Three key risks facing the Philippines

By Lucio B. Pitlo III

Inflation, food and energy crises, and the potential for conflict are three critical risks facing the Philippines under the new leadership of President Ferdinand Marcos Jr.

The war in Ukraine, which is already in its fifth month, had a massive knockdown effect on global energy and food prices as the combatants are among the world’s largest producers and exporters of wheat. Russia is also a global oil and gas supplier. Therefore as a commodity importer, the Philippines is put in a tight spot.

Still reeling from the huge blow dealt by the Covid-19 pandemic over the last two and a half years, tight global supply and high prices of food, fuel, and fertilizers compound its recovery efforts. Antagonism among great powers contributes to a more tense geopolitical landscape, with regional flashpoints like the Taiwan Strait and the South China Sea representing potential powder kegs for conflict.

Facing fallout of a distant conflict

President Marcos recognizes these pressing problems facing the Southeast Asian country of 110 million people. Reacting to the impact of the Ukraine war on the global food supply, the new leader, in his inaugural address, complained that “the most vulnerable when it comes to food [supply disruptions] are the countries farthest away from the conflict.”

He also noted the profound implications of the war: “We face prospects of the war abroad of which we are totally blameless. We seek friendship with all. But countries like ours will bear the brunt of it.”

He added that “if the great powers draw the wrong lessons from the ongoing tragedy in Ukraine, the same dark prospect of conflict will spread to our part of the world.”

Fighting inflation, preparing contingencies for an impending food and energy crunch, and keeping autonomous foreign relations are important for the country to weather the tempest.

George Siy, director of the Integrated Development Studies Institute (IDSI), said recently that inflation in food and basic transport and power costs is “the most important short-term item to address” as it “affects people’s livelihoods the most.” He said the situation can “very quickly descend into chaos if people have a problem with [access to] food.”

Marcos says he understands the gravity of the situation. Signaling the importance he attaches to the country’s food security and the sad plight of the country’s farmers, he is concurrently heading the Department of Agriculture for now.

His first marching orders were to boost local rice production, provide protection to homegrown staples, and revamp the entire agricultural value chain from scientists to farmers down to government-run farm-to-table food stores.

He also expressed openness toward government-to-government deals to buy fertilizers, eyeing such countries as China, Russia, Indonesia, Malaysia and the United Arab Emirates as potential suppliers.

Tackling the energy debacle is another serious challenge facing the new Philippine chief executive early in his term. Sanctions on Russian oil and gas unsettled the global energy market. Increased demand from countries recovering from the pandemic and stocking up for winter put pressure on scarce supply, resulting in price spikes that will hit developing countries like the Philippines hard.

Such a scenario, if not averted, may become reminiscent of a severe oil crisis that the president’s father, the late Ferdinand Marcos Sr, confronted in the 1970s. Back then, supply interruptions were artificial and triggered by political developments.

As other countries, notably China and India, but also Middle Eastern energy producers themselves like Saudi Arabia, capitalize on discounted Russian oil sanctioned by the West, Moscow offered help to address Manila’s fuel woes.

Last month, Marcos met with Russian Ambassador to the Philippines Marat Pavlov, with energy as a major item of discussion. However, possible untoward consequences of buying Russian energy goods to the country’s relations with traditional allies and partners like the US and Europe loom large over such a decision.

Avoiding enemies and conflict

Maintaining an independent foreign policy and avoiding conflict is crucial. Strategist Dan Steinbock, founder of the Difference Group think-tank, says it is the only way for the country to become an upper-middle-income economy.

He said recently that only through peace and stability can one create prosperity, arguing that any conflict will only undermine such aspirations and that a situation like Ukraine should be avoided at all costs.

Steinbock said countries that became successful in their drive to economic development have zero conflict, although he admitted this situation is difficult to sustain. He encouraged Manila to coordinate closely with fellow members of the Association of Southeast Asian Nations as it has many affinities and parallels with these countries and that, through the 10-member organization, it can have a greater voice in international politics.

The Philippines is situated right in the middle of regional hotspots, being a disputant in the South China Sea and the closest Southeast Asian country to the Taiwan Strait. Any conflict in these areas, especially between China and the United States, will surely entangle the Philippines.

University of the Philippines Professor Bobby Tuazon, a Center for People Empowerment in Governance fellow, says war in Taiwan is becoming more imminent because of a confluence of elements. This includes increased US naval activities in the strait and defense sales to Taiwan, which emboldens independence-leaning leaders in Taipei.

Changes in Washington’s long-standing strategic ambiguity toward its commitment to the island also stoked fears about inviting a harsher reaction from Beijing and upsetting the status quo. Tuazon argued that Manila should revisit its alliance with Washington, as its treaty commitments complicate its pursuit of an independent foreign policy and entangle the country in a possible great-power clash involving its ally.

Aside from these simmering flashpoints, Steinbock also raised concerns about increased threats of nuclear proliferation in the region, especially with the advent of AUKUS. He cited the dilemma facing Marcos’ government in its desire to “continue [the] Philippines’ special relations with the US, but also hope to find ways to resolve conflicts with China.”

He asserted that continuing former president Rodrigo Duterte’s policy of rejecting alignment with just one country and instead being friends with everyone, which Marcos promised to continue, is in the country’s best interests.

Major powers face turning points

Citing the case of Ukraine, Siy pointed out how war could quickly wipe out many of a country’s advantages. The Eastern European country had already lost 20% of its territory, with its manufacturing and agricultural sectors sustaining heavy losses, but with the end to the catastrophic war not yet in sight. He said the Philippines should avoid getting into a similar mess.

Instead of perennially reacting and responding to the whims of clashing great powers, Siy said the country should take the initiative to shape the region’s security agenda alongside ASEAN neighbors and partners.

He pointed out that major powers, including the US, China, Russia and Japan, are facing turning points. This presents an opportunity for the Philippines and fellow Southeast Asian countries to have an input and influence in building the future regional and global order.

As the Marcos leadership deals with these grave risks, lessons from the past, how other countries deal with the situation, and a clear appreciation of the country’s genuine national interests should ground its actions.

Lucio Blanco Pitlo III is a research fellow at the Asia-Pacific Pathways to Progress Foundation. He writes on Asian security and connectivity issues.