Philippines

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Development Challenge The USAID Program Other Program Elements Other Donors Program Data Sheets Summary Tables USAID Search: Philippines Previous Years' Activities 2002, 2001, 2000, 1999, 1998, 1997 Last updated: 24     THE DEVELOPMENT CHALLENGE: The Philippines is a critical partner in the global war on terrorism. Since the September 11, 2001 terrorist attacks on the United States, President Gloria Macapagal Arroyo has stood shoulder-to-shoulder with the United States. She granted access rights to U.S. ships and planes and moved swiftly to achieve passage of an anti-money laundering bill, developed with USAID assistance, to aid international efforts to cut off funding for terrorist organizations. She requested U.S. help in defeating the Abu Sayyaf, an armed terrorist group holding U.S. hostages in Mindanao. The Philippines has proven in the recent past to be a platform for terrorists to plan and organize international attacks. Philippine President Gloria Macapagal Arroyo stands firmly with the United States in the global war on terrorism. The Philippines is a recognized leader among Southeast Asian nations as they confront the political and economic challenges presented by China’s World Trade Organization (WTO) admission. This recent development will present either an opportunity for new markets or an overwhelming challenge from fierce competition. The Asian Financial Crisis, followed in 1999 by the internal conflict with the Muslim separatist groups, brought foreign investment almost to a standstill in the Philippines. Hostage taking by the Abu Sayyaf ended tourism in Mindanao. The current worldwide economic downturn and the bursting of the information technology bubble slashed demand for the Philippines’ largest export—electronic components. The cumulative economic impact has been staggering. Per capita GDP tumbled from $1,019 in 1999, to $977 in 2000, and is estimated to have dropped further still in 2001. Although its democratic system has demonstrated vibrancy and resilience, the Philippines remains East Asia’s economic growth laggard. Between 1975 and 1999, per capita income grew by only 14%, compared to 326% in Indonesia, 153% in Malaysia, and 220% in Thailand. Poverty afflicts 40% of the population, the highest incidence in Southeast Asia—much higher than Malaysia (8% in 1998), Thailand (12.9% in 1998), and Indonesia (20.4% in 1999). The country’s natural resources are being severely depleted. Corruption and unbridled population growth are the most critical factors contributing to the Philippines’ continued poor economic growth and poverty. The country has East Asia’s fastest growing population: 2.36%, as compared with 1% in Thailand and 1.6% in Indonesia. Lack of Corruption and unbridled population growth are the most critical factors contributing to the Philippines’ continued poor economic growth and poverty. transparency and corruption constrain performance at all levels of the executive branch, the legislature, and the judiciary. Systemic and structural weaknesses allow corruption to flourish, inhibiting the development of competitive markets, deterring foreign investors, and severely limiting the Government’s ability to raise revenue. Uneven distribution of the benefits of economic growth has disproportionately excluded the Muslim minority, strengthening the resolve of armed separatist groups in the Mindanao, some elements of which have been linked to Osama bin Laden’s al Qaeda terrorist network. The ongoing conflict feeds the cycle of poor economic performance by scaring off private investors, halting tourism, and draining fiscal coffers of funds needed for infrastructure and education. THE USAID PROGRAM: USAID will devote $50,058,000 in DA and $21,000,000 in ESF in FY 2002, and requests $50,659,000 in DA and $20,000,000 in ESF in FY 2003. The program will help reduce the conflict in Mindanao; combat corruption and improve the quality of governance; improve competitiveness within the private sector; support trade-related measures such as intellectual property rights, biotechnology, and customs reform; promote family planning; promote health, particularly for HIV/AIDS and TB; and preserve and restore the natural environment. Over half of USAID’s FY 2002 and FY 2003 funds will support activities in Mindanao, particularly in conflict-affected areas, and national level initiatives that have an impact on counterterrorism. The four Strategic Objectives for which USAID is requesting funds are: to strengthen the prospects for peace in Mindanao; to improve the investment climate by helping reduce corruption and poor governance; to reduce unwanted fertility, maternal and child morbidity, TB mortality and HIV/AIDS prevalence; and to improve environmental management and enforcement. Over half of these funds will support activities in Mindanao, particularly in conflict-affected areas, and national level initiatives that have an impact on counterterrorism. All funds are for ongoing objectives. In addition, USAID is considering Global Development Alliance funding that will leverage private sector resources to develop renewable energy sources in remote areas of the country. ONGOING PROGRAMS FOR WHICH NO FY 2002 OR FY 2003 FUNDING IS REQUESTED: The USAID program in the Philippines includes the following objectives for which USAID is not requesting new funds, but is continuing to expend funds previously appropriated. Number: Title: Last Notified: Planned Completion: 492-001 Economic development of Mindanao FY 02 CBJ, p. 156 FY 2004 492-005 Reduce global warming FY 02 CBJ, p. 177 FY 2003 492-007 Control the spread of HIV/AIDS, TB, dengue, and malaria FY 02 CBJ, p. 187 FY 2003 OTHER PROGRAM ELEMENTS: The Philippines has received significant amounts of U.S. PL 480 Title I loan assistance: $30 million in FY 1999 and $40 million in FY 2000 and in FY 2001. The Government of the Philippines has requested another $40 million loan from the FY 2002 program. Proceeds of the sale of commodities are used to fund Government of the Philippines activities for agriculture and fisheries modernization, and in coordination with USAID, for activities supporting the peace process in Mindanao and coastal resources management. OTHER DONORS: Donor coordination is excellent, with major collaborative efforts on many current issues including economic governance, the Mindanao peace process, health, local governance, environmental management, power-sector reform, and poverty reduction. Japan is the largest donor (50% of the total donor commitments in 2000), followed by the Asian Development Bank (25%) and the World Bank (21%). Major bilateral donors include the United States, Japan, Australia, Germany, and Canada. The Japanese are focusing on strengthening economic infrastructure and the World Bank and the Asian Development Bank on poverty reduction and corruption issues. The UN agencies are active in poverty alleviation, environmental improvement, human development, child welfare, and family planning. The UNDP is supporting the Mindanao peace process. The Australians support rural income generation, health, education, and the environment, especially in Mindanao. The Germans give priority to vocational training, industrial and urban environmental management, maritime safety, and health and family planning. The Canadians are focusing on private sector strengthening, and strengthening of democratic institutions and civil society, including Mindanao. Program Data Sheets 492-002  Investment Climate Less Constrained by Corruption and Poor Governance 492-003  Reduced Fertility Rate, Maternal and Child Morbidity, TB Mortality and HIV/AIDS Prevalence 492-004  Environmental Management Improved 492-010  Prospects for Peace in Mindanao Strengthened Country Background Information Resources     CIA Factbook Library of Congress National Geographic Country Maps State Dept. Country Information

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