Traders demand transparency on foreign-funded infra projects
Business leaders in Cebu demand transparency over foreign-funded infrastructure projects.
While they understand the need for the country to accept the financial help from China and Japan, they hoped these are the right projects that needed foreign assistance.
“It’s similar in business where you pick which bank or financial institution offers you the best interest rate,” said Mandaue Chamber of Commerce and Industry (MCCI) president Stanley Go.
But to ask whether the country will fall into a debt trap with China or Japan is difficult to answer, said Go.
“It depends upon the rates offered by these countries and the kind of infrastructure we will be building. Would it (infrastructure) be necessary? If not, then it becomes a trap. It becomes a stupid investment,” he added.
Go emphasized the need for government to be transparent so the public would know of the country’s true financial position and to determine if we are borrowing too much.
“A comparative analysis should be done by all countries offering loans to other countries,” he said.
Debt trap
According to Go, the country will fall into a debt trap if the infrastructure it is building is unnecessary and is not generating any revenue. Second, if it borrows money from a country that offers high interest rates.
“At the end of the day, there is no business that exists without debt. Well, if you do not (have debt) and you rely on cash, you are lucky. But with the growth we have right now and a 100 million plus popula- tion, there is an opportunity for us to scale up our infrastructure and we need resources for that,” explained Go.
“We just need to pick which of these countries offer the best rates,” he added.
Go believes China and Japan may have seen the potential of the Philippines, the reason they have extended help.
Cebu Business Club (CBC) president Gordon Alan Joseph hopes the government makes smart choices when planning these projects.
While he worries about too much borrowing from China, Joseph said, if the country’s economy is strong and well managed, there is nothing to be be fret about.
“We should be able to repay the debt. We need infrastructure and not all of these projects will be feasible through the private-public partnerships schemes,” Joseph said.
He, however, emphasized transparency in methodology as he thinks there is no one funding mechanism that fits all projects.
China versus Japan
Between two countries the CBC official thinks Japan’s quality is superior.
“The cost of Japan debt settle to be significantly lower than Chinese debt and in terms of quality, the Japanese are superior. The country needs these projects and we need these projects as soon as possible. It is not just about the cost of these loans, it is about the economic benefits of these projects,” he said.
Finance Secretary Carlos Dominguez III said the claims of some sectors and critics are “totally unfounded.” “Those [debt trap claims] are totally unfounded. The financing we availed ourselves of are soft loans at the lowest possible interest rates and the longest possible term arrangements,” Dominguez said.