MANILA, Philippines — Senators on Tuesday expressed concern over the country’s loan agreement with China for an irrigation project in which the Duterte administration used “patrimonial assets” as collateral that could be seized by Beijing if the government defaulted on its payments.
Supreme Court Senior Associate Justice Antonio Carpio last week raised the alarm over what he described as lopsided provisions in the $62-million loan agreement to build the Chico River Pump Irrigation Project, including the arbitration of any dispute by China International Economic and Trade Arbitration Commission in Beijing.
Carpio warned that in case of a default in the payment of the loan, China could seize the gas-rich Recto (Reed) Bank in the West Philippine Sea as a “patrimonial asset” or an asset “dedicated to commercial use” by the Philippine government.
“Calling these onerous provisions alarming is an understatement. Despite Malacañang’s denials, it is clear as day that these loan agreements will have catastrophic results for our sovereignty, natural resources and economic security,” Sen. Risa Hontiveros said on Tuesday.
Confidentiality clause
She also slammed the loan’s confidentiality clause, which Carpio said was unconstitutional.
Former Bayan Muna Rep. Neri Colmenares, who first called public attention to the Chico River loan, said President Rodrigo Duterte has been “blinded by the billions” in Chinese money for his infrastructure projects that he could not see other wrongdoings by Beijing, such as allegations that Filipino fishermen were being driven away from Panatag (Scarborough) Shoal by Chinese authorities.
“He has apparently decided that the interest of our fisherfolk is less important than getting loans from China, despite their onerous and highly irregular, if not illegal, conditions,” he said.
Presidential spokesperson Salvador Panelo dismissed concerns over the seizure of patrimonial assets as “misplaced,” saying the Philippines had never defaulted on a foreign loan.
That defense of the deal was unacceptable to Sen. Panfilo Lacson.
“Unless Secretary Panelo was just making an ‘educated guess,’ something seems wrong with his statement that it is alright to collateralize the nation’s patrimonial assets,” Lacson said.
He, however, agreed with Panelo that the Philippines would not be reneging on loans because automatic debt service was built into the budget system.
Learn from experience
Sen. Joel Villanueva said Malacañang should have learned from the experience of other countries with Chinese debts and considered the loan contract’s long-term effects on Filipinos.
“We have already seen the negative effects of this type of arrangement with China in a number of countries where China eventually ended up controlling the resources and critical assets of a country,” Villanueva said.
He said the government should ensure that any loan project adhered to the Constitution and should consider its immediate and long-term effects on Filipinos, such as the displacement of communities.
“We have to guarantee that the Filipino people are not worse off with these loans,” he said.
Sen. Francis Pangilinan said the loan provisions were so “downright ridiculous and one-sided” that no private groups “would propose or ever agree to such lopsided terms.”
The loan contract was also “manifestly and grossly disadvantageous to the government” and could be considered a violation of the antigraft laws, Pangilinan said.
PPP agreement
Senate President Pro Tempore Ralph Recto said the Philippines would have been better off funding the project through a public-private partnership (PPP) agreement because there would be “no need to borrow money.”
On Tuesday, Panelo said Carpio was wrong in citing Recto Bank as a patrimonial asset because it has not been declared as such by law or by presidential proclamation.
He said the President would not declare it a patrimonial asset because the loan agreement has already been signed.
As an inalienable public property, it could not be sold or given away, but it could be leased, according to Panelo.
He pointed to a July 9, 2002, Supreme Court ruling penned by Carpio himself that said “you cannot just convert a public property to a patrimonial property.”
Panelo also tried to ease concerns over any arbitration to be presided over by the trade and arbitration commission in Beijing.
“Assuming China wins the arbitration, it cannot be implemented,” he said. “Under the contract, under the loan agreement, it has to pass through our courts first. It needs the validation of our courts before that can be enforced.” —With reports from Christine O. Avendaño and Melvin Gascon