French Ambassador laments SC ruling on ODA funding

RG Cruz, ABS-CBN News

Posted at Feb 13 2023 05:03 PM

MANILA — Funding for a €25 million shipyard project in the Philippines from the French government through official development assistance (ODA) is on hold because of a Supreme Court ruling, the French Ambassador to the Philippines told the House Ways and Means Committee on Monday.

Ambassador Michele Boccoz told the panel that ODA funding has blended sources.

"For large development projects at the moment already, financial facilities from European partners in particular are often composed of sovereign soft loan backed by buyer credit, which is a sort of sovereign, blended loans," Boccoz explained.

"These are the traditional loans that are also part of the the international rules for ODA and I think in particular of the OECD Development Assistance Committee, which brings together 31 of the largest donors around the world and set the rules and there are a number of tools for ODA among which these sovereign blended loans are part. So this is sort of current practices we use into funding projects around the world," Boccoz said.

However, the Philippines is barred by jurisprudence from accepting these.

"According to the Department of Finance at the moment, this type of financing is currently unavailable in the Philippines, due to the interpretation of the case law from the Supreme Court as I understand it that limits the definition of ODA to project fully financed with sovereign loans, which restricts significantly the list of potential partners for the Philippines," Boccoz explained.

"This limitation also restricts European partners' ability to provide their expertise in many areas where cooperation would also contribute to support the Philippines and to investment in the Philippines... So we do hope that there is a possibility to unlock the situation so that we could continue supporting our companies who would want to invest in the Philippines through ways such as the sovereign, blended loans," Boccoz added.

House Committee on Ways and Means Chair Joey Salceda told the panel he has already filed House Bill 7135 to address this.

"Essentially it says here that ODA may be covered by national or international official instruments in the nature of exchange of notes memoranda so for as long as your blended is covered by one.... national instrument, let's say of France and then you have an exchange of notes that covers the blended. Is it in practice covered by an exchange of notes or an MOU or any other official instrument?" Salceda said.

In a separate statement, Salceda said that expanding the country’s ODA portfolio is particularly important “due to their nature as long-tenured, deeply concessional loans with a more diplomatic character.”

“ODA loans allow for the financing of programs and projects where economic returns are not necessarily immediately realizable, or where a viability gap would make a certain project less financial to the open capital markets or to private or commercial institutions,” Salceda said.

Salceda cited that interest rates through ODA loans are much lower that commercial rates, even if the grant component is adjusted.

Salceda explained some European partners, who tend to include a commercial partner in their ODA packages, are excluded from offering ODA loans to the Philippines due to ambiguity in the ODA law with regard to whether they still qualify for government-to-government procurement without public bidding.