Is China’s aid an entrapment?


To drill down to the very basics, the admin’s economic platform is a slew of infrastructure projects to drive growth. Their tag line screams “Golden Age of Infrastructure” which of course gets lots of oligarchs’ adrenaline rushing. There is no doubt the Philippines need to improve on its infrastructure to take the country to a higher level. A huge dose of infra projects will also by themselves provide a kick to the economy from the resultant multiplier effect. Infra grand plans always look fantastic on paper and in public speeches but need to be treaded warily, especially when several mammoth projects are being undertaken almost concurrently. Egos, personal interests, and politics often get in the way of economic management.

According to NEDA, there are 12 mega projects worth a total of $4.4 billion (Php220 billion) such as the 653 km North-South Railway, New Centennial Water Source-Kaliwa dam, and the 2,000 km Mindanao railway project. Having cut the proverbial bridge to the US with Duterte’s pivot to the Chinese, the latter was primed to be the main source of funds provider for Philippines. The Japanese were already sold on investing in the Philippines after the pitch Pnoy made to the their National Diet in 2015 where parliamentarians gave the visiting president a standing ovation. In the Duterte admin, Japan is a Johnny-come-lately, but they too are willing to fund some of the projects. Depending on how one views it, the Japanese are jostling for influence in the country, or it is Duterte playing 2 sides.

Let’s get some perspective. It’s worth pointing out that the Pnoy admin had seen GDP grew from $200B in 2010 to $292B in 2015 whilst reversely bringing the debt to GDP ratio down from 52.4% in 2010 to 45% in 2015. Some of the infra and discretionary spending had been from substantial savings from lower interest payments on loans, no doubt by restructuring loans to take advantage of the era of low-interest rates. The Duterte admin proposed infras will thus nudge up the debt to GDP ratio by 3-4% which is maintainable. However this has to be seen against a backdrop of :

  • A rising interest rate regime is going to hurt loan servicing costs. The days of bingeing on cheap money appears over as the Fed is bent on rate increases in light of perceived improvement in the US economy. The EU central bank appears set to increase rates as well after more than a decade.
  • The weakening peso scenario makes foreign loans weigh more in peso terms.
  • Budget Secretary Diokno’s intent is on deficit budgeting as a growth pathway.
  • There is a weakening local economy due to the difficult political situation.
  • Global uncertainties have been caused by an unpredictable Trump presidency.

Funding sources:

External funding sources are from the private sector, bilateral arrangements, or multilateral organizations. What sorts of requirements do they normally entail?

Private sector — Consortium or syndicated loans are put together by financial institutions if the proposals meet their risk criteria and the projects are viable. These are purely commercial transactions at market rates.

Bilateral — these are put together after country to country agreements and normally take the form of exim bank credits or ODA (overseas development aid). The arrangement will work in some advantages to the lender country for the soft loans extended. Such give-aways include using creditor country’s banks, hardware, consultancy in relevant fields of expertise, developers, contractors,etc. Increasingly, advanced countries try to tie aid packages to benign conditions like human rights commitment, good governance, anti-corruption, or other social commitments like poverty reduction, health care improvements, etc.

Multilateral — these are from institutions like IMF, World Bank, and Asian Devt Bank. The good part is the borrower is tied to strict terms of accountability, transparency and legalities. The bad part is these institutions are controlled by western countries who demand third world borrowing countries implement economic policies in line with their neolibertarian ideological leanings such as privatization and globalization.

The bitter taste in the mouth comes during times of default. Private sector loans will work out through loan restructuring. Bilateral ones will see creditor country gain physical control of assets. Multilateral lenders will ram down the borrower’s throat bitter pills of some template economic recovery programs like heavy doses of austerity that have done more damage than good, and generally altered the economic landscape of these countries where capital resources are taken over by core group of mighty capitalists.

The lessons in Latin South America and Africa are markedly different coming out of the debt traps in the 70s/80s. The Latinos were primarily indebted to banks. There were many debt restructuring exercises and some big bank lenders themselves got rescued by their govts which reconstituted the loans into tax payer funded ODAs. Big financial institutions grouped together in what was known as the ‘London Club’ and it took them years to solve the mess. The African experience was different. They borrowed primarily from multilateral lenders who loaned recklessly. Many took on huge loans for infra projects and with economies basically relying on one or two key products, like oil, diamonds, or cocoa, they went into default easily when commodity prices collapsed. It was left to the ‘Paris Club’, a grouping of lender countries, to sort out the mess. Many rescue packages required borrowers to adopt macro economic policies that failed to solve underlying problems. Several of these countries remain heavily in debt with economic assets in the hands of foreigners.

Enter the dragon:

Duterte has said Chinese financial aid comes with no strings attached. This needs a big call-out because, at the very least, there are interest servicing and repayment requirements. China has already promised a $3.4B exim bank credit for Philippines, and this has been hailed by admin supporters as a great success. People say the mayor from Davao has done what previous presidents couldn’t do. He has brought the bacon home. But is this true, when terms remain unknown? It implies that, without China, the infra projects cannot proceed. The Pnoy admin had brought the country on a path of economic recovery and good governance that has earned it investment grade ratings for the first time in 40 years. With the improved credit rating, one of the highest GDP growth rates, and a world still flushed with liquidity and lesser investment opportunities, the Philippines would have had no problems going to the international capital markets. Sadly, within 8 months of the new admin, Philippines credit standing is now questionable. It seems we are indeed stuck with China after all.

The era of western-style colonialism, the likes of Magellan, Vasco da Gama, English East India Company etc, one of physical occupation, are long past. It had been replaced by treaties or covert subversion, in various forms, to retain countries under spheres of influence. The latest superpower, China, now straddles the world with neocolonial ambitions. It has no desire for physical military occupation of countries, (other than Tibet which it invaded in 1950) but nevertheless it’s objective is to create a hegemonic sphere of influence through trade, communication, security arrangements — a throw back to the ancient days of the Silk Road where weaker peripheral countries traded with and paid homage to the middle kingdom. The One Belt One Road strategy is a mammoth transportation network meant to cement this hegemonic sphere. As long as weaker countries maintain friendly relations with China, there is no fear of a Chinese confrontation. It is left to be seen to what extent China will recognize these countries’ sovereignty when contentious issues arise in the future. Needless to say, countries that become dependent on China will unilaterally take positions favorable to China.

In ancient days, trade flowed along the Silk Road with all sorts of goods getting into China in exchange for silk. Today, China wants all sorts of commodities in exchange for cheaper mass produced goods from Chinese factories. China takes whatever they require from various countries, but unlike the Conquistadors, they pay for it. China has also been very friendly by providing lots of financial aid for infra projects, with no strings attached.

This is a politically naive view expressed by many frustrated with western cynicism.

The Chinese debt trap:

It is becoming apparent that China’s financial aid destroys a country insidiously. Experiences include :

  • Favored projects — They are not in it to help solve a country’s economic problems. Projects they finance are those that (1) enable access to natural resources that they seek; (2) help in the distribution of their manufactured goods (eg, those huge warehouse complex in Kazakhstan; (3) allow them to project further influence (eg ports in Sri Lanka).
  • Local corruption is acceptable — Govt-to-govt deals with corruption at high levels is tolerated, often by pricing project cost high to provide a big margin for officials.
  • Chinese corruption — Officials all the way up to the proletariat is a nest egg of corruption. Project pricing is also forced up to grease Chinese hands.
  • Chinese monopoly — Projects lock-in Chinese companies, equipment, products and services, Chinese labour from engineers to unskilled laborers. Exim bank financing takes care of that. ‘Exim’ means export/import which means the financing is for projects that involve the exportation of Chinese products and services.
  • Dubious companies — Some Chinese companies and products banned by UN agencies for substandard issues continue to be active in Chinese projects.
  • Local jobs — marginalized.
  • Labor relations — Chinese tend to have poor labor relations in host countries. When there are encampments of huge number of Chinese workers in a project, labor friction is common.
  • Questionable hardware — It is not uncommon to see Chinese use of hardware or designs that are questionable. Eg the nuclear plants they built in Pakistan are of a design the Chinese themselves don’t use in China.
  • Environmental impact — Pollution and environmental issues are very important in China. (They have a huge reforestation project involving replanting 66 million trees in China). In host countries, they pay scant attention to environmental issues. This is especially disconcerting in Africa where local legislation on environment is weak and the Chinese are active in energy, mining, logging, and extraction industries.
  • Interest rates — Nobody said it was free money. It is termed soft loans in that the terms are often stretched compared to commercial loans, and credit risks may not be acceptable to financial institutions. But the interest rates are not necessarily subsidized.

Duterte is right. Chinese aid has no strings attached. The Chinese are not interested in host country issues so their loans carry no requirement as to good governance, human rights commitment, social responsibilities, etc. They don’t care if you eat dogs, legaleize same-sex marriage, sponsor extra-judicial killings, officials skim-off the top, etc. They don’t even care if the projects have no economic benefits for the population. Nor do they even care whether borrower has the capability to service and repay the loans.

Question : What sort of leaders make a beeline for this type of aid?

So what do the Chinese really want? – Commercial penetration and strategic leverage. A country is ensnared in a debt trap when it is caught in a cycle of interest capitalization or taking on new loans to pay off interest or principal repayments. When default occurs, the Chinese move in to gain control of the resources, corporations or installations. As in the case of the port in Sri Lanka, it turned out to be a white elephant, but the Chinese are not bothered because they now have a port where their naval vessels drop anchor to project maritime influence right under Indian noses. The financial hold of the Chinese on Cambodia, Laos, Myanmar, and Thailand ensures a disunited ASEAN when it comes to China’s aggression in the West Philippines Seas. Not that it really counts as Asean Chairman Pres Duterte isn’t interested in pursuing the matter. Recently, Cambodia has unilaterally suspended its ‘Angkor Sentinel’, an annual US-Cambodian joint defense exercise agreement. It has also banned the Taiwanese flag in Cambodia.

What then are the benefits to takers of Chinese aid? The payback for countries that are well-managed reap the economic rewards from their projects. Rogue countries or leaders that take from China and remain subservient gain protection. China suffers no moral turpitude in their extension of aid. They subscribe to the I-rub-your-back-you-rub-mine doctrine. Beijing has funded Pakistan heavily, and stationed Chinese troops in Pakistani space to observe Indian troops. In return, China has consistently blocked UN actions against people like Masood Azhar, Syed Salahuddin, Hafiz Saeed, and Zaki-urRehman Lakhvi – a motley group of terrorists and Pakistani intelligence agents who have committed dastardly acts including the bombing of a famous hotel in Mumbai, India where hundreds of tourists perished.

The Philippines and Chinese aid:

Where did the idea for the pivot to China come from? Because a snide comment by Obama
offended the personal feelings of Duterte? It’s ridiculously silly to think so but that’s precisely what many have been led to believe. A careless Facebook posting by Bong Go (personal assistant to Pres Duterte) told us the president visited China a few months prior to the election.

How far back did this China love go? What is currently not in the public consciousness is a little queer diplomatic development back in 2007. Bongbong Marcos, then a provincial Governor, petitioned for the establishment of a PRC consulate in Laoag, the capital of Illocos Norte. It boggles the mind as to the purpose and how it passed Congress. The reason offered was it facilitates the growth of Chinese business in Illocos Norte. Is that even believable, if not, what was the real intent? It’s not far-fetched to venture that the Marcoses drifted towards the Chinese long ago, if for no other reason than they are persona non-gratia in US.

It is clear the Marcoses had a close relationship with Chinese officials for a long time. Then along came Imee Marcos’ contributions to the presidential bid of Duterte. Was the China pivot a leveraged outcome of the sponsorship and if so, for what is the purpose? Bearing in mind Bongbong’s political ambition, the more sinister question actually is, were the Marcoses the channel the Chinese used to turn Duterte? John Le Carre would have asked, who are the Chinese handlers of the Marcoses? Considering the family had sold out the country once by acts of indigenous spoliation, selling out the country a second time is within the realm of plausibility.

The Pnoy admin had made a policy decision of using the PPP model for infra projects and the necessary legislation and process have been put in place. The financing would be partly from domestic savings and partly commercial loans arranged by contracting entities. Thus, it allows for the channeling of domestic savings to national projects. The groundwork had taken too long and Pnoy admin had been criticized for the failure to push PPP projects through. The Chinese funding are bilateral arrangements which mean the required bidding processes under PPP do not apply. The all too familiar problems of transparency will once again be revisited.

The admin has bandied various admirable projects, but there do not seem to be any concrete plans. Even the Chinese have said they do not, at the moment, understand how the financing is to proceed, and specifically for the Mindanao railway, they are looking for various studies and analytical reports. It is apparent the admin is long in ideas, but short in detailed plans. The officialdom from Mindanao must now realize that it’s one thing to criticize previous admin for being slow in taking action, it’s altogether different when sitting in executive chairs. Planning for such projects takes years and NEDA has recognized that some projects might extend into the next admin. Railway projects, for example, require ridership data, cost of alternative mode of transport, eminent domain resolution, station site determination, environmental impact studies, economic benefits, and probably a hundred other studies. In many other countries, such projects involve community participation. Will it be simply railroaded here, pardon the pun?

Previous Budget Secretary Abad had warned that “chronically weak linkage between planning, budgeting and execution in most agencies … led to weak absorptive capacity, poorly programmed projects, and implementation delays”. Absorptive capacity is a qualitative inference to project management staff in govt service. The govt staffers do not measure up and this has hampered project implementation. The underlying cause is simply civil service pay scale is not on par with the market resulting in a brain drain with more skilled workers avoiding public service. Since this problem is not addressed, we can expect the Golden Age of Infrastructure to suffer similar setbacks.

In line with what’s been said above on Chinese objectives in their financial aid, two developments in THE Philippines can be prophesied:

  1. There will be Chinese participation in some port development somewhere on the Mindanao southern coastline. As a matter of fact, the govt has scrapped a Pnoy PPP project, the Davao Sasa Port Modernization, and replaced it with a Php39B Davao mega port project contracted out to R-II Builders Inc, a company that is embroiled in a few legal suits and charges of professional incompetency. It’s a no-brainer that the Chinese will be roped in because the contractor has no financial muscle. Why the Chinese interest in a southern seaboard? To extend maritime influence southwards spanning Indonesia, resource rich Papua New Guinea, Australia and New Zealand.
  2. In the ongoing battle being waged by DENR against existing mining businesses, Duterte has repeatedly said he stands by Secretary Gina Lopez. He minced no words when he said he is willing to forego Php 60B revenue from the industry with the closure of all mines. With Chinese interest in raw materials, it looks like a Machiavellian maneuver is paving the way for oligarch change in the extraction industry, especially in Mindanao.

Reference :  China’s Debt Trap Diplomacy”  by Brahma Chellaney, Professor of Strategic Studies at the New Delhi-based Center for Policy Research and Fellow

167 Responses to “Is China’s aid an entrapment?”
  1. NHerrera says:

    The blog boils down to the massive funding or the river of money to finance infrastructure with strings attached defined according to China’s definition of strings, not the strings defined by bilateral funding from the US and multilateral funding from IMF which latter funding has strings attached like human rights, good governance, etc. With the state of the Philippine governance still in its infancy or adolescence those strings from China are strong abaca rope, not the puny strings attached to funding we had before.

    And, of course, there are the overriding geostrategic goal/objectives of China you pictured.

    Meantime, as is my wont, let me end, for the moment, with the following.


    Unfortunately for us, President Duterte is no fly.

    Thanks again chemrock for a good, timely read.

    • edgar lores says:

      While reading, I was caught between spider and mouse trap analogies. Bet you were, too.

      • NHerrera says:

        That steel clamp snapping my neck in a mouse trap — for the chance to eat that cheese — is rather like death by hanging. Would I prefer the slow death in the spider web? I want to think about that, edgar — especially at my age. 🙂

      • chemrock says:

        I think it’s spider. Once borrower gets entrapped, restructuring often takes the form of acceding to more Chinese projects, those strategic ones that the seek. So borrowed gets deeper into the muck, slowly loosing their sovereignty. But this spider doe’nt want to kill. What’s the point of having dead slaves.

        • edgar lores says:

          Perfect analogy.

        • parengtony says:

          a couple of points about following the money:
          1. there is a world of difference between foreign aid and foreign loan. ask joeam.
          2. any financial transaction involving the people’s money has got to be 110% transparent. Why, for crying out loud, the deafening SILENCE from the media?
          3. So, I say again, follow the money…, e.g. PRC/CPC – BBM – PRD, ET AL.
          4. clue: Forbes list of RP billlionaires.

          • chemrock says:

            Foreign financial aid is in the form of a loan. I think you are referring to grant which is a freebie.

            Forbes list of billionaires is critically wrong. The top 3 Filipinos are — Marcoses, Binay and Erap.

            • parengtony says:

              That the $12B China foreign aid is really a loan is clear disinformation. Specially that China and Duterte continue to hide the terms of reference of the loan. Hindi ba kayang maabot ng RP media ang ganitong panloloko sa taong bayan? Talagang mahirap gisingin ang nagtutulogtulogan.

              Re your top 3 Filipino billionaires – precisely my point… Marcos is no. 1 (I dunno about your nos. 2 and 3) but where do you look for where the money is stashed? answer: Forbes list.

  2. Francis says:

    History will show who is right in the end.

    It is tragic. The principled supporters of the current administration—they are driven by a powerful sense of anger. They are angry at what they see as the “Faustian Bargain” of the current order—that the reformers brought about by the spirit of EDSA would compromise at all costs to achieve what they perceive as so little.

    Channeling them: “Damn them! Hypocrites with George Soros’ aid! Puppets of the West! You hypocrites mouthing human rights, not knowing what Filipinos really experience!”

    What I wish I could say to them:

    In your anger—you fail to see that you have become worse than the enemies you so hate. You are angry with the hypocrisy of EDSA—so you resolve the ills of this hypocrisy by allying yourself with the Marcoses. But the Marcoses are surely the purest of all the angels in heaven now, right? Shame (please forgive the crude analogy) the “Yellows” for the equivalent of looking at racy pictures on the internet—but condone GMA and Marcos for equivalent of pimping? You are angry with our dependence on the West—so you resolve the ills of this dependence by allying with China. At least—kaya pa nating ipahiya ang mga Kano at Europeo. Americans and Europeans—at the very least—maintain the pretense of being liberal and democratic society, so our civil society can shame them for betraying their principles when neo-colonialism occurs. Negotiation (or at least the pretense of such) is possible. Eh, yung mga Tsino? Matigas yan. They maintain no pretense of playing nice.

    Tragic. But I am a coward for expressing such sentiments on this blog and not there. An elitist, privileged coward.

    But “1 + 1” is still equal to “2” regardless of whether the one saying it is a sinner or saint, rich or poor. That I know. That I know.

    • NHerrera says:

      No cowardice there. At my age for example — late 70s — standing in the middle of Plaza Miranda on a soap box and crying out may not be as effective as commenting here.

  3. The Philippines will be finished.

    worse than after the Marcos/IMF loans.

    • NHerrera says:

      Yes, but there will be pockets of kingdom(s) such as will be ruled by Marcos, Alvarez, Pimentel with their associated oligarchs that will flourish — by consent of the Middle Kingdom.

      • chemrock says:

        My gut feel is Marcoses do not want federalism. Who wants to be lord over a small fiefdom. Have you ever seen the Marcoses sing in praise of federalism publicly?

        • madlanglupa says:

          Strangely, it is under Marcos Sr. that he divided the country into regions, supposedly to facilitate better control of bureaucratic operations, about the closest to implemented federalism, hence we have regional offices for law enforcement, education, agriculture, land reform, health etc.

  4. edgar lores says:

    Chemrock, thank you. Very informative.

    This reads like a dry financial manual, a penetrating political and geopolitical analysis, and a spy thriller.

    You connect a lot of dots: the financial web underpinning infra spending, the overall strategy of the Chinese with the world and neighboring countries, Duterte’s pivot to China, and the simmering Marcos ambition.

    The overall impression I get is that the Philippines is an easy prey to an external predator-nation in cahoots with an internal fifth column. And the irony is that we don’t have to be a prey.

    This is a must-read for all Filipinos.

  5. karlgarcia says:

    Imee Marcos was Congresswoman from 1998 to 2007, I think that demystifies the passing on congress bit. And of course BBM lobbied for it.
    About project delays and underpaid civil service… spot on.
    A trillion spent for personnel yearly and still we do not have enough and all are spread too thin.

    Their number one import for the past few years is soya, maybe they plan to convert all the rice fields in the Philippines to soya bean farms and source all their rice to Vietnam and Thailand.😉

    The Chinese have been reading my landfill mining /wte rants 😉😜, they will just build a giant wte plant at home and many small ones here.

    They were not able to succeed the first time in NBN ZTE the first time, maybe it is sweeter the second time around.

    • karlgarcia says:

      Sorry, soya is not their number one import, but they are the largest importer of soybeans.
      They source their soya from the States, maybe that will change because of Trump, maybe not.
      Until domestic production soya recovers, they will look for other sources of soya.
      The Philippines had been lucky with the swine flu and the bird flu, they can source their pork and peking duck from us.

    • chemrock says:

      Thanks for the correction on the governorship dates Karl. That makes it even more puzzling — how can private citizen Bongbong get the govt to allow a consulate in Laoag?

      NBN ZTE was a lucky escape for Philippines that time.But GMA is out to do ‘follow-ups’ ? But watch out for Huawei.

      • karlgarcia says:

        You were correct, BBM was the governor till June 2007 he was governor at the same time Imee was Congesswoman. He then became Congressman at July 2007.

        • chemrock says:

          Ah OK, nice to know sometimes Librarians slip up too haha so our fallibility is more excusable.

          • karlgarcia says:

            I slip up most of the time.🙂But that time we just had a little confusion, I was trying to guess how the consulate in Laoag passed congress, and I said because Imee was congreswoman and BBM lobbied for it.(when he was governor as stated in the article “leaked” by wikileaks.)

      • karlgarcia says:

        Smart Bro Pocket Wi fis are already cornered by ZTE, but Huawei has the routers and tablets for PLDT DSL.


    Needed to be confirmed: $$9B @ 6% compared to 2.8-3% @ WB. and ADB.

    PPP is looking way, way better. I wonder how our local conglomerates are reacting to this, particularly that Laguna Lake dike projects and other PPP projects of FPNOY admin.

    • NHerrera says:

      No economist here, Mary, but even if that quote of 6% per year, as against WB 3% per year were true, shouldn’t one normally compound to see the effective economic burden:

      That is at 6% per year, results in

      450B(1.06)^15 = 1078B instead of just 855B

      compared to number with 3% per year:

      450B(1.03)^15 = 701B

    • chemrock says:

      There are lots of such financial figures floating all over the place. None representing any finalised projects that I know of. So just be careful putting too much faith on these stuff. Better to rely on NEDA figures.

      And remember not to mix up govt arranged aid and fundings for govt projects from Chinese investments. Chinese businessmen are free to invest here like any other foreign investors. Their FDI models are private matters.

      • Bill In Oz says:

        Let’s all remember that the point of infrastructure projects is to help the whole country function more efficiently, more effectively and be more productive, creating more opportunities and a bigger economic pie for all Philippines. If these outcomes can be achieved then it’s worth the cost of borrowing the funds.

        The worst outcome would be for the borrowed funds to be squandered in corruption & lurks, perks and quirks for the officials involved.

  7. How can one communicate such complex issues to the facebook generation?

    Nice post Chemrock!

    • chemrock says:

      Thanks Gian.
      To your question, one needs to break it up into a hundred postings of a hundred memes?

      • sonny says:

        Short, comprehensive, to-the-point answer, chempo! (Reminds me of object-code generators, my era) Neat. It’s not too far away in the future, already a Master’s in Fine Arts thesis – a movie-review text-generator. 🙂

    • a distant observer says:

      I think you’re asking the million dollar question right there, Gian.

  8. Bill In Oz says:

    Chemrock, there is one major point to be made about China. In the past 45 years it has achieved major economic growth and a substantial proportion of the Chinese people have been lifted out of grinding poverty. All the major economic texts laud this as a major accomplishment.

    Meanwhile for most of the years since independence in 1946, most Filipinos have continued to be mired in major poverty. This continued poverty has happened despite the 2-3 million Filipinos who have migrated and have sent home hard currency for decades; despite the hard working OFW’s scattered all around the planet also sending hard currency home for decades; and despite the BPO industry in the Philippines also earning hard currency for the past 15 years. This grinding poverty has also continued despite the good governance of the Aquino government from 2010-2016.

    Clearly something HAS to change if the Philippines is to give it’s all it’s people a reasonable chance at gaining some prosperity instead of grinding poverty.

    Sooooo.. Will Duterte’s pivot to China achieve this ? I am not sure. But I am willing to give him the benefit of the doubt. As for China, it is seeking allies in SEA. Some countries will never be allies of China : Japan, Taiwan, Vietnam, South Korea and probably not Indonesia. So it is in China’s interests to do ‘good’ deals with the Philippines to detach it from the USA and help create a new prosperous Philippines which is an ally of China.

    In that process the Philippines has some aces. There will be times when the Philippines needs to say No to China. And maybe Duterte will have the smarts to know when this is needed.

    Meanwhile there is an other aspect to cooperation with China : the drug trade. Today in Australia it was announced that $100 million ( Au ) in Shabu scheduled to be smuggled in a shipping container from China to Australia, was stopped with assistance from the PRC police. Five suspects have also been arrested in China and in Australia. This is a major win in the drug war.

    Let’s all ( even in TSOH ) encourage the Philippines to establish the same relationship with the Chinese police. It would really help to reduce the drug trade in the Philippines. And maybe be a better solution than killing low level pushers and users.

    • NHerrera says:

      Bill, you often offer a nicely worded and reasoned counter to thoughts expressed in TSH; something I like forward to reading.

      I like that note of hope that may come out between China an the Philippines. I understand for example that aside front North Korea and Pakistan, China does not really have allies. So your note has a pleasant ring to it — something like making an example or jewel of PH as an ally. But I am afraid the fawning subservience which continues to be displayed may not result in that pleasant picture. If you were China, and you were dealing with


      who would you deal with the most contempt (unexpressed of course) after you get most of what want? Just asking.

      • NHerrera says:

        something I like forward to reading = something I Iook forward to reading

        • Bill In Oz says:

          N’Herrera, I don’t accept your use of the word ‘contempt’..’Contempt’ is a personal attitude expressed by an individual or a group of individuals.. China on the other hand is a nation state and it has a well defined view of it’s interests and how to achieve them. I don’t think that the Communist Party leadership would allow individuals to jeopardise China’s interests with personal attitudes.

          Moving on, I don’t think the Philippines needs to be fawningly subservient to China. The Philippines needs to know when to say ‘No’..just as was stated by Stephen Fitzgerald a couple of weeks ago, about Australia’s dealings with China.

          Personally I am not particularly pro-China. But I am awrae that Chin has done something enormously remarkable since the 1970’s : encourage rapid economic growth and created a prosperous 2-3 hundred million middle class, where before there was just grinding poverty.

          So maybe they can help & teach the Philippines to do something similar ?

          And cultivating a good relationship between the PNP & China’s national police may help stop the drug scurge. !! Now that is important NOW !

          • NHerrera says:

            Ok bill. If I used that word for Australia or Australian, you have every right to not only not accept what I said. May be challenge me to a duel? 🙂

            Two things bill,

            – you sound like you’re speaking for China?

            – A contempt I said unexpressed. There are several ways of showing contempt is what I have in mind. I was about to go to the dictionary to check on the word. But I will not. In short, you have your view on contempt and I have mind. OK?

            (Please re-read my note previous to the word “contempt.”)

          • chemrock says:

            Philippines don’t need to say ‘NO’ to see what China’s reaction can be. Ask Yassay.

          • Chris Ibarra says:

            Then how and what would you characterize the slow build up of reefs in Spratlys into full scale militarization ? Isn’t that Contempt on the part of the Chinese politburo every time they make an announce meant that it will be fishermen shelters, for civilian purposes now inherently part of their territory. I understand Chinese takes the long view so does most Western nations. Just because they have the long view of strategic plans for their nation doesn’t mean they are not acting in contempt.

        • Bill In Oz says:

          N’Herrera, I read TSOH each day. But if I cannot make an informed comment, I prefer to stay silent. But here I do have some thoughts..stimulated by reading about the siezure of meth worth $100 million before it could be distributed…. and the arrest of the organisers.

          • NHerrera says:

            That is the point, bill. And to refer to my note above, Australia is not one to show fawning subservience.

            I may be wrong and karl — our Chief Librarian — may have something, but I have not read of China doing something for friend Duterte about clamping hard on the Chinese source of chemicals or Chinese bad guys coming over and contributing to the drug problem hereabouts.

            • A step that WOULD build confidence and good will.

              • Bill In Oz says:

                The lack of any results from cooperation between the China police & the PNP. is something that I was about to write here myself ! There have been no results yet Why ? Why ? Why ?

              • Because the Administration is of the power and favor mindset, not law-based. There is no sense at all to killing poor drug users unless one wants a “cause”, a kind of concocted ‘rebellion against the State’ that gives reason for authoritarian ways and deeds. There seems to be no sincere desire to cut off drugs, but to control the pipelines. That’s the way we skeptics look at it, even those who are Filipino and not American.

              • Bill In Oz says:

                Joe, you said ” Because the Administration is of the power and favor mindset, not law-based.” Yes I agree but so is China. So this is neither here nor there.

                You also say of the Duterte government, ” There seems to be no sincere desire to cut off drugs, but to control the pipelines.” . Joe, that is the subject of an important post of it’s very own.

                And I’d really like to see the evidence to support this view. It contradicts what Duterte says in public.

              • Haha, Duterte contradicts what he says in public, so contradiction is neither here nor there. The proof is found in three facts: (1) Senator De Lima is in jail with the tag of the nation’s number one drug lord, a real laugher for sure, (2) Peter Lim walks free, and (3) street murders continue unrestrained as powerful drug gangsters clear out the competition.

              • And number 4, Davao still has a drug problem.

              • No need to mention the President is himself a self-confessed drug abuser.

                This is a deadly slapstick drug war, funny in its ludicrous grim outcomes.

              • Bill In Oz says:

                Joe as I said, this is an important article in it’s own right…It’s worth far more than 3-4 sentences.. If it is true then it is important to put it out as part of the ‘big picture’…Please note I am not saying you are wrong. I am am saying put out all the evidence so we can all understand it.

              • I have other projects to work on, but you are welcome to do any research necessary to decide for yourself. We have the same resources available to us.

              • @Bill, I’ve deleted one of your comments and two of mine. This personal rap needs to end. Stick with the issues rather than commenting on the character of the people making arguments. Don’t reply to this comment. Move on.

    • A mutually beneficial relationship between China and the Philippines would indeed be win/win. Normally, such a relationship would not have China sitting in Philippine economic seas, nor would the government of the Philippines be excusing powerful drug lords (who source their product from China) whilst gunning down impoverished drug users and street peddlers who have no recourse, through the courts or anywhere. Both sides will have to demonstrate good will, I think, and openness in exposing the financial deals being cut. When the PH decides to fast track Chinese deals without following the time-consuming bidding process, and is openly arguing for a change in Audit directorships to get an Admin-friendly person in place, then it is hard for me to believe the good ideals you express are actually what is happening. Color me highly skeptical to overlay your coloration.

      • Bill In Oz says:

        But Joe, you have your American colored glasses on. So naturally you are skeptical. 🙂

        Australia is a major economic partner of China’s with large trade exports& imports from China & many Chinese tourists & students coming here as well. It has been a very mutually beneficial relationship. This is indicated by the visit last week of the Chinese premier to Australia for 5 days. But we still need to say No, occasionally. And China appreciates that need to say No sometimes.

        There is a good lesson in this for the Philippines and for the Duterte government.

        And yes the shabu come from China ! So it is important to establish good relations with the China police. The link I posted above illustrates the huge benefits.

        • And you wear your anti-American glasses, so naturally you say what you say. The point is not that, it is the need for both China and Philippines to be open, transparent, and build good will and confidence. Kindly separate out the argument from the person making it, and lets get rid of the personal aspersions.

          • Bill In Oz says:

            Joe, there is no need to be so sensitive. I was making an attempt at a joke. I am not anti-american or pro China. I am simply trying to be objective and put forward information to support that perspective.

            • No need to make jokes that aren’t funny.

              • By way of elaboration on my sensitivities and judgment that you are anti-American, I draw this from a remark you made a number of weeks ago that got me so angry I flipped off the computer and went for a long walk. You wrote at

                “I will speak frankly. I am not American. I was not raised in the USA where all kids are taught to love America as part of the school curriculum and socialization process. I have no psychological obligation to think or say ‘ America right or wrong.’ But that is exactly where you are coming from..”

                The idea that Americans cannot think objectively because they are taught in school to love America is a pile of horseshit. We were taught WHY we should love America, for the values she stands for, and taught to think critically and for ourselves. When America herself (politically or decision-wise) acts against the values we were taught it is our JOB as citizens to speak up. You totally deny my life’s experience, of anti-war protesting that got me an FBI file in Los Angeles, of marriage to a Singaporean who taught me that through a certain lens, Chairman Mao saved China (her father was a communist, her mother a high ranking official in the Singapore government), my 12 years in the Philippines dealing first hand with the life and history of this nation, or 7 years of blogging. You reduce it all down to some preconceived bullshit bigotry that Americans are psychologically incapacitated by their education. So, yes, your remark flew directly into that framework, and until you prove otherwise, you are in my “anti-American” bucket, and I will look upon your jokes with little humor.

              • NHerrera says:

                The beauty of that response on sensitivity is not in denying the matter, but explaining the sensitivity by

                A = recalling the item in italics;
                B = elaborating with the notes that come after A.

                I frankly cannot fault the response. A lesson of some sort on how to handle a matter of some delicacy with finesse.

                It goes well with my second cup of coffee.

              • The whole premise of this blog is that people arrive here as individuals of integrity warranting respect for the ideas they bring to the table regardless of who they are or things like the color of their skin or ability with English. It is hard to stay on that path, but leaving it puts us on the same path as those who hold that blacks are intellectually inferior, or women belong in the kitchen, or handicapped people are less than we are. Or Americans can’t think straight about America.

              • Haha, and beware the acidity of coffee . . . 🙂 🙂

        • a distant observer says:

          And I plead guilty for wearing pro-Filipino and anti-Imperialist glasses. Still, since Filipinos seemingly tend to lean on some strong state instead of truly take a stand on their own, I still prefer the US even though I think the American government did some disgusting things in the past few decades.

          • I agree America has done some disgusting things, each occasion of which needs to be examined for time and context to understand why. However, the US has been very hands off since 1990, as far as I know. The PH Senate in a hotly contested debate ended the American military presence, and that was that. Under President Aquino, I think the relationship was very much mutually determined and professional with the PH benefiting from American intelligence, the US by the suppression of terrorism in the South, and both by joint military training and some assurance of interoperability. There has been no imperialistic pressure of any significance, and the open attitude has allowed the rise of the BPO industry, storm relief, and other clear benefits to the Philippines.

            I think it is wise to avoid using the “imperialism” tag politically, as President Duterte has used it, to castigate Obama (based on deeds done over 100 years ago), because Obama raised the matter of human rights. Obama would have been negligent NOT to raise it, because in these days, human rights are a main plank in American foreign policy. If a nation chooses not to abide by international human rights standards then that is a problem. The PH Constitution is very pro-human rights. So the objection to Obama by Duterte was clearly political.

            History is great for lessons, but we ought not be living in the past, or biasing the present with it.

          • chemrock says:

            Some states are stronger, some are weaker. It’s a natural order of the universe. There is absolutely nothing wrong for a weaker state to enter into alliances or some arrangements for security. This is something that has been going on ever since mankind learnt to live in communities. Alliances are often determined by shared ideals like democracy, freedom, rule of laws etc and of course the flip sides are the dictatorial types who prefer their own breeds (certainly not for real love, but for covering their asses like in the UN). There are only 3 countries in the world that can “stand on their own”.

    • karlgarcia says:

      This article was last August, PNP chief Bato’s theme was “if the drug lords are not killed here, fhey will be killed in China”, I guess it wont change as long as Duterte is around.

      • NHerrera says:

        Promises yes. But if I recall correctly there was an agreement for both China and Philippines to get out of Scarborough Shoal. So the PH abided, but not China. So, Karl, I say some of these promises are not worth one devalued centavo.

    • chemrock says:

      Bill, thanks for your diplomatic piece.
      It’s good to have an opportunity to respond to your views here.

      “In the past 45 years it has achieved major economic growth and a substantial proportion of the Chinese people have been lifted out of grinding poverty”

      Long time ago, the Chinese civilisation was culturally the most advanced in the world. 268 years under the last dynasty, the Ching Dynasty, the Manchus depressed Han people development. Then followed 2 generations under the old communist party. The Chinese fell into back waters for a long period in history. Within one generation of Deng Xiao Ping’s open policy, the country has achieved developed country status. There is no doubt it has been a great achievement.

      However, it would be a tragic loss of great magnitude if China does not understand and appreciate that it’s revival and achievements was came about not just on due diligence of it’s people and govt, but from a world that shared knowledge with them and traded with them for mutual benefits.

      “Clearly something HAS to change if the Philippines is to give it’s all it’s people a reasonable chance at gaining some prosperity instead of grinding poverty.”>

      1. You compared Philippines inability to achieve prosperity for it’s people for hundreds of years whilst the Chinese could do it in one generation. We all know the reasons, much discussed here, like bad leadership, corruption, poor political system, bad judiciary, etc..BUT most importantly, it boils down to the electorate who decides who to rule them. As you said, Aquino made headway economically, but the electorate rejects that for a messiah.Filipinos don’t want Aquinos slow but steady train, they want Duterte’s bullet train PROMISES. Somebody should tell Filipinos even the Chinese did’nt get their bullet trains in 6 years.

      2. So you feel the pivot to China might benefit Phils and thus to give Duterte the chance.
      Putting the China issue aside, Duterte leadership is already beginning to loose steam and crumbling.
      You point seems to suggest with no China, Duterte can’t raise funds to push development. As I indicated, this is erroneous. Pnoy’s PPP points the way to development — partly domestic savings, partly business partner sourced finance. Philippines corporates were in a good position to seek funds in international capital markets 2016 as well as entice foreign corporate participation in infras. Note that with PPP there will be NO INCREASE IN NATIONAL DEBT.
      Also note that in other countries, Chinese aid came before first before these host countries collapse into subservience. In Duterte’s case, he accepted subservience to get aid. You said it is in China’s interest to do good deals in Phils so that the latter will detach from US. Wrong. Phils is already detached from US. China must do it’s part to be seen to support Duterte so the president earns legitimacy in the eyes of the people. And whilst doing it, they entrench themselves into strategic industries and squeeze the screw tighter.

      “In that process the Philippines has some aces.”
      Philippines have no more aces left to play, Duterte has thrown away the ace card, that is US military alliance.

      “Meanwhile there is an other aspect to cooperation with China”
      Absolutely, Bill. All these could be pursued without kicking a friend in the face.

      • Bill In Oz says:

        I disagree Chemrock when you say that Duterte has thrown away his one ace, the “US military alliance’. There are other aces and how he plays them will be important. How effective and efficient his government is will also be important.

        • chemrock says:

          The Chinese are experts in this sort of game. They know Duterte has painted himself into a corner. With US out of the way he tried to balance Chinese influence with Russians who isn’t biting. With the Japs there are problems because it is not a power the Chinese fear. What other aces can Duterte throw on the table? The Chinese just need to sugar coat Duterte to make the masses happy with his achievements. And as we speak, the Chinese are looking ahead of Duterte, the next admin that will remain BFF with China. That’s one area i’ m sort of tinkering to write about so I’ll leave it for now. There is also one more thing that Duterte can do to balance China a bit but I’ll elaborate in time.

          I would like to hear your points. What are his other aces left?

          • Bill In Oz says:

            Chemrock, Duterte remains overwhelmingly popular with the Filipino people. He is the incumbent. He is an unabashed nationalist. And he can change his mind on the drop of a pin. China has to deal with him. And Duterte can rearrange his cabinet & other personnel as he wishes.

            It’s true does not have significant military power at his disposal. But that is not a major change. The Philippines has always been militarily weak since 1936. But he is the leader of a mostly nationalist minded people.

            • chemrock says:

              “China has to deal with him”
              I think it’s the other way round. Duterte has to deal with China. Proof :
              1. Feb 21 Ex Foreign sec Yasay said that Asean had grave concerns about Beijing’s apparent militarization of man-made islands it has built in contested waters. Feb 23 China threw tantrums. Chinese Commerce Minister Gao Hucheng postponed an official trip to the Philippines. Duterte had to manage that.
              2. Chinese vessels caught surveying in Benham Rise. Duterte had to manage that.

              “He is an unabashed nationalist. And he can change his mind on the drop of a pin”
              Rash act has nothing to do with him being nationalist. It’s got to do with him being dictatorial. Presidents consult cabinet and makes studied decisions, not rash decisions.He can impose his mind changing mastery at home. He can praise VP today, condemn her next day, and invite her for diner later. He can suspend tokang today, Impose it next day. Try doing that at bilateral multilateral platforms. He’s already got reputation for cancellation meetings with other heads of states at important Asean and Apec meetings. There are consequences.

              “Overwhelingly popular” is buying into the hype and propangada. The 90% or 80% survey results asked “are you happy with Duterte’s admin?” which is not the same as “who do you prefer (A)Marcos (B)Aquino or (C)Duterte?”

              • NHerrera says:

                In this case then the tail definitely does not wag the dog. And we know who the dog is.

  9. karlgarcia says:

    Look what they did to Venezuela, they figured out that they can get oil elsewhere because Venezuela can no longer deliver, they are no longer lending them money. The Venezuelans mismanaged everything, the Chinese do not know what to do with them. In the article below one said, that they allowed Venezuela to be stupid.

    • karlgarcia says:

      Africa is that other source of oil and other natural resources, soon they will be in a debt trap too, we should watch what happens.

      China is having a corporate debt time bomb waiting to explode.

      • NHerrera says:

        karl, thanks for those links. They give a good reading supplement to chemrock’s blog article. Concrete historical facts for Filipinos to have in mind in dealing with Uncle China bearing gifts.

      • Bill In Oz says:

        You know Karl, China will never accept advice from the IMF. The International Monetary Fund is seen as a tool of US financial ‘imperial’ capitalism….

        And the suggestion that China lower the level of economic growth in China, ( currently around 6% ) would if adopted, destroy the popular legitimacy of the communist Party government of China.

        There is one other factor to take into account with all these loans. China has adopted a policy of deliberately lowering it’s US dollar denominated foreign exchange. For decades China was paid for almost all it’s exports in US dollars. It had accumulated reserves of 3 trillion dollars. But China is not comfortable with that now because of the huge & continuing US balance of payments deficits…

        So they have had a problem of hat to do with the US dollar reserves..Using them as loans to gain friends and influence other countries was adopted as a way to acheive a win win solution to this problem. The point being that the loans were made fr political and international financial reasons. Not just as income interest earning business loans.

        • karlgarcia says:

          But IMF recently approved Yuan as a reserve currency, would that not mean anything to China?
          I tried reading the English articles about the matter in and the Chinese journalists seem to acknowledge IMF a lot.

        • chemrock says:

          Bill thanks for bringing this up. It stretches the discussion wider for greater understanding.

          China’s apprehension of IMF is understandable as is American apprehension for Huawei.

          Money makes the world go around.

          When petrol prices moved from it’s decades of stable $5 under barrels and hit the sky, all the money goes to the middle east. The smart ones built for future generations (Kuwait), silly ones built cities of gold (Dubai, Qatar), thuggy ones built armies for conquest (Iraq, Iran), bastardly ones built killer religious orders (Saudi Arabia).

          Venezuela — With oil money Chavez built everything free for everyone (so that he can be a hero) until there is nothing left.

          Japanese — their manufacturing prowess brought in all the world’s money. They upgrade their society, bought into corporate America.

          Others — like HK, Singapore, Taiwan — with the money from economic success they improved the lot of their society and saved like hell.

          China — when their economy swings, the amount of money that came pouring in is unimaginable. That money has to be recycled somewhere or the country will sink under it’s weight. China smartly chose to build the hegemonic sphere by aid and investments in the One Belt One Road. Even with so much money diverted into offshore economy, they still had so much left in China to cause housing and equity market bubbles.

          • karlgarcia says:

            Many thanks for that Chemrock.It answered a very basic question i had about IMF and China.

            • karlgarcia says:

              If corporate debt is a ticking tome bomb in China, would that be a problem to us in the future if all the giant conglomerates go via the PPP route and participate in all the projects?

              Stupid questions deserve intelligent answers. 😉

              • Hahahaha, so do intelligent questions, such as yours. 🙂 🙂

                I believe Jollibee is scaling back their ambitions in China, and I wonder what other major PH companies think. One has raised its investment in oil exploration at Reed Bank.

                The default agreements in the PPP contracts would be interesting to read.

              • chemrock says:

                No questions are ever stupid if the intent is to understand something.

                A funder or creditor would be interested in the credit worthiness of the borrower and the viability of a project. The contractors would be interested in the financial arrangements to ensure prompt payments as well as all necessary work by host country to ensure no undue delays or stoppages. The host party want to ensure the financial and technical capabilities of the contractors. Every project carries risks which we try to cover as much as possible. Insurance, performance bonds, govt guarantees, etc are some of the means to cover risks. Exit clauses are crucial so one party need not be locked in due to the default or incompetence or inability to continue for whatever reasons.

              • karlgarcia says:

                Many thanks Joe.🙂
                And per usual, you are so accommodating Chemrock.🙂👍🏻

              • karlgarcia says:

                Going back to debt repaying to China.
                In the case if Sri-Lanka, the government is proposing equity for debt which the citizens vehemently opposed. That would mean China can own most of their companies?
                Or will China be contented with its easy access to the Indian ocean?

  10. a distant observer says:

    Salamat chemrock for the very insightful read.

    “If one day China should change her color and turn into a superpower, if she too should play the tyrant in the world, and everywhere subject others to her bullying, aggression and exploitation, the people of the world should identify her as social-imperialism, expose it, oppose it and work together with the Chinese people to overthrow it.”

    ~ Deng Xiaoping, speech at the UN General Assembly, April 10, 1974

    • NHerrera says:

      Thanks for the additional reading item.

      • karlgarcia says:


        • Bill In Oz says:

          The past is important.

          Southern Vietnam was once part of Cambodia.. It was settled and conquered by Vietnamese settlers in the 16th-18th centuries. Also in 1978 Vietnam occupied Cambodia and removed the Pol Pot’s Kymer Rouge genocidal regime. ( Ironically with help from Cambodians lead by Hun Sen. ) So China is for Cambodia, a natural, essential and reliable ally counter balancing their larger neighbour, Vietnam.

          Turning to Sri Lanka, there was a civil war there for 30 years between the Tamil Tigers and the elected Sri Lankan governments. In this civil war the Sri Lankan government found it difficult to obtain military aid from western counties or India. But the Tamil Tigers got lots of help from the 40-50 millions Tamils living in Tamil Nadu state in India.

          This made it difficult for the Sri Lankan government to win the civil war. Finally Sri Lanka turned to China for military aid. China was quite willing to provide it without all the strings and limits demanded by Europe, the UK and the USA. And the Sri Lankans then also ignored all the attempts by human rights groups to ‘stop’ them winning. Controversial methods ? yes But they won that civil war and destroyed the Tamil Tigers. They did it with weapons, training and advise from China. So there is significant good will towards China in Sri Lanka. And they see this tilt to China as off setting the dominance of India in their region.

          These moves by these 2 counties to pursue their own national interests are seen by many in the USA, Europe etc. as helping China to expand it political, economic and military influence. And so there are articles and ‘propaganda’ of various forms to undermine this situation. But these 2 countries are pursuing their own national interests. and it is for the governments of these countries to decide their own national interests.

          The same logic applies in the Philippines with the new government lead by Duterte. I suspect that if he gets this all wrong, then there will be increasing opposition to his China Tilt.

          • madlanglupa says:

            > But they won that civil war and destroyed the Tamil Tigers. They did it with weapons, training and advise from China.

            And the general who led the army to that victory, was… jailed, because the president of the time feared that his conquest could be a threat to his rule.

            • Bill In Oz says:

              Madlanglupa, that President lost power 2 years ago because of his own dictatorial ways. And the general is part of the new government…’The wheel turns’ as Sri Lankan Buddhists say.

          • chemrock says:

            I don’t know much about Cambodia so no comment.

            For Philippines I see the pivot to China as a leadership decision not in consonance with the wishes of the majority of Filipinos. Survey results indicated this. It was a decision made for the people but not by the people.

            As for Sri Lanka, Bill, I think your views are inaccurate and totally misleading, and somewhat dangerous in the context of our discussions here in TSH. Of course I’m totally aware you carry no bad intent. Please allow me to elaborate and I need to go rather lengthy as I think it’s important that we understand it and also for the fact it’s within topic here.

            The Sri Lanka civil war was a religious and ethnic war – majority Sinhalese Buddhist vs minority Tamil Hindus. It was a war agitated by Buddhist monks, some of whom were also politicians. It was one of the rare instances in world history where Buddhists have veered so far away from their pacifist religion. The reason is tied to the history of the religion. Buddhism was once the great religion of India of which Sri Lanka was part of. Over time Hinduism took over the great sub-continent and Buddhism was driven out. The last refuge was Sri Lanka and Buddhist monks took up the mantle to protect the island from the influx of Hinduism. Sri Lanka became sort of the last Indian outpost for Buddhism. They physically prevented further migration of Hindu Tamils from southern India into the island. Over centuries, that religious baggage developed into chauvinism that drove pacifist Buddhist monks into active violent activists. Despite a religion that practices pacificism, chauvinism has been engrained into their pysches over the centuries.That is the underlying core of their civil war.

            The Sinhalese are the natives of Sri Langka, Sinhala is the native language. Tamils came from southern India and they speak Tamil, one of the thundreds of dialects of India. Under British rule, the island was known as Ceylon and English became the national language. The Ceylonese prospered under British rule and had a pretty high standard of living amongst British Commonwealth countries, much higher than any Asean countries then. It was known as the Pearl of the Orient. But beneath the veneer of prosperity, Tamils as a minority were a neglected and suppressed lot.

            Then came the 4th Prime Minister Mr.Sirimavo Bandaranaike in 1956. An ultra-nationalist (a populist to the Sinhalese masses) he made Sinhala the sole national language, changed the name to Sri Lanka, adopted socialist and non-western policies (does all these sound familar?) Racial chauvinism took to new heights as politicians pander to the masses. Result – Tamils further marginalised and discrimiated.

            Tamil frustration turned to riots and eventually to the formation of the guerrila movement known as Tigers. The Tigers certainly had the support of fellow Tamils in India. It started off as insurgencies and then a full-fledged war 1983 to 2009. The Tiggers were initially branded as terrorists and Sri Lanka govt garnered direct US military support. There were certainly atrocities committed by both govt troops and Tigers. It soon became clear the govt was pursuing the war with over exuberant atrocities and human rights violations became very serious issues. Foreign reporters and observers were barred from the country. Western criticisms of human rights violations were brushed aside as colonial hectoring. By 2007 it was a war that the US no longer wished to support in view of the deterioration of human rights record.

            In 2007, out stepped Uncle Sam and in stepped China. The Chinese poured in $1B aid and DONATED military hardware — weaponries, fighter jets inclusive of training, and also got Pakistan to sell arms to Sri Langka. That turned the tide and in 2009 Sri Lanka finally killed the Tiger leader Velupillai_Prabhakaran in a decisive final battle that annihilated the rebels and brought the civil war to a close.

            Mahinda Rajapaksa, the Prime Minister (2004-2005) President (2005-2015) continued to accept the new sugar daddy China’s aid to develop the country. China has vetoed UN resolutions to hold MR accountable for human rights violations in the civil war. Many of the infra projects failed economically and pointed to massive corruption of MR’s govt. Current govt is trying to make MR account for corruption. The country has fallen into Chinese debt trap, and in order to service debt and maintain the economy, it is forced to enter into further contractual deals with Beijing. As of today, the status is govt going after MR for corruption, MR in turn counter blaming the govt for all these new Chinese deals where further corruption thrives and leading the country into further financial misery.

            At the start of the civil war, Tamils formed about 18% of the population. Today, it is about 8%. Western countries howled human rights violations. Not a single Eastern or Middle East country say anything, except Singapore where Lee Kuan Yew called it ethnic cleansing.

            So Bill, and all here, the Sri Lanka lesson is of humanitarian and great political import as well as in the context of this blog.

            In retrospect I had great respect for Lee from the Sri Lanka lesson. He spoke of something that I did’nt quite understand in my younger days. He said in governance the majority must always look out for the minority, they should never be marginalised. And that has been the ethos of his governance of a multi religious and multi racial Singapore. For Philippines, that would be the problematic task of bringing the moros into the mainstream.

            Footnote – back in the late 80s in the midst of the war, I spent a week in Sri Lanka. I did’nt see any action which was in the north and north-eastern part. It was rather peaceful for me. I visited the famed Temple of the Tooth and went rather far up north (but not the war torn part) to a place where I saw a supposedly foot imprint of Asokha the Great – the king who helped spread Buddhism. In out of town eateries, young Sinhalese waiters and waitresses were eager to talk to me. Imagine my surprise – many asked me about Mr Lee Kuan Yew (honorifics always there- they are polite). That was pre-internet, no smart phones, no TV, few newspapers.

            • sonny says:

              Valuable concise history of Sri Lanka & her civil war, chempo. Thank you. I have more respect also for Lee Kuan Yew. The history of Malay peninsula has recently interested me.

              • NHerrera says:

                Same here. A lot of Sri Lanka items related to the blog and the situation of PH — something that would have taken me hours to google. One needs to extract the essence of that and marry it with PH’s circumstances to apply the lesson to PH.

            • Thanks, Chemrock, i join sonny and NH in expression of appreciation for the ominous history lesson.

            • Bill In Oz says:

              Chemrock, a goo summary of modern Sri Lankan history. However there are 2 aspects that need to be added. When Ceylon was ruled by Britain, English speaking Tamils and Burgers ( part European Christian locals ) were very ‘over represented ‘ in the civil service. And the development of the British managed tea industry in Ceylon saw many, many thousands of Tamils migrate from Tamil Nadu to Ceylon to work as poorly paid indentured workers on the tea estates .

              Both these developments generated animosity among Sinhala people. They felt excluded from the administration and from the income & jobs in the tea industry. And some came to see this as a Tamil attempt to take over the country. These things created the conditions that led to Sinhala chauvenism in the 1960’s & 70’s . And then the Tamil Tiger escalating response.

              • chemrock says:

                You are right about the tea industry. It certainly added to the resentment. Same story all over the world. Better off locals bypassed for cheaper foreign workers. Its happening now in Singapore too. The tea plantation added to existing resentment, it became another cause celebre, but it was not the underlying cause which is centuries old. It’s just another new horse to kick.

            • edgar lores says:

              Let me make it unanimous.

  11. madlanglupa says:

    Read every word.

    As if sidewalk markets overflowing with bootleg products wasn’t enough, I fear that this massive amount of aid, intended to ensure that we are placed within the hegemonic sphere, would also be subject to abuse by capricious syndicates of corrupt politicians and smarmy businessmen who intend to enrich themselves by cutting corners and fudging figures. It has also happened before, with Marcos cronies benefiting indirectly and stashing the rest of the loot to offshore banks.

    • madlanglupa says:

      The other sad thing is that the populace now reads the news on Facebook, so of course with memes, literally the short simple messages that harkens back to the days of the Bolsheviks who used similar propaganda (i.e. “Land! Bread! Peace!”) to bring support to their revolution, becomes more terribly effective than long explanations.

    • madlanglupa says:

      BTW, I hope that painting doesn’t come with something “extra”, similar to the The Thing which was presented to the US Ambassador by the Soviets as a gift, but turned out later to be a well-built KGB listening device.

  12. Very sharp. Thank you, Chemrock. I hope someone translates this to Filipino.

  13. RHiro says:

    “I was repeatedly asked about the possibility of a China-centric globalization – reinforced by Chinese leadership in multilateral trade (the 16-nation Regional Comprehensive Economic Partnership, or RCEP), pan-regional investment (China’s One Belt, One Road initiative), and a new institutional architecture (the Chinese-dominated Asian Infrastructure Investment Bank and the New Development Bank). It’s as if China had been preparing to fill the void being left by Donald Trump’s “America first” US.”

    “The Chinese are keen students of history. They know that shifts in global leadership and economic power are glacial, not abrupt. Yet I get the sense that they view the current circumstances in a very different light: Trump, the great disruptor, has changed the rules of engagement for what had long been a US-centric globalization. Many in China are now wondering whether this may be an opportunity to seize the reins of global power.”

    “Anything is possible – especially in a world where uncertainty is the only certainty. But there is another lesson of history that the Chinese must bear in mind. As Yale historian Paul Kennedy has long maintained, the rise and fall of great powers invariably occurs under conditions of “geostrategic overreach” – when a state’s global power projection is undermined by weakness in its domestic economic fundamentals. Global leadership starts with strength at home, and China still faces a long road of rebalancing and restructuring before it reaches the Promised Land of what its leadership calls the “new normal.”–roach-2017-03

    For purposes of my reply I would like to point out that when one talks about China one can not limit it to the mainland. China in economic and cultural terms is part and parcel of Greater China
    (PRC, HK, Macau and Taiwan) Plus one must include China’s Commonwealth of the Bamboo Network composed of Overseas Chinese in Singapore, Indonesia, Thailand, Malaysia, Philippines and Vietnam. It is an important part of historical fact of the PRC’s peaceful rise was helped a great deal by the Bamboo Network. Paramount leader Deng called on the group in the early days of China’s rise.

    The Philippines is a newcomer to the group as far as investments from China is concerned. Vietnam is a good example to look at. In spite of the troubles with China, Greater China including the PRC and the bamboo network are major FDI investors in Vietnam.

    Kishore Mahbubani’s talk At Harvard ..

    • RHiro says:

      Even though Trump so far has been a gift for China and it seems he will not stop giving since he wants globalization but wants a free ride for America.

      The Philippines has just taken the first tentative steps with Greater China and the Bamboo Network. But it has to follow through and institutionalize the opening up of economic sectors to FDI’s. Duterte had said that he is open to it except for land ownership.

      Economic institutions also are still in the drawing stage. Land use etc. A lot of spadework still needed.

      The idiotic exclusive focus on law and order by the President is at the heart of the problem of Chinese investments. Not China.

    • chemrock says:

      Thanks RHiro, that excerpt of Steven Roach’s article is really sharp. More specifically global leadership starts with strength at home and China is not anywhere there yet. Thus their global overreach may collapse before they can attain global leadership position.

      I think Karl innocently asked what happens to PPP infras with Chinese firms WIP and the China collapsed, not his exact words.

      Your comment on the bamboo network is spot on. Singapore was one of the first countries he visited. Singapore was drawn in to help them build their first EZ called Suchou Industrial Park. It was’ not a good experience. We lost billions but our govt has not been transparent so much remains unknown. Basically it was a matter of LGU trickery over central and we got suckered. Of course corruption was at its root. Thought I mention this in light of a Chinese proposal to help Philippines build an EZ.

      For those who don’t know Kishore Mahbubani was Singapore ambassador to UN.

  14. Gilda Rodriguez Dela Cruz says:

    The events of the past seem to me like pieces of puzzle that needs to be solved, and since you mentioned John Le Carre, a perfect spy might be in the making, There was one interview of Duterte during the campaign where he spoke of his vision for the Philippines. This is the only time I will ever hear him mention it. He spoke of becoming the world’s producer of steel. Where did he get that idea? I’m not sure but I do know that in 2005, China was one of the world’s top steel producers, enjoying a third of the world’s share, followed by Japan, Russia and the US. The years between 2000 and 2005 saw a high demand for steel. Even Indian steel firms managed to rise in prominence during this period. But starting 2008 with global recession, demand decreased and new construction declined, causing prices to get so low it sold way below cost of production. The industry continues to reel from this economic slowdown, with China’s role making it worse for other steel producers because, as anything that is made in China, they produce and sell steel that is 20% cheaper and lower in quality. Thus. tariff set for Chinese steel in some countries in Europe and America are higher. What does President Duterte got to do with these? The Benham Rise. I read somewhere it produces minerals and materials which can make steel.

    • chemrock says:

      I would’nt pay much attention to him when he talks economics. There is nothing illuminating. Nobody can deny the importance of steel in an economic boom. Andrew Carnegie made his stash in steel at a time when American was in full throttle in infra development. Just imagine all those steel for US rails and bridges and battleships. Same thing during China’s boom. Duterte’s timing could’nt come at a worst possible time for the steel industry as you indicated. It showed his business acumen is next to zero.

      If you’re trying to connect the dot to Benham Rise, I’m totally blank here.

      • NHerrera says:

        Something may have triggered the thought of steel production to PRD before the election. If he was serious about it, he could have asked NEDA to take a serious look after the election. NEDA would then have consulted the DOST, DTI and DOF among others in their study.

        The probability of huge amounts of manganese — needed to make steel — in Benham Rise may be a “dot” to connect but that dot is rather distant, involving as it does the mining of manganese from a depth of 3000 meters, etc, not an easy task at this time, I understand.

        A possibility is the thought coming to him via someone suggesting that that some steel plants from China can be transferred to, say, Mindanao. The matter of manganese needed for the steel can be sourced from traditional sources. The thought of manganese from BR is probably an added thought, if ever.

        And of course as you noted the economics of it is a big factor.

        • chemrock says:

          Ah you may have a point regarding machinery transfer. Then again they may have done due diligence and realised it can’t work. We are just grasping here, not healthy.

          • NHerrera says:

            Right — a conjecture.

            • sonny says:

              For the PH’s sake, I hope it’s not the iron earth-extraction part at all. Any iron-extraction must only be for our consumption.

          • I have sent a comment from LCX to trash. I found objectionable his listing of addresses of the President, Sec Lopez, and others with an appeal to TSH members to take up a letter-writing campaign. That would be beyond the discussion format of the blog and turn it into an active advocacy. I don’t object to advocacy, but that is not this blog. He also had some comments about your article which he is welcome to resubmit without the appeal for advocacy.

      • Gilda Rodriguez Dela Cruz says:

        Yes, I’m trying to connect the dots because why would these foreigners be so interested in us and Duterte in them besides China being the major supplier of fentanyl? These are goal motivated behaviors. The Benham Rise is still unexplored, rich in minerals and natural resources, as rich as those islands in the Spratlys, the Scarborough Shoal, that more than 3 countries are fighting over its ownership, so golden that talks are dealt with care. There’s got to be a tangible benefit to both. All these games the President and his allies are playing, including the Marcoses, GMA, the Chinese, the Russians, and all which keep us guessing what is next for us I guess boils down to one thing: greed – each to his own greed. Whether it is greed for power, for market leadership, for wealth, global control, it is human perverseness which is dictating now. And it is along this line I feel repulsive that a group of greedy people, led by our highest official, want to cheat us blind. Nevertheless, I would like to think the President has kept a small but distinct part of him as good, noble,and patriotic; just that he overestimated himself, as he always did, and beginning to realize he is a novice in the political game. Benham Rise. I have a strong feeling it is all about BR and the opportunities it can provide.

        • chemrock says:

          Good question, What is the objective of each party. We will probably never know the truth, and perhaps each party do not know of the other.

          Because there is no transparency, everybody is entitled to guess. It’s all conjecture, and I have mine.

          China — In my previous article “China’s 9 Dash Lines” I laid out the claim their objective was building a defense strategy to against US submarines.
          Mr Duterte — He bought into the Marcoses’ scheme of things, and all his actions are aligned to the latter family’s interest. Why? For more than 30 pieces of silver?
          Marcoses — They sold to the Chinese long time ago. Why? I’m researching into this angle. I have an idea and it’s so basic folks never see it. I’ll leave it as a cliffhanger for now.

  15. NHerrera says:

    Off Topic

    During today’s SC 3rd Oral Arguments on De Lima’s petition against RTC Judge Guerrero on the Judge’s issuance of warrant arrest on De Lima, there is the period between 38 min to 1 hour 25 minutes from the start of when Justice Leonen questioned Solgen Calida. I enjoyed listening to the exchange. (My bias is showing here. Justice Leonen is one of my admired SC Justice.) It is not an indication of how the SC will decide, but the reader — if he has the time — may enjoy the exchange also. Of course the reader can listen to the whole 4 hours of the Orals. I stopped at Justice Leonen.

  16. karlgarcia says:

    Guys, remember this?

    “Whatever Happened to the Lease of 1/10 of Phil. Agricultural Land to China?

    The Philippines has about 10 million hectares of arable land devoted to and classified as agricultural lands. Although geographically such agricultural lands are not used in cultivating a single crop due to geographical circumstances such as availability of irrigation all year round, these lands are the main capital in the Philippine agricultural system. Thus, the ownership and utilization of agricultural land remains a contentious social, political and economic issue in the Philippines.

    Way back in 2007, the Department of Agriculture decided to lease 1 million hectares of Philippine agricultural land to the Chinese. Yes folks! No need for an invasion! The DA leased 1 million hectares to Jilin Fuhua Agricultural Science and Technology Development Co., Ltd. (Fuhua Co.). That is 1/10 of available Philippine agricultural land.

    Fuhua Co. Planned to plant hybrid rice, corn and sorghum in these lands. This was to meet the Medium Term Development Plan which is to develop 2 million hectares of agricultural land. The contract is expected to bring in about US$3.87 billion in investments.

    The MOU with Fuhua Co. was one of 18 agriculture- and fisheries-related contracts that was signed in the presence of then Chinese Premier Wen Jianbao when he visited Malacañang in January 2007.

    The 18 contracts covered agriculture and fisheries research, the provision of facilities for fishery and agriculture, the investment of Chinese entities in local agribusiness, and other trade-related matters. This was signed during the administration of President Gloria Macapagal Arroyo.

    Whatever happened to this MOU and is it operational until now?”

  17. The article below is an interesting read. Are most of China’s infrastructure projects in PH located in Davao and/or Mindanao area? There seem to be a precedence in Africa. The author’s prediction is since such political targeting widens social and economic inequality, the eventual outcome might be a destabilized nation. What strike me most are the following paragraphs:

    “Governing elites in developing countries seem to be manipulating these projects for their own political gain. We find that a disproportionate share of Chinese development projects show up in politically privileged areas — specifically the birth regions of African leaders (and their spouses)”.

    “And the level of political targeting bias is high. Our results indicate that the average African leader’s birth region receives roughly three times as much (195 percent more) financial support from China during the leader’s time in power”.

    “This means Africa’s politically privileged may benefit disproportionately from Chinese development projects, with fewer benefits going to politically marginalized regions. It also raises questions about the long-run consequences of persistent or widening inequality, which a number of researchers point out may heighten the risks of social unrest, violent conflict and political instability in Africa”.

    • Seems to punctuate Chemrock’s main point.

    • chemrock says:

      Neda website carries a list of projects already approved by Neda and ICC by the Duterte admin. It is not Mindanao or Davao-centric. That’s of Feb 2017.

      Note that the Mindanao railway was a Pnoy initiative. Neda commenced studies in 2014. But of course a Duterte railway could be very different.

      “AFTER the successful visit of Chinese diplomats in Davao Region, the regional office of the National Economic Development Authority (Neda) expressed optimism that all lined up proposed infrastructure projects will further improve the economic activities of the city as the center of trade and commerce in Mindnanao.” …Sunstar 18 Mar 2017

      There is no mention of what these Davao projects are.

      What if they prioritise infras in Mindanao, then they go federal. Who carries the debt burden — central govt?

  18. RHiro says:

    “What is “capital”? To Karl Marx, it was a social, political, and legal category—the means of control of the means of production by the dominant class. Capital could be money, it could be machines; it could be fixed and it could be variable. But the essence of capital was neither physical nor financial. It was the power that capital gave to capitalists, namely the authority to make decisions and to extract surplus from the worker.”

    “Early in the last century, neoclassical economics dumped this social and political analysis for a mechanical one. Capital was reframed as a physical item, which paired with labor to produce output. This notion of capital permitted mathematical expression of the “production function,” so that wages and profits could be linked to the respective “marginal products” of each factor. The new vision thus raised the uses of machinery over the social role of its owners and legitimated profit as the just return to an indispensable contribution.” JAMES K. GALBRAITH

    I do not mean to disrespect anyone but the last few posts on the China pivot and the discussion on the political spectrum of a weak state like the Philippines is way off base by a lot.

    Please note that the Chinese government are fully versed in the ideas of Marx and Lenin.

    Capitalists and the power they wield in the political structure.

    A prime example is the partnership of the Henry Sy family and the Chinese State in the vital strategic transmission of electricity in the Philippines. The Chinese State is fully aware of the state of industrial development in the country. They are fully involved in the transmission of power to the entire archipelago.

    Henry Sy and family are the top conglomerate in the country. Hence the Chinese know fully well the political capital they wield.

    Why was there no outcry when this happened? The guys who wield power in this country is not the weak state.

    The elite of this country are traders and bankers. Some are allied with the Japanese/Taiwanese and some with the PRC…They comprise the most powerful group in the political economy of this country.

    In my discussions with some Chinese State companies in the past concerning the Philippine scene it was clear to me that, they the Chinese, knew fully well who called the shots. – Big Business. Their entry into the country would be through the same.

    The alliance of big business/military is alive and well in this our weak State.

    For now Big Business here are tolerating the President. However his one dimensional character as “Dirty Harry”has very short legs.

    The elite are waiting for him to focus his political capital on the economic reforms promised them.

    Once he falters on the more important affairs of the State (the economy stupid)

    He becomes a footnote. There are external pressures building up and he may wish he be back in Davao.

    The man is a street tough and knows well enough not to get in the middle of the fight of two bullies. The U.S. has already weaponized their dollar empire. You do not have to send in the CIA to try to topple Duterte. He should thank his lucky stars that Trump got elected. The only problem would be that Trump may inadvertently decide to end the Korean war.

    The president has already reneged on his promise on contractualization.

    Big business told him where to go through his Labor Secretary.

    If he falters there he will be gone before he realizes it.

    The President has no constituency at all. He does not have a mass base. All he has got are crazies who are riding on his popularity. Look at his Justice Secretary. A man known for living off the sewer that is the justice system as a litigation lawyer. An ambulance lawyer whose aroma would repulse a dung beetle. His circle are mainly old classmates who probably could not plan policy or plan a stag party in a brothel.

    The bunch of crazies are scared shit that this guy could drop dead before his time and the VP becomes Madame President.

    The Chinese are well aware of his huge shortcomings. More importantly they are also aware of the utter weakness of the Philippine State.

    • A most interesting read, oddly offering some hope that the current chaos, lunacy, and dark dealings has . . . as you put it . . . short legs.

      • sonny says:

        With all these not altogether unexpected difficulties of the presidency of the country, I’ve come to realize that we are riding no less than an AIRPLANE OF STATE, a vessel that operates in the full complement of dimensions in space and time. It’s a vessel that must be guided through rough weather every minute in order for every one to survive. We must have full control: handling and manning our vessel through each pitch, roll and yaw, every balance between thrust and drag, between lift and gravity, unflinching hold of the rudder and an ever watchful eye on our navigational charts, these all at the same time. Nothing less is required.

    • chemrock says:

      I discern no disrespect RHiro.
      I agree with you on the Chinese business angle. In fact I’m researching on the angle of Marcoses connection to the Chinese. I know Chinoys and especially Chinoy businessmen are grateful to old Freddie for allowing naturalisation of Chinese in Philippines. He did it not really out of love but during martial law Spanish and American capital and families were exiting Philippines in drove, so Freddie needed to depend on Chinese money support in a fast collapsing economy. That same Chinoy support has transferred to BBM because they are grateful for Freddie. However, the Chinoy allegiance are mostly to Taiwan. Perhaps time has changed and they are PRC facing now and for quite some time. So its through this Chinoy link to PRC that’s where I bet the Marcoses veered towards long before Duterte coined the pivot.

      I also agree the Chinese are a few steps ahead of the game. They understand Duterte’s frailties. Question is who are they cultivating for post-Duterte.

  19. RHiro says:

    Another case of power relations business gone awry when it hits the spotlight in the U.S.

  20. NHerrera says:

    If I am not wrong, there were previous other links and discussions in TSH on the second-nature affinity or strategy of the Chinese with Elite/Wealthy Businessmen of other countries — so much the better if they are, or related to, the top leaders too. They are masters at sweetening the relationship with the just the right gifts at the right time. RHiro’s recent posts seems to round this up rather nicely.

    In a small way, I have observed that in my youth in a city in Visayas where a Chief of the City Health Department, come Christmas time, have their house virtually bursting with gifts mostly from Chinese-Filipinos. With a change in the Head of the Department, the gifts came to a just a few from friends. And the phenomenon is again observed at the house of the new Chief.

  21. chemrock says:

    I leave this link here for posterity. The Philippines Center for Investigative Journalism did an excellent job on those China deals.

    Read how “the Duterte administration appears to be willing to consort with contractors with colorful histories, as well as contractors with zero histories.”

    Read about the nickle ore deals and the steel mills. I was right all along. Duterte and Federalism is all about oligarch change especially in the extraction industry in Mindanao. And I based this pre-election all purely on gut feel and critical thinking, no proofs and no basis to validate. And why Duts mentioned about having a steel milling industry, despite a weak international market. Can you still not see the picture? Why Build Build Build and Golden Era of Infras? It boils down to Steel for the infras. The jewel in the China deals is the steel mills. Whoever is behind this will be the Morgans of Philippines. (JP Morgan’s steel mills helped built American and made their the family fabulously wealthy. Folks, they planned this long long ago.

    This is what the emergency powers fo infras is all about. Will Senator Poe wake up?

    Taxpayers will be left to pay-off the infra fundings for the next 30 years. Whether the infras will be done properly, or we have railroads to nowhere and bridgest with no connecting roads, the oligarchs will laugh all the way to the bank.

    Be frightened, be very frightened, when you read the PCIJ report.

  22. karlgarcia says:

    NEW DELHI — The Philippines could end up in hock to China if it is not careful about entering into investment and infrastructure deals with Beijing, according to an Indian think tank.

    Hardeep Puri, chair of India’s Research and Information System for Developing (RIS) Countries, warned that the Philippines should be wary of China-funded projects to avoid falling into the same debt trap that has bedeviled other countries that have received massive Chinese loans and investments such as Laos and Sri Lanka.

    Puri, a former permanent representative of India to the United Nations, said the Philippines should ensure the China-funded projects would be economically viable and would not impinge on the country’s sovereignty.

    ‘You have to pay it back’

    “It has to be viable projects. You have to pay it back. If it will lead to debt and equity then drop it,” Puri told the Inquirer during a visit of Southeast Asian journalists to India on July 4.

    “If debt becomes equity, then you’re selling your country. You (the Philippines) might end up selling more than your islands,” he said.

    Expanding its economic clout, China has poured massive amounts in loans and investments into a number of Asean countries such as Thailand, Myanmar, Laos and Cambodia.

    “Be careful about these schemes, which bring lots of easy money,” Puri said.

    $24B for PH

    President Rodrigo Duterte visited China in October last year to mend relations soured by a suit brought by the Philippines to the Permanent Court of Arbitration in The Hague challenging China’s claim to almost all of the South China Sea.

    He returned with $24 billion in investment and loan pledges from China. Most of the investments would be in infrastructure projects such as railroads and ports.

    Puri expressed hope the projects would be economically viable, noting that “in this game there is no such thing as philanthropy or altruism.”

    “The consequences are clear — that if you raise the economic stake such that you owe a bank a huge amount of money, the bank will come after you,” he said.

    Puri cited the cases of Sri Lanka, which was forced to convert its debts to China into equity to avoid defaulting on payments, and Laos, where China is building a $6-billion high-speed railway the economic viability of which is under question.

    China funded an international airport and deep-sea port in Hambantota, Sri Lanka, which have become white elephants and left the country heavily indebted to China.

    Costing almost $2 billion, the airport and seaport are losing heavily. The airport receives just one flight a day and the seaport only six ships week.

    “If you are an economy which is small and your capacity for revenue generation and capacity for debt repayment is limited, you come to a point where the ability to pay the debt or the amount of debt exceeds the revenue or whatever earnings you have. In that situation, what will happen? It’s not one where you will say, ‘I’ll stop paying,’” Puri said.

    Debt-to-equity swap

    To avoid defaulting, Sri Lanka agreed to a debt-to-equity swap with China. It agreed to give China Merchants Port Holdings an 80-percent stake in the Hambantota port for 99 years, including 6,000 hectares of land around the port.

    In exchange, China wrote off most of Sri Lanka’s debts. But the deal enabled China to gain access to a strategically located outpost in the Indian Ocean region, though not without protests from the locals who slammed what they called China’s “colonization” of Sri Lanka.

    The national leadership had no choice. Sri Lanka, 65 percent of whose gross domestic product (GDP) goes to debt servicing, owed China $8 billion in high-interest loans.

    “If you have a small economy and 70 percent goes to debts, you cannot run that country efficiently,” Puri said.

    “If you (the Philippines) are going down that road, I don’t know whether the Philippines can get away with it since you are a democracy. But I tell you in India we can’t get away with it,” he said.

    Puri noted that the disputed islands occupied by China in the West Philippine Sea are heavily fortified.

    “Those islands have got force. It’s a $12-trillion economy and in addition to that, China has the capacity to use force,” he said.

    In Laos, China began construction of the $6 billion high-speed railway from Kunming in China’s Yunnan province to Vientiane, the Laotian capital, in December last year.

    Puri said it would take 11 more years for the railroad to become economically viable.

    85 percent of port

    In nearby Myanmar, China built a 770-kilometer oil and gas pipeline from the Kyaukpyu port to Yunnan at a cost of $1.5 billion. Now, China is demanding 85-percent ownership of the port.

    “It’s the same story for everybody. You go to Kenya, it’s the same thing,” he said.

    To avoid the pitfalls that have left some countries mired in debt to China, Puri said China’s One Belt, One Road initiative, under which the projects come, should be overhauled to consider sovereignty and economic viability.

    • NHerrera says:

      If it is any consolation, we have to thank the fortunate circumstance that Duterte placed at the helms of BSP, NEDA, DOF competent men, and not those with the creative, highly-subservient kinds of Alavarez, Aguirre, Sotto and Bato.

      • karlgarcia says:

        Yes NH but we are no experts in learning from past mistakes.

        Here is another oped about China’s “gifts”.

      • chemrock says:

        Sorry Nherrera, DOF Sec Dominguez is part of the problem. I used to think he is a technocrat which is good for Philippines. Seems he is one of the devils. It has been said he is one of those shadow figures together with GMA who schemed to bring D30 into the election race. His family interest comes first, as demonstrated in his stand and actions against Gina Lopez ex DENR Sec.

        • NHerrera says:

          Thanks for adding to my mind’s data bank on Dominguez.

        • sonny says:

          My thanks too, chempo. my mental dossier on Sonny Dominguez has also gone down a few more additional notches. He and Trans Sec Tugade were the only personalities I had “close” personal knowledge of, whom I could vouch for in the integrity+expertise category. Thanks for disabusing me of the notion. I’d appreciate to know your assessment of Sec Tugade, too.

          • chemrock says:

            Arthur Tugade distinguishes himself as Secretary of Dept of Transportation in 2 ways — Firstly, by his missing-in-action. He has’nt been leading from the front but MIA on the rail tracts and traffic jams, Secondly by his fervent request for Emergency Powers to solve the traffic woes. Emergency Powers is another way of saying give me a blank check to do my purchases. Emergency powers means no biddings for contracts, and that will solve traffic jams

            6 months into his job he committed his first official mis-step. He transferred 40 B pesos unspent budget of the DOT budget to Civil Aviation Authority so that his dept looks good for efficiently completing their projects. Oh how they screwed the Dilawans for incompetence and inefficient for underspending budgets !

            Tugade has never cleared himself for his involvement with Jack Lam. He was the boss at Clark Development Corp that gve Jack Lam the gaming licence. He was the guy that signed all the permits for all those Chinese workers of Lam.

            He and Dennis Uy were pally pally at Clark Development Corp. Uy’s company provided all the networks and electronic stuff at Clark. All these Mindanoans came from the same melting pot.

            What is your level of confidence the traffic woes will be solved?

            • sonny says:

              Again, thanks much, chempo. Your comments are as fresh air assessment to a highly toxic state-of-affairs. I have personal, albeit dated, knowledge of integrity of Sec Tugade. I was aware of preparatory talks with Japan regarding Disaster Preps and Recovery for MetroManila during FPNoy’s admin. I am not optimistic about amelioration of MM traffic woes since there are many dependencies among agencies tasked with said betterment. Your past blog-analysis affecting MM traffic woes was quite enlightening to say the least.

  23. karlgarcia says:


    Mariano Renato Pacifico
    July 15, 2017 at 04:43 · Reply
    Bring Chemrock over here. Chemrock knows how to count. I was wowed by his Bangaldesh heist not only from A-to-Z it included 1-to-10 !

    • chemrock says:

      Haha thanks Karl

      I do read filipinogerman ocassionally but didnt contribute. Been busy. I still enjoy MRP’s dry humour haha

      • karlgarcia says:

        Haha. Before Lance became Chief Troll, there was MRP.

        • I once did a blog about MRP, considering the artistic merits of his literary expression. I may have to roast . . . er, toast . . . Lance for his logic calisthenics. Or I’ll let Edgar write it, ahahahaha! 🙂

          • karlgarcia says:

            Hahaha! 😊

          • edgar lores says:

            Now that I am aware might capture the mind-bending calisthenics, I might actually do that.

              • I’ve always said I was a big fan of MRP here—- I put him and Wil in the same category, MRP more cynical; whilst Wil more the romantic.

                As for that mental calisthenics article, I suggest start here:

                but read the last 2 paragraphs first…

                “As a sharpening of wits, controversy is often, indeed, of mutual advantage, in order to correct one’s thoughts and awaken new views. But in learning and in mental power both disputants must be tolerably equal. If one of them lacks learning, he will fail to understand the other, as he is not on the same level with his antagonist. If he lacks mental power, he will be embittered, and led into dishonest tricks, and end by being rude.

                The only safe rule, therefore, is that which Aristotle mentions in the last chapter of his Topica: not to dispute with the first person you meet, but only with those of your acquaintance of whom you know that they possess sufficient intelligence and self-respect not to advance absurdities; to appeal to reason and not to authority, and to listen to reason and yield to it; and, finally, to cherish truth, to be willing to accept reason even from an opponent, and to be just enough to bear being proved to be in the wrong, should truth lie with him. From this it follows that scarcely one man in a hundred is worth your disputing with him. You may let the remainder say what they please, for every one is at liberty to be a fool — desipere est jus gentium. Remember what Voltaire says: La paix vaut encore mieux que la vérité. Remember also an Arabian proverb which tells us that on the tree of silence there hangs its fruit, which is peace.”

          • Edgar Lores says:

            On second thought, while such a blog may illuminate and raise consciousness, it will also cause harm. Therefore, I decline.

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