With loan application to China withdrawn, Mindanao Railway further derailed

Sketch of Mindanao Railway Project train (From DOTr Facebook)

UPDATED MANILA, Philippines – The Department of Transportation (DOTr) said Friday that the government could finish the Mindanao Railway Project by 2028 if the loan for the project is finalized by mid-next year.

During a hearing before a Senate finance subcommittee on the agency’s proposed P167.12 billion budget of the DOTr in 2023, its Transportation Undersecretary for Planning Timothy Batan said that loan applications for three China-funded projects, including the Mindanao Railway, were withdrawn last June due to the Chinese government’s inaction on the financing request.

“[It] was a condition that was imposed by the previous Department of Finance (DOF), that if the loans will not be closed or will not be signed by the end of the previous administration, then we are withdrawing our loan applications,” Batan explained.

He also said that the DOTr had recently written to the DOF to inquire about resubmitting the applications for these loans. Batan also revealed that the department counted on getting the Chinese loan next year.

“The current program involves an assumption that we will obtain our China loan by the middle of 2023, and if that assumption in our current program is achieved, then our target is for completion in 2028,” he said.

Batan later added that this target also depends on several other assumptions, including their eyed completion for right-of-way acquisition and construction of specific segments, among others.

But Senator Nancy Binay argued that the DOTr should “manage everybody’s expectations,” especially since the loan application has not even been resubmitted yet.

Batan said the DOTr would take note of this but also pointed out that the agency has since secured investment approvals, which means the project is not entirely in limbo as other activities like the right-of-way acquisition are already being pursued despite the pending loan.

Asked why the Philippines is still seeking a loan from China instead of applying to another funding source like the Japan International Cooperation Agency (Jica), Batan said the gap between the interest rates offered by Jica and the Chinese Exim Bank is “not very far apart.”

According to him, Jica’s 0.1 percent interest rate per annum is a Japanese yen denominated loan while the China Exim Bank’s two percent interest rate per annum is a U.S. dollar denominated loan.

“For each of our bilateral partners, there is a lending ceiling that our bilateral partners are limited to, and currently, their lending ceiling to the Philippines is already almost depleted,” he also noted.

The completion of a Mindanao Railway system was among the notable promises of former President Rodrigo Duterte when he campaigned in the 2016 national elections.

Following his predecessor’s footsteps, President Ferdinand Marcos Jr. also vowed to back the project’s construction, noting that it would bolster economic development in the region.

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/MUF/abc