The United States (US) government’s Millennium Challenge Corp. (MCC) has earmarked a $60-million grant for the Philippines focused on the energy sector.

Documents discussed during the US aid agency’s economic advisory council meeting last month, which were made public last week, showed that the upcoming Philippine grant was listed under MCC threshold programs “in implementation and under development,” with the Philippines tagged for a $60-million energy program after being selected in December 2023.

This latest disclosure provides the clearest indication so far of the potential size of the grant assistance that Washington may extend to Manila as the Philippines grapples with a prolonged global energy crisis wrought by the war in the Middle East, which has triggered sharp oil price swings and supply shortages.

Manila Bulletin earlier reported that MCC’s fiscal year (FY) 2027 congressional budget justification document showed the Philippine government and the US aid agency have already reached “the final stages of designing the threshold program, which will focus on enhancing energy security and reducing barriers to investment in energy.”

The proposed threshold grant for the Philippines would be presented to MCC’s board for consideration this coming June.

The energy sector appears to be a fitting focus given the ongoing oil price and supply shocks triggered by the Middle East conflict, which prompted President Ferdinand R. Marcos Jr. to declare a state of national energy emergency last March.

Unlike the previous MCC compact secured by the administration of former president Benigno Aquino III—which involved a $434-million grant to support infrastructure, fiscal reforms, and poverty-reduction projects—the new threshold program is smaller in scale and focused specifically on policy and institutional reforms tied to energy security and investments.

Last year, US President Donald Trump moved to shutter MCC, temporarily putting into question the threshold program being developed for the Philippines. Former Department of Finance (DOF) chief and current Executive Secretary Ralph G. Recto had told Manila Bulletin that the MCC issue was “not a concern” for the Philippine government at that time because the country was not yet receiving aid under the program.

Even before Trump’s return to the White House, MCC had already indicated that it would proceed with a smaller-scale grant program for the Philippines despite concerns involving the country’s anti-corruption performance.

During the administration of former president Rodrigo R. Duterte, “significant concerns” involving human rights issues related to the deadly war on drugs prompted MCC to halt the renewal of its aid package for the Philippines.

In a social media post last week, the Energy Regulatory Commission (ERC) disclosed that it held an alignment meeting with MCC representatives last May 20 as part of “ongoing discussions aimed at strengthening regulatory capacity, improving operational efficiency, and supporting the modernization of the Philippine energy sector.”

According to the ERC, discussions covered reforms involving tariff and economic analysis workflows, streamlining regulatory processes, strengthening consumer protection mechanisms, enhancing records and document management systems, as well as accelerating digital transformation initiatives across the commission.

The discussions also involved issues relating to rate resets, tariff regulation, power supply agreement (PSA) approvals, capital expenditure (capex) applications, market operations monitoring, and broader operational efficiency improvements.

The ERC said the discussions explored possible MCC support for process improvements, digital systems enhancement, electronic filing systems, and records information management initiatives.

Back in January, the ERC also disclosed that it met with MCC and DOF officials to discuss possible collaboration involving digitalization, data analytics, online regulatory platforms, governance reforms, and efforts to address regulatory backlogs.

Led by ERC Chairperson and Chief Executive Officer (CEO) Francis Saturnino C. Juan, the January meeting also tackled reforms involving rate resets, tariff regulation, PSA approvals, capex approvals, and key transmission projects.

Unlike loans, MCC assistance is extended through grants that do not require repayment by recipient governments.

Established in 2004, MCC provides grants for infrastructure, institutional reforms, and economic development projects in partner countries considered relatively well-governed. According to MCC documents, it has committed over $17 billion across 76 programs worldwide.

MCC has also highlighted the Philippines’ strategic role in global semiconductor supply chains, particularly in assembly, testing, and packaging (ATP) operations.

In a paper titled “Capturing the Mutual Benefits of Development Assistance” presented during the same economic advisory council meeting, MCC said the 2021-2022 post-Covid-19 pandemic global microchip shortage exposed vulnerabilities across the semiconductor supply chain, particularly in the US automotive sector, which produced about 10 million fewer vehicles and incurred hundreds of billions of dollars in lost revenue.

“The risk stems not only from chip fabrication, but throughout the microchip supply chain. The Philippines, a current MCC partner, plays a significant role in the assembly, testing, and packaging (ATP) step of the supply chain—a role that contributed significantly to the 2021 disruption,” the paper said.

The paper added that ATP has been identified as “a strategic sector to de-risk” and an area suitable for cooperation with developing economies.