DOF brands as ‘erroneous’ claims that Chinese loans for water projects ‘onerous’
The Department of Finance (DOF) on Tuesday (Jan 7) dismissed as “erroneous” a party-list representative’s claim that the loan agreements with China for two big-ticket water projects had “onerous” provisions and should also be reviewed.
In a statement, Finance Undersecretary Mark Dennis Y.C. Joven said that the Philippines “continues to uphold strict standards in dealing with foreign lenders” who finance a number of flagship infrastructure projects under the Duterte administration’s ambitious “Build, Build, Build” program.
As far as the loans secured from China for the Chico River Pump Irrigation and Kaliwa Dam projects were concerned, Joven said these cannot be compared apples-to-apples with the water concession agreements entered into by the state-run Metropolitan Waterworks and Sewerge System with Manila Water and Maynilad, which are currently being reviewed by the government.
Bayan Muna Rep. Carlos Zarate had sought a review of the Chinese loans similar to the water concession contracts.
“The basic structure of the water concession agreements, which are essentially public-private partnership (PPP) contracts, is very different from the official development assistance (ODA) financing agreements entered into by the government with countries such as China, Japan, France and Korea, which are covered by international law,” Joven explained.
“There is also a difference when it comes to the parties to these agreements. The water concession agreements refer to the Philippine government vis-à-vis Filipino corporations, while ODA financing agreements are between the Philippines and other sovereign entities such as countries and multilateral lenders like the World Bank and the Asian Development Bank (ADB),” Joven added.
“We have had long public discussions on this matter already,” the DOF official said.
“We published all the loan agreements we have signed for the ‘Build, Build, Build’ flagship infrastructure projects on our website last year. We once again encourage the critics to closely scrutinize the documents for themselves in order for us to have an accurate conversation about the matter,” Joven said.
According to Joven, the government had six top considerations in deciding on what type of financing to secure for “Build, Build, Build” projects, namely: projects must benefit the Filipino people; the country must take advantage of cheaper or concessional foreign financing; there must be public disclosure of information on loans; loan provisions must be standard across all lenders; the choice of arbitration venues and rules must be negotiated on a per-loan agreement basis; and these loans must still allow the Philippines to manage its debt responsibly and sustainably.
In the case of the Chico River Irrigation and Kaliwa Dam loans, Joven said that while these agreements did contain confidential clauses, “they are accompanied by specific provisions stating that the agreements may be released ‘in accordance with any Philippine law.’”
“The Philippine Constitution mandates disclosure of information relating to foreign loans,” Joven said, pointing out that Executive Order (EO) No. 2 issued by President Rodrigo Duterte in 2016 mandated “full public disclosure and transparency enshrined in our Constitution.”
“That is why the DOF unilaterally released copies of the loan agreements online,” he said.
“Anyone who closely reviews the loan agreements with China will find that the provisions are standard across our loan agreements with other lenders,” said Joven.
“For example, the choice of governing law in the interpretation of the loan agreement is often the law of the lender, as seen in our loan agreements with China, Japan, Korea and France, even during past administrations. There is nothing unusual with this provision, as it is found in loan agreements with several countries,” Joven said.
“To further explain, these choice of law provisions are essential to international agreements with a commercial nature because of the presence of a foreign element. On the other hand, this is not necessary in the case of a water concession contract, which is governed by domestic law,” he added.
Joven maintained that for each and every loan agreement, “the Philippine government negotiates very hard for favorable terms.”
“The country’s debt-to-GDP (gross domestic product) ratio, which is a measure of how much debt we have against the size of our economy and our ability to pay, has declined on the back of a healthy growing economy,” said Joven.
“As of the second quarter of 2019, it stands at 37.6 percent, from as high as 74.4 percent in the early 2000s,” he added.
The upgrade of the Philippines’ credit rating, he said, helps the country negotiate better loan terms.
