“Outreach to the Filipino Diaspora”

Remarks at Breakfast Meeting with the Philippine Community by MCC CEO Ambassador John Danilovich

Thursday, June 26, 2008
Chicago

As prepared

Introduction

It’s a pleasure to join you here in Chicago to discuss the partnership between the Millennium Challenge Corporation and the Republic of the Philippines in achieving a shared goal—the reduction of poverty through sustainable economic growth.

I am here, because like you, the Millennium Challenge Corporation cares about poverty reduction and prosperity in the Philippines. I appreciate your presence here today.

I am here because of MCC’s commitment to transparency and an open dialogue with key stakeholders to ensure the most effective use of our aid. As stewards of American taxpayer dollars, we have a fiduciary responsibility to make sure our assistance delivers results in the lives of the poor. Your active involvement in this process ensures the accountability of MCC’s program and the continued success of MCC’s partnership with the Philippines.

I am here to discuss the process moving forward and what, realistically, should be expected.

And, I am here to confirm that the continuation of MCC’s partnership with the Philippines depends upon the commitment of the government and people of the Philippines to be an MCC partner. Let me underscore that eligibility for MCC funding depends on the sustained policy reforms undertaken by the government of the Philippines.

We support and encourage the reform efforts already underway in the Philippines to bring meaningful and lasting change to the lives of the poor. There is a great deal of need in the Philippines—with nearly half of the population of some 84 million citizens living on less than $2 a day—but we also see tremendous potential for economic growth and development.

MCC seeks

tangible,
measurable,
and sustainable

ways to stem poverty and stimulate growth around the world. We partner with some of the world’s poorest countries and provide them with development assistance in the form of grants, not loans. These grants come in two forms:

five-year compacts to fight poverty through development priorities identified by the partner country,

and shorter, two-year threshold programs aimed at helping countries improve their performance in certain

political,
economic,
or social

policy areas we measure in order to hopefully qualify for a full compact.

The Philippines exemplifies the process of the MCC model, by making progress on its threshold program and through its recent selection for a compact by our Board of Directors last month.

As involved members of the Filipino community, I welcome this opportunity to brief you on the work of the Millennium Challenge Corporation, including in the Philippines, a country not only of enormous strategic importance but also of deep personal significance for each of you in this room.

MCC 101

Since our start four years ago, MCC has partnered with 16 countries in

Africa,
Central America,
Eurasia,
and the Pacific

to invest in their priorities for development and, as a result, impact the lives of the poor in meaningful and lasting ways.

MCC awards assistance based on sound policy performance. Each year, we create a summary of performance—a scorecard—for each poor country, using 17 publicly available policy indicators taken from non-U.S. Government organizations that measure whether a country

governs justly,
invests in health and education,
promotes economic freedom,
protects the environment,
and fights corruption.

These scores are all on our website, and MCC is the only donor that currently ties eligibility for assistance to performance on a transparent and public Control of Corruption indicator.

We partner with countries

willing to undertake the often difficult work of

political,
economic,
and social

policy reforms necessary to pass MCC’s eligibility criteria and to remain eligible,

willing to build their capacity to lead their own sustainable development,

and willing to deliver results where they matter most—in the lives of the poor.

To date, we have provided $5.5 billion in compacts to partners worldwide and have signed threshold programs with 17 additional countries totaling nearly $365 million to help them move closer to compact eligibility. Around the world, MCC partner countries are using these investments to:

issue land titles,
increase farmer incomes,
create jobs,
increase market access,
improve infrastructure,
strengthen small-scale fisheries,
expand artisan training,
open health clinics to contain the spread of HIV/AIDS and other diseases,
build girl-friendly schools,
expand vocational training,
strengthen access to credit,
and improve access to water and sanitation services.

These early results demonstrate that the MCC model is working, and we are seeing sustainable and measurable change take root in our partner countries.

Philippines and MCC: Threshold to Compact

In the Philippines specifically, some of this change came through the effective implementation of its MCC-funded threshold program. Signed in July of 2006, this $21 million program focuses on enhancing anticorruption efforts by

improving tax and customs administration,
strengthening the Ombudsman's office,
and increasing enforcement capacity within the Finance Department.

As further confirmation of the Philippines’ commitment to fighting corruption, the government matched and doubled the MCC threshold program grant with an additional $20 million of its own money. This unprecedented move underscores the government’s strong willingness to tackle difficult challenges and improve the lives of the Filipino people.

The Philippines has performed well on its MCC threshold program, meeting or exceeding most benchmarks. We can point to many threshold program successes.

The Ombudsman's office has made gains in prosecuting corrupt officials, evidenced by the fact that annual conviction rates have risen from 19 percent in 2006 to 55 percent in 2007.

A program to reduce corruption in revenue-generating agencies nearly doubled its caseload between 2006 and 2007. So far, 18 tax and customs officials have been suspended under the program.

Two new programs to target tax evaders and smugglers have undertaken significant caseloads.

The Reduction in Red Tape Act has been adopted, designed to reduce the opportunities for petty bureaucratic corruption.

Civil service salaries have increased significantly to also reduce the motivation for petty bureaucratic corruption.

The Philippines adopted a new procurement system, which the World Bank has called a “model.”

While the very active media in the Philippines report regularly on instances of corruption, media-reported scandals are often a sign that anticorruption mechanisms exist and are active. This is precisely the media’s role in an open and democratic society.

Corruption is very much a problem of human nature, and no donor—and no amount—of development assistance can completely eliminate the risk of graft or corruption. However, tangible steps can be taken: By continuing our dialogue with the government about its ongoing reform efforts and by demanding strict standards for procurement and fiscal accountability in our programs, MCC helps to bolster and build systems based on openness and transparency that work to effectively minimize corruption. We are proud of how the Philippines used its threshold program to consolidate reforms in its fight against corruption.

And, we see other reforms underway in the Philippines as well. For example, there has been improved economic management in recent years. Aggressive fiscal reform efforts—praised by the World Bank and the IMF—have brought the fiscal deficit down from over 4 percent in 2003 to around 1.5 percent in 2007. During the past few years, the country has experienced strong economic growth. Over the last two years, it has had the strongest Asian currency vis-à-vis the U.S. dollar.

Because of the Philippines’s good performance on its threshold program and given its consistent good performance on MCC’s eligibility criteria, our Board decided in March to select the Philippines as now eligible for a large-scale MCC compact.

In the words of President Arroyo, the selection of the Philippines as compact-eligible offers—and I quote—“a remarkable validation of the efforts of our government and nation to

invest in our people,
fight corruption
and encourage economic freedom.

I am deeply honored and pleased that our efforts are paying off and have been recognized…I believe that if we can all come together, redouble our efforts and continue to meet the criteria of the Millennium Challenge Corporation, the long term benefit to our nation will be the best gift I can leave this nation…”

I join President Arroyo in congratulating the Philippines and the Filipino people in reaching this momentous milestone.

So what does compact eligibility mean for the Philippines and what is your role in this process? I see three next steps.

First, the Philippines must maintain its policy performance. While eligibility is an essential first step in the MCC process, selection does not guarantee funding. The Philippines, like all countries eligible for a compact, must focus on maintaining and improving its performance on MCC’s selection criteria. This is fundamental.

Second, the Philippines must engage in a consultative process with its own people. MCC is not going to tell the Philippines what programs to implement to overcome its barriers to poverty reduction and economic growth. Rather, the Philippines is going to tell MCC what it needs to eliminate such constraints. This is what we mean by country ownership. It is vital that all segments of Filipino society participate in a

timely,
participatory,
broadly-based,
and meaningful

consultative process to identify and prioritize the key constraints to economic growth and poverty reduction. The Philippines has a

very vibrant civil society,
strong democratic institutions,
and a positive history of consultations with its people.

Civil society organizations,
the private sector,
the legislature,
and nongovernmental agencies

all have a stake in the Philippines’ development and all have ideas about what the country needs most to develop.

You—as concerned members of the Filipino diaspora—as members of the Filipino business community—have a voice that needs to be heard and insights that need to be shared. I would encourage you to get involved in this process and contribute, from the very beginning, to the consultative process that will outline an action plan for sustainable development in the Philippines.

Third, it is up to the Philippines to develop and submit a compact proposal. By gathering such essential information through the consultative process, the Philippines will be well positioned to flesh out the details of its compact proposal, including how it will ensure

financial accountability,
transparency,
fair and open procurement,
and measurable results.

Before any potential MCC funds reach the Philippines, the Philippines must take these steps—

maintain and improve performance,
consult with its citizens,
and develop a feasible compact proposal.

MCC’s Vice President for Compact Development John Hewko visited the Philippines in May to discuss these next steps in more detail. He had excellent meetings with civil society groups, the private sector, and government officials, including President Arroyo.

And, we were very pleased to welcome representatives from the Philippines to MCC University that we hosted earlier this month at our headquarters in Washington, D.C. MCC U provided countries in compact development, like the Philippines, with an overview of the process and gave them a chance to interact with countries that have already developed their compacts and are now implementing them.

We are looking forward to working closely with the Philippines as their government and people now work toward an MCC compact, a process in which we would encourage you to fully participate.

Conclusion

This is an exciting time for the Philippines. The country is embracing reforms and working with renewed vigor to

stimulate economic growth,
attract investors,
and impact the lives of poor in tangible ways.

The Millennium Challenge Corporation is proud of the role we are playing to support the Philippines in these efforts—their own country-determined solutions to their own country-determined challenges.

The long term impact of our role can be amplified by partnering with so many others also interested in development and growth in the Philippines—from

donors
to businesses
to members of the Filipino diaspora.

We seek and welcome this, because we know we can accomplish so much more working together rather than working alone. So, let us recommit ourselves to this cooperation and collaboration to usher in a new day of prosperity in the Philippines.

Thank you again for your interest in the Millennium Challenge Corporation, particularly our deepening partnership with the Philippines, and I would be happy to answer any questions you may have.