WASHINGTON, November 11, 2004 (STAR) By Jose Katigbak STAR Washington Bureau - Poor fiscal discipline and limited spending for health have disqualified the Philippines from receiving aid under the Bush administration’s Millennium Challenge Account (MCA), said the head of the body that administers the US aid program.

But Paul Applegarth, chief executive officer of the Millennium Challenge Corp. (MCC), said the Philippines was declared eligible for a threshold program designed to help it eventually win MCA assistance.

Applegarth said 16 of the world’s poorest countries qualified for MCA assistance for fiscal year 2005 out of a pool of 68 countries, each with a per capita income of $1,465 or lower. These countries are Armenia, Benin, Bolivia, Georgia, Ghana, Honduras, Lesotho, Madagascar, Mali, Mongolia, Morocco, Mozambique, Nicaragua, Senegal, Sri Lanka and Vanuatu.

Applegarth said corruption and the questionable quality of the country’s court system were other factors that influenced the MCC board not to name the Philippines as an MCA—eligible country. But he said the board also recognized the country’s "commitment to meeting the eligibility requirements for MCA assistance in the future."

The board named the Philippines as one of 12 threshold countries that could apply for grants to help them qualify for the MCA. The others are Burkina Faso, Guyana, Kenya, Malawi, Paraguay, São Tomé, Tanzania, Timor-Leste, Uganda, Zambia and Yemen.

The MCC judges candidate countries in the areas of just and democratic governance, economic freedom and investment in social welfare.

Sixteen indicators, including rule of law, civil liberties, control of corruption, inflation rate, and trade and fiscal policy, are used to determine how much the political and economic conditions in a country promote broad-based sustainable economic growth.

Applegarth said threshold countries would be invited to submit funding proposals for improving their performance on the MCC selection criteria.

Selection as an MCA-eligible country does not mean the country automatically gets money, Applegarth said. Those deemed eligible will have to present their proposals for economic growth. The funding will only be given after the MCC evaluates and approves the proposals.

Secretary of State Colin Powell, one of the harshest critics of the pullout of Philippine troops from Iraq, is one of seven MCC board members that approved the list of eligible countries.

But Applegarth denied that the board was influenced by the decision of President Arroyo to withdraw the small Philippine force from Iraq to appease Iraqi militants that held a Filipino truck driver hostage.

"If it did, I don’t think the Philippines would have been named a threshold country," he said.

Commenting on the report, President Arroyo said the Philippines’ selection of the Philippines as an MCA threshhold nation "is a positive indication that the Philippines and the United States have a strong and continuing dialogue on development cooperation."

Applegarth said people from poor countries that don’t make the cut need not worry as other US programs provide significant humanitarian assistance directly to people in need.

The MCA was set up in January 2004 with a startup capital of $1 billion. Bush has asked Congress to provide $2.5 billion for the program next year.

The Arroyo administration is struggling to rein in a burgeoning budget deficit, which economic analysts warn could explode into a fiscal crisis.

Sen. Ralph Recto is scheduled to submit bill to the Senate for debate next week that will raise taxes imposed on cigarette and alcohol products. The measure is one of eight tax bills being endorsed by Malacañang to avoid a fiscal crisis.

The House of Representatives has passed its version of the bill, while the Senate ways and means committee is completing hearings on the House version and Senate Bill 1815, filed by Sen. Juan Ponce Enrile.

Enrile’s bill seeks a higher cigarette tax than that recommended by congressmen.

The House version of the measure, approved last Oct. 28, is estimated to bring in revenues of over P25 billion over a three-year period.

The House suggested that tax adjustments be 20 percent for 2005, three percent for 2006 and another three percent for 2007. In the case of low-priced cigarettes, which are levied a specific tax of P1.12 per pack, the 20 percent increase is equivalent to 22 to 23 centavos. Enrile wants the tax increased by P4.88 to P6 per pack for this classification of cigarettes.

The House, however, is still open to a compromise with the Senate for the passage of the "sin" tax bill into law, Speaker Jose de Venecia Jr. said. — With Marichu Villanueva, AFP

Reported by: Sol Jose Vanzi

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