Independent think-tank IBON Foundation said that a recent international study which showed that the Philippines lacks transparency and accountability in aid disbursement only confirmed what broadband scandal whistleblower Rodolfo Noel Lozada Jr. described as a “dysfunctional” official development assistance (ODA) system.

The Baseline Study and Survey of the Government of the Philippines’ Compliance with the Paris Declaration Commitments was made by the Harmonization Committee on Aid Effectiveness, which includes the NEDA. The Paris Declaration is a set of reforms aimed at improving the effectiveness of aid in reducing poverty and inequality in recipient countries.

IBON said that the anomalous infrastructure projects such as the national broadband network (NBN), funded by Chinese loans and is now under Senate inquiry, is an example of how the country’s foreign aid system is easily subverted by political influence-peddling.

Another example is the North Luzon Railways Project (NorthRail) deal whose two components are meant to be financed largely with US$960 million in concessional loans from China allegedly involved some US$50-100 million in “commissions” to high-ranking government officials. The ZTE-NBN fiasco in turn allegedly involved US$130 million in kickbacks out of a US$329 million deal.

Anomalies like these are ultimately shouldered by the Filipino people through illegitimate debt service burdens for projects with unjustifiably low or even negative social and economic returns. Political influence over loan decisions has been aggravated by procedural changes in early 2007 which weakened the control of the NEDA-led Investment Coordination Committee (ICC) over foreign-assisted infrastructure projects.

The Paris Declaration was adopted by the Development Assistance Committee (DAC), a group of bilateral donors, under the Organization for Economic Cooperation and Development (OECD) in 2005.

According to the research think-tank, the country needs to institute deeper reforms beyond the Paris Declaration to correct flaws in the ODA system.

For one, aid remains oriented towards furthering donor foreign policy interests more than the country’s considerable development needs, as in the case of Japan and the US. Aid from multilateral agencies has also continued to have attached explicit and implicit conditionalities inimical to the interests of the Filipino people.

Donors have also used aid to advance their foreign policy interests at the expense of the country. Japan, overwhelmingly the country’s largest donor, has effectively been using its past and current yen loan packages as leverage for the ratification of the Japan-Philippines Economic Partnership Agreement (JPEPA). Government economic managers themselves have argued that non-ratification of the JPEPA could antagonize the country’s biggest aid source. The 27th and 28th yen loan packages have been reported to be worth at least P67 billion.

The US, in turn, has been taking advantage of its being the country’s largest source of grant aid to revive, expand and deepen its military presence especially in Mindanao but also in conflict-affected areas across the country. There has been US$460 million in US aid over the 2004-2007 period, not yet including some US$20 million yearly in P.L. 480 loans to purchase US food surpluses.

The biggest loans of the World Bank and Asian Development Bank (ADB) have had “free market” policy conditionalities attached to them since at least the 1980s. These have required changes in overall macroeconomic and sectoral policy frameworks, as well as gone into very specific implementation details.

The World Bank’s US$250-million Development Policy Loan (DPL) in 2006 for instance was essentially given because of the government’s harsh fiscal austerity including cutbacks on social services, the imposition of new taxes, and continued power sector privatization.

IBON believes that the Paris Declaration also has its basic flaws, among these is its narrow focus on aid delivery and management outside of a development, human rights, gender and social justice framework. A broader conception of aid accountability and demand for results is needed.

There are also key developmental issues not in the Paris Declaration. This includes the removal of policy conditionalities, measures to address debt burdens, the need to increase grant aid, de-linking aid from donor foreign policy interests, and sanctioning donors for aid projects that violate human rights and have other adverse impacts.

The inclusion of important concerns such as tied aid and the accountability of donors is welcome in principle, but according to IBON, the commitments here are unclear with time frames and targets conspicuously ambiguous


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