A new era in Korea-Philippine relations

(Part 1)

As the world experiences increasing conflicts in some continents like those in the Americas (the US vs. Venezuela or Cuba), the Middle East (US and Israel vs. Iran), or Europe (Russia vs. Ukraine) it is comforting to see some countries in Asia getting closer to one another.

I am referring especially to our own country establishing closer ties with the Republic of Korea that was highlighted by a recent state visit (March 3) by South Korea’s President Lee Jae Myung to the Philippines. As Korean Ambassador Lee Sang-hwa wrote in an article that appeared in this paper (March 13), that historic visit marked the dawn of a new era in Korea-Philippine relations.

As Ambassador Lee highlighted in his article, the South Korea is one of only five countries with which we have a Strategic Partnership. This partnership will help the Philippines leapfrog into high-value industries that are shaping the future.

In the last century, we missed the boat of labor-intensive industrialization that propelled the four tigers (Singapore, Taiwan, Hong Kong, and South Korea) to become First World economies in record time as we languished in an inward-looking, import-substitution and highly protectionist industrialization strategy that ended up in economic disaster.

There is no use, however, crying over spilled milk. Through the help of South Korea today, we can develop the high-value industries that are shaping the future: ship building, defense, and nuclear energy, among others.

As Ambassador Lee reported, the Subic Shipyard, revitalized by investments from HD Hyundai, will bring back the maritime glory of the Philippines during the Spanish colonial period (1565 to 1815) when a trade route linked Manila to Acapulco in Mexico (then also under Spanish rule). This trade is often considered to have been the first sustained trans-Pacific trade route, making the Philippines a key bridge between East and West long before modern globalization. Large ships called galleons sailed once or twice a year across the Pacific Ocean. The westbound route (Acapulco to Manila) carried silver from the Americas while the eastbound route (Manila to Acapulco) carried luxury goods from Asia, such as silk from China, spices from Southeast Asia, and other luxury items such as porcelain, lacquerware, ivory, and textiles. In fact, the famous manton de Manila that became a fashion success in Spain was manufactured in China, not in the Philippines.

This renewed interest of the Koreans to help the Philippines play a major role in the global ship-building industry is very welcome after the big disappointment that resulted from the closing in 2019 of the Subic-based Hanjin Heavy Industries and Construction, once one of the world’s biggest ship yards.

Because of our archipelagic nature and abundant manpower, we can be the next shipbuilding power in the world, taking over from where Spain and South Korea were in the last century. Our shipbuilding industry can serve not only the local market for passenger ships but can build bulk carriers, container ships, and oil tankers, some of which are already exported to Japan, Germany, and other countries. The country has over 120 shipyards engaged in shipbuilding and repair. It has been ranked among the top shipbuilding nations (around 4^th at one point in time). Most local shipyards, however, focus more on repair and maintenance than new builds.

The decision of HD Hyundai to invest in the Agila Subic Shipyard, one of the world’s largest drydocks, will make it possible for ships built in the Philippines to traverse global trade routes carrying “Made in the Philippines” products, symbolizing the synergy between South Korea and Philippines — a capital- and technology-rich economy on one hand, and a resource- and manpower-abundant upper middle-income nation on the other.

The major shipbuilding centers in the Philippines are Balamban, Cebu; Subic Bay where there are large shipyard facilities; General Santos; Batangas City; and Manila where there are smaller yards. Some of the notable shipbuilders are Tsuneishi Shipbulding Cebu, the largest producer today; Austal Philippines, which builds high-speed vessels; and Dynast Shipbuilding & Repairs, Inc., which is especially focused on ship repairs.

The decision of HD Hyundai to invest in Subic will give a big boost to finally make the Philippines a ship-building center in Asia, competing with China, South Korea, and Japan, all of which are suffering from serious manpower shortages because of their rapid ageing and depopulation in contrast with the still very young Philippine population (despite our also falling fertility rate).

Ambassador Lee also referred to the fact that South Korea has become a trusted partner and a backbone of the Armed Forces of the Philippines’ modernization efforts.

Building on the landmark acquisition of 12 FA-50 PH fighter jets, along with a series of deals for frigates, corvettes, and offshore patrol vessels, the Korean defense systems now serve as vital pillars of Philippine maritime security.

This reminds me of the gratitude expressed by the Koreans of my generation to the Filipino soldiers who fought alongside the Americans and the South Koreans, including former President Fidel V. Ramos, against the North Koreans during the Korean War. The Philippines was the first Southeast Asia country to send combat troops to Korea. Our country deployed 7,420 troops in total, organized into several battalion combat teams (BCTs). In fact, in one of my many trips to South Korea over the years to lead road shows trying to attract Korean investors to the Philippines with the assistance of a very good friend, the late Ick Ho Um, I had the occasion to visit the tomb of a relative of some close friends of mine who was killed in action during the Korean War. He was Lieutenant Jose B. Arciaga, a Filipino officer of the Philippine Expeditionary Forces to Korea, who was killed in action during the war. His death is remembered by the Koreans as one of the early Filipino sacrifices in the war. His name appears in memorials to PEFTOK* soldiers who died in service.

According to Ambassador Lee, another frontier for South Korea-Philippine cooperation is in energy, particularly in nuclear energy.

The Philippines is in an advanced stage of addressing the serious problem of very high energy prices, which do the most harm to the poor. Philippine energy prices are the highest in Southeast Asia. The large investments being made by the private sector in solar and wind energy are to be highly appreciated as a contribution to addressing climate change. It may take a long time, however, for renewable energy to bring down energy prices.

In fact, there is consensus in both government and business circles that coal will continue to be a major source of energy for the next decade or so to bring down energy prices. The Philippines contributes less than 1% to the carbon footprint of the world. The ones who should carry the brunt of reducing carbon in the environment should be the big polluters such as Japan and China.

As advocated especially by Congressman Mark Cojuangco, we have to seriously consider modular nuclear plants to bring down energy prices sooner than later. Together with the US, South Korea is a strong potential partner in seriously considering nuclear power to secure Philippine energy needs. During the recent Korea-Philippines summit, the two leaders agreed that nuclear energy development is essential to meeting the power demands of the AI era and that South Korea could be the Philippines’ optimal partner in this endeavor. Meralco recently signed a memorandum of understanding with Korea Hyrdro & Nuclear Power to collaborate on the development of nuclear energy projects in the Philippines.

* Philippine Expeditionary Force to Korea

(To be continued.)

Bernardo M. Villegas has a Ph.D. in Economics from Harvard, is professor emeritus at the University of Asia and the Pacific, and a visiting professor at the IESE Business School in Barcelona, Spain. He was a member of the 1986 Constitutional Commission.

bernardo.villegas@uap.asia