"An official said there's no harm in taking advantage of official development assistance while these are still available."
"An official said there's no harm in taking advantage of official development assistance while these are still available."
It appears there’s no stopping the momentum of enhanced economic relations between the Philippines and China despite what Malacañang has described as “irritants” in bilateral ties.
When President Rodrigo Duterte attended the Second Belt and Road Forum in Beijing from April 25-27 along with 37 other heads of state, he also met with Chinese President Xi Jinping. That meeting yielded a one-billion renminbi (P7.7 billion) grant to the Philippines, and the signing of 19 business agreements valued at $12.16 billion. The agreements covered a wide range of investment areas including energy, infrastructure, tourism-related facilities, internet connectivity, agriculture and training of Filipinos in China. The business deals are expected to create more than 21,000 jobs for Filipinos.
Earlier in April, the country hosted the first Boao Forum for Asia (BFA), considered the Davos of Asia. The BFA seeks to unite Asian countries to achieve common development through the integration of the regional economy. With this year’s theme of “Concerted Action for Common Development in the New Era,” the event was attended by 100 business leaders from China, 100 business leaders from the Philippines and 100 executives from Chinese enterprises in the Philippines.
Addressing the gathering, China Embassy Charge d’Affaires Ad Interim Tan Qingsheng said bilateral relations “have entered a golden age with political and security coordination, economic cooperation, and people-to-people exchanges.”
At the same time, he denied any hidden agenda in loan agreements with the Philippines, adding that speculation regarding the so-called China debt trap was “completely groundless.”
Tan cited figures from the Bangko Sentral ng Pilipinas (BSP) showing that Chinese loans account “for merely 0.65 percent of the total debt” of the Philippines. “Even if the planned financing is implemented, the figure will only be around 4.5 percent by 2022. If we compare the interest rates in US dollar terms, the interest rate of Chinese loans is actually very similar or even lower than that of other countries,” he pointed out.
The Chinese envoy also said that more job opportunities for Filipinos will be created through the economic cooperation between the two countries. He said about 50 large-scale Chinese companies based in the Philippines have employed more than 16,000 Filipinos so far, and the number is expected to increase in the coming years.
The diplomat stressed during the Boao Forum that bilateral economic ties have brought tangible benefits to both sides, with total trade volume in 2018 reaching US$55.7 billion, with an 8.5-percent year-on-year increase. China is now the Philippines’ top trading partner, the largest source of imports and the fourth largest export market.
Earlier, Finance Undersecretary Gil Beltran, the chief economist of the Department of Finance, debunked fears that we would be drawn inexorably to a China debt trap as “overblown” and “overdiscussed.”
Beltran said that with an interest rate of 2 percent per annum for projects financed by China versus an internal rate of return (IRR) of at least 15 percent, the Philippines would easily gain 13 percent from these projects.
“You only lose money if you mismanage the project and that will take a very stupid manager or a very corrupt manager. And these are very good projects which should have been implemented 20 years ago,” Beltran told a recent forum of business journalists.
Beltran said that since the Philippines needs to upgrade its infrastructure and the projected IRR is very high, there’s no harm in taking advantage of official development assistance (ODA) while these are still available.
“There’s a limit to how much you can get from ODA source and what we’re getting from China is what they allocated to us,” he said.
“We are not favoring China; It’s just they allocated $9 billion for us and Japan also said they’re going to give $9 billion. So we let them choose which projects which they can implement given their resources and capabilities,” he added.
The DOF believes that our per capita income might breach $4,000 this year, which makes us an upper-middle income country. At present, our per capita income of over $3,000 puts us in the low-middle income category which qualifies the country for most ODA packages consisting of grants and loans.
At any rate, among the participants in the 2nd Belt and Road Forum were top officials of the International Monetary Fund (IMF), headquartered in Washington, D.C, which gathers 189 countries “working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.”
For Changyong Rhee, the Director of the IMF’s Asia and Pacific Department, the BRI project is a “very important contribution” to the global economy as it would help improve the infrastructure requirements in the low-income countries and also promote regional cooperation and connectivity in trade, investment, finance and human mobility. The IMF official said his organization “is in very close collaboration with Chinese authorities on sharing the best international practices, especially regarding fiscal sustainability and capacity building.” This is an interesting development that we’ll monitor in the months ahead amid the ongoing US-China trade war.
