DOTr: Philippines still pursuing China loans for railway projects

The Philippine government is still pursuing loan agreements with China for three major railway projects, an official of the Department of Transportation (DOTr) said Friday.

Transportation Undersecretary Timothy John Batan so confirmed after senators asked how the DOTr would achieve the completion of the Mindanao Railway Project’s Tagum-Davao-Digos segment, the Philippine National Railways Calamba to Bicol line, and the Subic-Clark Railway Project.

In the DOTr’s presentation before the Senate panel, Batan said the Mindanao Railway Phase 1 is set to start its partial operations by the first quarter of 2027 and full operations by second quarter 2028; the PNR South Long Haul Project is expected to be fully operational by the third quarter of 2026, and the Subic-Clark Railway Project by the third quarter of 2026.

"Currently, the DOTr has already written to DOF requesting for the resubmission of our loan applications for our China-funded projects and this is currently ongoing, the processing by our Investment Coordination Committee for purposes of getting the necessary government approvals," Batan said.

Senator Nancy Binay then asked if the government was still pursuing the Chinese financing, to which Batan answered in the affirmative.

"Yes, madam chair, that is the current direction for these three China rail projects," Batan said.

Asked how they came up with the target dates when there was no sure funding for the railway projects, Batan said the DOTr was expecting to secure the loans from China by mid-2023.

"Based on this target of 2023 loan agreement signing with our Chinese partners po, then that is the basis po of our current completion date for Mindanao Railway of second quarter of 2028," Batan said.

Batan said that the DOTr had investment approvals for the railway projects, which meant some activities could still continue such as right-of-way acquisition while the financing for the contract packages are being arranged.

Senator Grace Poe, who presided over the hearing, then asked why the Philippines is still pursuing these China loans when there are other countries, such as Japan, who can lend the government with "better terms."

On the issue of interest rates, Batan said the difference between the interest rates offered by the Japan International Cooperation Agency (JICA) and China Exim Bank was not that big.

He said the JICA's 0.1 percent interest rate per annum is a Japanese Yen denominated loan while the China Exim Bank's 2 percent interest rate per annum is a US Dollar denominated loan.

"If we apply a currency parity conversion to our JICA Japanese Yen denominated loan agreements, then roughly from an interest rate perspective, they will not be very far apart," he said.

Further, Batan said the country's bilateral partners also set a lending ceiling and Japan's lending ceiling to the Philippines is "almost depleted."

In July, the DOTr said China "backed out" of funding the three railway projects as it did not act on the Duterte administration’s request for loan financing.

Batan said the condition imposed by the Department of Finance under the Duterte administration was that if the loans would not be closed or would not be signed by the end of the previous administration, then the Philippines would be withdrawing the loan applications. —NB, GMA News