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A World with Extreme Poverty is a World of Insecurity.

Saturday, September 29, 2007

Donor-driven, donor-dependent

Opinion / Financing and Population Management

Health News and Views / Dr.A.G. Romualdez / Malaya, 25 September

Donor-driven is the term used by a number of senators to describe the ZTE-NBN project. The fact is that the deal was also supplier-promoted and externally facilitated. All these features rendered the ZTE deal extraordinarily susceptible to unsavory practices such as bribery and other forms of corruption.

However, apart from the immensity of the amounts involved and the exposure of unprecedented direct participation by very high-ranking officials, donor-driven, supplier-linked, and externally facilitated projects are the rule rather than the exception in most foreign assisted projects in the Philippines, whether they be bilateral (one country donor) or multilateral (international finance institution).

In the health sector, Japan, Netherlands, Austria, Spain, and in fact almost all OECD countries have in the past implemented projects with features similar to the controversial broadband network deal. The modus operandi for project development is essentially the same in most cases.

The story usually begins with a supplier who is well-connected in the donor country. The supplier identifies and approaches a local group that has vested or professional (or both) interests in an activity and offers to secure funding for a project. In exchange, the local group is expected to facilitate the government processes for project development and approval including counterpart funding or government guarantees when necessary. Depending on the donor countries’ procedures for overseas assistance, the deals can be finalized anywhere from one year to a few years of initial contact.

At this point, it should be emphasized that not all projects that follow this process are disadvantageous to the Philippines. In fact most of them are of distinct benefit and have contributed to peoples’ welfare significantly. The Research Institute for Tropical Medicine (RITM) in Alabang (funded by Japan) and the Eye Institute as well as the Emergency Medical Complex at the Philippine General Hospital (funded by Spain) are only two examples out of many.

Unfortunately, quite apart from the potential for scandal and graft, there are other adverse effects of foreign assistance that need to be anticipated and to the extent possible mitigated. The worse of these are most likely when the supplier-linkage is eliminated or minimized such as is the case with most multilateral agencies such as the World Bank and the Asian Development Bank.

Among the most undesirable of these adverse effects is the strong tendency to develop donor dependency in Philippine institutions. Donor dependency is in the long term more harmful to Philippine interests than some of the financial consequences of individual projects. Unfortunately, in the health sector there are a number of examples.

Arguably one of the most successful of foreign funded programs in this country is USAID’s family planning assistance. Over the last three decades, population growth rate dropped significantly, and the population management program is so well institutionalized that repeated attempts (including the present administration’s) to dismantle it have so far failed. However, the country’s complete dependence on foreign support for contraceptive supplies, aided and abetted by government’s reluctance to allocate money early in the program, has resulted in today’s dangerous situation of lack of supplies especially for those who need them most – the country’s poor women.

Similarly, a number of apparently successful programs currently on-going are in danger of suffering the same fate if and when donor interest wanes. For instance, drug procurement for the Philippines’ most important disease control programs is largely dependent on funds from the Global Fund on AIDS, TB, and Malaria (GFATM).

The Department of Health’s Formula One strategy to institute health reforms in the Philippines is another example of donor dependence preventing the major portion of the Philippines from benefiting from serious changes in the way health services are delivered. All efforts are concentrated on 16 provinces identified by a combination of past experience (old pilot projects) and donor-interest that are beneficiaries of World Bank, European Union, Asia Development Bank or other donor agencies projects. It appears that without foreign-funding, even the highest of priorities are unlikely to receive attention because no Philippine funds are appropriated for them.

One characteristic that is shared by all donor-driven activities is over-pricing. This is because it is in the donors’ interest to spend as much money as possible. In the late 70s, when it was established that 95 percent of the World Bank’s First Philippine Population Project objectives had been met at a loan availment rate of 55 percent, a na├»ve health official suggested that the excess money be returned. The government finance establishment was aghast and instructed the health ministry to forthwith reprogram the funds for other activities.

For the record, these instructions were issued without finger pointing and the use of the phrase "back off".