Riding the tiger

There is no such thing as foreign aid without conditionality. The Chinese give only loans rather than outright grants that need not be repaid.

While the interest rates are concessional, we still have to pay back Chinese loans, with interest. So it’s no free lunch. And contrary to the hard sell of the Duterte administration, all Chinese loans have one conditionality: projects to be funded must be awarded to Chinese contractors. Considering the continuing economic slowdown in China, countries that accept Chinese loans are doing those companies a favor. 

The same conditionality is attached to official development assistance (ODA) from several other countries, among them Japan. But Japanese firms have a far better track record in terms of quality compared to the Chinese.

Just consider what happened to the Metro Rail Transit 3 when the Department of Transportation and Communications replaced Japan’s Sumitomo with an unheard of, newly incorporated Philippine group, and bought trains from China’s Dalian. Think of what happened to the Northrail project that was awarded to China National Machinery and Equipment Corp. Group. Think of the Philippine experience with China’s ZTE.

President Duterte likes to say he does not believe in awarding government contracts to the lowest bidder, since bids can be rigged and quality can be sacrificed.

He should apply this when considering the award of contracts funded by Chinese ODA. Apart from quality issues, Chinese firms have been embroiled in corruption scandals in developing countries in Africa and elsewhere. These are mostly countries where oppressive and corrupt regimes love the absence of conditionalities attached to Chinese aid, unlike those set by donors following international best practices set by the Organization for Economic Cooperation and Development.

As we all know, there is one other conditionality attached to the millions of dollars in aid now being dangled to us by Beijing: we should accept Chinese occupation of the entire South China Sea, including reefs and isles over which we have been awarded sovereign rights by the United Nations-backed Permanent Arbitration Court. This unspoken conditionality, unique to Chinese aid, calls for Manila to ignore the UN court ruling.

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Already, there is a growing murmur of unease in the Armed Forces over the prospect of getting military equipment made in China – not just because of our maritime dispute but also over quality concerns.

Soldiers are the same everywhere; they want top-of-the-line equipment for laying their lives on the line. Our soldiers want Israeli-made Uzis and US McMillan TAC-338 sniper rifles. Our cops want Austrian Glock handguns. You don’t give a China-made Cherry to someone who’s hoping for a German-made Audi.

President Duterte, who likes to show his concern for the military and police, will have to deal with such sentiments in his headlong pivot to China.

Even in other products, China has yet to recover from scandals in recent years, from toxic toothpaste and killer pet food, melamine in milk and candy and cardboard in dim sum.

Eventually the China brand may be equated with quality, as Japanese, Taiwanese and Korean brands did, but at this point the evolution is a work in progress. In the meantime, it’s prudent to remember, caveat emptor.

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The bilateral talks starting today on the Code of Conduct on the South China Sea would test whether President Duterte is taking the right tack in bowing and scraping before Beijing.

The code will bind the parties mainly to the status quo in disputed waters. Thanks to Beijing’s divide and rule strategy and its Southeast Asian vassals now led by the Philippines under Du30, China has managed to stall the approval of the code long enough to build artificial islands all over the South China Sea, with facilities for military purposes.

This is the status quo that will be affirmed by the Code of Conduct. It will be a regional agreement that Beijing naturally will accept rather than the UN court’s ruling, which invalidated China’s entire nine-dash-line maritime claim and awarded the Philippines sovereign rights over specific areas.

Even when we win spectacularly, we end up as losers.

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The reward for the willing loser is a promise of Chinese aid large enough to allow the country to turn its back on ODA from the European Union, whose parliament keeps harping on Duterte’s human rights record. That’s 250 million euros (about P14 billion) in lost grants.

Rejecting aid from the European Union, the largest destination for Philippine exports, seems like a preemptive move amid the country’s likely loss this mid-year of an expanded trade privilege extended by the EU to developing countries. The loss will be due to human rights concerns.

Undoubtedly, we will benefit from increased trade and closer economic cooperation with China, which has been a friend of the Philippines far longer than any European state.

Chinese development aid is also welcome, but this should not mean shutting out other ODA sources and making unnecessary enemies. 

In this global village, we have to be friends with everyone and we can use all the help we can get. But we have to enter into any partnership with our eyes wide open, especially in our culture where corruption runs deep and the regulatory framework is weak.

Even the Chinese should not want their aid-funded projects in the Philippines stuck like ZTE and Northrail in another corruption scandal. This administration won’t be here forever, and the next one could conduct endless probes on contracts and projects under Duterte’s watch.

Even with his still impressive popularity, surveys indicate that President Duterte cannot make Pinoys go along with him in riding the Chinese tiger. Duterte connects well with the Filipino people, but misses the public pulse when it comes to international affairs.

Let’s hope there are people in the administration who can dare show their boss a world map and point out where Benham Rise is located, how far Turkey and Mongolia are from Southeast Asia, and how much of the South China Sea Beijing is claiming as its own just because it says so.

An independent foreign policy doesn’t mean declaring independence from a rules-based world order.

It doesn’t mean independence from international rules… except those of China.