Philippines says cautious on infrastructure loans from China

MANILA, June 27 (Reuters) - The Philippines is exercising caution in accepting Chinese loans for infrastructure projects, a senior government official said on Wednesday, after Sri Lanka gave up control over a port built on Chinese debt to reduce its liability.

“Given the various experiences already felt by other countries that dealt with China, we are even more cautious, we are extra careful in having projects funded by China”, Economic Planning Secretary Ernesto Pernia told a media briefing.

Relations between China and the Philippines have improved markedly under Philippine President Rodrigo Duterte, who is negotiating investments, trade deals and billions of dollars worth of loans to help fund his “Build, Build, Build” plan.

Manila needs additional funding to upgrade and modernise its ageing infrastructure in order to lift its growth rate to as much as 8 percent, create more jobs and reduce poverty.

China has committed $7.19 billion for projects in the infrastructure, energy and public safety sectors, the Department of Finance has said.

Pernia’s remarks came amid claims by analysts that China is leveraging debt in exchange for political influence through its debt policy.

Sri Lanka has handed operating control of its China-built deep sea Hambantota port to Beijing on a 99-year lease, under a $1.12 debt-to-equity deal to reduce its debt to China.

“We don’t want that to happen to us, that we convert the loan to equity,” Pernia said, adding the Philippine government is diversifying its sources of financing, to countries like Korea and Japan.

Malaysian Prime Minister Mahathir Mohamad is also looking to tap Japan’s vast pool of low-cost capital as he shifts his country away from an over-reliance on Chinese investment.

Mahathir, who has accused Chinese state-linked firms of inflating deal costs, engaging in corrupt practices, has pulled out of a high-speed rail project with Singapore and is reviewing a $14 billion local rail line to be built by Chinese companies.

Reporting by Karen Lema; Editing by Simon Cameron-Moore