Corruption stalls RP’s MCC bid

WASHINGTON – The Philippines was thwarted in its bid to get a multimillion-dollar grant from the US Millennium Challenge Corp. (MCC) for failing to meet performance benchmarks, particularly control of corruption, but was allowed to continue the process of developing a compact grant in 2010.

It was the second straight year the Philippines failed to get a significant share of the US government‘s innovative foreign assistance program.

The MCC Board of Directors at its quarterly meeting here on Wednesday said in deciding to reselect the Philippines as compact eligible it took into consideration its indicator performance as a lower middle-income country as well as information that the Philippines would have met the criteria as a low income country.

The board stressed that clear commitment to and progress in the fight against corruption were critical for any country that hoped to enter into a compact with the MCC.

MCC provides well-performing countries with large-scale grants, referred to as compacts, to fund country-led solutions for reducing poverty through sustainable economic growth.

In Manila, Foreign Affairs Secretary Alberto Romulo said the Philippines was reselected compact eligible by the MCC Board of Directors chaired by US Department of State Secretary Hillary Rodham Clinton.

“The reselection reaffirms both MCC’s confidence in the Philippines’ high capacity as development partner and the Philippine government’s highest level of political commitment to good governance,” Romulo said.

This is the third time that the Philippines was endorsed as compact eligible under MCC’s Millennium Challenge Account (MCA) program.

The Board of Directors’ meeting was the first for new MCC chief executive officer Daniel Yohannes, who was sworn in on Tuesday by Secretary of State Clinton.

“We took the opportunity to review the status of MCC’s compacts, review the policy performance of our partner countries, and reaffirm the US government’s commitment to finding lasting and innovative solutions to global poverty,” said Yohannes.

The Philippines had hoped to sign a compact with the MCC in 2008 but a failing grade in “control of corruption” dashed its hopes.

This year it was confident it would overcome all hurdles but it failed in seven, including corruption, out of 17 policy indicators the MCC uses to determine which developing countries to select for grant assistance. In 2008 the Philippines failed in three out of the 17 indicators.

Explaining why the country received a worse report than before, government officials said this was because in 2008 the Philippines was graded as a low-income country (LIC) whereas this year it was graded as a lower middle-income country (LMIC) based on improved income per capita. Higher income countries are measured using more stringent standards.

To be able to sign a compact with MCC, developing countries must show their commitment to policies that promote political and economic freedom, investments in education and health, control of corruption, and respect for civil liberties and the rule of law.

At the Wednesday meeting the MCC board agreed to select Cape Verde as the first country eligible to develop a proposal for a second compact grant.

The board also agreed that Jordan, Malawi, the Philippines, Indonesia, and Zambia are eligible to continue the process of developing compacts in fiscal year 2010.

Since its inception in 2004, MCC has approved compacts totaling over $7 billion with 19 partner countries.

Last October MCC announced it would give Manila $5.5 million to help it complete environmental and social impact studies on investments and cost estimates for proposed projects to benefit the needy.

The Philippines is finalizing three projects estimated to cost $500 million for MCC compact financing – a Secondary National Development Roads (SNDR) project, Kapit-Bisig Laban sa Kahirapan-Comprehensive and Integrated Delivery of Social Services, and an Integrated Revenue Information System.

Clinton, in a visit to Manila last month, said that “the Philippines should not be penalized for its own success,” referring to the country’s income reclassification  from LIC to LMIC category, which affects MCC funding for its compact proposal under the MCA Act of 2003.

Congresswoman Sheila Jackson Lee (D-Texas) also observed that “despite the change in standards, the Philippines exceeds ten (10) out of the seventeen (17) indicators on the MCC scorecard.” She added that this development is remarkable given the shift in income classification. –Jose Katigbak, STAR Washington bureau (The Philippine Star) with Pia Lee-Brago, Philippine Star