Linking foreign aid, infrastructure, and institutions: the case of the Philippines
Date
2018-05
Authors
Villegas, Aldrin V.
San Juan, Lei Andrea B.
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Abstract
Infrastructure plays a crucial role in economic growth and development. The Philippines,
however, has been significantly underinvesting in physical infrastructure. Infrastructure
underdevelopment in the country is thus a major contributor to hampered economic growth.
In financing large-scale infrastructure projects, the Philippines heavily relies on foreign aid
which, in many dimensions, is encapsulated by Official Development Assistance (ODA).
Despite this trend, local literature has yet to investigate the specific effects of the political
environment on the overruns incurred by ODA- funded projects. This study attempts to
provide a comprehensive literature review about the Philippine economic and political
environment, the country’s infrastructure program, and the historical and contemporary role
of ODA or foreign aid in today’s globalized world where the Philippines situates itself.
Likewise, empirical evidence is provided in this paper. By specifically using political
environment variables such as public trust and corruption perception, this study responds to
the need for empirical explanations on how politics affects dynamics in public infrastructure.
The study’s empirical section shows that project technical variables as well as ODA
investment level in the country have a greater effect on project outcomes than economic and
political factors. Overall, the study provides a good reference for exploring the situation of
foreign aid, infrastructure, and institutions in the Philippines.
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Keywords
Official Development Assistance, foreign aid, infrastracture, institutions, political environment, corruption