Transcription
Let's uh >> [music] >> break down today's developments with our resident geopolitical analyst Richard Heydarian. Good af- Good Good afternoon. Good evening, Richard.
>> Yes, yes, yes. >> I know I said geopolitical analyst, but really I should extend that now because now you're also you took a course in economics now. So, you understand the economic side of things.
>> yeah. >> So, so let's string it together. May geopolitical aspect then kasi itong Pax Silicon, which uh isn't often talked about talked about and that is uh that the US is making a big push for it because it wants to diversify away from Taiwan. Of course, there are fears that, you know, China might block it Taiwan soon. So, for them this is a de-risking move. Um uh paint us a picture of what role we should play in all of this.
>> Well, I think the big picture is really supply chain resilience. Um the reality is that as far as the Americans are concerned, they're not interested in free trade agreement. Uh protectionism is the name of the game. It's almost a bipartisan consensus. The Democrats were creating a lot of trouble for Obama when he was pushing for uh you know, new trade agreements in this part of the world and now of course we know that the Republican Party under Trump is also very, very highly protectionist. So, what they're more interested in is whether you want to be part of a supply chain that America feels is not influenced by China. It's not controlled by China. And if you go all around the world, you look at critical minerals, you look at the uh access to uh you know, if you look at the supply chain of all of these critical minerals, important things, China's dominate most of them. Oh, whether it's the >> 90% >> It's nickel in Indonesia, whether it's in cobalt and lithium from Africa to Latin America. So, the Philippines, which has the second largest reserves or production of nickel, uh the Philippines, which is a US treaty ally, the Philippines, which has even more problem with China than the United States as far as territorial disputes is concerned, and the Philippines, which is geographically right next to Taiwan, we tick all of the boxes. And of course, the Americans also know that um one of the fundamental issues in our bilateral relationship is that it has been lopsided. I mean, Vietnam, a former enemy of the US, with a GDP similar to ours, exports 10, 15 times to to America. We don't even have a free trade American uh free trade with the Americans, even a sectoral trade agreement, digital trade, Latin America. So, maybe this is the time whereby you have a coincidence of needs. The Americans want to create a kind of a China-free supply chain for critical minerals. They want to de-risk from Taiwan. They want to create new nodes of production. And this is where the Philippines comes in because we have the critical minerals. We have been part of semiconductor supply chain, but at the lower value added, and we want to move up. So, those who are kind of involved in negotiations who have reached out and those who are making a case for the Pax Silica, they're saying that basically what this offers us is an opportunity to process our own critical minerals, turn them into chips, >> and industrialize. >> And basically have a step on the wrong on the ladder to development, right? I think the problem with with Pax Silica in terms of the PR around it is that you have a combination of hype, which obviously works both ways. When you hype something too much, you create a lot of expectation, but also the problem with that is that once you hype it, you also open it up to misinformation. And I would even say disinformation.
>> And criticism. >> I mean, there are valid criticisms. Like, we have to scrutinize this thing.
>> Because really at this point all we know are the headline figures. Uh 30, what is it? 30 to 70 billion uh in investment, potentially 100 over 100,000 jobs, and so on and so forth. But the details have been scarce. And I know the framework agreement has not been signed.
>> Yeah. >> Uh they're they're hoping
>> As we speak, they're in negotiations, aren't they? >> And they're hoping by the end of uh the year, maybe in November during ASEAN, if President Donald Trump comes here, then they could sign it formally. Um uh but but the point about critical minerals is important because the concerns about data, power usage, and water usage have overshadowed point about the critical minerals processing.
>> Absolutely. I mean, for me, that could be the potential game-changer in a good way, right? But not game-changer in a way that we go from third world to first world, right? Overnight. No, it just gives us a first step on in the ladder of development, moving up the value chain, develop our our semiconductor processing capabilities, making sure that, you know, our access to our mines actually allows for the country to leap up. Obviously, with industrialization always comes certain environmental issues, among other things. So, therefore, you have to have guardrails. You have to have safeguards. And I think one of the legitimate criticism is that let's not rush this. Let's have proper legislation in place. Let's have scrutiny in place. Let's make sure that the regulatory framework is aligned with the Philippine Constitution. I think one of the reasons why the Pac Silica was also very open to misinformation, and I would even say disinformation, is that, you know, there were reports that the Americans were pushing for some sort of immunity.
>> Yeah. >> They it. They said they're more looking for investment protection clauses. So, I think it's very important that we signal to to our people, to the rest of the world, that, you know, Pac Silica is not going to be a way for kind of a new colonialism, right? That this is more industrial than imperialist policy.
>> I think there are worries that it might be just that.
>> And and because you also have disinformation, right? Of course, misinformation comes from our dark history of dealing with colonial powers, but the disinformation also comes from pro-China elements who don't want us to get any significant investments from the United States. And and there are also legitimate concerns that you don't want to be locked into an US-led supply chain, because that could complicate our relationship with China. So, for me, that's why it's very important that let's not get ahead of things. Let's look at what's going to happen here. I mean, even on the AI data center thing, if you talk to the real expert, they would say that if you want to really do do it the AI-driven data center, you need security, massive power generations, and there are a lot of skepticism that anything major will be established here.
>> Yeah. >> Um and I think again, that's where the hype does doesn't help because it creates all of this panic. And remember when it comes to AI-driven data centers, you know, the Americans try to keep it in America so that they feel safe about it. They put it here, the next thing you know, the next Filipino president has a different persuasion, right?
>> signature uh uh you know, uh philosophy of the Trump administration, bring the jobs back home. Bring bring the expertise back home.
>> the data center AI-driven maybe I think some people are getting ahead of themselves unless they have an evidence to show me we're going to generate like what? Uh equal to 1/4 of our total power generation now to feed the new like where are you going to get that power? When are you going to build a power generator? So, I think some people are getting ahead of it. There's a limit of misinformation misinformation there. But, I would say it's also important because the timing is issue here. President Marcos is in the tail end of his administration. He wants to say something about his legacy. Probably he wants this to be part of his legacy that, you know, he's pushing the Philippines towards an industrial policies. Meanwhile, since I've heard the Filipino president talk about this in a state of the nation address. But, also also of course, I think the other concern that some people have is that if we don't get anything big out of our relationship with the Americans on non-military issues. Because on military issues, everything is going strong, right? Uh Balikatan exercise getting bigger and bigger and more sophisticated every year. But, on the economic front, you know, you don't want the Philippines to be the Pearl Harbor of Asia whereby we host all of these big military events and all,
>> [laughter and gasps] >> but where's the investment going? It's going to Vietnam. It's going to uh Thailand. It's going to Malaysia. So, I think the worry of some people is that we might end up where Duterte ended up. Remember, Duterte also got a huge pledges of investment from China and then we ended up with POGO. Didn't come through, yeah. Or it it it we ended up with POGO which even China didn't like. So, I think some people are worried here. Here again, we are another superpower given big promises and you end up with I don't know data centers which is not good for environment or people. I think in fairness to this, for the first time and I I this is where I'm cautiously optimistic. If we play our cards well, we can get something good out of this or relatively good out of this is that geoeconomics and geopolitics are now one.
>> Yeah. >> For a long time and I raised this in
>> National security is economic security. >> 100% and this time this could help us because generally our Western partners just overlooked us because investment conditions here are less favorable than some of our neighbors. But now they're looking for countries that they can trust on geopolitical issues. At least relatively. Obviously Philippines is not perfect. The next Filipino president would end up more China-friendly, but compared to that to alternatives you have a communist party in Vietnam, right? Or or very China-friendly
>> Yeah, or or Thailand. They used to really treat you badly, but the elite there is very China-friendly unlike the Philippines, right? So relatively the Philippines is a safer geopolitical bet and therefore the geoeconomics and geopolitics are coming together. That is why I'm more cautiously optimistic that if we play our cards well, if different agencies work together, if we make our red lines clear, we might not get a super game-changer of third world to first world, but we might get at least a foot into the room of moving up the value chain.
>> supply chain because that's where the all the growth seems to be.
>> Semicon I think the chips and semicon doctors are a big thing. I mean just neighboring Taiwan now has
>> Yeah. And the Philippines.
>> market than India and the United Kingdom.
>> And the Philippines >> the absolutely several times because of the TSMC.
>> Yeah. >> But you know, but the Taiwan is also themselves are hitting the wall. They're also looking at investing in the Philippines. I think TSMC has admissions here.
>> They're very conscious of the fact that the geopolitical tide is really against them. Um and they think there there's a lot of worry
>> course they they want to still remain important. The last thing I want to say on this point is that another reason why I'm cautiously optimistic is because I feel the Pax Silica is part of a bigger thing. That's the Luzon Economic Corridor.
>> Yeah. >> And if you look at the Luzon Economic Corridor, it's also part of a bigger thing which is not only the US. The Japanese want to go big in the Philippines because they see an alignment of interest. For demographic reasons, they see the big markets here, right? For supply chain reasons, they see diversification towards the Philippines as something reasonable. They're helping us to build our public infrastructure. The Europeans who are getting closer to us on the security front who are worried about China or China domination of critical mineral supply chains. They're also looking at the Philippines, right? So, this is a time whereby the world is giving us a second look, especially major industrialized democracies. So, we have to play our card well. Yes, President Marcos doesn't have too much runway on this, but I think if he puts the right people in charge of these negotiations, we might get something good out of this. Um so, I'm cautiously optimistic. This is is not as a hype game changer, but it could give us some opening.
>> make a difference if the next president doesn't go and tear up the agreement.
>> There are also ways. And and that's why I doubt
>> You got to safeguard the continuity of the
>> I doubt there's going to be huge huge investment in the next year or two or big AI, I don't know, data center because of course the investors the remember this is US you know China to who to send the company to, right? They can just nudge them. They can create the ecosystem for investment. I don't think a lot of these companies will go big in the Philippines if unless they feel really safe about our country for the next 5 to 10 years. That's why
>> Yeah, they're looking for stability.
>> Let's just forget about the hype and all the game changer talk and hundreds of thousands of jobs and tens of billions. It is possible that we can get a few billions of dollars in the coming years. And and and the kind and it's a kind of investment that could be sensible for all sides regardless of who's the next president. Because even if let's say someone like Sara Duterte is the next president who's friendly to China, what is her reason to kick out a company that is not like making us super into the US military machine, right? But it's creating jobs, tens of thousands jobs. So, I think there's a Goldilocks whereby the investments will not be so big whereby it could create concerns of us getting locked into an American supply chain or big aid, but big enough for us to give an entry-level access to that more rarefied world of processing of critical minerals, making better semiconductors, and then put the next administration, whoever that is, in a position to negotiate to take to take this to the next level. So, in short, um in short, opening up in the
>> it, so we want the details, right? So, if you tell me that uh it's going to bring in $30 in investments, yeah, we want to see
>> Well, I heard that before. The Luzon economic corridor was 100 billion. Where's 100 billion?
>> Exactly. And the big question is, who is going to extract value from this? Is it us? Is it the US? Is it the other countries in Clark Silicon Valley? There's a very fundamental question of what is in it for them to build their data centers here, to build their AI supply chain here. There's got to be something in it.
>> Absolutely. And And my point is also there's room for our major conglomerates in the Philippines to get involved. I mean, at the end of the day, the conglomerates here also need to diversify. You know, the traditional sectors' growth is slowing down. And if you look at the BPO industry, it's also meeting a lot of challenges and headwinds. So, I think it makes sense also for companies who are already big in the Philippines, want to diversify to also involve it. I mean, if you're talking about power needs, right? Maybe it's not AI data center, whatever it is, it needs power needs. Then you can think of a couple of big conglomerates in the Philippines who would want to be part of that. So, I think this is also where there's a room for industrial policy, whereby it's not only the Philippine government talking to the American companies. No, the Philippine government corralling different Filipino companies to team up with the American companies so that this will create the long-term foundation for more manufacturing investments. That's where industrial policy comes in. And that's what I don't hear from people talking about. It's all always about oh, tayo usap natin mga Amerikano, but but this could be an industrial policy.
>> We missed the window for industrial policy making.
>> But now is our chance.
>> been 20 years ago, 10 years ago, even.
>> But from the experience of India and Vietnam, you can see that it's still not too late for industrial policy, for manufacturing. And because of the China squeeze, because China is trying to dominate all sorts of production, we have no choice. I don't want to be dependent on China considering everything concerning the risk that we have. So, manufacturing is the only game in town if you want to move up the value chain, if you want to create more inclusive development, and if you want more national security precisely because geoeconomics and geopolitics right now are fused.
>> Take a long I I know we're supposed to talk about this all the time, but I want Now that you brought up China, I wanted to veer in a sort of different direction and ask you about the the pure geopolitics security architecture of it. What do you think? How do you think we are handling this uh renewed tensions with China, so to speak? You saw there were a number of incidents over the past week.
>> Yeah. >> Right smack on the week that the ASEAN Foreign Ministers Meeting was being held here. And then you have Chinese Foreign Minister Wang Yi saying very publicly that he told the Philippine his Philippine counterpart, which is Secretary Lazaro, the Philippines has to choose the the right path or something along those lines, that the next stage of this relationship is really up to the Philippines. So, it's very, you know, it's still very um
>> airy-fairy, I got it.
>> Yeah, it's still a little bit of a hard stance. How do you think we're managing this relationship?
>> Well, I mean
>> It's been It's been quiet there.
>> The big picture is very troubling, right? If you look at the three superpowers, or at least in terms of military capability, two of them are already in active combat operation. One in the Ukrainian conflict, the other one in the Persian Gulf, right? That leaves only China as the only superpower that's not involved in direct conflict, which makes you scratch your head. Maybe the Chinese will get some funny ideas. Now, that depends on how you
>> I mean, I certainly would if I were the leader of that country.
>> be worried, right? I mean, but of course it cuts both ways. I mean, as we speak, of course these wars are also showing the vulnerabilities of superpowers. You've seen both Russia and the United States have been frustrated by middle-sized countries. So, the Taiwanese are saying, "Wait, if the Iranians can do that this and Americans and stand up, if the Ukrainians can do this Russian, maybe we can do this." In fact, the Taiwanese are looking at how to survive even decapitation operations. If you target and kill our top leaders, we can still go on using the mosaic defense strategy. They're learning drones capabilities from Ukraine. How can they use advanced technology to overcome, I don't know, asymmetries in in resources, in manpower, and so on and so forth. And not to mention, of course, the geography is the strength So, so in short, the big picture is that there's now a temptation for the other superpower to also make a move, but also, I'm not surprised that the Chinese are also careful because they also know that the others are also learning from the successes of the Ukrainians or the Iranians against much more powerful country. So, I think what's happening right now again is very tactical situation, right? On the part of the Philippines, we don't want to do anything big. I mean, we're frustrated with the US. I mean, you know, the conflict in the Hormuz Strait is affecting us. Our seamen millions of Filipinos in the Gulf region, our economy is battered. And it's going to get even worse. And then they're putting on tires. At the same time, we know we need the Americans in the military front. They're still our ally, right? So, I think on the part of the Philippines, you don't want to do anything big because you're still hoping the Americans show reassurance. So, on one end, it is reassuring because I think it was the American Coast Guard which was just around just over the horizon and helped one of our navy, you know, servicemen who was injured by the Chinese. But at the same time, you wonder now that the Chinese are looking at America being distracted, America alienating a lot of countries. The Pew survey just came out. For the first time at the It's better. That's how bad it is for the US. I think the Philippines wants the US to show more sophistication or self-correction capability. And and I think that's why we're worried, and that's why the Philippines, I think, is genuinely genuinely unsure about how to approach this. And that's why suddenly you have this discourse about is the Philippines doing a bad cop good cop? Why is the defense minister speaking so tough, but why is the foreign secretary speaking
>> Or was calling for restraint? So so there's there if you look if you're an outsider looking at this, it's almost as if there's a rift. There's a disconnect because you're right the defense team the defense department is you know, very firm on China and and Secretary Gibo himself is very assertive.
>> That's what happens when you have a president which is which has a non-ideological and tactical approach, right?
>> So it boils down to that.
>> you look at President Aquino, he was very clear. I mean like China is the enemy, right? Let's get the help of everyone we can. Yet Duterte complete opposite. China is not the enemy and the South China Sea issue or West Philippine Sea issue should not define it. With BBM, he's very different. He's very tactical about this. So for me that creates a genuine space for disagreements to emerge because the DFA instinct is always engagement.
>> And and restraint and diplomacy.
>> And DFA will say all you can bash all of this whatever notification whatever mechanism, but look at it since 2024 no conflict major skirmishes happened until recently. The DND could say in the complete opposite, well, if we didn't give them any idea that they had any leverage in here, they wouldn't even be there to bully our people. And by the way we're we are the ones on the front line and we're paying the price including the defense secretary was getting visa restrictions and all that.
>> for himself and his family.
>> So honestly, I don't think this is good cop bad cop and I think this is a genuine disagreement on how to deal with a rising China while there's a big question mark about America's commitment to this part of the world.
>> Yeah. >> But what makes it even more difficult is that if you look at how the Trump administration treats the Philippines, it's for the lack of better term strategic compassion. We're probably the only US ally which is not bashed by Americans. If anything they keep on saying look at the Filipinos, they punch well above their weight. They have limited resource. We're a model ally to the Americans at least for the Trump administration. So this is where you can see there are many mixed signals here and and the Philippine government is trying to just exactly it's working its way through.
>> Secretary Marco Rubio here just last week saying to President Marcos that President Trump holds him in high regard. So, on the one hand you have that but on the other, why are we not uh exempted from these um you know, very arbitrary tariffs as an ally as as one of their their oldest ally in Asia, right? So, there's those questions.
>> single print has also got that and they were insulted cuz the United
>> DFA by the way, um what was I saying about that? There's also questions about that provisional agreement, the so-called provisional agreement that
>> The notification thing, yeah.
>> says that we worked out with them but to this day we haven't seen the details of that.
>> Yeah, it looks like there was Yeah, it looks like there was an understanding that turned into misunderstanding, right? The the thing with, you know, having it cuz it it's very possible we have an understanding where I the Chinese interpreted as, "Oh, they're going to get our permission by basically notifying us." Our understanding was that it's just an FYI, you know, just so that there's no drama but it's none of your business.
>> on this issue.
>> until we're in the world right now where as I said two out of three superpowers are engaging active combat operations, right? And that's where probably there are elements in China, not probably, you can see it, who are saying, "Why not we test the waters?" But then again, they're not conducting kinetic action. There's no shooting yet, right? Um but but the gray zone the shades of the gray zone becomes darker and darker and getting closer and closer to actual skirmish and combat operation. And that's why I am still very, very worried about this. Having said that, I think earlier this year there was a hope that there'll be enough stabilization bilateral relationship. I mean, I had a conversation with the new Chinese ambassador who literally said, "I mean, they were very realistic. We just want stabilization." because probably they were hoping Xi Jinping will come here in November. Trump will come here in November also. And then there could be some conversation Philippines US and and and and China. But now I don't know. I mean you could see the situation is very very difficult.
>> for several months early this year I have to say. Um I can't remember the last incident.
>> Ronald Llamas all that chinador thing and all?
>> Well, I mean there were there were there were incidents but nothing quite like what we saw last week where in there was the water cannoning twice.
>> Yeah. >> There was the incident with the head. They bashed one of our officers' heads. Um those are that's bad. That's that's very bad and and I don't I know we we the different departments defense DFA all issued statements but we've not heard from President Marcos on it. He didn't name China in his SONA even though everybody knew who he was talking about. So in terms of ideological foreign policy I'm just wondering where do we stand?
>> Yeah. >> here. It's not clear to me.
>> I mean for me my worry in the meantime is short sharp war. I mean there's this doctrine called like you I mean they did that to the Vietnamese in the Johnson South Reef in 1988. And by the way there I think there was a recent incident with Vietnam a vessel got sunk and there's missing people. So things are every
>> Indonesia or Vietnam I think?
>> Vietnam and so something tense is also happening there. And my worry is that the Chinese at some point will say you we're just going to bludgeon them quickly and then de-escalate and then impose a new reality.
>> Yeah. >> Uh whether it's in Bajo de Masinloc which has very clear MDT implications or my other worry is they'll build structure already in Scarborough Shoal and all of that. And that also is my So for me once it gets there you have crossed the line. And then we're really talking about a very [snorts] dangerous situation which was similar to the prelude we saw to the Ukrainian war and the Persian Gulf War right now. So I'm really watching those are my basically you knew my boxes. But not take my hand we're totally different world.
>> We don't even know if the line where is the line now? I'm not sure because
>> No building structures in Scarborough show I think that was always a red line.
>> there was that floating structure a few months back.
>> There's a reporter also lurking there. So I I I worry is this a warning shot or is this a prelude? That's the problem. Which
>> means a test balloon like let's see how they react.
>> Well they always do the test one that's the salami's but This is where also it matters and this is where it up my head because we're not happy with the US on the on certain fronts whether it's the ill-conceived war right now in the Persian Gulf or more importantly they you know this this new ties are putting on us and all these things. But at the same time we know that if China wants to move to the next phase our best chance at deterrence is still our alliance right? So as as Churchill once said the only thing worse than having allies is not having any allies right? It's like having the worst thing than having a bad insurance is not having an insurance. That's the sad thing yeah. So US is gives us headache we give them headache but not having allies not an option for us at this point in time.
>> Cautiously optimistic that is how I describe you. We'll leave that there. Thank you so much for explaining all of that geopolitical and well now economic analysis as well I guess and blogger and host Richard Heydarian.