Press Release
December 16, 2008

Poor hardest hit by foreign aid cut due to corruption -- Loren

Senator Loren Legarda yesterday warned that unless corruption in the Philippines is curbed, the country would suffer more serious cutbacks in foreign aid, with the poor suffering the most.

Senator Legarda issued the warning in the face of the recent pronouncement made by US Millennium Challenge Corp.(MCC)that it would cease providing financial assistance to the Philippines unless it is able to solve the problem of corruption.

Loren expressed fear that if the government fails to drastically reduce corruption, other international aid agencies would follow the lead of MCC and stop providing assistance to the Philippines.

The MCC is one of the major international agencies and private organizations that provide assistance for the reduction of global poverty through the promotion of sustainable economic growth, especially in developing countries.

"The sad thing," according to Loren, who is chair of the Senate Committee on Agriculture, "is that the poor, who are the target of the bulk of foreign aid, are the ones who would suffer most if the aid is drastically cut. Expect poverty incidence in our country, already estimated of from 40 to 50 percent, to expand further."

The Philippines may also find it hard to find foreign sources of funding for its projects for economic development, thus denying millions of jobless Filipinos opportunities for employment.

Granting that the Philippines might be able to secure foreign funding, Loren said, it could be at higher interest rates, owing to the status of the Philippines as a risky loan customer.

"If aid-giving institutions are already wary, more so will those institutions that provide money to countries at commercial rates," Loren said.

Foreign investors, Loren said, cannot be blamed if in the future they become more cautious in dealing with the Philippines owing to its reputation as a corrupt country.

Corruption leads to instability and this, Loren explained, adds cost to conducting business in the country where so much "red tape" are to be overcome before finally making actual profits, she explained.

Loren said business costs soar due to corruption because of bribery, bureaucratic red tape and extortion by corrupt government officials.

"How can you entice new business ventures when just getting the necessary business permits bog them down. Each day a company fails to start operations represents a day of lost opportunities to get a return on its investments," she pointed out.

"Corruption also undermines the very faith of the people in the government," Loren said.

"This is a wake-up call on the government, and I do not want to think it is not paying attention to MCC's declaration," she said.

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