* This is my article in BusinessWorld last March 29, 2019.
How dangerous or non-dangerous are China loans to the
Philippine economy?
This is a valid concern but another bigger concern is the
endless and irresponsible borrow-borrow-borrow policy of various
administrations even without economic turmoil or crisis. This is the subject of
the Market-Oriented Reforms for Efficiency (MORE) series of this column today.
The good news in the Philippines’ public debt is that the
debt/GDP ratio has been declining since the last decade from 74% in 2004, 55%
in 2009, to only 42% in 2016. The bad news is that the decline has been halted
under the Duterte administration (see Figure 1)
The decline in trend was due to high borrowings by the
current administration, even if they have big new tax revenues under the TRAIN
law on top of natural increase in taxes. And high public debt means high
interest payment.
Philippine government’s outstanding debt stock (actual +
guaranteed) and interest payment, P billion
Now the China loans. One example often cited is Sri
Lanka, with unpaid debt of $1.1 billion it was forced to lease out to China its
strategic Hambantota Port for 99 years.
Some 21 projects worth P753.4 billion have been proposed
for China funding by the administration, many of which can be done by big local
firms at no cost to taxpayers. The Kaliwa Dam Project should be zero loan if
the Duterte administration allowed the original Japanese proponent GUDC, or two
local firms pre-qualified by the PPP Center, San Miguel and Datem, to build it
under integrated PPP financing. But Duterte awarded the contract to China and
we have a new loan of P18.7 billion.
We need less borrowings. We need to retire more old loans
and we should pay low interest payment. There should be more fiscal
responsibility in government.
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See also:
BWorld 305, MORE electricity supply in East Asia, March 24, 2019
BWorld 306, MORE stock market development, March 26, 2019
BWorld 307, MORE airline competition, March 28, 2019
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