This paper examines the institutional spillover effect, as observed in a port development projectfunded by foreign aid, using the Batangas Port Development Project in the Philippines as a case study. First, weexamined the project purposes, processes, and results by reviewing literature and interviewing local actors. Next,we focused on the key single event—i.e., a demolition—to identify institutional impact. In the project planningprocess, the local executing agency experienced difficulty in finding suitable relocation sites for affectedresidents. Together with some non-governmental organizations (NGOs), local residents started to oppose theproject. The donor requested that the executing agency find a peaceful solution in negotiations with oppositiongroups. Although the executing agency made great efforts to build consensus with the local opposition groups,including the introduction of an Inter-agency Committee, it finally conducted the demolition without notifyingthe donor. We examine in detail the behavior of the donor and recipient, to understand the reasons as to why thedemolition happened as it did. Finally, the role of the Inter-agency Committee and its limitations are discussed.