The Palace backtracked Thursday, acknowledging that a portion of the oil and gas deposits in the Reed Bank could be seized by China should the Philippines default on its $62-million Chinese loan for the Chico River Irrigation Loan Agreement.
Presidential Spokesman Salvador Panelo conceded that Supreme Court Associate Justice Antonio Carpio was right when he said Presidential Decree No. 87 or the Oil Exploration and Development Act of 1972 and Philippine Service Contract 72 provide for the conversion of the oil and gas deposits in the Reed Bank into patrimonial properties.
“I never said in my press briefing that there was no law and no service contract was entered into for gas and oil exploration in Reed Bank. What I said was Reed Bank itself, not the gas and oil there, which Carpio cited, is an inalienable property, which cannot be given, sold, or be subjected as a contractual prestation,” Panelo said in a statement.
“PD No. 87, as correctly stated by Justice Carpio, converted the gas and oil found in Reed Bank into patrimonial assets and may thus be alienated,” he added.
Patrimonial assets refer to properties owned by the Philippines in its private capacity and not public service, use or intended for development of national wealth.
Carpio has previously warned the government that China could seize natural gas deposits in Reed Bank once the Philippines failed to pay off its $62-million Chinese loan for the Chico River Irrigation Project.
The Palace official then shrugged off Carpio’s concern, maintaining there is no possibility that China would seize the Reed Bank as the country has never reneged on its obligations.
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However, Panelo admitted that portions of the oil and gas reserves in Reed Bank could be exploited by China if the country fails to pay its loan obligations.
“Assuming we have defaulted for just a small amount of the loan, China cannot seize all the gas and oil there but only the equivalent of the unpaid loan. It cannot go beyond the outstanding balance,” he said.
He said the situation is “improbable, if not impossible,” however, as the country has maintained its good credit standing.
“Our economic managers have ensured that there are safeguards in case an arbitral award is made in favor of China,” Panelo said.
“The Philippines will never default on its loan with China as the payment for the country’s debt is automatically included in the government’s national budget,” he said.
Panelo then slammed critics for speculating on the terms and conditions of the loan agreement.
“These rantings and speculations have overshadowed the economic benefits of the projects that these loans shall fund,” he said.
“We find the criticism and the discussions on the loan agreement trivial, circuitous and pointless.”
The Palace official also did not spare Carpio from his criticism, telling critics to “set aside politics” and give the farmers in Northern Luzon a better life with the multi-million-dollar project.
Panelo and Carpio bumped into each other in a convention of lawyers in Iloilo City.
In a photo sent to Palace reporters, Panelo said he and Carpio exchanged pleasantries during the Integrated Bar of the Philippines National Convention Thursday afternoon.
“[We] exchanged pleasantries. We are fraternity broads in the Sigma Rho in UP Law. He is a Junior brod. I was one of the senior brods who initiated him, but not physically,” Panelo said.
On Thursday, Finance Undersecretary Bayani Agabin said the likelihood of the Philippines defaulting on its debt obligation was “remote.”
“The government is responsible in managing the country’s debts, be it external or internal,” Agabin said, noting that the Philippines has no record of reneging on its obligations, even during the most difficult times.
Finance Undersecretary Mark Dennis Joven, meanwhile, denied that the Chinese loan was onerous, saying the provisions are standard to the country’s loan agreements with other countries.
“All our bilateral agreements with China, Japan, Korea, France and with China under previous administrations, all of them have a choice of governing law provisions. And all of these choices of governing law provisions refer to the law of the lender, not the law of the borrower,” Joven said.
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