MANILA – Government critics must first look at the Philippines’ credit history and fiscal position before ranting about the perils of securing infrastructure loans from China.
Department of Finance (DOF) assistant secretary Antonio Joselito Lambino II on Monday insisted that worst-case scenarios such as China seizing gas which may be found in Reed Bank if the Philippine government defaults on its loan payment is far from happening.
He said there is nothing questionable on the clause of the USD62-million loan extended by the Chinese government for the Chico River Pump Irrigation Project, which Senior Associate Justice Antonio Carpio said is an onerous deal.
Citing news reports quoting Carpio as saying that the Philippine government will not have a chance of winning an arbitration case against China, Lambino said “arbitral rulings are still subject to the Philippine Constitution and the Philippine Court system.”
Carpio said that if the Philippine government failed to make good on its payments, China can seize gas deposits in Reed Bank since the area is part of Philippines patrimonial assets dedicated to commercial use.
Reports said that Article 8 of the loan agreement states that the Philippines “irrevocably waives any immunity on the grounds of sovereign or otherwise for itself or its property in connection with any arbitration proceeding.”
Lambino, however, said that “the waiver of sovereign immunity is standard for agreements which involve a state as one of its parties and include an agreement to resolve disputes through arbitration.”
He explained that “states generally benefit from sovereign immunity” since this will allow the creditors to take the borrowers to arbitration in the case of default.
He cited a Supreme Court ruling dated February 7, 2012 wherein “Senior Associate Justice Carpio himself was present, states that “an agreement to submit any dispute to arbitration may be construed as an implicit waiver to immunity from suit.”
“This means that we allow our sovereign immunity every time we agree to arbitration, whether or not the waiver is explicitly stated in the agreement,” he said.
The DOF official also stressed that “arbitral rulings are still subject to the Philippine Constitution and to the Philippine court system”, noting that the Philippines has strict prohibitions on foreign ownerships of lands.
Citing an SC decision penned by Carpio on July 9, 2002 for the Chavez vs. PEA and Amari case, he said “the gas which may possibly be found in Reed Bank is a public asset and cannot be seized by a foreign entity unless explicitly declared otherwise.”
Thus, Lambino called on government critics to first look at the government’s credit history and the current fiscal situation before painting a negative situation.
“The Department of Finance challenges critics to take a look at the Philippines’ credit history and the data on the government’s fiscal situation (which have been regularly discussed by the DOF in the annual budget hearings and which have all been available to the public through the website of the Bureau of the Treasury) and consult with its experts on fiscal matters before coming up with a conclusion on whether or not the Philippines is indeed at risk of falling into a so-called ‘debt trap’,” he added. (PNA)