Calm down, folks. There’s really nothing wrong with the Philippine government using the country’s assets as collateral in the loans it secured from China. At least that’s what President Rodrigo Duterte’s spokesperson Salvador Panelo wants you to think.
He said today that using the country’s territories as collateral is no big deal and that these are standard clauses in inter-government loan contracts.
Panelo’s statement comes a few days after Supreme Court Senior Associate Justice Antonio Carpio said that China could seize the gas-rich Reed Bank in the contested West Philippine Sea if the government fails to pay off a multi-billion loan from the Asian superpower.
Carpio said that the Philippine government offered any part of the country as collateral for a PHP3.69 billion Chinese loan (US$70.26 million) to fund the Chico River Pump Irrigation project, ABS-CBN News reported.
According to the Philippine Daily Inquirer, the loan contract was signed in April 2018 and stated: “[I]n case of default by the Philippines in repayment of the loan, China can seize, to satisfy any arbitral award in favor of China, ‘patrimonial assets and assets dedicated to commercial use’ of the Philippine government.”
Rappler reported that the loan comes with a 2 percent annual interest rate, a “management fee” worth $186,260 (PHP9.78 million), and an annual commitment fee of 0.3 percent. The loan has been described as onerous by critics of the government who warned that it was a debt trap.
The project will reportedly irrigate 8,700 hectares of land in Kalinga and Cagayan. However, Carpio warned that if the Philippines fails to pay the loan, the government would end up going into arbitration at the China International Economic and Trade Arbitration Commission in Beijing, which Carpio said the Philippines will likely lose. If the Philippines does, he said China could take the disputed Reed Bank.
However, Panelo, who also works as the government’s chief legal counsel, dismissed Carpio’s warning and said the Philippines can pay off its loans.
“I don’t see anything wrong because I know it will never happen; that is precisely why perhaps the economic managers who entered into the contract know that it will never happen,” he was quoted by CNN Philippines saying.
He also added that it was just natural for China to include a clause in the loan contract that was more favorable to them and unfavorable to the Philippines.
Yes, he seriously said that. He also said that the Philippines can no longer renegotiate the terms of the contract.
“When we take out a loan, do we really have a say? When we [take out a] loan from the bank, it’s always the terms of the bank. It’s just natural that they will make sure that they won’t lose out in giving that loan,” Panelo said, according to GMA News.
Duterte’s government is generally perceived to have pro-China policies with the president even announcing an economic and military split from the United States, one of its oldest allies, to align himself ideologically with China.
Some critics have assailed the government for this, especially because Duterte has consistently refused to enforce a 2016 ruling which invalidated China’s claim over the West Philippine Sea.
This article, Duterte spokesman says there’s nothing wrong if gov’t uses PH assets as collateral in China loans, originally appeared on Coconuts, Asia's leading alternative media company. Want more Coconuts? Sign up for our newsletters!