DoF rejects claims Kaliwa Dam, Chico irrigation projects contain ‘onerous’ provisions



MANILA, Philippines — The Department of Finance (DoF) has rejected claims by a legislator that the loan agreements for the Kaliwa Dam and Chico River Pump Irrigation Projects have “onerous” provisions.

In a statement, Finance Undersecretary Mark Dennis Y.C. Joven said that the government maintains “strict standards” when dealing with foreign lenders.

He said the structure of water concession agreements, which are public-private partnership (PPP) contracts, “is very different” from that of official development assistance (ODA) financing agreements which the government enters to with other countries and multilateral lenders and are governed by international laws.

Earlier, Deputy Minority Leader and Bayan Muna Representative Carlos Isagani T. Zarate claimed that the loan agreement for the China-funded Kaliwa Dam and Chico River Pump Irrigation Projects contain “onerous provisions,” and should be reviewed by Malacañang.

Zarate objected to the waiver of sovereign immunity, the interpretation of the terms under Chinese law, and provisions outlining the procedure for arbitration in the event of disputes.

However, Joven said such provisions are standard on all loan agreements entered into by the Philippines with other countries and that the choice of governing law in interpreting the agreement “is often the law of the lender, as seen in our loan agreements with China, Japan, Korea, and France, even during past administrations.”

“There is nothing unusual with this provision, as it is found in loan agreements with several countries,” he said, adding that “these choices of law provisions is essential to international agreements with a commercial nature because of the presence of a foreign element. On the other hand, this is not necessary in the case of a water concession contract, which is governed by domestic law.”

He also said the choice of arbitration venue, which in this case is Hong Kong, are determined on a per-loan agreement basis as a precaution against default by the borrower.

“Regardless of the venue of arbitration, the usual international arbitration rules apply, such as the nomination of three impartial arbitrators from among hundreds of arbitrators from Europe, US, Latin America, and other countries like Singapore and the Philippines,” he said.

He said the government is responsibly managing its debts both from local and foreign sources by maintaining a healthy ratio of debt to the size of the economy, currently at 37.6% as of first half of 2019.

“The country borrows from other countries to take advantage of concessional, or cheaper, financing… The interest rates offered by foreign countries are way lower than anything the private sector can offer. Borrowing at lower interest rates means having to pay less for the loans and thereby freeing up more government resources for other productive investments,” Mr. Joven said.

He said added that all loan agreements signed for projects under the “Build, Build, Build” program are published online in the interest of transparency.

“Although we will find that the loan agreements for the Kaliwa Dam and Chico River Pump Irrigation Projects do contain confidentiality clauses, they are accompanied by specific provisions stating that the agreements may be released ‘in accordance with any Philippine law.’ The Philippine Constitution mandates disclosure of information relating to foreign loans,” he added.

The Metropolitan Waterworks and Sewerage System (MWSS) said the construction of Kaliwa Dam will prevent another water crisis for Metro Manila.

Citing an analysis, it said the capacity of Angat Dam, a major source of Metro Manila’s water, will no longer be enough “to satisfy the water demand of Metro Manila between 2020 and 2025.”

“Taking into account a supply buffer of 15%, the Angat supply capacity will be insufficient before 2020. These numbers illustrate the need for a large water supply source. The events since March 2019 have only confirmed said projections,” it said.

Meanwhile, the MWSS said that the social and environmental impacts of the Kaliwa Dam project will be minimal compared to the earlier plan of an integrated Kaliwa and Laiban Dam System in 2013.

The MWSS also said its consultations with the indigenous people in Quezon and Rizal provinces “reached a positive outcome” in December after they adopted a resolution of consent to the project. (Stacy Ang/JGo/CurrentPH)

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