DOTC: P500-B worth infra projects complete by 2016

RAPPLER - In spite of delays in the roll out of public-private partnership (PPP) projects, the Department of Transportation and Communications (DOTC) remains confident that most infrastructure projects valued close to P500 billion would be finished by the time President Aquino's term ends in 2016.

In a speech read by DOTC undersecretary Catherine Gonzales in a thrift bank forum on Wednesday, March 20, Transportation secretary Joseph Emilio Abaya said that the DOTC is hastening the bidding process for infrastructure projects such as mass transport, airports, and seaports.

1. Light rail transit line 1 (LRT1) Cavite extension
This is the Aquino administration's biggest infrastructure project that connects capital Manila to Niog in Bacoor, Cavite in the south. The P60 billion project is scheduled for completion in 2016.

Abaya said that the agency is scheduled to bid out the project in June 2013, with construction expected to start in 2014. DMCI Holdings Inc., Light Rail Manila Consortium, SMC Infra Resources Inc. and MTD-Samsung Consortium have pre-qualified for the project.

The Cavite extension would lengthen LRT-1 to 32.4 kilometers from 20.7 kilometers. The new southern endpoint of the line would be in Niog, Bacoor, Cavite instead of Baclaran. The extension project involves the construction of 10 stations, 10.5 kilometers of viaduct, support beams, and 3 intermodal facilities.

The extension is meant to serve 4 million residents of Cavite, Parañaque and Las Piñas. The Cavite extension would be elevated for 10.5 kilometers and at grade level for 1.2 kilometers.

2. LRT2 extension project in Masinag, Pasig City
Abaya said DOTC is set to bid out a P350 million consultancy contract for the civil works of the P9.7-billion LRT-2 extension project. The LRT-2 project would extend the train line 4.14 kilometers eastward. It would terminate at the intersection of Marcos Highway and Sumulong highway instead of the existing Santolan Station.

Two stations will be added to the train line; one at Emerald Station in front of Robinson's Place Metro East and the other at Masinag Junction in Antipolo City.

The development is scheduled for completion in 2015.

3. Automated fare collection system (AFCS) for the LRT and the MRT
The DOTC will also bid out the P1.7 billion AFCS project. Abaya said that 31 companies have submitted bidding documents.

The scheme is meant to provide a single ticketing system for both the LRT and MRT.

4. Various airports
The Aquino government's major airport projects are the P17.5 billion Mactan Cebu international airport expansion project and the rehabilitation of the Ninoy Aquino International Airport (NAIA), the country's main international gateway.

Projects that can be completed in the 3rd quarter of 2016 include the P4.3 billion Puerto Princesa Airport, P7.2 billion New Bohol (Panglao) International Airport, and the P1.1 billion Bicol International Airport.

The DOTC already is bidding out the preparatory work for the Panglao Airport project. Submission and opening of bid documents are scheduled on April 16.

There are also plans to build airports in Tacloban, Laguindingan and Puerto Princesa to contribute to the country's target of 10 million tourists by 2016.

5. Cebu Bus Rapid System project
The P10 billion project will be subject to the approval of the National Economic and Development Authority (NEDA) board within the 1st half of 2013.

6. Davao Sasa wharf improvement project in Mindanao
The DOTC will bid out the P4 billion by the 3rd quarter of 2013.

7. Intermodal stations in Metro Manila
The agency is pushing for a P7.4 billion project for the installation of intermodal stations in 3 locations around the National Capital Region.

The intermodal stations are meant to house provincial bus stations to decongest Metro Manila.
Abaya said that the DOTC is also looking to revive of the Manila Bay – Pasig river – Laguna Lake ferry system.

So far, the government has successfully bid out only one or two of the 10 PPP projects identified by the Aquino administration in 2010.

For latest information on the Philippine Real Estate Industry and the Real Estate Service Act (RA9646), please visit www.ra9646.com.ph.   

A first: Investment grade rating for PH

RAPPLER - The Philippines won its first ever investment grade debt rating from global credit rating firm Fitch.

By upgrading the Philippines' sovereign credit rating to BBB- from BB+, Fitch gives the country a vote of confidence, and marks the first time the Philippines, once a basket case in Asia, joins the A-lister countries considered safe to invest in.

The Philippines follows in the footsteps of Indonesia, which secured investment-grade status in January 2012 with upgrades by Fitch Ratings and Moody’s Investor Service.

In a statement on Wednesday, March 27, Fitch added a stable outlook and cited a robust economy and improved fiscal management.

"The Philippine economy has been resilient, expanding 6.6% in 2012 amid a weak global economic backdrop. Strong domestic demand drove this outturn," Fitch said.

Fitch was the first among the other international credit rating firms -- Standard & Poor's (S&P) and Moody's Investors Service -- that granted the Philippines a long-awaited investment grade. S&P and Moody's still rate the country one notch below investment grade. S&P currently rates the Philippines a BB+ market, while Moody's gave it a Ba1.

"This is an institutional affirmation of our sound good governance agenda," President Benigno Aquino III said in a statement. He also called this "a national pride." (READ: Aquino admin downplays Arroyo role in investment grade)

"The task now is to ensure that the investments will be used to empower the economy." he added.
Finance Secretary Cesar Purisima, who has been leading the efforts toward a credit rating upgrade, called Fitch's decision "a landmark achievement."

"This is the clearest and most definite affirmation that good governance is indeed good economics," he said in a statment.

What a credit rating means
An investment grade is a seal of good housekeeping. It tells investors it is safe to do business in the country, and encourages them to put huge capital here.

An investment grade means the Philippines, as a borrowing country, has a strong ability to pay its debt. This lowers its borrowing costs, generating savings, which may be spent for social services. For Filipinos, it means better education and health care, and affordable loans for major purchases.

What led to the upgrade?
In summary, these are the reasons Fitch granted the Philippines an upgrade:

• RESILIENT REMITTANCES. Remittances, which account for 8% of the Philippine economy in 2012, stayed resilient despite the global financial crisis. The inflows from overseas Filipino workers (OFWs), which grew 6.4% to US$23.8 billion in 2012, supported a strong net external creditor position, which accounted for 12% of GDP in 2012. This means there are more dollars flowing into the country than those being paid out (like payment for imports).
• RESILIENT ECONOMY. The 6.6% growth rate in 2012 made the Philippines stand out amid the struggling economies of rich countries in the west. "The Philippines has experienced stronger and less volatile growth than its 'BBB' peers over the past five years," Fitch said.
• FISCAL PRUDENCE. Fitch cited the improvements in the fiscal management during the administration of former President Gloria Macapagal Arroyo. These reforms, which included the passing of the VAT reform law in 2005, "have made general government debt dynamics more resilient to shocks." Fitch noted that under President Benigno Aquino III, the government ably managed the country's foreign debts, which has fallen to 47% of total government borrowings, from 53% at end-2008.
• PRUDENT MONETARY STRATEGY. Fitch has cited the Bangko Sentral ng Pilipinas' (BSP) inflation management track record and proactive use of monetary tolls to support the economic growth.
• GOOD GOVERNANCE. Fitch noted that governance reforms, which have been a centrepiece of the Aquino administration's policy efforts, must remain a priority of the Aquino government and institutionalize these beyond 2016. Fitch also said that the Philippines' good governance scores based on standards of international groups like the World Bank "remain weaker than 'BBB' range norms but are not inconsistent with a 'BBB-' rating as a number of sovereigns in this rating category fare worse than the Philippines."

More upgrades coming?
BDO Capital chief market strategist Jonathan Ravelas told Rappler that upgrades from Moody's and S&P's are key to sealing this vote of confidence.
"We need another credit rating agency to give us an investment grade to really be considered of the upgrade."
Economist Victor Abola echoed this. "I will not be surprised that the other two (Moody's & S&P) will give their own upgrades this semester," he told Rappler.
"The credit rating upgrade of Fitch is an indication of the reflection of what the market is already doing," he added.
On Wednesday, the Philippine Stock Exchange main index rallied to a new high, closing at 6,847.47 points, up 182.35 points or 2.74%. This marks the 24th time this 2013 that the PSEi hit a record high.
"It’s primarily considered a gold standard in the financial community and...would unleash and allow some funds that only invest in stock and countries to invest in Philippines stocks," John Forbes, president of the American Chamber of Commerce of the Philippines, told Rappler.
PROPERTY BOOST. Analysts say the investment grade is "great news" for the property market. Photo by Rappler/John Javellana
Industry boost, peso impact
Aside from the capital markets, other industries expected to get a boost from the investment rating upgrade include the property market.

“This is a great news particularly for the property market and especially since there have been a lot of foreign investors looking into the market. This tells foreign investors it's about time to invest in the Philippines," Karlo Pobre, research analyst at Colliers International, told Rappler. (READ: 'Hot' PH attracts multinationals)
"There is more opportunity in the commercial or industrial sector since the residential sector is already slightly competitive. There should be increased expansion from BPO’s (business process outsourcing) and there may be more financial insitutions coming in to set up office,” he added.

Lylah Fronda, associate director market of property consultant Jones Lang Lasalle, echoed this: "The upgrade will encourage more businesses to expand and relocate to the Philippines. If last year's total office space take up was around 400,000sqm, we are expecting a better performance this year -- probably 20% more."

"With a lot of job opportunities that will come available and possibly significant growth in expat community we see more demand in luxury destinations and leisure properties. Manila will continue to be a favorite among real estate investors and developers as a good alternative market in Asia," she added.

The upgrade, however, may further result in a stronger peso, which does not bode well for dollar earners, including overseas Filipino workers to send money home, as well as exporters and BPO firms.
“It's good in a sense that it gives confidence of the investors to come. However the effect of that is the peso appreciation, which affect the cost efficiency of the third party and ones who are outsource. The BPO industries are already suffering from that.” Fronda noted.

Trickle effect?
Making the rest of the Filipinos, especially those who consider themselves poor, benefit from these investments remain a challenge.

"[The investment grade] has relatively little to do with the specifics of actual investment in direct job investing activities such as agro business, mining, or manufacturing. Those investors are concerned with the actual cost of investment, quality of infrastructure and labor issues,” Forbes noted.

"Prudent measures to attract investment, improve the business climate and diversify the economy have paved the way for growth. Now it's up to the authorities to make that growth more inclusive by creating more and better jobs," Norio Usui, Country Economist at the Asian Development Bank (ADB), said in a statement.

"This rating is unprecedented in the Philippines and can trigger the kind of investment that will help carry the country into its next phase of development," he added. (READ: PH needs 'judo economics' to further grow)
BSP governor Amando Tetangco echoed this: "The upgrade to investment grade status should inspire the entire government bureaucracy and the Filipino people to capitalize on the opportunities that will arise from this positive credit rating action."

"We should continue to work together not only to achieve higher credit ratings but also to ensure that the gains from these benefit most of our people," he stressed. - with reports from Lala Rimando, Cai Ordinario, Lean Santos and Aya Lowe/Rappler.com

For latest information on the Philippine Real Estate Industry and the Real Estate Service Act (RA9646), please visit www.ra9646.com.ph.   

PH real estate industry welcomes investment grade

Real estate players are rejoicing at the news that the Philippines has achieved its first investment grade rating from Fitch.

"We are very pleased with the credit rating upgrade which affirmds the strength of the Philippine economy developed through years of structural reforms. It should further enhance the competitiveness of the country and the business community as thet prepare for the integration of the ASEAN markets" Jaime Ysmael, CFO, Ayala Land told Rappler.

Announced on Wednesday, March 27, the new BB+ investment grade is expected to boost an already robust local real estate industry, particularly in regards to foreing investment which has already been increasing along with the country's strong GDP growth of 6.6% in 2012.

“This is great news particularly for the property market and especially since there have been a lot of foreign investors looking into the market. This tells foreign investors it’s about time to invest in the Philippines," Karlo Pobre, research analyst at Colliers International, told Rappler.

According to Pobre, the sectors that stand to benefit from the announcement include the commercial and industrial sector.

"There is more opportunity in the commercial or industrial sector since the residential sector is already slightly competitive. There should be increased expansion from BPO’s (business process outsourcing) and there may be more financial insitutions coming in to set up office,” he said.

Lylah Fronda, associate director market of property consultant Jones Lang Lasalle, echoed this sentiment saying, "The upgrade will encourage more businesses to expand and relocate to the Philippines. If last year's total office space take up was around 400,000sqm, we are expecting a better performance this year -- probably 20% more."

This will have a domino effect in the industry. As more international businesses open new offices in the Philippines, it will bring in more foreign workers who in turn will be looking for mid to high end accomodation.

"With a lot of job opportunities that will come available and possibly significant growth in expat community we see more demand in luxury destinations and leisure properties. Manila will continue to be a favorite among real estate investors and developers as a good alternative market in Asia," Lylah added.

Speaking at a press briefing in January 2013, Rick Santos, chair of real estate consulting firm CBRE Philippines, said investor confidence in the Philippines was already high due to strong macro-economic fundamentals, renewed confidence in the country's leadership, record low interest rates, a booming Business Process Outsourcing (BPO) sector, record tourist arrivals, a strengthening currency, and all time record level of the Philippine stock market.

“This is the best market I’ve seen in the Philippines in the last 20 years. It reminds me a lot of the excitement and activity we saw in Hong Kong, Singapore and China during their real estate booms,” said Santos.
Santos predicted that the investment upgrade at a time when most countries are getting investment downgrades, this would further this boom. Now that this has become reality, analysts, developers and realty agents can prepare for a busy year ahead. - Rappler.com

For latest information on the Philippine Real Estate Industry and the Real Estate Service Act (RA9646), please visit www.ra9646.com.ph.   

Balisacan sees GDP growing 7.5% in 2014

Manila Standard Today (February 2013) - THE National Economic and Development Authority expects economic growth to accelerate up to 7.5 percent in 2014, driven by expansion of agriculture, services and household consumption.

“For this year, we expect the economy to grow 6 to 7 percent. For next year, the growth is expected to accelerate to 6.5 to 7.5 percent,” Neda director-general and Economic Planning Secretary Arsenio Balisacan said in a gathering of members of Managers Association of the Philippines in Makati City over the weekend.

Balisacan said on the supply side, agriculture would be buoyed by government’s programs and projects that would increase the efficiency of producing staples and high-value commodities and crops.
“The positive agriculture outlook benefits from improvements in infrastructure, logistics, and the reduction in price volatilities,” he said.

He said industries were also set to expand faster in 2013 and beyond, mainly driven by manufacturing and construction.

“Construction is expected to grow robustly due to strategic public and private infrastructure projects. Likewise, manufacturing is expected to be more vibrant, particularly semiconductor and electronics, food manufacturing, and light manufacturing industries,” he said.

For latest information on the Philippine Real Estate Industry and the Real Estate Service Act (RA9646), please visit www.ra9646.com.ph.   

PH as ‘Northern Gateway’ to integrated Asean

Finance Secretary Cesar Purisima highlighted the increasing prominence of the Philippine economy in ASEAN at Standard Chartered’s Singapore Forum 2013 last March 20. Purisima was invited as a panelist during the panel discussion “Spotlight on ASEAN”, which was attended by executives from leading corporations and institutional investors throughout Southeast Asia.

“We in the Philippines look forward to ASEAN Integration in 2015. Our hope is that the Philippines will be the Northern and Pacific Gateway to ASEAN. The Aquino Administration is committed to ensuring that we continue to invest in infrastructure, our people, and address the constraints to growth to ensure that our people are ready to take full advantage and be part of an integrated ASEAN.”, Purisima said.

The ASEAN is currently pursuing regional market integration through the progress of the ASEAN Economic Community (AEC) inititatives, which are targeted to be accomplished by the year 2015. The AEC covers areas such as lowering of trade barriers, mutual recognition of professional standards, and capital market integrations.

For latest information on the Philippine Real Estate Industry and the Real Estate Service Act (RA9646), please visit www.ra9646.com.ph.   

149,000 residential units expected in next 5 years

Jones Lang LaSalle, a real estate services company, expects some 149,000 residential units to be completed over the next five years, on increased purchasing power of Filipino consumers.

JLL associate director Antonio Sabarre said in a news briefing top property developers SM Development Corp., Megaworld Corp. and Ayala Land Inc. were expected to build half of the residential units in the period 2013 to 2018.

The remaining half would be shared by other property developers, including DMCI Homes, Robinsons Land Corp., Filinvest Land Inc., Eton Properties Philippines Inc. and Vista Land and Lifescapes Inc.

Sabarre said the 149,000 units which were set for completion over the next five years would be significantly higher than the 135,650 units completed from 1999 to 2012.

JLL regional director and country manager David Leechiu said demand for residential projects across all sectors was being fueled by remittances from Filipino workers overseas, strong domestic economic growth and increased purchasing power of business process outsourcing employees.

JLL said at least 55 percent of the units would cater to the affordable market, with units costing from P1.5 million to P3 million.  Most of the condominium developments will rise in Quezon City, Ortigas, Mandaluyong, Makati, Fort Bonifacio and Alabang.

Leechiu also downplayed concerns about housing bubble, given the steady introduction of residential projects in the market.  He said the debt levels of banks and the government sector continued to be low and that demand from housing buyers remained strong.

For latest information on the Philippine Real Estate Industry and the Real Estate Service Act (RA9646), please visit www.ra9646.com.ph.   

Chinese ‘occupation’ of Bajo de Masinloc could reduce PH territorial waters by 38 percent

by Ellen Tordesillas, VERA Files

The Philippines is at a loss over China’s declaration its ships will stay permanently in Bajo de Masinloc, a declaration some experts say could lead to the Philippines losing 38 percent of its territorial waters.
Bajo de Masinloc, a triangular-shaped coral reef formation that has several rocks encircling a lagoon, is located 124 nautical miles west of Masinloc town in Zambales in the northwestern part of the Philippines.

“The shoal is under virtual occupation by China,” said former foreign undersecretary and former Philippine Permanent Representative to the United Nations Lauro Baja.

Foreign Secretary Albert del Rosario confirmed this, saying, “In a subministerial consultation, Chinese Vice Foreign Minister Fu Ying had said to our people that China’s presence was permanent and they had no intention of withdrawing their ships from the vicinity of Bajo de Masinloc.”

The National Mapping and Resource Information Authority (NAMRIA) says Bajo de Masinloc has an area of about 120 square kilometers. It is also referred to as Panatag (calm in Pilipino) by fishermen who seek refuge in the area during stormy weather.

Its international name is Scarborough shoal after the tea-carrying British boat Scarborough which sank in the vicinity in 1784. China also claims ownership of the shoal which is 467 nautical miles away from its mainland, and refers to it as Huangyan Island.

Republic Act 9522, which defines the country’s archipelagic baseline, includes Bajo de Masinloc as part of Philippine territory. The law classifies it as a regime of islands under Art. 121 of the Law of the Sea Convention (LOSC), which means it generates its own territorial sea, exclusive economic zone (EEZ) and continental shelf.

Under UNCLOS, “an island is a naturally formed area of land, surrounded by water, which is above water at high tide.”
An island generates its own maritime regimes, which are 12 nautical miles (nm) for territorial sea, 24 nm for contiguous zone, 200 nm for EEZ and 200 nm continental shelf.

Under this definition, the Chinese claim over Baja de Masinloc means the Philippines risks losing not only the 120-square-kilometer strategically vital reef formation but also some 494,000 square kilometers EEZ, representing 38 per cent of the country’s EEZ.

One of the Philippines’ options to protest the Chinese encroachment is going to the United Nations International Tribunal on the Law of the Sea (ITLOS), the arbitration arm of UNCLOS, of which the Philippines and China are signatories.

Legal experts say the Philippines can ask the ITLOS, which does not deal with territorial disputes, to declare Bajo de Masinloc as a rock rather than an island.

UNCLOS said, “Rocks which cannot sustain human habitation or economic life of their own shall have no exclusive economic zone or continental shelf.”

Retired Philippine Navy Commodore Rex Robles, who has been to the area a few times for gunnery practice, declares that “Panatag shoal is a rock.”

“It cannot support human life. It is not an island,” he concludes.

Lawyer Romel Bagares, executive director of Center for International Law (Philippines), said RA 9522 “does not actually specify whether Bajo de Masinloc consists just of uninhabitable rocks or is capable of economic life pursuant to Art 121 of the UNCLOS. This could be one way of arguing ITLOS has jurisdiction, especially as to the interpretation of provisions. It's a pragmatic approach, no doubt.”

What is obvious, Bagares said, is that RA 9522 assumes that the shoal is part of Philippine territory in the fullest sense of the term.

Del Rosario said, “To the extent that their three ships are within our exclusive economic zone, this is in gross violation of the DOC and UNCLOS.”

DOC is the Declaration of Conduct of Parties in the South China Sea signed in 2002 by members of the Association of Southeast Asian Nations, four of them part claimants to islands in the South China Sea, and China. UNCLOS is the United Nations Convention on the Law of the Sea.

Baja said, “When our ships withdrew from Bajo de Masinloc in June and now (we) could not access the area, the shoal became under virtual occupation by China. “

Baja, who drafted the DOC with Malaysia’s Abdul Kadir, also said Chinese occupation of the disputed shoal has changed the status quo, contrary to the DOC.

The DOC states: “The Parties undertake to exercise self-restraint in the conduct of activities that would complicate or escalate disputes and affect peace and stability including, among others, refraining from action of inhabiting on the presently uninhabited islands, reefs, shoals, cays, and other features and to handle their differences in a constructive manner.”

Baja said China is exercising what the International Court of Justice (ICJ) calls “effectivités.” “This is the basis of the Court’s decision on the Ligatan Sipadan case where the court awarded the area to Malaysia over Indonesia. Also the same principle in the case between Chile and Peru and between Nicaragua and Guatemala,” he said.

In 2002, the ICJ awarded sovereignty over Pulau Ligitan and Pulau Sipadan, two very small islands located in the Celebes Sea, off the northeast coast of the island of Borneo, to Malaysia against Indonesia giving weight to the former’s actual and continued exercise of authority over the islands.

Baja said, “We must act and interact before we lose the territory by default and/or estoppel.”

Seven months after China’s occupation of Bajo de Masinloc, the Philippines is still “reviewing” its options.

Asked about the Philippines’ response to China’s declaration it has no intentions of pulling out their ships from Panatag shoal, Del Rosario said, “We are reviewing all our options in accordance with our three track approach encompassing the political, legal and diplomatic means.”

President Benigno Aquino III has refused to discuss publicly the Philippine efforts on Bajo de Masinloc because he said doing so would be “giving the other side a preview of everything that we will do.”
He said, though, in October at a forum by the Foreign Correspondents Association of the Philippines that the matter “is still being studied by our consultants.”

Aquino added, “There are several law firms that we are consulting, conversant and very well thought of and experts in international law, to precisely chart the course of how we will utilize the legal procedures in international law to advance our claims.”

Experts point to two options available to the Philippines: the military option—which is not really an option considering the inferior state of the Philippine Navy compared with China’s naval might—and the legal option.

THE permanent stationing of three of its ships in Bajo de Masinloc is part of China’s “creeping invasion” of disputed territories in the South China Sea, a high-ranking Philippine government official said.

Bajo de Masinloc is Huangyan island to China, which has time and again reiterated “that Huangyan Island and Nansha Islands have always been parts of Chinese territory and that the People’s Republic of China has indisputable sovereignty over these islands and their adjacent waters.”

“The claim to territory sovereignty over Huangyan Island and Nansha Islands by the Philippines is illegal and invalid,” China says.

Nansha is what the Chinese call the Spratly Islands, a group of islands on the South China Sea, parts of which are being claimed by the Philippines, Vietnam, Malaysia, Brunei and Taiwan.

China’s presence on Bajo de Masinloc is also an alarming reminder to the Philippines of how Mischief Reef came under Chinese control 18 years ago.

In the early 1990s, China had built structures it said were just fishermen’s shelters on Mischief Reef. Through the years, China added installations on the island, including a radar system.
Philippine and U.S Air Force reconnaissance revealed military structures on Mischief Reef belying Chinese claims. In January 1995, the captain of a Philippine fishing boat reported that he was arrested and detained for a week by the Chinese when he ventured into Mischief Reef.

Since then Mischief Reef has been under the control of China and inaccessible to Filipinos.

A paper titled “Geopolitics of Scarborough Shoal” written by Francois-Xavier Bonnet of the Bangkok-based Research Institute on Contemporary Southeast Asia (IRASEC) explains the importance of Huangyan Island to the bigger and long-term objective of China.

Bonnet said Huangyan Island/Bajo de Masinloc is crucial to China’s claim over the Zhongsha Qundao islands which is vital in its controversial “nine-dash line map.”

The map is called “nine-dash line” or “nine-dotted line” because it shows a series of nine dashes or dotted lines forming a ring around the South China Sea area, which China claims is part of its territory. The area includes the Spratlys group and Bajo de Masinloc.

The “nine-dash line map” puts 90 percent of the whole South China Sea under Chinese jurisdiction.

The map does not have coordinates, but was submitted by China to the United Nations on May 7, 2009.

Bonnet explained, “The Zhongsha Qundao is composed of Macclesfield Bank, Truro Shoal, Saint Esprit Shoal, Dreyer Shoal and Scarborough Shoal. All these banks and shoals, except for Scarborough Shoal, are under several meters of water even during low tide. Chinese policymakers know too well that without Huangyan island, the chance of their ownership over Zhongsha Qundao recognized is nil.” Bonnet said, “The stakes are high. If China loses Huangyan/Scarborough, it will lose Zhongsha Qundao, which could be divided by the EEZs of the neighboring countries or placed under the regime of the high seas. By consequence, China’s entire claim to the South China Sea supported by the U-shape line would be moot and academic.”

Last June, China elicited international concern when it established Sansha City on Yongxing Island in the southernmost province of Hainan. Sansha City’s territory includes the Spratlys, the Paracels and Macclesfield Bank.

Immediately after establishing Sansha City, China’s Central Military Commission, its most powerful military body, approved the deployment of a garrison of soldiers from the People’s Liberation Army to guard disputed islands.

China’s Ministry of Civil Affairs said in June that putting Macclesfield Bank, the Paracels and the Spratlys under Sansha would “further strengthen China’s administration and development” of the three island groups.

The Philippines protested the establishment of Sansha City, specifically the inclusion of a part of its territory, Macclesfield Bank, one of the largest underwater atolls in the world, covering an area of 6,500 square kilometers.

Former foreign undersecretary and Philippine Permanent Representative to the United Nations Lauro Baja said there is no doubt that China has Bajo de Masinloc in its long-term territorial design.

Incidents of Philippine Navy ships apprehending Chinese fishermen in the vicinity of Bajo de Masinloc is common. In 1999, the Philippine Navy even “accidentally” sank a Chinese fishing boat. But the conflict never went beyond the standard diplomatic protests.

Former Foreign Secretary Domingo Siazon recalled one apprehension in 1998 that was a subject of a diplomatic protest by China involving a young navy officer named Antonio Trillanes IV, who would would later on become a senator and play a controversial role in the tension between the Philippines and China over the disputed shoal.
But Philippine encounters with the Chinese in Baja de Masinloc took a different turn on April 8, 2012, when the BRP Gregorio Del Pilar, the Philippines lone modern warship acquired from the United States, arrested Chinese fishing vessels in the area.

Philippine military officials said BRP Gregorio del Pilar was due for preventive maintenance servicing in Subic at that time but was redirected to Northern Luzon as contingency undertaking for an impending North Korea rocket launch.
The combat ship was also ordered to verify reports about the presence of the Chinese fishing vessels in Bajo de Masinloc. They arrested Chinese fishermen in eight fishing boats caught with sizable quantities of endangered marine species, corals, live sharks and giant clams.

Looking back, officials say the April 8, 2012 incident gave China an excuse to occupy the area.

China immediately deployed three Chinese Marine Surveillance (CMS) ships to Bajo de Masinloc to rescue their fishermen and added more than 80 vessels as the standoff dragged on.

The Philippines later withdrew BRP Gregorio del Pilar, which was replaced by a Philippine Coast Guard ship and a research vessel by the Bureau of Fisheries and Aquatic Resources in observance of “white to white,” referring to civilian ships, and “gray to gray,” meaning navy-to-navy rules of engagement.

The standoff that lasted 57 days spilled over to the economic front with China rejecting inferior quality bananas from the Philippines and cancellation of Philippine-bound Chinese tour groups.

It was only broken upon the insistence of the United States State Department that the issue be resolved because President Barack Obama did not want it included in the agenda of his June 8, 2012 meeting with President Benigno Aquino III at the White House.

With the breakdown of communication between the straight-talking Philippine Foreign Secretary Albert Del Rosario and Chinese Ambassador Ma Keqing in Manila, U.S. Assistant Secretary of State for East Asian and Pacific Affairs Kurt Campbell proposed to Chinese Vice Foreign Minister Fu Ying in Washington D.C. that Chinese and Philippine vessels withdraw simultaneously from the disputed shoal.

By that time, Trillanes had entered the picture and was directly negotiating between Beijing and Malacañang to help de-escalate the tension.

Hours before Aquino left for London and Washington D.C. on June 4, 2012, Malacañang announced the pullout of Philippine ships from Bajo de Masinloc “consistent with our agreement with the Chinese government on withdrawal of all vessels from the shoal’s lagoon to defuse the tensions in the area.”

Diplomatic sources said Fu Ying never committed complete withdrawal of their ships from Bajo de Masinloc as there was resistance from the People’s Liberation Army, an important sector in China’s power structure.

Del Rosario said when he met with Fu Ying during her Manila visit last Oct. 19, “I was very direct in saying that the presence of their ships is in clear violation of our sovereign rights, and they must withdraw their ships at the earliest possible time.”

Fu Ying did not respond, he said. 

For latest update on real estate development and its RA 9646, the Real Estate Service Act of 2009, visit www.ra9646.com.ph.