US MCC to hurt PH economy more—IBON

November 15, 2017

by IBON Foundation

The Philippines will be more incapable of building and protecting its own industries and economy under another Millennium Challenge Corporation (MCC) grant from the United States. Research group IBON said this in light of the recent agreement between US president Donald Trump and Philippine president Rodrigo Duterte to strengthen socio-economic ties in their Association of South East Asian Nations (ASEAN) Summit bilateral conversation.

The MCC  is the multi-million dollar centerpiece program of the Partnership for Growth (PFG). The PFG is the most comprehensive US intervention in economic policy-making in the Philippines. It funds programs and projects purportedly aimed at economic growth and slashing poverty. The country was previously enrolled in a US$434-million MCC grant. Amid the international community’s expression of alarm over tens of thousands killed in Duterte’s anti-drug war in 2016, the US did not renew Philippine availment of the MCC grant due to diminished scores in curbing corruption and upholding the rule of law.

Government’s economic managers have meanwhile expressed optimism that the country can requalify for an MCC grant once the US takes into account the Duterte administration’s current efforts in improving governance and further liberalizing the economy. The US aid agency has in fact signified that the Philippines is among the candidate-countries for compact eligibility for 2018.

IBON however said that being a highly conditional aid, the MCC further compels the Philippines to strip its economy of protection to fulfill the aid’s ‘economic freedom’ requirement. The MCC may suspend or terminate the grant if the country fails to remove trade barriers such as trade quotas, production subsidies, government procurement procedures, and local content requirements.

The US has been among the beneficiaries of Philippine trade liberalization, noted IBON. Specifically, a significant portion of Philippine export of raw materials goes to the US while the latter exports products that the country either can produce or does not necessarily need. For instance, no less than 70% of Philippine coconut oil, sugar and pineapple exports go to the US and other countries. Meanwhile, up to 90% of imported wheat, milk and cream products and soya come from the US and other countries. The Philippines also imports a huge amount of sugar from the US. At the losing end is Philippine food security and Filipino farmers, said IBON.

US corporations are also among the Top 1,000 companies in the Philippines, IBON observed, such as Texas Instruments, Chevron Corporation and Proctor & Gamble. Under so-called ‘economic freedom’, foreign companies get to cut production costs with cheap Philippine labor at the expense of millions of Filipino workers and their families. They also avail of tax holidays and other perks institutionalized by the government ‘for ease of doing business’ and attracting even more foreign investments. There are also no requirements for technology transfer, thus leaving any prospect for local development void.

According to IBON, the Philippines should build, strengthen and protect its own economy instead of entering disadvantagous compacts such as the MCC.  Instead of allowing US aid and investments to exploit Philippine resources for corporate profit, the Philippine government should be able to set a path that prioritizes the utilization of all of these to forge industries that will meet the Filipino people’s and nation’s needs for genuine development.###