Russia and the Philippines: 2023/24 Trade and Investment Opportunities
By Emil Avdaliani
Russia and the Philippines have been peripheral to each other, as while bilateral trade and investments ties are small, the geography has also largely precluded developing closer ties. What could change this are the unfolding geopolitical developments across Eurasia pushing Russia to seek closer ties with Southeast Asia.
Amid Russia’s re-orientation of trade from the West to Asia, the Philippines play an important role in facilitating this long-drawn process. As a vital member of the Association of Southeast Asian Nations (ASEAN), the Philippines serve as a jumping point for Russia to increase commercial ties with the booming South-East Asian region.
Following the outbreak of the conflict in Ukraine, Russia has made major moves toward this end. For instance, in 2022 Moscow opened a Russian trade mission in the Philippines. Moreover, Manila also has showed readiness to enter into a Free Trade Agreement with the Moscow-led Eurasian Economic Union (EAEU) which follows the Double Taxation Avoidance Agreement between the two countries.
Trade relations between Russia and the Philippines have experienced steady growth over the past years. The bilateral trade increased from US$486.3 million in 2010 to US$862.8 million in 2020. In 2021, Russia’s exports to the Philippines amounted to US$560 million, with semi-finished iron being the top product, while the Philippines’ exports to Russia amounted to US$444 million. In 2022 the Philippines’ imports from Russia were valued at US$651.24 million with the total trade levels reached approximately US$1.4 billion.
Russia is looking to diversify and expand its trade and investment cooperation with the Philippines, focusing on various sectors including pharmaceuticals, medical equipment, infrastructure, and the military equipment. The Philippines’ exports to Russia consist of electrical machinery, mechanical appliances, and agriculture products.
These figures and initiatives reflect a robust and growing economic relationship between Russia and the Philippines, with both nations seeking to bolster their trade ties in agricultural products as well as creating joint ventures for processing agricultural products. In 2022 the trade turnover of agricultural products between the two countries increased by 14% reaching US$72.2 million.
Russian fuel is another product the Philippines are interested in buying. Despite the conflict in Ukraine, Manila has abstained from criticizing Moscow and has not joined the Western sanctions regime. The goal is simple: Russia fuel will help the Philippines to diversify its supplies, limiting the risks of overdependence on any single importer.
Russian businesses expect that the country can turn into a major exporter of meat and grain to the Philippines if the existing restrictions on the supply of Russian meat products are lifted. This would fit into the overall trend observable in the period of 2018-2022, when the Philippines increased meat imports threefold, to US$2.4 billion. Almost half of these imports are pork – 44%. Overall, in 2022 the Philippines imported almost US$21 billion worth of agricultural products. The Philippines are also interested in supplies of petroleum products from Russia.
After a four-year pause, in October 2023 the joint Russian-Philippine Commission on Trade and Economic Cooperation governments convened for a trade and economic meeting, signaling Moscow’s growing commercial and investment interest in the country and the wider ASEAN and Southeast Asian area The Russian side was represented by such giants as Rosatom, Gazprom, Kamaz, GAZ Group and others.
Following the imposition of Western sanctions on Russia, the latter’s trade contacts with the Philippines became complicated. As a result, the two countries are presently looking for opportunities for trade through the means other than SWIFT. However so far, no reliable alternative has been found, though Moscow and Manila agreed to encourage the opening of correspondent accounts in the two countries’ banks.
Russian investment in the Philippines has been encouraged and facilitated by the Philippine government as part of efforts to strengthen economic cooperation between the two countries. Specific interest has been shown by Russian companies in oil exploration and the construction of both traditional and nuclear power plants. Moreover, during a state visit by the Philippine president to Russia, at least 10 business deals worth US$12.57 million were signed, indicating active engagement between the two nations.
There is also a significant interest from Russia’s financial sector, with Tinkoff Bank planning in 2021 to invest into the country. In early 2022 former Tinkoff Bank executives launched a Fintech startup in the Philippines – an investment of US$16 million. The startup will operate in Southeast Asia, but the Philippines will be its first market.
The Philippine political leadership has on numerous occasions assured Russian investors of potential gains and a conducive investment environment. Manila is also interested in attracting Russian investments in mineral processing, car manufacturing, and medical industry.
Russian businesses are also exploring the possibility of trading a range of products with the Philippines and the broader ASEAN region. The fields of trade and investment cooperation are expanding, with new focus areas including pharmaceuticals, medical equipment, infrastructure, agribusiness, business-process outsourcing, mining, tourism, creative industries, and medical travel. These sectors are highlighted as priority areas for Russian investors, showcasing the breadth of opportunities available in the Philippines.
With the Philippines as an ASEAN member, investors in the country have Free Trade access to the other ASEAN nations: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Singapore, Thailand and Vietnam. ASEAN also has FTA with the Philippines large neighbour to the north – China, while Hong Kong is just an hour’s flight from Manila.
The two countries are also working on expanding ties in tourism. Manila believes that direct flights (operated by Russia’s Aeroflot) will be established in the first quarter of 2024. So far, Russian tourists have been using connecting flights mostly via the Middle East countries.
Physical infrastructure too matters. Given the Philippines’ location there is limited connectivity with Russia, but one way to correct it is through building connections with Russia’s Far East ports such as Vladivostok. Extensive work still has to be made in that regard, but the two countries are considering developing trade via this route.
Emil Avdaliani is a professor at the European University in Tblisi.
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