(Cagayan de Oro City, 19 July 2017) The secretary of the country’s socio-economic planning agency has belied reports that the Philippines could be paying too much for loans and official development assistance from China arising from President Rodrigo Duterte’s recent state visit to Asia’s largest country.
“We don’t know yet what the Chinese will be charging because nothing has been signed yet in terms of financing,” said Socioeconomic Planning Secretary and National Economic and Development Authority Director General Ernesto M. Pernia during a press conference held here following the unveiling of the Philippine Development Plan and the Northern Mindanao Regional Development Plan for 2017-2022.
The administration’s economic “Build, Build, Build” infrastructure program is estimated to require external borrowings of US$ 157-billion, mainly coming from China and Japan.
Public and private economic planners have expressed alarm over the administration’s abrupt shift from the Public-Private Partnership (PPP) of the former administration to ODA citing the minimal ODA extended by China to the Philippines ($123M out of total $30.08 billion) and the relatively slow downloading of ODA, particularly from China (27 months from project development to groundbreaking for PPP, vs. 37 months for Korean ODA, 38 months for Japanese ODA and 40 months for Chinese ODA), according to NEDA records.
Thus, the $6-billion ODA package proffered by China to the Duterte administration was recently the hot topic at the Bangko Sentral ng Pilipinas (BSP) forum in Cebu City, according to a Sun Star Cebu Business story filed by Jeandie O. Galolo.
In her report, Galolo cited how Fernando Fajardo, economist and professor at the University of San Carlos, detailed the unfortunate experience of infrastructure projects in Africa which resulted in the fourfold rise of Chinese financing to Africa from US$7-billion in 2008 to US$26-B in 2013, according to the Wharton School of Economics. In December 2015, Chinese President Xi Jinping pledged $60 billion to support Africa’s infrastructure wish list.
Fajardo cited the sad experience of the Chinese-financed Mattala International Airport in Sri Lanka which has been unable to generate passenger traffic.

Socioeconomic Planning Sec & NEDA Dir. Gen. Ernesto M. Pernia unveils the Philippine Development Plan and Regional Development Plan for Northern Mindanao 2017-2022 with the assistance of RD Leon Dacanay Jr., NEDA Usec.Jose Miguel dela Rosa & NEDA-X ARD Mae Ester T. Guiamadel (CIO Photo)
However, fellow economist and former socioeconomic planning secretary Cielito Habito asserted ODA from China to the Philippines would not end up similarly, if properly used.
Habito cited how the Philippines recorded in 2016 its lowest debt-to-GDP ratio level in the last 20 years, at 42.1 percent from 44.7 in 2015, indicating the PH economy has the resources to pay back its debts. Habito added that provided the country’s GDP grows faster than public debt, it won’t be a problem. As of end-2016, the national government’s outstanding debt stood at P6.09 trillion.
In November last year, the National Economic and Development Authority (Neda) Board approved the guidelines to ensure the transparent availment of Chinese loans being extended to the Philippines.
The board, chaired by the President, approved the “Guidelines for the Availment of Chinese Support for the Conduct of Pre-investments and Investment Activities.”
To avail of the Chinese support or preferential or concessional financing, the Department of Finance (DoF) said that proponent agencies are required under the guidelines to: adhere to the implementation procedures of both the Chinese and Philippine governments; employ qualified, legitimate, and good standing Chinese consultants/contractors; engage different entities in the development and implementation of projects for Chinese support; and, undertake competitive selection in the procurement of Chinese contractors.
To allay fears about other countries’ allegedly adverse experience with Chinese ODA, the government recently sent a mission to Pakistan to investigate.
“We sent a delegation from the DOF and the NEDA to Pakistan recently to try to sound them out, on their experience with ODA from China, and they haven’t made a report yet,” Pernia said.
“So nothing has been set in stone as far as Chinese commitments are concerned. There are so far no signings of loan or ODA agreements with China,” he added.
Budget Secretary Benjamin E. Diokno belied claims that Chinese ODA would adversely affect the Philippine economy, in a report filed by BusinessWorld last May.
Diokno said the country’s debt to GDP ratio would decline from 40% in 2015 to 35% in 2022. He said the Philippine’s borrowing costs would be around 4%, with nominal GDP likely to increase by nine to 10% annually. Further, he said the administration is aiming for an 80:20 mix in favor of local borrowing to minimize foreign exchange risk of foreign financing of the deficit.
Comparatively speaking, Pernia said the Philippines have had a much longer experience with Japanese ODA.
“We’ve had a much longer experience with Japan and we know that the interest on Japanese ODA rangers from .25 to .75 percent, below one percent,” Pernia noted.
The latest state visit to the Philippines last January of Japanese Prime Minister Shinzo Abe resulted in ¥1 trillion in aid over the next five years.
According to the Bangko Sentral ng Pilipinas, Japan is the largest foreign direct investor in the country, with net investments more than doubling to $394.91 billion in 2015 from $117.50 billion in 2014.
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