Part III: The West Philippine Sea Is Also an Economic Story

When discussions turn to the West Philippine Sea, public attention almost instinctively gravitates toward coast guard confrontations, naval patrols, diplomatic protests, and competing territorial claims.

Economic strength has become one of the defining foundations of national security. A nation that builds resilient industries, competitive supply chains, and technological capability strengthens not only its prosperity, but also its capacity to safeguard its sovereignty. [Illustrator: ASK]

These images have come to define the dispute for many Filipinos over the past decade.

Yet beneath the surface of those contested waters lies another story—one that may prove equally consequential to the country's future. It is a story about technology, industrial competitiveness, critical minerals, supply chains, and the growing realization that economic strength has become an indispensable pillar of national security.

This broader perspective framed the presentation of strategic industry analyst Cesar Tolentino during a recent Monday Circle forum at the Westin Manila.

While previous speakers examined the strategic and informational dimensions of the West Philippine Sea, Tolentino shifted the conversation toward geoeconomics, arguing that the contest unfolding across the region is ultimately about far more than maritime boundaries.

Strategic industry analyst Cesar Tolentino has long advocated for strengthening the Philippines' position within global semiconductor and electronics value chains. His work challenges the country to move beyond exporting raw materials and toward building industries that create greater national wealth and long-term strategic resilience. [Photo: Cesar Tolentino LinkedIn]

It is also about who controls the industries that will shape the global economy for decades to come. "Security today is economic security," he remarked.

That observation reflects an increasingly accepted reality among governments around the world.

Competition among nations is no longer measured solely by military capability or territorial control. Increasingly, it is determined by access to critical technologies, resilient supply chains, secure energy systems, and the ability to produce the advanced components that power modern economies.

Wealth Under Waves

Within that equation, rare earth elements have assumed extraordinary strategic importance.

These minerals, including neodymium, cerium, lanthanum, and yttrium, are indispensable in the production of semiconductors, electric vehicles, wind turbines, advanced electronics, telecommunications equipment, and sophisticated defense systems.

Reports suggesting that portions of the West Philippine Sea and the broader South China Sea possess geological conditions favorable to rare earth deposits have therefore attracted considerable international interest.

Although the commercial viability of deep-sea extraction remains subject to scientific verification and significant technical challenges, the possibility alone has elevated the strategic value of the region.

For Tolentino, however, the more important lesson extends beyond the minerals themselves.

Natural resources possess limited value unless they can be transformed into high-value products.

A country's true competitive advantage lies not merely in extracting raw materials but in processing them, refining them, integrating them into sophisticated manufacturing, and ultimately creating technologies that command premium value in global markets.

China offers perhaps the clearest example of this principle. Its industrial strength is not simply the result of abundant domestic resources but of decades of sustained investment in processing capacity, manufacturing ecosystems, logistics, and technological innovation.

Reports suggesting that portions of the West Philippine Sea possess geological conditions favorable to rare earth elements underscore why these waters matter far beyond fisheries and maritime boundaries. In the twenty-first century, access to critical minerals increasingly shapes technological leadership, industrial competitiveness, and national resilience.

Raw materials sourced from around the world, including significant mineral inputs originating from countries such as the Philippines, are converted into finished products that dominate global supply chains.

One regional example offers an equally instructive perspective.

Indonesian Inspiration

Over the past decade, Indonesia has fundamentally reshaped its position within the global minerals economy through an ambitious downstream industrialization strategy known locally as hilirisasi.

Rather than continuing to export unprocessed nickel ore, Jakarta prohibited the export of raw nickel and required that minerals be processed domestically before entering international markets. The policy initially drew skepticism and even legal challenges abroad.

Yet over time, it transformed Indonesia from a supplier of raw commodities into one of the world's most important centers for battery materials and electric vehicle manufacturing.

The economic results have been remarkable.

Indonesia's nickel export value climbed from approximately US$3.3 billion in 2017 to roughly US$33.5 billion by 2023. The policy attracted more than US$47 billion in foreign direct investment, leading to the construction of more than 30 smelters and integrated industrial parks across the archipelago. Industrial hubs such as Morowali have evolved into globally significant production centers, generating more than 180,000 direct jobs while positioning Indonesia as an indispensable participant in the rapidly expanding electric vehicle and advanced electronics supply chains.

The lesson extends well beyond nickel.

Indonesia's hilirisasi strategy demonstrates the power of moving up the value chain. By processing minerals at home rather than exporting raw ore, the country transformed natural resources into investment, manufacturing, skilled employment, and global industrial influence.

Indonesia demonstrated that the greatest economic value does not necessarily lie beneath the ground.

Rather, it is created through deliberate industrial policy, domestic processing, technological capability, manufacturing ecosystems, and long-term investment in value-added industries.

Natural resources became the catalyst, but industrial capacity became the true source of national wealth. For the Philippines, the comparison is both timely and instructive.

Capturing Greater Economic Value

Like Indonesia, the country possesses abundant mineral resources, a globally competitive electronics sector, and a strategic geographic location at the heart of the Indo-Pacific. It is also one of the world's leading suppliers of nickel ore and an important contributor to the global semiconductor industry.

Yet much of the value generated from these resources continues to accrue overseas after the minerals leave Philippine shores.

This is precisely where Tolentino's argument acquires greater significance.

"The Philippines is helping drive China's EV industry," he observed, emphasizing that much of the economic value derived from Philippine resources is ultimately captured elsewhere through downstream processing, advanced manufacturing, and integrated supply chains.

The Philippines supplies many of the raw materials that help power the global electric vehicle revolution. The next strategic challenge is not simply exporting those resources, but capturing more of the value they create through domestic processing, advanced manufacturing, and technological innovation. [Photo: BYD]

His point was not that the Philippines should replicate Indonesia's policies in every respect. The two countries possess different political systems, industrial structures, investment environments, and resource endowments.

Rather, Indonesia illustrates what becomes possible when a nation deliberately moves beyond exporting raw materials toward building domestic industries capable of capturing significantly greater economic value.

Instrument of National Security

For the Philippines, this means strengthening mineral processing, expanding semiconductor design and advanced packaging capabilities, investing in battery technologies, encouraging research and development, and cultivating industrial ecosystems where manufacturing, innovation, logistics, and skilled labor reinforce one another.

Such investments would not merely increase exports. They would strengthen economic resilience, generate higher-value employment, deepen technological capability, and enhance the country's strategic relevance within global supply chains.

Viewed through that lens, economic policy itself becomes an instrument of national security.

Every additional stage of value creation retained within the Philippines reduces external dependence while expanding the country's capacity to exercise genuine strategic autonomy.

This broader perspective also completes the picture painted throughout the Monday Circle discussions.

Professor Joshua Espena argued that the Philippines must preserve its self-agency by making decisions anchored on Filipino interests rather than great-power rivalry.

Regine Cabato demonstrated that such independent decision-making depends upon protecting the country's information environment from coordinated foreign manipulation.

Cesar Tolentino completes the picture by reminding us that strategic autonomy ultimately requires a strong and competitive economy capable of sustaining national resilience over the long term.

Economic Security is National Security

The three perspectives converge on a single conclusion. The West Philippine Sea is no longer simply a question of geography. It is a question of how the Philippines prepares itself for an increasingly complex century in which prosperity, technology, security, and sovereignty are inseparable.

As the nation marks the tenth anniversary of its landmark arbitral victory under UNCLOS, it is worth remembering that legal victories alone cannot secure the country's future.

International law establishes rights, but national capability determines how effectively those rights are exercised.

Ships and aircraft remain indispensable, yet so too are laboratories, universities, research institutions, advanced manufacturers, responsible media, innovative businesses, and forward-looking public policy.

The responsibility for strengthening Philippine sovereignty therefore extends well beyond the Armed Forces or the Department of Foreign Affairs.

It belongs equally to businesspeople building globally competitive industries, educators preparing the next generation of scientists and engineers, journalists committed to truthful reporting, universities advancing strategic research, and citizens who recognize that national resilience is ultimately a shared enterprise.

The next chapter of the West Philippine Sea will not be written solely on nautical charts or diplomatic communiqués. It will also be written in classrooms, factories, laboratories, boardrooms, technology parks, and research centers across the country.

In many respects, Indonesia has already demonstrated what can happen when a nation chooses to retain more value from its own natural resources and invests deliberately in its industrial future.

The Philippines need not follow the same path in every detail, but it can certainly draw inspiration from the principle behind it: that lasting sovereignty is reinforced not only by defending territory, but by creating prosperity.

Ultimately, the country's greatest strategic advantage will not depend solely on what lies beneath the waters of the West Philippine Sea. It will depend on what Filipinos choose to build above them.

That is the enduring challenge before government, business, academia, the media, and civil society alike.

The future of Philippine national security will be determined not only by how well the nation protects its maritime domain, but by how successfully it transforms its natural wealth, human capital, and innovative capacity into enduring national strength.

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