Drilon, Lacson confident that PH can pay its loans; other senators wary of labor provisions

Published March 26, 2019, 8:23 PM

by Ellalyn De Vera & Richa Noriega

By Hannah Torregoza and Vanne Elaine Terrazola

Senators on Tuesday downplayed fears over an alleged onerous provision in the Chico River Pump Irrigation Project between the Philippines and China, saying the government would be able to pay the loan.

(L-R) Sen. Panfilo 'Ping' Lacson and Sen. Franklin Drilon (MANILA BULLETIN)
(L-R) Sen. Panfilo ‘Ping’ Lacson and Sen. Franklin Drilon (MANILA BULLETIN)

Senate minority leader Franklin Drilon said Presidential Decree 1177 which authorizes automatic appropriation of public funds to pay off loan interests and principals in any loan is in place to ensure that the Philippines would be able to pay off its loan obligations with foreign countries.

“If we don’t have this law, walang magpapahiram sa atin kung ang pagpapahiram sa atin ay depende sa decision ng Kongreso (nobody will lend to us if the decision to enter loans is dependent on Congress nod),” Drilon told reporters in an interview.

“Kung walang pambayad sa loan eh di walang pambayad sa utang? (If we don’t have any means to pay a loan, then we can’t pay off our loan obligations?) That is why that law up to now exists in order to assure creditors that there is sufficient authority under our existing laws to pay the obligation,” Drilon said.

Drilon said that as far as he is concerned, presidential spokesperson Salvador Panelo’s perception that it is “natural” for China to seize “patrimonial assets” is purely theoretical.

The loan agreement, which was signed on April 10, 2018, states that “in 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.”

Senior Associate Justice Antonio Carpio warned Beijing might seize gas in the resource-rich Reed Bank with this provision as it falls under the category of “patrimonial assets and assets dedicated to commercial use.”

Former Bayan Muna Rep. Neri Colmenares had also warned that the loan agreement was “onerous and highly favors China.”

Panelo, for his part, considered this collateral provision “standard” in any contract whenever a country enters into a loan agreement with other countries.

“So this exposure of our patrimonial assets is just theoretical, because point of fact, we are obligated to pay from funds from the Treasury even without need of appropriation. And that is by virtue of PD 1177,” Drilon said.

Sen. Panfilo Lacson agreed with Drilon and pointed out why lawmakers make it a point not to tinker the automatic appropriations under the General Appropriations Act (GAA).

“Kung titingnan nyo ang GAA, tatlo yan. Regular budget, Special Purpose Fund (SPF) and Automatic Appropriation,” Lacson said, also in an interview.

” Ang SPF pang-augment sa regular budget ng pangulo kung kakapusin. Pero ang automatic appropriation, hindi namin pakikialaman yan pagdating ng budget deliberations (We use the SPF to augment the regular budget in case the President needs it. But we don’t tinker with the Automatic Appropriations during the budget deliberations),” he said.

Lacson said this particular provision in the GAA is the best “collateral” that would assure a foreign government the Philippines would not renege from its loan obligation.

“Precisely, because, as Sen. Drilon said, ito nagpo-protect sa sa atin kasi kasama rito debt service whether principal or interest payment. Kasama sa automatic appropriation; ito ang pinakamagadang collateral pagka nangungutang (this automatic appropriation is the one that protects us because it includes debt service whether principal or interest payment. It is included in the automatic appropriation; this is the best collateral if we enter into a loan),” Lacson said.

But to say that patrimonial assets can be used as collateral is wrong.

“The fact remains we cannot renege because we are committed by way of our GAA because our annual budget always has a debt service provision under automatic appropriations,” Lacson said.
Senate President Pro Tempore Ralph Recto, on the other hand, expressed his position that the Philippine government should not depend on China to fund its programs.
“There are many ways to finance our projects. My preferred method is PPP (public-private partnership), if govt needs to borrow then it may borrow with the ADB (Asian Development Bank) and World Bank. Thereafter it may borrow from JICA (Japan). The last should be China. If at all,” Recto said in a text message to reporters.

Aside from collaterals, Recto said he does not prefer China loans because these are “more expensive” compared to other loan agreements.

In addition, Chinese workers are preferred “instead of Filipinos” in rolling out projects that are funded by the superpower country.

Senator Joel Villanueva, meanwhile, said the Palace “should never use our patrimonial assets as collateral.”

“We have already seen the negative effects of this type of arrangement with China in a number of countries where China eventually ended up controlling the resources and critical assets of a country. Even the provision on the use of Chinese labor is unfair to us, unconstitutional to say the least,” he said in separate statement.

Infrastructure programs, he also noted, should create jobs for Filipinos. Other international financial institutions are also offering lower interest rates, Villanueva said.

“We should ensure that the provisions of these agreements are consistent with the constitution and our existing laws. We have to guarantee that the Filipino people are not worse off with these loans,” he added.