Summary: GAO reviewed selected aspects of United States foreign assistance, both economic and military, provided to the Republic of the Philippines. This report includes matters involving the administration of the economic assistance program in the Philippines, with particular emphasis on grant aid and loans provided for development purposes. In our review, we examined the effectiveness of management controls within the Agency for International Development in developing and carrying out the program in accordance with established United States policies and objectives. Our review was directed toward (1) measuring the effectiveness of the program in achieving its intended economic goals, (2) identifying problems that restrict the effective use of assistance, (3) evaluating the utilization and maintenance of equipment and facilities provided as economic assistance, (4) considering whether the United States was providing assistance prematurely or unnecessarily, and (5) evaluating the administration of the program by United States agencies, including coordination with other agencies within the Philippines. Our review was conducted both in Washington and in the Philippines. In Washington, we examined pertinent records of the Agency for International Development. In the Philippines, we discussed United States economic assistance objectives and programs with representatives of the United States Embassy and the United States Operations Mission to the Philippines. We also examined programs and project records and reports in detail and visited major economic assistance projects to observe the extent to which United States assistance was being used in the furtherance of program objectives.
Our review of selected United States grant aid and loan assistance projects disclosed that economic assistance provided at a cost of about $70.2 million exceeded the capacity of Philippine recipients to effectively absorb, maintain, and utilize and had not, therefore, achieved the results in developing the Philippine economy that otherwise would have been reasonably expected. Foreign currency contributions by Philippine recipients, needed to make effective use of this assistance, had been insufficient and a number of projects also had not been effectively planned or administered by United States officials. A fundamental limitation on the effectiveness of the economic assistance program has been the inability or unwillingness of Philippine recipients to provide the foreign currency resources needed to adequately support United States development assistance projects. Our review of selected grant aid projects disclosed that projects costing $54.7 million had not met their interim or long-range objectives, principally because the Philippine Government was unable or unwilling to provide enough foreign currency funds to permit effective utilization and maintenance of equipment, material, and services provided by the United States. Our review of development loans totaling $27.9 million, of which $15.5 million has been disbursed, disclosed that loans had not been successful in meeting their economic development goals about 5 years after they were made, and that repayments on two of the loans were seriously delinquent. We believe that development loans, which were made to both the public sector and the private sector, were approved and disbursed without sufficient reviews of their economic and technical feasibility and without adequate surveillance of the management of the loan proceeds. The ineffective use of this assistance had created an economic burden to some of the borrowers rather than an economic benefit. A fundamental problem in making effective use of development loans, aside from weaknesses in managing and controlling projects, has been the limited foreign currency financial resources devoted to the projects by the borrowers.
