Foreign assisted projects

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In an episode of the BBM Podcast that aired last Aug. 4, BBM stressed the importance of ensuring that the national budget allocates sufficient funding for FAPs, warning that budget “insertions” have jeopardized vital infrastructure initiatives and damaged the country’s credibility with international financial institutions.

Yet, two FAPs under the Department of Transportation took major hits in the recently approved 2026 budget, which could affect their implementation timeline and incur higher commitment (delay penalty) fees.

Was BBM’s sentiment being ignored by legislators? Did BBM know what he was signing when he approved the NEP?

The Metro Manila Subway Project Phase 1 (MMSP1) ended up in the 2026 national budget with only P20.4 billion in funding from the original P39.2-billion proposal, while the North-South Commuter Railway (NSCR) system had its budget halved from P57.6 billion to P28.8 billion.

Congress had been habitually sabotaging vital infrastructure projects funded by foreign donor countries.

“For four straight budget cycles, billions of pesos meant for airports, railways, mass transport, flood control, and climate protection were quietly pulled out of the national budget. The projects were approved. The loans were negotiated. The need was undeniable. And yet, year after year, the funding was stripped away at the last moment.

“What followed was not fiscal discipline. It was paralysis. Idle loans. Delayed infrastructure. Rising costs. Missed jobs. And communities left exposed to floods, congestion, and high prices — while public money flowed elsewhere.

“This has been the fate of the Philippines’ foreign-assisted projects since 2023. This is not a debate about foreign borrowing. It is about who derailed development — and who is paying for it,” former budget secretary Butch Abad wrote in a paper, a copy of which he sent me.

“From 2023 to 2026, the Executive branch proposed between P200 and P280 billion a year in foreign-assisted projects (FAPs) under the National Expenditure Program (NEP). These were not wish lists. They were real projects — already vetted technically and financially, already reviewed for environmental and climate risks, already negotiated with institutions like the Asian Development Bank (ADB), the World Bank and the Japan International Cooperation Agency (JICA).

“Then came the budget process. Between the NEP and the final General Appropriations Act (GAA), legislators removed the bulk of these projects from the programmed budget and dumped them into Unprogrammed Appropriations, where funding becomes uncertain, contingent — or simply unusable.”

What way to run a government… on sheer greed of legislators at the expense of losing our credibility with the foreign countries funding our much needed, big-ticket infrastructure needs we can never fund on our own.

Who was responsible for this travesty? Speaker Martin Romualdez, House appropriations committee chair Zaldy Co and Senate President Chiz Escudero. Happened in their watch.

We should have been more appreciative of such assistance to build capital-intensive transportation projects.

As of early 2024, approximately 40 percent of the 197 projects in the government’s “Build Better More” flagship list is funded through foreign aid. Japan remains the largest partner ($13.23 billion), followed by the ADB ($11.05 billion) and the World Bank ($8.64 billion). South Korea is also a significant partner.

We are obligated to provide local counterpart funding to supplement ODA loans or grants. Our counterpart funds serve as our government’s equity or “skin in the game” for foreign-assisted projects. It is typically 20 to 25 percent of the total project cost.

Why are congressional leaders defunding our obligations for FAP counterpart funds? Because they want to use those funds to fund their pork barrel projects instead.

Fragmented pork barrel projects make abuse easier. Oversight is harder. Kickbacks are simpler.

Foreign assisted projects are subject to international procurement rules, lender oversight, multilayered appraisal, and independent audits. It’s not easy to get kickbacks.

JICA chief representative Takashi Baba expressed significant concerns about how our legislators are treating the budget needs of ODA projects. Baba reminded the Philippine government that while adjusting public spending is a sovereign decision, bilateral agreements legally require Manila to provide sufficient funding for land acquisition to cover right-of-way requirements.

JICA previously complained that delays in fund releases from Philippine agencies for ROW have left Japanese contractors unable to collect dues, forcing some to borrow from banks to keep projects moving.

Roughly 44 foreign-assisted projects were flagged as “at-risk” or behind schedule as of July 2025 due to implementation hurdles, according to data from the Department of Economy, Planning and Development (DEPDev).

Project delays caused by the failure of our government to provide counterpart funding makes us liable to pay commitment fees. These are “penalties” charged by multilateral and bilateral lenders — such as the ADB and the World Bank — to compensate for holding funds that have been earmarked but not yet used.

As of late 2024, cumulative penalties for “problematic” projects reached P2.2 billion ($38.5 million). Commitment fees rose by 21 percent from 2023 to 2024 as more projects faced implementation hurdles.

We have wasted all those billions of pesos in penalty fees funded by our taxes. All that money could have paid for school buildings or fed more children.

International lenders like JICA and the ADB have signaled that shifting ODA projects to Unprogrammed Appropriations signals a lack of political will to meet sovereign loan obligations.

As Mr. Abad warns: “The damage goes further. Foreign assisted projects are closely watched by investors, credit rating agencies, and development partners. When a government repeatedly approves projects, negotiates loans, and then blocks their use through its own budget, it sends a message: plans here are fragile.

“At a time when foreign direct investment inflows have already plunged, this matters. Defunding FAPs does not explain the entire FDI decline — but it deepens doubts about infrastructure readiness, growth prospects, and the state’s ability to execute long-term commitments.

“Confidence, once shaken, is slow to return.”

Boo Chanco’s email address is [email protected]. Follow him on X @boochanco