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Philippines
The Development Challenge: Corruption and conflict continue to limit the Philippines' economic and social development, impeding badly needed investment and growth. Forty-six percent of the population lives on $2 per day or less, and the country continues to fall further behind its neighbors on key economic and social indicators. This is aggravated by an alarming rate of population increase (2.4%), continued resistance by some vested interests to badly needed reforms, and steady degradation of the country's natural resource base. While the Philippines is one of the United States' most important allies in Southeast Asia in the global war on terror, it is also a fragile state.
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Nevertheless, it has maintained its vibrantly participatory democratic institutions and its market-based economic system, as well as its historic ties with the United States. The country made some important strides forward in the past two years, and President Arroyo's strong and consistent support for President Bush's efforts in the global war on terrorism was complemented by reciprocal state visits and the Philippines being declared a major non-NATO U.S. ally in 2003.
The USAID Program: USAID/Philippines' assistance is organized around five strategic areas: the Muslim separatist conflict in Mindanao; corruption and poor economic governance; damaging mismanagement of the Philippines' unique natural resources; serious deterioration in quality and access to education; and the impacts on health and economic growth of the high number of unwanted pregnancies, the recent resurgence of tuberculosis, and potential vulnerability to HIV/AIDS. Reducing corruption and mismanagement through decentralization, private-sector involvement, and administrative reform are cross-cutting implementation approaches for all areas. Assistance in all five areas has focused on the conflict-affected areas of Mindanao since the resurgence of fighting in early 2000 and the events of September 11.
USAID has an exceptionally close working relationship with both local and national figures working to manage the long-running Muslim separatist conflict in Mindanao and the Sulu Archipelago. USAID's program will, by 2005, have assisted every one of the 25,000 former combatants of the Moro National Liberation Front who need assistance to reintegrate themselves into the economy. The U.S. Department of State distributed a video presentation of this program worldwide as a model for U.S. relations with the Islamic community. USAID is fully prepared to implement a similar assistance package for the Moro Islamic Liberation Front should a peace agreement be signed.
Economic and social conditions are fundamental factors underlying extremism and conflict in the Philippines. Therefore, in addition to providing assistance to re-integrate former combatants into the economy, USAID is addressing economic growth and job creation in Mindanao in other ways. Microfinance field programs are achieving dramatic successes by helping rural banks lend to micro enterprises profitably by using local resources to implement lending programs based on international best practices. Working through private producers' associations, commodity development programs have increased farmer incomes by successfully moving farmers into new higher value-added crops. Programs to strengthen economic governance are helping communities increase forest and coastal zone productivity to enhance basic food security. USAID has continued and expanded community infrastructure construction. As conflict-affected communities benefit from these interventions, USAID's new education program is the stepping stone to the future for the next generation. The United States is already providing books, teacher training in English, and computers and computer literacy training to elementary/high schools in conflict-affected communities in Mindanao. These and other education activities underway will help counter inadequate, extremist teaching taking place in some of the hundreds of private "madaris" that have sprung up in the southern Philippines. They will also help build a truly pluralistic democracy by preparing the poor in the conflict-affected areas to take advantage of growing economic opportunities. USAID is also giving increasing priority to the conflict-affected areas of Mindanao in its health, environmental, and energy programs.
Nationally, the continued failure of the Philippine economy to attain the success achieved elsewhere in the region has turned the spotlight onto governance factors and corruption, especially after former President Estrada's downfall in 2001. USAID is developing transparency and accountability improvement programs in government agencies to address areas of their operation that are vulnerable to corruption, such as revenue administration, government procurement, and judicial strengthening.
USAID supports both governmental and non-governmental stakeholders in reform efforts in regulation of public utilities, including electricity, telecommunications, ports, and airlines, where governance is especially weak. USAID provides critical technical assistance for an energy-sector reform program that may be a make-or-break initiative for an economy confronted with high electricity prices, looming power shortages, and investor skepticism. USAID also provides technical assistance for reforms that are vital to the transition to less-polluting and renewable sources of energy and improved air quality, including promotion of natural gas vehicles for the transportation sector. USAID approaches environmental management, in Mindanao and nationally, as a governance issue. Assistance, therefore, emphasizes strengthening transparency and accountability in local governance to more effectively manage natural resource use rights (often vested in communities), especially for threatened resources.
USAID's assistance for health recognizes the Government of the Republic of the Philippines' (GRP) devolution of responsibility to local levels of government for family planning, maternal and child health care, TB and HIV/AIDS management, and food fortification and thus works to strengthen the capacity of local government to provide health services. USAID is also breaking new ground in finding innovative ways to stimulate the private commercial sector to play a greater part in improving access to quality health services for those who can afford to pay, even in non-traditional areas such as family planning and tuberculosis management, thus relieving the burden on the public sector to provide these services. USAID is also seeking ways of financing health care through internal mechanisms in the country to reduce the country's long-term donor dependency.
Other Program Elements: USDA's PL 480 Title-I program provided local currency for budget support to the government, part of which has been directed to agricultural development. Co-financing with USAID Washington of microfinance assistance continues, and new initiatives under the Making Cities Work program and the Monsanto Corn Alliance were funded. USAID has tapped the Development Credit Authority (DCA) Program for an innovative loan guarantee program for participants in the Well-Family Midwife Clinic program, a first such application of DCA funds. USAID's environment program was highly successful in utilizing both USAID's Global Development Alliance funds for the Marine Aquarium Council, as well as the ANE Mission Incentive Fund for Public Private Alliances, specifically for the SUCCESS Cacao Project expansion and activities under the Energy and Environment Incentive Fund. The U.S. Department of State, Treasury, Justice and Energy Departments provide training and technical assistance in important areas like tax administration, privatization of the energy sector, and control of money laundering.
Other Donors: The major donors to the Philippines are the Japan Bank for International Cooperation, the Asian Development Bank (ADB), and the World Bank, which support infrastructure or sector policy programs. USAID collaborates closely with the ADB and the World Bank on sectoral policy in energy, basic grains, bank and non-bank financial regulation, and expenditure management. USAID and the U.S. Embassy maintain an active dialogue with the IMF, which has a small but influential technical-assistance program that includes tax administration assistance to the Philippines Bureau of Internal Revenue. The United Nations Development Program has been active in coordinating assistance of other donors who complement USAID's programs in Mindanao, and the Japanese continue to coordinate their Mindanao planning with USAID. Bilateral assistance from Australia and Canada includes an emphasis on Mindanao, corruption and governance that complements USAID's. A number of donors have education initiatives for which coordination has been initiated. Other bilateral donors with substantial programs, including Germany and other Economic Union members, emphasize direct assistance to small enterprises and small farmers.
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