Beijing-led Export-Import Bank of China (CEXIM) indicated higher returns to bankroll the Duterte administration’s three big-ticket railways projects, former Finance Secretary Carlos G. Dominguez III said.
Dominguez, who served as former President Duterte’s chief economic manager, explained that there were indications that CEXIM “at the very least” would ask a three percent interest rate for the Bicol, Subic-Clark, and Mindanao railway projects.
Citing a report by Finance Undersecretary Mark Dennis Y.C. Joven, Dominguez said that US dollar benchmark interest rates have increased to around three-percent, and "CEXIM will push to recover this funding rate at the very least.”
While CEXIM has yet to specify the financing cost it intends to offer, Dominguez noted that the Chinese lender has stated that it intends to extend loans while recovering “at least marginal funding cost.”
Asked if three-percent was a reasonable yield considering the rising global interest rate environment, Dominguez said “the prudent path would be to ascertain that the cost of the debt be less than economic returns of the project financed.”
If the previous administration pursued the CEXIM loans, its interest rate could have been way above the 0.1 percent yield given by the Japanese government as development assistance to the Philippines.
On Friday, July 15, Transportation Undersecretary for Railways Cesar B. Chavez was quoted in media reports, saying the Philippine government dropped its Chinese loan applications for the Bicol, Subic-Clark, and Mindanao railways.
Chavez said Manila has withdrawn the application after Beijing failed to act on the documents filed by the Duterte administration.
Finance Secretary Benjamin E. Diokno confirmed the withdrawal, but the Marcos administration was not yet ready to throw in the towel.
The Department of Finance (DOF) will revisit the Beijing-backed infrastructure projects, Diokno said “If found worthwhile, it may choose to restore the loan application. If funding is still available.”
Meanwhile, Joven said that Manila and Beijing would still discuss “how to move forward” with the three railway projects.
“I recommend bilateral discussions between the Philippines and China representatives to reach consensus,” Joven said.
He also said there was no loan withdrawal for the Beijing-backed railways as these projects “have not been approved for funding by the Chinese.”
Loans for the Philippine National Railways (PNR) project from Banlic, Calamba to Daraga, Albay, as well as Clark Subic railway project are not yet approved, the DOF official said.
The Mindanao railway project, on the other hand, only awarded the project management consultant contract, Joven said.
“I think, government of the Philippines and Chinese government have to discuss how to move forward with the three projects,” Joven said.