By Cai Ordinario, August 19, 2020; Business Mirror

EVEN before the pandemic, several Official Development Assistance (ODA) projects needed to be restructured due to changes in project design and cost, according to the National Economic and Development Authority (Neda).

In its 2019 ODA Portfolio Review, the total ODA portfolio as of December 2019 amounted to $21.62 billion. This consisted of 84 loans worth $19.98 billion or 92 percent of the total portfolio; and 268 grants worth $1.64 billion or 8 percent.

Neda said 32 of the total projects encountered problems during implementation, prompting the eight agency-implementors to seek restructuring.

“[The projects are] expected to be restructured in CY 2020, covering extension of loan validity and/or implementation period, changes in scope, cost, implementation arrangements and loan reallocation. Agency requests for restructuring will require ICC [Investment Coordination Committee] review, approval, and/or Neda Board confirmation,” the Neda said.

The list included 19 projects funded by the Japan International Cooperation Agency (Jica), the largest source of the country’s ODA loans; four projects each funded by the Korean Economic Development Cooperation Fund (KEDCF) and International Fund for Agricultural Development (Ifad); and two projects funded by the Chinese government.

One project each is funded by the Ifad and the Asian Development Bank (ADB); the Italian government; and World Bank and the Agence Française de Développement (AFD), or the French Development Agency.

The projects funded by Jica include the Flood Risk Management Project-Cagayan de Oro River, which is set to be restructured next month and requires a change in cost; and the Forestland Management Project, Central Luzon Link Expressway Project, Flood Risk Management Project—Cagayan, Tagaloan and Imus River, LRT Line 1 South Extension Project, and the LRT Line 2 East Extension Project—which all require a change in cost and project extension.

Jica projects also include North-South Commuter Railway Project Phase 1 and the Metro Manila Interchange Construction Project Phase VI, which will require changes in scope and project extension.

Projects funded by Jica that will require a change in scope and cost are the Metro Manila Subway Project and the Maritime Safety Capability Improvement Project, Phase I. The Metro Manila Subway Project is targeted to be restructured by end of August.

All the projects needing to be restructured due to extension of implementation period are funded by Jica. These include the MRT 3 Rehabilitation Project; Davao City Bypass Construction Project; and the Metro Manila Priority Bridges Seismic Improvement Project, among others.

The only project that must be restructured on account of a loan reallocation is the New Bohol Airport Construction and Sustainable Environment Protection Project, also Jica-funded.

Korean projects

Meanwhile, the four KEDCF-funded projects that will be restructured are the New Cebu International Container Port Project and Jalaur River Multipurpose Project Stage II, which require changes in cost, project extension and loan reallocation.

The other two projects are the Integrated Disaster Risk Reduction—Climate Change Adaptation in Low-Lying Areas in Pampanga Bay, which requires a change in scope and cost, and the Panguil Bay Bridge Project, which requires an extension of implementation and loan validity period.

Ifad projects that require restructuring are Rural Agro-Enterprise Partnership and Inclusive Development; Fisheries, Coastal Resources and Livelihood Project; and Convergence for Value Chain Enhancement and Rural Growth Empowerment, which require changes in scope and project extension.

The other Ifad project for restructuring is the scaling up of the Second Cordillera Highland Agriculture Resource Management Project, which requires an extension of implementation and loan validity periods, and change in cost sharing.

The two China-funded projects to be restructured are the Binondo-Intramuros and Estrella-Pantaleon Bridges Project and Chico River Pump Irrigation Project.

The Bridges Project requires a change in cost and extension, and will be restructured in October.

The Chico River project requires a change in scope and cost (which rose 38.6 percent) and is up for restructuring this second semester.

Cost overruns

The Neda said the ICC received six requests for change in cost amounting to P32.97 billion, higher than the seven requests received in 2018 amounting to P24.79 billion.

This swelled by 63.2 percent the total project costs of the six projects, now worth $85.14 billion from the initial estimate of P52.17 billion.

In 2018 the total cost overrun increased 264.02 percent from P6.81 billion in 2017. The total cost of projects increased by 33.36 percent to $99.122 billion from $74.329 billion.

“Cost overrun is defined as additional costs over and above the ICC-approved project cost,” the Neda said. “Agency requests for cost-overruns undergo the ICC review process, mainly to determine whether the project continues to be economically viable.”

This year, of the six projects, the Angat Water Transmission Improvement Project of the Metropolitan Waterworks and Sewerage System (MWSS) funded by ADB recorded the highest cost overrun increase at 95.99 percent.

The total project cost of the project is now estimated at $11.32 billion from the initial cost of $5.778 billion. This represents an increase of $5.546 billion.

However, in terms of actual increase in cost, the largest was incurred by the Davao City Bypass Construction Project.

While the cost increase only represented 81.07 percent of the cost, the actual amount reached $20.956 billion. Due to the cost overrun, the new total project cost reached $46.8 billion from the initial estimate of $25.85 billion.

Portfolio performance

The Neda said the government’s absorptive capacity improved in 2019 as the disbursement rate and availment rate of the portfolio rose. However, the disbursement ratio only posted a slight increase.

The report said overall disbursement level of the loans portfolio rose 21 percent to $2.71 billion in 2019, from $2.23 billion in 2018 due to the increase in disbursements of project loans.

“Historically, loans’ financial performance is at a decreasing trend; however, the portfolio performance is showing improvements for the past two years,” the Neda said.

The availment rate of the project loans portfolio also performed better, rising to 73 percent in 2019 from 67 percent in 2018.

Disbursement ratio barely increased by 0.80 percentage point to 20.09 percent in 2019 from 19.29 percent in 2018.

Neda also said the disbursement rate of project loans portfolio exhibited a 6-percentage point increase to 64 percent in 2019 from 58 percent in 2018.

“The project loans portfolio still registered a disbursement shortfall,” Neda said, however. “Despite the improved performance, the project loans portfolio registered a $1.46-billion net availment backlog.”

Grants record poor

For grants, the data is not as rosy. Neda said the utilization level of active grants contracted in 2019.

Data showed the utilization level of the active grants reached $0.83 billion, posting a utilization rate of 51 percent against the total grant amount of $1.64 billion.

This reflected a 19-percentage-point decrease in utilization rate compared to the 70 percent posted in 2018.

In terms of physical performance, Neda said out of the 329 active ODA-assisted projects, which included 61 loan-assisted projects and 268 grant-assisted projects, only 62 projects or 19 percent were physically completed.

One project was ahead of schedule and 217 (or 66 percent of total) were on schedule.

Neda said 40 projects were behind schedule or 12 percent of the total; eight (less than 2 percent) have not yet started; and one project loan closed with incomplete outputs, or less than a percent of the total.

In terms of physical status, nine of the 61 loan-assisted projects were physically completed, one was ahead of schedule, 25 were on schedule, 17 were behind schedule, one closed with incomplete outputs, and eight have not yet started.

For the 268 grant-assisted projects, 53 were already completed, 192 were on schedule, and 23 were behind schedule.

Top donors

Data showed Japan provided the bulk of ODA assistance, accounting for a 39-percent share worth $8.51 billion for 41 loans/grants of the active ODA portfolio.

This was followed by the ADB with 26 percent worth $5.7 billion for 44 loans/grants; and the World Bank with 20 percent or $4.31 billion for 25 loans/grants.

Similar to CY 2018, the infrastructure development sector accounted for the largest share of the active ODA portfolio with 58 percent or $12.54 billion.

This was followed by the social reform and community development sector with 18 percent or $3.81 billion; and the governance and institutions development sector with 15 percent or $3.38 billion.

Other areas were agriculture, agrarian reform, and natural resources sector with 8 percent or $1.68 billion; and the industry, trade, and tourism sector with the remaining 1 percent or $0.20 billion.