China loan process different from other countries
Speaking to the Senate committee on economic affairs, BDA president Vince Dizon confirmed that the loan process of China is different from other lending countries such as Japan and South Korea.
The STAR/Mong Pintolo
China loan process different from other countries
( - March 5, 2019 - 2:54pm

MANILA, Philippines — Compared to other lending countries, China has a different process in offering loans for infrastructure projects in the Philippines, government officials confirmed Tuesday.

During the Senate committee on economic affairs' inquiry into the Duterte administration's "Build, Build, Build" program, Finance Assistant Secretary Maria Edita Tan admitted that the Philippine government goes through a limited competitive bidding process when it comes to China loan offers.

"In the case of the Chinese, they first would want to have a contract for us to go through a bidding process before they say 'Okay, I'm okay to confirm to finance it,'" Tan told the Senate panel headed by Sen. Sherwin Gatchalian.

Tan also said the Chinese usually starts with providing three contractors of "good standing" before the bidding process.

The Chinese want to be assured first that they will be getting a Chinese contractor if they will be funding a project as it would be a tied loan.

Bases Conversion and Development Authority President Vince Dizon confirmed this, adding that the process is different between China and other lending countries such as Japan and South Korea.

"For the Japanese (Official Development Assistance) loans, the loan agreement is first signed before the tendering or bidding process takes place under a tied loan agreement," Dizon told the Senate panel.

The process with the Chinese is slightly different as the bidding comes first before the loan agreement is negotiated and signed, according to the BCDA president.

Citing the Subic-Clark Railway Project as an example, Dizon said the National Economic and Development Authority (NEDA) board first approved the project for funding through the Department of Finance (DOF) from the Chinese government.

After the NEDA board approval, Beijing will be giving the Philippine government a shortlist of three accredited contractors under a tied loan agreement.

"The Philippine government will then bid out the project under our own rules and once the winning bidder has been awarded, then the loan negotiation takes place between the Chinese government and our Department of Finance," Dizon said.

Dizon, however, clarified that there is no direct negotiation in the process of selecting the Chinese contractor.

Sen. Nancy Binay, meanwhile, questioned the basis of competitiveness as the bidding comes first before the DOF releases the terms of reference.

"Actually, the terms of reference is based on the approvals of the NEDA board," Dizon said, noting that the terms of the loan are not part of the terms of reference of the bid.

According to the NEDA, 56 infrastructure projects have been identified for possible ODA loans and will be turned over to the DOF.

As of the moment, the DOF has executed nine loan agreements with other countries — two from China, two from South Korea and five from Japan.

Last year, US Vice President Mike Pence warned countries to be wary of China's loan offers to poorer countries. His warning came before the Philippines and China signed several agreements during Chinese President Xi Jinping's visit to Manila.

Speaking before the 2018 Asia-Pacific Economic Cooperation CEO Summit in Papua New Guinea in November, Pence said Beijing's terms of loans are "often opaque at best."

"Projects they support are often unsustainable and of poor quality. And too often, they come with strings attached and lead to staggering debt," Pence said.

Then Budget Secretary Benjamin Diokno, however, said the Philippines is "very careful" in accepting loan deals from China.

"We are careful. Number one, we choose the projects we want. Second, we would step around for the best terms," Diokno earlier said.

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