Download Sectoral conditionalities - VUFO

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
350
NG Health spending, 1986-2008
0.74%
0.80
1997
2008
200
0.50
0.31%0.40
150
0.30
100
50
Health (Pesos per capita, CPI=2000)
0.20
Health (% of GDP)
0.10
0
0.00
Year
% of GDP
0.60
250
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
PhP per capita
0.70
0.58%
300
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
–
–
–
2.
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
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
% of GDP
40
30
Declining
manufacturing
20
AGRI, FISHERY & FORESTRY
INDUSTRY SECTOR
10
Declining
agriculture
Manufacturing
SERVICE SECTOR
0
1946
1951
1956
1961
1966
1971
1976
Year
1981
1986
1991
1996
2001
2006
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
25
20
Declining
investment
15
10
5
Gross Domestic Savings
Declining
savings
Gross Investment
0
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
% of GDP
30
Year
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
1990
1997
20.7%
25
20.3%
1,200
20
NG budget (PhP billion)
2008
NG budget (% of GDP)
16.8%
600
15
10
400
5
200
0
0
Year
% of GDP
800
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
PhP billion
1,000
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