LAST Friday, July 15, 2022, Department of Transportation Undersecretary for Rails, Usec. Cezar Chavez, averred that China has withdrawn funding for three big-ticket railway projects of the previous administration, namely: (a) the Calamba to Bicol (South Rail) amounting to P142 billion; (b) Subic to Clark amounting to P51 billion; and, (c) Tagum-Davao-Digos amounting to P83 billion.
The word “withdrawn,” I think, was used in the context that China accordingly did not act on the Philippine government’s request for funding for the three major railway projects.
As a reaction, President Ferdinand “Bongbong” Marcos Jr., ordered the DOTr to go back to the negotiating table with the Chinese government which I think is the most fitting and prudent response to the matter at hand. Hence, the Marcos administration is inclined to revisit the said China-backed infrastructure projects.
As expected, this news flash has triggered a mix of reactions and speculations among the public and of course, among government officials.
Hence, before speculations and emotions get the best of us, and before the “Sinophobic few exploit this issue against the flourishing and deepening friendship and understanding between the Philippines and China, it might be prudent and wise to put this newsflash into proper perspective.
PH-CN relations under a Marcos Presidency
To lay down the predicate, if one is observant, one will realize how the Chinese put so much value and importance both on Philippines-China bilateral relations and friendship and to the newly constituted administration of President Marcos Jr., exemplified by the fact that China sent a high-level delegation led by Chinese Vice President Wang Qishan, who acted as President Xi Jinping’s special representative to Marcos Jr.’s inauguration to foreshow a good start to Philippines-China relations for the next six years.
A few days later, another high-level delegation from China headed by State Councilor Wang Yi, the first Foreign Minister received by the newly-inaugurated Marcos administration met with President Bongbong Marcos, Vice President Sara Duterte, Foreign Secretary Enrique Manalo, and National Security Adviser Dr. Clarita Carlos, took place.
In the context of these visits of high-profile Chinese officials to the Philippines, to a considerable extent, these visits fortified the practical cooperation between the Philippines and China in many avenues, such as the Belt and Road Initiative (BRI), the Comprehensive Infrastructure Plan between the Philippines and China and cooperation on large-scale agriculture, digital infrastructure, infrastructure, energy, and the commitment to maintaining the strong relationship between the two countries and peoples.
The successive visits of high-ranking Chinese officials to the Philippines are no doubt an expression of goodwill, friendliness, and China’s commitment of support to the Philippines, more particularly to the Marcos administration, in every possible way.
This also just goes to show how important the Philippines is to China. This further means that the Philippines is a priority partner to China.
Thus, to imagine that the Chinese government is withdrawing its financing support for the said three railway projects is unconvincing.
Just to set the record straight, according to reports, from 2021 to 2022, the Department of Finance (DOF) informed China Eximbank that the submitted loan applications for the three railway projects would only be valid until May 31, 2022, and would be automatically withdrawn if not approved.
“In a text message to Chavez, former Finance Secretary Sonny Dominguez said that he ‘canceled’ the application instead of keeping it in suspended animation.”
This is in light of a change of administration from Duterte to Marcos and as an act of deference to the new administration.
Thus, technically and substantially, China did not deliberately and categorically withdraw its support to the said railway projects; rather there was a withdrawal of the loan applications for the said railway projects on the part of the previous administration and one of the reasons pointed out is the notion that China wants a 3 percent interest on these three railway projects. Hence, let us put this issue and look at it from a proper perspective.
Interest Rate
No doubt, some China-backed infrastructure projects under implementation had a 2 percent interest rate including the P19.32-billion bridge connecting Samal Island and Davao City payable in 20 years, and the Kaliwa Dam project, also payable in 20 years.
However, if one is cognizant of what’s happening globally when it comes to interest rates and inflation, one will observe that there’s a hike in interest rates and the world is experiencing an inflationary crunch brought about by the ongoing Ukraine crisis.
These challenging development puts pressure on financial institutions like the Exim Bank of China to raise their interest rates too, to some extent to adjust to this ever-volatile and challenging global financial situation.
For example, the United States Federal Reserve is increasing interest rates drastically to curb a 9.1 percent inflation rate not seen in more than four decades or a 40-year record.
Such action on the part of the US Federal Reserve is causing turbulence and troubling the global markets reliant on the US dollar.
This is also prompting financial institutions like the Exim Bank of China to increase their interest rates vis-a-vis their loan portfolio. Likewise, if you ask for loans from the Asian Development Bank (ADB) and World Bank, the interest rates are also increasing. This is the reality at the moment.
Conclusion
In retrospect, I think the crux of the matter is the fact that there’s a new administration, in so doing, this necessitates a renegotiation of the supposedly Beijing-backed three railway projects to suit the needs and the priorities of the new administration.
Even this matter which relates to the said 3 percent interest rate that the Exim Bank of China has proposed to the previous administration is a technicality that I think can be part of such renegotiation and discussion.
I do not doubt that the Chinese government is open to discussions and negotiations with the new administration in the same manner that the new administration is also open to renegotiations with the Chinese government as prescribed by President Marcos himself.
I guess this is the most important piece of information between the two sides that needs to be pursued patiently by concerned government agencies following the directives of the president.
I also think that the Philippines-China bilateral relationship is stable and resilient.
No doubt, both countries, the Philippines and China, are partners and are willing to join hands with each other to carry out bilateral cooperation ushering in a new page in the golden era of Philippines-China bilateral relations, friendship, and understanding.