Gatchalian: Strict Vetting System for Foreign Aid Needed

The Philippine government has been using a loose vetting system for foreign-funded investments, which has allowed scheming foreign firms to pull off one-sided trade contracts to the detriment of the nation and the Filipino people, Senator Win Gatchalian bared after a hearing by the Senate Committee on Economic Affairs regarding investment deals inked during President Duterte's state visit to China last year.

Gatchalian, who is the chairman of the Senate panel, 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.

Describing the current mechanism, the senator said: "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 during the committee hearing on Proposed Senate Resolution No. 222, which called for an inquiry, in aid of legislation, into Philippine-Sino trade agreements forged during the state visit last October 2016.

The Department of Finance (DOF) admitted during the hearing that the 2016 Chinese investment deals were actually 'tied' loan agreements that allowed the Export-Import Bank of China, which would serve as the Chinese funding agency, to name pre-qualified suppliers or contractors for government projects.

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

"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 added that, "it is not even clear who should vet these suppliers or contractors, whether it's the National Economics and Development Authority or the DOF,", as he vowed to come up with a legislation to address 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," the senator said.

He added: "We have to remember that once we sign a loan agreement, this is a loan that all of us will pay in the end. 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."