Junked rail loans show China is unfit as partner – analysts

MANILA, Philippines — Next year, between July and September, and in 2028, between April and June, three railway projects, which are expected to serve thousands of passengers a day, would have been completed if China did not back out of its commitment to finance the projects.

It was in 2017 when China promised a $7.34 billion loan to the Philippines for the implementation of then President Rodrigo Duterte’s “Build, Build, Build” program, which covered infrastructure projects such as the South Long Haul Railway, Subic-Clark Railway, and the Mindanao Railway Phase I.

Based on data from the Department of Transportation (DOTr), the 639-kilometer South Long Haul Railway that would link Metro Manila with Matnog, Sorsogon, is worth P175 billion and is expected to serve 100,000 passengers a day.

 

The 71.13-kilometer Subic-Clark Railway, which would provide cargo service between Subic Bay Freeport Zone and Clark Freeport and Special Economic Zone, is worth P50.03 billion, while the Tagum-Davao-Digos Mindanao Railway that would serve 122,000 passengers a day is worth P81.7 billion.

Back in 2019, China even reiterated its commitment to finance the projects, especially the Mindanao Railway, which would have been one of the infrastructure legacies of Duterte, who consistently appeased China on the basis of the supposed investments and loans that the Philippines receives.

As stated by the DOTr in its website, before the 2026 and 2028 deadlines, the projects were even set to be completed by 2025 for the South Long Haul Railway, and 2023 for both the Subic-Clark Railway and the Mindanao Railway Phase I.

So if only China kept its promise to provide loans for the construction, these projects would have been working by now, serving thousands of people who are relying on the existing 76.9-kilometer railway system, which is not even 10 percent of the 1,200-kilometer government target.

But China “backed out.”

‘Not reliable’

International relations analyst and De La Salle University instructor Don McLain Gill, pointed out that China not proceeding with its commitment was “a clear representation of how it politicizes its so-called development partnership with countries such as the Philippines.

READ: PH scraps China loan deals for Duterte rail projects

Back in 2022, the DOTr stressed that China already backed out even before the government withdrew its loan requests on the basis of then Finance Secretary Carlos Dominguez III’s letter saying that if the requests remain not acted upon until June, “our application for loan is considered withdrawn.”

Interestingly, while negotiations started as early as 2018, the request by the Philippines did not prosper as China failed to act on the application despite the Department of Finance (DOF) telling China Eximbank that the loan requests would be valid until the end of the Duterte administration.

READ: Pivot away from Chinese loans

The DOTr had already procured and awarded contracts for the engineering, procurement, construction, and commissioning of the Subic-Clark Railway, as well as the design-build of the South Long Haul Railway and the project management consultant of the Mindanao Railway.

As it said, the contract for the construction of the South Long Haul Railway was awarded to the joint venture of China Railway Group Ltd., China Railway No. 3 Engineering Group Co. Ltd., and China Railway Engineering Consulting Group Co. Ltd.

The construction of the P51-billion Subic-Clark Railway was awarded to China Harbour Engineering Co., while the Mindanao Railway Phase I, which would link Tagum City, Davao City, and Digos City did not proceed as scheduled since China failed to give a list of contractors.

Gill told INQUIRER.net that “this highlights that China is unreliable as a development and economic partner,” pointing out that the Philippines is now one of the many examples in the Indo-Pacific that prove how China cannot be relied on despite laying itself as a leader in the Global South.

READ: Aborted China railway loans

“Ironically, China has only continued to put strain, pressure, and inconvenience to countries, particularly from the Global South [...] so in that regard, China showed that at any point, it cannot be seen as a consistently reliable economic partner,” he said.

For Gill, China “would all depend on what it sees fit based on its narrowly driven ambitions.” “This is not the type of economic partner we need,” he said while pointing out that to look for other loan sources is the “right and logical thing to do.”

‘We can’t wait forever’

The DOF of the Duterte administration can be recalled cancelling the loan request instead of keeping it in suspended animation, a move which the DOTr of the administration of President Ferdinand Marcos Jr. understood as in light of the transition and in deference to Marcos.

So in 2023, Philippine National Railways general manager Jeremy Regino said the government was still in negotiations with China to secure billions worth of loan for the three railway projects, which are expected to boost the economy and provide reliable and faster transportation for people.

READ: Philippines revives infra loan talks with China bank

Regino said the government was seeking to secure a loan at a 2.5 percent interest rate, lower than the 3 percent that China had proposed.

However, only a few days later, then Transportation Secretary Jaime Bautista stated in a radio interview that the three railway projects will really no longer be financed by China. “It seemed like they aren’t that interested anymore,” he said.

“We can’t wait forever,” Bautista stressed as he shared that the government already started looking for new loan sources to complete the railway projects, which is why the government has not yet provided a definite completion date.

READ: PH quits seeking Chinese loan for Mindanao rail

As pointed out by international relations and security expert Lucio Pitlo III to INQUIRER.net, “under the present state of bilateral ties, it’s really hard to see progress on such financing so looking for alternative sources makes sense.”

READ: PH formally withdraws China loan negotiation for Subic-Clark railway, says DOTr exec

Marcos, in 2022, took an almost complete turn and departed from Duterte’s stance on China, which, despite its baseless and illegal nine, now 10-dash line, is consistently spitting at a 2016 arbitral decision that sided with the Philippines on the issue of the West Philippine Sea.

Gill stressed that the Philippines, “being serious on its development agenda would not just sit and wait for a country that shows no interest in being an equitable economic partner to break its silence on a matter that would benefit the Filipino people.”

Based on the latest government pronouncements, France is now being considered as a loan source for the South Long Haul Railway, while the United States has been confirmed to provide technical assistance for the Subic-Clark Railway. The government is eyeing a public-private partnership for the Mindanao Railway.

(2025/08/15-14:41)

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