Natural resources not collateral for Philippine loans, says Beijing

MANILA, Philippines — The Chinese government has denied a report that it would require the Philippines to use its natural resources as collateral for the loans that it will provide to the Duterte administration.

But Rep. Gary Alejano of party-list group Magdalo warned President Duterte against falling into what he called “China’s debt trap” following the statement of a Chinese expert suggesting that the Philippines’ natural resources could be used as collateral.

Alejano quoted the expert, Zhuang Guotu of Xiamen University, as saying, “The interest rate on the loans China has provided to the Southeast Asian country is very low. And the Philippines has strong debt-paying ability. Besides, the loans are usually accompanied by repayment agreements, which use certain natural resources as collateral.”

In a press briefing in Beijing on Friday, Chinese foreign ministry spokesman Geng Shuang said the views expressed in the report of Chinese newspaper Global Times quoting Zhuang does not reflect the position of their government.

The report, which came out earlier this month, raised concerns after Zhuang made the statements.

“By convention, parts of China’s concessional loans require the borrowers to use certain sovereign credit as collateral, which is an international practice,” Geng said.

“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,” he added.

Presidential spokesman Harry Roque denied the report and described it as “gossip.”

During the press briefing, Geng maintained that China will not use the territorial dispute in the economic relations of Manila and Beijing.

“To properly resolve the South China Sea issue is the basis and important guarantee for the sound and steady development of China-Philippines relations, but China will not link the South China Sea issue with bilateral economic and trade cooperation projects,” he said.

“China stands ready to work with the Philippines to follow through on the consensus between the two leaderships and stay committed to properly resolving differences through dialogue and consultation, ensuring the sound and steady development of bilateral relations and jointly upholding regional peace and stability,” the foreign ministry spokesman added.

Geng also reiterated China’s support for the Duterte administration’s “Build, Build, Build” program by providing financing, “including preferential buyer’s credits, and assisting the Philippines in issuing the panda bonds, which effectively ensured the implementation of relevant projects.”

Debt trap has precedent

Alejano, however, said there is reason to believe such arrangement may be present in the loan agreements with China, given its previous transactions with other countries. 

“We can now see such scheme in other countries which have dealt with China. These countries are poured with loans until they can no longer repay and are already buried in debt. In exchange, they are forced to give China access to their natural resources,” he said.

Alejano said Venezuela, Angola, Sudan and Kazakhstan are among the nations that have fallen into China’s debt trap.

“All of these countries were contracted billions of loans from China and oil is being used as collateral for their debts. For instance, Venezuela, which is experiencing an economic crisis, is now forced to pay their debts with oil. Angola also found itself with shrinking amount of crude to sell since most of its oil flows to China as debt repayment,” he added.

Alejano claimed that China “is obviously lusting over our natural resources, particularly in light of their aggressiveness in the West Philippine Sea and the Philippine Rise.”

“In fact, since 2012, it has been reported that Chinese mining firms have been setting up and operating illegally near Scarborough Shoal in Masinloc and also in Zambales. The Chinese have been exporting metals and other precious minerals extracted from our lands while taking advantage of our porous borders,” he said.

He urged the Duterte administration to disclose the terms and conditions of the loans it has obtained from and is negotiating with China.

The former Marine officer also shared the views of Supreme Court Associate Justice Antonio Carpio “that we should never acknowledge that there is a dispute or even a shared area between the Philippines and China in the West Philippine Sea.”

“It is, by all means, our territory. Therefore, sharing and co-ownership do not merit any discussion and consideration,” he said.

He said it is time that the President invoke the ruling of the United Nations Permanent Court of Arbitration giving the country sovereign rights over the West Philippine Sea. 

Duterte has floated the idea of co-ownership of contested areas where Beijing and Manila would agree to conduct joint exploration of natural resources. – With Janvic Mateo