Pragmatism

The sovereignty issues at the South China Sea will not be resolved in our lifetime or in this century. In fact, they may never be resolved at all.

Some of us might prefer that we fold our arms, spew belligerent rhetoric at every opportunity and maintain a hostile stance toward China for building up reefs and fortifying them in what we consider our exclusive economic zone. In the meantime, we lose economic opportunities and leave usable wealth buried under the sea.

The Duterte administration has chosen a path that diplomats call “principled pragmatism.” That might sound like an oxymoron at first blush. But in a world of nuances and complexities, it is the only productive posture to maintain.

This is not anything new.

Recall how hostile and unproductive our relationship with Malaysia was in the past over the matter of the Philippines’ Sabah claim. At one point, when the Malaysian Federation was at its infancy, we actually planned on invading the territory. Malaysia retaliated by supporting insurgencies in the Philippine south.

When Fidel Ramos was president, he decided sustained hostility toward a neighbor was counter-productive. Although we have not given up the claim, and the British still make token lease payments to the Sultan of Sulu, we have transformed our relationship with Malaysia into the productive partnership it is today.

Rodrigo Duterte wants to transform our relationship with China in the same manner – our grandstanding politicians notwithstanding. During his meeting with Chinese leader Xi Jinping in Boao last April, the two leaders agreed to advance cooperation in offshore oil and gas exploration in the contested area.

Shortly after their meeting, Xi was quoted by Xinhua News Agency as saying the disputed waters should be “a sea of cooperation and friendship.” Further, he said “China supports the Philippine government in exploring development path in line with its own conditions.”

The political signals are clear. All we need at this point is to develop the legal and diplomatic framework to make such cooperation possible.

Acting Chief Justice Antonio Carpio, a staunch defender of our sea claims, said in a speech sometime ago our territorial claims do not preclude the involvement of Chinese firms in the exploration and exploitation of resources in the area. They may participate as “technical and financial contractors of the Philippine government.” This recognizes the fact we do not have the technical expertise and financial muscle to extract resources from under the sea.

This is exactly the arrangement we have with Shell for the Malampaya oil and gas facility. Our neighbors in the region – Vietnam, Indonesia, Malaysia and Brunei – have similar exploration agreements in their exclusive economic zones.

President Duterte wants cooperation to happen soon. Time is not on our side. The natural gas deposits at Malampaya will run out by 2030. Our largest power generating plants run on natural gas.

We will have a power crisis if we do not enter into cooperative exploration ventures soon. The Chinese companies are ready for that. Some of our self-styled patriots are not.

Technology hub

When jurisdiction over the online gaming industry was transferred to Pagcor, the Cagayan Economic Zone Authority (CEZA) lost tens of billions in revenue. That did not faze CEZA administrator Raul Lambino.

The CEZA moved quickly to search for alternative business opportunities to keep the free port thriving. With its digital infrastructure in place, Lambino decided to transform the CEZA into a “technological garden.” He and his team quickly put together rules and regulations to make the free port a hub for financial technology (fintech) and home to blockchain-based businesses, including trading in crypto currencies.

CEZA set aside six hectares of its vast landholding in Sta. Ana, Cagayan to host fintech or crypto currency locators. The area will host back-office support and customer service enterprises involved in emerging financial technologies.

In addition to hosting locators, CEZA is planning to establish a Blockchain University that will offer advanced training for tech and financial workers. The free port projects that about a quarter of a million high paying jobs could be created in the area, revolving around newly emerging financial technologies.

The Cambridge Center for Alternative Finance estimates that investments in crypto currencies will reach $2.5 trillion in ten years. At present, 38 percent of crypto currency users are based in the Asia-Pacific. That can only increase as digital currencies and assets become more broadly accepted.

According to the latest data, total daily turnover of crypto currency as of last May stood at $15 billion. This is higher than the daily trading value of Apple or Google, 15 times the daily turnover at the Singapore Stock Exchange.

Banks and technology-based enterprises, principally from Japan and Korea, have responded quite positively to CEZA’s initiatives. Over the next few months, locators should begin setting up shop. The northern tip of Luzon could become the regional hub for rapidly evolving financial technology enterprises.

As the technology-based enterprises grow and a large BPO community settles in, the CEZA envisions the growth of tourist facilities in the area. Sta. Ana, Cagayan is ideal for this, with its abundant beaches as well as its proximity to the East Asian economies. Four technology and tourism-related agreements between CEZA and giant Korean firms were signed in Seoul during President Duterte’s visit a few days ago.

From being a remote outpost, the CEZA area could quickly transform into the principal hub for technology-based enterprises, linking the entire East and Southeast Asian regions. That is the hardworking Raul Lambino’s reachable star.