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Economic Planning Secretary Ralph Recto said the government would do well to tap more official development assistance (ODA) from China and other bilateral lenders rather than take commercial debt amid rising interest rates brought on by the global financial turmoil.

China, with an estimated trillion dollars in reserves, offers relatively cheap loans, Recto said.

ODA loans normally carry an annual interest rate of 2.0 or 3.0 percent. Commercial loans cost twice or thrice as much.

“We have to improve our relations with China, which is the biggest lender to the United States. If we can get concessional loans from China, why not do so?” Recto said, when asked about his policy stance on loan agreements with China.

He said that although some China-funded projects in the past were tainted with corruption issues, these should not stop the Philippines from seeking loans from the Chinese government.

One such project was a $329-million national broadband network for the government that was to be funded by a loan from the Chinese government and done by Chinese firm ZTE Corp. The project was canceled amid allegations of corruption.

Recto agreed that government agencies should be made to comply with the prescribed procurement process to prevent controversies like that involving ZTE from happening again. But he said such controversies should not prevent the government from getting loans from China.

The National Economic and Development Authority, which Recto heads, is tasked with studying the economic and social gains of proposed ODA-funded projects, but the concerned government agencies are in charge of project implementation. Monitoring the implementing agencies should also be intensified, Recto said.

The government’s 2009 borrowing program amounts to $2.5 billion, with commercial loans at $1.0 billion and ODA of $1.5 billion.

Recto said the government should rethink its borrowing program, given rising interest rates on commercial loans a result of the current global financial crisis. Edited by INQUIRER.net

• Top officials eye rise in cash subsidy
• Forex stock down to $2.7B in September
• SMIC sells San Miguel stake for P27B
• Bankers ratify steps vs global crisis
• BSP acts to help ease pressure on peso
• Learn lesson from NBN deal, govt told
• Recruiters seek tax breaks
• Banks agree to limit dollar holdings
• Crisis stops RP-Spain labor deal renewal

• RP raises $1.5B from int’l bond offering
• Shares slide 1.66% lower
• Economic crisis fears return
• Forex reserves as record $37.1B
• RP less vulnerable to crisis, says Fitch
• NFA rice procurement highest since 1979
• Treasurer sees drop in interest rates
• HK fund buys 13% of Alliance Tuna
• Philex reports P800-M output