De Lima warns of debt traps from China, citing Malaysia, other countries


By Macon Araneta i FilAm Star Correspondent

Opposition Senator Leila M. de Lima has urged the Duterte administration to heed Malaysia’s decision to withdraw from the China-backed projects to prevent the Philippines from facing bankruptcy due to suspicious Chinese loans.

But Senator Aquilino “Koko” Pimentel III said no two countries are 100 percent similarly situated.

“Let us decide for ourselves what best to do given our own situation and our own analysis. We should not blindly copy what other countries are doing,” he said.

Senate President Pro Tempore Ralph Recto, however, said this is what we should look out for.

“And that’s why PPP (Private-Public Partnership) should be a better model than ODA (Official Development Assistance). PPP will not affect the balance sheet of the national government, no need to borrow too much,” he further said.

Sen. JV Ejercito said this is also his apprehension on China being friendly and offering assistance to finance and undertake big infrastructure projects.

“For sure, it will have strings attached. And knowing China, it will come at a heavy price too. Lutong Macau,” he said.

De Lima, who chairs the Senate committee on social justice, welfare and rural development, said the government should look at the long-term economic repercussions of all the planned China-funded infrastructure projects and investments into the country.

“The Philippine government must take its cue from Prime Minister Mahathir Mohamad who decided to cancel three China-backed projects amounting to U.S. $22 billion to avoid his country from falling into a debt trap. We need to take heed before it’s too late,” she said.

“Entering into loan agreements, especially those that are not obtained through competitive procurement, can put not only our country in dire debt and cripple our economy but also undermine our sovereignty and national security,” she added.

Mohamad confirmed that three China-backed projects – including a railway connecting Malaysia’s east coast to southern Thailand and Kuala Lumpur, and two gas pipelines – will be cancelled until Malaysia can find a way to pay its debts.

In the Philippines, the Duterte administration has reportedly allocated some PHP 8.2 trillion to fund what it called “the golden age of infrastructure” under the “Build, Build, Build” program over the next six years, which would be heavily reliant on Chinese loans.

As early as November 7, 2016, De Lima filed Senate Resolution No. (SRN) 222 which seeks to inquire into the various investment deals entered into by the Duterte administration during the President’s State Visit to China in October.

In May 16, 2017, she also filed SRN 377 urging the Senate to look into the possible onerous terms and long-term financial and economic repercussions of the multi-billion dollar loans and investments package offered by China to the Philippines under its belt and road initiative.

Last February, she again filed SRN 628 directing the appropriate Senate committee to investigate the complete terms and conditions of the loans entered into by the Philippine government to fund its “Build, Build, Build” Program to assess the possible impact of Chinese loans on our economy and national security.

In her SRN 628, De Lima expressed concern over the administration’s obvious lack of transparency over the terms of Chinese loans to fund the infrastructure program especially because lenders, including China, pay around 2-7 percent finders’ fee for each agreement.

In the same resolution, De Lima also took issue on the loans offered by China which she claimed would have an impact on the Philippines’ foreign policy, including the country’s stakes in the contested islands in the South China Sea, locally known as the West Philippine Sea.

De Lima noted that there is already an empirical evidence to show the pattern of China in making use of their supposedly altruistic loan packages but resulting in debt traps and economic collapse in different parts of the world.

“We should learn from the mistakes and misfortunes of other countries in their dealings with China. Our national leaders should exert all honest efforts in protecting our country and the Filipino people against imprudent debt accumulation,” she said.

De Lima cited in particular the cases of Mongolia who had to sell coal to China for only 11 percent of the international market price and of Sri Lanka who had to offer debt-for-equity swaps to China over infrastructure projects, among others.