Philippines not falling into debt trap, Chinese envoy says

MANILA, Philippines — The Philippines is in no danger of falling into a debt trap with China’s funding of the Duterte administration’s flagship infrastructure projects under the “Build, Build, Build” program, an official of the Chinese embassy in Manila said yesterday.

Charges d’Affaires Tan Qingsheng said he “cannot understand the logic” behind media reports that the Philippines is facing a debt trap with China-funded projects that account for about a third of the government’s 75 flagship infrastructure projects under the “Build, Build, Build” program.

“Those projects (were) proposed by the Philippine side and are economically viable and positive for the Philippine economy,” Tan said during the China-Philippines Business Forum.

“I can assure you that there will be no danger of the so-called debt trap,” he said.

Experts warned of risks of falling into the Chinese debt trap amid hyped opportunities in the Belt and Road Initiative, which the Philippines believes it will benefit from and help the Duterte presidency’s envisioned “Golden Age of Infrastructure.”

Tan noted that China and the Philippines are both developing countries and promoting sustainable economic growth and social development is the priority of President Duterte.

During the two-day state visit of Chinese President Xi Jinping in Manila last week, he and Duterte witnessed the signing of 29 cooperation documents, including the Memorandum of Understanding (MOU) on Cooperation on Oil and Gas Development. The MOU aims to promote oil and gas development cooperation.

The two sides agreed to set up an inter-governmental joint steering commission and inter-enterprise working group and decide relevant cooperation arrangement at an early date.

“The MOU is a big step in the right direction,” Tan said.

The diplomat stressed that “contentious issues, such as the South China Sea, are not the sum total of China-Philippines bilateral relations.”

The United Nations-backed arbitral tribunal based in The Hague, Netherlands ruled that China’s nine-dash line claim does not have a legal basis and that Beijing violated its commitment under the 1982 United Nations Convention on the Law of the Sea for building artificial islands in the Philippines’ exclusive economic zone.

China, however, opposed and refused to honor the tribunal ruling. Beijing not only rejected the arbitral ruling, but has steadily moved to consolidate its presence and power projection in the South China Sea.

Tan said the most important document signed during the visit is the MOU on Cooperation on the Belt and Road Initiative. With the MOU, he said China will be able to inject fresh vitality to the bilateral relations and lift the economic and trade cooperation to a new level.

Duterte accepted the invitation extended by Xi to attend the second Belt and Road Forum for International Cooperation to be held in Beijing in April 2019, according to Tan.

The Philippines and China signed agreements on the implementation of Safe Philippines Project Phase I, New Centennial Water Source-Kaliwa Dam and the Philippine National Railway South Long Haul project.

China also committed to facilitating the construction of an Industrial Park in New Clark City, Davao River Bridge, Panay-Guimaras-Negros Island Bridge and Davao City Expressway.

Tan said China would continue to encourage China Telecom to participate in the network construction and operation as the third communication provider in the Philippines.

China, he said, is ready to provide its financial and technical support to the development of the Philippines.

“However, both countries need to provide an enabling environment for their enterprises to invest in each other’s country,” he said, noting that China welcomes the Philippines and other countries on board the express train of its development.

‘Totally unfounded’

The Department of Finance (DOF) yesterday concurred with Tan’s statements.

In a speech at the Clark leg of the Sulong Pilipinas 2018-Philippine Development Forum, Finance Secretary Carlos Dominguez III assured stakeholders that the government is borrowing prudently from its foreign partners and denied claims that the country may become buried in debt from China and Japan.

“Some uninformed critics claim that we are falling into a ‘debt trap’ by tapping Chinese and Japanese financing for our strategic infrastructure projects. This is totally unfounded,” Dominguez said.

For one, Dominguez said the government makes sure that it acquires financing assistance from other countries at the lowest possible interest rates with the longest possible payment terms.

The finance chief also said loans from China and Japan account for only a small part of the government’s total borrowings.

“If we include project financing coming this year, our estimated project debt to China will only constitute 0.65 percent of our total debt from the current 0.11 percent. Our project debt to Japan will increase from the current 3.17 percent to 8.9 percent of the total debt at the end of this year,” he said.

Dominguez added that by 2022, when most of the financing for the “Build, Build, Build” program has been accessed, the share of China financing in the government’s total debt would reach only 4.5 percent, while Japan’s share is projected to rise to 9.5 percent.

“So, there is no danger of us being drowned by Chinese debt,” Dominguez said.

The secretary added that the Duterte administration ensures that projects go through a rigorous process not in any way influenced by other parties.

“In the past administration, there was a big scandal involving Chinese financing. That administration allowed the Chinese state-owned enterprises to dictate what projects are going to be done here,” Dominguez said.– With Mary Grace Padin