Debt trap (2) PDF Print E-mail
Tuesday, 13 March 2018 11:43



Three days ago, China clarified reports its massive loans to the Philippines require natural resources as collateral and could lead to borrower-country to a “debt trap.” We have yet to listen to Malacanang’s full disclosure of the loan terms.

The Global and Mail newspaper reported in May, last year, a report that I wrote about, raised new questions in Pakistan about the real costs of doing business with China. The report said that some countries have expressed concern that the “One Belt, One Road” project leans too heavily in China’s favor.

The report said that “tenders need to be open to everyone,” German Economy Minister Brigitte Zypries said, further warning that Germany could not sign on if that condition wasn’t met. European news reported that European union countries have made good on the threat, refusing to sign one of China’s proposed “One Belt, One Road” joint statements on trade.

India, the newspaper said, which opposes Chinese construction in regions whose ownership it disputes with Pakistan, “skipped China’s ‘One Belt, One Road’ summit altogether, instead cautioning countries that accept Chinese funds risk taking on an unsustainable debt burden.”

I don’t know why Mr. Federico D. Pascual, Jr., columnist of The Philippine Star wrote about this controversial loan package offered by China only last March 8, and got a response from China’s foreign ministry spokesman Gene Shang only two days ago. The point is, this highly-questionable   project was divulged 10 months ago by the Globe and Mail newspaper published in Canada.

The document details how Pakistan would be divided into geographic zones according to the industries that could prosper there, including gold, diamonds and other minerals in the west and northwest, cement in the center and petrochemicals, iron and steel in the south.

The Xinjiang Production and Construction Corp., a quasi-military group in western China, could be used to overhaul agriculture in Pakistan by bringing mechanization and new methods of irrigation and breeding. At least some of that would be enabled by leasing large tracts of agricultural land to China interests and allowing Chinese-investment companies to build fertilizer factories and storage facilities, the report said.

Here under is the answer to Mr. Shang. Part of transcript reads:

“In principle, we do not make specific comments on the view points of think tanks, media, experts or scholars.

“However, we have noted that the Philippine side has already made remarks on this, so I assume a response from our side is also due...

“Since the turnaround of the China-Philippines relations in 2016, China has been actively helping the Philippines develop its economy and improve people’s livelihood, and we have given our full support to President Rodrigo Duterte’s large-scale infrastructure program Build, Build, Build”. The Chinese government and financial institutions have also provided financing support to the Philippines, including preferential buyer’s credit, and assisted the Philippines in issuing the panda bonds, which effectively ensured the implementation of relevant projects.

“By convention, parts of China’s concessional loans require the borrowers to use certain sovereign credit as collateral, which is an international practice. China has never asked and will never ask relevant countries to use natural resources as collateral in loan agreements. In this vein, our assistance and support to the Philippines are provided with no strings attached...”

We’ll see what happens when the time comes for the government to pay these huge loans.