Philippines drops China loan for Mindanao railway

MANILA, Philippines — Infrastructure cooperation with China is starting to show cracks under the Marcos administration, as the Philippines withdrew the proposed first rail system in Mindanao from Beijing’s portfolio.

In a letter, the Department of Finance (DOF) informed Chinese Ambassador Huang Xilian that it is pulling out the Philippines’ request for official development assistance (ODA) from Beijing for the P83-billion Mindanao Railway Phase 1.

“As discussed with the Department of Transportation, the government of the Philippines is no longer inclined to pursue the Chinese ODA financing for the Mindanao Railway Project Phase 1 Tagum-Davao-Digos Segment,” the letter read.

The letter, signed by Finance Secretary Benjamin Diokno, made no mention of why the DOF is withdrawing the application for a loan.

Apart from this, the government is planning to pull out the Philippine National Railways (PNR) South Long Haul from China’s fold.

Last week, PNR general manager Jeremy Regino disclosed that the project was being offered to other funders like Japan.

With China out of the picture, Transportation Secretary Jaime Bautista said the government may now explore alternatives for financing the Mindanao Railway Phase 1.

One of the possible choices, Bautista said, is to combine government resources with foreign and private funding to pool the capital needed to construct the railway.

Recently, Bautista also met with the ambassador of an Asian country interested in financing the PNR South Long Haul, also known as PNR Bicol, proving that the rail lines can be built without China’s support.

Bautista said the proposed interest rate from this particular funder was lower than three percent. In recent negotiations, China has indicated willingness to slash the interest of the loan for PNR Bicol to 2.5 percent, although Japan can reportedly go as low as 0.1 percent.

The government expects to secure a new financier for Mindanao Railway Phase 1 within the first quarter of 2024. On the other hand, it remains uncertain when the funding for PNR Bicol will be finalized, as Manila continues to haggle with China in the negotiating table.

The first segment of the Mindanao Railway Project will cover 102 kilometers all in all, crossing Digos City, Davao City and Tagum City, and it is expected to cut travel time from end to end to just 1.3 hours.

The PNR Bicol, once completed, will recommission rail services in Southern Tagalog and Bicol Region, running for roughly 600 kilometers between Calamba, Laguna and Daraga, Albay.