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China 'backed out' of funding three railway projects, says DOTr exec

The Chinese government did not act on the Duterte administration’s request for loan financing for three major railway projects, therefore it is considered withdrawn and has to be renegotiated by the current government, a top official of the Department of Transportation (DOTr) said Friday.

"Ang totoo niyan sa usapang diretso nag-back out ang China. Umatras ang China to fund the Calamba to Bicol, to fund the Tagum-Davao-Digos, to fund Clark to Subic,” Transportation Undersecretary for Railways Cesar Chavez told reporters on the sidelines of a press briefing in Pasay City.

(The truth is, China backed out. China backed out in funding the Calamba to Bicol, to fund the Tagum-Davao-Digos, and to fund Clark to Subic.)

Chavez said the Duterte administration’s National Economic and Development Authority (NEDA) Board has approved the three railway projects to be funded by official development assistance (ODA) loan from China.

However, Chavez said negotiations, which begun as early as 2018, did not prosper as China failed to act on the Philippine government’s requests for funding.

He said that former Finance Secretary Carlos Dominguez III sent a letter to Chinese financing agencies that if the funding requests for the railway projects remain not acted until June 2022, the last month of the Duterte administration, "our application for loan is considered withdrawn.”

He explained that ODA-funded projects from China require that procurement must go first before a loan agreement can be signed, unlike the process with other bilateral or multilateral partners.

"Walang action, therefore withdrawn, therefore walang pondo," Chavez said.

(There’s no action, therefore it is withdrawn, and therefore there is no funding.)

In a separate statement, Chavez said that pursuant to the applicable executive agreements between the Philippines and China, the “DOTr has procured and awarded contracts for the Subic-Clark Railway Project's (SCRP) Engineering, Procurement, Construction, and Commissioning (EPCC) Contractor; the PNR South Long Haul (SLH) Project's Design-Build (DB) Contractor; and the Mindanao Railway Project's (MRP) Project Management Consultant (PMC).”

The contract for the construction of the P142-billion Philippine National Railways South Long Haul project or the PNR Bicol from Banlic, Calamba to Daraga, Albay was awarded to joint venture of China Railway Group Ltd., China Railway No. 3 Engineering Group Co. Ltd., and China Railway Engineering Consulting Group Co. Ltd. (CREC JV) in January.

At least 85% of the PNR Bicol’s cost was supposed to be financed through a loan from the Chinese government.

Meanwhile, the P83-billion Tagum-Davao-Digos segment of the Mindanao Railway Project —a campaign promise of former President Rodrigo Duterte — did not proceed as scheduled as China was not able to submit a shortlist of contractors for the project’s design-and-build contract.

Last year, it was indicated that the construction of the railway project’s phase 1 will begin in the second quarter of 2022 and is targeted to be partially operable by the latter part of the year. The Mindanao Railway was originally set to begin construction for its phase 1 or Tagum-Davao-Digos segment in January 2019.

The construction of the P51-billion Subic-Clark Railway project was awarded to China Harbour Engineering Co. in December 2020.

“Following DOTr's award and signing of the above contracts, and also pursuant to the applicable [Philippine and Chinese governments] Executive Agreements, DOTr endorsed the contracts to the DOF for the DOF to submit and negotiate the corresponding Loan Applications with China,” Chavez said.

He said that respective loan applications were submitted by the DOF to China Eximbank for financing of contracts for SCRP and PNR Bicol.

“In May 2022, DOF informed China Eximbank that the submitted loan applications will only be valid up to May 31, 2022, and that if the loan applications are not approved, then the loan applications shall be automatically withdrawn,” the Transportation official said.

“DOTr understands that this is in light of the upcoming transition of government, and in deference to the incoming administration,” Chavez said.

As the loan applications were not approved as of May 31, 2022, the Transportation official said that accordingly, in June, the DOF advised China Eximbank that the loan applications “are deemed automatically withdrawn.”

Chavez said President Ferdinand Marcos Jr. ordered to "go back to the negotiating table" with the Chinese government.

However, he said that other funding options are also being considered such as the possibility of opening it for the private sector since the government thrust is towards public-private-partnerships (PPP). 

At the beginning of his term, Duterte touted that he brought home $24 billion or about P1.2 trillion worth of pledges in loans and grants from China for mostly his ambitious infrastructure initiative after his state visit to Beijing in October 2016.

The Philippines has so far received from China about P5.9 billion grant for the Binondo-Intramuros and Estrella-Pantaleon bridges, P4.37 billion loan for the Chico River Pump Irrigation project, P998 million grant for the Marawi City rehabilitation, and P12.18 billion loan for  Kaliwa Dam project.  —KBK/NB, GMA New