Official Development Assistance

We often hear or read about the term “Official Development Assistance” or ODA. It ordinarily connotes “loans” or “grants” used for huge multi-billion projects. The other sources of funds for government spending are through the Public-Private Partnership (PPP) schemes (including Joint Ventures), and the General Appropriations Acts (GAA). The latter is merely an acronym referring to the country’s annual budget coming mainly from internal generation, or simply, taxes. Of the three, ODA is the sexier term, being “foreign-funded!”

But let’s clearly define ODA. It’s a term originally coined by the Organization for Economic Cooperation and Development (OECD) to measure aid from developed countries to developing ones. It has three strict elements: It must be undertaken by the official sector (states and local governments); it must promote economic development and welfare as the main objective; and it must be at concessional financial terms, i.e., grants, or if a loan, having a grant element of at least 25% (having been regularly updated since 1969). Or simply: 1.) Official, 2.) For economic development and welfare, and 3.) Concessional. Other than that, it’s not ODA!

Now let’s look at it from the view of National Economic and Development Authority (NEDA) which simply adopts the definition from Republic Act 8182, or the ODA Act of 1996 – “It is a loan or a grant administered with the objective of promoting sustainable social and economic development and welfare of the Philippines.” NEDA says ODA resources must be contracted with governments of foreign countries with whom the Philippines has diplomatic, trade relations or bilateral agreements or which are members of the United Nations, their agencies and international or multilateral lending institutions.

Since there are specific ODA sources with whom the Philippines is contracting and these have specific contracting amounts which are even projected, by year, into the future, the NEDA Board is the primary agency which oversees how ODA is managed.

This is crucial because in terms of loans, the ODA concessional portion is often mixed with the regular commercial loans of International Financing Institutions, mainly the multilateral development banks (WB, ADB, AIIB, etc.). Bilateral sources, like Ausaid, AFD, KOICA, USAid, etc., have mostly pure grants. ODA is limited and so is the Philippines’ capacity to contract external debt, which has to be paid in the future. That is the nature of investment programming.

So, the next time we hear or read something about ODA, let’s mean it to say either grants or “concessional” loans from either bilateral or multi-lateral sources. These are limited amounts, programmed on a yearly basis, not a free-for-all thing that one can just ask for. There is an investment program being followed, and a procedure in getting financing.

You need to go into the pipeline first, which means a project needs to be approved. Concessional as it maybe, ODA has to be utilized with the highest prudence and integrity. Which means only projects with adequate economic returns and benefits, and the highest ones at that, gets to get the limited funding. The difficult job of determining this, falls on the Investment Coordinating Committee of NEDA. (To be continued)