Ex-lawmaker raises alarm over onerous’ China loan

The Philippines has entered into an “onerous” loan agreement with China for an irrigation project in the Cordillera, former Bayan Muna Rep. Neri Colmenares said on Wednesday.

At a press briefing, Colmenares said this should compel top government officials to disclose the terms of all agreements they had entered into with the Chinese government.

“The loan agreement for the Chico River Pump Irrigation Project is onerous and highly favors China. It is a disaster for the Philippines,” said Colmenares, who obtained a copy of the document from a nongovernment organization.

The project is covered by a 20-year loan with Export-Import Bank of China as lender and the Philippine government as borrower. Upon completion, it will supply water to around 8,700 hectares of agricultural land, benefiting 4,350 farmers and their families, and serve 21 barangays in Kalinga and Cagayan provinces in northern Luzon, according to the government.

But the terms of the funding deal highly favor China, which is guaranteed payments of high interest rates and preference for Chinese contractors, Colmenares said.

Other projects

A separate document obtained by Bayan Muna showed that aside from the Chico River project, other “first basket projects” totaling P205 billion are to be financed by China.

These include:

• Philippine National Railway South Long Haul Project worth P175.3 billion, of which P14 billion is supposedly for “consultancy services”
• New Centennial Water Source-Kaliwa Dam of the Manila Water Sewerage System (P12.2 billion)
• Davao-Samal Bridge Construction Project of the Department of Public Works and Highways (P17.9 billion)

The Chico River project was signed on April 10, 2018, by China’s ambassador Zhao Jianhua, on behalf of the lender bank, and Finance Secretary Carlos Dominguez III, on behalf of the Philippine government.

Interest rate, fees

According to Colmenares, the contract for the $62.086-million loan (P3.2 billion at current exchange rates) sets an annual interest rate at 2 percent, with an additional annual “commitment fee” of 0.3 percent of the loan and a “management fee” of 0.3 percent.

He said the 2-percent interest rate was exceedingly high compared with the 0.25 percent for loans offered by other countries.

“Our children will continue paying this highly disadvantageous loan as we get enmeshed in a debt trap in the amount of hundreds of billions of dollars from China,” he said.

Automatic appropriation

The contract is also riddled with other “highly onerous” terms, said the former party-list lawmaker.

Under the agreement, China is guaranteed to be “paid in full without counterclaim or retention,” and will not be made liable to pay any taxes or charges for the entire transaction, including any interest income it earns from the loan.

“China even dictated the content of our budget laws by demanding that payment be automatically included in the general appropriations law, practically usurping the constitutional power of Congress to solely decide the content of our yearly budget,” Colmenares said.

He said the deal also designated China CAMC Engineering Co. as contractor.

With these terms, the Chinese contractor is likely to hire Chinese nationals and displace Filipino workers, Colmenares said.

While Philippine laws require contractors  to undergo a procurement or bidding process, China simply imposed its own contractor, he said.

“We are like a province of China that it can dictate on. These kinds of agreement is humiliating to the Philippines and must be stopped,” he said.

Patrimonial property

Under a “vaguely worded” provision, the agreement will allow China to own patrimonial property in the country, according to Colmenares.

“A dangerous component of the agreement is … Section 8.1 that does not recognize our sovereign rights in the country and could allow China to take control of our patrimonial properties should we fail to pay the loan,” he said.

“This allows China’s takeover of our patrimonial properties and resources deemed by China’s tribunal to be ‘of commercial use,’” Colmenares said.

He cited the experience of Sri Lanka, where China took over the Hambantota Port after Sri Lanka failed to pay its debt due to the delay in the opening of the port’s commercial use.

Bayan Muna Rep. Carlos Zarate called out the Philippine government to be transparent on the deals with China and allow public access to its “contents and other relevant documents.”