FOREIGN AID (ODA)

Theodora A. Noval
PA 235
RELEVANT LAWS ON ODA:
1. RA 8182 or An Act Excluding Official Development Assistance
(ODA) from the Foreign Debt Limit in Order to Facilitate the
Absorption and Optimize the Utilization of ODA Resources, Amending
for the Purpose Paragraph s, Section 2 of RA 4860, as amended
(June 11, 1996).

2. RA 4860 or An Act Authorizing the President of the Philippines to

Obtain Such Foreign Loans and Credits, or to Incur Such Foreign
Indebtedness, as May be Necessary to Finance Approved Economic
Development Purposes or Projects, and to Guarantee, in behalf of the
Republic of the Philippines, Foreign Loans Obtained or Bonds Issued
by Corporations Owned or Controlled by the Government of the
Philippines for Economic Development Purposes Including those
Incurred for Purposes of Re-lending to the Private Sector,
Appropriating the Necessary Funds Therefore, and for Other Purposes
(August 8, 1966).
3. RA 8555 or An Act Amending RA 8182, and for Other
Purposes (February 26, 1988).

4. The President, under Section 20, Article VII, of the 1987

Philippine Constitution, may also contract or guarantee foreign
loans in behalf of the Philippines with the prior concurrence of
the Monetary Board, and subject to such limitations as may be
provided by law. The Monetary Board shall, within thirty days
from the end of every quarter of the calendar year, submit to
Congress a complete report of its decision on applications for
loans to be contracted or guaranteed by the Government or
government-owned and controlled corporations (GOCC) which
would have the effect of increasing the foreign debt, and
containing other matters as may be provided by law.

Source: Consolidated Audit Report on ODA Programs and Projects

2016
In Philippine jurisdiction, a bill is introduced by any
Member of the Senate or the House of
Representatives by filing it with the Office of the
Secretary where it is calendared for the First
Reading. Some bills, however must originate
exclusively from the House of Representatives, such
as the appropriation, revenue or tariff bills, bills
authorizing increase of the public debt, bills of local
application, and private bills, although the Senate
may propose or concur with amendments (Sec. 24,
1987 PH Constitution).
Under Section 2 of RA 8182, ODA is defined as a loan, or a loan and grant,
which meets all of the following criteria:

a. It must be administered with the objective of promoting sustainable social and

economic development and welfare of the Philippines;

b. It 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;

c. There are no available comparable financial instruments in the capital market;

and

d. It must contain a grant element of at least twenty-five percent (25%). Grant

element is the reduction enjoyed by the borrower whenever the debt service
payments which shall include both principal and interest and expressed at their
present values discounted at ten percent (10%) are less than the face value of
the loan or loan and grant. The grant element of a loan or loan and grant is
computed at the ratio of (i) the difference between the face value of the loan or
loan and grant and the debt service payments to (ii) the face value of the loan or
the loan and grant.
ODA as Source of Public Investment
PLANNING AND PROGRAMMING
BUDGETING
IMPLEMENTATION

Table 2.1 Implementation Arrangements for ODA Projects

Arrangment Implementing Agency

Project-based

• PMO per project ASFPMO, DA, DAR, DepEd, DENR,

DOTRC, DOH, DPWH, DSWD, DTI,
LLDA, NCRFW, NIA, Northrail PNP
• With clustering DILG, DPWH

With Supervising Unit Within ASFPMO, BIR, DA, DAR, DENR, DBP,
the IA Managing thePMOs DepEd, DOE, DOH, DOST, DTI, LLDA,
LBP, LWUA, MWSS, NIA, SC
MONITORING AND EVALUATION LEVELS
1. Implementing Agency Level

Table 2.2 M & E Functions in Agencies

M & E Functions Agencies

Embedded in PMO (8) ARG, BIR, DOE, LBP, North

Rail, PNP, SBC, SC
Planning/specialized unit within (6) DBP, DOH, COTC, DSWD,
the IA LWUA, MWSS
Joint function of PMO and other (10) DA, DAR, DENR, DepEd,
units in IA DILG, DOST, DPWH, DTI, LLDA,
NIA
TOTAL 24
2. OVERSIGHT AGENCY LEVEL

a) NEDA

b) DBM

c) COA
3. INTERAGENCY COMMITTEES LEVEL

a) Investment Coordination Committee

b) Project Monitoring Committees

under the RPMES
THE REGIONAL PROJECT MONITORING AND EVALUATION
SYSTEM (RPMES)

NPMC
NEDA, DBM, DILG, OP-PMS
(NEDA-PMS as Secretariat)

RPMS
NEDA, DBM, DILG, OP-PMS, PSR/NGO

PPMCs
DILG, PSR/NGO, Selected Members of LDC

MPMCs/CPMCs
DILG, PSR/NGO, Selected Members of LDC
DEVELOPMENT PARTNERS

Supervision/Implementation Review Missions are

generally conducted by DPs. Outputs of the
missions include, project status, rating of the project
performance for the period of review, diagnosis of
implementation issues, and proposed action items,
among others. Result of the review missions are
reported to the concerned implementing and
oversight agencies.
FOREIGN LOAN

Foreign loans are generally entered into by the

Department of Finance. Other Departments,
including DFA, may conclude them only with the
endorsement from the finance department. As the
Constitution prescribes a distinct negotiation and
approval process, foreign loan agreements do not
undergo the usual treaty ratification procedure.
Under Section 3 (5), Title II, Book IV of EO No. 292, the DOF is
tasked to undertake and supervise activities related to the
negotiation, servicing and restructuring of domestic foreign debt
incurred or guaranteed by the government and its instrumentalities.

Under Memorandum Circular No. 16 of the Office of the President

dated 11 April 2017, to enhance the coordination between and
among various departments and agencies in the negotiation and
signing of international agreements, and agreements covering
borrowings, guarantees and foreign grants, the following are hereby
ordered:

1. All heads of departments, bureaus, offices, agencies or

instrumentalities of the government, including GOCCs and SUCs,
are hereby directed to coordinate closely with the DFA prior to the
negotiation and signing of international agreements as defined in
E.O. No. 459, and/or with the DOF prior to the negotiation and
signing of agreements covering borrowings, guarantees, and
foreign grants.
2. Prior to the negotiation or signing of a treaty or
executive agreement, as well as agreements covering
borrowings, guarantees, and foreign grants, authorization
must be secured by the lead agency from the OP, unless
the DFA or the DOF determines that the nature or scope
of the agreement does not require such authorization from
the OP.

3. Authorizations for the negotiation and signing of

international agreements, or agreements covering
borrowings, guarantees, and foreign grants shall be
granted in writing through Full Powers, Special Authority,
Letter or Memorandum signed by the President, or the
Executive Secretary “by authority of the President.”
4. All heads of departments, bureaus, offices,
agencies or instrumentalities of the government,
including GOCCs and SUCs, are directed to strictly
observe and comply with the requirements of
complete staff work under MC No. 68 before
requesting the abovementioned authorizations.

5. To give the OP sufficient time to evaluate and

process the abovementioned requests, the same
should be submitted to the OP, through the DFA or
the DOF, as the case may be, at least 10 working
days before the desired date of issuance.
The procedure for the conclusion of foreign grants
and ODA is governed by the Official Development
Act of 1996 (RA 8182). These agreements require
endorsement from the National Economic
Development Authority (NEDA) as these have to be
in line with national development plans and
particularly when there are requirements for local
counterpart funding.
Source: Malaya, J. Eduardo and Mendoza-Oblena, Maria Antonina. 2010. PHILIPPINE
TREATY LAW AND PRACTICE. The Lawyers Review/September 30, 2010.
The Philippine Development Plan 2017-
2022 states that the investment program
of the Government for infrastructure
projects will be based on an optimal mix
of Government domestic financing, official
development assistance, and private
capital.
Recognizing that inadequate and poor quality of
infrastructure has been a binding constraint to
achieving sustained and inclusive high growth, the
PDP underscores the need to ramp up Infrastructure
spending. Infrastructure development supports all
three pillars of “Malasakit,” “Pagbabago,” and “Patuloy
na Pag-unlad,” and intermediate goals of the Plan.
Infrastructure development is vital to enhancing the
social fabric, reducing inequality, and increasing the
country’s growth potential. Thus, the next six years
will be characterized as the “Golden Age of
Infrastructure,” to be delivered through the “Build
Build Build” program or Dutertenomics.
In accelerating infrastructure development,
Government has committed to increase
spending on public infrastructure from 5.32
percent of Gross Domestic Product (GDP) in
2017 to around 7.45 percent of GDP by 2022,
or an average of 6.8 percent of GDP in the
current Plan period, and with total funding
requirement of about PhP8.44 trillion (USD168
billion) over the medium term. Infrastructure
spending was only about 2.9 percent of GDP
from 2010 to 2016, on the average.
Of the USD168 billion total infrastructure
investment requirement under the 2017-2022
Public Investment Program, the bulk of the
projects will be implemented through local
financing/GAA at 66 percent. The remaining
projects will be carried out through PPP at 18
percent and ODA at 15 percent.
In the period 2010 to 2016, of the 28 PPP
projects approved by the NEDA Board, 50
percent or 14 PPP projects have yet to be
implemented or was discontinued or
terminated. In comparison, for ODA and
locally-financed projects, at least 80 percent
are currently ongoing or have been completed.
BASIC MERITS IN FINANCING
INFRASTRUCTURE PROJECTS THROUGH
ODA INCLUDE, AMONG OTHERS:

(1) longer-term maturity and favorable

concessional financing terms, with grant
element of at least 25 percent, and

(2) a wider access to knowledge,

experience, and technology.
Many large infrastructure projects will require long-term
financing, especially if these have long gestation period. ODA
accessed by Government has favorable financing terms that
match the needs of such infrastructure projects much better
than commercial sources of finance.

As an example, in the case of Japanese ODA financing,

Japanese untied loans have a standard interest rate of 0.65
percent to 1.4 percent, with a maturity period of 30-40 years,
inclusive of a 10-year grace period. For its tied loan, its terms
and conditions include a 0.2 percent standard interest rate,
with a maturity period of 40 years, inclusive of a 10-year grace
period. These are highly concessional as compared to
commercial lending, with a shorter maturity period.
Second, is the knowledge creation and transfer of new
technology through a wider number options through ODA.
This is embodied in the ODA Financing Framework crafted
during the time of Sec. Purisima, that ascertains the
comparative advantage of the source country in terms of
technology, experience, and knowledge, as well as ensure
competitive and transparent procurement among firms from
the source country or internationally, to gain real benefits.

In addition, ODA-funded projects undergo full feasibility

studies, go through a rigorous and transparent appraisal
process, and entail a more participatory process of monitoring
and evaluation (M&E).
Notwithstanding these merits, concerns have
been raised on whether ODA financing is
sustainable and supportive of local growth and
development, particularly, as foreign borrowing
could expose us to foreign exchange risks and
a serious debt burden that would imperil our
strong macroeconomic stability, and therefore
sustainable growth.
There are some successful ODA-funded
projects that have been undertaken by the
government.

First is the Angat Water Utilization and

Aqueduct Improvement Project, funded by
China. The project was completed eight months
ahead of schedule and without cost overrun
and now strengthens Metro Manila water
security. This was bidded out among qualified
Chinese contractors.
Another is the Philippine-Japan Friendship Highway,
the longest highway in the Philippines that connects
country’s north–south backbone. Construction and
rehabilitation of the highway was funded by the
Japanese government.

Third is the LRT Line 1 and Line 2 projects. LRT

Line 1 began its operations in 1985, our first urban
rail, funded by Belgian tied loan then by Japanese
ODA for its capacity expansion. LRT Line 2 was
funded by Japan, including its ongoing expansion.
The specific decisions in recent times to change
the mode of implementation from PPP to ODA if
not GAA of some projects do not constitute a
“shift in policy from PPP to ODA.” The PDP and
the Infrastructure Program clearly articulate
these policies and strategies.
Source: Presentation on the Official Development Assistance and Public Private
Partnership in Financing Public Infrastructure by NEDA Undersecretary Rolando G.
Tungpalan, Management Association of the Philippines (MAP) General Membership
Meeting, May 30, 2017; Makati Shangri-la
ODA PORTFOLIO PROFILE

Total ODA Portfolio as of December 2016:

USD 15.6 Billion

Consisting of :

66 loans (USD 12.21 Billion)

400 grants (USD 3.39 Billion)

SOURCES OF LOANS
1. Japan (Japan International Cooperation Agency)

USD 5.47 Billion (45% share on overall loan portfolio)

2. World Bank

USD 3.04 Billion (25% share)

3. Asian Development Bank

USD 2.88 Billion (24% share)

SOURCES OF ODA GRANTS
1. USA (USAID and MCC)

USD 1,343.73 Million (40% share on the total grants portfolio)

2. Australia-DFAT

USD 823.78 Million (25% share)

3. UN System

USD 381.64 Million (11% share)

DISTRIBUTION PER SECTOR FOR THE ODA
LOANS PORTFOLIO

1. Infrastructure Development Sector

USD 6.83 Billion assistance for 36 loans (56% share)

2. Social Reform and Community Development

22% share

3. Governance and Institution Development

13% share
DISTRIBUTION PER SECTOR FOR THE ODA
GRANTS PORTFOLIO

1. Social Reform and Community Development

USD 1,229.42 Million (36% share)

2. Governance and Institution Development

25% share

3. Infrastructure Development

17% share
REFERENCES

1. Consolidated Audit Report on ODA Programs and Projects 2016

prepared by COA

2. Presentation on the Official Development Assistance and Public Private

Partnership in Financing Public Infrastructure by NEDA Undersecretary
Rolando G. Tungpalan, Management Association of the Philippines (MAP)
General Membership Meeting, May 30, 2017; Makati Shangri-la

3. Source: Malaya, J. Eduardo and Mendoza-Oblena, Maria Antonina.

2010. PHILIPPINE TREATY LAW AND PRACTICE. The Lawyers
Review/September 30, 2010.

4. NEDA CY 2011 ODA Portfolio Review Report.

5. Memorandum Circular No. 16 Requests for Authorization to Negotiate

and sign International Agreements and Agreements covering Borrowing,
Guarantees, and Foreign Grants, dated 11 April 2017