Philippines Senator Alleges that Unfair Chinese Loan Contract Terms Collateralize Infrastructure Assets
On February 27, Philippine Senator, Neri Colmenares, raised alarm over “highly unusual” contract terms embedded in a $62.1 million loan agreement signed last year between the Philippine government and the Export-Import Bank of China for the Chico River Pump Irrigation Project undertaken by Chinese contractor, CAMC Engineering Company.
One of the most serious allegations brought against the contract highlights Section 8.1 of the agreement, which reportedly states that the Philippines “irrevocably waives any immunity” of its patrimonial assets and assets for commercial use. Colmenares is concerned that this stipulation, which he says does not exist in Philippine agreements with other countries, could harm the national security of Philippines, comparing the potential downside to what has befallen Sri Lanka in the case of Hambantota Port. In short, it could provide China an avenue to take over critical infrastructure assets, if Manila defaults on loan repayments. This could, in turn, jeopardize the country’s port, energy, and transportation assets, such as the Batangas Port, the Power Sector Assets and Liabilities Management Corporation, the National Power Corporation, or even the LRT and MRT public transportation systems.[1]
Colmenares also accuses the Chinese lender of stipulating a higher than normal interest rate of 2%, while exempting itself of any taxes or charges on the interest income earned. The current government under President Rodrigo Duterte, which signed the deal, has refuted Colmenares claims about the contract and has instead accused him of staging a public relations stunt ahead of the midterm elections in May 2019.