MANILA – Chinese Ambassador to the Philippines Zhao Jianhua allayed concerns that the Philippines is headed to a debt trap amid observations Manila seems inclined to borrow more from Beijing to fund its ambitious infrastructure program.
Zhao issued the statement as he attended the groundbreaking ceremony for the construction of two bridges in Manila that are financed by the Chinese government.
“There is no mention or no avenue for ownership, your government will own all those projects. So there will be no question of putting yourself in debt. I think your economic team is smart enough,” Zhao told reporters in Intramuros, Manila.
“Actually there has never been a debt trap. It’s all based on mutual agreement,” he added.
Zhao, in a speech during the event, said Duterte and his economic team were “smart enough not to allow the Philippines to fall into the so-called debt trap.”
“China will honor this commitment to make sure those projects will benefit Filipinos and will not have a negative impact on the socio-economic development of the Philippines,” the envoy said.
China has been criticized by various quarters for using loans to encourage dependency and undercut sovereignty of borrowing nations.
On Monday, US Overseas Private Investment Corporation (OPIC) head Ray Washburne accused China of saddling poor nations with unsustainable debt through large-scale infrastructure projects that are not economically viable.
For instance, Sri Lanka handed over commercial activities in its main southern port in the town of Hambantota to a Chinese company in December as part of a plan to convert $6 billion of loans that Sri Lanka owes China into equity.
Zhao said the 506.46-meter Estrella-Pantaleon Bridge and 734-meter Binondo-Intramuros Bridge will be constructed by China for free.
The construction of the bridges is set to begin this week and will be accessible to the public by 2020, according to the Department of Public Works and Highways.
“Let me make it quite clear, these projects, these two bridges are going to be financed by Chinese grants. That is, we’re going to build it for free,” the ambassador said.
“You’re going to use some Chinese soft loans to finance some infrastructure projects. That is simply the decision by your government to use the soft loans and the infrastructure project will be undertaken by a Chinese company through limited bidding process,” he added.
Finance secretary Carlos Dominguez earlier said that to ensure efficient borrowing, the government will now be targeting the proportion of domestic borrowing to increase to 75 percent, which will reduce the percentage of external financing in the mix to 25 percent.
Dominguez also said the “rapid expansion” of the country’s economy will help “outgrow our debt.”
“Those who raise the specter of a debt crisis arising from our use of official development assistance to finance infrastructure program are not reading the numbers well enough,” the Cabinet official said on July 6 in a government-organized forum ahead of President Rodrigo Duterte’s State of the Nation Address.
The country’s debt as a percentage of gross domestic product remained steady at 42.1 percent last year, the same rate as 2016. (GMA News)
