US-Philippines flex collective powers to save Spratlys - vs dragon

From waging a joint bloody war against Islamic terrorists, the United States and Philippines now find themselves shifting to another battle front: checking China's provocations on the high seas.

In what could be na overture to an imminent face-off with China, American and Filipino naval forces will launch "war games" on June 28-July 8 off the coast of Palawan province, west of Manila, near the hotly contested and potentially oil and gas rich Spratly islands in the West Philippine Sea - South China Sea.

The US will deploy three warships - USS Chung-Hoon, USS Howard and USNS Safeguard, while the Philippines will pitch in four US-made battleships. They will be backed by hundreds of combat-ready American and Filipino marines.

The joint military maneuvers, part of the US-Philippine military alliance, come amid reports that China will test next week its first-ever Russian-designed Ukraine made aircraft carrier called Varyag prior to its formal mobilization later this year.

China, seen by many Filipinos as an emerging neighborhood bully, had earlier sent its biggest maritime vessel to the Spratlys in what critics here described as "gunboat diplomacy" to assert its "historic" claims to the island chain following a verbal spat with rival claimants, the Philippines and Vietnam.

In reaction, the Philippines sent its biggest, oldest and lone warship, the US-made RP Rajah Humabon, to patrol the country's 250-nautical miles exclusive economic zone (EEZ), which Manila now refers to as the "West Philippine Sea".

"If they attack us, we will fight back," Armed Forces of the Philippines (AFP) chief General Eduardo Oban said, referring to repeated Chinese intrusions into the Philippines-claimed portion of the Spratlys. AFP troops have in retaliation dismantled markers and buoys bearing Chinese characters planted by Beijing within the Philippines' claimed EEZ.

The AFP has recorded at least seven incidents of Chinese incursions into its claimed Spratly Island areas since February, prompting Manila to lodge diplomatic protests with Beijing. The government has announced plans to elevate soon its complaints to the United Nations.

On March 2, Chinese ships harassed a Philippine vessel exploring oil in the Reed Bank located 80 miles (129 kilometers) off Palawan and within the Philippines' EEZ, but 576 miles (927 kilometers) from China. "Why should there be a dispute if we are conforming to international law?," Philippine president Benigno Aquino told a news briefing about the incident.

Manila's mild saber rattling followed Washington's assurance that it would honor its mutual defense treaty, which both countries signed in 1951. The treaty mandates both sides to aid each other in case of external attacks.

"The Philippines and the United States are strategic treaty allies. We are partners. We will continue to consult and work with each other on all issues, including the South China Sea and Spratly islands," US ambassador to the Philippines Harry Thomas recently said.

The treaty will be reviewed during a top-level meeting of US and Philippine defense and military officials in August this year in Hawaii. Atop the agenda will be China's perceived as belligerent moves to press its claims to the Spratlys and how the US and its allies will in future respond.

Also expected to be discussed at the Hawaii meeting will be US access to its former Philippines-based military bases at Subic and Clark which the US abandoned in 2001 after Manila refused to renew a lease deal with Washington.

Now economic zones, Subic and Clark boast US-built ports and airports which could be of strategic importance both amid mounting tensions with China over the Spratly Islands and Washington's wider aim to contain China's strategic rise.

Though Manila remains hopeful the territorial row with China can be solved through diplomacy, it's not taking chances either. President Benigno Aquino's government has recently stepped up its acquisition of armaments under the US foreign military sales program, in what could be seen as a sign of an impending arms race among Spratly claimants.

In August this year, the US Coast Guard will deliver to Manila a large and modern Hamilton-class cutter patrol craft to boost the Philippine Navy's maritime patrols. The vessel, which boasts a wide array of state-of-the art interdiction capabilities, forms part of the US commitment to help modernize the 125,000-strong AFP, which has lagged behind its Asian counterparts in terms of equipment.

Philippine Foreign Secretary Albert del Rosario is this week in Washington on invitation of US Secretary of State Hillary Clinton to lobby for more American vessels and equipment to beef up the AFP's external defense posture.

Other items on del Rosario's shopping list reportedly include frigates, fighter jets, patrol helicopters with sensors, search-and-rescue vessels, transport aircraft and strategic sea-lift ships.

Aquino earlier warned visiting Chinese defense minister Liang Guanglie of a possible arms race should tensions over the conflicting Spratlys claims worsen. He noted that while the AFP is currently ill-equipped to match China's military might, this could force Manila's hand to beef up its armaments, given China's repeated intrusions into the Philippine-claimed portions of the Spratlys.

"We may not have the capabilities now, but that might force us to increase our capabilities also," he said.

In turn, Liang assured Aquino that China wanted to resolve the Spratlys dispute through peaceful and diplomatic means. In their talks, Aquino and Liang pledged to avoid any "unilateral actions" that could inflame tensions over rival claims.

Stronger strategic ties with the US carries certain political risks for Aquino, who earlier carefully balanced his policy between China and the US. As expected, leftist groups have already assailed US involvement in Manila's diplomatic spat with Beijing over the Spratlys.

 

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Food inflation will end very soon

Rampant food inflation in Asia, blamed for undermining social cohesion and prompting monetary tightening that threatens to choke the world economic recovery, is almost yesterday's villain.

Its impact is likely to fade month by month over the next year as the prices of key agricultural commodities stabilize, as do the costs of other production inputs such as fuel.

Why should the price of grains such as wheat, which doubled between June last year and February, start to ease or at least flatline for the next 12 months?

Basically worldwide production is expected to increase as the La Nina weather pattern ends.

La Nina, which occurs when sea-surface temperatures in the Pacific are below normal, brought flooding to key producers such as Australia and drier conditions to North America.

Forecasters are predicting normal conditions on both sides of the Pacific and around the Indian Ocean basin.

This is good as it means crops get the chance for a normal season or two before the possible start of an El Nino event, the opposite of La Nina.

The Indian Ocean Dipole, which measures sea-surface temperatures in that region, is also indicating more normal conditions. The Australian Bureau of Meteorology says it is "weakly positive," which should result in slightly drier conditions in Australia but wetter ones in countries such as Indonesia.

All this means that wheat output should increase by 3 percent to 670 million tons from July 2011 to June 2012, according to the Australian Bureau of Agricultural and Resource Economics and Sciences.

Wheat production will rise in the Black Sea region, Canada, Argentina and Australia, offsetting a drop in the U.S.

This will keep the price at an average of $310 a ton in 2011-12, down slightly from $318 a ton the prior 12-month period, the bureau forecast.

It's much the same story for coarse grains, with corn output expected to jump five percent to a record 855 million tons, driven by increased plantings in the U.S. and Latin America. Barley production should rise 6 percent, the bureau said.

Taking an overall picture, it is for world production of wheat and coarse grains to grow, taking production back above consumption, a reversal of the situation in the 12 months ending this month.

Turning to rice, the Asian staple, and Thailand, the world's biggest exporter, expects to ship a record 10 million tons in 2011, while India may resume exports after banning them in 2007 to secure supplies during a drought.

All this points to sufficient supplies of food in Asia. It will take some time to rebuild inventories of some crops, but even with stock replenishing it is reasonable to expect more stable prices.

This should help trim China's food inflation rate, which was 11.7 percent in the year to May. Food is the main driver of price rises, taking the consumer price index to 5.5 percent in May, a 34-month high.

That prompted another round of monetary tightening in China and fears of more in financial markets, thereby placing a question mark again over world growth prospects.

It is entirely possible that inflation in China and India may go higher for a few months yet, but the pre-conditions for lower food inflation are now in place.

Energy costs may also stay controlled for the rest of the year, with a Reuter’s poll of analysts published May 25, before the current pullback in prices, forecasting Brent crude to average $108.80 a barrel in 2011, below the current $112.05.

If food and energy costs stabilize, then inflation by year's end will look far healthier in China and India. It is economic growth in these two countries that will help the world avoid a double-dip recession.

It is also clear that the best way to control food prices is to ensure production growth matches or exceeds demand growth, and that healthy inventories are maintained.

Hopefully G20 agriculture ministers meeting today in Paris choose to look at ways of boosting the available farmland and its productivity and freeing trade as the best ways to lower food prices

 

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Philippine Peso Climbs on Greek Confidence Vote; PPP Growth Philippines

The Philippine peso rose to a one- week high as demand for emerging-market assets increased after Greek Prime Minister George Papandreou won a vote of confidence, easing concern the European nation would default.

Asian currencies and stocks climbed on optimism Greece will move ahead with reforms to cut the budget deficit and sell state assets in order to get further financial aid from the European Union.

“Greece bought a new lease on life and we’re expecting the peso to gain further,” said Marcelo Ayes, a senior vice president at Rizal Commercial Banking Corp. in Manila. “The risk factor on emerging markets lessened with the Greek move.”

The peso strengthened 0.2 percent to 43.365 per dollar as of the 4 p.m. close in Manila, the highest level since June 15, according to Tullett Prebon Plc. The MSCI Asia-Pacific Index of regional stocks advanced for a second day, rising 0.8 percent.

Benchmark 10-year bonds slid for a second day. The yield on the 7.375 percent note due March 2021 gained five basis points, or 0.05 percentage point, to 6.40 percent, according to Tradition Financial Services. That’s the highest level since June 6.

PPP of the Philippines – Grow the Economy

The government’s public-private partnership (PPP) initiative is one way by which the Philippines can encourage private companies to go green and help develop a green economy, a study released by four major international institutions said.

With storms getting stronger during rainy season, businesses need to implement climate-change adaptation measures and help develop a green economy, according to a report by the United Nations Global Compact, United Nations Environment Program, Oxfam and World Resources Institute.

“Public-private partnerships for climate-change adaptation can combine the power, authority, social responsibility and accountability of the public sector, with the finance, technology, managerial efficiency and entrepreneurial abilities of the private sector and the informed voice, energy, drive and oversight responsibilities of civil-society organizations. Partners share project risks, but also the benefits,” the report said.

PPPs can help address the seven factors that prevent companies from going green. These factors, according to the report, include information gaps, risk and uncertainty, and immediate investments needed but with long-term effects and gains.

Other concerns include poor access to financing, private costs versus public benefits, undervaluation of resource use and conservation, and policy and regulatory weakness.

But the only way Philippine PPPs can address these concerns is if the government strengthens and builds off existing PPPs to incorporate a strong focus on climate-change adaptation. There must be policies and laws that would have to be implemented to attract the private sector to invest in green technologies and strategies.

“Ingredients for an effective public-private partnership include careful partner selection; a high level of political commitment and a solid statutory foundation; a detailed business plan that articulates the responsibilities of all parties; a guaranteed revenue stream; active engagement and monitoring by the public sector; and strong stakeholder support,” the study stated.

The study said companies would be able to earn more profits under a green economy, which is a necessary move to veer away from a business-as-usual approach to climate change.

The study said the private sector is a key factor in a green economy.

Companies, the report said, should implement measures that would help anticipate and address the impacts of climate change. These investments, it said, would “pay for itself many times over” securing profits for companies.

But these investments must be complimented on the government side by integrating environmental and social safeguards into national laws, policies and regulations, and government contracts can also make important contributions to reward business behavior, avert maladaptation and improve community vitality and resilience to climate change.

The report cited data from an Asian Development Bank report released in 2007 that a “business-as-usual” trend would result in an economic cost to Indonesia, the Philippines, Thailand and Vietnam to equal a loss of 6.7% of their combined gross domestic product by 2100, in contrast to a projected global average of 2.6%.

 

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