Saturday, May 5, 2012

Philippines Seeking U.S. Help Against China’S Bullying


A protest outside the U.S. embassy in Manila over the weekend by local leftwing and indigenous groups is an indication of what can be expected in the run-up to planned combat drills involving U.S. and Filipino forces in the troubled waters of the South China Sea.
'The combat drills with U.S. and Philippines marines have certainly worried many sectors here,' noted Walden Bello, a first-term congressman from the Citizens’ Action Party, which is part of the Aquino administration’s coalition in the national legislature.
'The Philippines is unfortunately playing a dangerous game in entertaining a U.S. military presence,' he added in a telephone interview from Manila.
Giving Washington a military foothold will 'convert a territorial dispute, where the Philippines has a stake, into a superpower conflict,' Bello said. 'We should rely on regional and multilateral mechanisms.'
A verbal volley fired by an ultra-nationalist Chinese newspaper brings such warnings into relief. The Philippines should be targeted with 'countermeasures' and 'punishment' for offering the U.S. military an expanded role in the South China Sea, raged the English-language ‘Global Times’ in a commentary last week.
'A reasonable yet powerful enough sanction can be considered,' added the paper. 'It should show China’s neighbouring area that balancing China by siding with the U.S. is not a good choice.'
The planned military drills off the Philippines coast, scheduled for late March or early April, will be staged near an oil rig in the South China Sea. This news, following a mid-January bilateral defence dialogue, came after the Philippines got another boost from U.S. foreign policy heavyweights to contain China.
'What we’re talking about is maritime security,' U.S. Senator Joseph Liberman said at the end of a trip to the Philippines capital with three other senators last month. 'We simply cannot allow one nation, in this case China, to exercise disproportionate control over these waterways.'
This body of water has increasingly become a flashpoint following China’s strident assertion in 2009 that it had control over a stretch of ocean that has a spread of reefs, coral atolls and slivers of land that are hardly habitable.
Yet, what has raised stakes in the South China Sea, whose waters are shared by Vietnam, Brunei, Malaysia, Taiwan and the Philippines, are reports that its bed contains huge deposits of oil and gas - in addition to supplying nearly one-tenth of the world’s seafood catch.
The Parcels Islands archipelago and the Spratly Islands have, consequently, become important for energy security.
China controls the Parcels, having edged out Vietnam in a 1974 battle that left 18 people dead. And, Manila fell victim to Beijing’s bullying when the Asian giant occupied the Mischief Reef in 1995, once part of the Philippines.
The dispute led to the 2002 Declaration on the Conduct of Parties in the South China Sea (DoC), the first political agreement between China and the Association of Southeast Asian Nations (ASEAN) bloc that includes Burma, Cambodia, Thailand, Singapore, Laos, Indonesia and South China Sea littorals — the Philippines, Vietnam, Brunei and Malaysia.
Neither the 10-year-old declaration, nor the diplomatic breakthrough in July last year to create 'guidelines for implementing' the DoC, has done enough to ease the tension through 2011. Both Vietnam and the Philippines accused China of asserting its territorial claims by sending fleets of vessels into disputed areas.
'The Philippines has become the most outspoken on this issue with the ASEAN members,' says Kavi Chongkittavorn, a regional affairs commentator, in ‘The Nation’, an English daily in Thailand. 'It has been boosted by the defence treaty it has with the U.S.'
But efforts by Manila to raise the diplomatic stakes against China 'will not have wide support in ASEAN,' Kavi told IPS. 'ASEAN will not want to be dragged into a conflict with China.'
The imminent diplomatic challenge Manila faces comes nearly a year after the Philippines government turned to the United Nations Convention on the Law of the Sea (UNCLoS) to resolve its territorial disputes.
'The Philippines has called on ASEAN to support the idea that the issue must be resolved on the basis of the rule of law, particularly UNCLoS,' reveals Herman Kraft, associate professor of political science at the University of the Philippines.
'Using UNCLoS to advance its argument allows the Philippines to take the moral high ground and hopefully (win) the sympathy of the international public,' he explained in an interview. '(China’s push to resolve the problem bilaterally) is a non-starter for a small state dealing with a larger and more powerful state.'
There is an international treaty which can help 'break the deadlock between China and other countries over territorial disputes in the South China Sea,' says Kumar Chitty, a former senior U.N. official at the International Tribunal for the Law of the Sea, a Hamburg-based judicial body created to resolve disputes between countries about the oceans and their resources. 'This is how Australia and East Timor resolved their dispute,' Chitty said.
But China is avoiding such an international judicial route, preferring the ASEAN-led DoC resolution.
'China will seize this opportunity of making efforts with ASEAN countries to maintain peace and stability in the South China Sea and bring benefits to the people in the region,' Chinese foreign ministry spokesman Lu Weimin said following last month’s ministerial meeting in China to reduce tensions in the South China Sea.

Friday, April 20, 2012

High Oil Price Inflation

News about the high oil prices in the Philippines has been surfacing around the radios, televisions, internet and newspapers. There are clearly a lot of complaints about such increase in prices and there are even rallies held at the streets protesting and showing their disbelief and disapproval of that fact. I read an article stating that the high oil prices pose the biggest risk to the Philippines' inflation outlook this year. 



According to the Governor of Bangko Sentral ng Pilipinas Armando Tetangco, their inflation's target of 3% to 5% could be reached   if Dubai crude reaches $150 to $160 per barrel. He stated that they had conducted scenario analysis as to how much an increase of price will threaten the inflation target. Their estimation per barrel oil price is $150 and $160 that may possibly lead to a breach of the inflation target. 




The Philippines' imports nearly all of its crude oil needs and escalating geopolitical tension in the Middle East could push up power and transport costs. Dubai crude, the benchmark in setting local oil prices, has reached over $120 a barrel in recent days. But Tetangco said that at the moment, the inflation outlook remains manageable and the BSP's policy stance, appropriate.

"Over the policy horizon, we expect inflation to be below the mid-point of our target range. We will continue to monitor developments, particularly in the MENA ((Middle East and North Africa) and their impact on volatility in international prices, to see if there is any need to adjust our policy stance," he said.



While much attention is being directed at the impeachment trial of Chief Justice Renato Corona, oil prices are threatening to go through the roof. 
The surge in prices of imported oil has been attributed to increased political risks mainly in the oil-producing Middle East and North Africa and the growing demand of large economies like China and India. The oil price benchmark used by the Philippines, the Dubai crude, cost $123.65 a barrel as of March 9.
For an import-dependent country like ours, there is no question that crude oil is the life blood of the economy. Oil is the source of gasoline to run cars, of diesel for public transport, of aviation fuel for air transport, of bunker fuel to generate electricity, and of LPG for households, among others. Oil is so important a commodity that runaway prices can trigger a vicious cycle: the transport sector seeking fare increases, power utilities demanding higher electricity rates, producers raising prices, and battered consumers clamoring for higher wages to keep up with the rising cost of living.
Reforming the petroleum industry is on many experts’ minds. Some legislators have sought to amend the Oil Deregulation Law or Republic Act 8479. Pending at the House of Representatives are at least seven bills proposing to repeal or amend the law, five resolutions to investigate oil pricing, and a resolution to provide the President emergency powers to address the oil crisis. Three bills seeking to amend RA 8479 are pending in the Senate.
There are other long-term measures that can help oil-importing countries like the Philippines mitigate the impact of surging crude prices. On top of these are policies to restrain oil demand and to make use of solar, wind and hydro energy.
Among the current proposals, the one that stands out is the scrapping or suspension of the 12-percent value-added tax (VAT) on oil, and bills to that effect have been filed in Congress. Considered an easy fix to the grave problem, the removal of the VAT on petroleum products is estimated to lower pump prices by P6-P7 a liter; its suspension is seen to at least soften the impact of the price increases.
The problem, however, is that President Aquino has rejected calls not only for the scrapping but even for the suspension of the VAT on oil. His administration’s main argument is that the revenues are needed for various social projects.