Press Release
October 10, 2007

LOREN SUPPORTS IPU PROPOSAL FOR CONGRESSIONAL
OVERSIGHT OF FOREIGN AID AND PROJECTS

GENEVA, SWITZERLAND - Philippine Senator Loren Legarda, Senate Economic Affairs Committee Chairperson, yesterday (Oct. 10) supported a draft report of the International Parliamentary Union (IPU) calling for more parliamentary oversight of state policies on foreign aid and their implementation.

Loren expressed her support for the recommendation during the panel discussion of the IPU Standing Committee On Sustainable Development, Finance And Trade.

Loren said that "more strict oversight by Congress or parliaments over government projects financed by foreign aid and foreign loans would result in a more efficient accomplishment of the projects supported by such aid or loans. It would also reduce if not eliminate cases of corruption involving foreign financial aids or loans for projects in developing countries, including the Philippines."

The Philippine senator also backed the IPU recommendation for discouraging the practice of giving "tied aid" to developing countries, "where the transfer of funds and technical aid are made contingent on the purchase of goods and services in the donor countries." The IPU draft report said:

"The practice that probably most seriously compromises aid effectiveness is that known as 'tied aid' where the transfer of funds and technical aid are made contingent on the purchase of goods and services in the donor country. The partner countries lose out at several levels.

"The absence of free market contracting means they cannot obtain the same goods and services at a lower price elsewhere. Tied aid may result in the transfer of unsuitable products, services and technology. Comparisons of purchase prices have shown that tied aid reduced the value of the aid by 11 to 30 percent."

At the sidelines to the IPU committee discussion, Loren told reporters that on her return to the Philippines she would seek a senate inquiry into the nature and outcome of foreign aid and loans granted to the Philippine government to determine whether they are in "tied loans" as defined by the IPU report. "It is probable that developing countries like the Philippines end up on the losing side, especially if the implementation of the foreign-assisted project is fraught with corruption."

Loren said that the Congress can come up with legislation to promulgate rules and regulations covering the solicitation and acceptance by the Philippine government of financial assistance and loans, even if denominated as "concessional", to ensure that such foreign aid and loans result in "concrete and measurable benefits to the Filipino people."

Loren pointed out that some loans that have been entered into by the Philippine government, such as the $500 million US loan secured by the Marcos administration for the Bataan Nuclear Power Plant that was never used, have ended up saddling the Filipino people with foreign debts to be paid by them through their taxes. "Sometimes the interests when summed up end up bigger than the original loan," Loren lamented.

Loren lauded the IPU report which declared: "Tied aid decreases the value of a resource that is in desperately short supply in the fight against poverty, it is also incompatible with the other objectives set by the donors. It undermines the development of national ownership. The procurement policies and mechanism associated with tie aid in the donor countries lack transparency and pave the way for frequent abuse."

The report added: "Paradoxically, tied aid constitutes a form of support for donor industries that the donors condemn when it is practiced by the beneficiary countries. Tied aid is therefore an ineffective use of taxpayer money by ODA [Official Development Assistance] donors. Since its establishment, the OECD/DAC [Organization of Economic Cooperation and Development/Development Assistance Committee] has called for aid to be 'untied' and the level of 'untying' varies widely among its members."

Loren commented that if the IPU recommendation on tied aid is observed by the Philippine government it would ease in the future the burden on taxpayers of paying foreign debts and obligations which have not benefited the country.

News Latest News Feed