Documents
Resources
Learning Center
Upload
Plans & pricing Sign in
Sign Out
Your Federal Quarterly Tax Payments are due April 15th Get Help Now >>

Ocean

VIEWS: 43 PAGES: 28

									IBON Foundation

The Philippines and Aid Conditionality
Regional Workshop on CSOs and Aid Effectiveness Hanoi, Vietnam October 9-12, 2007

Outline
1. Brief overview of conditionalities 2. The Philippine experience: Accumulating conditionalities, deepening underdevelopment
a) ODA profile b) Macroeconomic conditionalities: trade and investment (WB, IMF, ADB, Japan) c) Sectoral conditionalities: Health sector (WB, ADB, IMF) d) The (implicit) debt service conditionality

3. Some key points 4. Suggested areas for CSO action

What are conditionalities?
• The application of specific, predetermined requirements that directly or indirectly enter into donor decisions to approve or continue to finance a loan or grant.
– Donors using financial pressure to leverage actions they believe would not otherwise have been taken

• By purpose: policy conditionalities, outcome conditionalities, process conditionalities and fiduciary conditionalities

“Aid” not always helpful
• Donors exploit recipient country weaknesses:
• • Scarce capital and foreign exchange in backward countries (hence importance of ODA) Lucrative opportunities for corrupt domestic government officials

–

ODA’s most severe and far-reaching effects stem from conditionalities, especially policy conditionalities
• • ODA important part donor of foreign policy tools donors wield in their self-interest Conditionalities a particularly direct way of leveraging desired outcomes in recipient countries

The Philippines and ODA
• Total ODA commitments: US$13.2 billion (2001)  US$9.5 billion (2006)
– Equivalent to 8% of GDP, 45% of gross international reserves – 2006: Japan (US$4.7 billion or 49% of the total), ADB (US$1.8 billion or 19%), WB (US$1.5 billion or 16%) – 2001-2006: Infrastructure (67%) vs. social reform & development (7%)
Source of basic data: NEDA 15TH ODA Portfolio Review (July 2007)

• Outstanding ODA loans: US$21.6 billion or 40% of foreign debt stock (2005) • US$1.2 billion in external debt service to JBIC (US$495 M), WB (US$360 M), ADB (US$295 M) (2008) …
– … out of total US$3.9 billion in central government external debt service

Macroeconomic policy conditionalities
The Philippines has a long history of ODA conditionalities… (in 1980 was only months away from being the World Bank’s (WB) first structural adjustment loan (SAL) recipient) … which are an accumulation of “free market” policies of “globalization”, and have caused severe damage to the economy, lives and livelihoods.

The WB’s and the ADB’s biggest loans have had “free market” policy conditionalities attached to them since at least the 1980s.
– These have required changes in overall macroeconomic and sectoral policy frameworks, as well as gone into very specific implementation details.

The WB has a Country Assistance Strategy (CAS) and in 2006 gave a US$250 million Development Policy Loan (DPL) that was “acknowledgement of past government successes [and] incentive for maintained good performance]” – fiscal austerity, new taxes, power privatization

The IMF’s last loan to the Philippines had 110 conditionalities which it called “structural reform measures” (a US$1.4 billion stand-by arrangement from 1998-2000)

Philippines is now among Southeast Asia’s most open economies – with the lowest tariffs and least restrictions on foreign investment, next only to Singapore Since the 1980s, share in GDP of trade has doubled and of foreign investment quadrupled…

Macroeconomic policy conditionalities
Yet the Philippines is more backward than ever • De-industrialization and underdevelopment: shrinking share of manufacturing in economy (lower than in 1960s), and more and more foreign-dominated • Backward agriculture at historically low levels, rising agricultural trade deficits since mid-1990s, and record dependence on imported food

• Record joblessness for over six years
– Average 11% unemployment – 12 million jobless or underemployed Filipinos – 9-10 million “economic refugees” (i.e., overseas Filipino workers)

• Severe poverty at lowest income levels, disguised by sharpening inequality
– 69 million Filipinos (80% of population) struggle to survive on P96 (US$2) or less a day – 46 million Filipinos hungry everyday (by dietary needs)

• Note: Japan ODA being used as leverage to seal a Japan-Philippines free trade agreement?

Health sector privatization
WB and ADB funding for health sector programs, resulting in or otherwise supporting privatization through: • Health Sector Reform Agenda (HSRA), 1999 • FourMula One for Health (F1), 2005

Neglect of public health
1990-91

NG Health spending, 1986-2008
0.80
1997

350 300 250 200 150

0.74%

0.58%
2008

0.70 0.60

PhP per capita

0.31% 0.40
0.30
Health (Pesos per capita, CPI=2000) Health (% of GDP)

100 50 0

0.20 0.10 0.00

19 8 19 6 8 19 7 8 19 8 8 19 9 9 19 0 9 19 1 9 19 2 9 19 3 9 19 4 9 19 5 9 19 6 9 19 7 9 19 8 9 20 9 0 20 0 0 20 1 0 20 2 0 20 3 0 20 4 0 20 5 0 20 6 0 20 7 08

Year

% of GDP

0.50

Deteriorating public health services
• Rising proportion of Filipinos dying without medical attention
– 74% attended by trained health professional (1975)  67% (2002)

• Declining coverage of fully-immunized children
– 69.4% coverage (1993)  59.9% (2003)

• Budget cuts in programs for poorest
– Subsidies to indigent patients, public hospitals

The debt service conditionality

• Rising foreign debt payments
• Debt stock: $17 billion (1980) • … $130+ billion paid in debt service since 1980 • Debt stock: $60 billion (2006)

Some key points from Philippine experience
1.
–
•

Affirms adverse effect of conditionalities: aid has contributed to poverty, inequality & underdevelopment
Severe and accumulating damage to economy and to people’s lives and livelihoods
worst for the most vulnerable sectors (peasants, labor, informal workers, women, children, migrants…)

– –
•

… on top of the problems with tied aid Also strengthens or creates specific interest groups, and weakens others. After 2 ½ decades of “globalization”:
Created a domestic corps of neoliberal technocrats, consolidation and strengthening of domestic business elites aligned with foreign capital, diminished national industrial capitalists

Some key points from Philippine experience
2.
–
•

Conditionalities increasingly “internalized” by the government
Recipient governments sharing donor priorities and concerns
Resulting policy framework appealing to donors and foreign investors; national “development” strategies virtually indistinguishable from what donors want Conditionalities look less externally imposed

•

– –

While prior compliance, performance benchmarks, etc. persist Donor pressure is also applied on the basis of the sum of all ODA and not just case-to-case

Some key points from Philippine experience
3. Long-standing engagement of CSOs on conditionality issue
• • Maximizing strength and reach at grassroots and among wider public Solid constituency built

4. ODA to the Philippines has been unmindful of the (un)democratic or human rights record of recipient governments
• Wittingly or unwittingly, supports even those which have worked to co-opt or suppress CSOs

Some suggested areas for CSO action on conditionality
Reforms in delivery and management are important, but removing the undue direct and indirect donor influence on national policies through ODA is crucial 1. Central demand: Remove all explicit and especially “free market” conditionalities in ODA
– – – Single biggest barrier to aid effectiveness – ODA not just developmentally ineffective but actively counter-productive Without meaningful reductions, danger of Paris Declaration becoming merely diversionary Removal may not automatically result in development but will at least remove a key adverse influence on domestic policies

2.

Oppose donor-proposed mechanisms that further increase their individual and collective leverage over recipient country policies – esp. WB-, IMF-centered
– ex. Poverty Reduction Strategy Papers (PRSP), Country Assistance Strategies (CAS), Highly-Indebted Poor Countries (HIPC) initiative…

Some suggested areas for CSO action on conditionality
3. Demand debt cancellation
– Where continued debt servicing is the most pervasive, albeit merely implicit, conditionality

4. Increased allocations for social services (e.g., health, education, water & sanitation) + for countries with greater absolute poverty 5. Not just increase CSO voice but also build capacity and strengthen role:
– – Making governments more transparent and accountable Creating domestic policy and political conditions to overcome backwardness

Some suggested areas for CSO action on conditionality
6. However link of ODA to self-interested donor foreign policy is basic constraint in current aid system  Need to de-link ODA from donor foreign policy
– How to remove or minimize undue donor discretion in where ODA goes? How to ensure not just increasing recipient government discretion but also CSO participation?  Towards claiming the development process and building societies that genuinely serve the people’s interests and welfare

–
–

Maraming salamat!

Reality: Long-term decline
Gross Domestic Product, by industrial share (% of GDP, 1946-2006)
60

50

40

% of GDP

30

20

Declining manufacturing
AGRI, FISHERY & FORESTRY INDUSTRY SECTOR Manufacturing SERVICE SECTOR

10

Declining agriculture
1976 Year 1981 1986 1991 1996 2001 2006

0 1946 1951 1956 1961 1966 1971

Agricultural neglect
Food insecurity and dependence on foreign sources of food • Domestic food production has fallen 27%
– – 1,509 kg/person/year (1979-1981)  1,100 kg (2000-02) i.e., cereals, fruits, vegetables, root crops, sugar, spices, dairy products, meat, fish and other aquatic products

•
– – – – – – – – –

Comparing the period 1991-1995 with 2001-2003, increase in annual import volumes of:
Rice by ten-fold (increased by 916%) Corn five-fold (427%) Vegetables tripled (215%) Root crops quintupled (305%) Sugar and other sweeteners doubled (100%) Pork thirty-four-fold (3,300%) Poultry twenty-fold (1,900%) Beef almost tripled (169%) Fish by more than 49%

Reality: Long-term decline
Gross domestic savings and investment, 1946-2006 (% of GDP)
40 35 30 25 20 15 10 5 0

% of GDP

Declining investment
Gross Domestic Savings Gross Investment

Declining savings
Year

19 46 19 49 19 52 19 55 19 58 19 61 19 64 19 67 19 70 19 73 19 76 19 79 19 82 19 85 19 88 19 91 19 94 19 97 20 00 20 03 20 06

Reality: Long-term decline
Rising unemployment

• Historic unemployment
– 2001-2006 worst ever 6-year period of unemployment (11.3%) and underemployment (18.7%) – 11.6 M looking for work (4.1 M jobless, 7.5 M underemployed)

• Majority of jobs recently created are low-quality & low-earning
– e.g., unpaid family work, household help, wholesale/retail trade

• Unprecedented economic refugees
– 9-10 M overseas Filipinos in 192 countries – 3,400 leave the country everyday

A weakening economy
• • Govt neglects national industry & agriculture, and instead… … focuses on sectors profitable for a few but of low development impact
– Low employment generation, low capital accumulation, technological non-development, disconnected from the domestic economy

•

Narrow or otherwise unsustainable sources of growth:
– – – – – Overseas worker remittances Wholesale/retail trade, real estate Export enclaves (manufacturing, BPOs) Mineral resource plunder [In 2007] Elections

Shrinking govt budget
NG Budget, 1986-2007
1,400 1,200 1,000
1990

20.7%
NG budget (PhP billion) NG budget (% of GDP)

1997

25 20

20.3%
2008

PhP billion

800 600 400 200 0

15 10

16.8%
5 0

19 8 19 6 8 19 7 8 19 8 8 19 9 9 19 0 9 19 1 9 19 2 9 19 3 9 19 4 9 19 5 9 19 6 9 19 7 9 19 8 9 20 9 0 20 0 0 20 1 0 20 2 0 20 3 0 20 4 0 20 5 0 20 6 0 20 7 08

Year

% of GDP

Govt neglect of health
• Out of 192 countries worldwide, the Philippines ranks among the worst:
– 174th – 3.4%; Total expenditure on health as % of GDP – 153rd – 39.8 %*: General government expenditure on health as % of total expenditure on health – 156th – 6.3 %: General government expenditure on health as % of total government expenditure
• Note: using definition allowing for cross-country comparisons

– 39th – 60.2%: Private expenditure on health as % of total expenditure on health


								
To top