The Philippines is seeking a loan from China to help the country combat the forces of the jihadist militant group Islamic State of Iraq and Syria (ISIS) in the country, according to President Duterte.
In a late press conference that extended to an hour past midnight on Monday, the President said he is concerned about the presence of ISIS in the country because they “kill without compunction”.
“I have an urgent message to China to help us if they have precision-guided arms, [maybe] they can give us a loan,” Duterte said in a news briefing.
Should the Philippines obtain a loan from China, this will not qualify as official development assistance (ODA). Based on the ODA Act of 1996, or Republic Act 8182, ODA loans and grants must promote sustainable, social and economic development, and the welfare of the country. However, if the government is bent on seeking a loan from China to secure military equipment, Beijing can extend other loans to Manila.
National Economic and Development Authority (Neda) Undersecretary Rolando G. Tungpalan told the BusinessMirror these include semicommercial loans that can be obtained for various purposes.
This will entail higher interest rates than ODA loans, which are termed concessional, because they must have at least a 25-percent grant element.
“Grant element under this Act is the reduction enjoyed by the borrower whenever the debt service payments, which shall include both principal and interest and expressed at their present values discounted at 10 percent are less than the face value of the loan or loan and grant,” the ODA Act of 1996 read.
The President said the “top honcho” of ISIS is Isnilon Hapilon, who is allegedly holed up “somewhere in Lanao”, where the government has launched a military operation.
Duterte said he fears the presence of ISIS in southern Philippines because they use bombs and IEDs to kill even innocent civilians. He cited the Davao City bombing, where scores were killed after terrorists detonated IEDs in a flea market near the Ateneo de Davao University.
“That, to me, would be the more dangerous thing for us. And I have ordered a full-press military operation, because the incident could be repeated. And if they are desperate enough, they would resume bombing,” Duterte said.
“That is why I said to the military and the police, you embargo the place, you contain them in that area alone, in Lanao. I hope the fighting won’t have to affect areas outside of Lanao,” he added.
Last year Tungplan said the Chinese government is keen on reviving its cooperation with the Philippines through the provision of ODA loans in the next few years.
Tungpalan told the BusinessMirror that the country may forge a multiyear bilateral engagement with the Chinese government.
Due to the National Broadband Network (NBN)-ZTE fiasco 10 years ago and the Northrail project, he said the country’s ODA cooperation with China has been “stalled.”
Since the cooperation agreement will be done bilaterally—between Beijing and Manila—the ODA loans may be extended through the China Eximbank, the same institution that was supposed to finance the Northrail project.
However, Tungpalan said the Chinese government has other financial instruments that can be used to extend ODA loans and grants to the country.
The Neda official said these loans will not have to go through the China-led Asian Infrastructure Investment Bank (AIIB), since the cooperation with the Chinese government will be undertaken bilaterally. While the AIIB is a China-led development bank, it is deemed a multilateral financial institution similar to the Asian Development Bank and the World Bank.