Philippines drops China railway deals, seeks other funders

MANILA – The Philippines will no longer pursue Chinese loans to fund three railway projects valued at more than US$5 billion (S$6.85 billion) and has started discussions with other Asian countries for alternative financing deals.

“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 agreed to fund three railway projects

located outside the Philippine capital during the administration of then President Rodrigo Duterte who sought closer ties with Beijing.

The government of his successor Ferdinand Marcos Jr reviewed the deals due to lack of progress from the Chinese side.

Finance Secretary Benjamin Diokno in September 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.

The project involves a 100km transport system that would traverse Mr Duterte’s southern home region of Davao, which the government had valued at 81.7 billion pesos (S$1.96 billion). 

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

Mr Bautista said the finance department will send a formal notification to “terminate” the funding for the Subic-Clark freight railway, which links two former US military bases turned commercial zones, and a proposed long-haul commuter railway in the southern part of the main Luzon Island.

The railways are valued at 50 billion pesos and 175.3 pesos, respectively, according to an official list of projects as at May 2021.

Turning to other financing options may delay the projects that are critical to the South-east 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, Mr 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. 

Mr 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,” Mr Bautista said. BLOOMBERG