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Friday, March 29, 2024

China backs out of rail deals

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DoTr says Beijing ignored request for committed funds on 3 projects

China has pulled out of its commitment to pump P276 billion into three flagship railway projects initiated by the Duterte administration, the Department of Transportation (DOTr) said Friday.

“Frankly speaking, China has backed out,” Transportation Undersecretary Cesar Chavez said in Filipino, noting that the Chinese government did not act on the Philippine request to fund the P142-billion Philippine National Railways South Long Haul Project, the P83-billion Tagum-Davao-Digos segment of the Mindanao Railway Project and the P51-billion Subic-Clark Railway Project.

“No action [was taken], therefore [it was] withdrawn. Therefore, there were no funds,” Chavez said.

He said the government is looking fora private sector partner to pursue these rail projects, as the new administration is reviving the public-private partnership arrangements.

“What we want people to know is there is no funding,” Chavez said. “We are saying this to manage the expectations of the public, Congress, the Cabinet, and those hoping,” he said.

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Chavez recalled that then Finance Secretary Carlos Dominguez III tried following up on the Philippines’ loan application with China in February this year.

“Secretary Dominguez wrote to the Chinese government: ‘We have a loan application with you for the construction of the Calamba to Bicol railway. We wrote a loan application with you for the Clark to Subic railway worth about P51 billion.

We wrote a loan application with you for the P83 billion Tagum-Davao-Digos railway,’” Chavez said. “Because there was no reply, they (the loan applications) were withdrawn.”

Because of this, Chavez said President Marcos instructed them to reopen the loan application and renegotiate with the Chinese government.

In a Cabinet meeting July 12, President Ferdinand Marcos Jr. asked the DOTr to “go back to the negotiating table” with the Chinese government, Chavez said.

The three PNR rail projects are the among biggest components of the Duterte administration’s “Build, Build, Build” program, along with the Metro Manila Subway Project funded by Japan and the Malolos-Clark Railway and South Commuter Railway financed by the Asian Development Bank.

The DoTr in January 2022 signed a P142-billion contract with Chinese companies to build the first 380 kilometers of the Philippine National Railway Bicol Project from Banlic, Calamba to Daraga, Albay.

The agency through former Transportation Secretary Arthur Tugade signed the design-build contract with the joint venture of China Railway Group Ltd., China Railway No. 3 Engineering Group Co. Ltd. and China Railway Engineering Consulting Group Co. Ltd. The agreement covers the design, construction and electromechanical works of the project.

The first 380 kilometers of PNR Bicol will span 39 cities and municipalities, four provinces and two regions. It will involve the construction of 23 stations, 230 bridges, 10 passenger tunnels and a 70-hectare depot in San Pablo, Laguna.

Meanwhile, the P83-billion Mindanao Railway Project: Tagum-Davao-Digos segment is expected to reduce travel time from Tagum City, Davao del Norte to Digos City, Davao del Sur from 3.5 hours to 1.3 hours once it starts operations.

The P51-billion Subic-Clark Railway Project is expected to provide high-capacity freight service to support the existing industrial areas along the Subic-Clark corridor by serving as the link to the airport at Clark Freeport Zone and the seaport at the Subic Bay Freeport Zone.

At the start of his term in 2016, President Rodigo Duterte visited China and said he had brought home about $24 billion or P1.36 trillion in investment and loan pledges.

However, in 2020, Duterte’s own Socioeconomic Planning Secretary Ernesto Pernia said China was slow in providing funding for the country’s infrastructure projects.

The National Economic and Development Authority (NEDA) said that as of August 2020, or four years after Duterte’s China visit, the country had received only P5.9 billion for the Binondo-Intramuros and Estrella-Pantaleon bridges, P1 billion for rehabilitation of conflict-stricken Marawi City, P4.4 billion for the Chico River Pump Irrigation Project, and P12 billion for the New Centennial Water Source Kaliwa Dam.

Unlike Japan and the Asian Development Bank, China has not granted the needed loans to bankroll the construction of the three major infrastructure projects.

Albay Rep. Joey Sarte Salceda said if China would not fund the projects, other countries might.

“Japan has just provided the trains for the new North-South Commuter Railway Project a few months ago. And our countries are closer than ever. I think Japan will be very happy to take over financing a project that China has vacated,” Salceda said.

“The next step is not to try to persuade China to back us up again, but to simply look for other funders. Our development should not be used as diplomatic leverage among supposed friends. If they want to finance our development projects, they are welcome to, at the right terms. But if they don’t want to, we can always find others,” Salceda said.

“I will try my line with both Secretary Jaime Bautista and my network as former Green Climate Fund chair and current adviser to the Incheon Metropolitan City in Korea to see which countries would be happy to take China’s place. China was not the only proponent of funding railway projects in the country, after all,” Salceda said.

Salceda said opening the country’s project portfolio to more public private partnerships will also open up the country to new funders, such as Singapore, which has been investing heavily in the Philippine private sector.

“I think it’s also time for the United States to put its money where its mouth is about the strategic importance of the Philippines. South Korea even gave us more foreign aid and grants than China did last year. “

“If China wants to build stronger ties, they are welcome to try, as all other nations are. This withdrawal does not achieve that objective. If anything, it compels the Philippines to seek closer ties with other friends—countries that may not necessarily be China’s friends, too,” Salceda said.

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