What if Kaliwa Dam gets stalled?  

READ: Part 1 | Philippines’ $211-M Kaliwa Dam may submerge half of homes in Sierra Madre’s village

In October 2024, in an attempt to halt the construction of Kaliwa Dam, around 140 anti-dam people, including indigenous leaders wearing loin cloths, mobilized at the Quezon provincial capitol, some 129 kilometers east of the capital Metro Manila.

Dubbed the New Centennial Water Source-Kaliwa Dam project, the dam is part of China’s overseas Belt and Road Initiative, which then-president Rodrigo Duterte secured with a $211.12-million loan deal in 2018.

Kaliwa Dam has three components: the 73-meter concrete gravity dam, which straddles the borders of Quezon and Rizal provinces, the 27.7-kilometer underground conveyance tunnel, and the reservoir.

The group’s mobilization was meant to “challenge” Quezon Governor Helen Tan to “show some teeth” and issue a cease-and-desist order against the project, traditional indigenous people leader Marcelino Tena said.

On the other hand, engineer Ryan Ayson, project director of the Metropolitan Waterworks and Sewerage System (MWSS)-run dam project, claimed that the provincial government’s non-issuance of permits was the primary cause of delay in construction work. 

“If we have the permits, we can mobilize in the dam site anytime,” he told the Philippine Center for Investigative Journalism (PCIJ).  

The provincial capitol has administrative powers over half of the dam site and the diversion tunnel. It did not respond to PCIJ’s requests for comment. 

But there’s more than meets the eye. 

Ayson himself admitted that construction work had slowed down due to the “technically challenging terrain,” which would require rerouting. 

On top of this, the dam project is facing cost overruns and lingering funding uncertainty as the government has yet to renegotiate the loan deal with China.

“The project stalled mostly due to cost overruns,” Alvin Camba, critical materials specialist of Washington-based Associated Universities Inc., told PCIJ. “The government needs to negotiate another round of financing from the Chinese government to access more money to pay for the project. I don’t think it’s happened yet.”

Increasing costs, disbursement shortfalls

As of 2023, China has six active infrastructure projects with loans and grants amounting to $925.24 million, according to the National Economic Development Authority (NEDA). 

In 2022, China committed to fund an additional three railway projects, but these were later shelved amid escalating tensions in the South China Sea.  

In 2023, the Philippines’ active official development assistance (ODA) portfolio totaled $37.29 billion.

The Marcos administration’s “Build-Better-More” lists 41 flagship infrastructure projects amounting to P2.749 trillion. It has secured around one-third in foreign loans and grants amounting to P21.35 billion, NEDA data indicated.

Ten of the 20 highest ODA loans under the Marcos administration are bridge projects; six are train projects, six are flood control projects; and four are water resources projects like Kaliwa Dam.

Kaliwa Dam’s cost of $211.21 million (P12.25 billion) is currently the highest loan deal for a water resource project, ranking 18th overall, based on net commitments.  

The country’s total outstanding debt stood at P14.15 trillion as of June 2023, and external debts at P4.45 trillion, or 31% of the total debt stock. The country’s debt-to-GDP ratio, or the government’s capacity to repay government debt, is 57.53% in 2022, according to the International Monetary Fund.

In August 2024, the Philippine government said China will no longer fund the PNR South Long Haul. This comes a year after China exited two railway projects in late 2023 amid collisions between Chinese and Filipino vessels in contested territories in the South China Sea.

Kaliwa Dam is also delayed. In 2019, a state audit showed the MWSS had undrawn ODA due to 53 right-of-way issues. In 2021, MWSS availed of 15% of the loan amount, the COA reported. This should be around $31 million.

The MWSS has filed a restructuring request to extend the loan availment window for Kaliwa Dam until 2028.

Ayson said additional costs were incurred due to standby costs for the equipment and contract extensions since the project was anticipated to be finished in 2025. He maintained that the increase has no impact on total project cost. 

NEDA allows budget increases by up to 10% of total project cost, Ayson explained. But he added: “We are not expecting to breach that amount.”  

However, NEDA documents cited a 34.59% increase in Kaliwa Dam’s cost from P12.2 billion to P16.41 billion in its annual portfolio review report. Despite this, the NEDA report indicated the MWSS’ restructuring request was likely to be granted in 2024. There’s been no update on this yet.

This covers costs “associated with civil works contract, consultancy services and in the processing of the permits such as the Free Prior and Informed Consent (FPIC), ECC, land acquisition, compensation for structures, trees and crops and memorandum of agreement with Provincial Governments of Rizal and Quezon,” according to the NEDA report.

Controversial financing

Camba said widespread consternation over Kaliwa Dam stems from its lack of transparency, the political nature of its loan agreement, and how Duterte used the project to reward political allies.

China’s loan deals for the Philippines reflect similar lending arrangements across the world, according to Camba. This includes a 2-3% interest rate, a non-disclosure agreement, and flexible arrangements, which heads of states use to push their political agenda, he explained.

Anti-dam groups raised the terms of the loan deal with the Supreme Court to demand transparency, triggered by fears of a debt trap and onerous payment terms. The High Court dismissed the case in 2022, citing no constitutional breach.  

“There are many problems with Chinese financing, but it’s definitely not a debt trap problem — not the financial aspect. In the case of Kaliwa, this has been blown up,” Camba said. “There are many other deals, specific terms, that are problematic, but the biggest are the non-disclosure agreement and China’s non-inclusion in the Paris Club.”  

The Paris Club comprises some G7 countries that coordinate restructuring debt agreements using a standardized approach. Members come together to offer alternative solutions, Camba explained. 

China, however, refused to include their deals and terms under the Paris Club, and its lending arrangements have challenged debt crises management in countries like Sri Lanka, Camba said.

“Kaliwa Dam is a project we can pay for, but it was built for political reasons — for Duterte to reward local elites. When you build a dam, you include suppliers, you include allies in the supply chain through the dam,” Camba said. 

“Kaliwa Dam is not economically bad, but we could have gotten funding for other, more strategic projects,” he added.

The worst-case scenario, Camba said, is for the Kaliwa Dam to become a stranded asset.

Battle over permits

The Department of Environment and Natural Resources (DENR) issued three notices of violations to MWSS — one each in 2021, 2022, and 2024 — mostly on the conduct of public consultations.

These notices were nothing more than a “parent reprimanding a child,” said Ramcy Astoveza of the Alyansa ng mga Mamamayan Laban sa Mapaniil na Dam or ALMA! Dam, a local coalition. 

The DENR did not respond to PCIJ’s request to access the notices. 

But Ayson offered an explanation: “For one, the pandemic happened, so we cannot do public consultation. We couldn’t gather people…and partly because the local government units were not cooperative because of the pandemic.”  

As things stand, MWSS has so far secured permits from the Rizal government but not from the Quezon government.  

Meanwhile, Quezon Governor Tan has opened communication lines with the anti-dam group, Astoveza said.

“We are not losing hope because the project is not finished yet,” Astoveza said. “But I admit…the campaign [to stop the dam] is difficult…the best we could do is to bring this issue closer to people so they could support us.”

Meanwhile, MWSS’ Ayson said they are racing against time, the erratic monsoon season, and the forthcoming elections in May 2025 to acquire the necessary permits — all in hopes that Kaliwa Dam would not be delayed further.

“Some [local government units] are hesitant because it’s election period,” Ayson said. “But our reckoning point is the summer season [next year]. We need to do the preparatory work at the dam site during the summer so we can safely continue with construction even during the rainy season.”

“If we can't install those safety measures, we have to wait for another year,” he added. – Rappler.com

This article was republished with permission from the Philippine Center for Investigative Journalism.

This editorial project was supervised by PCIJ resident editor TJ Burgonio. It was produced with the support of Internews’ Earth Journalism Network as part of the Media Action on Sustainable Infrastructure in the Philippines.

Data used in this report were compiled from the Official Development Assistance Review Report 2023 of the National Economic and Development Authority, the Consolidated Audit Report on the ODA-Funded Programs and Projects from 2019 to 2022 by the Commission on Audit, the Environmental Impact Statement (EIS) and the Environmental Compliance Certificate from the Department of Environment and Natural Resources. Datasets were cross-checked with documents, press releases and published information sourced from various government offices.

Figures on forest loss extracted from Global Forest Watch datasets were obtained after overlaying the development site identified in the EIS on the website. These figures, however, only include forest loss in the dam site and reservoir areas. It does not include areas covered by the underground conveyance tunnel. The excel file of datasets are available here.

Interviews with indigenous leaders and company officials were conducted in Filipino but translated into English for brevity.