On the first anniversary of the landmark decision favoring Philippine claims in the South China Sea, Brunei, Malaysia, Taiwan, Vietnam—countries that together with China and Philippines have overlapping claims to hundreds of rocks and reefs that scatter the sea—should send President Rodrigo Duterte a thank you letter. For a good reason: his foreign policy flip-flops saved the peace in the region.
That’s according to a recent statement released by Department of Foreign Affairs (DFA). “The Duterte administration reaffirms its unwavering commitment to protect our country’s territorial claims and maritime entitlements, but believes that the ongoing territorial dispute in the West Philippine Sea should further be resolved in a manner consistent with the spirit of good neighborly relations,” the DFA said.
“The Philippine approach has led to great benefits for the country, allowing us considerable economic gains as well as strengthening our status as ASEAN chair and regional peacemaker.”
Here is how Duterte’s government gained the status of “regional peacemaker.”
Last July Philippines and its close ally, the U.S., won an international arbitration ruling that China has no historic title over the waters of the South China Sea. Yet Philippines’ President Rodrigo Duterte shocked the global community and financial markets by siding with China on the dispute, and seeking a “divorce” from the U.S. Duterte’s flip-flop left the US without a key ally to advance its cause in the South China Sea, and therefore no choice but to soften its tone.
Never mind that China continues its activities around the Scarborough Shoal. "So what do you want me to do? Declare war against China?" Duterte was quoted as asking reporters, in Chinatopix. "I can, but we'll lose all our military and policemen tomorrow, and we are a destroyed nation. And we cannot assert even a single sentence of any provision that we signed."
To be fair, America has done very little to help the Philippines assert the signed provisions and stop China – like “supplement diplomacy with deterrence by warning China that if continues, the United States will abandon its neutrality and help countries in the region defend their claims,” as Ely Ratner explains in the July/August issue of Foreign Affairs.
That might convince Duterte to make yet another flip-flop on Philippines foreign policy.
Meanwhile, investors should constantly keep an eye on the rising geopolitical risks in the South China Sea region markets.
ETF/Fund 12-month Performance (%)
iShares MSCI iShares China (FXI) 18.92
VanEck Vectors Vietnam ETF (VNM) 4.64
iShares MSCI Philippines (EPHE) -7.97
iShares MSCI Emerging Markets 22.41
Source: Finance.yahoo.com 7/14/2017
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