Debt-trap diplomacy
IT’S called “debt trap diplomacy” and the Philippines seems eager to get trapped in it. I bumped into that term while googling about the Duterte administration’s “Build, Build, Build” infra program and government’s need for loans, a bulk of which would come from China, to fund it. An article from Business Insider (www.businessinsider.com) caught my attention.
The title of the article, written by Tara Francis Chan, is kilometric: “China’s debttrap diplomacy reaches the Philippines, which is likely to accept Chinese loans 1,100% more expensive than other options.” But it also sums up what the point was all about.
But first, I say this could be an illustration of China’s increasingly imperialist status. It is trying to reconfigure the existing global setup largely controlled by the United States as the lone superpower after the demise of the Soviet Union. So on this, the United States may as well say, been there, done that.
The US and the West, through such financial institutions as the World Bank, have long used loans to be able to influence the economic direction of beholden nations. With China reaching imperialist status, it is using the same instrument but with seeming lack of scruples. But it can do so because hard-up countries are more likely to bite when funds are dangled in front of them.
Let me quote a paragraph of the Business Insider article: “The loans from China, which will be used to fast-track infrastructure projects including a dam, railway project and irrigation system, come with an interest rate of 2% to 3%. But loans available from Japan have interest rates between 0.25 and 0.75%, up to 12 times cheaper than those from China.”
But why is the Philippines biting? Director-General Ernesto Pernia of the National Economic and Development Authority (Neda) has an answer: “We cannot get all the loans from ...Japan. Between 2 and 3% interest rate is still much better than commercial loans.”
When talking about the “debt-trap diplomacy,” other articles actually point to the latest experience, the one that fellow Asian state Sri Lanka is currently going through. In December, Sri Lanka, unable to pay off its “onerous” debt from China, was forced to relinquish control of its Hambantota port to its creditor. The port was among the “vanity projects” of former Sri Lankan president Mahinda Rajapaksa.
What should interest us Filipinos from the experience of other countries caught in the Chinese debt trap is the conditions imposed before the loans are approved. It’s not only that Chinese contractors are preferred. It’s also this point raised by
Asian Times (www.atimes.com): “In exchange for financing and building the infrastructure that poorer countries need, China demands favorable access to their natural assets, from mineral resources to ports.”
Finally, the debt-trap diplomacy is also directed at stifling a country’s sovereignty claims, which should be a red flag for us who are asserting our ownership of the West Philippine Sea that China also claims as its own. Consider that even if we are still angling for loans, the Duterte administration has already muted our sovereignty win in the United Nations tribunal.