There is nothing wrong if the government used gas-rich Recto Bank as collateral for a $62-million loan agreement with China, Malacañang said on Monday.
“For me [China seizing Reed Bank should there be a default in the repayment of the loan] is … not a possibility because we never reneged,” presidential spokesperson Salvador Panelo told reporters, using the international name of Recto Bank.
“We are known for paying our obligations,” Panelo added.
Panelo was commenting on the warning of Supreme Court Senior Associate Justice Antonio Carpio during a presentation at Pamantasan ng Lungsod ng Maynila on Friday that China could seize Recto Bank if the Philippines failed to repay the loan for the Chico River Pump Project in Kalinga province.
Panelo said he had not yet seen the loan agreement for the river project. But assuming that what Carpio had said was true, he said he was standing by his statement.
On whether the loan agreement favored China, Panelo likened it to a bank loan for which “the terms of the bank” were followed.
“It’s only natural that they will make sure that they will not lose from the loan to us,” he said.
But that provision is “useless” because China knows the Philippines can repay the loan, he said.
Panelo said he believed the economic managers allowed the provision because they knew the country could repay the loan.
He said he did not think the terms were unconstitutional because the definition of patrimonial assets was unclear.
On Carpio’s statement that the loan contract is expected to be the template for other loan contracts with China, Panelo said: “[I]f we show the Chinese government that we are on time, regularly paying, if you were the … lender … you will know the borrower is good and there is no need to impose onerous conditions [on] them. So not necessarily that this will be the template.”
He added: “The onerous conditions that some are saying [are] incorporated in the contract [are] standard between lender and borrower to be sure that the lender will be getting what they have lent to the borrower.”
Seismic surveys have indicated that Recto Bank is rich in oil and gas deposits.
The UN-backed Permanent Court of Arbitration in The Hague ruled in 2016 that Recto Bank is within the Philippines’ exclusive economic zone in the South China Sea, meaning the country has sole sovereign right to explore resources there.
China, which claims Recto Bank, rejected the ruling. —With a report from Frances Mangosing
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