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Art of the Deal:

Geoconomics of our New Foreign

Richard J. Heydarian
The Filipino Gorbachev
Alexander Wendt (1992) argued that some mes decisive and
visionary leaders, as in Mikhail Gorbachev in the 1980s, can have a
decisive impact on the direc on of a state’s foreign policy. Any
“excep onal, conscious choosing [by a state] to transform or
transcend [its tradi onal] roles,” con nues, entails the following
precondi ons:

First, there must be a reason to think of oneself in novel terms. This
would most likely stem from the presence of new social situa ons
that can- not be managed in terms of pre- exis ng self-concep ons.
Second, the expected costs of inten onal role change – the sanc ons
imposed by others with whom one interacted in previous roles –
cannot be greater than its rewards. When these condi ons are
present, actors can engage in self- reflec on and prac ce specifically
designed to transform their iden es and interests and this ‘change
the games’ in which they are embedded.
5 Drivers of Strategic Recalibra on
1.) Wholesale rejec on of American-leaning elite;

2.) Rapid concentra on of execu ve power’;

3.) American strategic ambivalence;

4.) Chinese art of the deal;

5.) Personaliza on of foreign policy
  What is the public opinion?
Actual Impact on Foreign Affairs
  The security establishment has maintained the
founda ons of bilateral alliance with US, EDCA

  The IS glue: Counter-terrorism coopera on ghter
than ever;

  Decreased tensions over human rights and democracy

issues – bifurcated approach

  BUT: China given effec ve carte blanche in SCS, with

PH-US war games nixed/relocated in the area, and no
joint patrols on FONOPs coopera on; Bau sta Airbase
in Palawan off-limit to upgrade.
The Duterte Shock
  Ac vely blocked any cri cism of China’s
ac vi es in the South China Sea as ASEAN

  Maintained, similar to China, that the

situa on is “generally stable”, no need for
“outside interference”;

  Presented China as THE partner for na onal

development and regional connec vity and
economic integra on;
  China – via (new and old) partners like the Philippines – not only
dividing the ASEAN, but now also using it as a SHIELD against the US
and other external powers.

  Expunged the men oning of the UNCLOS arbitra on case from the
ASEAN discussions en rely

  Indirectly cri cized Vietnam for engaging in “similar (reclama on)

ac vates”

  Considering joint development agreement - PNOC (PNOC)

Explora on Corp, in partnership with China Na onal Offshore Oil
Corpora on (CNOOC) and Jadestone Energy Inc. are set to develop
Calamian project off the island of Palawan. CNOOC is expected to
hold a majority 51 percent share.
Follow the Money
  China offer of $24 billion in trade and

  Li Kequiang and Duterte mee ng in

November, $7.34 billion infra investment

  Duterte offered China a possible stake as third

major force in Philippine telecom
Source: RAND Copora on
China’s Silk Road Ini a ve
Five key Concerns with Chinese
  Security concerns over strategic sectors (i.e., telecom,
electricity, cri cal infra)

  Bidding and compe veness (i.e., North Railway


  Corrup on and good governance (i.e., NBN-ZTE)

  Reliance on Chinese labor (in addi on to tech,

management, and materials)

  Final costs, quality and durability

Facts on the Ground: Investment
  South Korea investment down by 92.61 percent, dropping
from P11.82 billion in 2016 to P873.15 million in 2017 (14
year low)

  American investment down by 69.62 percent, from P27.51

billion in 2016 to P8.357 billion (13 year low)

  China investment expanded by 15 percent, in 2017 from

P1.40 billion in 2016 to to P1.61 billion in 2017.

  Japanese investment increased by 23.79 percent, from
P25.43 billion in 2016 to P31.48 billion in 2017.

Source: Philippine Star; BOI; PEZA
From ASOG Dean Ronald Mendoza:

Mendoza’s Projec on:
  China policy is far from irreversible…
  AMTI: “New missile shelters, radar/
communica ons facili es, and other
infrastructure are going in on Fiery Cross,
Mischief, and Subi Reefs.”
Watch Out For…
  If China imposes an ADIZ in the Spratlys, or reclaims
the Scarborough Shoal;

  If China & the Philippines fail to secure an agreement

on joint exploita on of fisheries in the Scarborough

  If clashes in high-seas, accidental or inten onal…

  Duterte popularity plummets, need for rallying round
the flag…

  How Chinese investments roll out on the ground

IF rapprochement con nues:

  Duterte as harbinger of a Pax Sinica in Asia, an “Asia for


  A century from now, the reign of Duterte (and Trump) will

likely be remembered as the cri cal juncture, beginning of
a truly post-American order in Asia;

  The Philippines’ brazen strategic recalibra on under

Duterte brutally reflects the massive shi in balance of
forces in Asia;