Duterte's P8.2T infra program may force PHL into ‘bondage’ – analyst

President Rodrigo Duterte's P8.2 trillion infrastructure program may sink the Philippines into deeper debt, an analyst said in a Forbes article on Sunday.

Anders Corr, founder of Corr Analytics, said in a contributed article to Forbes that the Philippines' plan to spend P8.2 trillion or approximately US$167 billion on infrastructure projects during Duterte's six-year term may put the country into "virtual debt bondage."

"Dutertenomics, fueled by expensive loans from China, will put the Philippines into virtual debt bondage if allowed to proceed," Corr said.

Dutertenomics is the current administration's economic and development blueprint.

Corr said that the fund that will be used for the Duterte administration's infrastructure program will bring the total national government debt of the Philippines to US$290 billion (P14.4 trillion).

"More likely according to my analysis, at 10% interest the new debt could go to $452 billion, bringing Philippines’ debt:GDP ratio to 197%, second-to-worst in the world," he said.

He added: "That understates the burden to the Philippines, as existing national government debt would also accrue interest over that time, and such interest was not included in the analysis."

In his article, Corr assumed that a big chunk of funds that will be spent on the Duterte administration's infrastructure program will come from China.

Worst-case scenario

Budget Secretary Benjamin Diokno had said that taxes will largely fund the P8.2 trillion infrastructure program, which includes at least 30 big-ticket projects in the next five years.

Diokno did confirm that China may offer the Philippines an interest rate between 10% and 15% in the repayment of its debt.

"Without much needed transparency from the Duterte government and China on the rate, conditionality, and repayment terms of $167 billion of new debt for the Philippines, the public should assume, to forestall a worst-case scenario, that the rate would be somewhere between 10% and 15%," Corr said.

Over 10 years, the Philippines' debt:GDP ratio will balloon to 296%, the highest in the world.

Japan currently has the highest debt:GDP ratio at 250.40%, according to Trading Economics while the Philippines' current debt:GDP ratio is at 42.10%.

Corr said that if the country's debt:GDP ratio balloons to 296%, it will not be able to repay China.

"The Philippines will have to give political and economic concessions to China in order to repay annual interest, or renegotiate such a large quantity of debt," he said.

Among the political concessions that the Philippines may give to China is to give up "territory or oil rights in the South China Sea... it could include economic concessions, for example selling China its national companies, or agreeing to below-market rates on exports to China."

The Philippines may also be driven to reach out to other countries to be able to repay China. If the government reaches out to Russia, Corr said it may agree to give out a loan to the Philippines "with even stiffer terms."

Corr also alleged that the President and "his influential friends and business associates" would benefit from the administration's infrastructure program through "finders fees."

He said Filipinos should demand transparency in the Duterte administration's dealings with China.

"These interest rates, and all details of the deals, need to be made public and approved by the Philippine Congress, or the loans should not go through," he said.

Joma's concerns

National Democratic Front (NDF) Chief Political Consultant Jose Maria "Joma" Sison was also concerned over the government's alleged borrowing program.

"Can the Philippines really borrow the huge amount of USD167B from China at so fast a rate?" he said in a Facebook message. "Will not the Philippines become a debt slave of China?"

Sison added that the reforms being talked about by the government and communist forces could be derailed by such borrowing plans.

"Will not the drive to build, build, build infrastructure (rails, roads and bridges) draw resources away from a program of national industrialization proposed by the NDFP in the negotiation of CASER (Comprehensive Agreement on Social and Economic Reforms)?" he said.

Aside from this, Sison also questioned the credibility of dealing with China, given past controversies.

"Does not the Philippines have already bad experience in making deals with China, such as the overpriced NBN-ZTE and NRT scams during the [Gloria Mapagal-] Arroyo regime and the P3B wasted on defective trains from China during [Benigno Simeon C.] Aquino [III] regime?" he asked. — ALG, GMA News