Politics testing China’s patience over Northrail

BEIJING – Maligned of inability to build a railroad and irregularity in lending money for it, it’s a wonder China hasn’t dumped the North Luzon Railway project. Quite the reverse, officials here patiently are bearing the insult and quietly starting the Caloocan-Malolos line, trifling compared to their 70,000 kilometers of tracks. Penniless, politicking Philippines is still in luck.

Ren Hongbin, chairman of China National Machinery and Equipment Corp. (Group), is aware of the huge troubles at Northrail. Of Cabinet rank as head of the former Ministry of Machineries that became CNMEG, his project chief in Manila has reported the year-long delay in resettling 20,000 squatter families from the 32-kilometer tracks. Ambassador Wu Hongbo also has told him about Northrail’s mire in Philippine politics - first as an impeachment rap against President Gloria Arroyo, and then as a revived Senate inquiry on long answered issues. But Ren is unperturbed. "There is only one truth," he assured visiting Northrail officials and Filipino journalists, "the project will benefit the Filipino people."

Only 44 years old but boss for over four years of a conglomerate of 70 subsidiaries, Ren explained that Northrail is a result of China’s initiatives at amity with Southeast Asian neighbors. Two Presidents, Jiang Zemin and Hu Jintao, and two Prime Ministers, Zhu Rongji and Wen Jiabao personally had studied the project. Two Speakers, Li Peng and Wu Bangguo endorsed it to parliament. CNMEG is to lay new tracks over the old Philippine National Railways right-of-way from Caloocan to La Union. The first phase, to Bulacan, initially was estimated at $600 million, including 19 sets of coaches and locomotives, communication links for six stations, and a maintenance-repair depot. Haggling brought the price down, first to $503 million and finally, with the presidents’ and prime ministers’ assent, to $421 million. Even at that, Senate President Franklin Drilon, in leading moves to oust Arroyo, claims that the project is overpriced, forgetting that it is double track and thus consists of 64 kilometers of rail. Waving the old $503-million study, he is prodding an investigation by the Senate as a committee of the whole, only the tenth time it will be so constituted since 1987 but risking a diplomatic row with a neighbor that is eager to please. Ren confided to the Northrail delegates and journalists that "this is one of our smallest but the most difficult project." CNMEG is building 200 kilometers of rail in Jamaica and more in Bangladesh, plus a 1,000-kilometer line from Beijing to Tibet 4,000 meters above sea level. At the rate things are rolling, China will lose money from the Northrail construction. Still, Ren stressed that RP-China friendship is his aim in meeting CNMEG’s commitment. Close Friends is also the name of a campus paper he had founded and edited at engineering school several years ago.

Liang Xiang, assistant president of China Export-Import Bank, also stressed friendship in a separate audience for the Filipino visitors. Northrail CEO Jose Cortes Jr. had opened the meeting with apologies for a two-month holdup of interest payment for China Exim’s first release from a loan to pave the railroad. But Liang told him that delays are normal in first payments, because of the unaccustomed paperwork. "More important for us is that the project itself goes on without delay, so we can make subsequent releases," she smiled.

Northrail, after negotiating down CNMEG’s tag from $600 million to $421 million, also had asked in 2003 for financing help. Beijing officials pointed to China Exim. But the usual concessional terms for developing countries – 15 years to pay, 4-1/2 percent interest, three years’ grace period on the principal, and 15 percent equity - were still too stiff for RP. Cortes pleaded for even softer terms. China Exim granted Northrail an unprecedented 20 years repayment, 3 percent interest, five years’ grace, and 5 percent equity. China thus will lend $400 million; RP must put up $21 million as counterpart. But Cortes resolved not to burden the national government with the $21 million. So Northrail made arrangements to borrow part of it through Philippine banks – also from China Exim.

China’s preferential treatment of RP draws from historic ties. Scholars have found imperial records from 500 years back about a sultan from Sulu who had traveled to Beijing and died while vacationing for two years in China’s southern coast. Practically all Filipinos have Chinese blood, from ancestors who emigrated from Fujian and Hunan provinces. RP was one of the first countries during the Cold War to forge diplomatic ties with China, and recognizes its one-China claim over the wayward province of Taiwan. China has offered RP joint explorations for oil in the disputed Spratly isles in the South China Sea, and recently extended $3 million in military aid. Liang said President Hu Jintao often asks China Exim about the progress of Northrail. When they met at the United Nations Security Council meeting in New York last month, Hu also inquired Arroyo about the delays. Northrail is at the core of China’s diplomatic policy in Asia. China has committed to the UN $10 billion in aid and soft loans to developing countries.

Aside from friendship, Liang admitted that part of China Exim’s objective is to promote exports to the Philippines, in this case CNMEG’s know-how and trains. "Trade between our lands will benefit your people as well as ours," she told the journalists. President Hu’s latest query from her is the feasibility of lending another $500 million for Northrail’s second phase, from Bulacan to Clark Economic Zone in Pampanga. "We will do it," Liang assured.

But with politicians haranguing Northrail because it is a project of Arroyo with Speaker Jose de Venecia, only the aiding side looks eager for completion. To RP’s good fortune, China believes the politicking, which has emboldened the squatters to demand more "disturbance fees", will soon pass. But what if it doesn’t and RP’s luck runs out?

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