The Department of Finance (DOF) on Thursday said the loan it had obtained from China for the Chico River Pump Irrigation Project in Kalinga province was not “onerous,” pointing out that a number of agencies vetted it.
Finance Assistant Secretary Antonio Joselito Lambino II made the clarification after Bayan Muna senatorial candidate Neri Colmenares said the terms of the $62.09-million loan highly favored China, which was guaranteed payments of a high interest rate and preference for a Chinese contractor.
Lambino said that before the project was approved and the loan secured, they went through a “robust” approval process by the Investment Coordination Committee (ICC), an interagency group of government economic agencies.
The ICC issued guidelines for processing China-assisted projects as early as November 2016 to avoid a repeat of the corruption-tainted NBN-ZTE and Northrail projects.
The contract to build a national broadband network (NBN) won by Chinese firm ZTE was found to be bloated and tainted with irregularities, forcing the Philippine government to scuttle it.
The Northrail project that sought to link Caloocan to Malolos was described by a senator as “the greatest train robbery in history.” It was canceled in 2012 after the Supreme Court ruled that it was illegal for lack of competitive bidding.
NBN and Northrail were projects of the Arroyo administration.
Lanbino said the loan agreement was reviewed, negotiated and approved by the ICC composed of the Department of Justice, the Bangko Sentral ng Pilipinas (BSP) and the DOF.
The Monetary Board, the BSP’s highest policymaking body, “also approved the terms of the loan for the Chico River Irrigation Project before negotiation and after signing of the loan agreement.”
The loan agreement was signed in April last year.
Chinese contractor
Before awarding the contract to China CAMC Engineering Co., Lambino said China had provided a list of three contractors of good standing and the implementing agency was given the opportunity to vet and request a replacement, if needed.
Lambino said the US dollar denominated loan carried a concessional rate of 2 percent for 20 years, inclusive of a seven-year grace period.
Colmenares claimed that the 2-percent rate was exceedingly high compared with the 0.25 percent for loans offered by other countries.
Flagship
The loan will cover 85 percent of the National Irrigation Administration-led project’s total cost of P4.37 billion.
The Chico River Pump Irrigation Project is the first flagship infrastructure project to be financed by China under the Duterte administration’s ambitious “Build, Build, Build” infrastructure program.
As for the comparison between the rates offered by China and Japan, Lambino said the effective interest rates between the recently signed Japanese and Chinese loan agreements were quite close if factors such as project cost, loan denomination and foreign exchange depreciation risk were taken into account.
Fixed interest rate
“Also on the interest rate, our Chinese loans are fixed and not subject to change over time,” he added.
The DOF also rebuffed Colmenares’ assertion that under the loan agreement, “China is guaranteed to be paid in full without counterclaim or retention, and will not be made liable to pay any taxes or charges for the entire transaction, including any interest income it earns from the loan.”
Lambino said that for each loan agreement, an arbitration clause was negotiated to protect Philippine interests.
Based on DOF data, the country is unlikely to be saddled with Chinese debt.
“By 2022, project debt to China is estimated to be at around 4.5 percent of total debt. Project debt to Japan will be around 9.5 percent of total debt,” Lambino said.
He said the DOF was managing public debt responsibly on behalf of the Filipino people.
P44-B consultancy fees
Colmenares is not done with deals entered into by Manila and Beijing.
He said President Duterte and his economic managers owed it to the people to disclose recipients of about P44 billion that the Philippine government agreed to pay China for the deals.
“We would like to find out the Chinese consultants who will be paid P44 billion for a number of these ‘Build Build Build’ projects. That’s a shameless waste of people’s money,” Colmenares said in a statement.
The consultancy fees were contained in a set of leaked documents, including the loan agreement for Chico River project and a list of four “first basket projects” totaling P205 billion to be financed by China. —WITH A REPORT FROM MELVIN GASCON