PHILIPPINE EMBASSY Issue 08-2010

25 October 2010 UPDATES

About the Millennium Challenge Account-

Philippines

Created by virtue of Executive Order No. 849 dated 15 December 2009, the MCA-P is the accountable entity and a subsidiary of the Development Bank of the Phi l ippines Management Corporat ion (DBPMC) that will implement the five-year Philippine Compact. A Board of Trustees, composed of heads of key government agencies and non-government sector representatives, shall oversee the functions of the MCA-P Management Unit, to be led by a Managing Director. A Stakeholders Commit t ee, composed of representatives from NGOs, private sector, and local/regional government project beneficiaries, shall also provide a mechanism for the Philippine Government to continue the consultative process.

$434 Million Compact Agreement

*Kapit-Bisig Laban sa Kahirapan (“Linking Arms Against Poverty”)-Comprehensive and Integrated Delivery of Social Services

Summary of Economic Impacts

Projects ERR* Beneficiaries (%) (by 2030) KALAHI-CIDSS 13% 5.2 million SNRD (Samar) 14% 282,000 RARP 40% national**

*Economic Rate of Return (ERR) **RARP is expected to have broad impacts throughout the economy, thus making nearly all citizens project beneficiaries.

Philippines and MCC Sign $434 Million Compact to Fight Poverty and Corruption

I S S U E F O C U S : T H E P H I L I P P I N E M I L L E N N I U M C H A L L E N G E C O M P A C T

On September 23 in New York City, the Philippines and the Millen-

nium Challenge Corporation (MCC) signed a $434 million, five-year

grant agreement or Compact to reduce poverty, accelerate growth, and

create opportunities for the Filipino people.

President Benigno Aquino III and US Secretary of State Hillary Clin-

ton presided the signing ceremony held at the Waldorf Astoria Hotel in

New York City.

Finance Secretary Cesar Purisima and MCC CEO Daniel Yohannes

signed the Agreement while Foreign Affairs Secretary Alberto Romulo

and Philippine Ambassador to the U.S. Willy Gaa acted as witnesses.

"This is a momentous occasion for the Filipino people as the Millen-

nium Challenge Compact will help the Philippines achieve economic

growth with social justice, under a regime of good governance," Secretary

Romulo enthused.

President Aquino acknowledged that the agreement had undergone a

rigorous development and multi-stakeholder consultative processes. "This

Compact was made possible by Filipinos and Americans working to-

gether to give us the tools to finish the fight against poverty," the Presi-

dent said.

The Chief Executive added that the common objective of both the

Philippines and the U.S. is "for poverty to be banished and for develop-

ment and prosperity to take its place."

The President stressed that the three (3) Compact projects have inte-

grated several key components to combat corruption:

The Revenue Administration Reform Project (RARP) directly

targets improvements in governance or "internal integrity" within the

Bureau of Internal Revenue (BIR).

The Kapit-Bisig Laban sa Kahirapan ("Linking Arms Against

Poverty")-Comprehensive and Integrated Delivery of Social

Services (KALAHI-CIDSS) is designed to ensure that resources are

provided to communities directly where they are needed most, and

enforces transparency and

accountability for local

development investments.

The Secondary National

Roads Development

(SNRD) project (222 kilo-

meter road segment in

Samar/Eastern Samar)

introduces a number of

checks on construction

standards and road con-

tractors.

Describing the Philippine

Compact as a "negotiated agree-

ment, designed to be self-

sustaining", State Secretary and

MCC Board Chair Hillary Clin-

ton, in turn, said that the agree-

ment is about "a partnership that

creates conditions for economic

growth."

Secretary Clinton expressed

confidence that under the

Aquino Administration, the

Philippines should achieve great

strides forward. She noted that

Filipinos are among the hardest

working people in the world.

Promoting a policy per-

formance-based paradigm that

rewards good governance, MCC

has granted over $7.0 billion to

twenty Compact partner coun-

tries for programs focused on

promoting food security,

strengthening human develop-

ment, building infrastructure,

securing land rights, and cham-

pioning gender equality.

The Compact ceremony

was attended by high-ranking

Philippine and U.S. Govern-

ment officials, representatives

from the private sector and

think tanks, leaders of the Fili-

pino-American community, and

Philippine watchers in New

York.

The Philippines is MCC‟s

twenty-first Compact partner.

L-R: Assistant Secretary of State for East Asian and Pacific Affairs Kurt Campbell; former private sector Member of the MCC Board of Directors Alan Patricof, President Benigno S. Aquino III, Secretary of State Hillary Rodham Clinton, Foreign Affairs Sec. Alberto G. Romulo, Philippine Ambassador to the US Willy C. Gaa Seated L-R: Finance Secretary Cesar Purisima and MCC CEO Daniel Yohannes

Secondary Na-tional Roads Development

Project (SNRD)

$214.44 million

Community Devel-opment Project

(KALAHI-CIDSS)*

$120.0 million

Revenue Admini-stration Reform

Project (RARP)

$54.30 million

Program Manage-ment and Over-

sight

$36.91 million

Monitoring &

Evaluation (M&E) $8.26 million

UPDATES Page 2

First Capacity-Building Partnership Agreement Between IMF and MCC to Help Reform Tax Administration in the Philippines

The $434 million, five-year

Compact is a testimony to the Philip-

pine Government‟s highest level of

political commitment to and good

faith in the MCC processes.

Since the introduction by the

MCC of its Millennium Challenge

Account (MCA) Threshold Program

(TP) to the Philippines in 2005, up to

the time that the country was selected

“Compact eligible” from 2008 to

2010, the Philippine Compact pro-

posal had undergone a rigorous de-

velopment and multi-stakeholder

consultative processes.

Even the Filipino-American

communities in New York, Los An-

geles and Chicago were consulted by

MCC from April to June 2008 to

ensure that the Philippine Compact is

both innovative and sustainable.

MCC Board of Directors, led by

State Secretary and Board Chair

Hillary Clinton, lauded the proposal

for its creativity, innovation and

relevance while MCC senior officials

consistently affirmed the Philippines‟

“high capacity” as MCC partner

since the country‟s first selection as

Compact eligible on 11 March 2008.

The Philippine Compact is in-

tended to allow poor communities to

develop small-scale projects and

manage assets in a sustainable way,

facilitate increased commerce by

reducing transportation costs, and

increase the efficiency and sustain-

ability of revenue collection through

the redesign and computerization of

business processes.

During the Compact signing

ceremony in New York City last 23

September 2010, President Benigno

S. Aquino III emphasized that the

following initiatives will be pursued

to complement the Compact projects:

Continuation of MCC‟s Thresh-

old Program (TP) “investments”

through the Revenue Integrity

Protection Service (RIPS) or

“lifestyle checks” program.

Implementation of the Policy

Improvement Process (PIP) Plan

of Action to effectively address

performance issues such as con-

trol of corruption (COC). The

Philippine Government is cur-

rently refining the indicators for

the Performance Governance

System (PGS) which was already

introduced in six (6) national

government agencies (i.e., De-

partment of Education, Depart-

ment of Health, Department of

Public Works and Highways,

Department of Transportation

and Communications, Bureau of

Internal Revenue, and the Philip-

pine National Police).

Revival of the Philippine Devel-

opment Forum (PDF) in the 4th

quarter of 2010 so that the Phil-

ippines will remain on track with

our Millennium Development

Goals (MDGs) targets, especially

in meeting targets in primary

education and health services

delivery.

MCC‟s 2009 Annual Report,

“Investing in Peace,” also high-

lighted the Philippines‟ Threshold

Program on anti-corruption and reve-

nue administration, which met all its

programmatic targets.

Given the Compact program

which will enter into force in May

2011, the Philippines is poised to

demonstrate that it can be a good

model in “ruling justly, investing in

people, and promoting economic

freedom.”

The Compact further deepens the

Aquino Administration‟s avowed

“Social Contract with the Filipino

People,” a commitment anchored on

transformational leadership.

Office of the Ambassador

Embassy of the Philippines

1600 Massachusetts Ave NW

Washington DC 20036

Tel 202-467-9363

Fax 202-467-9417

phembassyusa@verizon.net

www.philippineembassy-usa.org

"This Compact was made possible by Filipinos and Americans working together to give us the tools to finish the fight against poverty."

President Benigno S. Aquino III 23 September 2010

Ambassador Willy C. Gaa

FROM THE CORNER OF BATAAN AND MASSACHUSETTS

ness processes in the BIR. The

40-month project will bolster the

effectiveness of revenue collec-

tion and reduce opportunities for

corruption. The project‟s design

was based on the work the IMF

has done over the past several

years with the BIR.

“The Philippine Government

welcomes this unprecedented

partnership between MCC and

the IMF to help the country

strengthen its revenue reform

measures.

This truly

represents a

milestone

in MCC‟s

„smart

power‟

approach to development assis-

tance,” Philippine Ambassador to

the U.S. Willy C. Gaa said.

Top IMF technical experts

joined several MCC Missions to

Manila since 2009.

cant number of short-term tech-

nical assistance missions by IMF

experts to assist with a wide

variety of technical tax admini-

stration issues. It is anticipated

that an IMF assessment mission

will travel to Manila in Novem-

ber and that the Resident Advisor

may be in place and engaging

with the BIR before the end of

2010. The IMF will submit an

annual report to MCC on the

BIR‟s commitment to reform

beginning in early 2012.

The funding is part of

MCC‟s US$434 million poverty

reduction Compact with the Phil-

ippines, which includes a

US$54.3 million investment to

computerize and streamline busi-

The International Monetary

Fund (IMF) and the U.S. Govern-

ment‟s Millennium Challenge

Corporation (MCC) signed a

partnership agreement on 12

October 2010 to provide capacity

-building support for the reform

and modernization of tax admini-

stration in the Philippines. The

pact is historic as it is the IMF‟s

first agreement of this kind with

the United States.

Under the

agreement,

MCC will

contribute

US$4.6 mil-

lion for tech-

nical assis-

tance by the IMF‟s Fiscal Affairs

Department to help the Philip-

pines Bureau of Internal Revenue

(BIR) improve its revenue ad-

ministration policies and proce-

dures. This will pay for a resident

advisor to the BIR and a signifi-

“This compact was created by and for the people of the Philippines…a results-focused program promoting sustainable economic growth. This example of

country-designed solutions strives to move the poor from poverty to prosperity.”

MCC CEO Daniel W. Yohannes 23 September 2010

“The Compact is about partnership that creates conditions for economic

growth."

State Secretary Hillary Clinton 23 September 2010