The Millenium Challenge Corp. (MCC), a US government aid agency funding government projects in the Philippines, has identified four obstacles to the country’s attaining sustainable growth.
The MCC is undertaking a “cause analysis” on how to address these concerns to ensure a strong finish next year for the local projects it is funding under a $434-million “compact” with the government.
According to Fatema Z. Sumar, the MCC department of compact operations regional deputy vice president for Europe, Asia-Pacific and Latin America, the MCC identified four challenges to Philippine growth based on an economic constraints analysis it conducted.
Multiyear agreement
These are: government implementation capacity; the high cost of transport logistics; the high cost of electricity; and land and market
failures.
The compact is a multiyear agreement between the MCC and an eligible country or an aid grantee for specific programs aimed at reducing poverty and stimulating economic growth.
Sumar said that with the clock ticking on the implementation of the five-year Philippine agreement, the program remains on track. The compact closeout date is May 25, 2016.
‘Very good partner’
“We are in a very strong position here in the Philippines, under this compact, to finish on track and to finish on time,” Sumar said, adding that the Philippine government has been a “very good partner” of the MCC.
“Overall, we are in a very strong shape here in terms of compact implementation. We have less than a year to go… we are seeing strong performance in each of the three project areas where we are operating throughout the country,” Sumar told reporters on Tuesday.
The five-year MCC compact with the Philippines, signed in September 2010 and implemented in May 2011, involves a grant of some $434 million for three projects: the Revenue Administration Reform Project (RARP); the Kapit-Bisig Laban sa Kahirapan-Comprehensive and Integrated Delivery of Social Services (Kalahi-CIDSS); and the secondary national road development project.
The $54.4-million RARP addresses the need to raise tax revenues, reduce tax evasion and improve revenue collection while the $120-million Kalahi-CIDSS aims to uplift poor communities through the provision of infrastructure and services. The $214.4-million secondary national roads development project is designed to reduce transportation costs through the rehabilitation of 222 kilometers of roads between the provinces of Samar and Eastern Samar.
Limits and challenges
According to Sumar, bureaucratic red tape limits the government’s ability to operate efficiently while geography and the environment have challenged seamless transportation and logistics.
Electricity cost in the Philippines, she said, is the highest among developing countries in the same status and bracket. She pointed out that markets for goods which are competitive are difficult to create when they are not accessible.
“Now that we have identified these areas, our teams are undertaking a cause analysis that will come away with a deeper understanding of what are the drivers within each of those areas that are impeding broader economic growth,” the MCC official said.