“There is no danger of us being drowned in Chinese debt.”
Thus declared the head of the government’s economic team amid fears that the Duterte administration’s P8-trillion infrastructure buildup program would make the Philippines vulnerable to a debt trap that would undermine the country’s economy and sovereignty.
Speaking before the convention of the Rotary Club on the weekend, Finance Secretary Carlos Dominguez III also reassured the public that no provisions of any loan agreement allowed China or any other creditor nation to seize Philippine assets in the event of a default by the latter.
“In conformity with the Constitution and laws of the Philippines, none of the pipeline projects allow for appropriation or takeover of domestic assets in the event of failure to pay, which hollows out our sovereignty,” he said.
“While we appreciate people warning us about the so-called Chinese debt trap, we certainly know how to avoid it,” he added.
He said the country’s experience in dealing with debt issues in the past had made policymakers more prudent in executing the government’s debt strategy.
Dominguez said no infrastructure projects were financed unless they go through a rigorous system subject to the final approval of the Cabinet and the President.
“The government will only fund projects that are economically viable and that benefit our people,” he said.
He said that, as of end of 2018, the country’s total project debt exposure to China was only six-tenths of one percent of the country’s total debt program. In contrast, the Philippines’ total project debt to Japan represents 9 percent of the country’s total debt.
“By 2022 when most of the financing for Build, Build, Build program should have been accessed, our project debt from China will constitute some 4.5 percent of total debt, while the project debt to Japan will be twice as large at 9.5 percent of total debt,” he said.
“There is no collateral in any of our loans to any country or bond,” Dominguez told reporters after his speech, responding to the statement of Senior Associate Justice Antonio Carpio that China could seize the resource-rich Reed Bank in West Philippine Sea if the country would default on a P3.6-billion loan for the Chico River irrigation project in Cagayan Valley.
“There are no collateral provided and all of the loan terms are on the website. Everybody can read it. The loan documents are there.”
“Let me assure you the Philippines will not fall into a debt trap to any country,” Dominguez said.