MANILA, Philippines – The Freedom from Debt Coalition today urged the Senate to summon outgoing Transportation and Communications Secretary Mar Roxas and officials of the Department of Finance and the North Luzon Railways Corporation (NLRC) to explain in full the details of the renegotiation with Chinese officials on the highly irregular Northrail Project.

The debt watchdog likewise expressed opposition to the planned payment of some US$184 million by the Aquino administration to the Export-Import Bank of China (China EXIM Bank) which, according to news reports, is a portion of US$500 million worth of official development assistance (ODA) loan to the halted construction of the project.

Ricardo Reyes, FDC president, said that since the project’s original and amended contracts are void ab initio, according to 14 July 2011 opinion of the Office of the Government Corporate Counsel (OGCC), the Philippine government has no obligation to pay China EXIM Bank.  

“Why should public money be used to pay for a loan agreement that was deemed irregular from the start? Why should the people be made to suffer again from another example of the irregularities committed under the Arroyo administration? If President Aquino and his Cabinet Secretaries are sincere in breaking from a corrupt past, then the government should immediately cancel this loan,” said Reyes.

FDC has been campaigning against debts that are considered onerous, fraudulent, wasteful and in violation of human rights conventions, and therefore, illegitimate, since it was established in 1988. In fact, the Northrail project is one of the 11 loan projects that were identified as illegitimate debts during the 2008 National Budget deliberations. Congress decided to reduce debt service by P25 billion and inserted a special provision that “no amount shall be used for the payment of interest payments on debts which are challenged as fraudulent, wasteful and/or useless.” Arroyo, as the group expected, issued a veto on the said special provision.

FDC also questioned why the DOF renegotiated the payment of a portion of the loan when it is clear that the project’s original and amended contracts are void from the very beginning.

“Paying US$184 million to China EXIM Bank is an injustice to Filipino taxpayers who will be burdened by this anomalous transaction,” stressed Reyes.

Reyes also said that recent developments have raised more questions than cleared the issue.

“How was the US$184 million spent by China National Machinery Industry Corp. (SINOMACH)? Did it come from the US$400 million which was borrowed by the Philippine government, through the DOF, and later re-lent to NLRC for the Phase 1 Section 1 of the project? Or, did it come from the second loan, which amounted to US$500 million, for the Phase 1 Section 2 of the project? If the amount came from the second loan, then SINOMACH and China EXIM Bank have a multi-million problem because said loan was never concluded,” said Reyes. -30-

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