Over the last several years, the Philippines has experienced major social and economic gains. Despite huge wealth disparities and pervasive poverty, social protection spending has increased dramatically and human development indicators have improved under former President Benigno Aquino III.
The World Bank is forecasting 6.4 percent expected growth in 2016 and 6.2 percent the next two years. Just last year, the Organization for Economic Cooperation and Development declared the Philippines has the best growth perspective among the ASEAN-5 countries with an average growth forecast of 6.2 percent from 2015 to 2019.
Since assuming office on June 30, Philippine President Rodrigo Duterte has pledged to accelerate reforms and make growth more inclusive, particularly in the country’s rural areas. Duterte signed Executive Order No. 5 or Ambisyon Natin 2040, which signals the Philippines’ aspiration to transition to a middle-class society by 2040.
The executive order could anchor and guide government development planning across several succeeding administrations. The Duterte administration has also released a 10-point socio-economic agenda that defines strategies for tackling issues including macroeconomic policy, infrastructure, rural and agricultural development, human capital and social protection.
The Philippines has traditionally attracted high levels of multilateral and bilateral official development assistance which helps fund important poverty alleviation and development programs. The World Bank and ADB, for instance, are the biggest contributors to the country’s flagship social protection scheme Pantawid Pamilyang Pilipino Program — a conditional cash transfer program that benefited 4.4 million poor households in 2015.
Japan, through the Japanese International Cooperation Agency, is a major funder of infrastructure development and support services. The Philippines is also one of only four countries selected to participate in the U.S. government “Partnership for Growth” program. And after closing an initial $434 million aid compact in 2016, the country is in the process of negotiating a second compact with the U.S. Millennium Challenge Corp.
But the new Philippine president’s controversial positions and rhetoric has alarmed some of the country’s long-standing foreign aid donors and international development partners. Duterte has asserted his administration’s intention to pursue a more independent foreign policy, build closer relations with China, and accept Chinese aid. He has also openly questioned the contributions and significance of traditional international donors, including the United Nations, European Union, and U.S.
To date, most Western donor nations have downplayed Duterte’s remarks, stressing a steadfast commitment to the Philippines’ development in the face of the political headwinds. Amid allegations of human rights abuses and uncertainty over the direction Duterte is leading the country, however, the relationship between the Philippines and international donor community could change during his six-year term.
To help re-establish a baseline and inform the debate over foreign aid to the Philippines, Devex assessed the country’s leading development aid donors for 2015 and defined their key programs and priorities. To identify the top donor spending, Devex analyzed official figures from the Organization for Economic Cooperation and Development and cross referenced them with individual donor data, including program and project- level commitments and disbursements.
Asian Development Bank FY 2015: $803 million
The Asian Development Bank tops the list of aid donors to the Philippines for three consecutive years. ADB’s development assistance to the country has steadily increased reaching $803.9 million in 2015. The amount is expected to expand further due to the eight pipeline projects estimated at $908 million waiting for approval and could reach $1 billion in 2016. ADB loans account for 97 percent of total development aid. Consistent with the “Philippine Development Plan, 2011-2016,” the ADB country partnership strategy focuses on improving the investment climate, more effectively delivering social services, and minimizing disaster risks.
In 2015, two of the largest programs were geared towards strengthening the implementation of public-private partnerships through capital market reforms and expanding private participation in infrastructure programs. ADB is also supporting Philippines national flagship programs in education and social protection. ADB provided the Philippine government $300 million for the Senior High School Support Program to develop senior high school curriculums, build and improve schools, and develop a voucher system to help students with tuition costs. ADB announced that in the medium term, it will provide additional financing to support the nationwide expansion of the government’s conditional cash transfer program as well as facilitate youth employment.
World Bank FY 2015: $356 million
The World Bank has 32 active projects in the Philippines. The bank’s total spent in 2015 totaled to $356 million, the bulk of which are in the form of loans. While in the past the bank heavily financed agriculture-related infrastructure and rural development needs, its “Making Growth Work for the Poor” 2015-2018 partnership strategy supports the country’s goal of inclusive growth through job creation and investment in social services.
The partnership strategy has five key engagement areas: transparent and accountable government; empowerment of the poor and vulnerable, rapid, inclusive and sustained economic growth; climate change, environment, and disaster risk management; and peace and institution building. In 2015, the bank’s single-largest investment in the Philippines was $500 million in budget support to assist the government in reconstruction after Typhoon Haiyan. Conditional cash transfers also remain a priority of the bank.
Early this year, the bank provided additional $450 million to Department of Social Welfare and Development to enhance the implementation of its conditional cash transfer program, specifically to improve the use of health and education services of poor children. An additional six projects estimated at $870 million are expected to be signed between the bank and new administration.
Japan FY 2015: $238 million
Japan channels the bulk of its development programming through loans, accounting for about 70 percent in 2014, while technical cooperation comprises 20 percent and grants make up 10 percent. Mirroring Japanese engagement elsewhere in the world, infrastructure projects remain a heavy focus of Japan’s development assistance to the country.
From 2012-2016, Japan spent $220 million on the Central Luzon link expressway construction project. Similarly, from 2011-2015 Japan spent $395 million on its road upgrading preservation project. Overall, Japan’s development financing has slightly decreased from $268 million in 2014 to $238 million in 2015, but the country recently pledged to invest $2.6 billion in a 38-kilometer elevated commuter line connecting Manila to Bulacan province to the north. A significant portion of Japanese aid is also directed at overcoming vulnerabilities such as natural disasters and climate change; and securing and stabilizing peace in Mindanao.
United States FY 2015: $236.9 million
The Philippines is the top recipient of American foreign aid among Southeast Asian countries, receiving $236.9 million in 2015. Unlike other donors, U.S. development assistance is channeled in the form of grants as opposed to loans. The Philippines was one of only four countries selected for the Partnership for Growth program which aims to fast-track and better coordinate development cooperation.
As part of the PFG, the U.S. and Philippines jointly defined a Country Development Cooperation Strategy for 2012-2016, which prioritized broad-based inclusive growth with a focus on increasing investments, competitiveness, and improving human capital, peace and stability in Mindanao, and environmental resilience.
Reflecting American interest to save lives and create a brighter future for families, U.S. channeled $42.5 million in health, with about 50 percent spent on providing access to family planning and maternal and child health care. Increasing access to quality basic education is another focus of U.S. development assistance with $25 million channeled to address shortages of teacher, learning materials, and engaging parents to support children’s education.
One U.S. flagship initiatives is the $12 million “Basa Pilipinas” project in support of the Department of Education early grade reading program. An additional $7 million was provided to specifically target education gaps in conflict areas under the Growth with Equity in Mindanao. A significant portion of US aid was also allocated to humanitarian assistance accounting for 12 percent of total aid in 2015. The American relief package in the aftermath of Typhoon Haiyan totaled $91million.
Australia FY 2015: $65 million
As a consequence of Australia’s government budget saving measure, aid to the Philippines has declined from $108 million in 2014 to $62 million in 2016. While the overarching objective of Australia’s development assistance remains the same — to promote prosperity, reduce poverty and enhance political stability — the country’s approach has shifted from basic service delivery toward supporting the Philippine government to manage its own resources.
In 2015, Australia channeled 38.7 percent of its total aid to promote economic growth. Australia’s largest investment includes the Provincial Road Management Facility to improve community access to provincial services, especially for the poor and people with disabilities. Australia continues to invest in the Philippine education system aimed through workforce education and labor market participation projects. For example, Australia funds the biggest education program in the Autonomous Region in Muslim Mindanao known as the Basic Education Assistance for Muslim Mindanao.
While Australia has no new funding for disaster risk reduction management initiatives, a bulk of Australia’s aid is also channeled through humanitarian assistance and disaster relief. Australia was the sole bilateral partner to support the humanitarian response after Typhoons Melor and Koppu in the last quarter of 2015.
France FY 2015: $57.5 million
Despite having opened office in Manila just six years ago, France has already established itself as one of the Philippines major development partners. In 2015, France channeled $57 million in support of the country’s goal of a green and inclusive economy. The French development agency’s activities in the country focus on climate change and environment. In addition, a bulk of aid is also provided to Local Government Units to strengthen their capacity for planning and budgeting.
France is expanding its development financing to include renewable energy and energy efficiency, REDD (reduction of emissions from deforestation and forest degradation), and urban development with specific focus on clean transport, water supply and sanitation and solid waste management.
A $54 million Urban Water Supply and Sanitation project in the appraisal phase is anticipated to improve water services in Metro Cebu and Davao City. It will specifically target expansion of water supply capacity, rehabilitate and construct water treatment facilities.
The Global Fund FY 2015: $36.6 million
The Global Fund to Fight AIDS, Tuberculosis, and Malaria is supporting the Philippines in its efforts to prevent and treat malaria and tuberculosis among the poorest population; and HIV/AIDS in vulnerable groups, which include migrant workers, people engaged in prostitution, and men who have sex with men.
To date, the Global Fund has invested a total of $291.4 million with $170.8 million spent on fighting TB. The principal recipients for Global Fund grants in the Philippines are the Pilipinas Shell Foundation for malaria, the Department of Health for HIV, and Philippine Business for Social Progress for TB. Currently, the Global Fund and PBSP are working closely with DOH to intensify and mainstream Directly Observed Treatment Short in the Philippines.
European Union FY 2015: $33 million
Poverty reduction has always been the target of EU Philippines development cooperation. Activities focus mainly on strengthening Philippine health system and improving access to health services for the poor. The EU is a also a major donor to the peace process in Mindanao. To date, it has disbursed an estimated $46.8 million to the Mindanao Trust Fund — Reconstruction and Development Programme. A bulk of EU development aid is channeled to humanitarian assistance. The EU provided 40 million euros in humanitarian assistance and early recovery interventions to help those affected by Typhoon Haiyan.
In the new program cycle, running from 2014 to 2020, the EU has more than doubled the development cooperation program with the Philippines. The indicative allocation for the Multiannual Indicative Program 2014-2020 for the Philippines is $353.6 million. It will focus on two key areas: rule of law and inclusive growth through access to sustainable energy and job creation.
Germany FY 2015: $12.9 million
Germany has ramped up its development cooperation in the Philippines, with $12.9 million in financial aid in 2015. Germany is committed to peace and development, and most of its activities are focused on peace building and conflict transformation in Mindanao. In addition, a significant portion of aid is channeled to governance of natural resources in these conflict-affected areas.
Germany is one of the few donors to have opened an office in eastern Mindanao. Currently, the German development agency manages seven projects. In recent years, Germany has expanded its programming in the Philippines and included projects with a focus on climate change and biodiversity, and economic and human development (agriculture, urban infrastructure, employment, micro-insurance, and health in schools).
One initiative is the management and conservation forest of Panay Mountain Range where Germany partnered with Department of Environment and Natural Resources to support local authorities, user groups and households in applying land rights instruments, establishing community forests and in devising management plans for areas of forest designated for conservation and commercial activities.
Canada FY 2015: $11.6 million
In 2014, Canada identified the Philippines as a focus country for its international development efforts, providing total financial assistance of $16 million. A large portion of its aid spending, estimated at $9 million, went to humanitarian assistance to help in the reconstruction and rebuilding of areas affected by Typhoon Haiyan. In 2015, Canada invested $11.6 million. However, actual spending is believed to be higher due to Canada’s emergency assistance following other typhoons.
Currently, Canada has nine active projects, mostly focused on private sector development. The largest single investment is a $12 million project centered on fostering inclusive growth that started in 2013 and will be implemented until the end of 2017. Canada has announced increased aid spending in 2017 amounting to $15.5 million.
Karen is a development analyst at Devex’s survey and advisory services team. She is responsible for conducting special research and consulting projects that focus on development business issues, including donor diversification, market penetration, brand awareness and fundraising strategy. Before joining Devex, Karen worked at several NGOs, where she conducted research, capacity building and policy advocacy on women’s human rights and access to justice.
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