The Duterte administration’s expectations that its “Build, Build, Build” program will receive massive financial support from China may be faltering.
Of the 18 infrastructure projects worth P731.7 billion proposed to be funded with Chinese loans and grants, only one—the P4.4-billion Chico River Pump Irrigation Project—has, so far, concluded a loan agreement.
According to reports, the rest are either under loan negotiation or subject of feasibility studies by Philippine and Chinese financial and technical panels.
Many of the projects are carryovers from the past administration’s public-private partnership program and were updated to address changes in the areas of construction and operation.
Some of the new projects will be built in Mindanao in line with President Duterte’s vision that the solution to the region’s Muslim unrest and insurgency problems lies in its economic development.
With the terms of reference and technical specifications of the “old” projects already complete, it is reasonable to expect their covering financing documents to be speedily completed.
Since China has been extending financial credits left and right in recent years to countries it wants to come under its influence, its financial, technical and legal staffs are already experts (or veterans) in the preparation and execution of foreign loans and grants.
As loan officers and lawyers put it, these kinds of documents are de cajon, meaning standard or fill in the blanks types, or to use modern IT language, templated.
Except perhaps for the interest rate or schedule of repayment, there is very little room for negotiation in development-type loan agreements, as in the case of infrastructure projects. It’s usually a “take it or leave it” proposition. Lenders are averse to making changes in their standard loan agreements lest they create unwanted precedents in future transactions.
More so in the case of grants as beggars can’t be choosers. Since the funds, products or services subject of the donation are given free of charge (at least on papers), discussions on the matters are often limited to where, when and how the freebies will be given to their recipients.
So what’s keeping the Chinese government from expeditiously living up to its promised funding assistance to the administration’s ambitious infrastructure program? At the rate financing is being arranged for the rest of the projects, the Duterte administration may no longer be on the saddle by the time they are concluded.
Two things come to mind about the unexplained delay in the execution of the funding arrangements:
First, the Chinese government is not serious about its promised assistance and that it did so only to encourage President Duterte’s foreign policy pivot from the United States, China’s self-proclaimed nemesis.
Note that although China may be awash with money, it has billions of dollars in financial commitments with other countries that, from its global strategic perspective, are more important than the Philippines, so funding the local projects is nowhere near the top of its priority list.
Second, the funding offer has been placed on slow track mode by the Chinese government to send a subtle message (or pressure) to the Philippines that it should watch its steps in dealing with China’s seizure and militarization of some islands in the West Philippine Sea, otherwise the promised funds will not be forthcoming.
A carrot is being dangled before the administration in consideration for its tolerating, if not accepting, Chinese encroachment in the Philippines’ exclusive economic zone. It’s like giving money in exchange for ceding Philippine sovereignty over islands and seas believed to be rich in natural resources.
The Chinese government knows Mr. Duterte’s legacy will rise or fall on the success or failure of his “Build, Build, Build” program. Given this situation, it should not come as a surprise if China is milking it to its advantage through the use of a financial carrot.
There’s more than meets the eye in the slow travel of the loan boat from China.