A geopolitical and geoeconomics expert warned that investments in infrastructure projects funded by Chinese Official Development Assistance (ODA) could lead to substantial debt.
Stratbase ADR Institute president Dindo Manhit also said there is a need to institute safeguard mechanisms against corrosive capital, which is private financing with underlying political motives.
“Lacking transparency and accountability, these have the potential to incite debt dependencies,” Manhit, speaking at a forum titled, “Revitalizing the Philippines’ Infrastructure Development through Public-Private Partnerships,” said.
He noted that early this month, the Department of Transportation announced the possibility of terminating the loan contracts of three major railway projects funded through Chinese ODA by the end of this year due to their failure to comply with requirements.
These include the Subic-Clark Railway Project, Philippine National Railways South Long-Haul Project or the PNR Bicol Express and the Davao-Digos segment of the Mindanao Railway Project.
“Without proper oversight, investments in infrastructure flagship projects, particularly those funded by Chinese ODA or through the Belt and Road Initiative (BRI), could be exploited to circumvent Philippine laws. These could then undermine the country’s democratic institutions and make it vulnerable to political and economic manipulation,” Manhit said.
COMPARATIVE ASSESSMENT OF INFRASTRUCTURE PROJECTS
As part of Stratbase ADR Institute’s efforts to promote transparency and governance in infrastructure flagship projects, the international think tank also released the results of its latest study on Friday that conducted a comparative assessment of two infrastructure flagship projects: the Kaliwa Dam Project, which was funded by a concessional Official Development Assistance (ODA) loan from China during the previous administration, and the Wawa Bulk Water Supply Project- Upper Wawa Dam, which was funded through a public-private partnership (PPP).
The study was conducted in partnership with the Center for International Private Enterprise.
“One of our primary observations highlights that heavily relying on ODAs to finance infrastructure and development projects presents the
risk of accumulating substantial debt. This can also make our country more vulnerable to external shocks. The sudden changes in global
economic conditions can jeopardize economic stability. The Philippines has experienced this vulnerability during times of global economic
uncertainty, highlighting the risks associated with dependence on foreign capital,” Manhit said.
“The New Centennial Water Source-Kaliwa Dam Project, funded by a concessional ODA loan from China, depicts how ODA loans have the
potential to be unfavorable to us… In the case of the mentioned project, it has a hefty interest rate of 2% and a comparatively
shorter repayment period of 20 years. All Filipinos will bear the responsibility for repaying the loan, regardless of whether they will
use the water produced by the Kaliwa Dam or not,” he added.
STRENGTHEN PUBLIC-PRIVATE PARTNERSHIPS
Manhit then emphasized the importance of the private sector’s involvement in ensuring a more robust and successful infrastructure
development in the country.
“Tapping the private sector, through increased public-private partnerships, fosters innovation by creating an attractive and
competitive investment climate that presents better risk management and ensures the successful implementation of infrastructure projects.
This approach increases efficiency in building large-scale projects through the expertise and resources of the private sector combined
with the government’s provision of incentives,” he said.
Manhit noted that while the government faces constraints in financing large-scale infrastructure projects, public-private partnerships can
expedite the development of critical infrastructure projects that the Philippines urgently needs.
Public-Private Partnerships hold the potential to accelerate infrastructure development and bring innovative solutions to the
table. It is not just about building bridges. It is also about building trust between the public and private sectors, as well as the
Filipino people,” Manhit added.
The author of the study, Stratbase ADR Institute Non-Resident Fellow Dr. Rizal Buendia, said that to improve transparency and
accountability in infrastructure projects, there is a need to establish mechanisms to provide the public more access to information
and documents like project papers, business-to-business agreements, monitoring and evaluation systems, and anti-corruption measures.
“Notably, transparency is central to empowering people: when citizens can easily obtain the public information that affects their
well-being, especially the direct stakeholders, they are better equipped to hold their leaders accountable and to participate in the
decisions that affect their lives. Lack of transparency and accountability leads not only to potential corruption but also to
conflict of interest, and favoritism,” Dr. Buendia said.
Senator Grace Poe in her keynote speech highlighted the strategic importance of PPPs in revitalizing the country’s infrastructure
growth.
Poe pointed out that “Through PPPs, this government can do more with less. PPPs offer stable funding for capital-intensive infrastructure
projects with the promise of efficient and innovative services.”
“PPPs can provide parallel, if not better, advantages than official development assistance (ODA). By requiring value-for-money proposals,
the better quality and longer life cycles of PPP projects make it more cost-effective than those solely financed by the national budget or
ODA,”
“We must focus on PPPs that offer ‘smart’ solutions through innovative and technology-driven projects. Sustainable and climate-responsive
design should be the norm in our infrastructures,” Poe said.