THE Cebu City Government the other day paid the National Government P38.1 million as guarantee fee this year for the foreign loan the City availed itself of for the South Road Properties (SRP).

Since the loan was released in 1996, the City has so far given the National Government, through the Department of Finance (DOF), a total of P396.6 million.

As embodied in the bilateral agreement between the Philippines and the Government of Japan, the National Government gets a share of two percent of Cebu City’s loan
payments.

Emma Villarete, assistant city treasurer for administration, said that in 2007, the City paid over P40 million in sovereign guarantee.

“It diminishes with a difference of P2 million each year,” she said.

The City’s foreign loan is payable until 2025, and the City Government pays the Japan Bank for International Cooperation (JBIC), through the Land Bank of the Philippines (LBP), as its conduit bank every February and August each year.

Villarete said that after the Aug. 20 payment, the City is left with a loan balance of Y10.193 billion.

Computed using the exchange rate of Y1=$0.010148 and $1=P48.94, the loan amounts to $103.44 million, or P5.062 billion.

Early this year, City Mayor Tomas Osmeña, who is currently on a medical leave in the US for the treatment of his urinary bladder cancer, said that after making the first sale at the SRP, he wants to leave out the National Government and the LBP from the loan agreement with the Japanese Government.

He alleged that of the P500 million the City Government pays for the SRP loan, P200 million annually goes to the National Government through the LBP.

Villarete, though, said the P38.1 million is the one-time payment in guarantee fee for this year.

An LBP official had said that being an Official Development Assistance project funded by the Government of Japan, the SRP loan requires a sovereign guarantee.

Osmeña had said that he will start negotiating with JBIC as soon as the City closes a deal with an investor at the SRP.

The 302-hectare development cost the City 12,291,866,796 yen in foreign loans in 1995. The City has so far paid P1.5 billion for it and has earned only P25 million in rent paid by Bigfoot Entertainment.

Osmeña had said the City would negotiate with JBIC or other creditors in Japan to deal directly with the City so they can do away with guarantee fees paid to the National Government. (RHM)

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(December 6, 2008 issue)
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