Press Release
November 20, 2007

Senate may look into deferred World Bank loan -- Loren

Senator Loren Legarda said yesterday that the Senate Economic Affairs Committee may choose to look into the deferment by the World Bank of a $232-million soft loan to the Philippines on allegations of corruption.

Loren said that the committee she heads can try to determine the circumstances that led to the loan's deferment in line with its ongoing public hearings on the utilization of official development assistance (ODA) funds.

"However, the better approach may be for all concerned Senate committees to hold joint public hearings on the issue," she said.

The senator noted statement issued by the World Bank in Washington saying the loan was put on hold due to procurement irregularities, and the denial by Malacañang that corruption attended the program.

"We need to look into this so we can pass remedial legislation providing safeguards in the use of so-called soft and tied loans," she said.

"We have two contradictory claims, and the public deserves to know the truth."

Loren said that safeguards in the disbursement of loans are needed to prevent corruption and to ensure accountability.

During the last hearing of her committee on ODAs, Loren expressed concern over the nature of "tied loans" that bind the grant of the loans to the purchases of equipment, supplies and technology from the lending country.

Filberto Llanto, senior fellow of the Philippine Institute for Development Studies, said during the hearing that competitive bidding for supplies, services and technologies should be used even for ODA-funded projects.

Experts said that competitive bidding is restricted in "tied loans" as the purchase of project components and services is limited to those offered by the lender.

An official of the Department of Budget and Management admitted during the hearing the prevalence of cost overruns in the implementation of ODA projects.

In a resolution, Loren noted that at least 141 ODA loans have been obtained by the Philippine government amounting to $9.5 billion as of December last year.

Nonetheless, she noted that ODA cancellations amounted to $222.34 million due to problems and implementation bottlenecks.

Loren stressed the need to maximize the impact of foreign loans to national development. She also cited the need to make public officials or implementing government agencies accountable for ODA loans.

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