Looking at the issue of foreign aid

In a way, it is good that this whole brouhaha about the Philippines turning down the European Union’s aid—280 million euros worth over a three-year period—has come to light. In a way. Because it forces the country to look at the whole issue of foreign aid and its importance to us, and our development.

But we have to define the issue before we even start the discussion.

So, what is foreign aid? It is assistance in the form of money, services (technical assistance), and/or goods from abroad, that must meet two criteria: 1) it must be designed to promote economic development and welfare as its main objective, and 2) it must be provided as either a grant or a subsidized loan, called concessional assistance (a subsidized loan is one which has a grant element of 25 percent or more.)

What kinds of foreign aid are there? There is Official Development Assistance or ODA, provided by donor governments, and there is private voluntary assistance, which includes grants from nongovernment organizations, religious groups, charities, and foundations (e.g., Bill and Melinda Gates Foundation, Oxfam International).

We will focus on ODA. Nota bene: Military assistance does not count as foreign aid/ODA because it does not meet the first criterion. Neither do World Bank or Asian Development Bank loans because they do not meet the second criterion (we do not qualify for loans and grants from the WB’s IDA or the ADB’s ADF). Only about 10 percent of the International Monetary Fund’s outstanding loans are categorized as ODA.

Now that we’ve got that figured out, we can ask: How important is ODA to the Philippines?  In 2015 (latest statistics), the aid volume was around $1.2 billion, as compared to its GDP for the same period of $292.45—or around 0.4 percent of GDP. Pretty insignificant if you look at the percentage, but $1.2 billion is nothing to sneeze at. Our largest donor was Japan, with almost $536 million, followed by the United States, with slightly more than half…

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