By Martin Petty and Manuel Mogato

MANILA (Reuters) – The Philippines is certain of “very strong” links between Islamic State and home-grown militants and is concerned about regional repercussions from tension between China and the new U.S. administration, Manila’s defense minister said on Thursday.

Intelligence from various sources had shown Muslim rebels in the southern Philippines had been communicating with Islamic State, and funds were being transferred via mechanisms commonly used by Filipino workers in the Middle East, Defense Secretary Delfin Lorenzana told Reuters.

“Before, what we suspected was the ISIS group would come here but now we are certain that the connections are very strong between home-grown terrorists here and ISIS in the Middle East,” he said in an interview, referring to Islamic State.

“Also there’s quite an amount of money being sent here from the Middle East.”

He said communications via social media, telephone and text messages had been intercepted and funds were being transferred that were difficult to detect due to the large numbers of Filipinos who regularly remit income from places like Saudi Arabia and the smaller Gulf states.

He said there was no indication governments of those countries were involved.

The Philippines did not consider ties with longtime ally the United States to be strained, he said, despite President Rodrigo Duterte’s fierce rebukes of Washington.

Some statements about China by advisers to U.S. President Donald Trump were “very troubling”, he said, adding that an Enhanced Defense Cooperation Agreement (EDCA) with the United States would make U.S. troops based temporarily in the Philippines “magnets for retaliation” if things turned hostile.

CAUGHT IN THE MIDDLE

“We are concerned if war breaks out and it is near us we will be involved whether we like it or not,” he said, adding that if a conflict looked likely, the Philippines would consider scrapping the EDCA, to avoid a repeat of World War Two, when his country was badly affected.

There were no signs of any new Chinese reclamation in the Spratly Islands in the South China Sea, he said, and he had been given assurances repeatedly by China’s ambassador that it would not do any dredging in the disputed Scarborough Shoal.

Despite warming ties with Beijing, the Philippines still “would like to know more the thinking of China” regarding its end-game in building artificial islands equipped with military hardware, he said.

The Philippines was in no rush to pressure China to abide by last year’s ruling by the Permanent Court of Arbitration, which largely rejected Beijing’s claims in the South China Sea.

After the Philippines won the award, the United States had wanted it to push China to comply, Lorenzana said, but it had offered no guarantees of support.

“If we assert our right, our award, it was never going to do any good for us,” he said. “Would the Americans have backed us?”

He said internal security threats were growing and his ministry would next year request a doubling of its budget, or more, to address them.

The army’s involvement in Duterte’s war on drugs, following his decision to suspend police from the campaign, would be limited to assisting the Philippine Drug Enforcement Agency (PDEA) on a case-by-case basis in hostile situations.

“They go there if they are asked by PDEA and they need firepower, then we will assist, that’s our job, that’s all,” he said.

(Editing by Robert Birsel)