Demands public access to official copies of all loan agreements with China

Bayan Muna Rep. Carlos Zarate and Bayan Muna Chairman Neri Colmenares today exposed an onerous, 20-year loan agreement with China and demanded government transparency by allowing the public to access its contents and related documents.

“The Loan Agreement for the Chico River Pump Irrigation Project is onerous and highly favors China. It is a disaster for the Philippines,” said Colmenares, who managed to acquire a copy of the document recently. “Worse, this PhP 3.6 Billion loan may just be one of the many secret loan agreements between the Philippines and China which could run in the billions”.

The agreement was signed between Ambassador Extraordinary and Plenipotenciary of China Zhaojian Hua, on behalf of the Export-Impot Bank of China, and Department of Finance Secretary Carlos Dominguez III, on behalf of the Philippine Government, on April 10, 2018.

High interest rate and cost

The contract sets an annual interest rate of 2% for the US$ 62.086 million loan (PhP 3.2 billion at current exchange rates but amounts to Php 3.6 Billion under Section 1.8 of the Agreement ) plus an annual “Commitment Fee” of .3% of the loan (Sec. 2.6) and a “Management Fee“ of .3% or US$ 186,260 (Sec. 2.5) .

“Furthermore, China demands that the loan be ‘paid in full without counterclaim or retention ’. It also provides that China will not pay any taxes or charges for the entire transaction including any interest income it earns from the loan. ” said Colmenares. “The 2% interest rate is exceedingly high compared to loans offered by other countries which only charge .25% per year. On top of this, there are other fees and charges that make this loan contract really onerous,” he said.

“China even dictated the content of our budget laws by demanding that payment should be automatically included in the General Appropriations Law , practically usurping the constitutional power of Congress to solely decide the content of our yearly budget,” said the former lawmaker.

Favored Chinese contractors

Colmenares lamented that despite the expensive rates imposed by China, which will be tax free, they still have the gall to require that the contractor be a Chinese company.

“Mabuti sana kung binigay yung pera, pero utang naman yon na babayaran natin sa mataas na interes. Bakit required na China CAMC Engineering Co. Ltd , ang contractor ng China ang gagawa, eh marami namang Pilipino ang kayang gawin ang proyekto?” asked Colmenares.

Colmenares warned that the Chinese contractor would most likely hire Chinese workers, adding to an even greater influx of Chinese workers, leading to the displacement of Filipino workers. “While Philippine laws require contractors to undergo a procurement or bidding process, China simply imposed its own contractor. Para na tayong probinsya ng Tsina na kaya nilang diktahan. These kinds of agreement is humiliating to the Philippines and must be stopped.”

Sellout of national patrimony

Colmenares also expressed fears that the Agreement will entail China’s ownership of patrimonial property as the Agreement does not allow immunity for patrimonial rights.

“A dangerous component of the Agreement is a vaguely worded provision under Section 8.1 that does not recognize our sovereign rights in the country and could allow China to take control of our patrimonial properties should we fail to pay the loan,” said Colmenares.

He revealed that the contract demands that the Philippines shall not have “any right of immunity in connection with xxx any enforcement of an arbitral award, court decision on the ground of sovereignty or otherwise is valid and irrevocably binding on the Borrower. Except (iii) those located in the Philippines and dedicated to a public or government use as distinguished from patrimonial assets and commercial use.”

“This allows China’s take over of our patrimonial properties and resources deemed by China’s tribunal to be ‘of commercial use’,” said Colmenares, citing the experience of Sri Lanka, where China took over the Hambatota Port after Sri Lanka failed to pay its debt due to the delay in the opening of the port’s commercial use.

“This is very dangerous. Today China controls that port in Sri Lanka and can even land its army there. The same thing can happen here,” Colmenares warned.

Governed by China’s laws

Zarate meanwhile bewailed the provision in the contract stating that any dispute or default in payments must be decided by a Tribunal in China, using China’s laws.

“The agreement first imposes an admission on the part of the Philippines that ‘the Agreement does not violate any Philippine law or rules’, practically preempting our country’s right to challenge the legality or constitutionality of the agreement,” said Zarate, a lawyer.

“Worse, it provides that any dispute such as a delay or default in payment shall be resolved by the China International Economic and Trade Arbitration Commission (CIETAC) and shall be governed by the laws of China. It even imposes that the venue shall be in Beijing,” he said.

“Bago pa lang nagsimula ang loan, talo na tayo kahit China pa ang nag delay or breach of contract,” he added.

The loan agreement also prohibits the Philippines from doing any act which, in the opinion of China, will materially affect the Philippines performance of its obligations. “This could mean any act since it is solely interpreted under China’s opinion,” warned Zarate.

“Madali tayong kasuhan ng China sa tribunal nila, habang tayo hindi maaring i-question ang agreement sa sarili nating korte. In fact, China imposed a confidentiality clause that renders us unaware that we are being sold to China,” concluded Zarate.

“This agreement is onerous and disastrous to the Philippines especially since it allows China the right to take over our patrimonial assets.

Show the contract

The contract has a confidentiality provision that prevents the public from gaining access to the document.

“We challenge Secretaries Dominguez and Pernia to dispute what we have revealed by showing to the public the official copy of the Chico River loan agreement and similar agreements they have signed with China, including those for the PhP12 billion Kaliwa Dam Project and PhP17 billion Davao Bridge Project,” declared Colmenares, who said the PhP3.6 billion loan is just one of the many unseen loan agreements between the Philippines and China which could run in the hundreds of billions,” they said.

“Our children will continue paying this highly disadvantageous loan as we get enmeshed in a debt trap in the amount of hundreds of billions of dollars from China. Ang masama rito, ginigisa na nga tayo sa sarili nating mantika, tayo pa ang pinagbili ng bawang at sibuyas,” Colmenares concluded.#

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