MCC defers compact grant after May polls

WASHINGTON – The US Millennium Challenge Corp. has rained on President Arroyo’s parade.

It has deferred, until a new government is installed in Manila, a compact agreement for a $584-million grant to the Philippines spread over five years to finance major projects to reduce poverty through economic growth.

The postponement came as a surprise to Philippine embassy officials who were optimistic an agreement would be announced after the MCC’s quarterly board meeting on Wednesday and signed during Mrs. Arroyo’s visit to Washington for a nuclear security summit on April 12-13.

Jesus Estanislao, founding chairman of the Institute of Solidarity for Asia, said he was surprised by the MCC’s announcement which came a day after he told a press briefing that a deal would be signed next month.

“We have no information on the matter. Nobody made mention of that,” he said.

Philippine ambassador to the US Willy Gaa said he was disappointed, particularly since the Arroyo administration had reached the necessary benchmarks set by the MCC for the proposed compact.

“I am personally disappointed at the delay but heartened that the MCC has acknowledged our hard work and commitment in developing the compact proposal. I am confident an agreement will be signed in due time,” he told The STAR in an interview.

In a statement after the board meeting chaired by Secretary of State Hillary Rodham Clinton, MCC said it deferred final consideration of the agreement until after the May elections in the Philippines to secure the new government’s commitment to the ideals and principals of MCC and to the compact’s objectives and implementation.

“We will look to the incoming Philippine government to demonstrate its commitment to MCC principles and the compact before final consideration,” said MCC chief executive officer Daniel Yohannes.

To sign a compact with the MCC, developing countries must score well on 17 policy indicators that promote political and economic freedom, investments in education and health, control of corruption and respect for civil liberties and the rule of law.

In 2008 the Philippines failed in three of the indicators – control of corruption, health expenditure and primary education.

Last year it flunked in seven indicators but this was chiefly because the Philippines had “graduated” from a low-income country (LIC) to a lower middle-income country (LMIC) based on improved income per capita.

In other words, the Philippines was a victim of its own success because had it remained an LIC it would have passed, government officials said.

Analysts said optimism that the MCC would announce the selection of the Philippines as a compact partner on Wednesday was not misplaced.

They pointed out that the MCC signed a $3.55-million grant with the government last month to recruit a procurement agent, develop the compact procurement strategy, create a bid challenge system, and provide a training program to prevent procurement fraud, supposedly the final steps in the compact development process.

Arroyo has been a strong lobbyist for the innovative US government assistance program and it would have been a feather in her cap had the agreement been signed during her watch, analysts said.  

The proposed five-year compact with the Philippines would include the expansion of a community-based rural development program called Kalahi-CIDSS focusing on poor areas and expected to benefit over five million people at a cost of $250 million.

The compact also would include construction and rehabilitation of the 220-kilometer Samar Road to improve access to markets and services for farmers, fishermen and small enterprises in some of the poorest provinces in the Philippines at an estimated cost of $187 million.

Finally, it would assist in the redesign and computerization of key business processes in the Bureau of Internal Revenue (BIR) at a cost of $147 million to increase the efficiency and sustainability of revenue collection while reducing opportunities for corruption.  – With Elisa Osorio