Philippines China Loan Agreement
Currently, two loans have been signed with China, two with South Korea, 4 with Japan and one with the World Bank for major infrastructure projects. We found that of the 9 treaties, only transactions with China had specific exceptions to sovereign immunity and mentioned patrimonial assets. The Marcos years – when the country repaid loans for overvalued projects for decades – should also be a sufficient warning to Filipinos. “Security is, you know, if you want to take out a loan and the [lender] wants collateral to pay the loan. Usually, for example, you want to take out loans for your business, banks will ask you to provide collateral,” Agabin said. Lambino said loan agreements typically have waivers, but are worded “differently.” Assuming that the highly unlikely scenario of a Philippine default occurs with its loan, any decision of the arbitral tribunal that would force the government to settle its debts should comply with the provisions of the Philippine Constitution and can only be enforced if our courts decide that such an arbitration decision is binding on us, said Agabin. Some bets of the opposition coalition Otso Diretso said that some parts of the loan agreements were expensive. The Philippine government says it is managing the debt well, and the numbers support that claim. While this may be the case, the case of Chinese loans should be seen in the context of how Beijing continued to lend to countries that had a history of managing bad loans. In addition, he said that the interest rates of loans with China are very similar to, if not lower, than those of loan agreements with other countries. Finance Secretary Bayani Agabin, for example, cited waiver of immunity and arbitration clauses that are standard in any forged interstate loan agreement. The contract for the $186 million Chico River Irrigation Project, 85% of which will be borrowed from Eximbank, included additional provisions.
“These clauses are included not only in the loan agreements between the Philippines and China under the current government, but also in other loan agreements concluded by previous governments, including with France and China,” said Agabin, who heads the DOF`s legal department. Agabin said the Supreme Court (SC) has already upheld this in one of its decisions, which states: “An agreement to submit a dispute to arbitration can be considered an implied waiver of immunity from action.” Antonio Carpio, a former senior associate justice at the Philippine Supreme Court, believes Beijing could end up taking over assets such as the gas-rich Reed Bank in the disputed South China Sea if Manila does not repay the loan. “For Japanese loans, project financing comes first before procurement and implementation begins, while for Chinese-funded projects, the loan agreement amount is received at a later date (since procurement takes place first). But then what is the advantage? The advantage is basically that you have better control over the procurement process,” he said. Tax authorities have repeatedly said the Philippines can afford the loan and that there is no collateral provided in the loan agreement, in response to critics who have said China could take control of the disputed islands in the event of default. “The ministry had received several requests for copies of the loan agreements and was therefore able to download them for public access. It`s constitutional,” Lambino told CNN Philippines, noting that this was the first time such offers have been posted online. Although some agreements do not explicitly state the waiver of immunity, Agabin noted that “all of them have arbitration clauses, which is in fact an implicit waiver of immunity.” The Department of Finance of the Philippines has signed an agreement with the China International Development Cooperation Agency on concessional loans under a renminbi-denominated credit facility. It also signed a preferential purchase loan agreement for the Philippine National Railways` (PNR) south long-haul project with the Export-Import Bank of China.
Confidentiality. Critics have repeatedly called for credit documents to be released so that they can be reviewed. .
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