Press Release
March 18, 2019

De Lima asks PH gov't to heed US, Malaysia's advice on Chinese loans

Opposition Senator Leila M. de Lima has urged the Duterte administration to heed Malaysia Prime Minister Mahathir Mohamad and US State Secretary Mike Pompeo's advice to be vigilant with its loan agreements with China to avoid putting the country in dire debt and forcing it into commitments that threaten its sovereignty.

De Lima, who chairs the Senate Committee on Social Justice, Welfare and Rural Development, said the government should learn from the mistakes of other Asian countries who borrowed heavily from China to fund their infrastructure projects.

"This is not the first time that top leaders or experts cautioned us about our dealings with China that could unfavourably affect our country's future, both in the aspects of financial and territorial security. We need to learn from the unfortunate fate of others who borrowed before us," she said.

"I urge the Duterte administration to listen to the advice of US and Malaysia, and stop binding the Philippines to huge monetary indebtedness to China at the expense of Filipino taxpayers who stand to pay for the onerous loans in the years to come," she added.

In an official visit to Philippines last March 7, Prime Minister Mahathir warned the Philippines over falling into a debt trap amid the country's obvious dependence on China to fund its ambitious infrastructure projects, among others.

"If you borrow huge sums of money from China and you cannot pay-you know when a person is a borrower he is under the control of the lender. So we have to be very careful with that," Mahathir said, adding that countries like the Philippines should "regulate or limit influences from China."

Mahathir was speaking from experience, considering that his government already withdrew the so-called "unfair" China-backed projects, including a railway connecting Malaysia's east coast to southern Thailand and Kuala Lumpur, and two gas pipelines.

Meanwhile, Foreign Affairs Secretary Teodoro Locsin Jr. confirmed that Pompeo admitted that the United States was worried about the country's move to borrow heavily from China as it could lead the country to falling into the China debt trap, in a meeting held during the latter's visit in Manila from February 28-March 1.

Instead of considering the advice of Pompeo to be careful about its dealings with China, Locsin recalled that he insisted that the US Secretary of State should not "worry about the debt trap" because "we are the experts in the bad loans."

"Mr. Locsin may want to rethink his statement. The point here is to act before it's too late. We need to be smart and strategic when it comes to loan agreements with China if we do not want to see a recurrence of the Marcos-era debt trap," De Lima maintained.

The lady Senator from Bicol reiterated that that the government should look at the pattern of China in luring poorer nations to accept its loan offers that eventually resulted in debt traps, thereby allowing it to gain power and influence over them.

"Warnings are everywhere and it must not be ignored, lest we want China to also use these bad loans as leverage against the Philippines in its aggressive effort to undermine our claims in the disputed islands in the South China Sea, or the West Philippine Sea," she said.

Among the countries who suffered from unsustainable debt by accepting Chinese loan investments include Sri Lanka and Mongolia, De Lima recalled.

De Lima earlier filed Senate Resolution No. (SRN) 377 urging the Senate to look into the possible long-term financial and economic repercussions of the multi-billion dollar loans and investments package offered by China to the Philippines under its belt and road initiative.

She also filed SRN 628 urging the Senate to investigate the complete terms and conditions of the loans entered into by the Philippine government to fund its "Build, Build, Build" Program to assess the possible impact of Chinese loans on our economy and national security.

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