Philippines ‘a responsible borrower’ – finance official

By Genalyn Kabiling

The government can pay its $62-million loan for the Chico River Pump Irrigation project but also expects China to comply with the provisions of the agreement, finance officials said Wednesday.

Finance Undersecretary Bayani Agabin said the country has never reneged on obligations “even during the most difficult times,” citing it has always been a responsible borrower.

Finance Undersecretary Bayani Agabin (SCREENSHOT / RTVM / MANILA BULLETIN)
Finance Undersecretary Bayani Agabin (SCREENSHOT / RTVM / MANILA BULLETIN)

The assurance was made to dispel concerns that the country might end up losing some assets to Beijing if it cannot pay its obligations under the Chico River deal.

“May probisyon tayo sa batas, it’s PD 1177, na awtomatikong naglalaan ng pambayad ng utang na nakapaloob po ito sa taunang [We have a provision in the law, PD 1177 that automatically appropriates payment for debt in the annual] General Appropriations Act. Meaning, all our indebtedness, it’s automatically appropriated in our budget,” Agabin said during a Palace press briefing.

He challenged government critics to look and study the country’s credit history and consult with experts, as he dispelled concerns the country might fall into a debt trap. “If you will look at it, we’ve never had a history where we renege on our obligations, even during the most difficult times,” he said.

Finance Undersecretary Mark Dennis Joven said the government also relies on the “good faith” of China to comply with the provisions of the loan agreement.

“We fully trust China to comply with a loan agreement which they signed, in the same way as they trust us to comply with a loan agreement which we signed,” Joven said in the same press briefing.

“We’re very well aware of what is happening in the world and we’re fiscally responsible enough not to do something which will endanger the fiscal position of our country,” he added.

The government has forged a loan agreement with China to build the irrigation project to provide water to Kalinga and Cagayan provinces. The loan agreement provides for arbitration proceedings to be conducted by the China International Economic and Trade Arbitration Commission in case of a dispute.

Any arbitration ruling must still go through the Philippine courts for enforcement, according to Agabin.

The DOF officials have also denied that the government has offered its natural assets as collateral in the loan pact with China. “Walang anumang collateral na nagdudulot ng pagsuko ng ating teritoryo na isinama ang gobyerno [There was no collateral that results in surrendering our territory that was included by the government],” Agabin said.

The government however waived its sovereign immunity where the lender has recourse in case Manila can’t pay its loans.

“Ang waiver of sovereign immunity ay hindi nagpapahintulot sa sinumang dayuhan o foreign party na kunin o angkinin ang ating mga likas na yaman [The waiver of sovereign immunity does not allow any foreign party to claim our natural resources],” Agabin said.

“If government—despite the recognition by the court that it’s a valid arbitral award and we still refuse to pay, then they can get that and look for patrimonial properties,” he said.

Agabin said the government would have to source funds in case of arbitration payment. “Generally, how does government raise funds? They issue bonds or they take out loans, or they get it out of taxes,” he said.

Supreme Court Senior Associate Justice Antonio Carpio earlier warned that China could seize the country’s “patrimonial assets and assets dedicated to commercial use” if it defaults on the loan payment for the Chico River irrigation project. Carpio claims that patrimonial assets include the oil and gas in the Reed Bank.

Joven said since the Reed Bank concession was granted, it was not technically possible for China to enforce an arbitral award by getting the Reed Bank or Recto Bank concession.

“The only way for the Chinese government to recover Philippine properties located in the Philippines is to go through Philippine courts, right? So, if… it opts not to go through Philippine courts, then how can it get Philippine properties?” Joven said.