Philippines fails to get MCC nod

Posted at 12/10/09 5:44 PM

WASHINGTON DC, United States -- The Arroyo administration would not be getting a Compact Agreement with the Millennium Challenge Corporation (MCC) that could have been worth as much as $300 million.

The MCC board met here Wednesday presided by US Secretary of State Hillary Clinton, who chairs the corporation, and Daniel Yohannes, its new chief executive officer.

The Philippines graduated this year from a low-income to lower-middle-income country.

The MCC board acknowledged the Philippines could have passed performance standards if the Philippines remained in the low income category.

“Graduation to a higher income category can impact a country’s indicator performance, while not necessarily reflecting a change in policy performance,” the MCC said.

The MCC said the Philippines can still get a Compact Agreement provided it improved its grades, especially the fight against corruption. The Arroyo administration, however, fared badly in this year’s MCC country evaluations.

“The board stressed that clear commitment to and progress on the fight against corruption are critical for any country that hopes to enter into a compact with MCC,” the MCC said.

The State Department had already sought funds from the US Congress for the Philippines anticipating it would get the MCC Compact Agreement in 2010.

Flunked test

Back in November, the Arroyo administration was reported to have flunked anew the MCC's corruption test. (Read: Arroyo administration flunks corruption test anew)

Philippines' Foreign Affairs Secretary Alberto Romulo had quickly blamed "technicalities in evaluation" for the country's poor showing, which casts a cloud on prospects for winning up to $500 million in poverty- and corruption-fighting grants.

Romulo had explained that the Philippine's failing grades was the result of the MCC's decision to move it from the list of Low-Income Countries (LICs) to the list of Lower Middle-Income Countries (LMICs), where standards are slightly higher. He pointed out that the Philippines' Control of Corruption indicator actually improved from 39th to 33rd among LICs.

The MCC median indicators for the Philippines did increase in most categories but it appears to be unchanged in the corruption category.

In 2008, MCC officials told ABS-CBN News that the Control of Corruption indicator was "crucial", that it would be difficult to win additional funding even if the Philippines passed all other indicators, if it flunked the corruption test.

"We have to know the money will go where it's supposed to," one official said at the time.

The Philippines has been working to win Compact Status since 2008. The country is more than half-way through the steps needed for signing a Compact Agreement with the MCC.

In a visit to the Philippines last November, Clinton she was hopeful that the MCC will reselect the Philippines as Compact-eligible.

Hurdling the MCC test has become a quest for the Arroyo administration, whose image was hurt from reports of lavish dinners during the President's last trip to Washington DC and New York, lingering questions about alleged billion-peso deals in China and elsewhere, and expensive properties in the US and Philippines.

An MCC agreement could have been seen as a US "seal of approval" for the Arroyo administration.

It was the last chance to prove her most rabid critics wrong in the last months of her administration.

The next time the MCC takes a look at the Philippines, the country will have a new president.

The MCC is already investing over $5 million to develop 3 projects selected from an original list of 5 projects that the Philippines submitted for funding.

The projects are the rehabilitation and upgrading of 4 road networks that traverse the poorest regions of the country; expansion of an existing World Bank-supported program that promotes community improvements and livelihood opportunities in the poorest municipalities; and building a revenue information system to fight corruption and help government raise the resources needed to improve basic services.

However, the Philippines is competing with other Compact-eligible countries to win MCC funding.