Philippines Drops China Railway Deals, Seeks Other Funders

Cliff Venzon
·2 min read
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(Bloomberg) -- The Philippines will no longer pursue Chinese loans to fund three railway projects valued at more than $5 billion and has started discussions with other Asian countries for alternative financing deals.

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“We saw that China appeared to be no longer interested, so we’ll look for other partners,” Transportation Secretary Jaime Bautista said in an interview at his office in Manila on Friday.

China had agreed to fund three railway projects located outside the Philippine capital during the administration of President Rodrigo Duterte who sought closer ties with Beijing. The government of his successor, President Ferdinand Marcos Jr., reviewed the deals due to lack of progress from the Chinese side.

Finance Secretary Benjamin Diokno last month notified Chinese Ambassador Huang Xilian in a letter that Manila “is no longer inclined to pursue” Chinese financing for the first phase of the Mindanao Railway Project, a 100-kilometer transport system that would traverse Duterte’s southern home region of Davao and which the government had valued at 81.7 billion pesos ($1.4 billion).

The Chinese Embassy in Manila did not immediately respond to requests for comment.

Bautista said the finance department will also send a formal notification to “terminate” the funding for the 50-billion peso Subic-Clark freight railway, which links two former U.S. military bases turned commercial zones, and a proposed long-haul commuter railway in the southern part of the main Luzon Island valued at 175.3 billion pesos, according to an official list of projects as of May 2021.

Turning to other financing options may delay the projects that are critical to the Southeast Asian nation’s infrastructure push to spur its economy. They are among projects initially listed for completion as early as this year.

There are “at least two Asian countries” that are interested in the Subic-Clark and long-haul railway projects, Bautista said, declining to name them because discussions are still preliminary.

The government is also considering funding the three projects or partnering with multilateral lenders and private companies, he added.

The decision to scrap Chinese loans comes against the backdrop of rising tensions between Manila and Beijing in the disputed South China Sea. Matters came to a boil last weekend when boats from the two countries collided on two separate occasions as the Philippines attempted to resupply a World War II-era ship it has used to reinforce its territorial claims.

Bautista would not attribute the stalled Chinese loan agreements to the geopolitical tensions. “Even before these tensions started, the discussions weren’t progressing,” he said, adding he would still welcome Chinese financing for other infrastructure projects.

“There are a lot of projects that they can support if they want to,” Bautista said.

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