The Department of Economy, Planning, and Development (DEPDev) has raised concerns over the sharp decline in the share of untied official development assistance (ODA) flowing into the Philippines, warning that the trend could reduce the flexibility and effectiveness of foreign-funded development projects.

In the Philippine Action Plan for Effective Development Cooperation published last Tuesday, July 14, DEPDev reported that the share of untied ODA to the Philippines plunged to just 29 percent in 2022 from 82 percent in 2018, marking one of the most significant findings of the country’s Fourth Monitoring Round under the Global Partnership for Effective Development Cooperation (GPEDC).

In development cooperation, untied aid refers to assistance that allows recipient countries to procure goods, services, and works from any qualified supplier instead of being required to purchase from firms based in the donor country. Such flexibility is generally seen as promoting greater competition, lowering costs, strengthening country ownership, and improving value for money.

According to DEPDev, lower levels of untied aid reduce procurement flexibility, limit competition, and may increase transaction costs. The report added that tied financing can also constrain the use of national systems and local suppliers, weaken value for money, as well as reduce opportunities to build domestic capacities and maximize local economic benefits.

DEPDev said the Philippines should focus on mitigating the impact of tied assistance by promoting greater transparency and structured dialogue with development partners.

“The gap is not simply the level of untied aid, but the absence of structured dialogue and transparency mechanisms that allow government to understand, manage, and negotiate the implications of tied assistance for national systems, costs, and results,” the report said.

To address this, the action plan calls for improving transparency in ODA procurement, encouraging equal opportunities for qualified local suppliers where appropriate, as well as integrating information on untied aid into existing government monitoring systems to better track how external financing is delivered and how it aligns with national priorities.

Beyond untied aid, the report found that the Philippines has built strong institutional foundations for effective development cooperation, including robust stakeholder engagement, transparent reporting systems, comprehensive development planning, and established accountability mechanisms. However, it said these strengths have yet to translate consistently into coordinated implementation and measurable development results.

Among the report’s key findings, development partners’ use of Philippine public financial management (PFM) systems declined to 63 percent, reflecting continued reliance by some donors on parallel budgeting, procurement, financial reporting, and audit systems because of perceived weaknesses in government processes.

The monitoring exercise also found that while annual ODA disbursements remain highly predictable, medium-term forward spending plans have weakened, making it more difficult for the government to align long-term development priorities with expected external financing.

On the positive side, the Philippines achieved full compliance in tracking and publicly disclosing gender-related budget allocations, maintained a comprehensive information management system (IMS) for development cooperation, as well as continued to provide broad public access to development cooperation information and progress reports.

DEPDev also noted that the Philippine Development Plan (PDP) 2023-2028, which serves as the Marcos Jr. administration’s medium-term socioeconomic blueprint, was formulated through an inclusive and results-oriented process. However, it said development partners’ use of country-owned results frameworks remains moderate, while monitoring data are still largely disaggregated only by sex, age, and geographic location, limiting assessments of outcomes for vulnerable sectors.

To strengthen development cooperation, the action plan outlines 20 priority actions, including establishing a unified development cooperation framework, reinforcing monitoring and evaluation (M&E) systems, advancing PFM reforms, improving data disaggregation, enhancing congressional oversight of development cooperation spending, strengthening mutual accountability, as well as expanding engagement with civil society and the private sector.

The report said these reforms are intended to strengthen country ownership, improve transparency and accountability, sharpen the focus on development results, as well as ensure that development cooperation contributes more effectively to the implementation of PDP 2023-2028 and the United Nations’ (UN) sustainable development goals (SDGs).