Duterte urged to take Malaysia cue on China aid

Manila: President Rodrigo Duterte should carefully study the option of taking loans from China given the experience of other countries having to contend with a debt vortex at a later stage, an opposition senator cautioned.

“We should learn from the mistakes and misfortunes of other countries in their dealings with China. Our national leaders should exert all honest efforts in protecting our country and the Filipino people against imprudent debt accumulation,” senator Leila de Lima said.

De Lima noted that there is already an empirical evidence to show the pattern of China in making use of their supposedly altruistic loan packages but in turn resulted in debt traps and economic collapse in different parts of the world.

The senator from the political opposition was referring to the experience of countries like Mongolia and Sri Lanka and most recently, the Maldives, which was provided with loans by China which she said turned out to contain unfair terms.

'Unfair terms'

De Lima said that in the case of Mongolia, it had to sell coal to China for only 11 per cent of the price in the international market.

Sri Lanka, on the other hand, had to offer debt-to-equity swaps to China over infrastructure projects.

As for the Maldives, a report published by the Japanese publication, Nikkei Asian Review, said the tiny Indian Ocean island nation may have to cede territory to China to repay its debts to the latter.

Former President Mohamed Nasheed said that as January, Maldives’ debt obligations to China accounted for “early 80 per cent” of the of the country’s foreign debt.

Most of the projects were unnecessary but the high interest rates imposed by China, made it untenable to pay the debt.

According to De Lima, chair of the Senate committee on social justice, welfare and rural development, said the government should look at the long-term economic repercussions of all the planned China-funded infrastructure projects and investments into the country.

“The Philippine government must take its cue from Prime Minister Mahathir Mohammad who decided to cancel three China-backed projects amounting to $22 billion to avoid his country from falling into a debt trap. We need to take heed before it’s too late,” she said.

“Entering into loan agreements, especially those that are not obtained through competitive procurement, can put not only our country in dire,” she added.

Mahathir cancels projects

Mahathir had recently said that three China-backed projects — including a railway connecting Malaysia’s east coast to southern Thailand and Kuala Lumpur, and two gas pipelines — will be cancelled until Malaysia can find a way to pay its debts.

Duterte has allocated some P8.2 trillion (Dhs 563 billion) to fund what it called “the golden age of infrastructure” under the ‘Build, Build, Build’ programme over the next six years — and most of these projects are heavily reliant on Chinese loans.

De Lima had already filed a resolution over the lack of transparency by the Duterte administration on the terms of the loans from China which reportedly pays a hefty 2 to 7 per cent “finders fee.”

She said government should carefully assess the possible impact of the loans from China not only on the country’s economy, but national security as well.