February 20th, 2023
House Ways and Means Chair Joey Sarte Salceda (Albay, 2nd district) says that the House tax panel, which also oversees sources of financing as part of its mandate, 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.”
“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 explains, the country is restricted by provisions that put a grant component floor of 40% of the total ODA loans, and at least 25% 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.”
PH already cleared to buy F16s
Salceda adds 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.”
“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.”
Loans to remain deeply concessional
Salceda assured 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.”
Salceda adds that the ODA law amendments will continue to 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% grant element, 6% discount rate. The current law requires ODA loans to be 25% grant component, at 10% discount rate.”
“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.”