The Philippines is a collection of 7,107 islands that are broadly divided into three main geographical divisions: Luzon, Visayas and Mindanao. Originally drawn together into a political unit by the Spanish, who first took dominion in the 16th century. In 1898 the United States took dominion after defeating the Spanish and in 1935 the Philippines became self-governing. Over the last eight decades the country experienced invasion, occupation and dictatorship. In 1986 the country emerged as a constitutional republic with elected leadership. The challenge is to lead the country forward in unity from its capital city, Manila on Luzon.
Domestic Territorial Conflicts
If you think of the Philippines as a territory rather than a country, it’s easy to see how complicated it would be to successfully rule such a diverse group of islands. Not only are there internal conflicts with Islamic insurgents like the Moro Islamic Liberation Front and Abu Sayyaf, but there are new forces at play due to new technology, especially cell phones used to help farmers.
The Philippines GDP is composed of only twelve percent agriculture, but that twelve percent represents a third of the labor force. Poor farmers cultivate sugarcane, coconuts, rice, corn, bananas, cassavas, pineapples and mangoes. Coconut oil and fruits are export products, so there is money in cultivating coconuts and fruits. Many smallholder farmers use cell phones to connect with agricultural services for advice about their crops as well as market information. For example, since 2010 the Consortium of International Agricultural Research (CGIAR) has been doing field study on sustainable agriculture at fifteen research centers scattered around the globe, one of which is in the Philippines.
Initially, in the 1970s, these research centers were taking form independently, and at that time they concentrated on breeding better food crops. They were an international collection of agricultural research outfits applying the technology of the “Green Revolution.” Today, those centers are united (after 2010) and funded by a multi-donor trust fund. They work together to make a scientific contribution to agricultural development for people who are poor. In the Philippines, since 2011, there is a branch of CGIAR called “Nutrient Manager for RiceMobile,” which provides rice farmers free advice by cell phone. According to Dr. Roland Buresh, the nutrient Management expert, “The nutrient needs of the crop can vary, even across short distances within and among fields.” That kind of information makes for more efficient and potentially more profitable farmers.
The point is there is an evolving technical revolution going on around the globe that changes the patterns of geography away from traditional geopolitics. One profound shift in this application of digital technology is that cities are taken out of the loop. Industrial development produced a move away from farms and towards cities. Social networks in cities worked against immigrants and made the acculturation process take generations. Once the city is taken out of the loop, development can happen at a more rapid pace. And, the technology of this evolving new development pattern isn’t based on agriculture alone. There are parallel changes in micro-finance and marketing which are also digitally based and impacting the traditional limitations of geography. These new developments offer support to the Philippines government, but over time may cause shifts in Philippines politics, away from the urban, bureaucratic, government hierarchy in Manila.
Transnational Territorial Conflicts
Internal territorial issues are only part of the Philippines’ story, there are transnational conflicts as well. The most significant regional conflict is over islands, reefs and water rights in the South China Sea. China has asserted continual and increasingly aggressive claims to territorial water rights along the coasts of all the countries bordering the South China Sea and East China Sea. But asserting rights is one thing, and probably wouldn’t draw much concern, except that, in the past two decades China has built a substantial regional navy with an inordinate number of submarines. None of the other countries surrounding the South China and East China Seas, including Japan has the military means to confront China. Even banded together the six countries claiming conflicting territorial rights in just the South China Sea, Malaysia, Indonesia, Thailand, Vietnam, Philippines and Taiwan don’t have the naval power to challenge China. Historically that’s always been true and is the reason China has always viewed Southeast Asian countries as client states.
This is where the United States enters the picture. The U.S. also has an interest in the South China Sea, it being one of the world’s most traveled shipping routes. With the development of fossil fuel independence from Middle Eastern countries so much more real now that the U.S. has natural gas and more offshore drilling production, U.S. strategic interests have moved toward Asia. The U.S.-Philippines Mutual Defense Treaty was reaffirmed in 2012 and joint naval exercises were undertaken between the U.S. and the Philippines in June 2013. The territorial conflict in the South China Sea includes the United States.
This transnational conflict also involves digital technology. Remember, a territorial cycle involves a relationship between territory and population. The people living on a territory have to feed everyone in their nation. So fishing rights play a significant role in the South China Sea conflict. The Scarborough Shoal, which falls within the Philippine’s 200-nautical-mile exclusive economic zone, and which is one of the world’s most abundant fishing grounds was fenced off by Chinese ships in 2013. The U.S. has strategic naval interests in the Philippines, but isn’t interested in reoccupying the Naval base at Subic Bay, which the Philippines forced the U.S. navy out of in 1991. The U.S. is looking for treaty based access for the Seventh fleet, which is stationed in Asian Pacific waters.
The way digital technology plays into this conflict is laid out by Joel Brenner in his 2011 book, America The Vulnerable. Brenner, the previous senior counsel at the National Security Agency (NSA) points out in horrifying fashion how a clumsy U.S. conflict with China in the South China Sea could potentially lead to digital security threats from China, which would be carried out in North America. In other words, if the U.S. fleet is too forceful in the South China Sea, the NSA contends there is the potential of Chinese retaliation by hacking security in American infrastructure, like digital bridge controls, digital dam spillway openings and the electric power grid. China hacks and puts down the U.S. electric grid and then tells the U.S. Navy to take a hike -I guess that’s take a swim. Brenner and the NSA may turn to these types of explanations in defense of their huge digital data gathering, but there is merit in the threat. Once you consider the amount of hacking China unofficially/officially partakes in, on North American networks, there is reason to be concerned. The Philippines territorial cycle, at this point, is far reaching.
For those with investment interest in the Philippines, it’s worth paying attention to the South China Sea conflict for the level of commitment the U.S. navy offers to the Philippines. In this we are just looking for stability and the U.S. navy provides that. But there are investment opportunities of two types. First of all if you are interested in helping poor farmers build a better future, then look at micro-finance sites like Kiva.org for humanitarian investing and support. There are not a lot of loans listed on Kiva for the Philippines, but of the ones there, about half are for agricultural needs. Secondly, if you are interested in emerging market investing, the Philippines power generation and communications stocks are worth investigating.