Philippines has no say in loan deals with China – Panelo

MANILA, Philippines – The Philippine government is powerless when it comes to determining the terms of loan agreements it enters into with China, said Malacañang on Monday, March 25.

Amid growing alarm over the Duterte administration's loan deal with China for the Chico River Pump Irrigation Project, Presidential Spokesperson Salvador Panelo said China, as lender, dictates the terms of such deals. The Philippines, meanwhile, has no choice but to abide by China's terms.

"Hindi ba pag nag-uutang tayo, mayroon ba tayong say? When we loan from the bank, it's always the terms from the bank. Natural lang 'yun na they will make sure na hindi sila malulugi sa kanilang pinautang sa atin," Panelo said during a Palace news briefing.

(When we ask for a loan, do we have a say? When we loan from the bank, it's always the terms from the bank. That's natural because they will make sure that they won't be at a disadvantage when they grant us the loan.)

"Eh wala ka namang – do you have any say when you're borrowing money? O sasabihin nila, 'Eh di 'wag na lang. 'Wag na lang kaming magpahiram sa inyo,'" he added.

(You don't have – Do you have any say when you're borrowing money? They'll just say, "Never mind, we won't lend you money.")

China is lending P3.69 billion for the project and is imposing a 2% interest rate, higher than Japan's rates of 0.25% to 0.75%. Beijing gave Manila 20 years to pay the loan, with a grace period of 7 years. 

'Impossible' for China to seize Reed Bank

Malacañang is not worried that the loan agreement allows China to seize oil-rich Reed Bank in the West Philippine Sea should the Philippines be unable to pay its debt. 

Why is the Palace so confident? Because it is sure the Philippines will "never" default on its loan. 

"It's not a possibility because we will never renege. It never happened to us. We're known for paying our obligations.... Kaya sila pumasok diyan kasi alam nila hindi mangyayari (That's why they entered into that because they know it will never happen)," Panelo said.

But what if the "impossible" happens? What if, for some reason, the Philippines is unable to pay China back? Panelo merely repeated that he thinks this is impossible. 

"It will never happen kasi we pay nga eh. Tsaka ang liit lang naman. Magkano ba, $92 million? Magkano lang 'yun (It will never happen because we always pay. And the amount is so small. How much, $92 million? That's small)," he said.

'Standard' terms from China

Panelo also said the use of natural resource assets like Reed Bank in the West Philippine Sea as collateral is "standard."

"Kasi 'yun nga ang standard ng terms ng kanilang mga ano eh (Because that's the standard terms of their contracts).... The onerous conditions that some are saying are incorporated in the contract [are] standard between lender and borrower to be sure that the lender will be getting what they have lent to the borrower," he said. 

Panelo was echoing the Department of Finance. But its assistant secretary, Tony Lambino, had also said nothing in the loan agreement turns natural resources into collateral.

Supreme Court Associate Justice Antonio Carpio raised alarm over the terms of the loan agreement, saying certain provisions allow China to seize Reed Bank, within the country's exclusive economic zone, should the Philippines fail to pay back the loan.

The controversial provisions in the agreement mention a "waiver of immunity."

The agreement states in two articles, Articles 5 and 8, that the Philippines must waive its right to immunity.

By signing the deal, the Philippines under Article 5.5 is not "entitled to any right of immunity on the grounds of sovereign" in the case of arbitration and execution of any legal processes in relation to the project.

This is reiterated in Article 8.1, which states that the country will also have to waive "any immunity on the grounds of sovereign or otherwise for itself or its property in connection with any arbitration" that may stem from unresolved disagreements related to the irrigation project. – Rappler.com

Pia Ranada

Pia Ranada covers the Office of the President and Bangsamoro regional issues for Rappler. While helping out with desk duties, she also watches the environment sector and the local government of Quezon City. For tips or story suggestions, you can reach her at pia.ranada@rappler.com.

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