The Manila Times Internet Edition | TOP STORIES > Analysts link corruption to ODA problems

A 2006 perception survey conducted by the Asian Development Bank (ADB) in Indonesia and the Philippines shows that 82 percent of respondents feel “corruption is to blame for waste in ODA.”

Even the Development Assistance Committee, a group of bilateral official development assistance (ODA) donors within the Organization for Economic Cooperation and Development, had once said its members share a concern with corruption.

Former researcher turned fair-trade advocate Arnold Padilla said, “Corruption in ODA transactions undermines good governance.” It wastes scarce resources, undermines credibility of borrowing government and the funder, and compromises all related processes, he added.

Jose Enrique Africa, Ibon Foundation research head, cited the North Luzon Railways Project (NorthRail) deal financed largely with a $960-million concessional loan from China —and allegedly involving up to $100 million in kickbacks to high-ranking government officials.

While it was initiated, the NorthRail probe was not properly concluded. In February, Sen. Joker Arroyo said, “I would oppose an investigation of the $70-million SouthRail project unless the Senate would first dispose its investigation of the gargantuan $500- million loan for the NorthRail, which it had already completed, and all that remains is to make the committee report. Otherwise, this will be one of those investigations without [a] committee report.”

Resolving allegations of corruption was not at all helped when important documents go missing.

Lately, the memorandum of agreement between the Philippine and Chinese corporations on the $932-million SouthRail projects was reported missing, Sen. Jamby Madrigal said Wednesday.

Corruption is decried as a main culprit in the continuing poverty and misery of Filipinos.

Physician Darby Santiago, who belongs to the Health Alliance for Truth and Justice, said, “Some 20 percent of the national budget goes to corruption, and seven out of 10 official development aid projects are mostly white elephants that do not deliver economic benefits.”

He said the alleged $130-million kickback, or P6.5 million, for the scrapped national broadband deal, would have paid for antibiotic medication for seven days for 6.5 million patients; anti-tuberculosis treatment for almost 1.1 million patients for six months; and would represent five times the annual budget of the country’s main training hospital, the Philippine General Hospital, which serves around 600,000 patients a year.

Standard practice

So, is overpricing the norm in projects funded by official development assistance?

According to the 2006 report of the Commission on Audit, irregularities attended many aid-funded projects, as well as problems of non-completion and unliquidated advances, involving billions of pesos.

More than P860-billion commitments for 301 ODA loans as of end-2006, some P107-billion worth of loans were cancelled and P102 billion were suspended due to non-compliance with procurement rules, the audit report said.

Involved in these loans were “unnecessary and overpriced” land acquisitions that cost more than P36 billion; double-recording, unrecorded or erroneous transactions that resulted into a net overstatement of P2.6 billion; unliquidated cash advances and fund transfers amounting to P1.56 billion; “irregular, unnecessary and uneconomical use of funds” worth P475 million; and P13.6-million worth of “excessive and defective” school implements, among others.

“We’re not talking of loose change here,” said Sen. Mar Roxas 2nd. “This is our people’s money in the billions of dollars apparently being stolen or frivolously spent.” Roxas, chairman of the Senate committee on trade and commerce, said he pushed for the audit commission’s recommendation “for a thorough review of the process by which ODA funds are used and approved.”

While the law provides for necessary checks to ensure transparency and fairness in government procurement, there are certain “exceptions to the rule” that eventually become loopholes, where billions in anomalous transactions leak through.

Roxas earlier filed Senate Bill No. 1793 to enforce the rule that even executive agreements are subject to public bidding, and Senate Bill 1794 to tighten rules on aid loans and which would require all ODA-funded projects to undergo Senate ratification.

China has lately emerged as an aid donor in the Philippines’, reflecting China’s increasing global aggressiveness in the ODA realm.

Africa of Ibon Foundation said China was only the Philippine’s distantly fifth biggest donor in 2006, but its loans were, on average, the largest at some $153 million per loan.

“The sheer size of these loans combined with China’s more lax approach to ODA, compared to the more established donors, has apparently tended to foster irregularities and corruption,” he said.

China’s donor standing could change significantly with the signing of a China-Philippines Framework Agreement in January 2007 that potentially covers at least $1.6 billion to $2.7 billion in additional aid for seven infrastructure projects.

“If even just the pipeline projects come on-line, then China would have over $2-billion worth of commitments to the country—bringing it from virtually nowhere to being a close second to Japan in just a few years,” Africa said.

Some legislators have charged that China’s increasing participation in aid funding in the Philippines could have been occasioned by its attempts to neutralize Philippine claim on the potentially oil-rich Kalayaan group of islands (also known as the Spratlys). Senate President Manny Villar Jr. is pushing for an inquiry about government’s dealings with China concerning the Spratlys.

In 2004, three years after Mrs. Arroyo became President, the Philippines entered into an agreement with China for joint exploration, and possibly development, of the area’s energy resources in the Kalayaan.

Mrs. Arroyo’s unilateral Philippine action on this joint exploration and development agreement has broken Asean solidarity on a status quo on territorial claims by four Association of Southeast Asian Nations (Asean), besides China and Taiwan.

World Bank projects

Critical eyes now watching developments concerning ODA are looking with keenness at the recent announcement of the Philippine office of the World Bank for the resumption of negotiations for the National Roads Improvement and Management Program Phase 2, cancelled three months ago for alleged irregularities.

Between 2003 and 2006, the World Bank rejected two large road contracts in three successive rounds of biddings because of strong signs of collusion and excessive pricing that also involved another Chinese corporation.

The World Bank acknowledged that some 90 percent of the project goals during the first phase of the program (2000 to 2007) were completed: 382 kilometers of roads were built or upgraded in provinces across the country, and an additional 975 kilometers of existing roads resurfaced and maintained. In 2003, however, signs of procurement problems in the first phase of the program were identified.

The funder then recommended “stringent anticorruption measures” it developed jointly with the Philippine government to be followed by implementing agencies before discussions on phase 2 of the road program can continue.

These included independent procurement assessment and technical audit to strengthen bidding transparency; enhanced processes for procurement, financial management, internal controls and audits of the road management agencies; and inclusion of a new and innovative coalition of citizen and road user groups, called “Road Watch” in the project management set-up to monitor project implementation and procurement, and issue periodic performance reports.

This project is a test case that can also be replicated in similar projects. Observers wonder if the government can implement these “stringent measures” and turn back the tide of suspicion that has attended its implementation of ODA projects.

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