28 May 2008

The Philippines... Moving UP?

WASHINGTON D.C. - The head of America’s chief global poverty-fighting arm said indications of worsening corruption in the Philippines is blocking the way to hundreds of millions of dollars in additional help.John Danilovich, Chief Executive Officer of the Millennium Challenge Corporation (MCC), said they have “serious concerns” with corruption indicators for the Philippines.“The drop in performance was in fact very dramatic,” he told reporters during a briefing at the Foreign Press Center here on Wednesday, January 30.
The MCC, established in 2004 to administer the Millennium Challenge Account, is part of the US development assistance infrastructure that rewards countries “that have demonstrated commitment to implement political, social and economic reforms.”
The MCC has provided $5.5 billion to 16 “Compact” status nations and another $325 million to 15 “Threshold” status countries that include the Philippines.
Finance Secretary Margarito Teves is headed here for scheduled talks with Danilovich on Tuesday.
The Philippines’ grade in the area of “control of corruption” – one of 17 categories the MCC is looking at – fell from 76 percent in 2007 to only 57 percent at the start of 2008. It’s still a passing grade, but the drop is so worrisome to the MCC that it is setting aside the Philippine’s elevation from “Threshold” to “Compact” status.
“We want to understand more clearly why that dramatic drop has occurred so we can have some clarity as to whether or not this precipitous drop is going to continue or if there was some indicator irregularity or if there are further strong reforms the Philippine government needs to take in this regard,” Danilovich explained.
This new concept of development assistance arose from the 2002 Monterrey Summit where US President George W. Bush called for a “new compact for global development” linking contributions from developed nations to greater responsibility from developing countries.
Staying in “Threshold” status or moving up has immense ramifications for the Philippines. As a “Threshold” nation, it will receive $22.1 million this year to improve revenue administration and anti-corruption efforts. The program will specifically benefit the Office of the Ombudsman, Bureau of Internal Revenue (BIR), Bureau of Customs and Department of Finance.
Compare that amount – average for “Threshold” status nations – to countries that have made it to “Compact” status. Morocco will get nearly $688 million for fruit tree productivity, fisheries and artisan crafts; Ghana with $547 million to boost farmer incomes in that country’s poorest regions; Mozambique with $507 million to improve water systems, sanitation, access to markets, land tenure services and agriculture in targeted districts; Mali with $461 million to develop two of that nation’s key assets – its international airport and the Niger River, among others.
Charges d’Affaires Carlos Sorreta pointed out that the Philippines has been improving steadily to meet all the MCC benchmarks. These are grouped into three main subjects:
- “Economic Freedom” which measures fiscal and trade policies, inflation, regulatory quality, business start-up and land rights and access;
- “Investing in People” which measures natural resource management, girls’ primary education completion, primary education and health expenditures, and immunization rates; and
- “Ruling Justly” which measures rule of law, voice and accountability, political rights, civil liberties and control of corruption.
“We’ve improved across the board on practically all categories so we’re very close now to possibly Compact status. We passed that corruption indicator but it’s a competition to attain Compact status so they want us to improve more,” Sorreta said.
In 2007 the MCC gave failing grades to the Philippines in the fields of fiscal policy, business start-up, primary education expenditures, health expenditures and immunization rates. But at the start of 2008, that number had been trimmed to just three areas – fiscal policy, primary education expenditures and health expenditures.
Sorreta admitted that the MCC puts a premium on fighting corruption. While there has been marked improvement in “Economic Freedom” categories, and mostly maintaining 2007 levels for “Investing People”, indicators for “Ruling Justly” categories have fallen over the last year.
He explained that the MCC relies on “third party assessors” to evaluate how participating countries are faring in all its pre-determined benchmarks.
“Third party assessors don’t actually have hard evidence. I’ve seen their reports, they don’t have the kind of evidence that you can go to court with,” Sorreta averred.
He surmised that the deluge of negative media reports on Philippine corruption may have contributed to the MCC’s unfavorable outlook on the country.
“It’s really research, open sources. So the MCC in a sense of fairness is giving us the opportunity to address those things that were raised to them,” he added.
Regardless of how the Danilovich-Teves meet fares, the Philippines has already blown its chance to be elevated this year. The MCC board, headed by State Secretary Condoleeza Rice, meets again in the summer, and if the Arroyo administration can convince them the state of corruption in the Philippines is not as bad as it’s been portrayed, it may get another chance to move to the next level.

ABS-CBN North America News Bureau
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