The strict process involved in scrutinizing loans from China for the Philippines’ infrastructure projects has led to a “rather slow” flow of official development assistance (ODA) from that country, the National Economic and Development Authority’s top official said.
Thus, Ernesto Pernia, socioeconomic planning secretary, said there is no way the Philippines will be “overshooting” its debt level.
“Actually, the ODA coming from China has been rather slow. We have been very cautious and strict in scrutinizing… we have this screening process at the China level and also on the Philippines’ side. They have to submit to us three names of companies that are reputable, no record of monkey-business before, and really credible. They submit three names and on our side we have to screen in terms of selecting the best of the three, so it has been rather slow,” Pernia said at the Nordcham Economic Briefing in Makati held last Friday.
“(Someone mentioned) we’re in danger of overshooting our debt level beyond 100 percent?
No way! It’s unlikely that we would be hitting even 50 percent debt-to-GDP (gross domestic product) ratio,” he added.
The Bureau of the Treasury previously said the debt-to-GDP ratio went down to 41.5 percent in 2019 from 41.9 percent a year ago, beating the program of 41.7 percent for the year. Of the total debt stock, 33.7 percent are external debt while 66.3 percent are domestic debt.
“The only China-project actually going on is the Chico River (Pump) Irrigation Project.
There is another one, that’s Kaliwa Dam but that has barely started so that goes to show that, compared with Japan, Japan International Cooperation Agency ODA has been much faster. There are so many projects now being funded that are ongoing, being funded by Japan. So that is the story,” Pernia said.
He also said the economic slowdown in China plus the Wuhan coronavirus that may affect China’s economy may possibly affect projects for approval.
“Maybe… except for those which they have already signed,” Pernia said.
According to the Department of Finance (DOF), since the start of the Duterte presidency in 2016, the Philippines and China have so far signed three loan agreements amounting to $493.08 million. The Philippines has also secured a total of $430.82 million-worth of grants from China since 2016.
Pernia previously said a screening system was put in place on the Philippines’ and China’s side to make sure that companies interested to participate in infrastructure projects in the Philippines are not questionable or do not have a bad record. They should not be blacklisted, for example, with the World Bank, Asian Development Bank or the Asian Infrastructure Investment Bank.
Last December, the DOF said newly appointed Chinese ambassador to Manila Huang Xilian has committed to institutionalize the conduct of regular meetings between the Philippines and China to thresh out issues involving the administration’s big-ticket infrastructure and development projects that are being implemented with funding support from China.
The DOF said Huang made this commitment in response to the proposal of Carlos Dominguez, DOF secretary, to hold regular dialogues between high-level officials of the Philippines and China to address such concerns.
“It would be very helpful if we have regular meetings regarding these projects. Our suggestion has always been to meet once every three or four months,” Dominguez said.
According to the DOF, Huang agreed with the finance secretary and said he would “work very hard” to ensure that projects under the “Build, Build, Build” infrastructure modernization program that are being implemented in cooperation with China would be launched “as soon as possible.”
“We will try to make this (regular meetings) happen as soon as possible. My suggestion is we need to institutionalize that kind of mechanism. Every three months to take place, every quarter,” Huang said.
In 2018, Dominguez said the Philippines will not fall into a “debt trap” by tapping funds from Japan and China, as the loans from these countries were extended with the lowest interest rates and the lowest term arrangements possible.
Dominguez then said by the end of the administration’s term, the country’s project debt to China would constitute around 4.5 percent of the total debt, while the project debt to Japan will be around twice as large or 9.5 percent of total debt.
