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Foreign Policy

Game Changer: China’s Telecom Deals with the Philippines

Sep 26 , 2019

Perhaps it is in the realm of technology where China’s growing influence in Southeast Asia is most poignant. The Philippines has taken a fateful step in wedding its technological future to China, yielding potentially major consequences for its alliance with the United States. Earlier this year, the Philippine government approved the Mindanao Islamic Telephone Company’s (Mislatel) bid to become the country’s third telecommunications player. This way, the Duterte administration hopes to break the decades-old duopoly of Globe Telecom and Philippine Long Distance Telephone (PLDT) in the Philippines’ US $5.2 billion telecom market. 

The bid, however, was highly controversial for several reasons. On one hand, the bidding procedure was deemed unfair, allegedly favoring Mislatel’s chief, Dennis Uy, a key ally of Duterte from Davao. More crucially, the state-owned China Telecommunications Corporation (China Telecom) is a major shareholder and primary source of technology for the company. 

Despite repeated warnings, including from Washington, the Philippines is set to adopt Huawei 5G network technology, while the Armed Forces of the Philippines (AFP), the linchpin of the Philippine-US alliance, has signed a highly controversial memorandum of agreement (MOA) with Mislatel. Under Philippine President Rodrigo Duterte, the Southeast Asian country is welcoming cutting-edge Chinese telecommunications infrastructure likely at the expense of its century-old military cooperation with Washington. 

A Public Relations Coup 

Despite strong backing form the Duterte administration, the Mislatel has had to contend with widespread stigma and opposition. It’s reliance on China Telecom equipment, know-how, and capital has made it suspect in the eyes of many both within and outside the Philippine state. 

This wasn’t the most auspicious welcome for a newcomer that seeks to challenge the entrenched duopoly of Globe and PLDT, which are owned by the country’s influential tycoons.

Thus, the deal with the AFP, largely seen as an institutional check on Duterte’s China-leaning foreign policy, represented a major public relations (PR) victory for the Mislatel. The new telecom player can now boast about the imprimatur of the Philippines’ defense establishment. 

The AFP-Mislatel telecom deal was signed in a high-profile ceremony in the Philippine Army Headquarters in Camp Aguinaldo, which saw the attendance of no less than Philippine military Chief-of-Staff Gen. Benjamin Madrigal and Maj. Gen. Adrian Sanchez Jr., AFP Deputy Chief of Staff for Communications, Electronics, and Information Systems (CEIS). 

Under the newly signed deal, Mislatel, renamed to Dito Telecommunity, will install communications facilities well within Philippine military camps. According to the MOA, the telecom company is required to “furnish all equipment, labor, and materials necessary to effect the co-location of its facilities and shoulders all expenses in connection with or incidental to the co-location.” It will also cover the training for utilization of the communications equipment as well as their maintenance and upgrade over the years. 

On its part, the Philippine military will determine the rental value for use of the Mislatel equipment as well as the exact locations of the communications facilities. The Philippine military chief quickly defended the deal as a standard agreement, which was similarly signed with the PLDT and Globe Telecom.

General Madrigal maintained that the previous agreements “significantly improved the ICT infrastructure of the AFP, and we are optimistic that this opportunity will also bring great benefits to the armed forces." He adamantly argued that there are “guarantees that the devices, equipment, and/or structures installed at the site provided by the AFP shall not be used to obtain classified information” amid national security concerns.

The deal, however, was met with a chorus of criticism from across the country’s political establishment and beyond. Critics argue that the Mislatel’s reliance on China Telecom technology and capital poses a direct threat, especially in light of China’s new National Intelligence Law, which requires "Any organization or citizen [to] support, assist, and cooperate with the state intelligence work in accordance with the law..."

Chinese Trojan Horse

Vice President Leni Robredo, the de facto leader of the opposition, called on the “leadership of the military” to exercise maximum caution and “study it thoroughly.” He also warned about a “number of activities that showed their [China] goal here is information gathering.” Various senators have called for inquiry into the deal, openly lambasting it.

“Why build these telco towers inside camps in the first place?” complained Senator Francis Pangilinan, a stalwart of the opposition Liberal Party. “The Philippine government has not only allowed the Chinese telco on our soil; it has laid the red carpet for Dito Telecoms inside our military camps,” he added in a statement released just a day after the MOA signing between Mislatel and the AFP.

The opposition senator warned that the deal "raises fears of electronic espionage and interference given the record of some Chinese firms for engaging in this illegal activity.” Under Duterte’s Beijing-leaning presidency, he warned, "Our security and foreign policies have become so absurd.”

Prominent independent Senator Grace Poe arguing that the deal could be challenged in courts and warned about cancelling Mislate’s franchise if deemed inimical to domestic laws and national interest.

Amid brewing backlash over the deal, Philippine Defense Secretary Delfin Lorenzana claimed that he didn’t know about the deal and will accordingly investigate the matter. As the head of the defense department, he has the final say on approving the AFP-Mislatel deal.

Jose Antonio Custodio, a former National Security Council consultant, warned that China may “perceive what happened as a gauge of their success in coopting elements from within the Philippine military,” risking the country “com[ing] out as an unreliable ally” to Washington. 

Earlier this year, the U.S. Secretary of State Mike Pomepeo visited Manila and openly warned that “America may not be able to operate in certain environments” if the Philippines adopts advanced Chinese telecommunications technology, especially Huawei 5G networks. For now, however, the Duterte administration seems adamant about welcoming the expansion of the Chinese telecommunications footprint in its critical infrastructure despite criticism at home and worries among key allies. 

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