The Society of Honor by Joe America

By Karl M. Garcia

Executive Summary: Financing Is Not Development

The Philippines has a development paradox.

It negotiates billions of pesos in foreign-assisted infrastructure financing, secures loans from international development institutions, announces ambitious railway systems, bridges, roads and water projects, and commits taxpayers to long-term repayment obligations.

Yet many projects remain behind schedule, some barely advance beyond preliminary work, and others encounter repeated procurement, right-of-way and implementation problems.

The financial consequences are increasingly difficult to ignore.

In 2025, the government incurred approximately ₱913.94 million in commitment fees on undrawn foreign loans, according to findings from the Commission on Audit (COA). Seven loans with zero drawdowns generated ₱150.62 million in fees.

Separately, the Department of Economy, Planning, and Development (DepDev) reported that 47 of 68 ongoing Official Development Assistance (ODA) projects, or 69.12%, were behind schedule at the end of 2025. Their combined approved cost was approximately ₱3.5 trillion.

These findings coincide with controversy over the House of Representatives’ approximately ₱130-billion reduction in the proposed 2027 allocation for Foreign-Assisted Projects (FAPs), prompting the Senate to seek restoration of funding.

The issue is bigger than a budget dispute.

It concerns the government’s ability to convert borrowed money into productive national assets.

The Philippines must move beyond measuring development by the amount of financing secured, the number of projects announced or the size of annual infrastructure appropriations.

The real measure is whether projects are properly prepared, competently implemented, completed on schedule and capable of delivering lasting economic and social benefits.

The country does not merely need more infrastructure financing. It needs the institutional capacity to make every peso of financing productive.

1. The ₱130-Billion Budget Reduction: A Development Financing Controversy

The proposed ₱7.2-trillion national budget for 2027 has generated controversy over substantial changes made between the executive’s National Expenditure Program (NEP) and the House-approved General Appropriations Bill (GAB).

One of the most consequential adjustments concerns Foreign-Assisted Projects.

According to Senate Finance Committee Chairman JV Ejercito, the House version reduced FAP allocations by approximately ₱130 billion.

The People’s Budget Coalition’s comparison, cited in Senate reporting, placed the original allocation at approximately ₱414.8 billion and the House version at ₱284.8 billion.

These figures should be understood as proposed budget allocations, not money already spent or loans already cancelled.

Nevertheless, the reduction raises legitimate questions about whether ongoing projects have sufficient funding to meet their implementation schedules.

Among the major developments affected are:

• Metro Manila Subway System
• North-South Commuter Railway
• Laguna Lakeshore Road Network
• Bataan-Cavite Interlink Bridge
• Davao Public Transport Modernization Project

These are not ordinary annual infrastructure activities. They are multiyear investments involving international financing agreements, government counterpart contributions, procurement schedules and contractual obligations.

Ejercito pledged to seek restoration of the affected allocations, particularly loan proceeds and government counterpart funding.

House leaders subsequently indicated openness to adjusting allocations following consultations with the Senate and implementing agencies.

However, openness to restoration is not yet actual restoration. The final appropriations must be examined in the bicameral conference committee and the enacted General Appropriations Act.

The House also defended its approach, arguing that appropriations should reflect actual implementation requirements rather than automatically provide large amounts to projects unable to spend them.

That argument deserves consideration.

A project that cannot absorb its allocation should not automatically receive additional funding. But reducing its budget without resolving the underlying implementation bottlenecks may simply postpone construction and increase costs.

The correct question is not whether every project should receive its original allocation regardless of circumstances.

It is whether the funding decision is supported by a transparent assessment of contractual commitments, project readiness, disbursement requirements and realistic construction schedules.

2. Loan Proceeds and Government Counterpart Funding Must Be Protected

Foreign-assisted infrastructure generally involves two important financing components.

First, foreign loan or grant proceeds.

These come from international development partners such as the Japan International Cooperation Agency (JICA), Asian Development Bank (ADB), World Bank and other bilateral or multilateral institutions.

Second, government counterpart funding.

These are Philippine government contributions that may finance land acquisition, taxes, utility relocation, local project components, administrative requirements and other eligible expenses.

Both are necessary for successful implementation, although their exact purposes depend on individual financing agreements.

Reducing counterpart appropriations can be particularly damaging when the government is responsible for acquiring land or completing preparatory work before contractors can proceed.

An international lender may have financing available, but the project can remain stalled if the government cannot deliver its own required contribution.

The reverse is also true: having counterpart funding does not guarantee progress when procurement, technical preparation or contractor mobilization remains incomplete.

There is also an important legal distinction.

An annual budget reduction does not automatically constitute a breach of an international loan agreement. The consequences depend on the specific agreement, disbursement conditions, government obligations and any applicable restructuring provisions.

However, the government cannot assume that reducing an annual appropriation automatically eliminates contractual responsibilities.

Congress and implementing agencies must therefore examine each affected project individually.

3. The Supreme Court Ruling: Fiscal Discipline Must Not Become an Excuse for Poor Planning

The 2027 budget controversy has another dimension: the Supreme Court’s October 2026 decision concerning unprogrammed appropriations.

The Court declared unconstitutional certain congressional increases to the 2024 and 2025 budgets and invalidated specified provisions governing the release of unprogrammed appropriations under the 2026 General Appropriations Act.

Importantly, the Court did not declare all unprogrammed appropriations unconstitutional.

Instead, it established safeguards.

Among these are:

• No lump-sum appropriations in unprogrammed appropriations.
• Clear and sufficiently defined funding conditions.
• Transparent prioritization when multiple purposes compete for available funds.
• Consistency with the national fiscal program.
• Recognition that new or additional revenue should generally support programmed expenditures, except where compelling reasons justify another treatment.

The Court expressly recognized foreign-assisted projects as a possible compelling reason for including certain expenditures under unprogrammed appropriations.

For 2027, the DBM proposed total unprogrammed appropriations of ₱111.984 billion, equivalent to approximately 1.6% of the total expenditure program.

During Senate budget discussions, DBM also identified ₱42.59 billion within this arrangement as funding support for pipeline foreign-assisted projects.

These figures must not be confused: ₱111.984 billion is the total proposed unprogrammed appropriation, while ₱42.59 billion is the reported FAP component.

Unprogrammed appropriations are standby spending authority, not automatically available cash. Their release depends on legally prescribed conditions.

This creates an important policy question.

Should ongoing infrastructure projects with existing financing agreements depend on contingent appropriations when their implementation requires predictable annual counterpart funding?

Where funding requirements are already known and predictable, programmed appropriations generally provide greater certainty.

Unprogrammed appropriations may have a legitimate role, but they should not become a substitute for proper budget preparation.

The objective should be constitutionally compliant, transparent and dependable financing.

4. ₱913.94 Million in Commitment Fees: The Cost of Not Using Borrowed Money

Perhaps the most disturbing finding is the government’s commitment-fee burden.

According to COA’s 2025 Consolidated Audit Report on ODA-Funded Programs and Projects, the government incurred approximately ₱913.94 million in commitment fees on undrawn foreign loans during 2025.

Seven loans with zero drawdowns alone generated approximately ₱150.62 million in commitment fees.

A commitment fee is a charge imposed by a lender for keeping an agreed loan facility available but undrawn, subject to the terms of the financing agreement.

It is different from interest on loan principal already disbursed.

The distinction matters.

The government may have negotiated financing for a legitimate development project, but if procurement, land acquisition or other requirements prevent the funds from being used, the financing arrangement may still generate costs.

These fees are not automatically evidence of corruption or illegal expenditure.

However, they represent a real financial burden arising from the gap between financing arrangements and implementation performance.

The government must therefore ask a fundamental question:

Why are taxpayers paying to maintain access to financing that implementing agencies are unable to use on schedule?

The problem is not necessarily borrowing itself.

Foreign-assisted financing can provide access to long-term capital, technical expertise, engineering standards and international development experience.

The problem is borrowing without sufficient implementation readiness.

5. Seven Loans With Zero Drawdowns: A Particularly Serious Warning

The seven loans with no recorded drawdowns are especially revealing.

Despite the absence of withdrawals, these loans generated ₱150.62 million in commitment fees.

The projects associated with the loans included:

• Cebu Bus Rapid Transit
• EDSA Greenways
• Davao Public Transport Modernization
• Bataan-Cavite Interlink Bridge

This does not mean that every associated project received no government expenditure from any source.

It means that the specific loans identified by auditors had recorded zero drawdowns during the reporting period.

Nevertheless, the finding raises questions about project readiness, procurement schedules and the timing of financing agreements.

Before entering into future loan arrangements, the government should establish whether the implementing agency has:

1. Completed adequate feasibility studies.
2. Secured necessary project approvals.
3. Identified and substantially resolved right-of-way requirements.
4. Prepared engineering designs and procurement documents.
5. Established realistic construction schedules.
6. Secured counterpart funding.
7. Established a competent project implementation unit.

The sequence matters.

Financing should support a project that is ready to advance, not become a substitute for completing the preparations necessary to make it implementable.

6. Seven in Ten ODA Projects Remain Behind Schedule

DepDev’s 2025 ODA Portfolio Review offers another picture of the implementation problem.

Of 68 ongoing ODA-assisted projects:

• 47, or 69.12%, were delayed.
• 21, or 30.88%, were on schedule.
• Their combined approved cost was approximately ₱3.5 trillion.

The average delay among projects with available data was 30.91 months, compared with 38.84 months in 2024.

The median delay was 17.47 months.

Transport projects experienced the longest average delays, at 51.50 months.

The report also identified 44 projects with implementation risks requiring attention, including projects at critical and early-warning stages.

These figures should be distinguished from COA’s separate finding that 52 of 62 ongoing foreign loan-funded projects missed their end-2025 progress targets.

The two reviews cover different project populations and should not be combined into one statistic.

Nevertheless, both point toward a recurring institutional weakness.

The Philippines can secure development financing, but too many agencies struggle to translate approved projects into timely implementation.

7. Cebu Bus Rapid Transit: When Project Preparation Becomes the Bottleneck

The Cebu Bus Rapid Transit project illustrates the consequences of prolonged implementation difficulties.

Designed to improve public transportation in Cebu City, the project has experienced serious delays involving land acquisition, site access and procurement.

According to DepDev, its physical accomplishment stood at only 11.43% at the end of 2025.

Its recorded delay reached 132.96 months.

COA reporting also identified approximately ₱82.07 million in commitment fees associated with the project.

The problems included right-of-way difficulties involving Cebu provincial government-owned lots, a cease-and-desist order and procurement delays affecting remaining civil works packages.

These figures are historical measurements at the end of 2025, not a claim that no progress occurred afterward.

Nevertheless, they demonstrate the consequences of inadequate project preparation and unresolved implementation issues.

A public transportation project should not spend years struggling with the very requirements that should have been substantially resolved before full implementation.

Land acquisition, relocation, compensation, utility coordination and procurement must be treated as integral components of project preparation.

They are not administrative details that can simply be postponed until construction begins.

8. EDSA Greenways and Davao Transport Modernization: Financing Must Translate Into Results

The EDSA Greenways project and Davao Public Transport Modernization Project also illustrate the difficulties of converting international financing into completed infrastructure.

EDSA Greenways is intended to improve pedestrian access and connectivity around major railway stations in Metro Manila.

Davao’s modernization program seeks to improve public transportation through a more organized and integrated system.

Both have important public benefits.

But the government must distinguish between financing approval, loan effectiveness, procurement, construction commencement and operational completion.

These are separate milestones.

A project should not be reported as substantially progressing simply because financing has been secured or a groundbreaking ceremony has been held.

Agencies should publish actual physical accomplishment, financial disbursement, procurement status and revised completion dates.

The public needs to know what has been delivered, what remains unfinished and what obstacles continue to prevent implementation.

9. Bataan-Cavite Interlink Bridge: Financing Must Be Matched With Construction Readiness

The Bataan-Cavite Interlink Bridge represents one of the Philippines’ most ambitious connectivity projects.

Its proposed connection across Manila Bay could strengthen access between Central Luzon and CALABARZON, reduce dependence on routes through Metro Manila and improve regional economic integration.

But a bridge of this scale requires extensive engineering, environmental assessment, procurement and coordination.

Its financing arrangements must be supported by realistic construction packages and clear implementation milestones.

Its inclusion among projects associated with zero-drawdown loans should prompt questions about financing utilization and readiness.

It should not, however, be interpreted as proof that the entire bridge project has been abandoned or that all preparatory activities have stopped.

The government’s obligation is to disclose the precise status of each financing component and construction package.

For a project of this strategic importance, delays should be explained, addressed and independently monitored.

10. Angat Water Transmission and Metro Manila Interchanges: When Restructuring Becomes Necessary

COA also reported approximately ₱15.59 billion in reductions to foreign loan commitments across ten ODA loans during 2025.

Two significant examples involved:

Angat Water Transmission Improvement Project

Approximately ₱6.18 billion in loan commitments were reduced amid problems involving contractor performance and procurement.

The project is important to the reliability of water transmission infrastructure.

Metro Manila Interchange Construction Project Phase VI

Approximately ₱2.82 billion in commitments were reduced.

The project experienced design conflicts, rail alignment issues and unsuccessful bidding.

COA reported that its progress had advanced only to consultancy-related activities roughly a decade after the loan became effective in 2015.

The cancelled financing balance represented approximately 94.92% of its original loan commitment.

These reductions must be understood correctly.

They represent reductions in available loan commitments, not equivalent amounts of cash stolen or commitment fees paid.

Nevertheless, they demonstrate the financial consequences of prolonged implementation difficulties.

When a project repeatedly fails to advance, the government must determine whether to redesign, restructure, rebid, replace contractors or terminate the arrangement.

Continuing to preserve an ineffective financing structure without a credible recovery plan is not responsible project management.

11. Kaliwa Dam: The Risks of Financing That Expires Before Construction Is Finished

The Kaliwa Dam illustrates another dimension of the problem.

The China-funded loan closed in May 2025 before the planned project work was completed.

The government had sought an extension from China Eximbank but did not secure the necessary agreement before the financing closed.

The Metropolitan Waterworks and Sewerage System subsequently proposed having private water concessionaires finance the remaining 85% of the civil works contract.

This is not simply a question of international borrowing.

It is a question of financing continuity.

Major water infrastructure projects require predictable financing throughout their construction period.

When loan validity expires before completion, the government must identify alternative funding, renegotiate arrangements or restructure the remaining work.

The closure of the original financing does not automatically mean the entire project has been abandoned.

But it does create additional questions concerning financing, implementation schedules and the ultimate cost to water consumers.

The Philippines needs a more systematic approach to ensuring that project timelines, loan validity and construction schedules remain aligned.

12. Why These Problems Keep Recurring

The recurring causes of project delays are not particularly mysterious.

They include:

A. Poor project preparation

Some projects enter financing and implementation stages without sufficiently mature engineering designs, completed feasibility studies or resolved land acquisition requirements.

B. Right-of-way acquisition

Land acquisition and compensation disputes delay roads, railways, bridges and other infrastructure.

C. Procurement bottlenecks

Poorly prepared bidding documents, unsuccessful procurement, lengthy evaluations and contractor disputes postpone construction.

D. Weak project management

Some implementing agencies lack sufficient technical personnel, project management expertise and institutional continuity.

E. Inadequate inter-agency coordination

National agencies, local governments, utilities, regulators and international financing institutions often have interdependent responsibilities.

F. Budget uncertainty

Changes in annual appropriations and delays in releasing counterpart funding can disrupt implementation.

G. Contractor performance

Financial difficulties, inadequate equipment, insufficient manpower and weak technical capacity can undermine construction schedules.

H. Unrealistic timetables

Political announcements and ambitious completion targets sometimes get ahead of actual engineering and procurement realities.

These are not isolated administrative inconveniences.

They reflect a deeper shortage of government implementation capability.

13. The 2027 Budget Must Protect Both Project Readiness and Fiscal Accountability

The Senate’s effort to restore FAP funding should not become an automatic endorsement of every allocation.

The House is also right to demand evidence that agencies can actually implement the projects they seek to fund.

The solution is a project-by-project review.

For every major foreign-assisted project, Congress should require:

• The original NEP allocation and House GAB allocation.
• The amount of committed foreign financing.
• The amount of government counterpart funding required.
• Loan effectiveness and validity dates.
• Actual disbursements and undrawn balances.
• Physical accomplishment and financial utilization.
• Right-of-way and utility relocation status.
• Procurement and contractor performance.
• Revised implementation and completion schedules.
• Outstanding commitment fees and other financing charges.

The public should be able to distinguish between a project that needs additional funding to accelerate construction and one that needs administrative intervention before more money is appropriated.

A project that is ready to proceed should not be deprived of necessary funding simply because another project under the same agency has performed poorly.

Conversely, an agency should not be rewarded with larger appropriations without demonstrating implementation capacity.

The principle should be straightforward:

Fund projects that are ready, resolve the bottlenecks of projects that are not, and restructure or discontinue those that are no longer viable.

14. From Project Monitoring to a National Infrastructure Delivery System

The Philippines needs to move beyond fragmented project monitoring.

It needs an integrated national infrastructure delivery system connecting budget preparation, project preparation, financing, procurement, construction, auditing and evaluation.

A practical framework should have six components.

1. Project readiness assessment

Before financing and procurement, agencies should demonstrate technical, financial, legal, environmental and institutional readiness.

2. Unified project monitoring

DBM, DepDev, COA and implementing agencies should use compatible project identifiers and reporting standards.

Every major project should have an accessible record of:

• Approved budget.
• Loan commitments.
• Counterpart funding.
• Disbursement.
• Physical accomplishment.
• Procurement status.
• Delays and causes.
• Revised completion dates.

3. Early-warning mechanisms

Projects should be flagged before delays become severe.

A project missing procurement, land acquisition or construction milestones should trigger corrective action rather than merely appear in the following year’s audit report.

4. Accountability for implementation

Project directors and responsible officials should be evaluated against documented responsibilities and achievable milestones.

Accountability should distinguish negligence, poor management, unavoidable external circumstances and deliberate misconduct.

5. Independent project evaluation

Major projects should undergo periodic technical and financial reviews.

Where appropriate, independent engineers and qualified third-party evaluators should validate reported accomplishments.

6. Institutional continuity

Project implementation should survive changes in administration, department leadership and political priorities.

Technical personnel, project records, procurement documentation and institutional knowledge must remain intact.

This is how infrastructure development becomes a continuing national capability rather than a succession of political announcements.

15. From Borrowing Capacity to National Development Capability

International development partners provide more than money.

They can provide engineering expertise, institutional training, technology transfer, environmental standards, procurement practices and project management experience.

But these benefits are not automatic.

The Philippines must deliberately absorb and develop these capabilities.

Foreign-assisted projects should strengthen domestic engineering firms, Filipino contractors, local suppliers, skilled workers, technical institutions and regional industries.

The multiplier of a project should therefore be measured beyond its immediate construction output.

It should include:

• Infrastructure completed.
• Travel and logistics costs reduced.
• Local employment generated.
• Domestic supplier participation.
• Skills and technical expertise developed.
• Technology and management practices transferred.
• Regional economic opportunities created.
• Long-term maintenance capability established.

This is the difference between financing infrastructure and building a productive economy.

A railway should not merely connect destinations. It should improve labor mobility, regional productivity and access to economic opportunities.

A bridge should not merely shorten travel time. It should strengthen trade, logistics, investment and regional integration.

A water project should not merely increase supply. It should improve water security, industrial reliability and public health.

The ultimate objective is to transform infrastructure investment into accumulated national capability.

16. A Practical Reform Agenda

The government should adopt a coordinated reform program.

Within 100 days

• Publish a consolidated inventory of all major FAPs.
• Identify loans with zero or low disbursements.
• Reconcile commitment fees with actual undrawn balances.
• Identify projects whose loan validity or counterpart funding is at risk.
• Publish the status of right-of-way acquisition and procurement.

Within one year

• Complete readiness assessments for major pipeline projects.
• Establish project-specific recovery plans.
• Resolve priority procurement and land acquisition bottlenecks.
• Review persistently delayed projects for restructuring or cancellation.
• Establish public dashboards for physical and financial accomplishment.
• Require agencies to explain substantial variances between programmed budgets and actual utilization.

Over the medium term

• Build permanent professional project management units.
• Strengthen domestic engineering and construction capabilities.
• Institutionalize independent technical reviews.
• Align loan validity, procurement and annual appropriations.
• Develop a national infrastructure delivery framework that survives administration changes.

The objective should be measurable: fewer avoidable delays, lower financing costs, higher utilization of approved loans and more infrastructure completed within realistic schedules.

Conclusion: The Real Measure of Development Is What the Country Can Actually Deliver

The Philippines does not suffer from a shortage of infrastructure announcements or development financing proposals.

It suffers from a persistent gap between what the government commits to build and what it can actually deliver.

The 2025 findings are sobering.

DepDev reported that 47 of 68 ongoing ODA projects were behind schedule, representing 69.12% of the monitored portfolio.

COA separately reported approximately ₱913.94 million in commitment fees on undrawn foreign loans.

Seven loans with zero drawdowns generated ₱150.62 million in fees.

The Cebu BRT had reached only 11.43% physical accomplishment at the end of 2025, after a delay of nearly eleven years.

Meanwhile, Congress is debating substantial changes to the funding of foreign-assisted projects in the proposed 2027 national budget.

These are not disconnected controversies.

They point to a common institutional problem: the inability to consistently align financing, preparation, procurement, implementation and accountability.

The government must protect legitimate international commitments without treating every proposed allocation as automatically justified.

Congress must scrutinize budget changes without inadvertently disrupting projects that are ready to proceed.

Implementing agencies must demonstrate that they can convert financing into actual construction.

International development partners must also remain engaged in helping resolve implementation bottlenecks and strengthening domestic institutional capabilities.

And taxpayers deserve transparent explanations whenever projects are delayed and financing costs accumulate.

The deeper lesson is that development cannot be measured by how much the Philippines borrows, how many projects it announces or how much it appropriates.

It must be measured by what the country can build, operate, maintain and continuously improve.

From financing to implementation. From projects to systems. From borrowed capital to accumulated national capability.

The Philippines must become a country that does not merely know how to secure financing for development, but knows how to deliver development.

Because every delayed project has an economic cost, every unused loan has a financing cost, and every unfinished infrastructure commitment represents a public benefit postponed.

The objective is not to borrow more. It is to build better, deliver faster, spend responsibly and develop a government capable of turning every legitimate investment into lasting national progress.