‘It is a pivot to China’: Recto urges gov’t to avoid Chinese loans

Senator Ralph Recto is urging the Duterte administration to refrain from borrowing money from China, in light of its continuing occupation of reclaimed islands in the West Philippine Sea and other actions that undermine Philippine sovereignty.

“I don’t think we should be borrowing more from China, considering everything that’s happening in the West Philippine Sea,” Recto said in an interview with CNN Philippines on Tuesday, September 15.

To finance its response to the COVID-19 pandemic and its Build, Build, Build infrastructure project, the government plans to borrow some P3 trillion in 2021 from foreign sources, said Recto, who is the Senate president pro tempore. Further borrowing is expected in succeeding years.

“Hopefully, we should not be borrowing this bilaterally from China,” he said, noting China’s track record in lending money to other countries.

In a resolution filed on September 7, Recto urged the Executive branch of government “to refrain from increasing the country’s debt exposure to China.” This is in order to “promote transparency, safeguard debt sustainability, and to preserve and protect the national interest.”

A cautionary tale

In the document, Recto cited the cases of Tajikistan and Sri Lanka as a cautionary tale of the negative consequences of Chinese debt.

In 2011, Tajikistan ceded some 1,158 sq km of disputed territory to China in exchange for writing off an “unknown amount of debt.”

In 2017, Sri Lanka gave China a controlling equity stake and a 99-year lease on Hambantota Port when it could not pay the loan it took to build the port.

Although China had pledged several loan packages to the Philippines, so far only two have been signed: the $62.1-million Chico River Pump Irrigation Project, and the $211.2-million Kaliwa Dam Project.

Recto said “irregularities” in the bidding and vetting process for the Kaliwa Dam Project resulted in it being a “negotiated contract.” This means the project was not opened to an optimal competitive bidding for contractors, which the law required.

Chinese loans to developing countries have largely been “obscure” when it comes to their terms and conditions, the senator noted. These loans typically come with high interest rates, short maturities and grace periods, and collateral clauses in which debt repayments are secured through revenues and national assets.

In contrast, multilateral lenders such as the World Bank or the Asian Development Bank have friendlier interest rates and longer maturities and grace periods. Other countries that offer loans have shown more transparency in debt relief measures, while China tends to be secretive and averse to multilateral approaches, Recto added.

Why reward Chinese companies?

Besides the ominous aspects of Chinese loans, Recto warned against the Philippines becoming increasingly indebted to China, which poses a threat to the national interest.

“Potentially, we may lose our exclusive economic zone (EEZ),” Recto told CNN Philippines. He noted that the country’s EEZ in the West Philippine Sea exceeds 30 million hectares, making it a little larger than the country’s entire land mass.

Recto also urged the Duterte administration to blacklist Chinese companies that were involved in reclamation and construction in the West Philippine Sea, which turned 7 formerly submerged reefs into military installations.

“Why should we reward contractors who developed or reclaimed parts of the West Philippine Sea? We will allow them now to what? Reclaim Manila Bay? We will allow them now to put up an airport facility in Manila Bay?” Recto said, referring to the Sangley Point International Airport Project bagged by a partnership that includes the China Communications Construction Company (CCCC).

CCCC is among several companies blacklisted by the US for its role in China’s occupation of the West Philippine Sea. President Rodrigo Duterte has refused to impose similar sanctions.

What independent foreign policy?

Recto said the Senate, which consists of 24 of only 26 nationally elected officials of the country, can “speak its mind and make recommendations to the President.” Besides senators, only the President and Vice President are voted into power by the entire national electorate.

The point he wants to make, Recto said, is that “not everyone in government is amenable. Not everyone in government is saying this is an independent foreign policy.”

“It is a pivot to China. What independent foreign policy are we talking about?” he added.

Recto has also openly opposed an agreement allowing the China-backed Dito Telecommunity to build cell sites in Philippine military bases.

With experts and even the military itself acknowledging risks of Chinese spying that come with the deal, Recto said it would be “better to be safe than sorry.” Military bases should be off-limits to Dito, he insisted. 

Recto hopes to get at least two-thirds of his fellow senators to vote to adopt his resolutions on these matters involving the Philippines’ dealings with China.

“The bigger the number, the greater the political impact…. If we get two-thirds, maybe the President will listen,” Recto said. – Rappler.com

JC Gotinga

JC Gotinga often reports about the West Philippine Sea, the communist insurgency, and terrorism as he covers national defense and security for Rappler. He enjoys telling stories about his hometown, Pasig City. JC has worked with Al Jazeera, CNN Philippines, News5, and CBN Asia.