Philippines refuses to budge on South China Sea row MANILA (Reuters) - Philippine President Benigno Aquino refused to budge on Monday on a territorial dispute with China, asking Beijing to respect Manila's rights in the South China Sea and announcing plans to upgrade military capabilities. Addressing a joint session of the Philippine Congress for the third time since his election in 2010, Aquino asked the Filipino people to unite behind his government's efforts to resolve the dispute peacefully. "If someone enters your yard and told you he owns it, will you allow that?," Aquino said. It's not right to give away what is rightfully ours. And so I ask for solidarity from our people regarding this issue. Let us speak with one voice. The South China Sea has become Asia's biggest potential military flashpoint as Beijing's sovereignty claim over the huge area has set it against Vietnam and the Philippines, as the three countries race to tap possibly huge oil reserves believed to lie under the seabed. Malaysia, Taiwan and Brunei also have claims on parts of the sea. The row was a central issue at an acrimonious Southeast Asian regional summit last week that ended with members failing to agree on a concluding statement for the first time in 45 years. Aquino said the Philippines had shown restraint by pulling out its navy ship and replacing it with a civilian vessel when Chinese fishing boats entered Scarborough Shoal, which lies in the South China Sea about 124 nautical miles west of the main Philippine island of Luzon. The Philippines insists it has sole jurisdiction over the uninhabited shoal because it lies within the country's 200 mile exclusive economic zone. "It's not too much to ask the other side to respect our rights just as we respected their rights," Aquino said, adding that as the nation's leader, "I must uphold the law of the land." Aquino also announced plans under a 75 billion-peso ($1.8 billion) military modernization fund to acquire a refurbished frigate, C-130 planes, utility and combat helicopters, communication equipment, rifles and mortars. This is not about picking a fight. This is not about bullying. This is about attaining peace. This is about our capability to defend ourselves," he said. Philippine defense and military officials say they are worried by China's "creeping imposition" of its claims in disputed areas in the South China Sea, a violation of an informal code of conduct adopted in Cambodia in 2002. The two countries have faced off on a number of occasions in the disputed waters, and earlier in the year they were involved in a month-long standoff at Scarborough Shoal. Last year, the Philippines scrambled aircraft and ships to the Reed Bank area after Chinese navy ships threatened to ram a Philippine survey vessel. It says freedom of navigation is its main concern about a waterway that carries $5 trillion in trade -- half the world's shipping tonnage. Reporting By Manuel Mogato; Editing by Raju Gopalakrishnan