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Quest Means Business

Trump Hosts Macron As Ukraine Marks Three Years Of War; CDU's Merz Pushes To Form Coalition With Center-Left SPD; Exploring Manila's Past, Present And Future; Vatican Says Pope Is Showing A "Slight Improvement"; Philippines And China At Odds Over Maritime Borders; Philippines, Japan Agree To Enhance Defense Partnership. Aired 4-5p ET

Aired February 24, 2025 - 16:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

[16:00:14]

RICHARD QUEST, CNN INTERNATIONAL HOST, "QUEST MEANS BUSINESS": Closing bell ringing on Wall Street, 5:00 in the morning here in Manila. A Special

Edition of QUEST MEANS BUSINESS.

The Dow is up just a tad or two, which is quite remarkable, bearing in mind what we've seen over the last few days in terms of losses, particularly at

the end of last week. Hit the gavel and trading comes to an end. A small eking out of the gain of 33 to 34 points on the Dow.

The markets are calm and these are the main events of the day.

President Macron insists peace for Ukraine must not come without security guarantees. It is a joint news conference with President Trump. We will get

into the details in just a second or three.

Pope Francis' condition has improved slightly.

Here in the Philippines and around the world, the prayers of the Catholic faithful are with him.

And tonight, my sit down interview with the Philippines Finance Secretary Ralph Recto wants to court companies looking to diversify out of China.

Tonight, we are live from Manila. Well, it is Tuesday morning here in Asia, 5:00 AM. For the rest of you in Europe, way behind, it is still Monday

night. It is February the 24th. I am Richard Quest in Manila and elsewhere, as always, I mean business.

Good evening. Well, good morning from Manila.

The sun will rise in just about an hour from now and we are in this city of more than 13 million people that's about to start the day.

The Philippines is at the center of so many economic forces. Trading ties with China to be sure, security guarantees with the United States. Those

guarantees have recently been reinforced by the Secretary of State Marco Rubio; and on the climate front, it is on the frontline. It is also home to

about 85 million Catholics, one of the largest percentage populations of the Catholic faithful. So obviously, much concern over the condition of the

Pope.

There is so much to talk about. We will be joined over the course of the hour by the Finance Minister and the Chief Executive of the Sovereign

Wealth Fund.

First, though, we begin with events in back in Washington, where Donald Trump and the French President, Emmanuel Macron, are vowing to secure the

peace in Ukraine, but the two men have perhaps a different way over which that should be done.

They've just held a news conference at the White House. It is marking the third year, the three years since Russia launched its full scale invasion

of Ukraine.

President Macron says the French is ready and willing to provide Kyiv with the necessary security guarantees. The Presidents discussed the idea of

European peacekeepers being deployed to a post postwar Ukraine. They also discussed reaching out to Russia.

(BEGIN VIDEO CLIP)

EMMANUEL MACRON, FRENCH PRESIDENT: I stopped my discussion with President Putin after Bucha and the war crimes, because I considered that -- I mean,

we had nothing to get from him in that time.

Now, this is a change -- there is a big change because there is a new U.S. administration. So this is a new context.

DONALD TRUMP (R), PRESIDENT OF THE UNITED STATES: I think it is to the very much benefit of Russia to make a deal and to go on with -- to go on with

leading Russia in a very positive way. That's what you have to do. But I really believe that he wants to make a deal.

(END VIDEO CLIP)

QUEST: Jeff Zeleny is with me from the White House. Are the two really that far apart on the questions of what will be required for a peace deal in

terms of security guarantees? Is there much difference between what the U.S. is really demanding and what the Europeans are prepared to offer?

JEFF ZELENY, CNN CHIEF NATIONAL AFFAIRS CORRESPONDENT: Richard, that is a central question, and it is one that was really not answered at that news

conference just a short time ago that ended.

President Macron talked considerably more about security guarantees, security reassurances than the American president did. He stood there and

listened to the French President, he was very friendly, very cordial, but very few specifics in terms of what Russia would have to do.

And of course, this is an extraordinary timing when you think about it. Three years to the date, of course, that Russia invaded Ukraine.

The American President insists that he believes that Vladimir Putin wants to make a deal. President Macron repeatedly said Europe will do more. They

know they must do more.

[16:05:10]

But the actual specifics were fairly short supply there in the press conference in the East Room of the White House -- Richard.

QUEST: And on this question of the specifics, because not only do we have Ukraine, there is this wider issue of the U.S.' security guarantee, if you

will, for Europe overall.

Now, I am sure they are going to get further into this, but there is no question the U.S. has now sent the message to Europe that it is not

prepared to offer that same level of guarantee and it is -- and it does want to get closer to Russia. that creates its own difficulties for this

relationship.

ZELENY: It certainly does. I mean, but that has been one of the central reasons that the French President Emmanuel Macron came to Washington and

really insisted on a meeting earlier than he was scheduled to do so, and he spent considerable amount of time with the American President in the Oval

Office this morning, started with a G7 virtual meeting.

Macron was right in the Oval Office with the American President, and then later on, at a longer session, then a lunch as well.

So throughout the day, really, the overarching goal for President Macron was to bring Donald Trump a little closer to Europe, at least to remind him

of that Transatlantic Alliance and perhaps away from Vladimir Putin. But we will see at the end of this deal.

The U.S. officials do tell me that they believe they are close on this rare earth minerals deal to essentially guarantee a repayment, if you will for

U.S. foreign assistance to Ukraine. We shall see how that goes forward.

But again, the security guarantees were talked considerably, much more by President Macron than Donald Trump.

QUEST: Right. Thank you, Jeff Zeleny at the White House.

Talking about that, let's go along further with the draft of the U.S.- Ukraine resources deal that is being presented.

President Trump actually says Volodymyr Zelenskyy may come to the White House soon to sign it. Now the U.S. is trying to gain access to Ukraine's

critical minerals. It is part of this wider negotiation. A Ukrainian source is saying the U.S. is resisting the inclusion of security guarantees. It is

almost like access to the rare minerals is payment for what has come before, not what might come next.

President Zelenskyy on Sunday has rebuffed the demands, if you will, for a share of the country's rare minerals without that guarantee.

Kimberly Dozier is our global affairs analyst with me now. The idea -- this is really what it is about, isn't it? I mean, that Ukraine sort of accepts

in a sense that there has to be a repayment or there will be up to $500 billion in a repayment. It is a question of the guarantee going forward or

is it really the White House and the U.S. mercantilistically saying, no, come on, just pay us what we've already paid so far.

KIMBERLY DOZIER, CNN GLOBAL AFFAIRS ANALYST: Yes, what we are hearing out of both sides really doesn't add up. It reminds me of watching any peace

deal in the past in the making, where one side was trying to pressure the other side to give in to something it didn't want to, or wasn't in its best

interest. So they said, yes, we are really close and that's what President Trump is doing.

But President Zelenskyy just told his public on Sunday that the deal before him would indebt ten generations of Ukrainians, that Ukraine would have to

pay back $2.00 for every $1.00 that the U.S. had invested.

I mean, the U.S. has only promised $183 billion and only delivered so far about half of that, whereas the Europeans, by the way, have promised about

$207 billion. But anyway, back to the deal. What's the there, there. Not seeing what Ukraine is getting if it is not getting continued security

guarantees.

So what we are hearing out of Kyiv does not match what we are hearing out of Trump's White House. It doesn't seem to be close at all.

QUEST: Now, the way the White House is putting this, they are basically saying, ah, but there is an economic partnership, meaning that the U.S.

will be so vested in Ukraine's economic future that Russia, et cetera, et al would not dare to go against it because it would be hurting U.S.

economic interests.

It is an interesting argument. I suspect Zelenskyy would prefer to have military guarantees rather than a nebulous economic one.

[16:10:08]

DOZIER: Well, if Zelenskyy could get the U.S. agreement and Kyiv does want an economic agreement with the U.S., that's the only reason it is

continuing to talk about this, but it is also insisting that then it has to have European troops on the ground that have been offered by France, by

Britain, and the U.S. signing on to those peacekeeping troops being there so that there would be a sort of a NATO road bump if Russia ever wanted to

try to invade again, because the last couple of times Ukraine has signed on to a peace deal, Minsk 1 and Minsk 2, well, what came after that was the

seizure of Crimea and then the 2022 invasion of the rest of Ukraine.

So they need something more than just an economic agreement with the U.S. and Russia's promise.

QUEST: I am grateful, Kimberly Dozier, thank you, joining us from Washington.

Let's stay with events in Europe for the moment. Germany's likely next chancellor says Europe must seek to achieve independence from the United

States.

Friedrich Merz then went on to say he never thought he would have to say such a thing on television, but as his center right party came out on top

in Sunday's snap general election, he has been celebrating the exit poll results.

The likely chancellor to be said the Trump administration is largely indifferent to the fate of Europe.

CNN's Fred Pleitgen with this report from Berlin.

(BEGIN VIDEOTAPE)

FREDERIK PLEITGEN, CNN SENIOR INTERNATIONAL CORRESPONDENT: After a very strong showing at the polls, Friedrich Merz from the Conservative Christian

Democratic Union is set to become Germany's next chancellor and he says he wants to form a coalition government as fast as possible. Most probably his

partner to do that is going to be the Social Democrats, who until now have had the chancellor in Olaf Scholz.

Now, there are a lot of problems that Friedrich Merz has acknowledged Germany needs to tackle. This country's economy has been in recession for

two years in a row. Migration was a big topic in the election campaign, but there is also a large part of the German population that's extremely

concerned about the Trump administration.

Of course, the Trump administration has taken swipes at Germany in the past couple of weeks, and I asked Friedrich Merz he felt about that and how he

wants to deal with the Trump administration.

(BEGIN VIDEO CLIP)

PLEITGEN: You spoke about some of the concerns that you have about the Trump administration, sir. How do you want to position Germany as far as

the United States is concerned, to prevent confrontations with the Trump administration, for Germany, for Europe?

And how concerned are you about Donald Trump's efforts at rebuilding relations with Russia to the detriment of both Europe and Ukraine?

FRIEDRICH MERZ, LEADER OF THE CHRISTIAN DEMOCRATIC UNION (through translator): I am quite concerned about what we hear from Washington,

especially over recent days, but I personally don't believe that what we heard were the last words.

I also heard very clearly different voices from the Congress. Many Americans see the view of their own government quite critically, but it is

important for me that we have a common attitude on the European side of the Atlantic on the topics that need to be tackled.

(END VIDEO CLIP)

PLEITGEN: The other big event here in Germany's election was the very strong showing by the far-right alternative for Germany, AfD, which doubled

the percentage of the vote compared to the last German election.

Now, Friedrich Merz has said he does not want to cooperate with the AfD. However, it has been getting a lot of support, for instance from Elon Musk

but also from U.S. Vice President JD Vance as well.

The centrist parties in Germany, though, have said that they want to keep up what they call a virtual firewall around the AfD, meaning they are

refusing to cooperate with the AfD.

I caught up with the leader of that party and asked her how she felt about that.

(BEGIN VIDEO CLIP)

ALICE WEIDEL, CO-LEADER, ALTERNATIVE FOR GERMANY: Firewalls are undemocratic and there should be no firewalls at all.

PLEITGEN: Elon Musk saying congratulations to you. How would you like to work together with the Trump administration?

WEIDEL: To be a very good partner and to have serious and proper conversation with our U.S. American partner. And, you know, for us, very

good international relationships are a precondition for a good international dialogue.

(END VIDEO CLIP)

PLEITGEN: The leader of the AfD also telling me that her party sees eye to eye with the Trump administration on almost all issues, including the war

in Ukraine and relations with Russia. But again, this is a party that the most probably next chancellor of Germany, Friedrich Merz says he does not

want to form a coalition with or cooperate with at all.

Fred Pleitgen, CNN, Berlin.

(END VIDEOTAPE)

QUEST: As we continue our QUEST MEANS BUSINESS tonight, which comes from the Philippines, the Philippines Finance Secretary said he is confident

that the U.S. will stick by its side with its military guarantees. Ralph Recto says he is not too worried about Donald Trump's tariffs, either.

You'll hear that after the break.

Tonight, it is morning, the program comes from the Grand Hyatt in Manila. It is morning here, quarter past five, QUEST MEANS BUSINESS live from the

Philippines.

(COMMERCIAL BREAK)

QUEST: Good morning from Manila.

The view from the, I think we are on the 60th floor of the Grand Hyatt here. it is quite spectacular.

The capital city of the Philippines, as you can see behind me, this city is the epicenter of one of Southeast Asia's most dynamic economies.

It has a young, largely -- well, mostly young population and the country is posed and positioned for fast economic growth. The sort of growth many of

the other countries and the rest of the world will be delighted to receive, but it is all part of a new chapter, which for the Philippines has had an

extremely complex history.

(BEGIN VIDEOTAPE)

QUEST (voice over): When you hear the honk of the jeepneys, you know you're in Manila.

These colorful transport vans are key for locals to get around in one of the most densely populated cities in the world.

More than 13 million people live in Metropolitan Manila, a melting pot marked by Spanish colonialism, U.S. rule and Japanese occupation in the

Second World War.

Now, an independent democracy, birthed from the rubble of World War II.

The decades that followed bred a center of culture, "The Thrilla' in Manila," fashion pageants, and shows from Beatles to Harry Styles. Its port

ushering the flow of billions of dollars' worth of exports of electronics, machine parts, and minerals.

Manila's modern age brings with it very modern issues. Glaring wealth inequities are everywhere. Existential threats from China in the south

China Sea, extreme weather, and climate change are never far away, and corruption hangs over institutions meant to chart the country's course for

the future.

The Philippines scored just a 33 out of 100 on the Corruption Perceptions Index last year.

[16:20:10]

Midterm elections in May will act as a barometer, a kind of referendum on what has become a fractured political scene.

Defined by the current President, Bongbong Marcos, the son of a former dictator, Ferdinand Marcos, and his wife Imelda, and Vice President Sara

Duterte. Her father served as President until 2022. His role was defined by a controversial and violent war on drugs during his administration.

The appointment of his daughter was meant to help breach the political divide.

QUEST (on camera): And throughout all of these trials and tribulations, Manila continues to grow to be the Metropolitan Manila you see around me

now.

And underpinning all of this, the Filipino spirit of determination and resilience. It has created an economic success that is today's Philippines.

(END VIDEOTAPE)

QUEST: Now, the Philippine Finance Secretary says he is not worried about the U.S. turning its back on his country, nor indeed about tariffs coming

from the Trump administration.

I asked Ralph Recto here in Manila, I asked if he thought President Trump's protectionism could ultimately hurt the Philippine economy.

(BEGIN VIDEOTAPE)

RALPH RECTO, PHILIPPINE FINANCE SECRETARY: Our economy is 70 percent domestic-driven, 70 to 75 percent is domestic driven. Unlike, let's say

China and Vietnam, which are more or even our neighbors in Southeast Asia, more export oriented driven.

We earn foreign exchange from OFW remittances. We have a trade deficit when it comes to goods. We have a robust BPO industry and we feel that that will

continue.

In fact, there are more interest in investing in the Philippines in the BPO industry, then you have tourism as well. Then, of course, FDIs. Hopefully

maybe Apple, if our western companies invested in China, will probably move also to the Philippines and we have a new law, Create More for that

purpose.

QUEST: So you are targeting, aren't you?

RECTO: Yes.

QUEST: You're targeting those companies that have to move out of China or choose to move to a more favorable jurisdiction.

RECTO: That's correct. That's correct.

We have -- we are now working on a Free Trade Agreement with the European Union. I suppose, we can impose lower tariffs on U.S. made cars. We are

open to a Free Trade Agreement also with the United States.

QUEST: The --

RECTO: And I bat for a reduction in tariffs on U.S. vehicles.

QUEST: Would you be delighted -- they would be delighted on that.

RECTO: Sure.

QUEST: Let's talk about then about the security aspect of it.

RECTO: Yes.

QUEST: Because you are part of a mutual agreement --

RECTO: That's right.

QUEST: The Mutual Defense Treaty with the United States.

RECTO: Yes.

QUEST: The Secretary of State Marco Rubio has reaffirmed the commitment to that.

RECTO: In the first week of the Trump administration.

QUEST: At the Munich Security Conference.

RECTO: Yes. In the first week, Secretary Rubio called our Foreign Affairs Secretary, met also with our Defense Secretary, together with your new

National Security adviser. I understand that they also met with the new Defense Secretary, and then in Munich recently, there was also a meeting.

Yes.

QUEST: That must be very reassuring because the --

RECTO: Only in the first 30 days of the Trump administration.

QUEST: Right, but the shift in policy in Europe has led many traditional allies to question the reliability of the United States as an ally.

RECTO: Yes.

QUEST: There must have been a moment when you doubted or you had a moment of pause. But are you now reassured?

RECTO: Yes. We are reassured -- reassured based on the pronouncements made by these U.S. officials, including the aid that will continue for our

security.

QUEST: Do you see that there will be trade shifts to avoid trading with the United States? Not for any meanness, just because you're looking for new

neighbors who might be more friendly to trade.

RECTO: Correct. Of course. Of course. I think everyone will be wanting to trade more with all countries in the world, right? So like I said earlier,

the Philippines and I am sure the European Union is interested to invest or trade with Southeast Asia. Southeast Asia being the fastest growing region

in the world today.

(END VIDEOTAPE)

QUEST: Now, part of that fastest growing region arguably comes from the Philippines using its new Sovereign Wealth Fund to strengthen economic ties

with its neighbors. It is called the Maharlika Investment Fund.

Bloomberg reports that it recently signed a deal with a Thai conglomerate, creating an equity fund to invest in Philippine agriculture, e-commerce and

green energy, hoping that the fund grows to $1 billion.

[16:20:11]

The fund was founded only two years ago. It has got the goal of securing the Philippine economy.

Rafael Consing is the Chief Executive of the Maharlika Investment Fund.

Sir, I am grateful that you got up really early. Thank you very much. That's what you're used to having to deal with New York, aren't you, and

the U.S. having to get up early and go to bed late.

RAFAEL CONSING, CHIEF EXECUTIVE, MAHARLIKA INVESTMENT FUND: Indeed.

QUEST: People get used to it in this part of the world.

And look, I am curious, as Sovereign Wealth Funds go, it is small and I wonder what is the purpose beyond picking and choosing winners within the

local economy?

CONSING: Well, primarily, the fund was created as a collaborative vehicle of government to attract foreign direct investments and in our case, we've

got a twin mandate of social impact and profits. And basically, that's what we are doing.

We are aiming basically for investing domestically. We are steering this as a National Development Fund, and once we are able to generate surplus

financial assets, then we will begin crossing the border.

QUEST: There are huge potential assets here to invest in, but I always worry in countries -- I mean, it is number 33 on the Corruption Index List.

You know, I always worry that the money gets funded into the wrong companies because somebody knew somebody, and so, it is the safeguards that

are important.

CONSING: Indeed, indeed. And we've set those safeguards basically by way of risk limits and also, we've identified the sectors and that's basically

what we are executing now.

QUEST: What are your main topics and goals in terms of areas?

CONSING: Well, energy security.

QUEST: Yes.

CONSING: Food security, mining, basically of critical minerals and we are also aiming for broadband connectivity across the nation.

QUEST: The difficulty, of course, is with the new administration in Washington, markets are highly volatile. You are taking stakes in

individual companies. It is almost like, well, not almost, it is the government's PE, I mean, in private equity fund in a sense, isn't it?

CONSING: Very much.

QUEST: How challenging is it going to be for the Philippines with the new Trump administration?

CONSING: I don't think it is going to be an issue because we are really focused domestically. And hence, regardless of what the Trump

administration's policies are going to be.

QUEST: But if you talk about the general economy here for the Philippines.

CONSING: Yes.

QUEST: You're not going to be too badly hit by tariffs, but if China is hit, China slows down, the whole of Southeast Asia then slows down. By

definition, you will be caught up in that draft.

CONSING: Indeed, indeed. And it will most likely be in two areas. One would be our export and imports. So hence that will be directly impacting our GDP

from the perspective of trade deficits. And second would be, you know, China is basically our third trading partner and therefore any weakness in

that economy could impact -- could in fact impact that export demand.

QUEST: The one thing that -- finally, the one thing that comes to me when I've been here, I've been here before, but it is the speed of growth. It is

the incredible vibrancy of the youth and the employment, but it is also the enormous infrastructure challenges that you have here, which are off the

charts.

CONSING: Indeed.

QUEST: How do you hope to help that?

CONSING: Well, part of our mandate basically is to invest in these. So it is really about catalyzing capital formation and that's what we are -- we

have been doing.

We are investing in energy infrastructure, both in the main grid and also when it comes to small power grids in the islands. And second will be

mining, which has got a direct impact basically on poverty alleviation.

QUEST: Well, the lights are still on behind us, sir. Thank you very much for joining us this morning.

CONSING: Pleasure.

QUEST: Getting up early, I am extremely grateful that you did so. It is only -- there is coffee and donuts. So please do go and enjoy. Thank you

very much indeed.

QUEST MEANS BUSINESS tonight from Manila.

The Philippines and China have a long running dispute over a body of water just over my shoulder between their countries. I will talk to Ivan Watson,

who has firsthand experience of that conflict.

(BEGIN VIDEO CLIP)

IVAN WATSON, CNN SENIOR INTERNATIONAL CORRESPONDENT: And as you may see, there is a large Chinese Coast Guard ship directly in front of this

Philippines Coast Guard vessel.

(END VIDEO CLIP)

(COMMERCIAL BREAK)

[16:32:26]

QUEST: The Vatican says Pope Francis is showing a slight improvement as he fights double pneumonia. His condition is described as still critical,

although he is said to be mobile, eating normally and, of course, getting some work done. Well-wishers gathered outside the hospital on the 10th day

of the Pope's treatment there.

And here in the Philippines, Filipino Catholics we spoke to are also offering prayers for his recovery.

(BEGIN VIDEO CLIP)

ALIZA RACELIS, OFFERING PRAYERS TO POPE FRANCIS: With the news this morning that's coming out of the Vatican where we're told that apparently, he went

through a respiratory crisis. Then, of course, I and my Catholic friends decided to pray even more intensely. We can only pray and we pray a lot for

his recovery. Of course, we very much want for him to be able to recover but we also leave him in the hands of God.

CARMENCITA HAO, OFFER PRAYERS FOR POPE FRANCIS: Everyone will be sad. We will be sad. That is why I'm going to pray over him so that he'll live and

he'll become stronger from his condition.

(END VIDEO CLIP)

QUEST: In Rome is Christopher lamb. They're very -- the Vatican are very generous with their details but it's still difficult to decipher, isn't it?

Exactly the current situation. It still sounds extremely serious.

CHRISTOPHER LAMB, CNN VATICAN CORRESPONDENT: Yes, Richard. It is serious. The Pope's in a critical condition still and it's very complex. I mean, it

is interesting that we are getting quite a high level of detail from the Vatican terms of the medical information coming out. And I understand my

sources have told me that is on the Pope's orders, he wants people to know exactly how he is but it is complex.

We were told tonight there has been some improvement. He had concern -- there was concern about kidney failure, but that now has gone away. He's

still receiving high flow oxygen but at a slightly lower level. Obviously, it's very concerning. He's 88 years old. He has pneumonia in both of his

lungs and has a history of respiratory infections. Tonight, behind me in St. Peter's Square, people gathered to pray for the Pope.

There was a rosary prayer led by Cardinal Pietro Parolin, a top Vatican official with other cardinals, gathering for that. It was a very poignant

service and had echoes of a similar service that was held for Pope John Paul II when he was very ill.

[16:35:01]

But it's a complex picture and it's one we're following very closely. How many do you have further updates from the Vatican tomorrow Tuesday.

QUEST: I'm grateful. Thank you. Christopher Lamb, it is already Tuesday here in the Philippines. Thank you, sir.

Now the Trump administration started an argument over calling the Gulf of Mexico the Gulf of America. The Philippines is no such stranger to maritime

naming disputes. But here, the beef with China is far deeper. China claims jurisdiction over most of the area between the two countries. It's the body

of water known generally as the South China Sea. The Philippines exclusive economic zone overlaps China's claims.

Primarily around an archipelago to the west called the Spratly Islands. And there they call the area of water the West Philippine Sea. People here tell

me the name is important to them.

(BEGIN VIDEO CLIP)

BRYAN BENITEZ MCCLELLAND, FOUNDER, BAMBIKE: And you can see the cranes --

(CROSSTALK)

QUEST: -- that's to the bay.

MCCLELLAND: That's Manila Bay. Yes.

QUEST: And then out into the --

MCCLELLAND: West Philippine Sea. Some people call it something else, but we like to identify it --

(CROSSTALK)

QUEST: You call it the West Philippine Sea.

MCCLELLAND: Yes. I feel, you know, sovereignty is sustainability for us and it's under threat constantly by our neighbors to the north.

(END VIDEO CLIP)

QUEST: Now the issue is much greater than just a naming right. The Philippine finance secretary says China is disrespecting the nation's

exclusive economic zone. And the secretary told me, diplomacy is the better approach.

(BEGIN VIDEO CLIP)

RECTO: In the past, we had very good relations with China. The only problem recently, in the last few decades would be during non-respect of our

exclusive economic zone. So that's where the problem relies on the security -- on the security aspect. We've been the longest treaty ally of the United

States. We, I think we're the first in Southeast Asia.

There are only few mutual defense treaties with the United States and the Philippines is one of them.

QUEST: But with that treaty, and, for example, with the islands and the exclusion zone, at some point, the worry is China is going to put everybody

to the test.

RECTO: Well, we're not the aggressors here. That's for sure. The policy of the president is to be friends to everyone and enemies to none.

Unfortunately, the Chinese government is disrespecting our exclusive economic zone and that's where the problem lies. And then there is no

conduct yet agreement in the West Philippine Sea code of conduct, right? So, if I were the Chinese government, then maybe they should treat the

Philippines exclusive economic zone. I mean, there's something we can all discuss and benefit from later on.

(END VIDEO CLIP)

QUEST: Now, our correspondent Ivan Watson, has firsthand experience with the skirmishes resulting from that dispute. He spent two days with the

Philippine Coast Guard in those contested waters last year. The first time a foreign journalist have been allowed to embed with the fleet in decades.

(BEGIN VIDEO CLIP)

IVAN WATSON, CNN SENIOR INTERNATIONAL CORRESPONDENT: As you may see, there is a large Chinese Coast Guard ship directly in front of this Philippines

Coast Guard vessel.

WATSON (voice-over): Growing concerns that one of these confrontations in the South China Sea could spiral out of control.

(END VIDEO CLIP)

QUEST: Ivan Watson is in Hong Kong. Ivan, we've had a helicopter incident in recent days, which really goes to prove just how serious this is. And --

I mean, the two are determined to keep going at this, aren't they?

WATSON: They sure are. The helicopter incident, that's where the Philippines says that a Chinese military helicopter came within three

meters, around 10 feet, of a Philippine government plane, a Cessna that was flying over the South China Sea. And that's just indicative of these types

of confrontations that seem to be taking place monthly, if not more often, and where you have ships and aircraft coming so dangerously close.

The embark that I went aboard last year on the Philippine Coast Guard vessel in that confrontation, I saw Chinese coast guard ships firing water

cannons at Philippine vessels, injuring a few people, and it was really tense. It was these huge ships coming in very close contact with each

other.

[16:40:04]

So, I characterize this as a David versus Goliath confrontation, where under the Marcos administration, the Philippines has been asserting its

territorial claims to these reefs and atolls that are much closer to the Philippines than they are to mainland China. And the Chinese have used

overwhelming kind of sea power to try to muscle the Philippines out of these areas. And this has not been resolved.

And it is bringing in other navies. You had earlier this month, an Australian reconnaissance military plane that the Australians accused

Chinese war planes of popping off flares around that Australian plane that was flying through the South China Sea. In that case, Beijing said that it

had expelled a foreign aircraft from its area. So that gives you a sense of kind of the tensions and the rhetoric that have been used in this ongoing

territorial dispute over the South China Sea.

QUEST: In a sentence or two, does the situation ease or get worse, with the new administration in Washington?

WATSON: That is a really good question, and something that I'm watching closely. We've seen that the long-standing ties between Washington and

Manila, they expanded under the Biden administration. The Philippine government gave the U.S. military access to more bases in the Philippines.

Beijing did not like that, And so, it will be very interesting to see where the Trump administration will lie, what position they will take in this

ongoing dispute.

Regardless of what they do, we've seen signs between the Philippines, for example, and the Japanese government. Just this week, the defense chiefs of

both governments talking about deepening their military relationships and cooperation. So, there may be some other regional hedging going on, as it's

not clear where the Trump administration, what position it will take, how much it will continue to support the Philippines in these ongoing

confrontations with China over these disputed areas.

QUEST: Ivan Watson, I'm grateful for you in Hong Kong. Getting up early. Thank you, sir. I appreciate it. Ivan Watson, joining me from Hong Kong.

By the way, the cameraman on that shoot that Ivan was with, Kevin broad, he is the one behind the camera that I'm looking at right at the moment.

Grateful for him too. And indeed, the whole crew.

And that's QUEST MEANS BUSINESS for this -- yes, it's Tuesday here. Monday for you. I'm Richard Quest in Manila. Whatever you're up to in the hours

ahead, I hope it's profitable. Coming up next. World of Wonder.

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