Allow me to expound a little on a story I did for The Correspondents
on February 19th.
Seven countries claim ownership of the disputed Spratly Islands, just
off of Palawan. China, Vietnam, Taiwan, Malaysia, Indonesia, Brunei,
and the Philippines all claim to own part or all of the Spratlys.
These overlapping claims have been a source of tension over the years
since the Spratlys (we Filipinos call them the Kalayaan Islands) are
believed to contain significant reserves of oil and natural gas. China
was the most aggressive in pursuing its claim. In 1999, the
Philippines-under President Joseph Estrada- led an effort to prevent
tensions by getting all the claimants to agree not to take actions to
provoke other claimants.
But in 2003, the Philippines-now under Gloria Macapagal-Arroyo- rocked
the boat that it previously steadied when it signed an agreement with
China to jointly undertake seismic studies of the Spratlys and explore
for oil and natural gas. Naturally, the other claimants were angry.
After getting them to agree not to rock the boat, the Philippines
sucker-punched them with the China deal. China's traditional ally,
Vietnam was so angry they it had to be let in to the deal to appease
Aside from angering our neighbors and potentially undermining regional
stability, Arroyo's action may also be illegal. Ombudsman Merceditas
Gutierrez-who was then acting justice secretary-told former Senator
Frank Drilon, who was then allied with the administration, that she
believed that the deal violated the constitution, because while it was
a deal between the state owned oil firms (PNOC of the Philippines and
CNOOC of China) of the two countries, it implicitly gave China access
to our oil reserves. Officers of the Foreign Affairs Department were
also upset because the deal effectively strengthened China and
Vietnam's claim to the Spratlys.
What would compel Gloria Macapagal-Arroyo to sign a deal that
potentially undermines regional stability, possibly grants China
parity rights to oil reserves in the Spratlys that we claim to be
ours, and likely violates our constitution?
How about $2 billion a year? After the Spratly deal was signed, the
Chinese government committed $2 billion in official development
assistance a year to the Philippines until 2010, when Arroyo is
supposed to step down from office. My sources tell me that the Spratly
deal was an explicit precondition to the loans.
A sizable amount to be sure, but for the Arroyo administration the
China loans are particularly appealing. Not so much because the
interest rates are so low and the repayment terms so lenient, but
because Chinese loans do not have the cumbersome requirements that
loans from the US, Japan, the EU, and big multilateral lenders have.
Requirements for documentation, bidding, transparency and other
details that make it very difficult for corrupt public officials to
commit graft. In fact, in November of last year, those cumbersome
requirements made it impossible for some government officials and
private individuals with sticky fingers to avail themselves of the
World Bank's generosity.
It had gotten to the point where a corrupt government could no longer
make a dishonest buck. That is until China's generous offer came
along. Given China's laxity with certain conditions, its no wonder why
almost every big ticket government project funded by Chinese ODA has
been the subject of allegations of graft and corruption. There's
Northrail, Cyber Education, the Fuhua agricultural projects,
Southrail, and of course the ZTE National Broadband project.
Until the ZTE National Broadband scandal, the Chinese government has
had little official reaction to any of these allegations. Why should
they? The $8 billion is a loan, not a grant. It enhances their
influence in the region, strengthens their claim to the Spratlys, and
expands their influence in the Philippines. The best part is,
regardless of what Philippine officials do with the money-whether they
put it to good use or steal it-it still has to be paid back. Its no
wonder that anytime some midlevel Chinese official comes to the
country, congressmen and administration officials literally trip over
themselves to roll out the red carpet.
For corrupt Administration officials and their cronies, $8 billion
represents unprecedented opportunities for graft on a scale that would
shock ordinary Filipinos.
And at the end of the day, that $8 billion is going to be paid back.
Not by the grafters in and out of government; not by the Chinese
citizens; but by the millions of ordinary middle class Filipinos who
go to work everyday, pay their taxes, struggle and to keep their small
and medium businesses afloat. The price will also be paid indirectly
by tens of millions of poor Filipinos who will not have access to
health care, quality education, and a functioning court system because
those resources are not going where they should be going.