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China says work on 3 railway projects are underway, reacting to reports in Manila that the funding requests had been withdrawn due to Beijing’s inaction on the loans
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President Ferdinand Marcos, Jr. tells officials to renegotiate the loans with Beijing while looking to other countries for cheaper financing
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The stumbling block is the 3% interest on the projects that China Eximbank will charge while Japan charges 0.1% for its ODA loans
China assured the Philippines that three major railway projects costing a total of P276 billion it had agreed to finance are ongoing, as the new Marcos administration said it would seek better financing deals from other countries while pursuing negotiations with Beijing.
Discussions with China Eximbank over financing of the rail projects stalled during former President Rodrigo Duterte’s administration, as the Chinese bank was insisting on a 3% interest rate on the official development assistance loan, which the Philippines considered exorbitant.
Finance Undersecretary Mark Dennis Joven said on Tuesday (July 19) the government had cancelled the financing application for the three railway projects but stressed it remains open to renegotiation.
Chinese Foreign Ministry spokesman Wang Wenbin said on July 18 that “the construction of more projects, including three railways, is well underway.”
Wang, interviewed by Chinese media, also gave the assurance that China will “coordinate seamlessly with the new Philippine government on this” as well as “move the projects forward [and] explore new projects while implementing existing ones.”
“China welcomes President Marcos’ instruction to the responsible department on discussing with China on the projects,” he added.
Transport Undersecretary for Railways Cesar Chavez disclosed last week the loan agreements for the railway projects were deemed “withdrawn” after Beijing did not act on the funding requests before Duterte’s term ended on June 30.
Marcos, in a cabinet meeting the previous week, said due to the project’s staggering cost, the government may consider official development assistance or public-private partnerships to put them back on track.
“Yes, of course [we will consider]. It should consider issues such as project cost versus financing cost,” Joven reported told a local newspaper in a Viber message when queried about the possibility of seeking financing from other countries.
“Not only these countries, but other countries which offer financing facilities as well,” he said.
The biggest of the three projects is the P142-billion PNR Bicol Railway or South Long Haul project, which will connect Laguna and Albay.
The two other projects are the P51-billion Subic-Clark Railway Project and the P83-billion Tagum-Davao-Digos segment of the Mindanao Railway Project (MRP).
The PNR Bicol project consists of seven contract packages – four for civil works, two for the trains and one for project management consultancy.
Joven said the government has negotiated the project management consultancy contract at a fixed rate of 2%.
“We are pursuing ongoing talks with the Chinese for the remaining six contract packages, with China indicating a rate of at least equal to the marginal funding cost of China Eximbank, which is currently around 3%,” he said.
Former Finance Secretary Carlos Dominguez III earlier warned that China would ask for more than 3% interest on the railway project loans.
