By Genalyn Kabiling
The Philippines is willing to provide sovereign guarantee for the financing of key infrastructure projects under a 10-year cooperation program sealed with China.
In the infrastructure pact released by the Palace Tuesday, both sides have agreed to promote investment and cooperation in transportation, agriculture, power, watershed management, and information and communications technology/telecommunications.
The agreement, signed by the two parties last week, included a commitment to improve the finance guarantee system for infrastructure cooperation to provide financial support for these projects.
“Both sides underscore the importance of sound financial risk management in ensuring smooth infrastructure cooperation. Both sides shall encourage their enterprises to use such insurances as export credit in duration to insure enterprises against risks and financial institutions for loan recovery,” the document read.
“The Philippines will consider extending sovereign guarantee for the financing of key infrastructure cooperation projects, as applicable,” it added.
A sovereign guarantee pertains to a government’s promise to cover an obligation if the project lender defaults.
Under the infrastructure cooperation program, Manila and Beijing are also prepared to use concessional loans, export credit and other means of financing to support infrastructure projects. They will encourage financial institutions to provide financing facilities for Chinese enterprises investing in the Philippines.
The infrastructure cooperation program was among the 29 agreements signed during the state visit of Chinese President Xi Jinping in the country last week.
The two sides agreed to “develop and adopt” the program that will be a framework for infrastructure cooperation from November 2018 to November 2028. The program also recognized “the growing demand of the Philippines on infrastructure brought by rapid economic growth, rapid population growth, and urbanization.”
“China is willing to share with the Philippines its experience and resources in investment in financing, consultation and design, engineering technology, contracting construction, project management, project financing, among others,” the document read.
China is also prepared to share its experience in planning, preliminary and preinvestment studies, and operation and management of large infrastructure projects with the Philippines.
On transportation, both sides agreed to urge enterprises to invest in the construction of the Philippine National Railways South Long Haul Project, Subic-Clark Railway Project, Mindanao Railway Project, and other railway projects.
The two countries also agreed to cooperate on the construction of roads, bridges and airports to meet growing transportation demand and ease traffic congestion.
They will also explore cooperation in the rehabilitation, upgrading and strengthening of the Pasig River Ferry System.
Both sides also recognized the huge potential for bilateral cooperation in irrigation and fish ports, power, water resources management, and ICT/telecommunications.
“The cooperation projects shall be identified based on the most cost-efficient and cost-effective measures to attain the best value for money through the application of value methodologies,” it said.
Under the infrastructure cooption program, the two sides also agreed to take measure to enable investment facilitate and protect investors’ interests, property and safety.
They will also improve bilateral tax treaties to avoid double taxation, enhance customs regime, strengthen tax administration system, build a sound levy and payment relationship.
“Both agree to create an open, fair and just investment environment for the cooperation projects and guarantee reciprocal reasonable or national treatment,” it said.