Saudi-Philippines Relations

Saudi-Philippines Relations

Mohammed Al-Sudairi

Saudi-Filipino diplomatic ties were first initiated in 1946 but were only formally established in 1969, according to various sources.1 Since the early 1970s, three distinct variables have emerged underpinning the foreign policy strategies of successive Filipino governments towards Saudi Arabia: (i) securing greater access to Gulf energy, (ii) alleviating employment pressures at home with a labor export policy and, (iii) utilizing ties with the Kingdom to address and pacify the political grievances of Mindanao's Muslim minority. It can be said that it was president Ferdinand Marcos who first initiated an 'aggressive foreign policy towards Arab and Middle East countries'2 - specifically Saudi Arabia - propelled in part by the oil shock of 1972-73, persistent unemployment within the country (leading to the arrival of the first group of Filipino engineers to the Kingdom in 1973),3 and a desire to involve the wider Mu slim world in containing the violence that had erupted in Mindanao starting in 1972 (with Saudi Arabia participating in the OIC 'Quartet' that helped produced the 1976 'Tripoli Agreement').4

By the early 1980s, while disagreements persisted over the implementation of the 'Tripoli Agreement' (apprehensions, one should add, that were shared by the larger Organization of Islamic Conference bloc), Saudi Arabia was already supplying roughly 40,000 bpd to the Philippines. This grew significantly as Iran imposed an oil embargo on the Philippines at the behest of the Moro National Liberation Front campaign)5 and hosted roughly 150,000 workers there.6 Several economic agreements7 were also concluded at the time, including a $500 million loan, likely extended to facilitate the peace process in Mindanao.8

Energy and Economic Ties

The 1990s and 2000s saw general improvements in the relationship, beginning with the conclusion of an Agreement on Economic, Trade, Investments, and Technical Cooperation between the two countries in 1994, an MoU between the Philippines and the Saudi Chambers of Commerce and Industry in 1999, and another MoU on the establishment of a Joint Business Council between the Philippines and Saudi Arabia in 2003.9 These agreements paved the way for a more sustained and brisk economic engagement between the two countries epitomized by the remarkable growth in the size of bilateral trade which rose from $1.16 billion in 2003 to $3.6 billion in 2007.10 This significant increase was probably driven by improvements in the condition of the global economy prior to the 2008 financial crisis and the subsequent recession. In 2012, bilateral trade stabilized at $1.9 billion.11 Of course, the vast bulk of this trade is dominated by Saudi oil and petrochemical exports to the Philippines, with Filipino exports barely registering at $66 million in 2007 and $24 million in 2012 (made up mostly of agricultural products, processed foods, garments, fashion accessories, furniture, decor, and basic machines)12  Dependency on Saudi oil has fluctuated between 40 percent and 60 percent as part of the overall total of the Philippines' net imports,13 growing slightly as a result of disruptions in the Libyan oil supply and the imposition of an expanded sanctions regime on Iran.14

Due to the stark imbalance in bilateral trade, the Filipino government has made it a priority to encourage greater Saudi interest in Filipino goods (both for Saudi and Filipino consumers) as well as investment opportunities in the Philippines. President Gloria Macapagal Arroyo's visit to the Kingdom in 2006 was primarily undertaken with this in mind, concluding several agreements including another MoU between the Jeddah and Philippines' Chambers of Commerce and Industry.15 Over the past few years, Saudi businessmen have been invited to attend various trade fairs and exhibitions as well as join the 'Public-Private Partnership' (PPP) programs offering various investment opportunities in infrastructure development.16 In addition, the Filipino Embassy and the Department of Trade and Industry have actively sought to bring Filipino companies into Saudi Arabia to explore possible joint ventures with their Saudi counterparts as part of their ove rall outreach to the local Saudi private sector.17 Priority areas of investment have been identified to include Halal products, agriculture produce, cosmetics, garments and textiles, and other basic consumer products,18 although it appears that the bulk of Saudi investments have been directed at agriculture, tourism, and, albeit briefly, the petrochemical industry (Aramco's holdings in the Petron Corporation until 2008).19

While the Philippines is a major rice importer, Saudi companies have, in accordance with government policies to promote 'food security', broached the possibility of increasing Filipino 'Basmati rice' production.' One Saudi company, Dar Al-Maskukat Trading, has proposed leasing up to 200,000 hectares of Filipino government and private farm land to produce 1.2 million metric tons for the Saudi market, potentially satisfying wholly the Kingdom's needs.20 Another Saudi firm, Abbar&Zainy, one of the biggest importers of bananas and a partner of the Lapanday Group, is seeking to establish storage facilities in Davao.21

Regarding tourism, the Kingdom Hotel Investments (KHI), a subsidiary of the Kingdom Holding Company, through a joint venture with Ayala Land Inc. opened in 2012 a 280-room Fairmont Hotel, a 32-suite Raffles Hotel, and 237-room Raffles-branded private residences in Manila.22 It is worth noting that in 2012 alone, over 30,000 non-Filipino visitors arrived from Saudi Arabia to the Philippines (up from 10,409 in 2001),23 a part of who were medical tourists.24 By contrast, around 6,000-8,000 Filipino Muslims comes to Saudi Arabia on pilgrimage every year.25

There are pending discussions regarding a possible MoU on tourism cooperation and an Agreement on the Avoidance of Double Taxation.26 According to data drawn from the Bangkok Sentral ng Pilipinas covering 1999 to 2012, net foreign direct investment from Saudi Arabia to the Philippines totalled around $4 million.27

(I) Expatriate Community

While the size of bilateral trade may not be particularly large, the 'hidden' economic dimensions of Saudi-Filipino relations lie more in the Philippines' large expatriate community in Saudi Arabia. Numbering 663,370 according to data drawn from the Ministry of Labor as of April 2013,28 it constitutes one of the largest Filipino communities overseas, indicated both by the size of the Filipino diplomatic mission (the largest abroad with a staff strength of 110 in the Riyadh and Jeddah compounds)29 and the network of 24 international schools catering to the educational needs of this expatriate community.30 Filipinos in Saudi Arabia work in a wide variety of sectors, including 120,000 in domestic service and 150,000 in nursing alone thereby playing a vital role in the development of the country.31 They make up, following the US and Canadian Filipino communities, one of the largest sources of remittances to the Philippines (amounting to 8.1 percent of the total as of 2013)32 translating into approx. $1.7 billion in 2012 alone.33

Like other expatriate communities, the Filipino diaspora has suffered significantly from maltreatment under the Saudi kafala (sponsorship) system, as well as existing labor and religious regulations.34  In early 2011, following a series of disputes with other countries concerning workers' rights in the Kingdom (mostly following the hospitalization of the Indonesian maid Sumiati Salan Mustapa who had been tortured by her employers)35 and more specifically with regard to set wages, the Saudi authorities stopped processing, verifying, or authenticating applications from the Philippines.36 Unlike its negotiations with other states, however, the Saudis quickly reached a compromise agreement with the Philippines on minimum wages which saw the re-admission of Filipino workers to the Kingdom (it should be noted that the Filipino side had to drop many of its initial demands - a point confirming the leverage Saudi Arabia wield s vis-a-vis the Philippines).37 This was succeeded by expanded talks in 2012 and 2013 resulting in an agreement on 'Domestic Workers Recruitment' and another on 'Standard Domestic Worker Employment Contract', both of which were aimed at ending workers' exploitation through the regulation of recruitment channels and costs, granting the right to legal recourse during contractual disputes, and creating an official 'joint committee' entrusted with maintaining an open channel on labor issues within Saudi Arabia.38 There is, it should be added briefly, a small expatriate Saudi community in the Philippines, made up largely of students (about 160-200), many of whom are pursuing studies in medicine, dentistry, engineering, civil aviation, and business management, among others, although they are not served yet by a cultural attaché office.39 This situation complicates their studies as many of their universities are not recognized by the Saudi Mi nistry of Higher Education.

(II) Mindanao Peace Process

Saudi Arabia has played a relatively 'soft' but nonetheless important role in backing the peace process in Mindanao.40 It has been consistent in backing OIC mediation efforts starting from the mid-1970s through the conclusion of the 1996 peace agreement between the MNLF and the Philippines government (which also included supporting Manila's quest to attain observer status in the OIC).41 It has also backed talks between the Moro Islamic Liberation Front (MILF) and the Philippines government, most notably by joining the 'International Contact Group' (ICG) which was formed in 2009 during a formal meeting between the rebels and Philippine authorities in Kuala Lumpur to resolve the conflict. The ICG, which includes in its membership such countries as Japan, Turkey and the United Kingdom, as well as a number of NGOs, has sought to ensure compliance of the various parties to, and implementati on of past agreements.42 Additionally, the Kingdom has sought to channel investments to Mindanao so as to further solidify the peace process with real economic incentives, including major development loans for various infrastructure projects (providing $20 million as part of a general commitment totalling $100 million), financial assistance for humanitarian agencies working on the ground, and donations for disaster relief.43

In a more general sense, these efforts can also be subsumed under Saudi Arabia's general objectives of supporting Muslim communities abroad, of which, for instance, Crown Prince Salman's donation of $20 million to the Faculty of Islamic Studies in the University of the Philippines in Manila is worth taking note of.44 While altogether exerting a positive influence in promoting peace in Mindanao, it should be pointed out that the Kingdom must contend with the fact that, throughout the 1990s and 2000s, Saudi nationals (as well as charities) have been involved in funding such militant organizations as the notorious Abu Sayyaf group, among others, complicating efforts towards finding a sustainable resolution to the conflict and, more problematically, empowering elements sympathetic neither to Manila or Riyadh.45

There is much potential in strengthening and deepening Saudi-Filipino relations. The Philippines is a newly industrializing economy with considerable manpower constituting both an important consumer base in its own right, guaranteeing long-term demand for Saudi energy, and a source of much needed labor for the Saudi economy itself (as has been the case for the past three decades.) Ensuring a good relationship with Manila - along with many other ASEAN capitals - will require not only relying on the traditional economic complementarity that has existed, but also tapping into the emergent investment opportunities in the Philippines. Encouraging greater economic engagement should be of interest to all parties. Moreover, expanding upon the existing rights regime for Filipino workers living in the Kingdom - as well as that of other workers - should be a priority for Saudi officials, not only because it constitutes an important human rights conce rn but also because it continues to exercise a negative influence in shaping perceptions about Saudi Arabia in a number of Southeast and South Asian countries. The possibility of expanding the potential security and strategic dimensions of the relationship should be explored, given not only the commonality of threats faced by Manila and Riyadh and their own experiences in dealing with home grown insurgencies, but also by virtue of the religious and cultural links binding the Philippines' Muslim minority with Saudi Arabia.

Mohammed Al-Sudairi is a Researcher with the Gulf Research Center


Copyright 2007