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US Development Policy


On the heels of President Trump’s trip to the Philippines, a bilateral foreign policy question looms. Next month, the Millennium Challenge Corporation’s board of directors will meet to select the set of countries that will be eligible for the agency’s large-scale grant programs. One of the decisions on the table will be whether to continue the partnership with the Philippines. The board needs to formally reselect the country this year for program development to proceed. The Philippines has been a long-term partner for MCC, having completed a threshold program (2006–2009) and a compact (2011–2016). In late 2014, MCC gave the Philippines the green light for the next step, selecting it to start developing a second compact. However, over the last year and a half, questions have emerged about whether the Philippines continues to meet MCC’s good governance criteria. In one month, MCC and its board will have to answer those lingering questions.

For background on MCC’s selection process, visit MCC’s official document or my short synopsis (see section “How the Selection Process Works,” p. 2-4).

The Philippines and the United States have long been strong allies. Close military and security cooperation, substantial trade and investment, and immigration have contributed to what both countries have typically viewed as an overwhelmingly favorable relationship. The inauguration of President Rodrigo Duterte in mid-2016, however, created something of a rift. At the outset of his tenure, Duterte engaged in inflammatory anti-American (and specifically anti-Obama) rhetoric, threatening to “break up with America.” This came largely in response to concerns voiced by President Obama and others over Duterte’s support for the extrajudicial killings of thousands of individuals suspected of involvement in illicit drug activity. When MCC’s board faced the decision last year of whether to give the Philippines the go-ahead to continue working toward a second compact, it deferred, opting to take a wait-and-see stance rather than a forward-leaning foreign policy decision. That decision, which could have been interpreted as either a stamp of approval or a punitive action with respect to a significant ally would have occurred just weeks before the new Trump administration was to take office.

Over the past year, anti-American rhetoric has waned as Presidents Trump and Duterte have forged a more friendly relationship. And Trump has been virtually silent on the human rights concerns expressed by the previous administration—even telling Duterte during an early phone call that he was doing an “unbelievable job on the drug problem.”

This sets up the MCC board for a tough call. Should good governance-focused MCC take a stand on the Philippines’ serious human rights concerns even though the White House has been ambivalent, at best, about the issue? How much will the answer to this question be informed by pressure to treat delicately an important geostrategic ally whose current leadership has responded to US criticism by threatening American interests and edging closer to China?

In making that decision, another important factor will come into play. The Philippines doesn’t pass MCC’s scorecard criteria this year, falling just short on the critical Control of Corruption indicator. In some ways, that may seem convenient. Pointing to a failing Control of Corruption indicator would theoretically give the board cover to pull back MCC’s engagement with the Philippines without having to (a) express concerns about other governance issues and (b) awkwardly put MCC, as opposed to the State Department, at the leading edge of that conversation.

As tempting as that rationale might be, it’s also wrong. The Philippines’ failing score does NOT mean that the country is suddenly much more corrupt. In fact, the change in score is slight and not even close to statistically significant. The simple fact is that the Philippines has always been near the middle of the pack on this indicator, fluctuating above and below the passing threshold (in its eight years as a lower-middle-income country, it’s passed the Control of Corruption indicator three times). Simply put, its measured corruption performance this year is not meaningfully different than the year it was selected.

As I’ve argued many times, MCC should not necessarily curtail a country’s compact development process just because it fails the Control of Corruption hurdle. For corruption to be a valid justification, MCC should be able to point to a concrete decline in actual policy—not just in score. MCC’s official guidance suggests this is the agency’s approach, as well, noting that the board should use its judgement—informed by its understanding of data limitations—to interpret what the scorecard says about policy performance. Unfortunately, the board’s interpretation of the data has sometimes been more rigid than the indicators’ imprecision allows. For instance, the board decided not to reselect Benin, Sierra Leone (FY2014), and Kosovo (FY2017) for compact eligibility when they narrowly failed the Control of Corruption indicator, even though MCC acknowledged (for the former two at least) there had been no deterioration in policy. Sierra Leone and Kosovo were relegated to MCC’s much smaller threshold program. Benin was reselected for compact eligibility the following year, but only after compact development was slowed by the earlier decision. Earlier this year, I was hopeful that MCC would formalize an approach to corruption that would—for decisions about whether to reselect countries to continue compact development—reduce the need for the board to trade off appearing to “play by the rules” (countries must pass the Control of Corruption hurdle) and the imperative to use data wisely. The current guidance isn’t explicit about this, leaving open the possibility that the board could use the Control of Corruption indicator as an “easy out.” I hope that’s not the route they’ll take.

I hope that instead, the board gives greater scrutiny to other aspects of the Philippines’ scorecard data. For eligibility for a second compact, MCC is clear that there is a higher “good governance” bar. The agency looks not just for a passing scorecard, but for improved performance during the course of the previous compact. In the past, I’ve highlighted why this can sometimes be an impractical criterion, but for the Philippines, there are some signals the board should heed. Notably, while the Philippines still easily passes the Civil Liberties indicator, Freedom House (the indicator’s source) gave the Philippines a “downward trend arrow” due to the extrajudicial killings associated with the war on drugs, as well as threats against civil society activists. The Philippines also fails the Rule of Law indicator (which covers events of 2016 and earlier). The decline is slight, and, given its longstanding middle-of-the-pack rank, it has failed this indicator before. But it will be useful for MCC and the board to understand what is behind the decline and how assessments have changed over the past year.

All this makes the Philippines the decision to watch at MCC’s upcoming December board meeting. In the balance are not only the fate of the Philippines’ compact, but also important questions of how the new board under the Trump administration interprets MCC’s good governance mandate and whether it will use data wisely.


CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.

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