US defers Philippine grant amid rule of law, rights issues

MANILA, Philippines - The US-led Millennium Challenge Corp. (MCC) has suspended a funding grant for the Philippines over “concerns around rule of law and civil liberties” under the Duterte administration.

In a statement last Wednesday, the MCC said it has “deferred a vote on the re-selection” of the country for another compact grant, “subject to a further review.”

No other details about the Philippines were released. Meanwhile, Burkina Faso, Sri Lanka and Tunisia were granted compact aid for the first time.

In 2011, MCC gave the Philippines $434 million to finance three projects on boosting revenue collection efforts, strengthening poor communities and developing national roads.

Socioeconomic Planning Secretary Ernesto Pernia downplayed MCC’s decision, saying the Philippines has other development partners.

The Bureau of Internal Revenue, the Department of Social Welfare and Development and the Department of Public Works and Highways utilized the first grant.

Even before the program’s conclusion last May, the country was already rated as eligible to develop a new set of projects for a new grant, which MCC had said would focus on boosting agriculture and competitiveness.

“(The first) compact is a strong example of how the US and the Philippines worked together to unlock economic growth and lift people out of poverty,” the US embassy said last October.

“A second compact would try to invest and leverage resources for significant impact on a more focused scope,” it added. The deferred program was also targeted to run for five years.

MCC evaluates potential recipients of funding using separate metrics for economic freedom, investment of people and rule of law.

Washington has criticized Duterte’s war on drugs, which has killed thousands and unleashed human rights violations, with victims mostly from the slums.

Duterte has repeatedly lambasted critics of his vicious war on drugs, including the United Nations, the European Union and even US President Barack Obama. He had threatened to sever ties with the US only to backtrack later.

The US is the country’s fourth biggest lender as of 2014, accounting for eight percent of the country’s total loans, according to data from the National Economic and Development Authority (NEDA).

Pernia, who is also NEDA chief, said the MCC decision would have little impact on development efforts.

“There are many offers of assistance from other countries and development institutions like AIIB,” he told reporters yesterday, referring to the Beijing-led Asian Infrastructure Investment Bank.

The AIIB, regarded as the rival of the World Bank, has also promised greater speed and ease in obtaining financing for projects.

Pernia said countries like Japan, China and South Korea are scouting for projects to invest in.

“They are all searching for projects. They do not want to be left behind in terms of participating in this big push in the next six years,” he pointed out.

“I don’t think they would link their programming to whatever MCC would say,” he added.

Last week, the Senate ratified the agreement between the Philippines and the AIIB, paving the way for the country’s full membership in the funding institution.

Last Tuesday, national treasurer Roberto Tan said the government might seek up to $500 million in funding on its first year with AIIB to finance a rapid bus transit system and a flood control project in Manila.

“It’s really more symbolic in terms of the confidence of those behind the MCC rather than that thing having a real impact on the economy,” Pernia said of the MCC decision.

“It’s not going to be anything of significance. And given amounts of investments that many countries are interested in putting in, I would not lose sleep over that,” he said in a briefing yesterday.

“The (AIIB) resident was here the other day and he was trying to sell AIIB assistance, trying to say that they are going to be different from the World Bank and the ADB in terms of speed of approval,” Pernia revealed.

“He said that while the World Bank project will take three years to process, they can do it in six months or less than a year,” the NEDA chief said of the message relayed by the AIIB representative, whom he did not name.

“He was practically offering us on a silver platter the assistance that they provided at AIIB,” Pernia maintained.

The AIIB has 57 member-countries, 37 of which are in Asia. It was formally established in November 2014 when 22 Asian countries gathered in Beijing to sign a memorandum of understanding on the creation of the multilateral institution, which has an authorized capital stock of $100 billion.

It aims to boost lending for infrastructure projects in the Asia-Pacific region, including energy, urban construction, transportation and logistics as well as education and healthcare.

The government has set aside P4 billion in the proposed budget for 2017 as the Philippines’ initial contribution to the AIIB. – with Czeriza Valencia