Malaysian Premier Mahathir gives Philippines stern warning against China loan

Malaysian Premier Mahathir gives Philippines stern warning against China loan
Malaysian Prime Mahathir Mohamad (left) and Philippine President Rodrigo Duterte greet each other before a joint press conference at the Malacanang Presidential palace in Manila Thursday. Photo Courtesy of REUTERS

Malaysian Premier Mahathir gives Philippines stern warning against China loan
Photo Courtesy of REUTERS

Knowing the danger that his country encountered during the time of his predecessor the embattled Najib Razak who incurred huge debt for Malaysia of whopping US$243 billion, Malaysian Premier Mahathir Mohamad gave his caveat to the Philippines.

The Malaysian Premier told to Philippines to carefully deal with the loans from China that led him to junk the “unfair” Chinese-backed infrastructure projects.

Last year, Mahathir had to cancel a lot of Chinese-funded projects worth over US$20 billion of Beijing-backed projects awarded by Najib which he found disadvantageous to their country.

However, the Malaysian Prime Minister made it clear that it is not just about China, but it is also about the country’s concern which can regulate or limit all these influences from China. This is also the same stand on the issue of China’s loan to Malaysia when he said, “It is not about the Chinese, it is about the Malaysian government.”

“If you borrow huge sums of money from China and you cannot pay, then you know when a person is a borrower he is under the control of the lender. So we have to be very careful with that,” he added.

With President Rodrigo Duterte plans to spend trillions of pesos to bridge the Philippines’ infrastructure gap via his controversial Build, Build, Build program, and to do this he asked China and other countries’ help for funding to reduce strain on his government’s budget. The palpable preference of Duterte with China has been highly criticized not only by the political oppositions but even by Duterte’s political allies.

While Duterte has a very strong tie China, many cautioned the President by exercising prudence with China knowing that Philippines and China continue fight over the resource-rich West Philippine Sea.

On several occasions, the Philippines has been warned that we could be the next victim of what they say is China’s “debt trap diplomacy,” where Beijing gives “friendly” loans to bankroll infrastructure projects in financially weak states in exchange for control over strategic assets.

However, our country policymakers have repeatedly said the country would not fall into an alleged “debt trap” with China and even claimed that this is a myth.

In the forum attended by The Philippine Business and News last week sponsored by Association for Philippines-China Understanding (APCU), the speakers on the forum shared the same sentiments of the government economic managers and policymakers that the Philippines is too big to fall in the debt trap.

While this statement posed ambiguity, even one of their most eloquent resource persons when asked by our media outfit why Maldives failed in the perceived China debt trap, the admitted they cannot explain and nobody did to explain it.

But for other countries who availed of “friendly” loans from China, the resource speakers said they failed because of corruption.

Mahatmir was very clear why he is against the loans being dangled by China, not just to Malaysia but also in other countries who do not exercise prudence because the loaned money is not even a foreign direct investment.

Even Capital Economics the London-based think tank said given the “corruption problems” associated with Chinese infrastructure projects and the Philippines’ current account gap “already approaching unsustainable levels,” Chinese investment “could worsen the problems for the Southeast Asian nations

Furthermore it acknowledged that while improvements to the country’s infrastructure are desperately needed, the pace of increase needs to be managed properly in order to avoid further balance of payments strains.

This is also the exact sentiment of Malaysian Prime Minister Mahatmir in the experience of Malaysia on China’s friendly loans during the time of  Najib, “Malaysians are playing around with money, not even doing proper feasibility studies and due diligence before going into business.”

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