Duterte’s US-Russia games cannot hide China’s attractions

A year into his presidency, Rodrigo Duterte is, geopolitically speaking, impossible to pin down. One day the Philippines’ leader is courting Donald Trump and the US, the next he is on a plane to Moscow to do deals with Vladimir Putin. Meanwhile, in the background is China and its $900bn One Belt One Road project, which could plug a hole in the Philippines’ gaping $150bn infrastructure deficit.

  • By Elliot Wilson
  • 15 Jun 2017
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duterteThat the world is burdened by political instability is hard to dispute. Over the past year, the UK has voted to leave the European Union, then endured a general election that left it more divided and confused than ever. 

US citizens selected Donald Trump as their 45th president, based, it seems, in large part on the buccaneering businessman’s debatable claim to be a world class dealmaker. And in France, the old political order all but collapsed in this year’s presidential race, opening the door to the 39-year-old political novice Emmanuel Macron.

But amid all the flap and fury in large parts of the West, it’s easy to overlook the astonishing rise of one the modern world’s most effective political insurgents, Rodrigo Duterte. Barely a day goes by in which the Philippine president, elected to office in June 2016, fails to dominate news cycles at home and, often, across Asia.

As a presidential candidate, Duterte, like Trump, was coated in Teflon. Bad news just seemed to slide off him. When he threatened to kill thousands of criminals and pledged that his six year presidential term would be a “bloody” one, his supporters cheered, spurred on by his rough diamond mien and can-do attitude. 

When he called his daughter a “drama queen” following her claims to have been raped, many shrugged — and voted for him anyway.

Since coming to power, Duterte has lost none of his power to shock, nor his ability utterly to flummox friends and enemies alike. 

Geopolitically, he is impossible to pin down. Shortly after entering office, Duterte reacted to Barack Obama’s criticism of his anti-drugs campaign by telling the then US president to “go to hell”. 

He then cosied up to Xi Jinping, before humiliating the Chinese president by releasing details of a private discussion regarding a longrunning bilateral maritime dispute. In June, after US special forces were called in to help remove Islamist militia from the southern city of Marawi, Duterte welcomed the support, then backtracked, claiming to be “not aware” of American boots on the ground. 

SPLIT JURY

To some analysts, Duterte is little more than a carnival huckster, adept at playing to the audience, but ill suited to the rarefied world of global diplomacy. They see him as oblivious to the sheer weight of challenges facing a low-lying island chain imperilled by climate change. During his short time in office, the president has, critics say, focused too much on combatting criminality and too little on job creation and narrowing a yawning rich-poor divide. 

But others see in the diminutive 71-year-old a complex and underrated character with street smarts, who started out as a lawyer before rising to serve seven terms as mayor of the country’s third largest city, Davao. 

Besides, dismissing him as an ingénu with no clear geopolitical outlook overlooks the fact that, from the start, Duterte has pursued what he describes as an “independent foreign policy” which harks back to the Cold War, when so-called ‘non-aligned’ states led by India, Egypt, Indonesia and Yugoslavia opted to remain neutral in the international arena, cleaving neither to the US and its allies, nor to the Soviet Union and its client states. 

What is not yet clear is whether Duterte has the patience and savvy required to play a geopolitical long game with the 21st century’s two superpowers, the United States and China.

For his part, the Philippine president is happy to pay more than lip service to this pragmatic form of anti-ideology. In May, frustrated by an inability to buy precision armaments from the US (Duterte claimed they were needed to strike down homegrown Islamist terrorists; the US nixed the idea, fearing the arms would be used to prosecute his shoot-to-kill drugs war), the Philippine leader hopped aboard a flight to Moscow, where he purchased Russian-made laser-guided smart bombs. 
Interviewed during his trip, Duterte denied any suggestion of anti-American antipathy. “I have nothing against America,” he told Russian state television. “Trump is my friend. But my foreign policy has shifted. You treat me as if I’m your colony still, but we are an independent country, and I want my country to be treated with dignity. I want to deal with China and Russia. Russia will sell me weapons with no conditions.”

TWO MASTERS

At one level, pursuing a truly independent foreign policy by playing Washington and Beijing off against one another makes a lot of sense. It is impossible to get away from the fact that the Philippines occupies a hugely significant place on the map. Manila is due west of Guam, a Pacific island state controlled by the US military. To the north of the Philippine capital lurks China, hemmed in by its own narrow maritime boundaries, and desperate to control the vast blue expanses of the western Pacific. 

Yet if Duterte is genuinely committed to pursuing a truly independent foreign policy, he seems to be going about it a strange way. To some critics, rather than forcing the US and China to dance to his tune, he is bending his knee to both. 

China has spent the past few years steadily making its presence felt in the South China Sea, building airstrips and self-contained townships on atolls, reefs and islets also claimed by the Philippines. 

But while Duterte’s predecessor, Benigno Aquino III, fought Chinese encroachment at every turn, bringing — and in 2016, winning — an arbitration case that undermined China’s claims to the expanses of water to its east and south, the current Philippine president has studiously avoided criticising China’s extraterritorial exercises.

That does not, however, mean he is willing to see his country sever its longstanding military and political ties with the US. In fact, the opposite is true. In January, Duterte’s defence secretary, Delfin Lorenzana, said the US would significantly boost its military presence in the Philippines as part of an enhanced military agreement, agreed in 2014 but never formally ratified. 

The pact will involve the construction of new barracks, warehouses and runways, and will enable US ships, aircraft and troops to dock and deploy at five bases scattered across the country. 

CHINESE FUTURE

Yet it is hard to escape the notion that the future of the Philippines will be determined, for better or worse, by the health of its relations, not with a distant superpower laden with debt and nursing its own domestic grievances, but with its huge and newly assertive near neighbour. 

China has overtaken Japan and the US in recent years to become the Philippines’ biggest trading partner. It gobbled up $16bn of Philippine exports in 2016, according to the Observatory of Economic Complexity, a data tool created by the MIT Media Lab in Massachusetts — more than any other country.

China is also co-opting a willing Manila into a series of vast global initiatives. Last October, following Duterte’s inaugural state visit to Beijing, the Bangko Sentral ng Pilipinas, the Philippines’ central bank, added China’s currency to its roster of official international reserves: another small step in the process of transforming the renminbi into a global reserve currency. And in 2014, the Philippines became one of 21 sovereign founder members, along with the likes of Vietnam, Pakistan and Mongolia, of the new Beijing-led Asian Infrastructure Investment Bank. 

OBOR: PROJECT OF THE CENTURY

Finally, there is the big daddy: China’s $900bn One Belt, One Road (OBOR) project, designed to rebuild Asia, and potentially the world, in its own image. OBOR was described in May by President Xi at a conclave of world leaders as the “project of the century” and as a force for peace “in a world fraught with challenges”. 

Grand words indeed — yet there is no denying the scale and burning ambition of OBOR. With a fractured Europe lacking cohesion and relevance and the United States withdrawing under Trump into a period of introspection and isolation, only China seems willing and able to pick up the baton of globalisation. It is building and funding highways, railway lines, ports, airports and pipelines to link China overland and by sea, with Europe, Central Asia, South Asia and the Middle East. 

In theory, OBOR, as it was first imagined by the Chinese leadership, does not pass through the Philippines — nor any of the major economies of Southeast Asia. But the magic of the OBOR brand is that any major infrastructure project funded by Chinese lenders and built by Chinese contractors — a highway here; a new airport or dry dock there — is now inexorably linked, in the eyes and minds of the global public, to China’s Belt-and-Road project. 

China’s genius here is to leave open the interpretation of OBOR, allowing any individual or institution, company or government, agency or supranational, to interpret it as they see fit. In the Philippines, it is widely viewed as a neat and logical solution to the country’s woeful infrastructure.

The Philippines has a glaring infrastructure deficit, estimated at around $150bn by CEIC Data, and Chinese companies and banks are hard at work across the Philippines, building ports and railways, steel plants and smart cities, as well flood defences to protect the coastline against the ravages of tropical storms and the more insidious impact of climate change. 

All of these projects, said HSBC economist Joseph Incalcaterra in a May 29 research note, will have a “sizeable positive impact” on an economy the bank reckons will grow by 6.5% in each of 2017 and 2018.


  • By Elliot Wilson
  • 15 Jun 2017

All International Bonds

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 24 Jul 2017
1 Citi 253,106.92 930 8.89%
2 JPMorgan 230,914.50 1036 8.11%
3 Bank of America Merrill Lynch 221,389.46 762 7.78%
4 Goldman Sachs 171,499.26 554 6.03%
5 Barclays 169,046.60 646 5.94%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 25 Jul 2017
1 HSBC 27,039.93 106 7.36%
2 Deutsche Bank 25,125.19 81 6.84%
3 Bank of America Merrill Lynch 23,128.33 61 6.29%
4 BNP Paribas 19,315.94 110 5.26%
5 Credit Agricole CIB 18,706.93 106 5.09%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • 25 Jul 2017
1 JPMorgan 13,488.13 59 8.47%
2 Citi 11,496.21 73 7.22%
3 UBS 11,302.86 45 7.09%
4 Morgan Stanley 10,864.95 59 6.82%
5 Goldman Sachs 10,434.21 54 6.55%