"The government also gets loans from other sources, not just from China."
Amid fears that loans from China could lead the Philippines to a so-called “debt trap,” Department of Finance Assistant Secretary and spokesman Tony Lambino has clarified that these loans are intended for projects that have been drawn up by Filipinos and will benefit Filipino families as a whole.
“I must emphasize that loans from China’s Official Development Assistance for our infrastructure projects are based on our own needs. If we look at the history of our development projects, these have been in the planning stage for a long time, even decades ago and through various administrations, such as the Chico River Irrigation Pump Project, or the Kaliwa Dam project which seeks to become the secondary water source for Metro Manila and outlying areas,” Lambino told media during last week’s Saturday [email protected]
“First and foremost, these are Filipino projects. We need them based on our own assessment. These projects are thoroughly discussed by the NEDA Board and approved based on a 10-percent Internal Rate of Return or IRR. It should be pointed out that Chinese loans carry only a 2 to 3-percent interest rate. We see to it that foreign loans have interest rates that are less than 10 percent and will benefit the Filipino people,” the Finance official explained.
“We want to improve our infrastructure program for logistics, for connectivity and efficiency not only because it’s good for the economy but also because it’s good for the Filipino family. If we’re stuck in traffic for three to four hours because of congested roads, that precious time we spend away from our families and loved ones,” he added.
Lambino also pointed out that the government also gets loans from other sources, not just from China. “There’s Japan, which is our No. 1 bilateral lender. Our debt to China is expected to reach only 4.5 percent of GDP by 2022. In the case of Japan ODA, the debt-to-GNP ratio is higher at 9 percent. We have also obtained ODA loans from South Korea valued at $1 billion. These are all sources of financing with low interest rates. Compared with private capital markets and bonds issued by the Bureau of Treasury, they have lower interest rates and offer cheaper financing for projects that we have identified and deemed beneficial to the national interest. The level of our foreign debt should be carefully managed relative to the size of the economy and our economic growth.”
The Finance official said our loan agreements with China have basically the same provisions as those with other countries. “We ask for lower interest rates through negotiations. There’s nothing out of the ordinary in our loan agreements with China. Even the provision on confidentiality, we were able to negotiate that, and any Filipino citizen can request for a copy of the agreement. We also said the loan agreement should be subject to Philippine laws. We have actually posted in our website the loan agreements with China and other countries and these can be downloaded by the public.”
The immunity waiver provision, Lambino said, allows the Philippine government to pursue arbitration proceedings if problems crop up. “We will not surrender our national sovereignty or patrimonial assets if our loan agreements run into problems. This applies to all our bilateral as well as multilateral loan agreements. Moreover, arbitral decisions must also be upheld by Philippine courts to become effective.”
The Philippines secures loans from China and other countries because “it is important to sustain our growth momentum. We are about to become an upper middle-income country. In fact, we want to reach high-income status and attain zero extreme poverty by 2040,” Lambino stressed.
The DOF official explained: “Our growth trajectory is based on two factors. One, we must heighten investment in our infrastructures, not only in flagship projects under the Build, Build, Build program but also thousands of small-scale projects throughout the country. That’s continuing up to now, although the reenacted budget has resulted in delays.”
Lambino continued: “Two, we have to catch up on our investment in the Filipino people through education, health care and social protection. The Universal Health Care Law signed by President Duterte early this year needs to be fully implemented. We want funding for Universal Health Care to be sustainable so that every Filipino can gain access to health care, based on the principle that an ounce of prevention is worth a pound of cure. The law provides that every Filipino should have a primary health care provider. That’s important because a healthy population is a productive population.”
The government, Lambino added, wants to pursue universal health care and give full support to the Department of Health in implementing the law. At the same time, the Department of Finance would also urge Congress to pass the Universal Health Care financing bill that awould raise taxes on ‘sin’ products such as tobacco and alcohol.
As far as education is concerned, Lambino said, the Department of Education is exerting all efforts to improve the K to 12 education program and ensure funding for higher education.
Ample proof that the government has been able to competently manage the economy and our debts, the official said, is the improved credit rating recently announced by Standard and Poor’s. The credit rating of BBB+—which is one step away from the coveted A rating of creditworthiness—he stressed, leaves no doubt that the government’s economic managers are making the right policy decisions for the benefit of Filipinos and their families.