INTRODUCTION
This morning, we are to consider ways and means of dealing with an emerging crisis in our Kalayaan Group of Islands in the South China Sea west of Palawan.

Conventionally, the Kalayaan Island Group (KIG) is considered part of the Spratly Islands — which are claimed, either in part or in whole, by six east Asian nations.

The People’s Republic of China has made the most encompassing claim — a claim to the entire South China Sea — which has set it against the five other claimants: Vietnam, Malaysia, Brunei, Taiwan and our own country.

This is the background against which we must assess the implications of the Chinese presence on Panganiban Reef — which the Chinese call Meijijiao, and which has been nicknamed (appropriately enough) Mischief Reef.

Panganiban Reef is right in the middle of the Kalayaan Island Group. It is only 135 nautical miles from the southwest coast of Palawan and about 100 nautical miles closer to Palawan than Pagasa, the main island of Kalayaan municipality. It is well within our 200-mile exclusive economic zone.

Our aerial reconnaissance and civilian reports confirm the presence of several Chinese ships and structures built on the reef itself.

We also have reason to believe a group of Filipino fishermen had indeed been briefly detained by Chinese forces in the area last month.
A VIOLATION OF THE MANILA DECLARATION
What are we to make of all this?

We cannot but view the presence on Panganiban Reef of Chinese ships and personnel as inconsistent with both international law and the Association of Southeast Asian Nation (ASEAN)’s Manila Declaration on the South China Sea in 1992 — to which both the Philippines and the People’s Republic of China adhere.

The Manila Declaration calls for the peaceful settlement of disputes over the Spratlys, the exercise of restraint in the area and cooperation among the claimants in developing the area. In this spirit, we are here to deliberate on what specific steps we are to take — first, to deal with the Panganiban Reef problem; and second, to realize and uphold — in concert with the five other claimants — the spirit and intent of the Manila Declaration of 1992.
WHAT WE HAVE DONE
Meanwhile, our government has taken the following steps:

1. Our foreign office has sent an aide-mémoire to the Chinese government referring to the manila declaration. It has also briefed the ASEAN ambassadors on the context and seriousness of the problem at the Panganiban Reef. And it is in touch with the government of Vietnam, whose foreign minister was coincidentally in manila at about the time the Chinese naval presence and building activities on Panganiban Reef were confirmed by us. Our government can come to no other conclusion but that the Chinese have established a new outpost and a possible naval support installation well within and in the middle of our exclusive economic zone (EEZ).

2. We are lodging a strong diplomatic protest with the government of the people’s republic in Beijing.

3. I have ordered the Department of Defense (DND) to strengthen, within our limited capabilities, our detachments and our naval presence in the Kalayaan Island Group and to intensify its aerial surveillance over Panganiban Reef.

Needless to say, we are keeping the chairmen of the foreign affairs and defense/security committees of both houses of Congress as well as our chiefs of mission abroad informed on every step we take.
NOT JUST A BILATERAL PROBLEM
The official Chinese explanation is that the occupation of Panganiban Reef was ordered by low-level functionaries acting “without the knowledge and consent of the Chinese government.”

On the other hand, the International Herald Tribune (Hong Kong edition) reported from Beijing in its 3 January 1995 issue that:

“A group of former American military leaders who visited China last year reported that China was forming a limited military force ‘capable of rapid response’ and designed to protect ‘island claims in the South China Sea as a matter of national priority.’

The group was led by former defense secretary Robert S. McNamara and four recently retired senior military officers, including David E. Jeremiah, a former vice chairman of the joint chiefs of staff, and James P. McCarthy, a former deputy commander of US Forces in Europe.”

In any case, the incursion on the Panganiban reef is not just a bilateral problem between the Chinese and Philippine governments. It is the multilateral concern not merely of the six claimants but of all the countries interested in the long-term stability of the South China Sea and the East Asian region as a whole.

Our own position is clear.

We see no substitute for consultations that produce a consensus among the six claimant states. As we all know, the Indonesian government has graciously hosted several consultations, and also the Philippines on one occasion, among the claimant countries in the interest to pursue the joint exploration and development of the area. We believe any agreement should include a suspension of new unilateral grants of drilling concessions by any claimant-state on disputed territories.

The strategic sea-lanes passing through the Spratlys are so widely used by regional trade — increasingly also by China — that any conflict there would prejudice not just the protagonists but the entire Asia-Pacific community.

I firmly believe all the claimants realize this. Any conflict over the Spratlys could easily burst the balloon of political stability that underpins East Asia’s amazing economic growth.

I also believe it is in this context that President Bill Clinton expressed to me personally — during my working visit to Washington, DC, in November 1993 — America’s resolve to oppose any resort to force in the Spratlys by any of the claimants.

It is well known that, I myself proposed the eventual demilitarization of the South China Sea as early as March 1994 on the occasion of my state visit to Vietnam, to include, as a first step, the maintenance of the status quo in the disputed area, and a freeze on all destabilizing activities there. Once this is agreed on, the six claimants — acting in concert — can then jointly develop and put the Spratlys and its resources to peaceful, humanitarian uses for the benefit of all.
COOPERATIVE UNDERTAKINGS BY CLAIMANT-COUNTRIES
The exchange of visits by high officials of the claimant countries — both civilian and military — can start off these cooperative undertakings. The defense minister of Vietnam was, in fact, here last December in response to these Philippine initiatives.

Examples of these cooperative undertakings could include:

* Setting up lighthouses and other navigational aids;

* Joint patrols against piracy and rescue teams for ships in distress;

* Multi-country undertakings in marine research, fishing enterprises and environment protection;

* Joint ventures in tourism, such as the building of way stations for sports sailing ships, interport races and scuba diving destinations; and,

* Other non-military confidence-building mechanisms.

All of these can become possible and do-able under a joint development authority.

In the interim, each disputed island should be placed under the stewardship, meaning the primary responsibility, of the claimant-country closest to it geographically, on the understanding that the steward-country accommodates the other claimants’ need for shelter, anchorage, and other peaceful pursuits.
NO SUBSTITUTE FOR READINESS
That is the position we intend to pursue in any settlement of the Spratlys claims.

At the same time, we all realize that, while hoping for the best, we must prepare for the worst. Let me express our government’s appreciation to the leadership of the senate and the house for their quick and favorable action on the bill modernizing our armed forces.

Finally, I suggest we tone down our individual rhetoric on the Panganiban reef problem. I see no need for undue alarm. Right is clearly on our side here — and being in the right endows us with a unique kind of strength that armed might cannot easily put down. This early we have received strong encouragement in our position from friends and neighbors like Indonesia and Vietnam, as well as from the United States.

I assure you we shall exhaust every diplomatic option available to us — from the ASEAN Foreign Ministers’ Conference to the ASEAN Regional Forum (ARF) and up to the Security Council of the United Nations — before we do anything else.

Thank you, and now let us turn to this morning’s work.