STORY BRIEF November 21, 2007 REFERENCE: Dr. Ed Tadem 0917-8910354 “Of the total Official Development Assistance (ODA) from 1986 to 2006, 84.22 percent was in the form of loans and only 15.78 percent was in grant form. This was a minimal improvement compared to the 1986-2000 loan-grant distribution of 85.42 percent and 14.58 percent respectively,” according to Dr. Eduardo C. Tadem, Associate Professor of Asian Studies in University of the Philippines. Japan’s ODA to the Philippines In a paper presented during the National Consultation on Financing for Development today, Dr. Tadem said the decline in foreign aid allotments is most evident in the case of Japanese aid. While remaining the country’s top donor, Japan’s annual average commitment fell by 37.5 percent in the 2001-2006 period compared to the 1986-2000 annual average. This is notwithstanding a global rise in Japanese ODA and a 2004 promise by the Tokyo government to increase ODA commitments by US$10 billion over the next five years. “Tied aid” remains a major irritant in Philippine ODA. Overall, Japanese tied loans had reportedly declined from almost 100 percent in the 1980s to only 27 percent in the 1990s but it seems to be enjoying a resurgence in the new millennium. For Japan Bank for International Cooperation (JBIC) loan amounts from 2000-2004, 59 percent was totally tied, 28 percent was partially untied and only 2.8 percent was totally untied. Human development The human development component of foreign aid, (e.g., health, education, and housing), continues to suffer highly inadequate allocations. Its already minuscule share of 11 percent of Philippine ODA in 1986-2000 fell further to 7 percent in 2001-2006. On the other hand, the economic growth-oriented sector of infrastructure development increased its share dramatically from 50 percent to 67 percent. Geographical distribution The geographical distribution of aid continues to favor the country’s more developed regions while discriminating against the less-developed areas. In 2002, Luzon’s share of ODA increased to 31 percent from 19 percent in 2001 with 20 percent of total ODA going to Metro Manila alone. The Visayas regions, on the other hand, had only a 10 percent share while Mindanao areas had a mere 7 percent share. The pattern of foreign aid to Mindanao reflects the new global trend of emphasizing geo-political concerns over development issues. In the light of the 9/11 attacks and given the long-running Muslim separatist insurgencies in the island, ODA to Mindanao now falls basically under the context of peace building, conflict resolution, and undermining support for armed rebellion.

Share of External Debt As of June 2006, ODA's share of the country's external debt stands at 40.8 percent. Though this is one of the lowest shares registered, the average over the 18-year period from 1988 to 2006 is a high 45 percent. The highest level was in 1994 at 60 percent and the lowest was in 2005 with 39.9 percent. A 2000 report by the Commission on Audit showed interest payments, commitment fees and penalties exceeded principal payments to ODA donors by P3.5 billion. The Philippine government repaid P10.2 billion of interest payments to ODA donors as against the P13.68 billion for principal payments, excluding other donor charges and fees. The COA report also showed a total of P10.34 billion in superfluous, unnecessary and unauthorized ODA expenditures and the underreporting and over-reporting of assets. China’s ODA to the Philippines China’s ODA accompanied by the surge in trade and investments appears to be filling the gap caused by declining OECD development aid. However, controversies on the projects abound due to lack of transparency, violation of Philippine laws, overpricing, bribery and corruption from questionable projects, such as the Northrail and National Broadband Network. Other concerns A report by the Economic Policy Research and Advocacy Group (Epra) noted that the “lack of transparency and insufficient disclosure in infrastructure projects with private sector participation engender graft and corruption that work against the interests of the taxpaying public.” A 2005 World Bank paper observed that the Build-Operate-Transfer (BOT) law, which allows for greater private sector participation in ODA-supported infrastructure development, “remains hounded by controversies related to vagueness over unsolicited bids where the scope of corruption becomes considerable.” Forcible displacement of local residents in connection with the Bohol Irrigation Project and the Northern Negros Geothermal Power Plant project were reported in 2006. An environmental activist linked to the opposition to a major dam project in Northern Luzon was also killed recently. Nine (9) large-scale ODA projects have been identified as socially and environmentally harmful. Social Watch Philippines organized the National Consultation on Financing for Development to review the status of the Philippines’ compliance of the MDGs and define policy measures that will be presented to the government and serve as the Philippines’ input in the next global assessment of civil society organizations.

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