Official Development Assistance (ODA) (Part 2)

Last Sunday, we started a discussion on ODA, or Official Development Assistance, more commonly referred to as foreign grants and loans. It has three characteristics: 1.) it's in the official sector, 2.) it must be concessional in nature, 3.) its objective and use should be for the economic development and social welfare of the recipient developing country, with the purpose of alleviating the economic conditions of the people of the latter, and/or uplifting their standard of living. The keywords here are “developmental” and “standard of living.”

One can always argue that monies given by foreign donors to our government are for governmental use or will ultimately result to the upliftment of the standard of living of our people. But ODA is not a direct doleout to the Philippine government or any of its agencies for the latter to use in whatever way they want. ODA is given for specific use through specific projects. There might be cases when the aid is for institutional strengthening or capability-building, or programmatic in nature, but these are still geared towards very specific intentions leading to economic and social development, not for salaries or operations of the government.

We have identified two general classes of ODA sources - the bilaterals and multilaterals. Generally, donors, whether countries or a multilateral development banks (MDB's) have their respective preferences for assistance and these are reflected in their “country programs” which may also differ from country to country. Some like to assist us in building hard infrastructure - roads, bridges, dams, etc., while others prefer socially-oriented development - education, health, social welfare. The “Country Program for Children” of UNICEF, for example, is very clear on its priorities as maybe gleaned from the program title itself.

Other ODA donors have programs or “windows” in water and sanitation (WATSAN), or in the climate change sector. ADB's country partnership strategy for the Philippines targets governance reforms and measures to drive broad-based growth and poverty reduction efforts. Other bilaterals have their own specific “flavors” or preferences on where to apply their aid. Actually, there are “regional preferences,” too, though this is not widely stated. Thus you may see most infra projects in Cebu as coming from Japanese ODA, while other areas in the country maybe the favorite locations for KOICA, USAID, or AusAid and the others.

In general, aid maybe in the form of a grant (free) or a loan (the concessional kind). OECD qualifies ODA as that which has a grant element of at least 25 percent. Many bilateral loans carry only two to three percent interest rates, oftentimes with 25 to 30 years repayment schemes, and usually, with five to 10 years grace periods, meaning, you don't start paying the principal for the first five to 10 years. Very attractive indeed, more so with grants which are 100 percent free. But these are developmental aid and should be used judiciously for uplifting the quality of life of the citizens of the recipient country. Donors are very adamant with that qualification.

With those exceedingly attractive concessional rates, one would expect business-minded people to attempt accessing this opportunity. That cannot happen. The first qualification, that of ODA being in the official sector precludes their access by private businessmen. In general, ODA utilization is a state function, its access and payment guaranteed by the national government.  In recent years, ODA may now be accessed by developmental non-government organizations (NGO's) and local government units (LGU's), but still through national government channels, and covered by bilateral agreements between states.

The use of ODA is still regulated by its donors. And rightly so, because at the end of the day, any donor country's ODA comes from taxes paid by their own citizens. There have been a few countries in the last decades that upgraded their economies so much so that they are now donors rather than recipients.  We hope to see the day the Philippines could become a donor, too.  How would you then feel if financial aid coming from Philippine taxpayers' money will be used in a wasteful indiscriminate manner by the country we give aid to?  That's why we have to use our present ODA carefully and wisely.