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Chinese Debt-trap Diplomacy: Can it happen in the Philippines?

The port facility at Hambantota, Sri Lanka that was taken over by a Chinese state-owned company after Sri Lanka fell behind on its debt payments. AFP PHOTO / LAKRUWAN WANNIARACHCHI
The port facility at Hambantota, Sri Lanka that was taken over by a Chinese state-owned company after Sri Lanka fell behind on its debt payments. AFP PHOTO / LAKRUWAN WANNIARACHCHI

uring the Integrated Bar of the Philippines’ 17th National Convention in Iloilo City, Supreme Court Senior Associate Justice Antonio Carpio, raised concerns about the loan agreement the Philippines signed with the People’s Republic of China for the Kaliwa Dam project. In an ABS-CBN News article, Mike Navallo writes that Carpio “warned that the loan agreement between Philippines and China for the Kaliwa Dam project also offers patrimonial assets as collateral, which he said could mean Beijing is going after gas in the Reed Bank.”

Novallo continues “Carpio said the deal bears terms similar with the Philippines’ loan deal with China for the Chico River Irrigation project. ’Our assets are also collateralized in that Kaliwa Dam. Patrimonial assets also. Different language but it means the same,’ Carpio told reporters. Patrimonial assets refer to properties owned by the State in its private capacity and not for the public, public service or intended for the development of national wealth. In contrast, a property of public domain is outside the commerce of man and cannot be sold.”

According to Carpio, the Reed Bank, is a patrimonial asset of the Philippines. Wikipedia notes that Reed Bank, also known as Recto Bank, is located off Palawan’s west coast and that “the Permanent Court of Arbitration ruled in 2016 that the area is within the Philippine Exclusive Economic Zone.” More importantly, “seismic surveys indicate that the Reed Bank is rich in oil and gas deposits.”

Carpio also noted that, should the Philippines default on the Chinese loans for the Chico River Irrigation project, or the Kaliwa Dam project, it can lose Reed Bank to China. In early March, even Malaysia Prime Minister Mahathir Mohamad “cautioned the Philippines to carefully deal with loans from China, drawing from his country’s experience after his government scrapped what he calls ‘unfair’ Chinese-backed infrastructure projects” wrote Ian Nicolas Cigaral of The Philippine Star.”

An example of the fate that could befall the Philippines, in late 2017, the island nation of Sri Lanka in the Indian Ocean “turned over the strategic port in the southern city of Hambantota to a Chinese company on a 99-year lease.” This was forced on Sri Lanka when it was unable to repay the “$ 1.5 billion [it] borrowed from Beijing” to build the port, noted Joe Gould of Defense News in April, 2018.

Could something similar happen to the Philippines? Does Justice Carpio have legitimate concerns over what some are calling the debt-trap diplomacy used by China on weaker countries? Or does the Philippines have nothing to worry about, as the Duterte administration insists? Give us your thoughts on this very important topic. Published 3/30/2019

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