Unfortunate rejection

It’s common knowledge that President Duterte does not take kindly to countries that criticize his administration’s war on drugs. The United States and the European Union have been the main targets of his disdain. Last week the President’s row with the EU took an unfortunate turn, with the Philippine government announcing that it would no longer accept development aid from the bloc, putting at risk programs to assist impoverished and conflict-hit regions in Mindanao.

EU Ambassador Franz Jessen noted that the decision to decline aid from the European Union would mean the loss of about 250 million euros or P14 billion worth of grants mostly for Moro communities. The government decision must have been encouraged by the billions of dollars in pledges that President Duterte got from China after attending the Belt and Road Summit in Beijing the other week.

The European Union has been helping in efforts to end a protracted conflict that keeps resource-rich Mindanao poor. From 2007 to 2013, the bloc granted 130 million euros in development assistance, and in 2015, it pledged 325 million euros (P18 billion) for a four-year program to finance various development projects in Mindanao.

Not surprisingly, economic officials sought to downplay the issue. Socioeconomic Planning Secretary Ernesto Pernia noted that the decision to cut aid from Europe could still change. “I will not take that as a policy. It is more of a reaction to criticism. I don’t think it’s going to remain as such,” he explained, pointing out that Europe ranked fifth- or sixth-biggest source of official development assistance for the Philippines.

Trade Secretary Ramon Lopez added that the Philippines wanted to maintain its trade arrangements with the European Union despite the decision to refuse aid from the bloc. Under the Generalized Scheme of Preferences (GSP), the Philippines can export to EU member-states without duties or at reduced tariffs. Lopez said he didn’t want the current GSP to be affected because it is not a grant and involves commercial transactions that could benefit both sides. The GSP provides market access to our exporters and also makes available cheaper Philippine products for EU consumers or cheaper inputs for their manufacturers, allowing EU investors in the country that export back to the European Union to benefit from the scheme, Lopez explained.

The GSP+, on the other hand, is a different story because it is tied to the Philippines’ compliance with 27 international agreements, including those involving human rights. The Philippines was given preferential status under the European Union’s GSP+ in December 2014, allowing the duty-free export of some 6,000 eligible products to the EU market. In the first six months of 2015, Philippine exports to the bloc under GSP+ increased by 27 percent to 743 million euros (about P41 billion) from 584 million euros.

The risks of antagonizing the European Union are big. It was the top destination of exports from the Philippines at $901 million last March, overtaking the United States and Japan, according to latest data from the Philippine Statistics Authority. In the first quarter, Philippine exports to the bloc accounted for 15.5 percent of the total, or a growth of 48.3 percent, making it the fastest-growing export market for Philippine goods. The increase was traced partly to higher exports of the processed agricultural products sector because of the GSP+ trade benefits. The European Union is also one of the biggest foreign investors in the Philippines, generating employment for about half a million Filipinos.

This is truly an unfortunate development because the money that the Philippine government has rejected is free and aimed at helping the poorest and more vulnerable sectors, particularly in Mindanao. It is hoped that the EU grant would be viewed as not so much foreign interference in the Philippines’ affairs as a means to help uplift the plight of disadvantaged sectors in the South.