WASHINGTON DC -- For the Philippine’s, the third try could be a charm. The country is edging closer to winning Compact status with the Millennium Challenge Corporation (MCC).

Earlier this month, the MCC formally notified the US Congress that it will be spending about $5.6 million to develop a Millennium Challenge Compact with the Philippine government, step no. 4 in a 7-tier checklist for the signing of a grant.

The Philippines is already in Threshold status, which allowed it to avail of $21 million in grants for graft-fighting programs in the Office of the Ombudsman and boosting revenue generation by the Department of Finance.

But the real prize is a Compact agreement because of the bigger amount involved.

“MCC funds will be used to finance the collection of baseline data for monitoring and evaluation activities for a community-driven development project, and detailed designs for two secondary national roads, including environmental and social assessments,” the MCC explained to the US legislature.

The MCC notification signals that it has selected projects it will finance in the Philippines. A source estimated the total tab for these projects will exceed $500 million.

“The uses of MCC funds will mitigate project implementation risks, yield accurate cost estimates and ensure adequate safeguards for proposed investments targeting the poorest areas of the country,” the MCC stated.

The congressional notification is the farthest the Philippines has reached in winning an MCC Compact.

Two earlier attempts were stumped by failing grades in the area of control of corruption. At the last grading period, the Philippines just barely missed the median by negative 0.01 percent.

Ambassador Willy Gaa blamed the second strike on a mix-up by reporting agencies which serve as the basis for the MCC’s country scorecards. The next report is due in November.

A ranking Philippine official, who asked not to be identified because he was not authorized to speak, told ABS-CBN News they were confident the Arroyo administration will pass the grade this time around.
Because the MCC procedure had focused attention on the Philippine’s problem with graft and corruption, an MCC Compact has become more important for a government eager to earn a respected American institution’s “seal of approval”.
    
Projects in the pipeline    
The MCC is looking into three projects submitted by the government.

“Three projects were selected for further development based on the analysis of the technical challenges presented by each concept, including project risk and possible risk mitigation measures, economic viability, and implementation preparedness,” the MCC said.

Secondary National Roads Development Project. The government proposes MCC funding for a rural road sector strategy involving the rehabilitation and upgrading of four secondary national roads spanning 280 kilometers.

It aims to promote economic growth to among the most undeveloped regions of the country, by providing access to center of agriculture and industrial activities, more reliable transport services and raising living standards of people living in these road corridors.

The project will be implemented by the Department of Public Works and Highways.

Kapit Bisig Laban sa Kahirapan-Comprehensive and Integrated Delivery of Social Services. Perhaps more easily recognized by its initials, the KC is a flagship poverty-fighting project of the Department of Social Welfare & Development.

They are community-driven activities where residents are trained to choose, design and implement projects that address their community’s most pressing needs.

The usual community projects include water systems, feeder roads, schools and health centers – that a World Bank-funded evaluation showed have relatively higher economic impact, with rates of return ranging from 16 to 65 percent.

“The MCC will explore ways to use private sector co-investment to leverage critical investment funds as part of the community empowerment process,” the agency declared.

Only the poorest municipalities will be eligible for MCC help.

Integrated Revenue Information System. The MCC grant aims to help the Bureau of Internal Revenue and Bureau of Customs to improve revenue collections, primarily through computerization.

This program is an offshoot of lessons learned by the Finance Department while it was implementing the MCC Threshold agreement.

 “The project will bring benefits to the Philippine economy. The project will reduce the private sector’s compliance costs and the public sector’s administrative costs…improved tax and customs revenue administration will be an important element of improving the business enabling environment,” the MCC said.

It stressed more revenues will allow the Philippine government to spend more for education, health and physical infrastructure.

The MCC is expected to finish its review of the Philippine projects in the next few months.

In addition to the Philippines, the other nations vying for an MCC Compact agreement next year are Malawi, Jordan and Senegal. Of these countries, only the Philippines flunked the corruption test (Jordan appears to have a failing grade on human rights categories).

The MCC review is scheduled to be ready by November, when it submits an Investment Memorandum for the Philippines. This will coincide with releasing the results of its country assessments for 2009.

MCC board of directors, headed by Secretary of State Hillary Clinton, will meet in December to deliberate and decide on the applications of the prospective Compact nations.

If it wins approval, as Philippine officials here appear to be confident of, the projects will be ready to come on-stream early next year. However, because of the campaign ban for new infrastructure, they may wait until after the May 2010 national elections.