Blessing in disguise
Stalled three large Chinabacked train projects of the recent Duterte-era is a good thing, a blessing in disguise.
While the stalled train projects dismayed Mr. Duterte’s true “Build, Build, Build” believers — all sadly duped by his trademark bombast — what is now stalled saves us all from grief later on.
Mr. Marcos Jr. tells us he has other options besides Chinese loans to get the train projects back on track.
But he is also allowing loan renegotiations with China. Recently, China diplomatically expressed willingness for such renewed talks.
Should Mr. Marcos Jr. go ahead, experts and critics, however, strongly advice he exercise extra caution when dealing with Beijing.
Guarded prudence is good counsel. Seeking multibillion peso Chinese loans for the Subic-Clark Railway Project, Philippine National Railways (PNR) South Long-Haul Project, and the Davao-Digos segment of the Mindanao Railway Project (MRP) involves unusual contracts and higher interest rates.
Higher interest rates, in fact, precisely derailed the rail projects in the first place.
Former Finance chief Carlos Dominguez III told Transportation Undersecretary for Railways Cesar Chavez China is asking “for interest rates in excess of 3 percent” for the “withdrawn” loan applications.
A three percent interest rate on loans from other countries isn’t peanuts. It is onerous for a country-to-country loan.
Japan, for instance, only offers its Official Development Assistance (ODA) at 0.1 percent per annum.
Besides high interest rates, there are other reasons why Chinese largesse didn’t come our way for trains.
And, it has nothing to do with our eager willingness to borrow but with China as a lender herself.
No doubt perceived Chinese largesse is irresistible to the developing world. So much so, many poor countries see China, in the words of a commentator, as “the so-called ATM of the developing world.”
There’s truth to that folksy tag. According to the World Bank, China has more money on loan to the world’s poor countries than the combined lending of the 22 rich nations that make up the Paris Club of creditor countries.
In recent times, however, Chinese largesse isn’t what it used to be. Indications are rife Beijing is subtly switching off the ATM and is now collecting loans instead.
A news website, quoting a research paper, says, “Two years ago, Beijing’s official banks went from being bigspending lenders to ‘global debt collectors’.”
Mind you, China isn’t as benevolent as a lender as when she’s a debt collector.
It seems China almost never agrees to any reduction in the amounts owed by a country when it gets into trouble. In contrast, the usual Paris Club practice is for everyone to agree to cuts or explore possibilities of condoning debts.
“China operates in a club of its own. It will agree to extend the term of its loans or make other concessions but not actually forgive any amount owing,” says one Australian commentator.
Given China’s present tack on loans, it now does seem we didn’t put our necks on the line. Good thing we did not, too.
If we had, “secretive” contracts with Chinese contractors would have made it look like we were dealt with a bad hand in the event — knock on wood — we get caught in a bad time, which needs respite from loans.
In fact, what that bad hand looks like we’ve already had a foretaste as far back as 2019, during a Senate hearing on the rail projects, a news website recently reminded.
“For the Japanese
ODA (Official Development Assistance) loan, the loan agreement is signed first before the bidding process. But with China, the bidding process comes before the loan agreement is signed,” testified thenBases Conversion and Development Authority (BCDA) president and chief executive officer
Vince Dizon.
Dizon also testified that the Chinese government would have to give a list of accredited Chinese train contractors first before the Philippine government can implement its own rules and choose contractors.
Such requirement to first choose Chinese contractors is precisely the reason why the Duterte vanity rail project, the P83-billion Tagum-Davao-Digos rail project, failed to get a single track laid. China was “unable” to submit a shortlist of contractors, says Chavez.
Anyway, now that our eyes are opened about all these China train deals, aren’t we all just glad China doesn’t yet control our frantic train dreams?
“It seems China almost never agrees to any reduction in the amounts owed by a country when it gets into trouble.
“Should Mr. Marcos Jr. go ahead, experts and critics, however, strongly advice he exercise extra caution when dealing with Beijing.