Duterte’s infrastructure miracle: Resurrecting a damned project

November 20, 2018

by IBON Foundation

By Jose Lorenzo Lim

Through China ODA, the Duterte administration revives a project halted by the historical struggle of the Cordillera people against destructive infrastructure

The Chico River Basin Dam Project was an infamous World Bank-funded hydroelectric project under the Marcos Era. Local opposition to the project was strong. The famed Macli-ing Dulag, tribal chieftain of the Butbut tribe, was among the leaders of opposition to the project. Then-president and dictator Ferdinand Marcos was insistent though and the 4th Infantry Division of the Philippine Army shot and killed Macli-ing Dulag in his home. The shooting spurred unity among the Cordillera peoples against the project and the Marcos regime eventually abandoned the project.

Today, Pres. Rodrigo Duterte is resurrecting the dam project with the China-funded Chico River Irrigation Project.

In the name of development

The Chico River Pump Irrigation Project is a Php4.3 billion project that is funded by Official Development Assistance (ODA) loan from China. The project will irrigate around 8,700 hectares that will supposedly benefit 4,350 farmers in 21 barangays from Tuao and Piat in Cagayan and Pinukpuk in Kalinga.

The Chico River Pump Irrigation Project is part of President Duterte’s Build, Build, Build infrastructure program for attracting foreign investors and accelerating economic growth. Build, Build, Build is a push for neoliberalism in the country particularly in the infrastructure sector. To recall, 70% of Tax Reform for Acceleration and Inclusion (TRAIN) revenues are earmarked for infrastructure projects mainly benefiting large foreign and domestic corporate interests.

According to the Cordillera People’s Alliance (CPA), the irrigation project privatizes agricultural services and forces farmers to succumb to unfair conditions set by corporations to be able to access their own resources. Communities also fear that the project will flood indigenous villages and farmlands in Barangay Sucbot, Pinukpok town up to Tabuk City. CPA also claims that affected communities did not consent to the Chico River Pump Irrigation Project.

However, the Duterte government continued on with the project and signed the loan agreement with President Xi Jinping on April 10, during the sidelines of the Boao Forum for Asia in Hainan, China. The winning contractor of the project is the China CAMC Engineering Corporation. The project is targeted to be completed in three years’ time and had its groundbreaking ceremony on June 8 at Tuao, Cagayan.

A reading from the onerous loan according to China

The Department of Finance (DOF) explains that the loan is worth Php 3.6 billion or 85% of the total value of the project to be implemented by the National Irrigation Administration (NIA). The loan for the Chico River Pump Irrigation Project has a 2% per annum interest rate and is payable in 20 years with a seven-year grace period. Moreover, there is a 0.3% commitment fee on the undisbursed amount and a one-time management fee pegged at 0.3% of the loan amount.

The loan agreement also has provisions that may be of serious concern. There is a provision that appears to, in effect, collateralize state assets. Article 5.5 is about the country not waiving immunity over Philippine assets dedicated to public and governmental use but suspiciously distinguishes these from “patrimonial assets and assets dedicated to commercial use,” which opens up the possibility that immunity over the latter is not waived.

The loan agreement’s Article 8.4 also explicitly says that it “shall be governed by and construed in accordance with the laws of China” but without similar explicit mention of Philippine law. Moreover, disputes regarding the loan agreement are to be settled at the China International Economic and Trade Arbitration Commission (CIETAC) which is outside of Philippine courts and beyond public transparency and scrutiny.

The Duterte administration seems focused on securing China investments and loans even to the extent of giving up territorial resources in the South China Sea. This is expressed in its desire to be included in China’s Belt and Road Initiative (BRI) and having access to its coveted infrastructure investments for developing countries.

China’s aggressive overseas efforts such as the BRI and its “debt book diplomacy”are part of the big power maneuvering and counter-maneuvering especially between China and the US for regional hegemony. The tensions between them recently became more public at the Asia-Pacific Economic Cooperation (APEC) summit. In particular, US protectionism went up against China’s desire to further open up economies. For the first time in its history, the APEC Summit was unable to produce a joint communique indicating not just the growing rivalry between the two big powers but perhaps even growing divisions among Asia-Pacific countries along those lines.

The mystery of dams

The Chico River Pump Irrigation Project is not the only dams project seeking China financing. Other projects include the Ilocos Norte Irrigation Project in Abra, the Gregorio Del Pilar Impounding Project in Ilocos Sur, the Tumauini River Multipurpose Project in Isabela, the Panay River Basin Integrated Development Project, the Ambal-Simuay River and Rio Grande de Mindanao River Flood Control Projects, and the New-Centennial Water Source- Kaliwa Dam Project of MWSS.

A deeper look into these projects shows that China is potentially interested in funding projects in areas with rich natural resources. According the Department of Environment and Natural Resources (DENR) the Chico River Basin has prospects for gold, sulfur, copper, clay, and gravel although since no actual drilling has yet been conducted in the river basin the volume of deposits is still uncertain.

The Rio Grande de Mindanao covered by the Ambal-Simuay and Rio Grande de Mindanao River Flood Control Projects of DPWH has metallic mineral sites within the river basin area including gold, copper, and silver, according to a study by the University of the Philippines Los Baños (UPLB).

The Chinese economy needs a constant and increasing supply of raw materials to keep growing and awareness of this should prompt more caution by the Philippines in the agreements it enters into with China. The possible collateralization of state assets such as under the Chico River Pump Irrigation Project loan agreement for instance may dangerously give way to China having undue access to the country’s rich natural resources in case of a loan default.

The New Centennial Water Source- Kaliwa Dam Project’s loan agreement is expected to be signed during Xi Jinping’s visit to the country. The loan agreement for this project may feature similar onerous conditions seen under the Chico River Pump Irrigation Project.

Continuing on

President Duterte’s development thrust is anchored on foreign investment liberalization with a huge infrastructure program as a central element. Infrastructure is essential for development but these need to be designed with a view to rural development and national industrialization. As it is, however, it is designed to reinforce the undue service- and foreign investment-orientation of the national economy. Moreover, the terms of deals especially with China seem to be onerous and surrender national sovereignty.

Philippine development should place the public welfare and national interest over that of narrow foreign and local big business interests.