Taiwan is suspending hiring Filipino workers and recalling its envoy amid a row over the killing of fisherman Hung Shih-cheng.
Taiwan said the move showed President Ma Ying-jeou’s “strong dissatisfaction” with Manila’s handling of the case.
Hung Shih-cheng was shot by the Philippine coast guard last week in waters both sides claim.
Early on Wednesday, the Philippine envoy in Taipei apologized over the incident – after a three-day deadline set by Taiwan for an apology expired.
Antonio Basilio, head of the Philippine Representative Office in Taiwan, said Manila had agreed to compensate the fisherman’s family and conduct a joint investigation into the incident.
“The Filipino people and the government understand the hurt and grief that the Taiwanese people have felt as result of the death of one of their own fellow citizens,” Antonio Basilio said.
But the Taiwanese leader felt the apology did not come from a high enough authority and lacked “sincerity”, his spokeswoman said.
President Ma Ying-jeou had also asked Antonio Basilio to return to the Philippines to “help properly handle” the case, she added.
Later on Wednesday, Taiwan’s PM Jiang Yi-huah told reporters that he was dissatisfied with the apology because it came from the representative office, not the Philippine government, and because the statement had been changed several times.
“Philippine civil servants killed a person and damaged the boat, the Philippine government cannot avoid responsibility,” he said.
Taiwan has demanded a “formal apology” from Manila, compensation for the victim’s family, investigation and punishment for those responsible for the shooting, and the commencement of bilateral fishing talks.
It says it will consider adopting a second wave of sanctions against the Philippines if it does not receive a satisfactory reply by 18:00 local time on Wednesday.
These include issuing a travel warning to discourage Taiwanese people from visiting the Philippines, stopping all high-level exchanges and carrying out a military exercise in the disputed waters.
The Philippines’ special envoy Amadeo Perez is expected to arrive in Taipei on Wednesday to meet the family of the fishermen and express “deep regret and apology from the people of the Philippines”, Antonio Basilio said.
There are about 88,000 Filipino migrant workers in Taiwan, most of whom work in the manufacturing sector.
Taiwan’s labor office receives around 3,000 work applications from the Philippines each month.
Hung Shih-cheng, the 65-year-old fisherman, was shot dead on May 9 when the coastguard vessel opened fire on his boat.
He was in waters south-east of Taiwan and north of the Philippines, an area considered by both countries to be their 200 nautical mile-from-shore exclusive economic zone.
The Philippine coast guard said its crew believed he was trying to ram their vessel – claims the Taiwanese fishermen have denied.
Maritime tensions in the South China Sea have been heightened in recent months. China, Taiwan, the Philippines, Malaysia, Vietnam and Brunei have competing territorial claims in the region.
These disputes have existed for years but in recent months China has been taking a more assertive stance – prompting a robust response from some nations.