Philippines missing out on projects due to ODA funding restrictions –envoy

France’s Ambassador to the Philippines Michèle Boccoz on Monday said Philippine limitations prevented the country from securing big-ticket development projects such as the €25 million shipyard project backed by a French company.

Invited to speak before the House of Representatives Ways and Means Committee to provide foreign government's views on the matter, Boccoz presented her government's thoughts in connection with House Bill 7135 filed by Committee Chairperson Joey Salceda of Albay.

The bill seeks to diversify sources of ODA loans by allowing a blended financing approach, a financing arrangement by which bilateral or multilateral government partners are allowed to mobilize funds from commercial or private financing institutions.

“This type of [blended] financing is currently unavailable in the Philippines due to the interpretation of the case law from the Supreme Court that, I understand, limits the definition of ODA to projects fully-financed with sovereign loans, which restricts significantly the list of potential partners for the Philippines,” said Boccoz.

Boccoz was referring to the High Court's December 2022 declaration that the $273 million China ODA loans for the Chico River Irrigation and Kaliwa Dam projects were constitutional.

“This limitation [of sovereign loans as the ODA fund source] also restricts European partners' ability to provide their expertise in many areas where cooperation would also contribute to support the Philippines, and to investment in the Philippines,” Boccoz added.

The 1996 ODA law defines ODA as a loan or loan and grant that complies with the following requirements:

• must be administered with the objective of promoting sustainable social and economic development and welfare of the Philippines;
• must be contracted with governments of foreign countries with whom the Philippines has diplomatic, trade relations or bilateral agreements or which are members of the United Nations, their agencies and international or multilateral lending institutions;
• only availed of when there are no available comparable financial institutions.

“For my own country, this situation [of limited ODA fund portfolio] is a significant obstacle to many projects that are in the pipeline at the moment. For example, the investment of a French company into developing a shipyard in the Philippines, a €25 million project, could be creating jobs and could be also an opportunity to have or to strengthen competencies or to translate competencies and create closer relations,” Boccoz said.

“As you know, France is stepping up its investment. But of course. at the moment it is [being] slowed down with these technical problems of what is considered and not considered eligible. So we do hope that there is a possibility to unlock the situation so that we could continue supporting our companies that would want to invest in the Philippines through ways such as the sovereign, blended loans,” Boccoz added.

Meanwhile, Salceda said European countries who include a commercial partner in their ODA packages are excluded from offering ODA loans to the Philippines due to ambiguity in the ODA Law over whether they still qualify for government-to-government procurement without public bidding.

“ODA loans allow for the financing of programs and projects where economic returns are not necessarily immediately realizable, or where a viability gap would make a certain project less financial to the open capital markets or private or commercial institutions,” Salceda said.

Salceda also pointed out that interest rates through ODA loans are much lower than commercial rates, even if the grant component is adjusted.

“As of December 31, 2021, some 43.93% or P1.663 trillion of our external debt is contracted through ODA. The Weighted Average Maturity (WAM) of the entire outstanding ODA loan portfolio, including the undrawn loan commitments that are yet to be availed/repaid in subsequent years, is estimated at 20.80 years,” Salceda said.

Salceda’s bill allows blended financing in Official Development Assistance (ODA) as they are covered by national or international official instruments like exchanges of notes, memoranda of understanding, or similar instruments.

Likewise, it states that the ODA partner may mobilize financing from private or commercial institutions in funding the loan or loan grant, and that the partner government, bilateral or multilateral agency, or international or multilateral lending institution should guarantee the timely and complete release of funds committed by such private or commercial institutions.

In addition, Salceda’s measure reduces the ODA grant component to 15% to attract more ODA and deletes the provision on a 40% requirement for the weighted average of the grant component of all ODAs. — DVM/GMA Integrated News