senate leading to the opinion that even the US Government does not recognize the validity of the RP-US Bases Agreement or that the US treats the RP-US Bases Agreement as a mere executive agreement.
May President Aquino, the incumbent President enter into a renewal of the RP-US Bases Agreement after the ratification and even before the convening of the regular Congress in July, 1987? Some quarters believe that the answer is in the affirmative and that President Aquino who exercises legislative powers before the actual convening of the Congress might as well consider the treaty as fully ratified. It is believed that it is the clear intent of Section 25, Article XVIII to let our Senate participate in the concurrence with the treaty and that the Executive Department should wait for the decision of the regular Congress on whether or not there should be a law requiring a general referendum on the issue of whether it is favorable to renew the RP-US Bases Agreement.
So that posterity may know, those who spoke against the retention of American bases after 1991 were Commissioners Edmundo Garcia, Wilfrido Villacorta, Rene Sarmiento, Chito Gascon, and Jose Nolledo. And those who favored the American bases were Commissioners Blas Ople, Ricardo Romulo, Serafin Guingona, Florenz Regalado, Christian Monsod, and Crispino de Castro . . .”
Despite the fact that the Constitution allows for the Philippines to approve foreign bases by vote of the Senate, the press and many politicians treat the provision as if it’s an immutable prohibition on foreign bases. A change to the constitution should be carefully considered. While it might help ease the return of United States bases in the short-run, it could also be used by the natural adversaries of the Philippines, such as China. It is possible that China could so increase their influence as to obtain Senatorial concurrence of Chinese bases in the Philippines. The constitutional provision allowing the House to set the issue before a national vote could be useful in keeping Chinese influence, and bases, at a minimum in the future.
 The Philippine political system has a President, Supreme Court, 24-member Senate, and 265-member House of Representatives. The President holds immense influence over the House of Representatives, as they are elected in districts, and much of their district-level budget is made by executive fiat. Senators, on the other hand, are elected nationally, aspire to the presidency, and are relatively independent. The small number of Senators and Senate treaty ratification requirement makes each of them relatively powerful in foreign affairs (Rupert Hodder, pp. 225-229). For example, President Corazon Aquino sought to renew the United States Naval Base Subic Bay lease in 1992, but the Senate blocked her and the United States had to leave the Philippines. For more detail, see Aileen Baviera, “The Influence of Domestic Politics on Philippine Foreign Policy: The Case of Philippines-China Relations Since 2004,” S. Rajaratnam School of International Studies, Working Paper No. 241, 6/5/2012, p. 10, http://www.rsis.edu.sg/publications/WorkingPapers/WP241.pdf, accessed 7/20/2013.
David E Sanger, “Philippines Orders United States to Leave Strategic Navy Base in Philippines,” New York Times, 12/28/1991, http://www.nytimes.com/1991/12/28/world/philippines-orders-us-to-leave-strategic-navy-base-at-subic-bay.html?pagewanted=all&src=pm, accessed 7/17/2013.
Carlo Munoz,. “The Philippines re-opens military bases to United States forces,” The Hill, 6 June 2012, http://thehill.com/blogs/defcon-hill/operations/231257-philippines-re-opens-military-bases-to-us-forces-, accessed 7 July 2013.
Floyd Whaley, “United States Negotiates Expanded Military Role in Philippines,” New York Times, 7/12/2013, http://www.nytimes.com/2013/07/13/world/asia/us-negotiates-expanded-military-role-in-philippines.html?ref=philippines&_r=0, accessed 7/18/2013; Stephen R. Shalom, “Securing the United States-Philippine Military Bases Agreement of 1947,” Bulletin of Concerned Asian Scholars, vol. 22, no. 4, Oct.-Dec. 1990, pp. 3-12, http://www.wpunj.edu/dotAsset/209673.pdf, accessed 7/18/2013.
 Sanger, David E. “Philippines Orders United States to Leave Strategic Navy Base in Philippines.” New York Times, 12/28/1991, http://www.nytimes.com/1991/12/28/world/philippines-orders-us-to-leave-strategic-navy-base-at-subic-bay.html?pagewanted=all&src=pm, accessed 7/17/2013.
 Sanger, “Philippines Orders United States to Leave Strategic Navy Base in Philippines.”
 Fabi and Rogato, “Insight: Conflict Looms in South China Sea Oil Rush.”
 Renato Cruz de Castro, “China, the Philippines, and U.S. Influence in Asia,” Asian Outlook, no. 2 (Washington, DC: American Enterprise Institute for Public Policy Research, July 2007), p. 2, http://www.aei.org/article/foreign-and-defense-policy/regional/asia/china-the-philippines-and-us-influence-in-asia/, accessed, 7/24/2013.
Thomas Lum, “The Republic of the Philippines and U.S. Interests,”Congressional Research Service, Washington, D.C., April 5, 2012, http://www.fas.org/sgp/crs/row/RL33233.pdf, accessed 16 July 2013.
 http://www.fas.org/sgp/crs/row/RL33233.pdf, accessed 7/19/2013.
Floyd Whaley, “United States Negotiates Expanded Military Role in Philippines.”
 Juan Ponce Enrile, “Speech Concerning the VFA,” Senate Committee on National Defense and Security, 1/24/2002. http://www.juanponceenrile.com/view/214, accessed 7/18/2013.
“Enrile: China’s new e-passports not a big deal,” Sun Star, 11/29/2013, http://www.sunstar.com.ph/breaking-news/2012/11/29/enrile-chinas-new-e-passports-not-big-deal-255771, accessed 7/18/2013.
 Alexis Romero, “‘Allies needed vs bullies’: They’re near our doorstep – DND chief,” Philippines Star, 6/29/2013,
Fabio Scarpello, “Philippines Election Reflects China’s Inroads into U.S. ‘Backyard,” World Politics Review, 05/05/2010,
 David Joel Steinberg, Philippine Collaboration in World War II (Ann Arbor: University of Michigan Press, 1967); Stephen R. Shalom, “Securing the United States‑Philippine Military Bases Agreement of 1947.”
 Renato Cruz de Castro, “China, the Philippines, and U.S. Influence in Asia.”
 Fabio Scarpello, “Philippines Election Reflects Chinese Inroads Into United States ‘Backyard,” accessed 7/20/2013.
 Aileen Baviera, “The Influence of Domestic Politics on Philippine Foreign Policy: The Case of Philippines-China Relations Since 2004,” S. Rajaratnam School of International Studies, Working Paper No. 241, 6/5/2012, p. 11-12 http://www.rsis.edu.sg/publications/WorkingPapers/WP241.pdf, accessed 7/20/2013.
 Chico Harlan, “Philippines Pushes Back Against China,” Washington Post, 7/23/2012, http://www.washingtonpost.com/world/asia_pacific/philippines-pushes-back-against-china/2013/07/23/4dfa6058-f043-11e2-bed3-b9b6fe264871_story.html, accessed 7/26/2013.
 Camille Diola, “China hits back: Phl broke ‘commitment,’ ‘aggravated,’ dispute,” Philippine Star, 7/17/2013, http://www.philstar.com/headlines/2013/07/17/980541/china-hits-back-phl-broke-commitment-aggravated-dispute, accessed 7/20/2013; Camille Diola, “China suggests ‘win-win’ exploration of disputed seas,” Philippine Star, 8/5/2013, http://www.philstar.com/headlines/2013/08/05/1054641/china-suggests-win-win-exploration-disputed-seas, accessed 8/5/2013.
 Renato Cruz de Castro, “China, the Philippines, and U.S. Influence in Asia,” accessed 7/24/2013.
“Former Philippine president’s husband arrested on bribery charges,” The Guardian, 03/13/2012, http://www.guardian.co.uk/world/2012/mar/13/former-philippine-president-husband-arrested, accessed 7/18/2013; Aileen Baviera, “The Influence of Domestic Politics on Philippine Foreign Policy: The Case of Philippines-China Relations Since 2004,” accessed 7/20/2013.
 Aileen Baviera. “The Influence of Domestic Politics . . . ,” accessed 08/12/13.
 Chico Harlan, “Philippines Pushes Back Against China.”
 Aileen Baviera,“The Influence of Domestic Politics . . . , “ accessed 7/20/2013; “Former Philippine president’s husband arrested on bribery charges,” The Guardian, March 12, 2013, http://www.guardian.co.uk/world/2012/mar/13/former-philippine-president-husband-arrested, accessed 7/18/2013.
 Partnership for Research in International Affairs and Development (PRIAD), “Anti-Corruption in the Philippines,” Situation Update. July 2012, http://www.priad.org/wp-content/uploads/2012/08/AC-Philippines-brief.pdf, accessed 7/18/2013; Alecks Pabico, “The Spratlys Deal: Selling Out Philippine Sovereignty?” Alternate Forum for Research in Mindanao, 3/17/2008, http://www.afrim.org.ph/m_news-page.php?nid=2198#.UgA77I3FVih, accessed 8/5/2013.
 Aileen Baviera, “The Influence of Domestic Politics on Philippine Foreign Policy: The Case of Philippines-China Relations Since 2004,” accessed 7/20/2013.
 Bowie and Unger, The Politics of Open Economies, pp. 100-102.
 Rupert Hodder, pp. 232-249.
 Rupert Hodder, pp. 232-238.
 Bowie and Unger, The Politics of Open Economies, p. 103.
 Rupert Hodder, p. 234.
 Des Ferriols, “FM, Erap make it to list of world’s most corrupt,” Asian Journal, March 26, 2004,http://asianjournalusa.com/fm-erap-make-it-to-list-of-worlds-most-corrupt-p836-67.htm, accessed 08/9/13.
Manny Mogato, “Former Philippine president Estrada pardoned,” Reuters, October 25, 2007, http://uk.reuters.com/article/2007/10/25/uk-philippines-estrada-idUKMNB0007120071025, accessed 08/09/13,
 Fabio Scarpello, “Philippines Election Reflects Chinese Inroads Into United States ‘Backyard,”accessed 7/20/2013; Renato Cruz de Castro, “China, the Philippines, and U.S. Influence in Asia,” accessed 7/24/2013; Aileen Baviera, “The Influence of Domestic Politics on Philippine Foreign Policy: The Case of Philippines-China Relations Since 2004,” accessed 7/20/2013.
 Rita Olchondra, “China urges more open PH market,” Philippine Daily Inquirer, 05/062013, http://business.inquirer.net/120231/china-urges-more-open-ph-market, accessed 7/18/2013.
 Office of the United States Trade Representative, “Philippines,” http://www.ustr.gov/countries-regions/southeast-asia-pacific/philippines, accessed 7/18/2013.
 United States Central Intelligence Agency. “Philippines.” CIA World Factbook, https://www.cia.gov/library/publications/the-world-factbook/geos/rp.html, accessed 7/20/2013. These figures do not include smuggling between the two countries, which by some estimates is equal to the official trade. For more on smuggling, see Cielito Habito, “Could China’s sanctions choke us?,” Philippine Daily Inquirer, 05/15/2012, http://opinion.inquirer.net/28719/could-china%E2%80%99s-sanctions-choke-us, accessed 7/21/2013.
 Rolando Dy, “Philippine Agri-Food Trade: Smuggling or Under-reporting?” Business Inquirer, 5/13/2013, http://business.inquirer.net/121501/philippine-agri-food-trade-smuggling-or-under-reporting, accessed 7/22/2013.
 Scarborough Shoal is known in the Philippines as Panatag Shoal or Bajo de Masinloc, and in China as Huangyon Island.
 Andrew Higgin, “In Philippines, Banana Growers Feel Effect of South China Sea Dispute,” Washington Post, 6/10/2012, http://articles.washingtonpost.com/2012-06-10/world/35461588_1_chinese-fishermen-president-benigno-aquino-iii-south-china-sea, accessed 7/26/2013.
 Cielito Habito, “Could China’s sanctions choke us?,” accessed 7/22/2013; Christopher Bodeen, “China Travel Agencies Suspend Trips to Philippines” Inquirer, May 10, 2012, http://globalnation.inquirer.net/36217/china-travel-agencies-suspend-trips-to-philippines, accessed 7/22/2013.
 Rolando Dy, “Philippine Agri-Food Trade: Smuggling or Under-reporting?,” accessed 7/22/2013.
 Republic of the Philippines National Statistics Office, 2010 Census of the Philippines, http://www.census.gov.ph/content/2010-census-population-and-housing-reveals-philippine-population-9234-million, accessed 7/25/2013; Senate of the Philippines. Press Release, 1/21/2013, http://www.senate.gov.ph/press_release/2013/0121_prib1.asp, accessed 7/25/2013; Aileen Baviera, “China’s Relations with South East Asia: Political Security and Economic Interests,” Philippine APEC Study Center Network, PASCN Discussion Paper 99-17, 1999, http://hilo.hawaii.edu/uhh/faculty/tamvu/documents/baviera.pdf, accessed 7/20/2013.
 Rupert N. W. Hodder, pp. 5, 108-117. Hodder argues that while Chinese-Filipinos have outsized influence in the Philippines relative to their population, claims that Chinese-Filipinos own 50-55% of market capital in the Philippines are exaggerated. Public perception of such extreme levels of influence are likely due to the proliferation of small Chinese entrepreneurs in the public eye, for example wholesalers of grain, fertilizer, and household goods. Nevertheless, Hodder believes the Chinese have immense economic and political influence in the Philippines compared to their population. Shortly after independence in 1946, the Philippine media published figures showing the Chinese owning approximately one third of the import-export trade, and 25% of national sales and assets (pp. 88-93). Hodder estimates that Chinese traders own about 16% of marketplace companies (p. 95), more of wholesalers (p. 120), and that the overall proportion of companies owned by Chinese fell from 5% in the mid-1990s to less than 5% in 2006 (p. 103).
 Rupert Hodder, pp. 85, 277.
 Ibid.. In Davao, Chinese activity is centered on Uyanguren Street, where approximately 54% of establishments are wholly Chinese-owned, in addition to 11% which are predominantly Chinese-owned.
 Bowie and Unger, The Politics of Open Economies, p. 104.
 Aileen Baviera, “The Influence of Domestic Politics on Philippine Foreign Policy: The Case of Philippines-China Relations Since 2004,” accessed 7/20/2013.
 “Henry Sy & Family,” Forbes Magazine, http://www.forbes.com/profile/henry-sy/, accessed 7/20/2013; “Philippines’ Henry Sy May Build Apartments in China,” Bloomberg News, 9/27/2010, http://www.bloomberg.com/news/2010-09-27/philippine-billionaire-henry-sy-plans-apartments-shopping-malls-in-china.html, accessed 7/20/2013.
In 2012, the Government of the Philippines indicated to China that there were conflicts in the Chinese investment in NGCP, and that the power grid and requisite technology should be handed over to the Philippines. Aurelia Calica, “Phl, China drop North Rail,” Philippine Star, 09/26/2012, http://www.philstar.com/headlines/2012/09/26/852997/phl-china-drop-north-rail, accessed 7/21/2013.
 Fabio Scarpello, “Philippines Election Reflects Chinese Inroads Into United States ‘Backyard,” accessed 7/20/2013; Lois Calderon, “Henry Sy’s Son’s Teaming Up for SM Prime,” ABS-CBN News, 7/12/2013. http://www.abs-cbnnews.com/business/07/12/13/henry-sys-sons-teaming-sm-prime, accessed 7/20/2013; Ian Sayson, “Billionaire Sy to Merge Real Estate Assets in SM Prime.” Bloomberg News, 5/31/2013, http://www.bloomberg.com/news/2013-05-31/sm-investments-orders-trading-halt-boosting-merger-speculation.html, accessed 7/20/2013.
 Rupert Hodder, p. 176.
 Ricardo Malay, “How NPA Guerrillas Lost Chinese Support,” Philippine Daily Inquirer, 3/29/2005, p. A1. Reprinted by the Philippine Defense Forum, http://www.timawa.net/forum/index.php?topic=2710.0, accessed 8/7/2013.
 Eton Properties Group,http://www.etonhold.com/templates/T_second_en/index.aspx?nodeid=75, accessed 08/15/13.
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