The China-funded Banaoang Pump Irrigation System

BAGUIO CITY — Questions on the provisions of the loan agreement between the Philippines and China regarding the Chico River Pump Irrigation Project (CRPIP) are snowballing. People in Congress, Supreme Court, and down to the grassroots are expressing their different concerns. Netizens are posting memes depicting sell-out of Philippine sovereignty and sharing news on China’s debt trap diplomacy to other countries.

Understandably, reports on the issue focused on the constitutionality and content of the contract governing the loan with the continuing tension in the West Philippine Sea, influx of Chinese workers in the country and the Supreme Court petition challenging the loan agreement.

But an equally important consideration are the issues plaguing the irrigation systems in the country such as high overruns, bloated projections of serviceable area, technical short comings and corruption. Concerns that manifested in an existing and operating structure funded and built by the Chinese government.

Before the controversial CRPIP in Kalinga, the National Irrigation Administration (NIA) undertook the Banaoang Pump Irrigation Project (now Banaoang Pump Irrigation System or BPIS) in Ilocos Sur.

Like the CRPIP, which is part of the ambitious “Build, Build, Build Program” of the Duterte government, the BPIS was one of the Arroyo government’s showcase in its Comprehensive and Integrated Infrastructure Program. Both programs, under the Philippine rice sufficiency program, relied heavily on loans from China for funding.

The Chinese connection

The loan extended by the Chinese government for the CRPIP covers about 85% of the P4.37 billion project cost compared to the 90% project coverage of the credit for the BPIS. In both projects, the lender (Chinese government) chose the company to build the structure. China CAMC Engineering Co., Ltd. (CAMCE) for the former and the China National Construction and Agricultural Machinery Import Export Corporation (CAMC) for the latter.

According to NIA, China provided P1.3 billion ($35 million during the period) of the P1.53 billion facility. It was designed to provide irrigation for 8 local governments:  Bantay, Sta. Catalina, San Ildefonso, Caoayan, Magsingal, Sto. Domingo, San Vicente and Vigan City in Ilocos Sur. Irrigation service was targeted to cover 6,312 hectares of agricultural lands with 5,334 farm household beneficiaries.

Funding for the facility was part of a $100 million credit for agriculture development secured by the Arroyo government during a state visit. The formal agreement was signed by the Department of Finance and China National Construction and Agricultural Machinery Import Export Corporation (CAMC) with 3% interest payable within 10 years, including the 2-year grace period. Included in the agreement was the utilization of part of the amount to purchase equipment for the project. Payment for the loan was supposed to end on June 2008 but was extended until December 2009.

In an interview with Engr. Rex Utrera, acting unit head for operations of NIA Ilocos Sur, he recalled that Chinese engineers and supervisors were overseeing the entire construction. But he has no knowledge if taking Chinese workers and the identification of the construction company was part of the loan agreement.

A logistics company, CAMCE Logistics Co. Ltd., provided a “large number of pipes, pumping stations, concrete mixers, concrete materials and other project materials” and arranged for the transport of the items during the construction.

CAMC and CAMCE Logistic are both associated with China CAMC Engineering Co., Ltd., the company assigned to build the CRPIP. On their website, CAMC declared that it is a “wholly-owned subsidiary” and the other a “company held by” CAMCE.

Snags along the way

Construction started in March 2003 with project completion seen within a 3-year period. NIA in June last year announced that CRPIP will take the same time to finish. In 2005, NIA reported that the construction was in full swing and announced a slight increase in the project cost by about P400 million.

By 2007, construction activities slowed down while NIA asked for P1.24 billion additional budget for the project. In the same year, the National Economic and Development Authority (NEDA) reported that the BPIP incurred the highest cost-overrun despite it being far from finished.

There was no mention in the NEDA document of the reasons for the increase from the original budget. However, the Philippine Center for Investigative Journalism cited in an article, “currency exchange rate movement, modification in the scope of works, and increase in right of way acquisition cost.”

The Investment Coordination Committee (ICC) during its December 13, 2007 meeting requested NIA-DA “to seek first the DBM advice on the procedural lapse and ensure that all necessary legal actions will be taken towards the resolutions of said issue.” But until April 30 the following year, no update was provided by the concerned agencies.

Then President Gloria Arroyo visited the site in January 2010 with NIA chief Carlos Salazar and ordered its immediate completion. In the event, the NIA official said the facility is already 87% complete. He even boasted that it was already supplying water for more than a thousand hectares. The official also promised to finish the facility by April of that year.

Despite the order of Arroyo and promise made by Salazar, the project dragged on for another year. The BPIS was finally turned-over and inaugurated for operation in July 2011, benefiting 4,220 families and covering 5,232 hectares. Its total cost reached P2.5 billion, about 92% higher than the P1.3 billion approved by the NEDA.

“Completed” with continuing issues

In 2015, NIA website reported the project as “complete”. However, an interview with NIA officials during the same period revealed the project was far from being finished. They admitted that they are yet to complete and repair construction flaws in some sections of the project. In the same year, P40 million was allotted to continue the facility and to resolve the design deficiencies.

Of the service areas declared during the inauguration, only 1,873 hectares were firmed-up for irrigation, of which 855 hectares were operational.

In a 2016 study conducted by researchers from the Philippine Institute for Development Studies (PIDS) technical issues were identified in the construction and operation of BPIS. These include siltation, canal-related problems, high operation cost of pump, and difficulties with the machines and equipment.

According to Utrera, parts of the Main Canal and Lateral Canal D are the only lined (cemented) portions of the irrigation when the contractor turned over the project for operation. He said it was only recently that they paved most of the eight lateral canals and resolved majority of the construction defects such as wrongly positioned turnouts and gates, along with inappropriate canal elevations.

To date, all local governments targeted for the service are using the facility except for Sta. Catalina who opted be excluded from the project said the NIA official. This increased the service area to 1,150 hectares but still short of 4,082 hectares from the reported service area by DA when it was turned-over to NIA Ilocos Sur.

The acting operations head explained the refusal of farmers to give up part of their land for the canals and service roads is among the reasons they failed to realize the designed area. Sta. Catalina in particular, he said, chose not to be included because they prefer planting high value crops that do not demand much water, cultivating rice only during rainy season.

He also cited that many were also reluctant to use the irrigation because of the prohibitive cost when the project was constructed and started its operation. Prior to the passage of the Free Irrigation Law in 2018, the BPIS fee was P5,600/hectare on wet season and P7,500/hectare during the dry season.

A tale told twice

The BPIS provides an added and solid ground to be concerned of the CRPIP loan agreement.

First, it involves subsidiary companies of the Chinese builder tasked to build CRPIP with record of delayed project completion and construction flaws. Issues that will cost tax-payers millions of funds if left uncheck in the course of the construction.

Second, failure of the contractor to work on the original budget and the huge gap between the designed and actual service area are red flags for possible corruption and a flawed design.

Third, the conscious effort of government officials to provide false figures and half-truths in this China-funded and built project make circumspection imperative for all aspects of CRPIP.

Fourth, the lack of consultation with the affected farmers is apparent with one of the underlying reasons shared by Utrera that caused the huge difference in the service area. This experience points the need for a thorough and strict conduct of the Free, Prior and Informed Consent as a key concern for CRPIP which is located in indigenous peoples’ ancestral domains.

Lastly, it highlights the fundamental issue of genuine land reform, with most farmers refusing the project due to limited land and meager capital to afford irrigation service. With the passage of the Free Irrigation Law, the more pressing matter is to identify who would greatly benefit from the facility considering the town with the largest serviceable area for the CRPIP is ruled by a dynasty of landlords.