THE House Committee on Ways and Means will present amendments to the Official Development Assistance (ODA) Law to ensure that the country has the flexibility “to acquire top-of-the-line air equipment and naval capabilities.”
House Committee on Ways and Means Chairman Joey Sarte Salceda is pushing for the passage of a bill expanding the range of ODA options for the country, which includes allowing local governments to access ODA loans and VAT reliefs for such borrowings.
“Let’s build our defenses so that countries that have their eyes on the West Philippine Sea don’t feel like they can push us around so easily,” Salceda said.
“Again, countries like us shouldn’t declare that our only option is diplomacy. No one wants war, but defenders don’t decide that. Aggressors decide whether they want war. And defenders have to be ready,” Salceda added.
Under the current ODA Law, Salceda explained, the country is restricted by provisions that put a grant component floor of 40 percent of the total ODA loans, and at least 25 percent of each loan.
Other limitations include the lack of provisions for private sector participation in financing, and the public bidding requirement, which may hinder loans for acquisitions such as defense equipment, which typically already have a single eligible supplier.
“That hinders us from acquiring, say, French submarines although France has already signalled its intent to make loans for these available.”
Salceda added that in 2021, Defense Security Cooperation Agency, or DSCA of the United States already cleared the Philippines to acquire F16s from the United States.
“We were also cleared to purchase Harpoon missiles, which would definitely deter any naval incursion into our waters,” he said.
“The message you want to send to adversarial countries is, well, we will never recourse to war as a first option, but we are ready to defend. And your attacks against us will cost you,” he added.
Salceda assured the public, however, that the loans for defense capabilities “will remain deeply concessional, especially with EDCA and other similar military arrangements.”
“ODAs remain the cheapest way to borrow. They are still deeply concessional. The capital markets do not give you a grant component. And certainly, they do not come with technical capabilities and knowledge-sharing,” he said.
Salceda added that ODA law amendments will require “that the ODA loans are still concessional compared to borrowing from the market.”
“But the ODA Law was written when we were still a country struggling out of political and economic crises. We are now on the cusp of being an upper-middle income country. In the OECD’s definition for ODAs, we’re so close to not being eligible for any ODA already. The grant component for peer countries is 10 percent grant element, 6 percent discount rate. The current law requires ODA loans to be 25 percent grant component, at 10 percent discount rate,” he said.
“At the rate we’re growing, soon, no ODA will qualify at our stage of development. And that, of course, is bad for our long-term development needs. Especially because ODA loans are very long-term, unlike most capital market instruments,” he added.
The House Committee on Ways and Means has conducted preliminary discussions on private sector participation in official development assistance, ahead of formal discussions on House Bill 7135, or amendments of the ODA Law.
