Foreign aid

For a nation that’s 78 years old, we are still dependent on the charity of other nations. We were once richer than South Korea but now the Koreans are building airports and multipurpose dams among other vital infrastructure in our country. And where would we be without the World Bank, the ADB and JICA.

Foreign aid or what is known as official development assistance or ODA remains our primary funding source for major government projects. Without ODA, we cannot even repair MRT 3 from the damage caused by our failure to maintain the railcars and the railway.

Japan built the airport in Panglao, Bohol and the Koreans did the airports in Cagayan de Oro and Puerto Prinsesa and soon Dumaguete. Japan also built the airport in Iloilo but it now looks old due to bad maintenance.

During former president GMA’s watch, the Chinese were contracted to build a railway from Manila to Malolos but did such a bad job of it that the project was a total failure. Corruption was suspected to be a key factor in getting Northrail derailed. The Chinese gave in to our politicians who wanted a provision in the contract for an unusual 30 percent up-front payment in the financing. You can only guess why.

Eventually, we had to pay back $500 million for the project loan provided by China’s Eximbank even if the Filipino people got nothing. The Japanese had to dismantle the little the Chinese had built when they took over the project. As business journalist Roel Landingin observed “the Northrail project is a tragic tale of what happens when cheap Chinese aid money hooks up with weak governance in a borrowing country.”

(Actually, Chinese aid is not cheap at three percent. Japanese at 0.40 percent and Korean aid at 0.05 percent are cheaper).

While foreign aid can be helpful for developing countries, it is also addictive. Now, our big-ticket infrastructure projects are mostly ODA. Our Congress hardly allocates funds for major infrastructure and have also moved the budget for counterpart funds to the unprogrammed part of the national budget so their pork barrel allocations can be accommodated. Our ODA counterpart funding is a national commitment and should be in the programmed part.

It is just as well that our China ODA projects didn’t all materialize. China uses foreign aid as a weapon for enslaving nations. Sri Lanka and many nations in Africa are cases in point. We almost fell victim to China’s strategy of politically blackmailing nations through foreign aid. Landingin, writing for the Philippine Center for Investigative Journalism recalls what happened:

“China Eximbank funding for the Northrail project, which began in 2004 and followed by a second credit in 2007, catapulted China into one of the Philippines’ biggest sources of ODA. From a miniscule $60 million in 2003, Chinese concessional lending to the Philippines surged to $460 million by 2004 and has more than doubled to $1.1 billion as of 2007, making China the fourth biggest development lender after Japan, Asian Development Bank and the World Bank (WB).

“Chinese loans for the Philippines were poised to triple to almost $3 billion if a kickbacks scandal over Chinese telecommunication firm ZTE’s contract to supply the National Broadband Network (NBN) project did not prompt Arroyo to scuttle talks for several Chinese loans, including $1 billion for the Laiban dam, another ambitious project to increase drinking water supply in Metro Manila, the capital, by half.”

Duterte resurrected the Laiban (Kaliwa) project with Chinese financing and project management.

There are always strings attached to foreign aid, specially the bilateral ones. The Japanese want to sell Japanese equipment and services. Same with the South Koreans. But at least, they do not use their financial assistance for political hegemony like the Chinese.

We should have enough money for our infrastructure projects if there was less corruption in Congress. Now our government’s strategy for funding our ambition to transition to upper-middle income country status is to access foreign or external financing. Even our Conditional Cash Transfer program for the poor is ODA funded.

Data from the NEDA’s recent report on the status of ODA projects showed that the country’s active ODA portfolio increased by 15 percent to $37.29 billion last year. This is composed of 113 loans worth $35.07 billion and 325 grants estimated at $2.22 billion. Over the past decade, ODA has consistently funded major capital projects, with 70 out of 87 projects approved by the ICC since 2014, amounting to P2.04 trillion.

Yet, we are unwilling to provide our counterpart funds. In 2023, only P61.33 billion allotment was made available for ODA loan-funded projects based on the approved appropriations in the Financial Year 2023 General Appropriations Act (GAA). To address the significant shortfall and ensure the continued implementation of these projects, implementing agencies sought a total of P222.94 billion additional budget from the FY 2023 UA-SFAPs for 46 ongoing ODA-funded projects.

NEDA’s ODA report notes “A significant number of ODA-funded projects were behind schedule due to various factors, such as procurement delays, right-of-way (ROW) acquisitions and extensions beyond the approved completion dates.” Finance Secretary Ralph Recto also told a Senate committee hearing this week that all ODA projects are delayed. These delays are partly because of inadequate budget to finance ROW acquisitions which is the obligation of our government.

According to NEDA, 75.32 percent of the 77 ongoing ICC-approved ODA-funded projects have become problem projects. The least we can do for foreign assisted projects is to show appreciation with efficient implementation and not waste the money of their taxpayers.

Nakakahiya na. But it seems our bureaucrats and members of Congress are without shame. Basta ganyan ang kalakaran. Our palms are always outstretched ready to receive from willing donors who are not squeamish about wasting the money of their taxpayers on our management incompetence and corrupt ways.

Boo Chanco’s email address is [email protected]. Follow him on X @boochanco.