Colmenares exposes 'onerous,' 'one-sided' loan agreement between PH, China

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Metro Manila (CNN Philippines, February 28) — Metro Manila (CNN Philippines, February 28) - A former lawmaker exposed a loan agreement between the Philippines and China, describing as "onerous," "one-sided" and which could be just one of many secret agreements between the two countries.

Bayan Muna Chairman and senatorial candidate Neri Colmenares said in a statement Tuesday that the loan agreement for the Chico River pump irrigation project was a "disaster for the Philippines."

"Worse, this ₱3.6 billion loan may just be one of the many secret loan agreements between the Philippines and China which could run in the billions," he added.

Colmenares acquired a copy of the document which was signed by  Chinese Ambassador Zhaojian Hua, on behalf of the Export-Impot Bank of China, and Finance Secretary Carlos Dominguez III.

The project broke ground in June 2018, and was among six bilateral agreements signed in April last year.

The ₱4.3-billion project, which is expected to be completed in three years, would supply water to 8,700 hectares of land, benefit 4,350 farmers and their families, and serve 21 barangays in Kalinga and Cagayan provinces.

RELATED: DOF: China commits over ₱382-B in loans, grants for 'big-ticket' PH projects

According to Colmenares, the contract set an annual interest rate of 2 percent, plus an annual "commitment fee" of 0.3 percent and a "management fee" of 0.3 percent.

He said this was "exceedingly high" as loans offered by other countries only have a 0.25 percent per annum interest rate. The other fees included also put the country at a disadvantage, Colmenares noted.

He said the contract requires that the loan be "paid in full without counterclaim or retention," that China would not  have to pay taxes or charges for the deal, including any interest income it earns from the loan.

Colmenares also noted that the deal provides that payment for the loan should be automatically included in the General Appropriations Law which, he said, undermines the legislature's power of the purse. Additionally, the contract has a confidentiality provision preventing the public from gaining access to it.

The deal designates China CAMC Engineering Co. Ltd. as contractor for the project, edging out Filipino companies which are just as qualified, Colmenares pointed out. He said the Chinese contractor would likely hire its nationals for the contract, displacing Filipino workers.

"While Philippine laws require contractors to undergo a procurement or bidding process, China simply imposed its own contractor. Para na tayong probinsya ng Tsina na kaya nilang diktahan [We are like a province of China that they can dictate to]. These kinds of agreement is humiliating to the Philippines and must be stopped," he said.

Colmenares raised another objection to a provision in the contract.

"A dangerous component of the Agreement is a vaguely worded provision under Section 8.1 that does not recognize our sovereign rights in the country and could allow China to take control of our patrimonial properties should we fail to pay the loan," he said.

For his part, Bayan Muna Rep. Carlos Zarate noted that the deal provides that any delay or default in payment should be settled under Chinese law in a tribunal in China. It also prevents the Philippines from making any move that in China's opinion, would affect the country's performance of its obligations under the contract.

"Bago pa lang nagsimula ang loan, talo na tayo kahit China pa ang nag delay or breach of contract," he added.

[Translation: We lose from the start,  even if it's China that caused a delay or committed a breach of contract.]

"Madali tayong kasuhan ng China sa tribunal nila, habang tayo hindi maaring i-question ang agreement sa sarili nating korte [It would be easy for China to file a case against us in their tribunal, while we cannot question the agreement in our courts]. In fact, China imposed a confidentiality clause that renders us unaware that we are being sold to China," Zarate stressed.

Colmenares is challenging the government to prove him wrong.

"We challenge Secretaries Dominguez and Pernia to dispute what we have revealed by showing to the public the official copy of the Chico River loan agreement and similar agreements they have signed with China, including those for the ₱12 billion Kaliwa Dam Project and ₱17 billion Davao Bridge Project," he demanded.