DOF still in talks with China on Bicol railway funding
MANILA, Philippines — The Department of Finance (DOF) remains in discussions with China for possible loans to build the railway to the Bicol region.
Finance Undersecretary Mark Dennis Joven said on Tuesday that the Philippine National Railways’ (PNR) P142-billion, 380-kilometer South Long-Haul project was composed of seven contract packages: one for project management consultancy, two for trains, as well as four for civil works.
While the DOF had negotiated the project management consultancy contract at a fixed rate of 2 percent, talks were ongoing for the remaining six contract packages “with China indicating a rate of at least equal to marginal funding cost of Cexim (China Eximbank), which is currently around 3 percent,” according to Joven.
Last week, he said that while Beijing had yet to specify the interest rates it intended to slap on new loans, it wanted to make up for prevailing high financing costs.
“At present, as US-dollar benchmark interest rates have increased to around 3 percent, Cexim will push to recover this funding rate at the very least,” Joven added.
Negotiations between the Philippines and China over financing for three railway projects—PNR Bicol railway, Subic Clark Railway and Mindanao Railway’s first phase (Tagum-Davao-Digos segment)—were canceled last month to give way to the incoming administration.
But according to Finance Secretary Benjamin Diokno, the new government “can revisit the projects; if found worthwhile, it may choose to restore the loan application, if funding is still available.”
In an interview with Chinese media on Monday, Wang Wenbin, Beijing’s Foreign Ministry spokesperson, said that “President Marcos’ instruction to the responsible department on discussing the projects with China” was a welcome development.
Wang added that the Chinese government would launch more projects to “set new benchmarks for our cooperation and help upgrade Philippine infrastructure in both traditional and emerging sectors.”
He stressed that infrastructure cooperation was a “highlight in the practical cooperation between Beijing and the Philippines in the past six years,” adding that the two countries had “jointly completed key projects,” including bridges and dams.
The project management consultancy contract for the Bicol railway project was among the $1.1 billion worth of loans extended by China to the Duterte administration. It also secured Chinese loans for the Metropolitan Waterworks and Sewerage System’s New Centennial Water Source-Kaliwa Dam; the National Irrigation Administration’s Chico River Pump Irrigation; and the Department of Public Works and Highways’ Samal Island-Davao City Bridge projects.
While closer ties between Manila and Beijing under the Duterte administration had been expected to yield economic benefits, especially concessional infrastructure financing packages from China, these had only trickled down and paled in comparison to Japan’s.
The state planning agency National Economic and Development Authority’s latest report on official development assistance (ODA) released last year showed that as of end-2020, China extended to the Philippines a total of three ODA loans and two grants totaling $620.7 million or merely 2.02 percent of the total ODA portfolio. Earlier, it committed $9 billion in ODA grants and loans for the country’s flagship infrastructure projects.
In comparison, Japan’s outstanding ODA loans and grants to the Philippines amounted to $11.2 billion or 36.4 percent of total across 45 financing commitments. Even South Korea had a bigger ODA to the Philippines than China, with 21 low-interest loans and grants worth $809.9 million.
—WITH A REPORT FROM TINA G. SANTOS