MANILA, Philippines — The Department of Finance on Tuesday chided anew critics of the Duterte administration’s dealings with Chinese loans, saying some sectors raising “the false spectre” that the Philippines is exposed to China "debt trap" diplomacy have no faith in their own country.
President Rodrigo Duterte plans to spend trillions of pesos to bridge the Philippines’ infrastructure gap, and to do so he sought Beijing and other countries' help for funding to reduce strain on his government’s budget.
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But critics have warned that the Philippines could be the next victim of Chinese “debt trap” — where Beijing seizes strategic assets of states that fell into financial distress after borrowing heavily from the Asian power.
In a recent media interview, Finance Secretary Carlos Dominguez III said fears of the Philippines defaulting on any of its loans are unfounded, arguing that the government has never failed to pay its debts “even during the worst of times.”
Dominguez then recalled that the country paid its $2.2-billion obligations on the mothballed Bataan Nuclear Power Plant constructed during former President Ferdinand Marcos' regime despite the project turning out to be a “white elephant.”
The finance chief also dismissed rising concerns that China would start seizing the Philippines’ public asset in case of a loan default, saying there is no “collateral” involved in the funding deals that the government has entered into with any country.
“The Philippines has never, never defaulted on its loans. The Philippines has not done it even in the worst time and the worst time was right after Marcos,” Dominguez said.
“The Philippines has no history of defaulting on its loans. So why are people saying now that we will default? They have no faith in the Philippines? I don’t know why people are saying ‘There might be a default.’ That means to say those people have no faith in their own country,” he added.
Philippine officials have been calming growing fears of a China “debt trap” after critics accused Duterte of agreeing to unfavorable loan conditions for Beijing-funded infrastructure projects.
Finance Undersecretary Bayani Agabin told a press conference in Malacañang last week that “we’ve never had a history that we’ve reneged on our obligations,” adding that Philippine laws mandate the automatic appropriations for debt payments.
Last year, London-based think tank Capital Economics said given the "corruption problems" associated with Chinese infrastructure projects and the Philippines’ current account gap "already approaching unsustainable levels,” Chinese investment “could make problems worse” for the Southeast Asian nation.
READ: ‘Philippines would be better off shunning Chinese investment altogether’
According to Dominguez, the Philippine government’s project debt exposure as of 2018 was only 0.66 percent to China and 9 percent to Japan in relation to the total debt.
By 2022, the country’s project debt to China will account for 4.5 percent, while that of Japan’s will be twice as large at 9.5 percent of the total debt, the finance chief added. — Ian Nicolas Cigaral