MANILA — The Philippine government announced Tuesday it is no longer pursuing its current second compact application with the Millennium Challenge Corp. on the same day the donor’s board of directors are set to meet to discuss countries for compact selection and reselection.
Presidential spokesperson Harry Roque Jr. made the announcement during a press briefing in Malacanang, where he also talked about the details of the government’s newly signed tax reforms. The decision, he said, was made by President Rodrigo Duterte’s economic team, and “primarily” by Department for Foreign Affairs Secretary Alan Peter Cayetano.
“It was deemed that for the time being, we will withdraw our application for the second cycle and we will focus instead on the rebuilding of Marawi,” Roque said, referring to a province in the south of the country hit by civil unrest.
He noted, however, that the Philippine government has “invited” the U.S. government to support and assist them on Marawi’s reconstruction.
Marawi, a province in Mindanao, has been hit by strife for months as Philippine government forces battle groups alleged to be affiliated with the Islamic State, also known as ISIS. The conflict, known as the Marawi crisis, caused widespread destruction in the province and has driven many people from their home. Thousands of buildings were destroyed in the heavy fighting.
“We will probably apply again some other time. But for now, our resources, attention, and energies are focused on the rebuilding of Marawi, and for obvious reasons,” Roque said.
The Philippine government’s decision comes a year after the MCC deferred its decision on whether to allow the Philippines to continue developing its second compact. The compact, MCC said in Dec. 2016, “is subject to a further review of concerns around rule of law and civil liberties,” which many assumed was a reference to rising international concerns on the Duterte administration’s deadly “war on drugs” campaign.
Last year, Devex sources close to the compact development process were still hopeful the compact would push through, unless the MCC decided otherwise. The MCC was supposed to make a decision in March 2017, but had not given any new updates. MCC is well-known for its strict ground rules regarding compact country selection and the disbursement of aid, and it has a history of suspending or terminating assistance to countries with governance issues.
The presidential spokesperson denied that the Philippine decision was in any way influenced by factors such as any potential U.S. interference in domestic affairs.
“Not at all. Not this instance. It was really just that Marawi happened. We did not expect it and it’s going to be very costly rebuilding,” he said, explaining that while the MCC compact would provide the Philippines additional financing resources for its development projects, it usually comes with a cost for the recipient government as well.
“We have to earmark funds also because these are projects with counterpart funds and of course, this will also focus on previously identified projects,” the spokesperson said. “And we have decided that our resources and our priority will be the rebuilding of Marawi for the time being.” He doesn’t think the rebuilding of Marawi qualifies under the MCC rules and priorities.
MCC’s compact priorities are in the sectors of agriculture, education, energy, health, land and property rights, roads and transportation, and water, sanitation, and irrigation. The Philippines’ first compact with MCC, which ended in May 2016, was focused on road rehabilitation, better tax collection, and a program aimed at improving public service delivery of poverty-reduction programs at community level.
The second compact was expected to be finalized in the fourth quarter of 2017, and in initial Devex discussions with the local compact team, was supposed to cover more than $400 million, roughly the same amount as the first compact. One of the areas being considered for investment in the second compact was in the area of rural agriculture.
“We are confident that the U.S. government fully understands the decision to reallocate our funding priority for this year and that this will not, in any way, adversely impact our eligibility for another round of compact assistance in the future,” Roque said.
Read more Devex coverage on the Millennium Challenge Corporation.