18mar08 – China loan terms must be disclosed
POSTSCRIPT / March 8, 2018 / Thursday
China loan terms must be disclosed
“WE the sovereign Filipino people” solemnly vowing in the preamble of our Constitution to “build a just and humane society, and establish a Government that shall embody our ideals and aspirations, promote the common good, conserve and develop our patrimony” will now allow President Rodrigo Duterte to use that same patrimony as collateral for multibillion-dollar loans from China to finance his infrastructure-building frenzy that many experts have warned could end in a debt trap as has happened in the case of other nations mesmerized by easy loans dangled by their “friend” China?
That 92-word paragraph is the longest lead I have ever written in my 50 years of journalism, violating my self-imposed rule that a paragraph must not exceed 40 words, or three lines of 12-point text on my computer screen. Sorry for that, but…
With so many horror stories of nation-borrowers of China loans falling into a “debt trap” – among them Sri Lanka, Pakistan and Maldives — it is time that President Duterte told the people the considerations and terms of the massive loans he is securing.
Unable to pay difficult debts to China, Sri Lanka recently turned over its strategically located Hambantota port to the Asian Shylock eyeing long-term high-value collateral. Hambantota straddles Indian Ocean trade routes linking Europe, Africa, and the Middle East to Asia.
Analysts have noted China’s use of economic tools to advance its geostrategic interests. Using its $1-trillion “One belt, One road” initiative, it picks projects in strategically located developing countries, often by giving huge loans to their governments.
Public borrowing is a normal resort of governments — big or small, rich or poor — aiming to accelerate development and other legitimate pursuits that redound to the common good. Borrowing, however, is not an exclusively presidential function in our case.
Section 20 of Article VII provides: “The President may contract or guarantee foreign loans on behalf of the Republic of the Philippines with the prior concurrence of the Monetary Board, and subject to such limitations as may be provided by law. The Monetary Board shall, within 30 days from the end of every quarter of the calendar year, submit to the Congress a complete report of its decision on applications for loans to be contracted or guaranteed by the Government or government-owned and controlled corporations which would have the effect of increasing the foreign debt, and containing other matters as may be provided by law.”
Even with this provision for periodic review and oversight, it appears that the Congress is either uninformed, uninterested or unconcerned despite widespread disturbing reports on the debt diplomacy of China and how the President appears to be falling for it.
• Natural resources used as collateral
OVER the weekend, Global Times quoted Zhuang Guotu, head of Xiamen University’s Southeast Asian Studies Center, as saying that China’s loans to the Philippines are “usually accompanied by repayment agreements, which use certain natural resources as collateral.”
The English-language mouthpiece of Beijing quoted Zhuang as saying: “This plan is essential for the Philippines to develop its economy and support its fast-growing population since the country is weak in terms of infrastructure and energy.
“Paying back its debts is not a problem for the Philippines. The interest rate on the loans China has provided to the Southeast Asian country is very low. And the Philippines has strong debt-paying ability.
“Besides, the loans are usually accompanied by repayment agreements, which use certain natural resources as collateral.”
Asked why Manila turned to Beijing, Zhuang said: “China’s infrastructure capability leads the world. As a result, many countries and regions are willing to cooperate with China. Besides, China is willing to provide loans, labor and expertise to help the Philippines.”
This tends to confirm reports that a loan condition is that Chinese technicians and laborers be brought in to work on projects financed by China. What happens to the Palace boast that thousands of jobs will be created for local workers?
Filipinos first learn of these details from the Chinese, not from Malacañang which has kept a tight lid on the terms of the Chinese loans eyed for Duterte’s $168-billion (P8.4 trillion) “Build! Build! Build!” program that includes roads, bridges, airports and ports.
We get a hint of what is going on sometimes by accident — as when Duterte disclosed in a recent speech that the Philippines and China would soon partner in a joint exploration of mineral resources in the West Philippine Sea.
(Acting Chief Justice Antonio Carpio tells us to stop describing as “disputed” the West Philippine Sea features that China has built up and militarized. He said Philippine ownership is backed by the United Nations Convention on the Law of the Sea, validated by the 2016 award of the Permanent Court of Arbitration at The Hague.)
The President also disclosed his startling understanding that equated joint exploration to co-ownership. He has not confirmed officially, however, if he has agreed to hock or surrender (in case of a loan default) certain strategic or mineral-rich portions of the national patrimony.
Anyway, paying onerous loans will not be a problem of Duterte, 72, but of administrations after him and of future generations of Filipinos.
While at it, the President may also want to discuss his environmental- and social-impact assessment (if any) of the projects covered, and address speculations on who gets the usual fat referral fees.
Whatever it is that Duterte and his Chinese friends are cooking, there should be an audible reaction from taxpayers, especially congressional leaders, academicians and authorities on the law and politics of sovereign loans and presidential power.
(First published in the Philippine STAR of March 8, 2018)
* * *