‘ODA law changes can boost AFP capabilities’
A key leader of the House of Representatives is setting his sights on amending certain provisions in the Official Development Assistance (ODA) Law to improve the Armed Forces of the Philippines (AFP)’s below par capabilities primarily with its Asian neighbors.
“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,” Rep. Joey Salceda, chairman of the ways and means committee that oversees sources of funding for the government, said over the weekend.
“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 said.
In a statement, the lawmakereconomist revealed his plans to present amendments to the ODA Law to ensure that the country has the flexibility to acquire top-of-the-line air equipment and naval capabilities.
He stressed that under the current law, the country is “restricted by provisions that put a grant component floor of 40 percent of the total ODA loans, and at least 25 percent 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,” the statement read.
“That hinders us from acquiring, French submarines although France has already signaled its intent to make loans for these available,” he said, referring to a previous meeting between government officials and the French ambassador over the matter.
Salceda underscored the need to acquire fighter jets like F16s and submarines to improve the AFP’s limited capabilities in defending the West Philippine Sea, which claimants include China and other Asian neighbors.
Loans to remain deeply concessional
On the other hand, the lawmaker gave assurance that the loans for defense capabilities “will remain deeply concessional, especially with Enhanced Defense Cooperation Agreement 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 said.
He explained that the ODA Law amendments would continue to require “that the ODA loans are still concessional compared to borrowing from the market.”
“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 Organization for Economic Cooperation and Development’s definition for ODAs, we’re so close to not being eligible for any ODA,” he said.
The grant component for peer countries is 10 percent grant element, six percent discount rate. The current law requires ODA loans to be 25 percent grant component and at 10 percent discount rate, Salceda said.
“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,” he said.
As early as 2021, Salceda disclosed that the Defense Security Cooperation Agency of the United States had already cleared the Philippines to acquire F16s.
“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,” he said.