Two reasons: scale and balance.
In terms of scale, one transport figurine represents dozens of individual ships, some of which could be unloading troops into Luzon while others unload troops in Mindanao and others unload into Manila. One full game turn represents somewhere around 3 to 6 months of history, so it’s possible that your ground forces first occupy Luzon, and then, a few weeks later, march north through the jungle, and then, finally, toward the end of the turn, subdue a guerrilla resistance near Bataan.
If you split the Philippines into three territories without giving Japan more transports, then you’re putting Japan at a huge disadvantage against the Allies. Japan already has trouble recreating even its historical expansion, and even its historical rate of expansion wasn’t nearly enough to give it a chance of defeating the Allies in the Pacific.
If you split the Philippines into three territories and give Japan two extra transports, now those transports can go plunder the rest of the world – instead of spending three transports to take the Philippines, I’d much rather spend one to take Singapore, one to take Borneo, and one to take Java. Next turn, those transports can go to Indochina, Celebes, and Sumatra. Instead of adding detail to the Philippines, you’ve just made the Philippines irrelevant in the opening.
If you split the Philippines into three territories, give Japan two extra transports, and also split all other territories into smaller pieces (maybe Borneo is split into British Borneo and Dutch Borneo; maybe Indochina is split into Tonkin, Annam, and Cambodia), now you’ve added an enormous amount of fiddly complexity to the game that will slow things down. It’s already hard to finish most versions of Axis & Allies in a single day; if you add too many new territories, it will become impossible. But if you’re planning on playing a multi-day game anyway, there are other platforms (World in Flames; Europe Engulfed, etc.) that will give you an even more immersive, skill-based, and realistic experience.
I think there’s room for a 3rd Edition of A&A: Pacific that would focus even more narrowly on the fight for the Pacific islands (leaving out some of the Chinese and Siberian interior), and in that game, I would like to see the Philippines broken up into three different territories. But if you’re playing a beer-and-pretzels game about a global conflict, the Philippines just weren’t important enough to justify three different territories.
