A huge upgrade of infrastructure is vital for Philippines economic future. That’s why it is contested by entrenched interests, including foreign powers. This is the first in a series of occasional commentaries about the Philippines transformation from an international viewpoint.
In the past year, President Duterte has initiated a series of economic reforms to accelerate economic development. Despite much “political noise”, the government seeks sustained growth around 6.5- 7% in 2017, by banking on multiple initiatives, especially higher infrastructure spending.
According to Ernesto Pernia, Director General of the National Economic and Development Authority (NEDA), investment spending must be ramped up to 30% of GDP for Philippines to become an upper middle-income economy by the end of Duterte’s term in 2022, and to pave the way for a high-income economy by 2040.
Yet, the huge infrastructure investment effort has been often misreported internationally. Infrastructure investment is a case in point.
The Allegation: Infrastructure as “Debt Slavery”
In early May, Secretary of Budget and Management Benjamin Diokno estimated that some $167 billion would be spent on infrastructure during President Duterte’s six-year term. Only a day later, US business magazine Forbes released a commentary, which headlined that this debt “could balloon to $452 billion: China will benefit”.
According to the author, Dr. Anders Corr, the current Philippine government debt of $123 billion is about to soar to $290 billion because China, the “most likely lender”, would impose high interest rates on the debt: “Over 10 years, that could balloon Philippines’ debt-to-GDP ratio as high as 296%, the highest in the world.”
These figures assume absence of transparency by the Duterte government and China on the interest rate, conditionality and repayment terms of $167 billion of new debt for the Philippines. Due to accrued interest, “Dutertenomics, fuelled by expensive loans from China, will put the Philippines into virtual debt bondage if allowed to proceed.” He assumes China’s interest rate would amount to 10%-15%.
But why would the Philippines accept such a nightmare scenario? Because, as Corr puts it, “Duterte and his influential friends and business associates could each benefit with hundreds of millions of dollars in finders fees, of 27%, for such deals.”
He offers no facts or evidence to substantiate the assertions, however.
About the Author Dan Steinbock is the Founder of Difference Group and has served as Research Director of International Business at the India China and America Institute (US) and a Visiting Fellow at the Shanghai Institutes for International Studies (China) and the EU Centre (Singapore). For more, see http://www.differencegroup.net
About the Author
Dan Steinbock is the Founder of Difference Group and has served as Research Director of International Business at the India China and America Institute (US) and a Visiting Fellow at the Shanghai Institutes for International Studies (China) and the EU Centre (Singapore). For more, see http://www.differencegroup.net