Press Release
November 25, 2007

LOREN COMMITTEE TO PROBE WB LOAN MESS

The Senate Committee on Economic Affairs, chaired by Senator Loren Legarda, will conduct an investigation, in aid of legislation, into the deferment by the World Bank of a $232 million "soft loan" to the Philippines due to alleged irregularities in the bidding and implementation of the projects programmed to be funded by the loan.

The Legarda committee will hold the hearing jointly with the Senate committees on public works and finance starting at 1 p.m. today (Monday, Nov. 26) at 1 p.m. at the Senator Padilla room of the Senate.

The senate has passed three resolutions directing the committees on economic affairs, public works and finance to conduct the investigation following a statement by the World Bank that it had put on hold the loan because of irregularities in its application.

In a statement from Washington D.C., World Bank Vice President for East Asia and the Pacific Region, said: "Between 2003 and 2006, the World Bank rejected two large road contracts in three success rounds of bidding because of strong signs of collusion and excessive pricing."

On the other hand, the Philippine government has tossed the blame to the World Bank. Budget Secretary Rolando Andaya said the WB was partly to blame for the alleged irregularities because its procurement system was prone to corruption.

Public Works and Highways Secretary Hermogenes Ebdane Jr. also said that without funding assistance from the World Bank, the Philippines would proceed with the project. The Office of the Ombudsman also announced that it was looking into the project to determine if any such irregularities exist and to file charges against those responsible.

Earlier, Loren said that she would ask the Senate to pass remedial legislation providing for safeguards in Overseas Development Assistance (ODA) loans to prevent corruption and ensure accountability in the use of such funds for government projects.

The World Bank loan is considered an ODA since it is a "soft loan", giving concession conditions and low interests to the borrower, the Philippines.

In her proposed resolution for an investigation of ODA loans, Loren noted that at least 141 ODA loans have been obtained by the Philippine government amounting to $9.5 billion as of December 31,2006. However, ODA loan cancellations amounted to $222.34 million "due to problems and bottlenecks in implementation.

Loren also wanted to look into "tied loans" from foreign countries that obligate the recipient countries, like the Philippines, to purchase equipment, supplies and technical assistance from the lender. In the end, the recipient country ends up the loser because a great part of the loan is kicked back to suppliers, contractors and technical personnel from the lending country.

"We must see to it that our foreign loans end up to the net benefit of our people, and not just result in pink elephant projects that benefit more the lender than the borrower," said Loren.

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