Strict vetting system for foreign aid needed

MANILA, Philippines -  The Philippine government has been lax in vetting foreign-funded investments, which has allowed scheming firms to pull off contracts to the detriment of the country, Sen. Sherwin Gatchalian warned yesterday.

Gatchalian, chairman of the Senate committee on economic affairs, issued the statement after his panel conducted an inquiry last week into the $24 billion in investment deals reportedly inked during President Duterte’s visit to China in October last year.

The Department of Finance (DOF) admitted during the hearing that some of the Chinese investment deals were actually “tied” loan agreements that allowed the Export-Import Bank of China, which would serve as the main funding agency, to name pre-qualified suppliers or contractors for government projects.

Other reports, however, named the China Development Bank and Bank of China as among the other Chinese financial institutions extending commercial and concessional loans.

“We look for financing agencies, and when we find one, these financiers are given the free hand to name their chosen contractors and suppliers as part of their trade packages. This is a revelation to me,” Gatchalian said in describing the current government mechanism as briefed by DOF officials.

He stressed the need to improve the assessment of foreign financing agreements and overseas development assistance (ODAs) to make sure that these investment agreements are beneficial to Filipinos.

The insertion of the suppliers and contractors in foreign-funded contracts has tied the hands of the government from doing an in-depth due diligence check on the corporate history of the handpicked foreign firms,” he said.

“A number of these contractors have been discovered to have bad history, bad records in doing business in our country. Some of them are facing corruption cases or are in trouble with other agencies, some have been barred by other multilateral loan agencies like the Asian Development Bank and the World Bank. We would have known all these issues earlier if our vetting system had been strict,” Gatchalian said.

He, however, did not name the contractors.

Finance Secretary Carlos Dominguez earlier vowed to keep incoming Chinese project and loan contracts clean.

Gatchalian lamented that it was not even clear which agency should vet foreign suppliers or contractors, whether it is the National Economics and Development Authority or the DOF.

The senator vowed to come up with a legislation to address what he said was the lax vetting system.

“We will study the process and draft legislation which will protect us from unfair loans and unscrupulous contractors. We will tighten the rules in terms of acquiring overseas development assistance and foreign financing. We will come up with mechanisms to protect all of us, the Filipino people,” Gatchalian said.

He said once the Philippines enters into a loan agreement, it is going to be shouldered by Filipino taxpayers.

“Thus, it is important that we make sure that these loans are beneficial to our country, and at the same time, that those contractors who will undertake projects are capable and unquestionable. That will be built-in in the law that we are going to propose,” he said.