On July 17, 2022 the Philippine Daily Inquirer headlined a complete and total lie about China’s loan assistance to the Philippines, blaring loudly and shamelessly “’Debt trap avoided’; Marcos pushed to review China loans.” How Philippine mainstream media is allowed to publish such outright misinformation and disinformation is truly disgusting.
Two portions of that headline need to be dissected. There are two basic categories of Philippine debt of which 70% is domestic creditors and banks while of its foreign debt as of 2021 Japan held close to $ 15-billion, the US 4-billion, the UK and Netherlands around $ 4-billion each, Taiwan a little less than $ 4-billion and China at around $ 3.5-billion.
I am rounding off the figures as I read them from a saved Bangko Sentral ng Pilipinas (BSP) chart instead of in figures as the its website is down at this moment of writing. Philippine debt is still less than 5% of the total foreign debt so the “debt trap” allegation is simply pure malevolent fantasy.
The Inquirer is pulling wool over the public eyes and then lighting a fire onto it – to inflame rather than to inform.
The Philippine-China “debt trap” yarn started being spun in 2017 by an article of Anders Corr entitled “New Philippine Debt of $167 Billion Could Balloon To $452 Billion: China Will Benefit” published in the Forbes magazine and followed up in the Philippines by the Amboy hacks like Jarius Bondoc, Dick Pascual and others and recycled over the years up to this day.
This year Manila times columnist Dr. Dan Steinbock wrote again about Ander Corr’s article and I was very happy he did. Little did I expect that this fabrication by Anders Corr would resurrect in this latest episode of anti-China smear campaign triggered by either a statement uttered out of sheer incompetence or as a planted interview with the insertion of the right words to trigger another episode of anti-China tirades.
US-PR operators at work
I have to start this segment with an apology to my friend, colleague and now Undersecretary for Railways of the Department of Transportation for my shoot from the hip reactions when the news of the “withdrawal” of Chinese funding was headlined. I know the passion for assisting the Philippines China has and the reliability and efficiency with which they carry out their missions particularly with foreign commitments, I was the reports couldn’t be accurate.
My reaction was to blame the undersecretary for what I though was sure was an inaccurate portrayal of the Chinese side on the matter and the apparent untimely publicity on a subject that should have been discussed between the parties first. I publicly described Chavez as “grandstanding” and “incompetent” for I was sure the Chinese would not just withdraw. Upon reading the may versions of the report I finally found the PNA that gve a me direct quote from Chavez which clarified it.
This is what Chavez is quoted to say, “’In his text message to me this morning, former Finance Secretary Sonny Dominguez said that he ‘cancelled the application instead of keeping it in suspended animation,’ Chavez said. DOTr understands that this is in light of the upcoming transition of government, and in deference to the incoming administration.’” So, the words “withdrawal” and “China” was never used to describe the events that transpired.
In was the Philippine side that in fact cancelled the application to China for the loans. Unfortunately, wittingly or unwittingly, the newspapers and media and social media picked up that misinformation and it spread like wildfire (as the manipulators behind the scenes intended, I am sure). Two Amboy politicians rode the wave, Reps. Joey Salceda and Rufus Rodriguez both of whom I know and don’t appreciate much for authenticity.
The PNA report I am referring to, although quoting Chavez correctly also had a suspicious item. It’s headlines for the story was “China withdraws funding for 3 railway projects: DOTr exec”. How could the editors have missed the inconsistency of the body of the new with that direct quote from Chavez and still print that “China withdraws funding”, but that is not the only transgression of journalistic aptitude, there’s one more.
The first paragraph of the report states, “’The loan agreements for three railway projects are now considered ‘withdrawn’ after the Chinese government failed to act on the funding requests by the Duterte administration, an official of the Department of Transportation (DOTr)’” and this again is not substantiated by the quote from Chavez which the paragraph goes on to attribute to Chavez. The State media outlet should be expected to be more reliable than this.
The editors, reporters, Chavez, Dominguez are all likely innocent in all the journalistic and media mishaps related to this story, but for certain there is an element of PR or public relations operations and operators here who worked to insert the concocted “China withdrawal” into Chavez’s mouth, the reports and stories, and the headlines. The American congress, by the way, added $ 500-mllion to the Strategic Competition Act vs. China purely for anti-China disinformation in February 2022.
Smearing China, fancifying Japan
The interest rate former DOF Secretary Sonny Dominguez says is being charged for the 3 train projects loan is 3 % and said to be “much higher than the 0.01-percent rate charged by Japan.” But there are several questions to this assertion, first of which is if Japan has any offer from Japan at all. I recall the many times the question has been asked, “Why not from Japan?” and the answer was invariably “Japan has reached the limits of its loanable funds.”
Before we go into Japan’s economic status today and capability to assist in financing projects in developing countries at this time considering the many factors lending nations need to consider, let’s take a look at the complicated formulations of Yen loans, something I recently learned wile studying what most people just as lover interest rates when they read 0.1 or 0.05% of Japanese loans which when converted to US Dollar loans turn out to be shockingly higher than the impression made.
As I was writing about this I got a Viber message, a chart comparing interest rates:
While studying and debunking the Sri Lanka “debt trap” stories I found this from the Economist Intelligence report, “The loan from Japan will be issued in Japanese yen and carry an interest rate of just 0.05%. However, because of a planned swap of the loan into US dollars, the actual borrowing cost may be closer to 3.5‑4%, according to Sri Lanka’s finance minister…”
The un-initiated public, when seeing the fantastically low interest rates in decimals reported by the press and media but without understanding the other intricacies such as currency transactions, are beguiled into immediately believing and swallowing the idea of how low Japanese loans rates are and instinctively ask “Why consider other loans from other countries at all when Japan offers such unbelievable low rates?”
The 3% initial loan offer China made for the DOTr’s three train projects is not particularly costly or high in interest, especially at this time when almost all nations are raising interest rates. They are huge projects, particularly the $ 3.5-billion 600-km South Luzon Long Haul train project, which are direly needed by our people for trade, commerce and social upliftment. The other two projects are the Subic-Clark Railway Projects and the consultancy for the Mindanao Railway Project.
Today the interest rates of major creditor countries do not differ too much from each other and generally they do not become “debt traps”, unlike in the 1970s and 80s when massive IMF, WB loans coupled with the oil price crises and the 80’s Paul Volker era when U.S. 20% interest rate sent rate in other countries to 50% and over. Most debt trapped countries today are caught in massive commercial or market borrowings such as Srii Lanka which has 47% of these private creditor loans.
As for Japan’s capability to extend more loans and at advantageous rates today, that remains to be seen with Japan’s first quarter 2022 GDP in the negative, interest rate hikes tracking the US, it may not e that easy but that does not prevent the jingoistic anti-China politicians from brandishing the threat of turning to the Japanese just to spite China. President Ferdinand R. Marcos, Jr. clearly has another idea” start renegotiation with China for more favorable terms.
The “Strongest Partner” will not fail
The words of President Bongbong Marcos uttered at the ceremony for the Awards for Promoting Philippine-China Understanding (APPCU) last June 10 reverberated throughout China and the world, and it lingered on for weeks through the visit of Chinese Vice President Wang Qishan and later Chinese State and Foreign Minister Wang Yi to bring home to China. China remembers, never forgets, a friend come hail or high water.
From my brief conversations with some Chinese diplomats at several recent social events I was given the impression they often end up waiting for developments from the Philippine side, like this transition period from one administration to the new administration. Projects are delayed and some kept in limbo. All the while they say, they are kept waiting. For a culture that finishes a Covid hospital for 1,500 patients in 5 days, efficiency and speed is an essential trait.
President Ferdinand R. Marcos, Jr. seemed to be as fast when, upon seeing the brewing confusion in the DOTr and media over the China loans for the train projects, quickly cleared the way with the order to proceed with negotiations. I wish the pols and execs in DOT, and the media, now shut up and just let the new negotiators focus on working for the improvement of the country’s transport system once again.
I am certain China will understand the Philippines’ predicament under the present trying circumstances and will find the best solution to a small problem that the crucial train projects face momentarily, for a relationship that is worth more than the hundreds of billions of the funding – a relationship that has lasted a thousand years and moving forward towards an equally long future of cooperation, peace and prosperity.