The Department of Finance (DOF) denied waiving any natural assets of the Philippines in its loan deal with China in relation to the multibillion-peso Chico River pump irrigation project.
“We absolutely have not waived anything with regards to these properties through the loan agreement,” Finance Assistant Secretary Tony Lambino told CNN Philippines. “No collateral with our loan agreements. That means our creditors do not have any guarantee to any asset that we have.”
Instead, Lambino said what was agreed upon between Beijing and Manila is to go to arbitration proceedings should the Philippines default on the loan agreement.
China shoulders ₱3.6 billion in the irrigation project that aims to help farmers in Northern Luzon.
The Finance official also allayed fears over the Philippines’ ability to pay the loan out, and said it is the best deal the Philippines can get.
“The interest rate that we are paying is lower than borrowing from multilateral development banks or borrowing from private capital markets,” he explained.
He added that 41.9 percent debt to gross domestic product ratio means “the size of our loans are very manageable relative to the size of our economy. We are also able to pay our debts.”
On Saturday, Senior Associate Justice Antonio Carpio in a lecture cited Paragraph 8.1 of the loan agreement. Carpio said Beijing can seize “patrimonial assets and assets dedicated to commercial use” of the Philippines.
Carpio added the phrase “patrimonial assets and assets dedicated to commercial use” includes the oil and gas in the Philippines’ exclusive economic zone in the West Philippine Sea like those in Reed Bank.
Under the loan agreement, disputes arising from the loan agreement will be handled in arbitration proceedings conducted by the China International Economic and Trade Arbitration Commission (CIETAC).
Government has 20 years to pay the loans from China. The Chico River pump irrigation project is one of two projects with China, including the ₱12.2 billion Kaliwa Dam project, to augment the water supply for Metro manila.