Aside from tax reform, the “Build, Build, Build” infrastructure program is benefitting from the generous funding support from Japan and China, two of the Philippines’ closest development partners in the region, Finance Secretary Carlos Dominguez III said on Wednesday, November 28.
Dominguez, speaking at the Sulong Pilipinas Forum in Davao City, noted that some “uninformed critics have made unfounded claims” about the country falling into a debt trap, as a result of the financing extended by China and Japan, even though the government had secured these at the lowest interest rates and longest term arrangements possible.
“Let me reiterate, in the face of uninformed criticism, this administration is not about to allow the country to be drowned in debts to China. In all the financing agreements, we have made sure that the country got the best deals possible and that the cardinal tenets of fiscal discipline are carefully observed,” Dominguez said.
He said that if project financing coming this year is included, the estimated project debt to China will constitute only 0.65 percent of the country’s total debt from the current 0.11 percent. Meanwhile, the project debt to Japan will increase from the current 3.17 percent to 8.90 percent of the total debt at the end of this year.
By 2022, when most of the financing for “Build, Build, Build” should have been accessed, the Philippines’ project debt to China will constitute around 4.5 percent of the total debt, while the project debt to Japan will be around twice as large or 9.5 percent of total debt, Dominguez said.
Dominguez said the Duterte administration has learned much from the past, blemished by the “scandalous mismanagement of Chinese financing” owing to the fact that “the previous leadership allowed Chinese state-owned enterprises to dictate what projects will be undertaken here.”
“In our own dealings, we have made it very clear to the Chinese side that the Duterte administration will protect the country from unnecessary projects driven by agencies outside the Philippines,” Dominguez said. “This does not please some people who intend to profit from wasteful projects that they are pushing.”
“These are now the same people who are attacking the prudent decisions of this government,” he added.
Dominguez ticked off the safeguards that the government has put in place to ensure that only projects that need to be urgently implemented are proposed for concessional financing: a feasibility is conducted on the project to determine its viability, sustainability and best means of financing; approval by the Investment Coordination Committee (ICC) and the National Economic and Development Authority Board; internal vetting of Chinese contractors that would be recommended to implement the project, to ensure that each project would be a successful one.
“In each case of projects using Chinese financing ... they have to name the bidders from which we will make the final choice. If the bidder does not deliver, the Chinese government will certainly lose face,” Dominguez said.
He likewise stressed that “in conformity with the Constitution and laws of the Philippines, none in any of the pipeline projects allow for the appropriation or takeover of domestic assets in the event of failure to pay which will hollow out our sovereignty.”
He noted that with the Philippines remaining one of the fastest-growing economies in the region, its foreign direct investments (FDIs) rose by 31 percent in the first eight months of the year, contrary to claims by the Philippine Economic Zone Authority (Peza) that investments are down.
“That is only true for Peza projects, where the investors are asking for what I consider unreasonable incentive packages from our government. The more meaningful investments are being made by competitive companies that do not ask for tax holidays and other incentives. These competitive investments are rising sharply, underscoring the investments are not prerequisites for getting the best projects,” Dominguez said. / PR