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Saturday, August 25, 2012

U.S. Missile Shield Plan in Japan-Philippines Seen Stoking China Fears

The U.S. decision to expand its missile-defense shield in the Asia-Pacific region, ostensibly to defend against North Korea, could feed Chinese fears about containment by the U.S. and encourage Beijing to accelerate its own missile program, analysts say.

The new effort, which includes the deployment of an early-warning radar system, known as X-Band, in Japan—and possibly another in Southeast Asia such as Singapore or the Philippines —reflects America's deepening military and security engagement in the region after a decade focused on the Middle East and Afghanistan.

China's official response has been relatively muted so far. Zhu Feng, a leading Chinese security expert at Beijing University, said the U.S. announcement is "more likely to speed up an arms race."

A senior U.S. official acknowledged that the Pentagon faces a hard sell convincing China's People's Liberation Army that the missile-defense architecture isn't designed to encircle them. "It sure looks like containment," the official said.

U.S. State Department spokeswoman Victoria Nuland said the missile defenses aren't directed at containing China.

At a news conference Friday, Japan's defense minister Satoshi Morimoto confirmed that Tokyo and Washington "have had various discussions over missile defenses, including how to deploy the U.S.'s X-Band radar system." He added the government needed "a little more time" before disclosing details.

US Radar system installation in Europe for Iran's Missile System

The news of the U.S. plans, reported in The Wall Street Journal earlier this week, strikes a nerve in a region concerned about the growing assertiveness of China.

Many in Japan feel the nation should beef up its own defense capability and strengthen cooperation with the U.S. in the face of China's military expansion and North Korea's nuclear ambitions. India is alarmed about China expanding its naval presence in the Indian Ocean. Vietnam, meanwhile, is building stronger ties with the U.S. Navy, while the Philippines, too, is reviving its security relationship with Washington amid a series of territorial disputes with China in the West Philippines (South China) Sea.

However, security analysts say the strategy risks further antagonizing Chinese leaders, who are already under pressure from vocal nationalists to defend the country's strategic interests.

"China will make a meal of this politically. To them it underscores their propaganda points about the pivot to Asia revealing America's Cold War mentality, that its purpose is to contain China," said Carl Thayer, an Asian security expert at the Australian Defence Force Academy in Canberra.

China's Ministry of National Defense hasn't commented directly on the antimissile plans, but Thursday sounded a cautious note, saying, "China has always believed that antimissile issues should be handled with great discretion, from the perspective of protecting global strategic stability." China's Foreign Ministry separately echoed the sentiment.

China is developing sophisticated new missiles, including those potentially capable of striking U.S. aircraft carriers operating in the Asia-Pacific. Those efforts are in part aimed at denying regional access to the U.S., which could complicate Washington's efforts to defend Taiwan in the event of a conflict.

Analysts say China may now be tempted to churn full speed ahead with this program in an effort to overwhelm an enhanced missile defense with firepower.

"Attempting to overcome this reality would risk entering the U.S. into a race that it could not afford to wage, let alone win," wrote China security analysts Andrew Erickson and Gabe Collins in a commentary for The Wall Street Journal.

The senior U.S. official said that while the system could be overwhelmed by a large-scale Chinese attack, U.S. missile-interceptors guided by the X-Bands could repulse a more limited strike, protecting U.S. bases and ships. "You don't need to be 100% effective in order to create a situation where the other guy has to change his calculus," the U.S. official said.

Japan has mixed emotions about the nation's defense and its long-standing security alliance with the U.S. Finding a home for the X-Band radar won't be easy because of the growing grass-root opposition to the American military presence in Japan.

Japan already hosts an X-Band radar in the northern prefecture of Aomori. At the time it was installed in 2006, it faced concerns from local residents who feared presence of the radar would make them a target for potential enemy attacks. Others were opposed to the arrival of more U.S. personnel to man the facility.

The Pentagon says North Korea is the immediate threat driving decision-making on missile defense.

South Korea's Foreign Ministry declined to comment on the missile-defense plans, which follow a provocative rocket test launch by Pyongyang in April. The rocket, which the North Koreans said would deploy a satellite into space, crashed minutes after takeoff.

Pyongyang previously launched long-range missiles in 2006 and 2009, both of which also crashed soon after takeoff. U.S. intelligence agencies have long held that North Korea could have a missile capable of reaching the U.S. as early as 2015 or 2016.

Some U.S. defense officials have said a third X-Band radar could be positioned in the Philippines, which would potentially help Washington and its allies more accurately track ballistic missiles launched from North Korea and part of China.

Raul Hernandez, assistant secretary at the Philippines Department of Foreign Affairs, said the Philippines hasn't been approached by the U.S. over basing an early-warning radar station there.

Some analysts warn that the U.S. plan may further destabilize a region that faces volatile territorial disputes, competition for resources and growing nationalism.

It may also force governments in the region to make uncomfortable choices. Sumathy Permal, a senior researcher at the Centre for Maritime Security and Diplomacy at the Maritime Institute of Malaysia, said that Malaysia values close ties with both the U.S. and China. "Malaysia may not want to upset either," she wrote in an email.

Lora Saalman, a Beijing-based researcher at the Carnegie Endowment for International Peace, said that the X-Band radar issue "cuts to the heart of China's overall military modernization and role in Asia."

However, she said a land-based X-Band radar is potentially somewhat less concerning to the Chinese than a sea-based one that could be more difficult for China to evade.

"So this land-based X-Band radar is not entirely a worst-case scenario for China," said Ms. Saalman.

—Adam Entous and Julian E. Barnes in Washington, Kwanwoo Jun in Seoul, P.R. Venkat in Singapore and Celine Fernandez in Kuala Lumpur contributed to this article.

Philippine Investment Grade Credit Rating is on the Air

 

Finance Secretary Cesar V. Purisima and National Treasurer Roberto B. Tan led the Philippine delegation in meeting with banks and investor groups in Singapore on Aug. 21 and 22, the Investor Relations Office (IRO) said in a statement on Friday.

Also in the team were Bangko Sentral ng Pilipinas Assistant Governor Cyd Tuaño-Amador and IRO Executive Director Claro P. Fernandez.

"The Philippine government's economic team provided an update on the fiscal and macroeconomic situation of the Philippines, as well as on the milestones of the Aquino administration's governance reform agenda," the statement read.

Among these were the 760.92 billion in government revenues in the first semester, up by more than a tenth from the previous year, as well as the foreign exchange reserves which hit a record high $79.35 billion in July. Remittances from overseas Filipino workers also hit $10.13 billion in the first half, climbing 5.1% against yearago levels.

"The economic team highlighted that the consistent strong performance of the Philippine economy was achieved against the backdrop of continued global economic volatilities," the statement read.

"Despite the debt crisis in Europe, economic slowdown in China, and weak consumption in the US, the Philippines is structurally well positioned to sustain its growth," it continued.

The Philippines' credit rating momentum was another focal point in the meetings, especially as country bagged positive actions from Standard & Poor's (S&P) and Moody's Investors Service.

Just last month, S&P upgraded the Philippines' credit rating to BB+ from BB, taking the country to just one notch below investment grade. This is aligned with the BB+ credit rating granted by Fitch Ratings in June 2011.

In May, Moody's also raised its outlook on the country's Ba2 credit rating to positive from stable, indicating that an upgrade is likely in the next 12 to 18 months. The Moody's credit rating is the Philippines' lowest at two notches below investment grade.

"Given that the cost of protecting Philippine bonds against default for five years is lower than some investment-grade countries such as Russia, and considering that two out of the three major credit rating agencies rate the country one notch below investment grade, Secretary Purisima emphasized that the Philippines can clearly make its case for an investment grade status," the statement read.

"The reception was very positive throughout the investor presentations, with investors recognizing the strong performance of the Philippine economy... " it continued.

The Singapore roadshow followed a tour of the United States last June. This roadshow was supported by global banking giants Citigroup Inc., the Credit Suisse Group AG, Deutsche Bank AG, Goldman Sachs Group Inc., HSBC Holdings Plc, ING Group, JP Morgan, Morgan Stanley and UBS AG.

Business World Online

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