ODA for the uninitiated

Senator Sergio Osmeña III has launched an inquiry into what he refers to as a massive scam that involves multi-departmental and even multi-governmental collusion on the President’s Bridge Program aka Tulay ng Pangulo, a comprehensive government bridging (infrastructure) program that has spanned the terms of three previous presidents; four including the incumbent.

For the benefit of those who don’t know, the only way the Philippines would be able to pay for these bridges, of which the NEDA in 1986 placed the requirement for the countryside at about 15,000 units, was through a bilateral financial transaction known as Overseas Development Assistance or ODA.

This is basically a loan from one country to another, but the difference between this and commercial loans (or loans from banking or financial institutions) is that it is concessional in nature, aka very easy terms.

For example, one of the loans contracted in 2001 from one of those agencies accused of participating in this “scam,” UK supplier Mabey and Johnson (M&J) was priced at 1.47-2.677 percent for 10 years, with a grace period (interest payment only/no payment on principal) of three years. This was for the Tulay ng Pangulo sa SZOPAD program which brought to the countryside 593 bridges.

Note that the target was for 526, but because of material savings, an additional 67 were built at no additional charge to the Philippine government.

It is a stellar performance record for big ticket infrastructure items, easily following the straight and narrow lines of President Aquino’s daang matuwid. But this was at another time, under another president, so one can say that the concept, while a worthy buzzword, has been done by a discerning few, in the past.

It isn’t easy locking in bilateral ODA, because doing so requires full disclosure between agencies and representatives of government. In other words, for it to be approved, not only Philippine review and audit agencies – such as NEDA-ICC and COA – must stamp their approval; so must the foreign aka “donor” government.

And just because it’s concessional, it doesn’t mean it’s a gimme. As one savvy congressman put it in a privilege speech, “it is not a donation.”

In other words – it’s a tied loan and comes with conditions.

And these conditions usually mandate that the country use a supplier of a specific technology, in this case, Mabey and Johnson’s “panel type” bridges.

Therefore engaging a supplier will mean more jobs, more exports, and generally more opportunities for the home (donor) country. Basically what they give up in terms of concession, they earn back in other ways. Again, “it is not a donation.”

This brings us to another aspect of ODA:  the grant element. This is by far the most useful of all the parts of the ODA, because it is truly concessional. It is denominated in some form, but it is not monetized. Meaning, it is mandated by our ODA Law to be at least 25 percent of the total loan package, but that does not mean that the donor country knocks of 25 percent of the loan amount and gives it to us for free.

The grant element is given in terms of capital equipment, consultancy and management services, buildings, technology transfer, and even (at times) social programs.

That agencies were able to participate in a massive scam to defraud the Philippine government of about P50 billion (and not the bloated P111 billion claimed by Osmeña) is simply, well, absurd.

Because it boggles the mind how elements in the Philippines could have hoodwinked foreign governments into lending the country huge amounts of money, engaging a specific supplier, and giving it at concessional rates.

Also if any anomaly was detected in the past, the checks and balances the COA has set in place and subjects all government projects to, would have already raised a red flag, tantamount to the cessation of payments to the donor government until said anomalies had been rectified. Considering the program and abovementioned suppliers were engaged in 2001 and nothing had come up until now necessarily means there was NO RED FLAG. The other question is, why only now?

So where’s the beef?

The proof of the pudding is in the eating. Bridges all over the countryside have brought development in terms of work, jobs, and access to social services where before there were none.

Horror story waiting to happen

The fuel tanker explosion that killed 23 people and injured 100 others in Riyadh, Saudi Arabia last Nov. 1 is a horror story that could easily happen on local shores.

Indeed, last October, a fuel tanker collided with a Victory Liner bus loaded with more than 40 passengers on the Maharlika Highway at the Science City of Muñoz in Nueva Ecija, killing nine people, including the oil tanker driver and the bus driver, and injuring nine others.

There were fewer casualties compared to the Riyadh accident, which by the way also caused some SR300 million in property damage, but that’s only because the local tanker did not spill oil or explode in the accident in Nueva Ecija. It could have been much worse if it did.

The thing is, with more oil trucks and tankers on our roads, an accident like the one that happened in Riyadh is not farfetched and may, indeed, be just waiting to happen.

Obviously, such accidents involving oil tankers could be avoided if only the 117-kilometer Batangas to Manila white oil pipeline would be reopened. Since a writ of kalikasan issued by the Supreme Court closed the pipeline in 2010, we have had to rely on oil trucks and tankers to deliver fuel from oil depots to gas stations. Accidents are unavoidable when you have so many trucks and tankers ferrying fuel.

The MMDA had previously issued additional exemptions for fuel firms’ trucks and tankers to compensate for the pipeline’s closure.

Before the pipeline was closed it supplied more than 50 percent of the petroleum products for Pandacan, which is considered the largest and most important depot in the country.

The Pandacan depot supplies fuel to 459 stations in Metro Manila and about 1,800 gas stations in Regions 1 to 4. On a nationwide basis, the Pandacan depot also supplies 70 percent of the shipping industry’s needs; 90 percent of lubricant requirements; 75 percent of all aviation fuel needs; and 25 percent of the demand for chemicals.

The Department of Energy had already recommended the re-opening of the pipeline after pressure controlled tests confirmed its structural integrity and proved there were no more leaks in the pipeline. Why not use the pipeline then if it is already safe to operate?

Reopening the oil pipeline will reduce the number of tankers plying petroleum products from Batangas to Manila, which will also lessen the probability of accidents involving trucks and oil tankers.

Let’s not wait for a massive and deadly oil truck explosion like the one that happened in Riyadh to happen here.

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