MANILA -- Diplomats from the Philippines and the U.S. are weighing options for a new military agreement after their leaders agreed to scrap an accord deemed crucial for their countries' defense alliance, Manila's ambassador to Washington said on Friday.

Philippine President Rodrigo Duterte's government on Feb. 11 informed the U.S. that it was abrogating their Visiting Forces Agreement, which facilitates routine military exercises with U.S. troops in the Philippines. U.S. President Donald Trump said Duterte's decision was "fine" and it will allow Washington to "save a lot of money."

However, the two countries' defense establishments have opposed the termination, which takes effect in August, 180 days after notification. One concern is that the U.S. military's absence from the Philippines could embolden China, which asserts expansive ownership claims over the South China Sea.

"We are now in the process of trying to find ways and means to be able to see how we can either come up with something similar" to the agreement, Philippine Ambassador to the U.S. Jose Manuel Romualdez told a forum in Makati City.

Romualdez said he and U.S. Ambassador Sung Kim have started discussions to see whether the 1998 agreement can be "polished" or "improved." They are looking at the Philippines' current security agreements with Japan and Australia as templates for a new pact, he added.

"At the moment, I'm not at liberty to say exactly what or where we are," Romualdez said. "But this is being studied and a recommendation will be made to the president."

People burn a U.S. flag during a protest against the Enhanced Defense Cooperation Agreement outside the U.S. Embassy in Manila in January 2016. © Reuters

Philippine officials and defense analysts have said the VFA's termination could significantly weaken Manila and Washington's 1951 Mutual Defense Treaty, the bedrock agreement that underpins the two nation's security alliance.

Duterte since coming to power in 2016 has advocated "independent policy," forging closer relations with China and Russia while blasting U.S. and Western allies for their criticisms over his brutal drug war, which has killed thousands of suspects.

Duterte's decision to scrap the VFA in January came after the U.S. canceled the visa of his close political ally Senator Rolando Dela Rosa, a former police chief who implemented the drug war. Duterte sees the visa cancellation as an affront to Philippine sovereignty, Romualdez said.

Military officials last week said they are also looking for ways to keep engagements with U.S. counterparts after the VFA is officially terminated. They said major military drills with the U.S. scheduled for April "have not been canceled."

"The door is not totally shut as far as I am concerned," Romualdez said. "But again, the bottom line always falls on sovereignty."

Romualdez said the Philippines still has a "special relationship" with the U.S., and the termination of the VFA is not the "end all and be all" of Manila and Washington's ties.

"I think anyone, any country around the world will agree that the U.S. is a major country that no one can ignore, including China," he said.