Philippines must learn from China’s debt-entrapment of Ecuador

Ecuador i -s among the countries China has ensnared in debt. Lent $19 billion, it contracted Chinese firms for bridges, highways, and dams. One project, $1.7-billion Coca Codo Sinclair hydroelectric dam, was supposed to light up a third of the country. But it was so shoddily built that sediment, sand, and tree trunks clog the reservoir. Straddling an active volcano, its towers can topple from constant mudslides. In 2016, two days before Chinese President Xi Jinping arrived to inaugurate, engineers tested the machines to full throttle. It shook violently and blacked out the national grid. Today the dam runs at less than half the 1800-mw capacity. More than seven thousand cracks slow down the turbines. Still Ecuador must repay the loan in full. Having signed away its patrimonial assets, it yields to China 80 percent of its most valuable export: oil.

The Philippines can fall into similar debt trap. Justice Antonio Carpio, the Supreme Court’s most senior, warns of China’s seizure of oil- and gas-rich Recto Bank off Palawan. That’s in case of default in repaying Beijing P4.37 billion for a China state firm to build the Chico River Pump Irrigation in the Cordilleras. Like Ecuador, the Philippines has waived immunity from suit and patrimonial property rights in the loan. Philippine mineral resources will be China’s for the taking.

Obtaining a copy despite the loan’s questionable confidentiality, Carpio exposes its onerous contents. For one, the government allows itself to be sued for default. Arbitration will ensue, under Chinese laws, presided by the China International Economic and Trade Arbitration Commission. There will be three arbiters, one each for Manila and Beijing, and the third their common choice. Should they disagree over the third man, CIETAC will assign a Chinese functionary. In sum, Manila will never win an arbitration, Carpio notes: “Lutong macaw (Raw deal)!” In arbitration rules, a relative or national of one party automatically is debarred from appointing arbiters. Not in Beijing’s lopsided ways. Any arbitral ruling immediately will be enforceable, no appeals allowed.

China will have its pick of Philippine assets to garnish, Carpio adds. The only exceptions are those already for diplomatic, military, or common public use. Article 8 of the loan exempts only those three from the waiver of immunity.

Beijing’s likely choice is Recto Bank, which it has been coveting for years. Abutting Palawan fields, Recto holds up to 5.4 billion barrels of oil and 55.1 trillion cubic feet of gas, the US Energy Information Administration reported in 2013. Although the bank is within the Philippines’ 200-mile exclusive economic zone and 650 miles from China, Beijing warships drive away Filipino drilling vessels. In 2005-2008 Malacañang treasonously let China explore the area in Joint Marine Seismic Undertaking, receiving no copy of the result. The following year Beijing unilaterally laid claim to the whole South China Sea. In 2016 a UN court upheld Recto Bank as Philippine maritime jurisdiction. Beijing refuses to accept, and the Duterte administration to assert, the verdict.

Another dam project is worse, says ex-congressman now senatorial candidate Neri Colmenares. China also is bankrolling and building the P12.5-billion Kaliwa Dam in the Sierra Madres of Quezon. Deceptively cheaper than a Japanese alternative, it will supply additional water to Greater Manila. But a separate water treatment plant needs to be added for P40 billion. The Chinese loan contains a similar “Article 8, Waiver of Immunities.” But unlike in Chico River, there are no exemptions of patrimonial properties to be given up, Colmenares notes.

Manila must learn from Ecuador’s folly. Pro-Beijing Ecuadorean officials who contracted the Chinese loans and projects have fallen from power. The president is in self-exile for offenses against political rivals. Three officials closely linked to the Coca Codo Sinclair dam – the ex-vice president, electricity minister, and anti-corruption agency head – are in jail or sentenced for bribery. Present leaders say Beijing got what it wanted: economic control. To get out of debt, they are borrowing more from China. They also are drilling for more repayment oil, which is destroying Ecuador’s forests and impoverishing the people.

Other Asian, African, and Latin American states have fallen into Chinese control. Sri Lanka was forced to yield its largest seaport and railway due to debt default. Malaysia wisely cancelled a multibillion-dollar loan from Beijing.

The Philippines too had fallen into debt trap before. In the 1980s dictator Ferdinand Marcos had borrowed from abroad, on cronies’ advice that it was foolish to not take advantage of cheap petrodollars. Money changed hands under the table; the cronies benefited from the contracts. Then came the global collapse. Manila defaulted. Marcos fell; Cory Aquino recognized the crooked debts, and borrowed more for repayment. The International Monetary Fund and World Bank took over the economy until all lenders were satisfied. Filipinos suffered from cutbacks in public services and the handover of their sovereign rights.

Today government spokesmen squawk that Filipinos shouldn’t worry about Chinese loans. The one who says that immunity waivers are “standard” was but a teenybopper during Aquino’s acquiescence to greedy lenders. The other who says Chinese loans are too small and easy to repay was a Marcos lawyer.

A passing generation has said, “Never again” to sovereign surrender in loans. It remains unheeded. The nation may not survive a default in case of catastrophe. Part of its territory permanently would be annexed by China.

(For more on Ecuador’s debt-entrapment, see https://www.nytimes.com/2018/12/24/world/americas/ecuador-china-dam.html).

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Tonight only: “Hotdog Minus 1,” a tribute concert for band original Rene Garcia led by composer-brother Dennis. Plus one very special guest: Boy Camara. 8 p.m., at SMX Convention Center, SM Aura, Bonifacio Global City, Taguig.

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