China loans to Philippines raise fears

THE $6-billion official development assistance (ODA) obtained by the Duterte administration from the Chinese government has raised fears among some, who believe this might turn out to be disadvantageous to the Philippines rather than beneficial.

In a competitiveness forum organized by the Bangko Sentral ng Pilipinas (BSP) in Cebu City on Tuesday, Fernando Fajardo, economist and professor at the University of San Carlos, raised the concern that loans from China could follow the same misfortune seen in Africa.

According to Fajardo, there are some reports that have surfaced about the anomalous financing of China to Africa. For instance, infrastructure projects in the continent employ Chinese workers, instead of Africans. Allegations also refer to it as China’s strategy to exploit Africa’s abundance of oil, iron, copper and zinc to help fuel the giant economy’s expansion needs.

China’s investment in Africa has skyrocketed in recent years from $7 billion in 2008 to $26 billion in 2013, according to the Wharton School of Economics in its website. In December 2015 alone, Chinese President Xi Jinping pledged $60 billion to support Africa’s wish list on infrastructure.

Another unfortunate case is the Chinese-funded airport in Sri Lanka, the Mattala International Airport, which became known as the “world’s emptiest,” because of its inability to attract passengers. The airport is the second air transport hub in Sri Lanka.

However, fellow economist and former socioeconomic planning secretary Cielito Habito asserted that the loan from China to the Philippines is another matter, if used well.

“It’s always a good idea to find low-cost financing for public projects, and by low-cost, I mean (under a) long-term (arrangement) and payment period is longer than the usual bank loan,” said Habito in an interview.

“In the end, the challenge is to use the loan responsibly. It’s implementation issues that we (in the Philippines) have always had a problem with,” he cautioned.

Healthy state

Further, Habito said the debt-to-GDP ratio of the Philippines remains at a healthy state. In 2016, the country recorded its lowest debt-to-GDP ratio level in the last 20 years, following a downward trend at 42.1 percent from 44.7 in 2015. A low debt-to-GDP ratio indicates that an economy has sufficient resources to pay back debts.

“For as long as our GDP growth is faster than the growth of public debt, hindi problema, we can cover up,” said Habito, who is also a professor at the Ateneo de Manila University.

As of end-2016, the national government’s outstanding debt is at P6.09 trillion.

“It doesn’t matter where the loan comes from, the important thing is that whatever loan we get is actually spent for the right things that we need, and not for the interest of contractors or suppliers,” said Habito.

Felipe Medalla, BSP Monetary Board member, also reminded the government to spend the loan responsibly.

In November last year, the National Economic and Development Authority (Neda) Board approved the guidelines to ensure the transparent availment of Chinese loans being extended to the Philippines. The board, chaired by President Rodrigo Duterte, approved the “Guidelines for the Availment of Chinese Support for the Conduct of Pre-investments and Investment Activities.”

To avail of the Chinese support or preferential or concessional financing, the Department of Finance (DoF) said that proponent agencies are required under the guidelines to: adhere to the implementation procedures of both the Chinese and Philippine governments; employ qualified, legitimate, and good standing Chinese consultants/contractors; engage different entities in the development and implementation of projects for Chinese support; and, undertake competitive selection in the procurement of Chinese contractors.
style="display:block; text-align:center;"


SunStar website welcomes friendly debate, but comments posted on this site do not necessarily reflect the views of the SunStar management and its affiliates. SunStar reserves the right to delete, reproduce or modify comments posted here without notice. Posts that are inappropriate will automatically be deleted.

Forum rules:

Do not use obscenity. Some words have been banned. Stick to the topic. Do not veer away from the discussion. Be coherent. Do not shout or use CAPITAL LETTERS!