Top Philippine Aid Donors: A Primer

Amid pockets of growth, the Philippines remains a recipient of significant international aid from bilateral and multilateral donors as the country continued to grapple with poverty, corruption, internal security and humanitarian emergencies. Classified as a lower-middle-income economy by the World Bank, the Philippines had available foreign loans worth $9.03 billion as of the third quarter of 2009, according to the Philippines’ National Economic Development Authority (NEDA). This amount includes two new loans, 71 remaining loans from previous years and 19 others that closed the same year. Some $1.3 billion in grants covered 314 projects on good governance, customs reform, village infrastructure and capacity building, NEDA figures showed. The amount does not include grants that foreign donors awarded directly to non-governmental organizations. The Philippines’ top international donors are: Japan International Cooperation Agency - Loans: $3.2 billion (Q1-3 2009) - Grants: $6.92 million (2006) JICA’s average annual assistance to the Philippines is 90 percent lending and 10 percent grants, according to Floro Adviento, loan program manager at JICA Philippines. “Normally,” Adviento said, JICA would award grants for pilot projects, “then you can scale it up by getting a loan.” He explained: “This is just to show to the borrowers: If you go into this project, you get this benefit. But if you want to scale it up, then better get a loan.” JICA projects fall into three major areas: economic growth, poverty reduction, and peace and stability in the restive southern region Mindanao. China - Loans: $960 million (Q1-3 2009) China has long been a significant trading partner of the Philippines, but its rise as a major lender is a fairly recent development, said Roderick Planta, NEDA project monitoring staff chief. China’s loans to the Philippine government accounted for some 11 percent of the country’s total ODA loans in 2008 and 2009, NEDA figures show. Such heavy investment came at a time when Chinese ventures with the Philippine government prompted congressional inquiries for alleged irregularities. These include the $7 million government contract awarded to China’s ZTE Corp. for the construction of a national broadband network. Several high-level government officials and President Gloria Arroyo’s husband were implicated in receiving multimillion-peso kickbacks. In the wake of the scandal, several civil society groups demanded Arroyo’s resignation. The project was eventually canceled. Called by one Philippine senator as “the greatest train robbery in history,” an $11 million China-funded railways project was also halted because of corruption allegations. Three Chinese construction firms were among seven firms the World Bank blacklisted in the Philippines last year for alleged involvement in a cartel of contractors that rigged bidding for a bank-funded national roadways rehabilitation project. Asian Development Bank - Loans: $2 billion (Q1-3 2009) - Grants: $27 million (2008) ADB was the Philippines’ second-largest lender last year, accounting for 22 percent of total loans as of September 2009, according to NEDA. This amount excludes assistance that the bank, which is headquartered in Manila, provided to Philippine NGOs and private institutions. ADB funds have been supporting coastal protection projects, justice sector reform, improved basic social services delivery, governance initiatives, and major infrastructure projects such as roads and airport improvement. World Bank - Loans: $1.5 billion (Q1-3 2009) - Grants: $139 million (2008) The World Bank accounted for 16 percent of the Philippines’ total borrowings as of September last year, serving as the country’s third-largest lender. Under its 2010-2012 country assistance program, the bank pledged to provide between $700 million and $1 billion in support for projects that target inclusive economic growth. Eric Le Borgne, World Bank senior economist, said the amount is disbursed through loans to specific projects and budget support, where funds are infused into the state budget to finance government programs aligned with the bank’s targets. Among the bank’s priorities are good governance, basic education, improvement of the investment climate, mitigation of climate change risks, and peace-building and economic stimulation efforts in conflict areas. United Nations System - Grants: $186 million (2008) Agencies under the United Nations spent a total $186 million in grants for Philippine government projects in 2008, according to NEDA. The figure excludes U.N. grants to nonprofits. UNICEF, the U.N. Population Fund, U.N. Development Program and U.N. Industrial Development Organization accounted for 14 percent of grants received by the Philippines in 2008. U.N. efforts focus on helping the Philippines achieve the Millennium Development Goals. United States - Total Assistance: $123.85 million (2009) The U.S. remains one of the most generous grant donors to the Philippines, funding programs through the U.S. Agency for International Development and its State and Defense departments. Total U.S. assistance to the Philippines has been steady at almost $130 million, including development and defense aid. This figure makes the Philippines the second-largest U.S. aid recipient in East Asia, said Myra Stokes, program resources management chief at USAID Manila. Of this amount, USAID accounts for an average of $70 million to $80 million annually, Stokes said. Roughly 60 percent of USAID funds goes to development efforts in the restive southern region of Mindanao. This is on top of U.S. military assistance to the Philippine government’s anti-terror efforts in the area. “Part of the reason we are in Mindanao is because it is the most impoverished out of all the regions in the Philippines,” Stokes said. “And so, obviously, we’re there for development, and I think also the element of insecurity is there as well.” Believed to be a hub of terrorists linked to al-Qaida, Mindanao has a significant military presence, with a U.S. military contingency providing technical assistance to local troops. Besides defense-related aid, the U.S. has been implementing programs on basic education, health and poverty reduction in conflict-affected Mindanao villages. “We say that our whole portfolio, whether it be investing in people [through] education, health or economic growth, helps support our peace and security initiatives, our counter-terror program,” Stokes said. “But obviously, it’s [for] longer-term development focus.” Australia - Grants: $107 million Australia is the largest bilateral grant giver to the Philippines, spending an average of A$120 million ($107 million) a year on projects that focus on basic education, health, microfinance and capacity building in fiscal policy and good governance. The Philippines became one of four top recipients of Australian aid after the latter beefed up assistance in 2007, said Titon Mitra, Australia’s minister counselor in the Philippines. Australia is also heavily investing in Mindanao, spending some 50 percent of its total aid on programs that focus on poverty alleviation, education, health services and peace initiatives. Mitra observed, however, that aid poured into Mindanao has yet to make significant gains as the eruption of violence disrupts development efforts from time to time. Ongoing conflict “not only makes it practically difficult to deliver aid, but it really does diminish the impact of aid,” Mitra said. “But that said, you can’t walk away from a situation like that.” European Union - Grants: $21.7 million (average 2007 to 2009) EU funding in the Philippines has seen a slump in the last two decades, decreasing by about 40 percent from aid levels in the early ‘90s. But the bloc’s assistance is set to pick up starting this year with Europe’s renewed focus on poverty reduction and trade-related assistance, said Alistair MacDonald, the EU ambassador to the Philippines. MacDonald said EU aid to the Philippines peaked at around 25 million euros ($34 million) in the ’90s, then dropped to current levels. MacDonald described this decline as “a reflection of the improvement in the Philippine economy.” EU development assistance in the Philippines focuses on the health sector, with investments in primary health care for poor villages, child and maternal care and reproductive health. The regional bloc has also been a strong supporter of trade development in the Philippines through technical assistance to the export industry and government trade policy.