Japan promises record $2.7 billion loan to the Philippines

MANILA - Japan has pledged about US$2 billion (S$2.7 billion) in soft loans to upgrade the Philippines' crumbling railway system in Tokyo's biggest ever support for any Filipino project, Manila said Thursday.

The 240 billion-yen package is a signal of increasing cooperation between the former World War II foes, including "closer security cooperation," the foreign department said in a statement.

The low-interest concessional loan will be used to finance a planned 36.7-kilometre (23-mile) elevated commuter railway to link Manila with Malolos City to the north.

The Philippines' overburdened public transport system has long seen the capital and surrounding areas snarled by huge traffic jams.

Philippine Foreign Secretary Albert del Rosario received the pledge from his Japanese counterpart Minoru Kiuchi on the sidelines of a meeting of Asia-Pacific foreign ministers in Malaysia on Wednesday, the statement said.

The pair also discussed "closer security cooperation, including the acceleration of discussions for an agreement on the transfer of defence equipment and technology," the foreign department statement said without elaborating.

Tokyo and Manila, both locked in territorial disputes with China, have strengthened their cooperation on defence in a bid to counterbalance Beijing's regional clout.

Japan has a maritime row with China over islands in the East China Sea while the Philippines has its own increasingly tense conflict with Beijing in the South China Sea.

Beijing's island building in the Sea has dominated the meeting of the Association of Southeast Asian Nations (ASEAN) in Kuala Lumpur this week.

Philippine President Benigno Aquino's spokesman said the loan underlined the "robust bilateral relations between the Philippines and Japan" and the two countries could continue to work together on maritime security.

It "affirms the confidence and support of the Japanese government to the reforms undertaken by the Aquino administration," Herminio Coloma said in a statement.

The cash-strapped Philippines has been seeking military aid including surplus equipment from its foreign allies to help modernise its military.

Japan is already the largest source of official aid to the Philippines.