POSTSCRIPT / March 26, 2019 / Tuesday


Opinion Columnist

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Patrimonial assets hocked to China!

PRESIDENT Duterte is bound by duty to disclose to the people to what extent and under what conditions he has hocked some of their patrimonial assets to China to get loans for his ambitious Build! Build! Build! program.

With the revelation of some details of huge debts he has contracted, including his waiving of sovereign immunity on the enforcement of any arbitral award, the President cannot invoke the non-disclosure clause in the loan agreements.

An example of a disturbing Chinese deal was given this week by Supreme Court senior associate justice Antonio Carpio. He cited the Chico River project in the Cagayan Valley estimated to cost P4.37 billion, of which about 85 percent (or P3.7 billion) will be funded by a loan from China.

In case of default, Carpio said, China could take, for example, gas-rich Reed (Recto) Bank that the Permanent Court of Arbitration in The Hague ruled in 2016 to be within the Philippine Exclusive Economic Zone. China has shown interest in it, going to the extent of harassing oil exploration in the area.

China may pick other valuable patrimonial assets – except those for diplomatic missions, military facilities, and property dedicated to a public or governmental use – to satisfy itself as lender extracting overdue payment.

In the Chico River contract signed on April 10, 2018, the Philippines agreed that in a dispute arising from a default, a three-member tribunal in Beijing (whose chair and one other member are Chinese) will resolve it with finality. A sure case, Carpio observed, of what Filipinos call “lutong Macau” (a raw deal)!

The Chico River deal could be a template or pattern of other China deals that Duterte has approved. Other loan contracts could contain similarly disturbing terms, which stoke public curiosity.

Before the country sinks deeper into what experts have warned as a “debt trap” – into which other borrowers of China have fallen — President Duterte should make a full disclosure. Filipinos should at least know what might hit them.

Future generations might just see certain strategic areas in the archipelago and valuable patrimonial assets being taken over by a money-lender who has taken advantage of what looks like perfidy of some leaders of the country.

 Constitution requires full disclosure

SIMILAR, or even worse, deals could have been contracted by past administrations, but that is no excuse for continuing the reckless and possibly traitorous contracting of onerous foreign loans.

Any review of questioned past loans should not becloud or block discussion of China loans of the Duterte administration, because corrective or preventive action is urgently needed.

Before President Duterte embarks next month on his fourth trip to China in less than three years, he might want to order the publication of a complete list, with a full disclosure of the terms and conditions, of all his loan contracts with Beijing.

Article II of the Constitution says: “Section 28. Subject to reasonable conditions prescribed by law, the State adopts and implements a policy of full public disclosure of all its transactions involving public interest.”

Article III says: “Section 7. The right of the people to information on matters of public concern shall be recognized. Access to official records, and to documents and papers pertaining to official acts, transactions, or decisions, as well as to government research data used as basis for policy development, shall be afforded the citizen, subject to such limitations as may be provided by law.”

On foreign loans, Article VII says: “Section 20. 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.”

The Constitution requires “prior concurrence” of the seven-member Monetary Board headed by the governor of the Bangko Sentral ng Pilipinas. All board members, btw, are presidential appointees.

 Duterte agrees to waiver of immunity

WE DON’T know how Carpio got a copy of the Chico River loan contract despite its non-disclosure clause. Until details of other loans are available, we can use it as a guide.

Carpio quoted Article 8 of the contract: “8.1 Waiver of Immunity. The Borrower hereby irrevocably waives any immunity on the grounds of sovereign or otherwise for itself or its property in connection with any arbitration proceeding pursuant to Article 8.5 hereof or with the enforcement of any arbitral award thereto. Notwithstanding the foregoing, the Borrower does not waive any immunity of its assets which are (i) used by a diplomatic or consular mission of the Republic of the Philippines, (ii) of a military character and under control of a military authority or defense agency of the Republic of the Philippines, or (iii) located in the Philippines and dedicated to a public or governmental use (as distinguished from patrimonial assets and assets dedicated to communal use).”

The Chico River loan from China has an interest rate of 2 percent and a “management fee” of $186,260, as well as a “commitment fee” valued at 0.3 percent per year.

Without giving details, economic managers of Duterte have expressed confidence that the Philippines will not default during the repayment period of 20 years, including a seven-year grace period.

But if the Philippines does default, Carpio warns, it will have to submit to arbitration — the pre-agreed mode of resolving the ensuing dispute — that is loaded against the borrower. It will be governed by the rules of the China International Economic and Trade Arbitration Commission.

 Carpio: Reed Bank is patrimonial asset

REACTING to Panelo’s comment that Reed Bank is not and cannot be a patrimonial asset, Carpio said late Tuesday (March 26) that a law in 1972 had already converted the oil and gas in the Reed Bank into patrimonial property.

Patrimonial assets are properties owned by the Philippine government in its private capacity and not for public use, public service or intended for development of national wealth.

Carpio cited the Oil and Exploration Development Act of 1972, as amended, which was the basis for the Department of Energy’s granting a service contract to Forum Energy to exploit the gas in Reed Bank.

Section 8 of the law says: “The (service) contract may authorize the Contractor to take and dispose of and market either domestically or for export all petroleum produced under the contract subject to supplying the domestic requirements of the Republic of the Philippines on a pro-rata basis.”

Carpio said: “This law proclaims the oil and gas covered by a service contract as subject to sale to the market — which makes such oil and gas patrimonial.”

He explained that “the power to reclassify from public domain to patrimonial is a legislative power” and that “the president’s power to so reclassify was merely delegated by the Congress.”

(First published in the Philippine STAR of March 26, 2019)

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