The government’s Investor Relations Office (IRO) reported last week that Japan is the Philippines’ leading source of overseas development assistance (ODA) as of the third quarter last year.
Japan’s ODA, which consists of low-interest loans and grants, is worth $11.2 billion, 89.1 percent of which (or $9.9 billion) went to fund the government’s “Build, Build, Build” infrastructure program.
The other sources of ODA are the Asian Development Bank, World Bank and South Korea. China, the government’s apple of the eye or niño bonito (favorite), is fifth on the list with $600 million.
To date, only four of China’s ODA-funded infrastructure projects are undergoing construction. The rest of the projects it offered to support are either the subject of feasibility studies or under contract negotiation. Recall that early in President Duterte’s administration, he visited China several times and, according to government reports, was able to secure the commitment of China’s leader, Xi Jinping, to extend massive loans and grants to the Philippines.
With that promise and the expectation of higher tax collection, the government’s economic managers said the Duterte administration would be the “golden age of infrastructure” in the Philippines. When the expected funds from China was slow in coming, Finance Secretary Carlos Dominguez III and several Cabinet members went to Beijing in 2017 to clear the logjam in the preparation of project documents and signing of funding or loan agreements.
Based on the IRO’s report, it seems that trip and the follow-ups made by key government officials to China had not made the promised financial aid a reality. In light of recent controversy over China’s unlawful actions in the West Philippine Sea, it is doubtful if China will be able (or willing) to do any more projects other than the four earlier mentioned within the remaining one year and two months of the Duterte administration.
This raises the question on whether China was sincere in its offer of financial assistance to the Philippines.
Note that the majority of the projects presented to China for funding support have existing feasibility studies. It would just be a matter for China to validate their data and that should not take long, unless the intention to redo the studies is aimed at delaying or derailing the signing of the financing agreements.
Those kinds of agreements are not difficult to conclude. Business executives or lawyers who have negotiated contracts of those nature know they are “templated,” meaning, prepared in advance and that except for changes in the borrower’s name, loan amount, underlying project, payment terms, and fees and charges payable, the rest of its provisions are nonnegotiable. Discussions on those agreements are simply exercises in “filling the blanks” or done on a take-it-or-leave-it basis because, as the saying goes, “beggars cannot be choosers.”
The reason often given to turn down requests for changes in boiler plate provisions of those agreements is, it’s the way the lender has been doing business with other borrowers, or any changes may create a bad precedent that may later turn out to be not in the lender’s best interests.
The issues on feasibility study and contract negotiations apply squarely to Japan and yet did not pose a problem in its ability to promptly release its ODA to the Philippines. And in contrast to China, Japan did not hype its offer of assistance or used it to enhance its standing in the eyes of the Filipinos.
So what gives? Was the Philippines taken for a ride by China? It looks like China’s dangling of financial aid was aimed at making the Philippine government look the other way as it illegally encroached and built military structures inside the Philippines’ exclusive economic zone. And it worked!
Remember the idiom “beware of Greeks bearing gifts”? The lesson behind that expression finds meaning in China’s so-called friendly relations with the Philippines. INQ
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