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Document o f The World Bank
FOR OFFICIAL USE ONLY
Report No: 37006-PH
PROJECT APPRAISAL DOCUMENT
ON A
PROPOSED LOAN
IN THE AMOUNT OF US$83.752 MILLION
TO THE
REPUBLIC OF THE PHILIPPINES
FOR A
MINDANAO RURAL DEVELOPMENT PROJECT
IN SUPPORT OF PHASE 2 OF THE MINDANAO RURAL DEVELOPMENT PROGRAM (APL)
March 1,2007
Rural Development, Natural Resources and Environment Sector Unit East Asia and Pacific Region
This document has a restricted distribution and may be used by recipients only in the performance o f their official duties. I t s contents may not otherwise be disclosed without World Bank authorization.
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CURRENCY EQUIVALENTS
Exchange Rate Effective August 2006
Currency Unit = Philippine Peso Php 52 = US$1
F ISCAL YEAR January 1 - December 31
ABBREVIATIONS AND ACRONYMS
AFMA - Agriculture and Fisheries Modernization Ac t AFMPs - Agriculture and Fisheries Modernization Plans APL - Adaptable Program Loan ARMM - Autonomous Region in Muslim Mindanao AusAID - Australian Agency for International Development
Barangay AFMP - Barangay Agriculture and Fisheries Modernization Plan BDPs - Barangay Development Plans BFs - Barangay Facilitators BFAR - Bureau o f Fisheries and Aquatic Resources B S W M - Bureau o f Soils and Water Management B A W A S A - Barangay Waterworks and Sanitation Association
CAS - Country Assistance Strategy C D D - Community Dr iven Development C F A D - Community Fund for Agricultural Development C I D A - Canadian International Development Agency C M B C - Coastal Marine and Biodiversity Conservation C O - Central Office C O A - Commission on Audit CPAR - Country Procurement Assessment Report
DA - Department o f Agriculture DAR - Department o f Agrarian Reform DBM - Department of Budget and Management DENR - Department o f Environment and Natural Resources DesA - Designated Account D F I M D P - Diversified Farm Income and Market Development Project DILG - Department o f Interior and Local Government DOF - Department of Finance DTI - Department o f Trade and Industry DPWH - Department o f Public Works and Highways
EA - Environmental Assessment ECC - Environmental Compliance Certificate EIS - Environmental Impact Statement EMB - Environmental Management Bureau
FOR OFFICIAL USE ONLY
eNGAS - Electronic National Government Accounting System
FM - Financial Management FMR - Financial Monitoring Report FMRs - Farm-to-Market Roads F S D E - Feasibility Study/Detailed Engineering
GEM - Growth with Equity in Mindanao GOP - Government o f the Philippines
IA - Irrigators Association I C R - Implementation Completion Report I C T - Information and Communications Techno1 IFC- International Finance Corporation IGR - Investments for Governance Reform IPS - Indigenous Peoples IPM - Integrated Pest Management IRA - Internal Revenue Allocation
gY
JNA - Joint Needs Assessment
KALAHI - Kapit-Bisig Laban sa Kahirapan
LARR - Land Acquisition Rehabilitation and Resettlement L G C - Local Government Code LGU or LGUs - Local Government Unit/s
M A 0 -Municipal Agricultural Office MDFO - Municipal Development Fund Office M E D C O - Mindanao Economic and Development Coordinating Off ice MFs - Municipal Facilitators MLGUs - Municipal Local Government Units M P D O - Municipal Planning Development Office MPMIUs - Municipal Program Management and Implementation Units MRDP1- Mindanao Rural Development Project APL Phase 1 MRDP2 - Mindanao Rural Development Project APL Phase 2 MSCs - Multi-sectoral Committees MTPDP - Medium Term Philippine Development Plan N C B - National Competitive Bidding NCIP -National Commission for Indigenous People NEDA - National Economic and Development Authority NG - National Government N G A S - National Government Accounting System NGOs - Non-Government Organizations NIA - National Irrigation Administration N I A - P I 0 - National Irrigation Administration - Provincial Irrigation Officer NRh4 - Natural Resources Management
0 & M - Operation and Maintenance
P A 0 - Provincial Agricultural Office
This document has a restricted distribution and may be used by recipients only in the performance o f their off icial duties. I ts contents may not be otherwise disclosed without Wor ld Bank authorization.
PASUC - Philippine Association o f State Colleges and Universities P B D - Philippine Bidding Document PCO - Program Coordination Office PLGUs - Provincial Local Government Units PAB - Program Advisory Board P/MAO - ProvincialMunicipal Agriculturist’s Office PMBO - ProvincialMunicipal Budget Office P M E O - ProvincialMunicipal Engineer’s Off ice P M P D O - ProvincialMunicipal Planning and Development Office POs - Peoples’ Organizations PPMrUs - Provincial Program Management and Implementation Units PRA - Participatory Rural Appraisal PSO - Program Support Office
RA - Republic Ac t RAFCs - Regional Agricultural and Fisheries Councils RFUs - Regional Field Units o f the Department o f Agriculture RI - Rural Infrastructure RIARC - Regional Integrated Agricultural Research Center R P A B s - Regional Program Advisory Boards RPCO/s - Regional Program Coordination Office/s R W S A - Rural Waterworks and Sanitation Association
SBD - Standard Bidding Document S L M - Sustainable Land Management SPCMAD - Special Project Coordination and Management Assistance Division SOE - Statement o f Expenditure SUCs - State Universities and Colleges
U S A I D - United States Agency for International Development
Vice President: James Adams, EAPVP
Sector Director Christian Delvoie, EASSD Country Director: Joachim von Amsberg, EACPF
Sector Manager: Rahul Raturi, EASRE Task Team Leader: Carolina V. Figueroa-Geron, EASRE
I . A . B . C .
I1 . A . B . C . D . E . F .
PHILIPPINES
Mindanao Rural Development Project . Phase ll
CONTENTS
Page
STRATEGIC CONTEXT AND RATIONALE ......................................................... 1 Country and sector issues .................................................................................................... 1 Rationale for Bank involvement ......................................................................................... 2
Higher level objectives to which the project contributes .................................................... 3
PROJECT DESCRIPTION ......................................................................................... 3 Lending instrument ............................................................................................................. 3
Project development objective and key indicators .............................................................. 5 Project components ............................................................................................................. 5
Alternatives considered and reasons for rejection .............................................................. 9
Program objective and Phases ............................................................................................ 3
Lessons learned and reflected in the project design ............................................................ 8
I11 . IMPLEMENTATION .................................................................................................. 9 A . B . C . D . E . F .
Partnership arrangements., .................................................................................................. 9
Institutional and implementation arrangements. ................................................................. 9
Monitoring and evaluation o f outcomeshesults., .............................................................. 11
Sustainability and Replicability ........................................................................................ 11
Loadcredit conditions and covenants ............................................................................... 12
Critical r isks and possible controversial aspects ............................................................... 11
I V . APPRAISAL SUMMARY ......................................................................................... 13 A . B . Technical ........................................................................................................................... 14
Economic and financial analyses ...................................................................................... 13
C . Fiduciary ........................................................................................................................... 15
E . Environment ...................................................................................................................... 16
Safeguard Policies ............................................................................................................. 17
Policy Exceptions and Readiness ...................................................................................... 17
D . Social ................................................................................................................................. 16
F . G .
Annex 1: Country and Sector or Program Background ......................................................... 18
. Annex 2: Major Related Projects Financed by the Bank and/or other Agencies ................. 24
Annex 3: Results Framework and Monitoring ........................................................................ 25
Annex 4: Detailed Project Description ...................................................................................... 31
Attachment 1 to Annex 4: Mechanism and Guidelines for Perfonnance-Based Grants .......... 49
Attachment 2 to Annex 4: Ant i -Comption Plan ...................................................................... 53
Annex 5: Project Costs ............................................................................................................... 56
Annex 6: Implementation Arrangements ................................................................................. 57
Annex 7: Financial Management and Disbursement Arrangements ..................................... 63
Annex 8: Procurement Arrangements ...................................................................................... 74
Annex 9: Economic and Financial Analysis ............................................................................. 78
Annex 10: Safeguard Policy Issues, Social Assessment and Analysis .................................... 86
Annex 11: Project Preparation and Supervision ..................................................................... 95
Annex 12: Documents in the Project File ................................................................................. 97
Annex 13: Statement of Loans and Credits .............................................................................. 98
Annex 14: Country at a Glance ............................................................................................... 101
Annex 15: Maps ......................................................................................................................... 104
PHILIPPINES
Source Local Borrower 39.900
MINDANAO RURAL DEVELOPMENT PROJECT - ADAPTABLE PROGRAM LOAN 2
Foreign Total 0.000 39.900
PROJECT APPRAISAL DOCUMENT
International Bank for Reconstruction and Development Total:
EAST ASIA AND PACIFIC
73.052 10.700 83.752
112.952 10.700 123.652
EASRE
Date: March 1,2007 Country Director: Joachim von Amsberg Sector Managermirector: Rahul Raturi/Christian Delvoie (30%); Sub-national government
Team Leader: Carolina V. Figueroa-Geron Sectors: General agriculture, fishing and forestry sector (40%); Roads and highways
administration (15%); Water supply (1 5%) Themes: Rural services and infrastructure (P);Decentralization (P);Rural policies and institutions (P) Environmental screening category: Partial Assessment
Project ID: PO84967
Lending Instrument: Adaptable Program Loan
[XI Loan [ ] Credit [ ]Grant [ ]Guarantee [ ]Other: Project Financing Data
For Loans/Credits/Others: Total Bank financing (US$m.): 83.752 Proposed terms: FSL in US dollars, with 8-year grace period and payable over 20 years with level reDavments.
Responsible Agency: Department o f Agriculture Office o f the Secretary Elliptical Road Diliman, Quezon City Philippines Tel: (63-2) 9288741
Project implementation period: Start June 29,2007 End: June 29,2012 Expected effectiveness date: June 29, 2007 Expected closing date: December 3 1, 2012 Does the project depart from the CAS in content or other significant respects? Re$ PAD I.C Does the project require any exceptions from Bank policies? Re$ PAD I K G
I s approval for any pol icy exception sought from the Board? Does the project include any critical risks rated “substantial” or “high”? Re$ PAD I I I ,E Does the project meet the Regional criteria for readiness for implementation? Ref: PAD I K G
[ ]Yes [XINO
[ ]Yes [XINO
[ ]Yes [XINO
[ ]Yes [XINO
[XIYes [ ] N o
Have these been approved by Bank management? [ ]Yes [ IN0
., Project development objective Re$ PAD II. C, Technical Annex 3 MRDP 2 aims to (i) improve livelihood opportunities o f targeted communities and (ii) institutionalize a decentralized system for agriculture and fisheries service delivery that promotes participation, transparency and accountability.
Project description [one-sentence summary of each component] Re$ PAD II.D, Technical Annex 4 (1) institutional capacities o f the DA and the participating LGUs in operationalizing a decentralized agricultural and fisheries support service delivery system;
Investments for Governance Reforms and Program Administration - aims to strengthen
(2) Rural Infrastructure Component - aims to finance local infrastructure priorities responsive to the needs and priorities o f LGUs and communities, for increasing agricultural and fisheries productivity and market development.
(3) Community Fund for Agricultural Development (CFAD) Component - aims to address diverse investment priorities o f rural communities, through the financing o f subprojects which meet community preferences and local priorities.
(4) Natural Resource Management Component - aims to conserve coastal resources and marine biodiversity through co-management o f critical marine habitats, better resource management practices and the introduction o f improved, upstream land management practices that would arrest land degradation and enhance the integrity o f coastal ecosystems.
Which safeguard policies are triggered, if any? Re$ PAD I K F , Technical Annex 10 Indigenous Peoples Policy (OP/BP 4.10) Involuntary Resettlement Pol icy (OP/BP 4.12) Environmental Assessment Pol icy (OP/BP 4.01 Pest Management (OP4.09)
Significant, non-standard conditions, if any, for: Re$ PAD III. F Loadcredit effectiveness: None.
Covenants applicable to project implementation: The Borrower wi l l not amend, abrogate, suspend, or waive any provision o f the Operations Manuals without the prior written concurrence o f the Bank.
The Borrower, by June 30,2008, wil l establish baseline data for the Project according to terms o f reference satisfactory to the Bank.
The Borrower, through PSO will: (i) furnish to the Bank, not later than October 31 in each year, starting October 3 1, 2007 for review and comments, an annual work plan for the implementation o f the Project in the following year prepared in accordance with the provisions o f the Operations Manuals ; and (ii) afford the Bank a reasonable opportunity to exchange views with the Borrower on said plan and, thereafter, promptly take al l actions necessary to implement said plan, taking into account the views o f the Bank o n the matter.
The Borrower, by December 3 1,2007, will reconstitute the PAB established under the first phase o f the Program, and thereafter maintain it throughout the period o f implementation o f the Project, with composition, terms o f reference, staffing and other resources acceptable to the Bank, to be responsible for providing overall direction and oversight for the Project implementation.
The Borrower wil l prepare, under terms o f reference satisfactory to the Bank, and furnish to the Bank, on or about February 15,2010, a mid-term evaluation report integrating the results o f the monitoring and evaluation activities performed on the progress achieved in the carrying out o f the Project during the period preceding the date o f said report and setting out the measures recommended to ensure the efficient carrying out o f the Project and the achievement o f the objectives thereof during the period fol lowing such date.
The Borrower wil l prepare, under terms o f reference satisfactory to the Bank, and furnish to the Bank, on or about six months prior to the closing date, a terminal evaluation report.
The Borrower wil l establish, by December 3 1 , 2007, and thereafter maintain throughout the period o f implementation o f the Project, an Internal Audit Service, with staffing, terms o f reference, and other resources acceptable to the Bank, to be responsible for conducting internal audit for the Project accounts by June 30 and December 3 1 o f each year, starting June 30,2008 and furnish a report to DA and the Bank upon completion o f each said internal audit.
The Borrower shall maintain or cause to be maintained a financial management system in accordance with the Drovisions o f Section 5.09 o f the General Conditions.
. The Borrower shall prepare and furnish to the Bank, not later than one month after the end of each calendar quarter, interim un-audited financial reports for the Project covering the quarter, in form and substance satisfactory to the Bank.
The Borrower shall have its Financial Statements for the Project audited which shall cover the period o f one fiscal year. This shall be furnished to the Bank not later than six months after the end o f such periods.
I. STRATEGIC CONTEXT AND RATIONALE
A. Country and sector issues
1. Despite some improvement in recent years, the Philippine economy continues to lag others in Asia with lower levels o f GDP growth and investment per capita than for the region as a whole’. Weak economic performance, coupled with high population growth, has constrained the country’s ability to reduce poverty and meet other development objectives. Reversing these trends and promoting economic growth, therefore, are at the heart o f the Presidents 10 Point Agenda for Growth, the Medium Term Philippine Development Plan (MTPDP 2004-2010) and the Bank’s Country Assistance Strategy (CAS) for 2006 to 2008*, which underpin the strategic framework for economic development, with social inclusion, poverty reduction and equity. The strategic goals o f the MTPDP and the CAS for the agriculture sector are: enhancing growth through higher productivity and agribusiness, asset (land) reform, responsible management o f natural resources and the environment and public sector/expenditure rationalization to improve public service delivery.
2. The Government has enacted further legislation to enhance agricultural and rural development including: (1) the Agriculture and Fisheries Modernization Ac t (AFMA), which aims to enhance the competitiveness o f Philippine agriculture; and (2) the Local Government Code (LGC) which devolves greater responsibility for frontline service delivery Local Government Units (LGUs).
3. Despite these strategic initiatives, progress in achieving national pol icy goals has been constrained by various factors, including: (a) the l o w availability o f public expenditures for infrastructure, transport and market development; (b) inefficient input supply channels; (c) slow pace o f effective devolution to LGUs, many o f whom are s t i l l to become effective providers o f devolved agricultural support services, and (d) poor linkages between rural development planning and implementation3. In addition, despite the enactment o f the L G C in 1991, progress toward effective devolution to LGUs remains slow, and many LGUs are yet to mature as effective providers o f devolved agricultural support services. Also, the Department o f Agriculture (DA) has not been quite effective in supporting LGUs to enable them to integrate communities into the LGU and DA decision-making processes for rural development priorities and investments.
4. Promoting poverty reduction and rural growth specifically in the island o f Mindanao, remains particularly high o n the Government’s and the Bank’s CAS pol icy and agenda given: (a) the island’s distinct climatic and geographic advantages which favor agriculture and fisheries sector growth, (b) the large proportion o f the country’s poor (almost one third) located in this area; and (c) advancing the peace initiative in Mindanao through the provision o f greater economic opportunities and integration, particularly to indigenous communities and other disadvantaged groups.
5 . As part o f the overall Adaptable Program Loan for the Mindanao Rural Development Program (MRDP) started in 2000, this second APL o f the long-term program aims to strengthen and operationalize the process o f devolution through effective partnerships between the National Government (NG) through the DA and the LGUs. This aspect o f the project, moreover, i s highly consistent with the objectives in the CAS related to developing the local platform, by helping build
’ Over the period 1960-2003 GDP per capita grew at 1.4% per annum in the Philippines compared to an average rate o f around 5.4% for seven other (comparative) countries in the East Asia Region.
Report No. 32141-PH, dated April 19,2005 For more background on country and sector issues see Annex 1 and section B 2 of the Project Appraisal Document (PAD) for phase one of the
APL program. In addition, Report No. 36682-PH - A Working Paper on Rural Growth and Development Revisited, dated June 2006, provides a good discussion o f these rural development issues.
1
6.
B.
7.
8.
9.
LGU institutional capacities in service delivery, planning, budgeting and revenue management in transparent and efficient ways.
In addition, MRDP will strongly complement other strategic Bank-assisted development initiatives in Mindanao (such as the ARMM Social Fund Project4, the Mindanao Reconstruction and Development Trust Fund’, the Community Based Resource Management Project6, the Second Agrarian Reform Communities Development Project’ and the Kalahi-CIDSS project’). All these projects encompass strong approaches related to community-driven development (CDD), which i s also at the heart o f MRDP2.
Rationale for Bank involvement
In meeting the sector and country objectives related to agricultural development, poverty reduction, devolution and the focus on Mindanao, the Bank has been a pro-active partner o f Government since 1999, when the first phase o f the long t e r m Mindanao Rural Development Project (MRDP) was prepared and subsequently implemented starting 2000. The objectives and rationale for continued Bank involvement for the overall APL program s t i l l remain highly relevant in the transition to phase 2 (See section D o f the M R D P 1 PAD’). The program’s primary objectives remain the same. It aims to: (a) increase the incomes and improve the food security o f targeted agricultural communities in Mindanao, who are considered as among the most disadvantaged and socially excluded populations in the Philippines. Under phase 2, however the project coverage will be up scaled to a further 225 municipalities in al l o f the 27 provinces from the original coverage o f 32 municipalities in 5 provinces under MRDP1. The project will also promote the active and continued participation o f indigenous peoples (IPS) and disadvantaged women in the development process in line with C D D approaches the Bank i s advocating, through various complementary projects specifically in Mindanao; and (iii) strengthening the institutional, management and financial capacity o f LGUs to improve service delivery. The justification for continued Bank involvement i s made stronger given the positive impacts and assimilation o f valuable experiences and lessons learned from the f i rst phase, which will be used in scaling up and expanding the program in M R D P 2 to other provinces in Mindanao. (See Section 1I.E for more details). Collectively, close engagement in these processes demonstrate that the Bank i s a credible partner in promoting effective models for accelerating decentralization in agriculture sector services in Mindanao which can be successfully replicated elsewhere in the country.
In addition to relevant experiences from Phase 1, implementation lessons and linkages to other Bank projects (such as KALAHI, ASFP, CBRMP and ARCDP2) o n CDD approaches and operations manuals have been incorporated into the design o f MRDP2. Coordination with other donor efforts in Mindanao (such as CIDA, USAID, ADB, A U S A I D and IFC, and through the partner members o f the Philippine Development Forum’s Working Group on Rural Development) have also been maintained in preparing MRDP2 to enhance i t s eventual effectiveness.
The Bank’s continued involvement and sustained partnership with the GOP in this long-term program i s crucial for supporting i t s momentum for pushing and deepening the agenda for the decentralization o f frontline support services delivery. I t wi l l help ensure the institutionalization o f field-tested planning and implementation mechanisms for demand- and community-driven approaches for
Loan No. 7153-PH TF 054041 Loan No. 4299-PH ’ Loan No. 7 152-PH
* Loan No. 7147-PH Report No. 19639-PH
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agricultural and rural development. The scaling up o f the program i s part o f the Bank’s overall agenda in contributing to rural and agricultural growth, especially in Mindanao where other complementary efforts are on-going. It also provides the Bank an opportunity to bring in development lessons and experiences o n local governance reform f rom other countries. The practice o f integrating community plans into higher tiers o f local governments and sectoral agency planning and budget processes remains a major weakness in the Philippines. As such, the success o f M R D P 1 o n this aspect i s almost unique and needs to be institutionalized, expanded and refined further. Overall, therefore, the Bank’s continued involvement and sustained partnership with the GOP and other partners in this long-term program remain crucial for maintaining momentum in further promoting decentralized development with active community participation.
C. Higher level objectives to which the project contributes
10. Within the strategic thrusts o f the MTPDP, AFMA, the LGC and CAS, MRDP2 will further scale up successful practices piloted under the first phase o f the APL program. The overall program objective at init ial design o f the APL program aimed at: (a) reducing poverty; (b) promoting growth with social inclusion (especially the integration o f I p s and poor communities); and (c) further strengthening decentralization, devolution and NG/LGU collaboration. These program objectives s t i l l remain highly relevant. In addition, given continued conflict in Mindanao, the realization o f sustained rural growth and visible benefits to conflict-affected populations, will directly contribute to reinforcing donor and Government efforts at consolidating the peace initiatives, a key pol icy goal (see section A.2 M R D P 1 PAD). Although the higher-level objectives o f the project remain consistent with those at the onset of the overall APL, the design o f MRDP2 will incorporate best practices and lessons learnt form M R D P 1 to broaden and enhance overall program outcomes and further strengthen and harmonize linkages and processes with other Bank initiatives focusing on C D D approaches in Mindanao
11. PROJECT DESCRIPTION
A. Lending instrument
11. The project constitutes the second (five-year) APL o f a long t e r m APL spanning 12 to 15 years. The selection o f the APL loan instrument i s highly consistent with the requirements o f the Borrower. Long-term Bank experience in rural development in the Philippines, and particularly f rom the f i rst phase o f MRDP, shows that an effective program o f poverty alleviation involv ing multiple stakeholders and governments at different levels requires sustained long-term commitment and involvement, particularly given the intricacies o f forging and strengthening delicate processes such as NG/LGU partnerships and community empowerment. These would be extremely diff icult to attain through a single investment operation. The continuation o f a phased long-term program involv ing a series o f APLs, each covering between 4 to 5 years, s t i l l remains as the most effective modality for achieving sector and national objectives related to poverty and development.
B. Program objective and Phases
12. The long t e r m program’s purpose i s to improve incomes and food security in the targeted rural communities within a l l o f the provinces in Mindanao. The program i s focused o n strengthening rural public investment programs (supporting the implementation o f the AFMA), reinforcing the LGC institutional framework, while ensuring close involvement o f rural communities in the design and implementation o f public investment programs intended to improve productivity and livelihoods. Taken together, these initiatives a im to support the GOP’s key objectives o f tackling poverty and ensuring food security.
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13. The 15-year program was envisioned to have four phases. The f i rst phase aimed to initiate the program in a small group o f LGUs (5 provinces and 32 municipalities), for testing out and initiating a process o f engaging LGUs and rural communities in designing and implementing a rural development program, in close association with concerned national government agencies, developing an implementation strategy, and establishing a mechanism for scaling up the program in the succeeding APLs. The second phase (MRDP2) i s envisioned to provide for geographic coverage o f the program across Mindanao, to provinces and municipalities which meet eligibil i ty criteria. The program would be deepened in the Phase 1 provinces by enlarging the scale, and also ensuring that al l eligible municipalities are included. The third phase (MRDP3) will continue support for a l l LGUs covered under Phase 2, and will complete the coverage across Mindanao. It would focus o n deepening the program by ensuring that al l eligible municipalities are fully engaged. The fourth phase (MRDP4) would focus on reinforcing the key thrusts underpinning the overall program and in securing both program and institutional sustainability o f the development initiatives undertaken in support o f increasing agricultural production and alleviating rural poverty.
14. MRDP1 was implemented and initiated in selected LGUs (32 municipalities in 5 provinces) in Mindanao from 2000 to 2004. I t s implementation was successful, despite c i v i l disturbances and implementation challenges in the early stages o f i t s implementation, and it brought about the active engagement o f LGUs and rural communities towards a common agricultural development agenda. M R D P 1 has helped develop a model o f partnership between the DA and the LGUs for priorit izing critical support infrastructure and has provided effective mechanisms for engaging substantively with communities (through the CFAD block grants) and for linking the various LGU development plans and budgets with the annual regional DA plans and budgets. The project has also provided an opportunity to reinforce the key objectives o f devolution - engaging LGUs o n better public expenditure management, improving the linkage between the DA and the LGUs, and most importantly, bringing the concerns o f communities more centrally into the LGU and DA resource allocation process. In view o f this, MRDP1 has demonstrated a credible and doable approach for accelerating decentralization o f agriculture sector services in Mindanao, and in developing decentralized models for countrywide replication.
15. With the fulfil lment o f the MRDP2 agreed triggers" (a year before i t s closing date in December 2004) and completion o f MRDP 1, the challenge and key development issues to be addressed for the second phase o f the program wil l be to get more LGUs across Mindanao to be substantively engaged in prioritizing and delivering crit ical investments and efficient frontline services, which respond to priority needs o f rural communities. Moreover, the partnership o f the DA with the LGUs will have to be broadened and deepened, with a v iew to improving the delivery o f devolved services, a l l aimed at improving agricultural productivity and increasing rural incomes. With respect to the 2-year gap between the completion o f M R D P 1 implementation (in December 2004) and the planned start o f MRDP2 implementation (by mid 2007), it was noted that the delay was brought about by the Government's internal difficulties o n finding an operational consensus on the formula for NG-LGU cost sharing for devolved investments, given the need to keep within the Government's broad objectives in addressing the fiscal deficit. During the course o f M R D P 2 preparation, an operational
lo The following triggers for moving from APL 1 to APL 2 have been met: preparation for APLZ started when 60 percent of the APLl Loan was disbursed; completion of the Social Assessment of the next group of provinces, which expressed interest to participate; approval of APL2 Loan upon 80 percent disbursement of APLl Loan; testing out and adoption of institutional arrangements for implementation, based on experience; satisfactory operationalization of the multisectoral committees; overall satisfactory performance at mid-term; improved arrangements for routine road maintenance sourced from increased budgetary allocations by LGUs; completion of at least 60 percent of proposed infrastructure program in a particular province for its continued involvement in APL2; improved rural development planning and allocation o f budgetary resources by LGUs, with community involvement; and greater integration of DA programs into LGU RD plans, synchronized through the regular planning and budgeting process and schedules.
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consensus has been reached and MRDP2 provides an operational vehicle to pi lot test a performance- based grant scheme which would provide additional grants to LGUs based o n achievement o f agreed revenue targets".
16. As earlier envisioned MRDP 3 would focus o n broader consolidation o f the initiatives gained under MRDP Phases 1 and 2. Hence, as stated in the M R D P 1 PAD Annex l(a), the agreed triggers to move f rom Phase 2 to 3 would be the following:
(a) Overall satisfactory performance, using the mid term evaluation as a basis for assessment o f key performance indicators (similar to those mentioned above, plus, more importantly, degree o f initiative by LGUs for instituting concrete mechanisms for sustainability o f institutional arrangements initiated under the MRDP).
(b) Provincial LGUs already participating in the program (under Phases 1 and 2) should have rural development plans in place, which are l inked to annual budgetary allocations. This should provide the basis for designing continued program support for these LGUs.
(c) Acceptance by LGUs already participating in the program, o f increased cost sharing o n project supported activities (as reflected in proposed or approved budgets, etc.); increased share o f RD activities funded from central DA budget integrated into LGU financial and investment plans.
(d) Project Preparation to be initiated once 60 percent o f the ongoing APL Loan has been disbursed. Social Assessment in eligible provinces and municipalities to be completed.
(e) Bank approval o f new APL Loan to be done once 80 percent o f the ongoing APL Loan i s disbursed, and the balance i s substantially committed.
C. Project development objective and key indicators
17. As envisioned, MRDP2 will expand i t s geographic coverage (involving 225 municipalities in a l l o f the 27 provinces o f Mindanao) to cover more LGUs and communities in Mindanao (horizontal broadening) after the f irst phase has successfully initiated the program in 5 provinces and 32 municipalities. I t s project development objectives reflect the larger program purpose o f improving incomes and food security. I t will specifically a im to: (a) improve livelihood opportunities o f targeted communities; and (b) institutionalize a decentralized system for agriculture and fisheries service delivery that promotes participation, transparency and accountability.
18. The key outcome indicators to be measured would include: (a) an increase o f 20% in average household incomes o f beneficiary communities over baseline and 10 % over control group; and (b) 15% and 35% o f target beneficiaries report significant improvement in LGU service delivery, at mid- term and at the end o f MRDP2, respectively (please see Annex 3 on results monitoring).
D. Project components
19. The project will have the same four components as MRDP1, which have been purposively modif ied to incorporate positive lessons and experience, in particular, aspects related to further strengthening the capacity o f LGUs and communities to manage and execute development programs and make the process o f Government more transparent and accountable. In addition, emphasis will also be given to improving the capacity o f DA as a service provider (in working with LGUs) and to more effective program coordination (integrating planning and development at various levels), both areas which proved to be instrumental to the realization o f project outcomes in M R D P 1. The components are:
I' For more details, please see Attachment 1 to Annex 4
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(a) Investments for Governance Reform (IGR) and Program Administration Component (total cost US$4. Imil l ion)
20. The principal target groups o f the component will be the DA, principally at regional level (Regional Field Units or RFUs o f the DA in Mindanao) and the Provincial and Municipal Local Government Units (PLGUs and MLGUs). The specific sector issues that the component will a im to address include furthering effective devolution in the Philippines in support o f the LGC and improving competitiveness o f the agriculture sector (in keeping with AFMA) through more effective public sector service delivery. In addition, i t will a im to improve governance and accountability mechanisms, both at NG and LGU levels, which are major pol icy thrusts in the medium term development plan. Moreover, fo l lowing agreement with the oversight agencies (DOF, DBM and NEDA) and LGUs, under MRDP2, the local governments will be required to implement governance reforms to be eligible for additional grant funding from National Government to implement projects involv ing devolved investments. This i s highly innovative and strongly supports National Government objectives in the medium term to make LGUs more fiscally responsible and independent. The project will provide institutional support and targeted technical assistance to these target groups, to eventually enable DA to phase out and hand over devolved functions to LGUs, which have been progressively strengthened and capacitated. Technical assistance, for capacity strengthening will be based on a learning-by-doing approach (piloted under Phase l), to ensure relevant adjustments in approach are made when needed and that processes are whol ly institutionalized.
2 1. The component will have three subcomponents: (a) Improving LGU Resource Management and Service Delivery Systems, including Enhancement o f Governance Systems and Mechanisms; (b) Improving DA Capacity to Support LGUs; and (d) Program Support and Coordination.
(b) Rural Infrastructure (M) Component - (total cost US$83.852 million)
22. The underlying objectives and principles o f the RI component remain identical to those for the program as a whole, though implementation lessons from Phase one has been incorporated in modify ing component design. Mainly, these include greater emphasis on capacity building o f LGUs to supervise and undertake infrastructure projects, more attention to quality issues in the design and construction and to ensuring O&M i s carried out. In common with the objectives o f the overall program, LGUs, agricultural producers, communities, women and consumers will be the main target groups that an increase in the stock o f rural and agricultural infrastructure will benefit. The RI component remains highly pertinent with regards to key aspects o f national and sector pol icy related to enhancing the competitive base o f agriculture through improved linkages between producers and consumers, enhanced productivity and improved value chains. MRDP2 will finance the rehabilitation and construction o f strategically-selected sections o f roads and bridges, and other critical infrastructure which will help enhance agricultural and fisheries productivity and access to markets. Under the RI component, capabilities o f LGUs will also be enhanced in overseeing the construction and rehabilitation o f devolved communal irrigation systems, with operation and maintenance (O&M) lodged with irrigators’ associations. In response to priorities expressed by rural women, rehabilitation or construction o f potable water systems will continue to be supported. The project will replicate good and sustainable O&M models o n LGU-community partnerships. In addition, a performance- based grant for farm-to-market roads and communal irrigation subprojects will be provided to participating LGUs, upon fulf i l lment o f agreed local revenue generation targets.
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(3) Community Fund for Agricultural Development (CFAD) - (total cost US$30 million)
23. Similarly under MRDP1, C F A D wil l continue to be MRDP’s mechanism to strengthen community decision making capacity for the rational identification, design and implementation o f local priorities, with DA, LGUs, NGOs and the private sector providing technical advice and other support services. I t will continue to target disadvantaged and vulnerable sectors in order to provide opportunities for increased incomes from agriculture and fishery production, including allied value-adding activities, that make use of appropriate, sustainable and environment-friendly technologies which are socially and culturally acceptable to target communities. W h i l e C F A D continues to focus o n the vulnerable segments of targeted communities, i t will also respond to the needs o f functional Peoples’ Organizations (POs) for technical and business advisory services for their sustainable l ivelihood activities. C F A D will persist in implementing the principle o f meaningful participation by beneficiaries in al l decision-making processes over the entire project cycle, including the procurement and financial management aspects o f the subprojects, which i s an improvement over the features o f CFAD in Phase 1. Ultimately, CFAD aims to empower communities to generate local savings and manage other investments basic to their development, in partnership with the LGUs and the other agricultural development stakeholders. At the country level, CFAD will specifically address aspects o f national and sector policies related to: growth with social inclusion, poverty alleviation and mainstreaming disadvantaged groups and minorities in development. I t provides development assistance to target groups that shall consist o f at least 30% Indigenous Peoples (IPS), rural women (with priorities for women-headed households) and youth and other disadvantaged sectors. I t s four subcomponents include: (1) food security interventions for very vulnerable groups; (2) community- managed livelihood and agribusiness activities, (3) sustainable income-generating activities for NRM- covered municipalities; and (4) small support infrastructure.
(4) Natural Resources Management (NM) - (total cost US.8.5.4 million)
24. The NRM component will build on the positive lessons and implementation experiences under MRDP1 ’s Coastal Marine and Biodiversity Conservation (CMBC) component, which was funded by a Global Environment Fund (GEF) grant and was completed in December 200512 . The NRM component under MRDP2 will be focused o n activities in upland watershed areas as wel l as land use management, which would impact o n agricultural and fisheries productivity in the MRDP2 sites. I t would contribute to the overall sector and long-term objective o f the program through implementation o f sound and sustainable management o f natural resources and the conservation o f coastal resources in priority areas. The target groups under the NRM component will be the relevant national agencies supporting LGUs and communities that have direct influence o n terrestrial and coastal resource use. Specifically, the project will support (a) capability building o f communities, LGUs and national agencies to improve land management practices critical to protecting coastal areas; (b) the introduction and demonstration o f sustainable land management practices that can directly benefit upland resource users as wel l as downstream users (especially fisherfolk), through controlling erosion, improving the fertility o f land and limiting the release o f agrochemicals; and (c) an increase in awareness o f the direct linkages between upland and downstream impacts to coastal ecosystems that will be mainstreamed into municipal policies and development plans.
25. Partnerships and coordination will be built with the Department o f Environment and Natural Resources (DENR) and the DA’s Bureau o f Fisheries and Aquatic Resources (BFAR), Bureau o f Soils and Water Management (BSWM), and RFUs, to ensure broad provision o f technical service to local governments and communities. I t s four subcomponents include: (a) NRM participatory community planning and development; (b) selective on-the-ground investments o n coastal/marine and
’’ Please see CMBC ICR dated June 29,2006, Report No. 36466-PH
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3 sustainable land management practices; (c) assistance to the development o f sustainable income generating activities; and (d) local policy development and strengthened partnerships in community enforcement,
26. In order to further broaden the scope o f this NFW component within the targeted MRDP2 sites, a GEF grant proposal i s currently being prepared by the DA. The grant i s expected to be available n o later than 12 to 18 months into the implementation o f the MRDP2 loan. The GEF grant resources wil l complement and scale up MRDP2 activities and investments on sustainable land use management in coastal areas o f global biodiversity significance.
E. Lessons learned and reflected in the project design
26. A number o f direct lessons have been incorporated in designing the project based on the implementation experiences from MRDPli3. Firstly, there i s a need for the Bank and the Government to sustain long-term commitment to bringing around institutional changes. The design o f the IGR component aims to improve on MRDP1 implementation and address these issues by ensuring a closer synergy between the workings o f NG and LGUs and ensuring greater involvement o f the DA RFUs than was the case under MRDP1. Secondly, the program’s strong links to sectoral goals and policies has resulted to the strong polit ical and social ownership in the program among diverse stakeholders. This again, was a positive lesson under the f irst phase as was the emphasis o n retaining flexibil i ty and learning-by-doing, which best operationalized and facilitated devolution, and showed how a national sectoral agency l ike the DA could facilitate devolution o f functions and responsibilities to LGUs in line with the LGC. The experience also showed practically that LGUs and the DA could be effective, equal partners in achieving national sectoral goals. Thirdly, building o n capacity-building efforts under MRDP 1, strategies for MRDP2 have been further adapted in design to ensure that they are more practical, more action-oriented and more incentives-based. Attention has also been placed on interlinking capacity building with investment resources for local priority needs to enable change in the institutional behavior between LGUs and the DA. Fourthly, MRDP1 showed that strengthening grass roots organizations, local governments and communities was essential to induce meaningful participatory and integrated development. This instilled a strong sense o f confidence among stakeholders that they could integrate and be effective drivers in the development process. These lessons have been used to further enforce the design o f the IGR and C F A D components. MRDP2 will also place additional emphasis on establishing and gearing up systems for results monitoring and management and financial information systems aspects which were inadequately addressed under MRDP1.
27. In addition to the lessons incorporated from Phase 1, experiences have also been drawn f rom various other Bank projects in rural development which show that: (a) commitment and ownership to program goals i s vital by al l stakeholders including Government, implementing agencies, communities, and local people; (b) project design needs to incorporate proven technologies; and the goals must be realistic and specific; (c) project design should be flexible; (d) beneficiary participation, at both the planning stage and during implementation, i s necessary; (e) credit and farm inputs are often critical to success; (0 arrangements for infrastructure O&M have to be in place f rom the start; and (8) social preparatory activities such as community organization and build-up should precede infrastructure development.
” Please see M R D P l Implementation Completion Report - Report No. 32660-PH, dated June 29,2005
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F. Alternatives considered and reasons for rejection
28. MRDP2 i s part o f a long-term rol l ing program with strong and active participation o f Government and stakeholders. The model adopted under phase one was robust and largely successfid in meeting i t s desired outcomes, especially those related to decentralization o f public services and empowerment o f poor communities. In light o f these positive experiences the reasons for rejecting alternative approaches in designing MRDP 1 (single commodity, social fund and area-based approaches) s t i l l ho ld t rue for MRDP2. Nonetheless, key lessons during M R D P 1 implementation were learned and have been incorporated in the design o f MRDP2 (See also lessons above in Section 11-E and Section D Project Alternatives Considered M R D P 1 PAD).
111. IMPLEMENTATION
A. Partnership arrangements
29. A GEF grant proposal worth US$7 mi l l ion i s currently being prepared by the Borrower for financing coastal marine biodiversity conservation efforts in a focused number o f M R D P 2 sites with global biodiversity significance. Collaboration, in terms o f information sharing, are currently being done with various development partners in Mindanao, such as the International Finance Corporation (IFC), who are supporting some agribusiness ventures in Mindanao and the A U S A I D who i s currently preparing a grant project which would focus o n supporting local infrastructure for sustainable economic growth in Mindanao and the Visayas.
B. Institutional and implementation arrangements
30. Institutional arrangements will continue to emphasize the use o f permanent and existing organizational structures within the DA and the LGUs, similar to what has been started under MRDP 1 and will be further reinforced under MRDP2.
3 1. DA will be the executing agency and will provide the overall management and supervision of the Program. The M R D P Program Advisory Board (PAB) will provide the overall direction and oversight on the implementation o f MRDP2. With the geographic expansion o f the program under this second phase, the reconstituted PAB will have an expanded membership, and a new Executive Order, superseding the existing one (EO 474 signed by the President o f the Philippines in April 1998) will be issued on or before December 3 1, 200714.
32. The DA’s Special Project Coordination and Management Assistance Divis ion (SPCMAD), owing to i t s inherent function o f coordinating and providing assistance to DA’s foreign-assisted projects, will act as secretariat to the PAB. The regional counterpart o f the PAB will be the Regional Program Advisory Boards (RPABs) ”, already existing and operational in al l o f the Mindanao regions and
l4 The Program Management Board or PMB during APL 1 will be reconstituted into the Project Advisory Board (PAB). It wil l still be chaired by the DA Secretary, co-chaired by the Director-General o f the National Economic and Development Authority (NEDA), and composed of the Presidents o f the Leagues o f Provinces, Municipalities, and Cities; Secretaries (or their representatives) of Finance (DOF), DENR, Budget and Management (DBM), Agrarian Reform (DAR), Trade and Industry (DTI) Public Works and Highways (DPWH) and Interior and Local Government (DILG); a representative from the Mindanao Economic and Development Coordinating Office (MEDCO); the Presidents (or their representatives) o f the Regional Agricultural and Fisheries Councils (RAFCs) in Mindanao; the President (or hisher representative) o f the Philippine Association o f State Colleges and Universities (PASUC); and representatives from Industry Associations in Mindanao. Is The RPAB i s chaired by the DA Regional Executive Director and co-chaired by the NEDA Regional Director. Members include Governors o f the participating provinces in the region, the President of the Provincial Leagues o f Mayors, the RAFC Chair, BFAR Regional Director, Regional Directors o f DENR, DAR, DILG and MEDCO, and representatives from industry associations. In the case of the Autonomous Region of Muslim Mindanao (ARMM), the RPAB shall be chaired by the Secretary of the ARMM Department of Agriculture and Fisheries.
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presently functioning as the regional oversight o f the DFIMDP16. The R P A B s ’ functions will be expanded to cover MRDP2. I t shall provide regional perspective for the prioritization and approval o f subprojects for funding under the Program.
33. Overall program support to coordination by the DA’s RFUs and the LGUs’ implementation under MRDP2 will be handled by a Program Support Office or the PSO (this was the Program Coordination Off ice or the PCO during MRDPl). The PCO’s main function will be re-focused f rom overall coordination to supporting overall program implementation. I t i s acknowledged that the PSO i s a temporary and program-specific structure and the need to mainstream the program coordinating functions to regular un i ts o f the DA i s critical”. To sustain the efforts done under the Program, the PSO, in the transition during MRDP2, will build capacities o f the DA RFUs o n program coordination, management and oversight o f project activities being implemented at the local levels by the LGUs and the communities.
34. For the DA RFUs to fulfill i t s coordination roles and responsibilities, it wil l create the Regional Program Coordination Office (RPCO) using i t s existing regular and permanent staff. The six (6) RPCOs (of the 5 DA RFUs in Mindanao and the ARMM’s Department o f Agriculture and Fisheries) wil l be fully involved in project coordination and management for the various components o f MRDP2. Related to this, the DA Secretary has issued a Special Order (SO 590, Series o f 2006, dated September 20,2006) on the constitution and roles and responsibilities o f the PSO and the RPCOs.
35. Institutional strengthening and capacity building efforts are focused o n DA-RFUs and LGUs’ efficient and timely delivery o f devolved agriculture- and fisheries-related services. Six months before the actual implementation, preparatory activities will be done and focused engagement o f both the LGUs and DA RFUs i s ensured to be on-the-ground so that by the time the Program i s implemented, the implementers are ready to assume the various responsibilities required from them.
36. Similar to MRDP1 arrangements, the implementation o f subprojects under a l l o f the components will be done by the Municipal LGUs (MLGUs) through their Municipal Program Management and Implementing (MPMIUs). The MLGUs will be supported by the Provincial LGUs (PLGUs) through their Provincial Program Management and Implementing Units (PPMIUs) that wil l oversee the implementation o f MRDP2 subprojects. The Rural Infrastructure component will be implemented by the Municipal LGUs through their MPMIUs. They wil l be supported by the Provincial LGUs, through their respective PPMIUs to oversee implementation o f RI subprojects and other subprojects across municipalities. C F A D will provide block grants for community-identified and managed agribusiness and livelihood enterprises. The component will make use o f the Multi-Sectoral Committees (MSCs) for project review, appraisal and approval o f subprojects. During APL 1, the active involvement o f the MSCs in the C F A D processes has improved the transparency o f LGU transactions, hence communities would l ike to adopt and institutionalize this mechanism to become part o f the Municipal Development Council’8. The NRM component will mainstream NRM issues into the regular functions o f LGUs, which will be provided with training and capacity building in NRM issues. Technical assistance will be provided by BFAR, B S W M and the DENR. BFAR will focus on marinekoastal and inland fisheries, B S W M on watershed management, soil suitability and agricultural technologies for upland areas, and DENR on pol icy guidance related to terrestrialhpland areas.
l6 The Diversified Farm Income and Market Development Project i s a Bank-assisted project of the DA (Loan No. 7236-PH) which aims to assist the GOP to strengthen the capacity o f its DA to provide market-oriented services to increase agricultural competitiveness and rural incomes. ” This, again, i s a critical lesson learned under MRDP1, when focused institutional strengthening to DA RFUs was deemed inadequate; hence, under MRDP2, the important role of DA RFUs in strengthening the DA-LGU linkages would be given primary focus, especially through MRDP2’s institutional implementation arrangements.
Trust Fund are also using the same institutional vehicle for engaging communities in reviewing and prioritizing their local investments. It i s useful to note here that owing to the successful institutionalization of MSCs during MRDPl, both ARMM Social Fund and the Mindanao
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37. The People’s Organizations (POs), based on the basic principle o f the Program, wil l plan, manage, maintain and provide equity for subprojects at the community level.
C. Monitoring and evaluation o f outcomes/results
38. In collaboration with the DA RPCOs and the DAF-ARMM RPCO, the PSO will have overall responsibility for collecting data and the monitoring o f results. At the level o f the project development objectives, the data will be derived from published socio-economic data for the project areas, a restricted baseline survey and periodic random surveys which will be designed to measure changes over time (before and after the project) and space (with- and without-project situations). A deficiency in M & E under M R D P 1 was the lack o f robust with- and without-project data, hence the recourse to inferring this was through the use o f before- and after-project data. For the intermediate results, the data will be f rom periodic surveys o f RFUs, LGUs and communities. External mid-term and terminal evaluations will be conducted by the Borrower in assessing project outcomes. As part o f the overall program for strengthening institutional capacity, training will be provided to key personnel in M &E, data collection, collation and analysis. T o retain transparency and objectivity, the project will finance independent consultants and institutions to undertake periodic evaluations. The results monitoring system will be incorporated as part o f the DA’s overall system for management and financial information systems, which has already been established under M R D P 1 for use by decision makers. T o ensure that there i s an appreciation o f the results M&E information being collected, some hands-on training will be provided to the PSO, RPCOs and LGU staff. Community monitoring tools would also be actively used in order to promote better governance and transparency in project activities, with participating communities provided with hands-on and practical tools to conduct such monitoring.
D. Sustainability and Replicability
39. Experience from MRDP1, shows clearly that the overall program positively changed the direction o f interaction between LGUs and the national government. The project also introduced crucial institutional momentum to support effective and participatory devolution in support o f the L G C and the AFMA, which remain key pol icy instruments o f Government. This established a very strong sense o f ownership and buy-in f rom various stakeholders and provided confidence to communities that local priorities can be effectively mainstreamed into public investment planning and implementation. LGUs feel much better equipped to make effective financial and resource allocation decisions based on the needs o f their constituents, which has added greatly to their sense o f confidence as partners (with national government) in development. Collectively, these experiences mean that there i s strong and continued support at the national and local levels to the long-term objectives o f MRDP, which wil l be sustained in the current and subsequent phases o f the overall program. The adaptation in design based on the lessons learned from MRDP1 also ensures sustainability as best practices have been scaled up, while those, which were less effective, have been modif ied to reflect ground realities.
E. Critical risks and possible controversial aspects
40. Results f rom phase one o f the program indicate that the design o f the M R D P i s reasonably robust and able to withstand some o f the critical risks envisaged in the original design. Nonetheless, the following r isks remain that need attention:
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Risk
Provision for making changes to participating
Strong capacity bui lding interventions targeted at
L G U s will enable moving to areas where implementation i s possible.
the LGU and community levels to enhance institutional sustainability and ownership; DA and the Bank wil l need to be pro-active in securing continued local pol i t ical ownership (similar to M R D P 1 efforts)
Provision o f additional 20% grant f i o m NG for LGU infrastructure subprojects would provide substantial incentives for sustained implementation and participation in the program
counterpart f imding (similar t o MRDP1) before accessing program funds; DA can apply for 100% financing for a l l eligible expenditures
MRDP 1 will be refocused, f r o m that o f
LGUs will b e required to provide upfiont
The role o f the Program Coordinating Off ice under
To oroiect develooment objective M
M
M
N
M
Deterioration o f peace and order in Mindanao, which may constrain active implementation Frequent changes in elected LGU officials
To component results Potential risk that LGUs do no t fo l low through o n their commitments under the program
Unt imely provision o f counterpart (national and LGU levels), in v iew o f the tight f iscal situation Possibil i tv that DA RFUs in Mindana i may not be able to immediately take the lead in the coordination and oversight o f implementation o f LGU subprojects
Overall Risk Rating
Mitigation Measure I RiskRating
F. Loadcredit conditions and covenants
4 1. Implementation Covenants: (a) The Borrower will not amend, abrogate, suspend, or waive any provision o f the Operations
Manuals without the pr ior written concurrence o f the Bank. (b) The Borrower, by June 30,2008, will establish baseline data for the Project according to terms
o f reference satisfactory to the Bank. (c) The Borrower, through PSO will: (i) furnish to the Bank, not later than October 3 1 in each year,
starting October 3 1,2007 for review and comments, an annual work plan for the implementation o f the Project in the fol lowing year prepared in accordance with the provisions o f the Operations Manuals ; and (ii) afford the Bank a reasonable opportunity to exchange views with the Borrower on said plan and, thereafter, promptly take al l actions necessary to implement said plan, taking into account the views o f the Bank on the matter.
(d) The Borrower, by December 3 1, 2007, will reconstitute the P A B established under the f i rs t phase o f the Program, and thereafter maintain i t throughout the period o f implementation o f the Project, with composition, terms o f reference, staffing and other resources acceptable to the Bank, to be responsible for providing overall direction and oversight for Project implementation.
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42.
(e) The Borrower will prepare, under terms o f reference satisfactory to the Bank, and firnish to the Bank, on or about February 15, 2010, a mid-term evaluation report integrating the results o f the monitoring and evaluation activities performed on the progress achieved in the carrying out o f the Project during the period preceding the date o f said report, and setting out the measures recommended to ensure the efficient carrying out o f the Project and the achievement o f the objectives thereof during the period following such date.
(0 The Borrower will prepare, under terms o f reference satisfactory to the Bank, and furnish to the Bank, on or about six months prior to the closing date, a terminal evaluation report.
(g) The Borrower will establish, by December 3 1, 2007, and thereafter maintain throughout the period o f implementation o f the Project, an Internal Audit Service, with staffing, terms o f reference, and other resources acceptable to the Bank, to be responsible for conducting internal audit for the Project accounts by June 30 and December 3 1 o f each year, starting June 30,2008 and furnish a report to DA and the Bank upon completion o f each said internal audit.
Financial Covenants: (a) The Borrower shall maintain or cause to be maintained a financial management system in
accordance with the provisions o f Section 5.09 o f the General Conditions. (b) The Borrower shall prepare and furnish to the Bank, not later than one month after the end o f
each calendar quarter, interim un-audited financial reports for the Project covering the quarter, in form and substance satisfactory to the Bank.
(c) The Borrower shall have i t s Financial Statements for the Project audited which shall cover the period o f one fiscal year. This shall be furnished to the Bank not later than six months after the end o f such periods.
IV. APPRAISAL SUMMARY
A. Economic and financial analyses
43. Economic Analysis; The major quantifiable benefits o f the project would result from: (a) the rehabilitation o f provincial and farm to market roads and the subsequent savings in transportation and travel costs; (b) rehabilitation and investment in communal irrigation schemes which wil l enhance farm productivity; (c) investments in potable water supply resulting in increased time-savings for collecting water and reduced incidence o f water-borne related sickness and disease; and (d) income generation activities for community-based development financed by the community funds. Given the programmatic nature o f the project's design, and the fact that local communities will be driving the choice o f subprojects (for example o n the CFAD component, as wel l as the selection o f rural roads, water supply subprojects, etc.), the analysis adopts a modular approach and uses the indicative implementation plan as a base scenario for estimating the expected economic benefits for the project as a whole. In the case o f CFAD, it i s unrealistic to project apriori the detailed micro-projects to be financed, given the demand-driven nature o f the component. Nonetheless, based on the MRDP1 experiences, some representative types o f small-scale community income generation projects are analyzed in anticipation o f the actual needs o f the communities.
44. The overall project ERR i s estimated at about 20% with NPV at PhP 803.4 mi l l ion (opportunity cost o f capital at 12%), based o n the aggregation o f the incremental benefits and costs f rom infi-astructure and C F A D components, and the incremental costs for project support and coordination and institutional strengthening and capacity building components. At the componenthubcomponent level, the investment in farm-to-market roads yields an ERR o f 21%; communal irrigation development, 24.8%; communal water supply development, 15 percent; and C F A D at 37%. The project is, either by component or as a whole, i s economically viable. The ERR for the whole project i s conservative,
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as secondary benefits, such as those from substantial but unquantifiable benefits f rom NRM component, and the efficiency gains and social capital f rom the institutional and capacity building component have not been quantified (See Annex 9 for details).
45. Switching values were calculated for each component and for the project in i t s entirety, and the results conf i rm that the ERRS are relatively robust to changes in revenues and costs. Overall, total project costs would need to increase by 20 percent or benefits to reduce by 20 percent, for the overall ERR to drop down from 20 percent to 12 percent, suggesting that the program i s more sensitive to changes in project benefits than to project costs. As discussed in more detail in Annex 9, the respective analyses for different components show greater sensitivity to changes in revenues than to costs. T o a large extent, this reflects the conservative bias in the assumptions underpinning the analysis.
46. Financial Analysis: The financial analysis only applies to the revenue-earning entities. As such, the project as a whole and project interventions, including farm-to-market roads, irrigation schemes and water supply subprojects do not require financial analysis. However, farm income analysis, for CFAD-supported enterprises was undertaken to assess the financial attractiveness to the households involved in the irrigation schemes. Under a without-project situation, farm income averaged PhP P44,838 per year, while with the project, the average beneficiary households’ on-farm financial situation would improve substantially to reach approximately PhP 84,158 at hll development (based o n a representative farmer household with land holding o f 1.6 ha.). As stated in the above section, for CFAD, the target communities will ultimately determine the type and scope o f each subproject; i t i s therefore unrealistic to conduct ex-ante costs and benefits for the whole component. Nevertheless, a number o f typical income generation subprojects (including asparagus production, high-value vegetable farming, coconut ropes and twines production) are selected for financial analysis. Those activities will be highly attractive to the beneficiaries with FIRRs ranging from 23% to 46%.
47. The major fiscal impact o f the project during the implementation will be the provision o f counterpart funding required from both national and local governments (see financing p lan in Annex 5 and detailed project costs on file). This has been, by design, guaranteed by the national government through annual budget allocations and by the participating LGUs through the cost-sharing arrangement. The future demand for fiscal resources for the project after implementation f rom national budget will be negligible with fiscal decentralization reform and as prescribed by the project operational plans. On the part o f the LGUs, there will be further demand for fiscal resources to cover the O&M costs for farm-to-market roads and irrigation systems. Based o n M R D P 1 experiences, LGUs will be in a good position to meet their financial commitments towards the project. Furthermore, positive fiscal impact can also be expected f rom improved allocations and more efficient use o f fiscal resources by LGUs.
B. Technical
48. As a rol l ing long-term program, the technical design o f M R D P 2 has benefited considerably f rom the experiences and lessons learned from Phase 1. A number o f the relevant lessons have been outlined earlier with implications for design modifications for MRDP2. In addition, the operations manuals (OMS) have been significantly updated to reflect enhancements and new institutional arrangements affecting the PSO, the RPCOs and the LGUs. The OMS will continue to be refined as lessons o f experience build up with implementation, and attempts are being made to harmonize operational procedures with other Bank-implemented projects such as the ARMM Social Fund, the Mindanao Trust Fund and other C D D projects.
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49. For the Rural Infrastructure component, year 1 subprojects have been identified and prepared by the LGUs. Detailed designs and related procurement documents for most year 1 subprojects have been prepared, with the emphasis being on: adopting l o w cost designs; provisions for adequate drainage and slope protection and encouraging labor-intensive construction methods. Selection criteria for the roads to be included under the program have been confirmed with the participating LGUs; communities will be involved in priorit izing investments among roads, which meet the required criteria, through the municipal multisectoral committees (MSCs). Commitments will be sought f rom the LGUs that they will allocate adequate resources for regular road maintenance, and the MOAS and grant agreements would stipulate that additional performance-based grants would be provided to LGUs only upon fulfil lment o f agreed revenue targets. For communal irrigation, M R D P 2 will promote LGU-led implementation, consistent with the national policy o n devolved functions. However, given the l imited role o f LGUs in irrigation development so far, NIA will assist in the preparation o f feasibility studies and detailed engineering plans, and in providing technical assistance to LGUs during implementation. For rural water supply, water quality issues and satisfactory community-based institutional arrangements (RWSA/BWSA) will underpin decisions on individual subprojects. MRDP2 wil l also support other rural infrastructure subprojects (of public good nature and with clear provisions for accountabilities for O&M) in response to LGU and local community demands. Institutional arrangements have been designed, and necessary technical assistance provided under the project, to ensure the technical soundness o f proposals put forth by LGUs and communities. For the NRM component, possible training in NRM planning, watershed, land use management and coastal resources conservation and complementing capacity building activities has been developed based on proven practice in other similar projects. Partnerships with the DENR, B S W M and DA- BFAR have been established to provide strategic technical guidance to LGUs and communities.
C. Fiduciary
50. Assessments were conducted during project preparation o f the financial management (FM) and procurement capacity o f the DA’s PSO and RFUs, and the sampled LGUs in relation to the project’s implementation arrangement and structure.
51 Financial Management. Based on the FM assessment done, the DA’s FM system would need to be improved in the area o f fund management, reconciliation o f the General and Subsidiary ledgers, reconciliation o f asset physical existence against recorded accountabilities, regularity in financial reporting, adequacy o f FM staffing, and internal audit function. Previous experience with the DA o n audit compliance has been satisfactory. In view o f the results o f the assessment, mitigating measures were discussed and agreed with the DA (please see details in Annex 7) hence, the FM risk rating has been reduced to Moderate. In addition, the FM arrangements for MRDP2 will address the aforementioned deficiencies and would meet a l l o f the Bank’s minimum requirements.
52. The Project will prepare quarterly Inter im Financial Reports. I t wi l l disburse through Designated Accounts (DesAs) maintained at the Program Support Off ice (PSO) and at the Municipal Development Fund Office (MDFO).
53. Procurement Assessment. The assessment builds on the results o f the successful harmonization effort with the Government and donors as wel l as the recent Country Procurement Assessment Reports. Hence, al l procurement other than International Competitive Bidding will use the Government’s own procedures, with the exception o f eight provisions in the national law which are not acceptable to the Bank, in line with the Bank’s desire to expand the use o f country systems” and to use procedures which are most appropriate for the project in terms o f fairness, economy and efficiency, transparency
’’ See World Bank, Expanding the Use of Country Systems in Bank Operations - Issues and Proposals. R 2005-0018/2, March 8,2005.
15
and accountability. The procurement will be carried out fo l lowing the project’s procurement manual which i s a consolidation o f the various procurement chapters/sections in the individual component’s Operations Manual. This design i s to ensure that procurement i s mainstreamed into the project operations.
54. The overall project risk for procurement has been rated as average. Issues/risks concerning the procurement aspects for implementation have been identified, and these include lack o f capacity o f RFUs to undertake the oversight role to LGUs, inadequate capacity o f PSO to provide technical assistance to RFUs, weak procurement planning o f LGUs and unclear LGU procurement process. The corrective measures which have been agreed upon include: designation o f procurement specialists in the RFUs and PSO; capacity building in the areas o f procurement planning and monitoring, and bid evaluation; and finalization o f the consolidated procurement manual. Whi le PSO staff has experienced procurement operations under MRDP1, there i s s t i l l a need to augment i t s procurement capacity due to the higher number o f LGUs involved and the init ial technical assistance i t will extend to the RFUs who will be the main oversight, and who wil l review the LGU procurement actions. A training o f trainors, for each region, has been conducted in June 2006 to ensure appropriate capacities are present in the regions to oversee the LGUs’ procurement operations.
D. Social
55. The overall program was guided by a comprehensive social assessment in al l f ive provinces covered under MRDP1 and was done to ensure that project areas and beneficiaries were appropriately selected, project objectives and strategies were responsive and acceptable to the intended beneficiaries, and the project would be feasible within the subject areas’ social, polit ical and institutional contexts. The findings o f the social assessment are s t i l l val id for MRDP2, as they were based on a representative sample o f agro-ecological zones that spread across Mindanao. Recently, there has also been a number o f social and needs assessments undertaken for Mindanao (e.g., Social Assessments o f Conflict-Affected Areas in Mindanao*’; and Joint Needs Assessment (JNA) o f Conflict-Affected Areas in Mindanao*l) which provided input into the preparation o f MRDP2.
56. Indigenous Peoples and other Vulnerable Groups. MRDP2 wil l be implemented in al l provinces of Mindanao and in 225 o f the more than 400 municipalities in Mindanao. T o ensure that vulnerable groups such as Project-Affected Persons, IPS, women and children are provided with social safeguards in the implementation o f MRDP1, the Program developed the Indigenous Peoples Policy Framework and the Land Acquisition, Resettlement and Rehabilitation Policy Framework. These policy frameworks were developed and approved for the entire long-term program o f MRDP. The framework for Indigenous Peoples will continue to be used under MRDP2. The framework for Land Acquisition, Resettlement and Rehabilitation has been updated to reflect the new OP 4.12 on involuntary resettlement. Operational guidelines for these policies have been reviewed and enhanced based o n the lessons and implementation experience o f MRDP1.
E. Environment
57. A Mindanao-wide environmental assessment (EA) covering a l l the 27 provinces o f Mindanao was satisfactorily undertaken as part o f project preparation. This document was properly disclosed in the country o n August 28,2006. The EA assessed the impacts o f the types and scale o f subprojects to be
2o Social Assessment of Conflict-Affected Areas in Mindanao (Philippines Post Conflict Series #l), The World Bank, March 2003 2’ Joint Needs Assessment for Reconstruction and Development Program o f Conflict-Affected Areas in Mindanao, The World Bank, December 2005.
16
supported under MRDP2, and also evaluated the implementation experience and lessons learned under MRDP1. Results o f the EA indicated that the Project's environmental impacts are minor and localized, which can be easily managed through strict observance o f environmental guidelines developed as part o f the EA and which are mainstreamed into each component. The environmental guidelines provide the basic environmental considerations in site selection, subproject planning, design, as well as implementation o f simple mitigating measures. In addition, the EA also formulated environmental policies to enhance the positive impacts o f MRDP2 and identified a negative l i s t o f subprojects and activities, including purchase and/or massive use o f chemical pesticides, to further safeguard the environment f rom any potential negative impacts. The Project has also formulated training programs to build the safeguard capacity o f the PSO, the RPCOs and the LGU and community subproject proponents.
F. Safeguard Policies Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP 4.0 1) [XI 11 Natural Habitats (OP/BP 4.04) [I [XI
Pest Management (OP 4.09) [XI [I Cultural Property (OPN 11.03, being revised as OP 4.11) [I [XI Involuntary Resettlement (OP/BP 4.12) [XI [I Indigenous Peoples (OPIBP 4.10) [XI [I Forests (OPIBP 4.36) [I [XI Safety o f Dams (OPIBP 4.37) [I [XI Projects in Disputed Areas (OPIBP 7.60). [I [XI Projects on International Waterways (OPIBP 7.50) [I [XI
G. Policy Exceptions and Readiness
58. MRDP2 complies with al l applicable Bank policies. In terms o f readiness for project implementation, design and procurement documents for Year 1 rural infrastructure subprojects program have been submitted to the Bank pr ior to negotiations. In addition, the l i s t o f Year 1 C F A D subproject proposals has also been submitted based on consultations with the MSCs. At the institutional level, the PSO and the RPCOs are already in place and LGU staff f rom the participating provinces and municipalities have been actively engaged in the preparation o f the Year 1 subprojects. The revised Operations Manual, adapting the lessons from MRDP1, has also been submitted by the DA to the Bank in October 2006 prior to negotiations.
' By supporting the proposed project, the Bank does not intend to prejudice the final determination o f the parties' claims on the disputed areas
17
Annex 1: Country and Sector or Program Background
PHILIPPINES: Mindanao Rural Development Project - Phase 2
A significant percentage o f the Philippine population i s agricultural and rural. The sector accounts for around 20 percent of the country’s GDP and provides the largest share in employment. Although the agricultural sector will continue playing a strategic role in the economy and growth, i t s relative share of GDP i s declining due to slow rate o f output growth. This contrasts with other emerging sectors, industry and services, which employ far less people than agriculture, but continue registering stronger productivity and growth rates. In the rwal/agricultural economy, there remain a number o f factors that will influence future growth: (a) there are clear domestic growth triggers (an increasing population and an expanding non agricultural economy, with growing aggregate income, which will need to be supplied with food and food products; (b) with increasing incomes, the domestic market i s becoming increasingly sophisticated and price and quality conscious. H o w much o f this demand can be successfully captured by domestic suppliers (to limit in f low from imports) i s a key challenge; (c) as other powerful regional economies grow, and trade barriers relax, the export market for agriculture produce i s growing rapidly. The Philippines, however, has only been able to capture a small, and declining share; (d) the natural comparative advantages the Philippines has together with i t s literacy, technical and entrepreneurial sk i l ls have only been partially harnessed in pushing the economy - and l i t t le in agriculture; and (e) the overall peace and security situation, particularly in Mindanao continues to hinder investment and output.
2. The Government’s strategy for securing sustained agriculture sector growth include: (a) furthering policy reforms to make the sector internationally more competitive; (b) increased public investment in infrastructure, especially irrigation facilities, farm-to-market roads (FMRs) and post-harvest facilities, to support intensive farming technologies; (c) increased research and development investments, in partnership with the private sector; (d) increased funding for agrarian reform, and making i t more effective and less costly: (e) improving natural resource management through pol icy reform, institutional strengthening, greater community participation, and development o f appropriate tenurial and market-based instruments; (0 streamlining the agnculture-related bureaucracy, including the interface between central and local governments; and (g) making devolution more effective through improvement in the institutional capabilities o f LGUs and channeling resources for devolved rural development activities. The pol icy thrusts to promote general and rural economic growth are at the heart o f the Medium-Term Philippine Development Plan (MTPDP 2004-2010) which underpins the strategic framework for poverty reduction and economic growth with social inclusion and equity. On the other hand, the Bank’s Country Assistance Strategy (CAS) for the Philippines 2006-2008 aims to stimulate a virtuous cycle o f more effective public institutions, fiscal improvements, economic growth, poverty reduction, and greater social inclusion. More specifically, within the MTPDP and the CAS, the strategic development goals include enhancing agricultural productivity and agribusiness, asset (land) reform, responsible management o f natural resources and the environment and public expenditure rationalization to improve public service delivery. In addition, the Government has two further pieces o f legislation to enhance agricultural and decentralized rural development, namely; (a) the 1997 Agriculture and Fisheries Modernization A c t (AFMA), which aims to enhance the competitiveness o f Philippine agriculture, and (b) the 1991 Local Government Code (LGC) which devolves greater responsibility for delivery o f frontline support services to Local Government Units (LGUs).
3. Promoting poverty reduction and rural growth specifically on the island o f Mindanao remains particularly high on the policy agenda given: (a) the island’s distinct climatic and geographic advantages which favor agriculture; (b) the large proportion o f the country’s poor (almost one third)
18
located there; and (c) advancing the peace initiative in Mindanao through the provision o f greater economic opportunities and integration. Despite these strategic initiatives progress in achieving pol icy goals has been constrained by various factors, including: (a) the l o w level o f public expenditures for infrastructure, transport and market development; (b) inefficient input supply channels; (c) slow pace o f effective devolution to LGUs many o f which are s t i l l to mature as effective providers o f devolved agricultural support services; and (d)] poor linkages between rural development planning and implementation.
4. A third o f the rural poor in the Philippines can be found in Mindanao, with i t s rural sector remaining in a state o f stagnation. Yet, with i t s distinct agro-climatic and geographic advantages, Mindanao holds tremendous potentials and has distinct comparative advantage for agriculture and fisheries sector growth. The poor situation in the rural areas has been brought about by l o w levels o f public expenditures for critical infrastructure, poorly functioning transport systems and rural markets, inadequate post-harvest facilities, l imited reach o f agricultural support services, diff iculty in accessing necessary production inputs and ill-prepared and non-integrated rural development planning and implementation. The pace o f decentralization has remained slow and many LGUs are yet to mature as effective providers o f devolved agricultural support services, as stipulated in the LGC. Also, the Department o f Agriculture (DA) has not been quite effective in supporting LGUs to enable them to integrate communities into the LGU and the DA decision-making processes for rural development priorities and investments.
5. Hence, in 1999, the Government and the Bank started the discussions for the design for a long-term program for promoting rural development in Mindanao. The long-term program aimed to improve incomes and food security in targeted rural communities within al l o f the provinces o f Mindanao, through implementation o f better targeted and sustainable agriculture and fisheries-related rural development and marine biodiversity conservation programs, and improved LGU institutional, management and financial systems. A letter o f sector development objectives was submitted by the GOP to the Wor ld Bank in June 1999 (please see Annex l(a) o f MRDP1 PAD), wherein it was recognized that poverty alleviation and rural development are long-drawn processes that would require sustained support. In addition, i t was also noted that while most o f the responsibilities for agricultural and rural development have been devolved to LGUs (with the passage o f the 1991 LGC), the institutional weaknesses o f LGUs continue to be the principal bottlenecks for effective and sustainable rural development. Building institutional capacity at the local levels and ensuring sustainability and support for such efforts at the national level also requires nurturing over a long period. Through the Bank’s loan instrument o f an Adaptable Program Loan (APL), an opportunity was presented to meet the specific, unique and long-term requirements for rural development. Outlined below are the agreed broad strokes o f the long-term program agreed between the Government and the Bank:
(a) MRDPI: Would initiate the program in a relatively small group o f about 5 provinces, for testing out and initiating a process o f engaging LGUs and rural communities in designing and implementing a rural development program, in close association with concerned national government agencies, developing an implementation strategy, and establishing a mechanism for scaling up the program in the succeeding APLs.
(b) MRDP2: Would provide for expanding the geographic coverage o f the program across Mindanao, to provinces and municipalities which meet eligibil i ty criteria; the program would be deepened in the APLl provinces by enlarging the scale, and also ensuring that a l l eligible municipalities are included.
19
Triggers for moving on to Phase 2:
Project Preparation to be initiated once 60 percent o f the APLl Loan has been disbursed. Social Assessment o f the next group o f provinces to be completed, which express interest
Phase2 Loan to be approved by the Bank once 80 percent o f APLl Loan i s disbursed, and
Institutional arrangements for implementation tested out and adapted based o n
Overall satisfactory performance, using the mid t e r m evaluation as a basis for assessment
in participating and meet eligibil i ty criteria.
the balance i s substantially committed.
experience’; multisectoral committees for the CFAD operating satisfactorily.
(key elements for assessment included adequacy and timeliness in providing counterpart funds in Phase 1 LGUs; improved arrangements for routine road maintenance sourced f rom increased budgetary allocations by LGUs; completion o f at least 60 percent o f proposed infrastructure program in a particular province for i t s continued involvement in APL2; improved rural development planning and allocation o f budgetary resources by LGUs, with community involvement; greater integration o f DA programs into LGU RD plans, synchronized through the regular planning and budgeting process and schedules).
m
(c) MRDP3: Would continue support for a l l provinces covered under APL2, and complete the coverage across Mindanao, to the extent that some provinces or municipalities remain outside the program due to their inabil ity to meet eligibil i ty criteria. I t would focus on deepening the program by ensuring that all eligible municipalities are fully engaged.
(d) MRDP4: Would focus on reinforcing the key thrusts underpinning the overall program and in securing both program and more importantly, institutional sustainability o f the developments undertaken in support o f increasing agricultural production and alleviating rural poverty.
Triggers for moving on to MRDP Phases 3 and 4:
Project Preparation to be initiated once 60 percent o f the ongoing APL Loan has been
Bank approval o f new APL Loan to be done once 80 percent o f the ongoing APL Loan i s
Acceptance by LGUs already participating in the program, o f increased cost sharing o n
disbursed. Social Assessment in eligible provinces and municipalities to be completed.
disbursed, and the balance i s substantially committed.
project-supported activities (as reflected in proposed or approved budgets, etc.); increased share o f rural development activities funded from central DA budget integrated into LGU financial and investment plans.
o f key results indicators, plus, more importantly, degree o f initiative by LGUs for instituting concrete mechanisms for sustainability o f institutional arrangements initiated under the MRDP).
rural development plans in place, which are l inked to annual budgetary allocations. This should provide the basis for designing continued program support for these LGUs.
Overall satisfactory performance, using the mid-term evaluation as a basis for assessment
Provincial LGUs already participating in the program (under Phases 1 and 2) should have
20
Indicative Timetable for MRDP Program Phasing (as reflected in the MRDPl PAD):
Notes: (1) The proposed timing and amounts for Phases 2 to 4 are tentative, and will be subject to a full appraisal process. In preparing the above projections, i t i s assumed that 18 provinces and 218 municipalities will participate in Phase 2, and 24 provinces and 315 municipalities in both Phases 3 and 4. Share of Bank Loan financing in total project costs i s assumed to decline from an average of around 70 percent in Phase 1, to 60 percent in Phase 2, 50 percent in Phase 3, and 45 percent in Phase 4.
(2) The implementation period for Phase 1 stretched to December 2004, in view of delays incurred due to the war in Mindanao dunng the first half of Phase 1 implementation and the lesson learned from implementation that capacity building and institutional strengthening through a learning-by-doing mode takes a longer time than was originally envisioned. In addition, in view of the tight fiscal situation of the country, there has been a lot of discussions at the macro level on the changes needed for the overall NG-LGU cost sharing which would govem modalities on the required minimum level o f financing between NG and LGUs for devolved investments, during the second half of 2004 to first half of 2006. The second phase i s now projected to take place from June 2007 to December 2012.
Eligibility Criteria for LGU Participation
The init ial group o f LGUs shown below (provinces, and respective municipalities), which formed the basis for project preparation, and where program implementation commenced in Year 1 under MRDP1, were selected by the DA and NEDA, primarily on the basis of: firstly, the province having an agriculture sector o f sufficient diversity to represent Mindanao (including having coastal municipalities); and secondly, the municipalities selected, as shown below, were 4" to 6'h class municipalities. . . North Cotabato Province: Aleosan, Banisilan, Antipas, Libungan, Arakan
Sultan Kudarat Province: Kalamansig, Sen. N inoy Aquino, Lutayan, Lambayong, President Quirino, Columbio.
The regional heads o f national government agencies (NEDA, DILG, and DA) f rom the six regions o f Mindanao, as wel l as f rom ARMM and MEDCO, met in November 1998, and agreed on criteria while selecting the following additional three provinces for inclusion in MRDP 1 : Agusan Sur, Maguindanao and Compostela Valley. This would result in four regions participating in the f i rst phase, and consequently, at an institutional level, facilitate the geographic expansion o f the program in subsequent Phases. If certain LGUs do not perform, and implementation performance suffers as a result, other provinces and municipalities can be brought in to replace the original LGUs; this would require the endorsement o f the PAB.
The criteria for bringing in additional provinces (and municipalities) into MRDP1 (and establishing a ranking, if necessary for project preparation purposes, among provinces expressing interest in participating in MRDP2) include the following:
21
.
. Preferably allow for one province per Region, which will facilitate quicker replication within each Region. Provincial LGUs should be willing to allocate financial, staff and other resources for undertaking project preparation; and commit themselves to facilitating, and participating in carrying out a Social Assessment. Within a Region, preference would be given to the province with the highest levels o f poverty, as evidenced by rural poverty incidence and rural poverty magnitude. Preference would be given to provinces with a higher potential in agriculture and fisheries, and with very l imi ted or n o similar externally financed project as MRDP. Ability to service debt - projected annual debt service for next 3 years i s less than 50 percent of development fund.
.
. 9. The above criteria were used in the beginning o f preparation o f MRDP2, in short listing the provinces
which will be included. However, towards the beginning o f 2006 when there was clarity in the NG- LGU cost sharing, a l l o f the 27 provinces o f Mindanao expressed strong interest to be part o f MRDP2. A similar criteria for the prioritization o f municipalities among the participating 27 provinces have been drawn up by the DA and had been applied by the provincial LGUs in coming up with their priority l i s t o f municipalities which would participate under MRDP2 (please see project files on criteria and process used by provincial LGUs in arriving at the l i s t o f 225 municipal LGUs which will be participating in MRDP2. .
Assessing Implementation Performance
10. The program will implement a strong M&E system, closely l inked to enhancing LGU capacity in this area, and putting in place an effective mechanism for assessing performance within the context o f the proposed phase program. In terms o f capacity building, training courses, workshops as wel l as technical assistance for LGUs will be provided. The key areas to be monitored include the following:
Rate o f implementation progress (e.g., no. o f kilometers o f roads rehabilitated within a period o f time, increase in the no. o f irrigated areas irrigated, etc.) Processes which result in increased involvement o f communities in the decision making process (e.g., description o f the mechanisms in which village level decision making i s arrived at in determining investment priorities and in managing community-based resources at the village level, etc.) LGU plans becoming more responsive to broad community priorities (e.g., greater level o f satisfaction among communities in the delivery o f devolved agricultural and fisheries support services, etc.) DA programs and budgets being integrated into LGU plans (e.g., increasing yearly DA budgets which are incorporated into devolved agricultural and fisheries support services, increasing role o f LGUs in performing and delivering devolved activities, etc.) Direct impacts o n beneficiaries f rom different components (e.g., increase in on- and off-farm incomes among targeted communities, improvement on access to basic services and markets, etc.)
1 1. Independent evaluation studies would be conducted at specific program milestones in order to assess effects and impacts o f interventions, as well as to consider adaptations to the program. Baseline data would be collected at the provincial, municipal and community levels pr ior to implementing the various program components in order to provide the basis for assessing the effectiveness o f program interventions.
12. As can be gleaned f rom the MRDP1 Implementation Completion Reports (Report No. 32660-PH dated June 29,2005 and Report No.36466-PH dated June 29,2006), the f irst phase o f the program
22
was implemented quite successfully and had achieved i t s project development objective. Equally important, lessons learned and implementation experience have been generated during M R D P 1 which would facilitate broadening o f the program to the rest o f provinces and a much greater number o f municipalities in Mindanao under MRDP2. One o f the key lessons learned i s in the need to ensure the usefulness o f planned M&E interventions by making these better focused, further simplified, more operational, and results-oriented, Under MRDP2, a more results-based M&E framework i s adopted to ensure more focused monitoring and evaluation o f this phase’s interventions and o f the evolving results and outcomes from the overall program.
13. The Bank’s continued involvement and sustained partnership with the GOP in this long-term program i s crucial for supporting i t s momentum for pushing and deepening the agenda for the decentralization of frontline support services delivery. I t will help ensure the institutionalization o f field-tested planning and implementation mechanisms for demand- and community-driven approaches for agricultural and rural development. The scaling up o f the program i s part o f the Bank’s overall agenda in contributing to rural and agricultural growth, especially in Mindanao. I t also provides an opportunity for the Bank to bring in development lessons and experiences on local governance reform f rom within the region and elsewhere. The practice o f integrating community plans into higher tiers of local governments and sectoral agency planning and budget processes remains a major weakness in the Philippines. As such, the success o f M R D P Phase 1 o n this aspect i s almost unique. It needs to be institutionalized, expanded and refined further, especially in light o f recent policies to hasten the decentralization process, serving as a model for other sectoral programs requiring strong involvement o f communities and their local governments.
14. The justification for continued Bank involvement i s made stronger given the positive impacts and assimilation o f valuable experiences and lessons learnt f rom the f i rst phase, which wil l be used in scaling up and guiding the program under MRDP Phase 2 to other provinces in Mindanao. Collectively, close engagement in these processes demonstrated the Bank as a credible partner in promoting effective models for accelerating decentralization in agriculture sector services in Mindanao which can been successfully replicated elsewhere in the country. In addition to experiences from MRDP Phase 1, implementation lessons and linkages to other Bank-assisted projects (such as KALAHI, ASFP and ARCDP 2) o n C D D approaches and operations manuals have been incorporated into MRDP2. Coordination with other donor efforts in Mindanao (such as those being done by the ADB, USAID, IFC, CIDA, and AUSAID) has also been maintained in preparing and designing MRDP2 to enhance i t s eventual effectiveness. Overall, therefore, the Bank’s continued involvement and sustained partnership with the GOP and other partners in this long-term program, i s crucial for maintaining momentum in further promoting decentralized development with active community participation
15. Within the strategic thrusts o f the MTPDP, AFMA, the L G C and the CAS, M R D P 2 will further scale up successful practices piloted under the f irst phase o f the APL program. The overall program objective, started during MRDP1 and will be continued under MRDP2 will contribute to the GOP’s development goals on reducing poverty, promoting growth with social inclusion, and in further strengthening decentralization. In addition, given the continued conflict in Mindanao, the realization o f sustained rural growth and visible benefits to conflict-affected populations, will directly contribute to reinforcing GOP and donor community efforts at consolidating the peace initiatives, which i s a key national pol icy goal. Moreover, i t i s aligned with the Bank’s CAS objective o f assisting the GOP to improve public institutions and service delivery mechanisms by harmonizing and synchronizing national and local agenda for sustained rural development.
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Annex 2: Major Related Projects Financed by the Bank and/or other Agencies
PHILIPPINES: Mindanao Rural Development Project - Phase 2
Sector issue
Bank-Assisted Area-based, targeted poverty alleviation; Strengthening Institutions for Promoting Decentralization Local Infrastructure Provision to Targeted
Groups; Microenterprise Development
Financing o f Local Government Investments o n NRM. Financing o f Local Government Investments o n NRM., Watershed Management
Water resources planning and management; watershed management Emergency Post-Conflict Recovery Targeted Poverty Alleviation; Strengthening Community Empowerment Enhancement o f Delivery o f Market- Oriented Services for enhancing Agricultural ComDetitiveness Other Development Agencies Targeted Area Development; poverty focus, micro-project financing LGU Institutional Strengthening o n NRM
Local Infrastructure Development Farmer linkage with Agri-business; enterprise development Note: IP/DO Ratings: HS (Highly Satisfactory), S (Sati (Unsatisfactory), HU (Highly Unsatisfactory)
Project
Mindanao Rural Development Program APL 1 Agrarian Reform Communities Development Program Community-Based Resource Management Laguna Lake Institutional Strengthening and Community ParticipatiodLISCOP
Water Resources (LISCOP)
Development Project ARMM Social Fund Project KALAHI
Diversif ied Fa rm Income and Market Development Project
European Union: Upland Development Project U S A I D : Environmental Governance Project ADB: INFRES Project U S A I D : Growth with Equity in Mindanao (GEM) Project Ictory), M S (Marginally Satisfactory),
Latest I S R Ratings (As o f December 2006)
(B a b - finance d Implementation
Progress (IP)
Completed
S
S
S
Completed
S S
U
n.a.
n.a.
n.a. n.a.
[U (Marginally Unsatir
rojects only) Development
Objective (DO)
S
S
S
S
S
S S
MU
n.a.
n.a.
n.a. n.a.
ctory), u
24
Annex 3: Results Framework and Monitoring
PHILIPPINES: Mindanao Rural Development Project - Phase 2
Results Framework
PDO
Overall Program Purpose:
Improved incomes and food security in the targeted rural communities within the 27 provinces o f Mindanao, f rom implementation o f better targeted and sustainable agricultural and fisheries-related rural development and marine biodiversity conservation program, and improved LGU institutional, management and financial systems.
Under MRDp2:
I t wil l specifically a im to (i) improve access to l ivelihood opportunities o f targeted communities and (ii) institutionalize a decentralized system for agriculture and fisheries service delivery that promotes participation, transparency and accountability.
Intermediate Outcomes
Component 1 : Investments for Governance Reform (IGR) and Program Administration
NG/LGU institutional linkages and framework for devolved services strengthened.
Project Outcome Indicators
Average household incomes o f beneficiary communities 20% higher than baseline and 10 % higher than control group.
Intermediate Outcome Indicators
70 % o f participating LGUs rate their ability to better plan and implement investment programs (control systems, planning, supervision) as satisfactory or better, attributing this to project
15% and 35% o f target beneficiaries report significant improvement in LGU service
Use o f Project Outcome Information
The increase in with-project income significantly higher (statistically) than base l ine and control to show that the project i s having a positive impact. Conversely, if not significant, may suggest that scaling-up the program needed to be more vertical than horizontal or was overambitious.
Use of Intermediate Outcome Monitoring
L o w % o f LGUs reporting better abil ity in planning and integration with national systems may flag that project activities in the timeframe are overambitious
L o w (below target) levels o f satisfaction signals that project activities in LGU strengthening
25
Component 2: Rural Infrastructure
Improved access and increased stock of quality rural infrastructure
Component 3: CFAD
Increased household income for vulnerable groups
delivery, at midterm and at end o f MRDP2, respectively
15% increase (compared to baseline) in expenditures for agricultural investments among participating LGUs by end o f MRDP2
80% o f provincial and municipal LGUs adopt resource generation, allocation, utilization and accountability measures at the end o f APL2
Travel time in targeted areas reduced by at least 30% at the end o f MRDP2 compared to baseline;
Savings in passenger and produce transport costs increased by at least 10% at the end o f MRDP2
Average cropping intensity increased to a range o f 150 % to 180% over baseline by the end o f MRDP2
Time to fetch water reduced by 65% over baseline by end o f project
At least 50% increase in the number o f households reporting reduced incidence o f water-borne diseases by end o f project.
At least 80% o f participating LGUs have increased their revenues in accordance with set targets over baseline.
Average household incomes o f beneficiary communities 20% higher than baseline and 10 % higher than control group.
are not effectively translating into results in service delivery requiring reconsideration o f design.
Below target adoption o f improved financial and governance systems indicates overambitious design, or need to further improve the quality and quantity o f institutional capacity building efforts aimed at improving governance and local resource generation and mobilization.
Shortfall in meeting targets or poor quality evaluation would suggest problems in the selection o f subprojects or targeting.
N o significant increases in yields would negate objectives o f increased production and household incomes.
Low levels o f income increase over controlhaseline flags problems with the menu o f subprojects or over-estimation o f
26
Component 4
Natural Resource Management
At least 30% o f CFAD allocations are accessed by IPS and women by end o f the project
10% decrease in siltation and sedimentation in coastal areas, as a result o f better land management practices.
20% increase in public awareness and community participation in better land management practices, and coastal and marine biodiversity conservation.
ex ante financial/economic returns
No improvement in siltation and sedimentation levels suggests problems in sustainable land management interventions.
Lack o f recognition and information on sustainable land management
27
B
I
e e
c E ! e e e c E
E
E z c
c
b
0 m
Annex 4: Detailed Project Description
PHILIPPINES: Mindanao Rural Development Project - Phase 2
Component 1 : Investments for Governance Reforms and Program Administration (US$4.4 million total cost)
Background/Key Institutional Issues. MRDP 1 strengthened the technical, financial and management capabilities o f 32 municipalities and five provinces to perform their legally-mandated roles under the LGC and AFMA. Successful initiatives will be further enhanced and expanded in MRDP2 to cover all 27 provinces in Mindanao to improve capacities o f other LGUs as providers o f devolved agriculture and fisheries support services. The project will integrate agriculture and fisheries planning and implementation being done separately by the DA RFUs, the LGUs and other agencies. The RFUs will be assisted to better orchestrate agriculture development-related support to the LGUs coming from DENR, MDFO, NEDA, MEDCO, DILG, NCIP, and other sources. Finally, MRDP2 will continue to mainstream community engagement in the process o f jo in t DA and LGU planning, budgeting and implementation o f agriculture and fisheries projects and activities, using lessons learned under the f i r s t phase.
2. Component Objective and Expected Outcomes. The overall objective i s to strengthen the framework and linkages for the integrated delivery o f devolved services by the national and local government units. The LGUs at the provincial, municipal and barangay levels comprise the principal target group. The principal outcome from institutional strengthening will be LGUs effectively delivering a l l devolved agriculture and fisheries services in a manner and quality satisfactory to target client-farmers and fishers, particularly but not l imited to those who are organized, leading to measurable increases in incomes. Outcome achievement will be determined through client satisfaction and LGU self-rating surveys. As a means o f achieving this primary outcome, the project will strengthen DA and other key institutions mandated by law to support the LGUs.
3. MRDP2 will facilitate DA’s systematic phase-out f rom directly performing devolved functions, and shift towards providing LGUs with planning and budgeting, research and extension, monitoring and evaluation, and related enabling support.22 Community groups wil l continue to be strengthened so that completed infrastructure and livelihood subprojects can be properly and sustainably operated and maintained. The ATI, SUO, NGOs, AFCs, industry associations, and other relevant institutions will be enabled to regularly participate as resource institutions in local planning, budgeting and implementation o f agriculture and fisheries initiatives. Taking o f f f rom the component’s outcome, the fo l lowing diagram summarizes what will be done under the component, as will be discussed further below.
These are the Department’s “core functions”. Other core functions, namely policy, regulatory and market development support, are covered 22
under the World Bank-assisted Diversified Farm Income and Market Development Project (DFIMDP).
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Output 1 : Improved Output 2: Improved Output 3: Enhanced LGU Resource Mgt DA Capacity to Governance Systems and Service Delivery Support LGUs & Mechanisms in DA
Systems & LGUs -
Training Inputs: Formal training Non-formal/on-the- job training
output 4: Established Project
Coordination & Support System
Figure 1
I
Non-Training Inputs: * Organizational
. Change development
management
4. Interventions under the Component. Institutional strengthening will support achievement not only o f the overall MRDP2 objectives but also those o f the RI, C F A D and NRM components. Interventions will include both training and non-training activities. Training - both formal and on- the-job - will cover technical areas (such as planning and budgeting), financial management, and project administration. On the other hand, non-training interventions will include the review and refinement o f institutional mandates, organizational structures, personnel policies, scopes o f work, staffing, staff development, and performance standards - al l in line with the Government’s on-going organizational development and rationalization program. The fol lowing are the three subcomponents:
(a) Subcomponent 1, Improving LGU Resource Management and Sewice Delivery Systems,
The objective o f the f i rs t subcomponent i s to enable LGUs to ably and sustainably perform the full range o f functions assigned to them under the L G C and AFMA. Institutional strengthening must recognize heterogeneity among LGUs. Capacity-building therefore will not be standardized but rather, will cater to the wide diversity in the socio-economic and leadership conditions, which lead to wide disparities in LGU technical and financial capacities. Capacity-building o f LGUs will be done through learning-by-doing modes, which was proven effective during MRDP1. M R D P 2 wil l address the lack o f sustained LGU capacity-building (e.g., by preparing simple training manuals) that coupled with a high rate o f staff turnover results in the endless clamor for more training. Moreover, incentives will be provided to MRDP2 participating LGUs to adopt cross-cutting best practices in transparency, accountability and participation in local governance. Improved governance will enhance and sustain the results o f the other components and subcomponents. This i s an innovative feature under the second phase o f the program wherein the project will p i lot test the operationalization o f a performance-based grants mechanism for LGUs which would apply to the subprojects being supported under the Rural Infrastructure Component. Measures o f performance will include adherence to practices which would promote good governance and measures which will enhance local revenue generation. Based on LGU performance, additional grant resources f rom national government would then be provided to participating LGUs for the implementation o f their priority local infrastructure. The major activities under the subcomponent are: (i) Institutionalization of
including Enhancement of Governance Systems and Mechanisms
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Participato y, Integrated, and Decentralized Local Development Planning and Implementation; (ii) Strengthening of Local Research and Extension Services; (i i i) Local Revenue Enhancement and Management; (iv) Procurement Reform; and (v) Mobilizing Participating Institutions toward Broad Convergence and Enhancement of Anti-Corruption Measures.
(b) Subcomponent 2: Improving D A Capacity to Support LGUs
The objective o f this subcomponent i s to refocus the RFUs’ role towards supporting the implementation o f a decentralized service delivery system in agriculture and fisheries. A popular lament about the L G C i s that i t cut o f f the LGUs from DA technical services, training and funding that used to be channeled through the RFUs. Under MRDP1, the RFUs began to revisit their role vis- h i s the LGUs. MRDP2 will re-affirm the nurturing links between the DA and the LGUs, not the pre-LGC model o f the DA, but playing an enabling role to build capacities o f LGUs to deliver frontline support services. The major activities under this subcomponent are: (i) Support to Local Development Planning and Implementation; and (ii) Support to Strengthening Local Research and Extension.
(e) Subcomponent 3: Program Support and Coordination
The objective o f this third subcomponent i s to lay down and to maintain the institutional foundation for effective program implementation. Capacity-building will target operating units within the LGUs and the DA, as these same offices and staff are expected to carry on lead and supportive roles in the longer-tern planning and delivery o f a l l devolved services in the sector. At the LGU level, training and non-training interventions on project support and coordination will target staff f rom the planning and financial management offices, plus those coming f rom the offices o f the LGU agriculturist and engineers, who will be officially assigned project facilitation roles. For DA, capacity-building will be directed at officially-designated personnel o f the RFUs and key service units at the DA central office particularly those for planning, f ie ld operations, and financial management. There wil l be three major activities under this final subcomponent: (9 Strengthening the Enabling Environment for Program Coordination; (ii) Strengthening Systems and Procedures; and (iii) Strengthening Support Systems for Program Coordination.
More details on the design o f the component and i t s subcomponents can be found in a working paper on file.
Component 2: Rural Infrastructure (US$83.852 million total cost)
5. Inadequate rural infrastructure stands out as a principal constraint to agricultural development and poverty reduction in Mindanao. A key impediment i s the diff iculty and cost o f hauling inputs to fanners and fishers and outputs to markets caused by the inadequate and poor condition o f road access infrastructure. In general terms, key elements o f infrastructure provision in Mindanao are presented in the fol lowing table:
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Table 1. Mindanao: Some key elements of infrastructure provision (2006)
Note: Rural roads include al l roads below the national roads.
6 . A survey undertaken as preparatory work for the project shows that rural infrastructure improvements rank high among the top local development priorities o f communities. Consultations with various groups held during project preparation revealed that the types o f rural infrastructure implemented under MRDP1 wil l remain the same for MRDP2 and wil l include: rural roads and bridges, communal irrigation and potable water supply systems. Additionally, other infrastructure related works would also qualify for financing, including timber ports, rock causeways, pedestrian hanging bridges, and post-harvest facilities. Infrastructure subprojects are strongly interlinked and need careful planning, such as the construction o f post-harvest facilities in conjunction with farm-to-market roads, etc.
7. Based on the experiences o f MRDP1, scope and ceiling for unit costs for the rural infrastructure component are estimated as follows:
Table 2. Total Cost o f Infrastructure Subcomponent (US$ million)
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Table 3. Unit Cost Ceilings and Estimated Average Unit Costs
Subcomponent
A. Rural Roads/Access
B. Communal Irrigation Systems
C. Rural Water Supply
D. Other rural infrastructure
Output Unit Unit Cost (ceiling), Estimated Average
Farm-to-market road 34,615 U S $ h 25,000 U S $ h (rehabilitated) Farm-to-market road 48,077 US$/km 34,615 U S $ h (construction) Single-lane bridge 3,846 US$/linear meter 3,846 U S $ h (constructed) Run-of-river communal 1,923 US$/ha 1,731 US$/ha irrigation system, CIS (rehabilitated) Communal irrigation 2,885 US$iha 2,692 US$/ha project, CIP (new scheme) Communal faucet water 154 US$/h.h. 13,462 US$/subproject systems (constructedrehabilitated) units 28,846 US$/subproject 19,230 US$/subproject
US$/unit Unit Cost (US$/unit)
8. Institutional strengthening and capacity building o f local institutions including RFUs and LGUs involved in the implementation o f rural infrastructure works, including that for community groups tasked in the operation and maintenance o f completed subprojects (e.g. rural water and sanitation associations, irrigators associations, etc.), shall be supported through training and capacity building efforts.
9. In general terms, the rural infrastructure component envisages working with 225 municipalities in al l o f the 27 provinces o f Mindanao. The f i rst year’s program financed under the project includes mainly subproject proposals f rom the 32 municipalities that participated under MRDP1. I t also includes a number o f new LGUs that have earlier indicated commitment to participate in MRDP2. As in the previous phase o f the program, MRDP2 will continue to support rural infrastructure subprojects in order to: (a) improve access to basic rural infrastructure services, and (b) enhance current operations and maintenance standards for infrastructure as practiced by LGUs and communities.
10. The component will fo l low a l l guiding principles and procedures established under MRDP223 (as reflected in the Operations Manual or OM), for identifying and implementing subprojects. The main guiding principles are summarized as following:
. .
.
Adopt program and network approach in selection o f rural infrastructure subprojects with active participation o f rural communities as outlined in the OM Fol low Wor ld Bank safeguard policies as outlined in Annex 10 Monitor and evaluate the set o f proposed indicators before the start and after the completion o f infrastructure works O&M system (as outlined in the OM) needs to be put in place in order to make sure that infrastructure assets rehabilitated under the project are kept in good and fair condition after completion o f works Fol low design features for subprojects according to the OM
23 Technical specifications for the rural infrastructure works under MRDP2 are found in the Operations Manual and follow the accepted minimum specifications as issued by the Philippine Department of Public Works and Highways and similarly adopted in other development projects in the Philippines.
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Rural RoadsIAccess
11. This activity combines the rehabilitation o f about 1,950 k m s . and the construction o f 200 k m s o f farm-to-market roads with about 1,000 linear meters small-scale bridge construction and replacement. Consultations in the representative target areas indicated the high pr ior i ty given to rural roads by rural communities (as i s often the case in poor rural areas). Given this high demand amid recurring issues that contribute to the l o w quality o f rural roads, the project will fund the rehabilitation and in some selective cases the construction/opening o f rural roads whi le seeking to promote best practices in the development o f a sustainable rural road sector. Rural roads are defined as farm-to-market roads and are designated roads below the provincial roads leading f rom the farm-gate to provincial, national or municipal town roads. Rural roads under this definition are therefore the responsibility o f the municipality andor barangay LGU. National and sub-national roads, which are under D P W H responsibility and supported through other programs, and the municipal town roads are not included in the project. The community footpaths and footbridges which fal l beyond the designated network wi l l be financed under the C F A D component o f the project, based o n community expressed demand.
12. The project under this component will continue to facilitate implementation o f the Local Government Code (LGC) which designates responsibility for farm-to-market roads to the LGUs. Implementation o f works will move f rom force account to implementation by contract, and will encourage labor- basedequipment supported rehabilitation when economically justif ied as compared to equipment based construction (labor-basedequipment supported works costs shall not be higher by more than 10 percent o f equipment based costs). Routine maintenance shall be required for al l completed road subprojects, as per agreed standards, otherwise sanctions may be imposed o n the erring LGU (sanctions may include temporary suspension or disqualification o f the LGU from further participation in the project), Subproject planning will continue to adopt the network approach, taking the province as the unit for planning purposes.
13. As indicated in Tables 2 and 3, the project wi l l provide support to an estimated minimum o f 1,950 k m s o f rehabilitated and 200 k m s o f newly constructed farm-to-market roads, together with about 1,000 linear meters o f single lane small-scale bridges. Upper unit cost limits are indicated. For roads, the project will continue to promote the least-cost approach (priority given to basic access as against speed; following o f existing grade lines thus minimizing excessive cut and fill) thus ensuring that l imited resources be made available to a greater number o f beneficiaries. Learning f rom M R D P 1 however, more attention shall be given to adequate drainage and better slope protection.
14. Selection criteria, All subprojects to be considered for financing under MRDP1 (including the proposed year 1 subprojects) need to satisfy the following criteria: a. Rural roads must link to an existing a l l weather road; b. They must be a vital link to key agricultural production areas o f the municipality as shown in the
LGUs’ Comprehensive Land Use Plans (CLUPs) and prioritized under the approved local development plans;
c. Road must have sufficient traffic, minimum o f 50 vehicles per day (may convert pedestrians to passenger carrying units);
d. Must have minimum Economic Rate o f Return (ERR) o f 15% (NEDA requirement); e. Unit cost must not exceed the fol lowing amounts:
(i) (ii) (iii)
Farm-to-market road rehabilitation: PhPl.8 mi l l ion (US$34,615) per km Farm-to-market road construction: PhP2.5 mi l l ion (US$48,077) per km Single-lane concrete bridge (RCDG): PhP200,OOO (US$3,846) per linear meter
15. Environmental Impact and Land Acquisition and Resettlement. All road rehabilitation subprojects will fo l low current alignments thus minimizing potential environmental impacts and land
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acquisition. N e w opening o f roads shall comply with project guidelines o n environmental and social safeguards in accordance with the Bank’s OP/BP 4.01, OP/BP 4.10, and OP/BP 4.12. Appropriate guidelines covering the three phases o f subproject development, namely - site selection, design and implementation, will be included in the Operations Manual o f the project.
16. Implementation arrangements. The specific arrangements are given in the operations manual.
7. Subproject design steps for rural roads Feasibility study (FS) preparation Municipal Planning Development
Officer (MPDO) - (in-house or out- sourced)
Detailed engineering and preparation o f bid documents Municipal Engineer (ME) - (in-house or out-sourced)
Bidding process and award o f contract ME & MPDO Supervision o f contract ME
18. The FS preparation, detailed engineering, bidding and supervision will be done by the LGUs. Where capacity i s limited at the Municipal LGU, they may call o n the assistance o f the Provincial LGU, or on the services o f private professionals/firm the cost o f which will be counted as part o f LGU’s equity. The average size o f a contract i s expected to be about US$125,000, with a 5-month implementation period preferably during the dry season (every January to M a y each year).
19. Operation and Maintenance. The project wi l l continue to emphasize routine maintenance, seeking a commitment to undertake routine maintenance f rom the participating LGUs, with sanctions for non- performance (LGUs not fulfilling this commitment will not be eligible for the fo l lowing year’s program). For any o f the 32 ApL1 LGUs to participate in ApL2, an audit following the O&M audit program undertaken in APL1, shall be conducted by the RPCO and should show an overall passing rate for the LGU in order for it to commence with i t s Year 1 subprojects. The same commitment f rom a l l LGUs in the ensuing years shall be required (i.e. stipulated in the subproject grant agreement; with proof o f approved annual budget for O&M, etc.) and regularly tested through a semi-annual O&M audit, the mechanics o f which are described in the Operations Manual. In order to assist LGUs to comply with this commitment, the project wi l l provide technical assistance to LGUs in routine maintenance and promote adoption o f schemes such as the “length-man” system.
20. Monitoring and Evaluation (M&E). The fol lowing indicators shall be measured, to be consolidated by the project’s MIS, before the subproject i s started and upon the end o f APL2: traffic count (average daily traffic) o n farm-to-market roads financed under the project, and travel survey over length o f farm-to-market road (km/hr). The PSO and the RPCOs shall conduct semiannual O&M audit program o f a l l completed road subprojects and track LGU’s compliance with O&M standards as set out in the Operations Manual.
Communal Irrigation Systems
2 1. Although there s t i l l remains room to convert potential non-irrigated areas (about 959,000 hectares, see Table 1) in Mindanao into irrigated areas, the number o f existing communal irrigation systems that need rehabilitation (due to a lack o f O&M funds at NIA) remains a priority challenge. MRDP2, will therefore support the rehabilitation o f an estimated 8,300 hectares, comprising community-owned and managed run-of-river communal irrigation systems (CIS), as wel l as, the construction o f a few estimated at 800 hectares, new communal irrigation projects (CIP). Rehabilitation o f existing communal irrigation systems as well as new communal irrigation projects to be funded shall not
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exceed more than 1,000 hectares in service area. The new systems are based o n gravity-type systems that do not rely on electrical equipment such as pumps, etc. to deliver the water to the field.
22. As i s the case for rural roads, the Government i s designating responsibilities to the LGUs in fully taking over the implementation, operation and maintenance o f communal irrigation as stipulated under the L G C o f 1991. T h i s represents a major shift f rom APLl wherein NIA implemented a l l communal irrigation subprojects. Under MRDP2, LGUs shall lead the implementation. The challenges to this new arrangement are daunting, considering the fol lowing three factors: high capital investment required; l o w political value due to l o w number o f beneficiaries when compared to other types o f rural infrastructure; and weak technical capability in irrigation systems by LGUs.
23. The project i s addressing these challenges by: (a) encouraging municipal LGUs to implement communal irrigation subprojects at a manageable scale o f only 50 to 100 hectares per subproject, larger ones may be implemented by Provincial LGUs; (b) promoting the more affordable 70-30 cost sharing offered by NEDA- ICC which i s conditioned on fulf i l lment o f governance reforms, (c) securing participation by Irrigators Association (IA) in putting up at least ha l f o f the LGU’s 30% equity (mechanics are described in detail in the Operations Manual), and (d) enlisting technical assistance from NIA or former NIA experts on FSDE preparation, construction supervision and institutional development.
24. Selection criteria. The selection criteria for this subcomponent are outlined in the Operations Manual and are the same as those indicated in the P A D o f MRDP1.
25, Subproject design features for communal irrigation systems. After pre-appraisal o f proposed irrigation subprojects by the DA-RFU, the LGU shall proceed to prepare a feasibility study according to standards and guidelines currently used by the NIA-PIO. In the event that the LGU i s not yet capable, i t may opt to contract the NIA-PI0 to undertake FS preparation, or hire a team o f engineers who are qualified to do the same.
26. Implementation arrangements. Overall coordination o f the irrigation subcomponent shall be the responsibility o f the Program Support Office (PSO) at the Mindanao-wide level, and the DA-RFU at the regional level. Overall management at the LGU level shall be the responsibility o f the Provincial and Municipal Program Coordinators. The LGU shall be primarily responsible for the implementation o f i t s irrigation subprojects. The LGU will have at i t s option: (a) to bid out the c i v i l works to private contractors; or (b) to negotiate with N I A - P I 0 through a Memorandum o f Understanding (MOU) for NIA to implement the c iv i l works. In the case o f private contractors, procurement shall fo l low agreed guidelines for the project. Arrangements for the second option for the LGU to work with NIA are described in detail in the Operation Manual.
27. Operation and maintenance. Operation and maintenance o f communal irrigation facilities shall be mainly the responsibility o f the Irrigators Associations (IAs). Institutional development activities pr ior to and immediately during the init ial year after subproject turnover shall focus o n enabling the IA to be adequately trained in the day-to-day operational activities and to be financially self sustaining through efficient collection o f irrigation user fees for the system’s maintenance requirements. Communal irrigation systems (CIS) currently under the supervision o f the NIA, even i f rehabilitated under APL2, shall continue to be monitored and assisted for O&M by the NIA-PIO. On the other hand, new schemes constructed by the LGUs shall be monitored and assisted by the MAOPAO. I A s that have existing repayment obligations to the NIA shall continue to pay their amortization to the NIA. However, the cost o f rehabilitation shall not be added to their obligation.
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28. Monitoring and evaluation. Under the project, institutional strengthening i s envisaged in the LGU, to carry out the function o f monitoring and evaluation o f O&M by IAs and providing assistance for I A in carrying out remedial actions to improve O&M, whenever deficient. The MAOPAO shall be tasked to collect data o n the crops grown and yields in each cropping season.
Rural Water Supply
29. Mindanao-wide consultations conducted during project preparation confirmed that water supply remains as a priority need among the rural poor. Under the project, rehabilitation and construction o f level 2 (communal faucets) water systems shall be supported. Level 1 (point source) water systems, which are generally much smaller in scale, shall be implemented under the CFAD component.
30. Implementation arrangements and selection criteria: The specific arrangements and selection criteria are given in the operations manual.
3 1. Operation and maintenance: The formation and training o f a RuraVBarangay Waterworks and Sanitation Association (RWSAdBAWASAs) in O&M shall be a pre-condition for subproject approval. Implementation shall be by Municipal LGU through contract, with community labor input, as i s currently the case for most rural water supply subprojects. More specific criteria for the identification and selection o f water supply subprojects are described in the Operations Manual.
32. Monitoring and evaluation. The following indicators shall be measured, to be consolidated by the project’s MIS, before the subproject i s started and upon the end o f APL2: Number o f potable water supply systems constructed including the number o f households served; percentage reduction in time to fetch water over baseline at the end o f the project; and percentage reduction in the number of households in subproject areas reporting reduced incidence o f water-borne diseases by the end o f the project.
Other Rural Infrastructure
33. Description of subcomponent. In addition to the types o f subprojects supported under the previous phase, other types were identified which are distinct to some localities not previously included under MRDP1, These other infrastructure would need to be o f public good nature, with clear provisions for accountabilities for O&M. The following are grouped together under this subcomponent: pedestrian hanging bridges, timber ports with pier head, rock causeways, multi-purpose centers, warehouse with solar drying pavements, and other agriculture and fisheries related infrastructure. Technical selection criteria for each o f these subproject types are described in detail in the Operations Manual. The Municipal LGU shall s t i l l be responsible in the implementation o f these subprojects in close collaboration with appropriate organized groups (e.g. farmers association, Barangay LGU, etc.) which shall be tasked with O&M upon subproject completion and turnover.
34. Mechanism for the Performance-Based Grants Scheme. The mechanism and guidelines for availing o f an additional grant for rural infrastructure subprojects, based on the successful achievement o f revenue generation targets by participating LGUs, i s presented in Attachment 1 to this Annex 4.
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Component 3: Community Fund for Agriculture Development (CFAD) - (US$30 million total cost)
35. The MRDP1 Implementation Completion Report (No. 32660-PH dated June 29,2005) stated very clearly that along with the IGR component, the CFAD was: . the “main driver for institutional development, sk i l ls transfer and capability-building under
MRDP 1 ”; Approximately 1,5 83 income-generating and productivity-enhancing subprojects benefited at least 37,000 households while community-based small infrastructure subprojects served around 16,000 individuals; and that allowing poor communities, vulnerable women and IPS to access opportunities for planning and decision-making established a sense o f ownership, generated high levels o f participation in subproject activities, and empowered beneficiaries to pursue other development priorities within their communities.”
36. Component Description: Similarly under MRDP1, C F A D will continue to serve as the mechanism through which MRDP shall make available funds to strengthen decision-making capacities at the community level for the identification, design and implementation o f local priorities. With the DA and the LGUs providing technical advice and other support services, C F A D will provide disadvantaged and vulnerable sectors in Mindanao “graduated” opportunities for increased income f rom agriculture and fishery production, including allied value-adding activities that make use o f appropriate and sustainable technologies which are socially and culturally acceptable by the target groups. I t will ensure their meaningful participation in decision making over the entire project cycle. Ultimately, i t aims to make communities capable o f generating savings for their o w n community development, and managing other investments basic to their areas’ continued growth. In the process o f relating closely with the LGUs and other stakeholders for agricultural development, beneficiaries and POs are envisioned to become active partners o f the LGUs and the private sector in pursuing development within their municipalities/provinces.
37. Key Principles. CFAD activities shall be guided by the same principles used throughout a l l the MRDP components:
w Transparency- degree to which the general public has access to timely, relevant, accurate, understandable and complete information about C F A D operations; Accountability - extent to which CFAD key stakeholders can be held responsible (rewarded or
penalized) for their decisions or actions (or lack thereof) based on an objective assessment o f performance in terms o f set standards; Participation - degree to which stakeholders are effectively and meaningfully able to take part in processes that lead to key actions/decisions being made; and Good Governance- consistent application by the beneficiaries o f widely-accepted best practices that lead to the effective performance o f mandated functions.
.
38. Subcomponents. (a) food security interventions for very vulnerable groups; (b) community- managed livelihood and agribusiness activities, (c) sustainable income-generating activities for NRM- covered municipalities; and (d) small support infrastructure. Social acceptability and sustainability (which includes environment-friendly characteristics) shall be considered key considerations for the identification o f subprojects. Access to higher levels o f CFAD assistance shall be dependent o n the analysis o f existing competencies o f beneficiaries to manage proposed subprojects. Indicators and readiness filters are reflected in the CFAD Operations Manual, and possible types o f interventions are included in the “Ladderized Menu” o f subprojects.
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39. For small rural infrastructure benefiting the general community, a ceiling o f PhP 500,000 has been agreed upon as the maximum amount o f infrastructure that can be implemented and managed directly by the CFAD beneficiaries. Beyond this amount, the subproject wil l be managed by the LGU concerned. However, for water supply and sanitation subprojects, technical and administrative supervision o f such types o f subprojects will be an accountability o f the LGUs, while the organization and mobilization o f potential water users to participate actively in the design, implementation and operations and maintenance o f the facilities will be the responsibilities o f the C F A D Beneficiaries.
40. To ensure success, CFAD will utilize the fo l lowing strategies:
Targeting o f beneficiaries will be purposive and indicators are la id out in the CFAD Operations Manual to guide Implementing Units. As discussed with key stakeholders during preparation, beneficiaries o f MRDP2 will now cover, aside f i o m the vulnerable groups (Indigenous Peoples, Women, Out-of-School Youth and other marginalized sectors), functional Peoples Organizations comprising poor households, which need investments for expanding a community-managed livelihood subprojects which are evaluated to be potentially a good business for the target areas; Interventions will be identified and designed based o n the needs and competencies o f targeted beneficiaries, to create the most impact for the least cost; Expertise o f the DA, LGU, Academic Institutions, NGOs and the private sector shall be tapped to provide beneficiaries with the necessary advise and services to develop the beneficiaries’ capabilities for managing sustainable interventions; Information, education and communication materials shall be developed and distributed to CFAD stakeholders to maximize use o f information for development and expansion o f CFAD activities; Appropriate training will be provided to improve LGU capabilities to identify, mobilize, organize and develop beneficiaries’ capabilities for organization and management o f their respective CFAD subprojects; Training for the beneficiaries will utilize experiential learning methodologies such as structured cross-visits to model sites, farmers’ f ield schools and demonstration sites to showcase innovative and appropriate technologies being promoted to facilitate beneficiary learning; All subprojects will be community-driven in character. Max imum participation o f beneficiaries in the decision-making processes for the entire subproject cycle will be required to develop capabilities o f beneficiaries for self-governance. As an improvement o f the M R D P 1 C F A D processes, procurement and financial management processes are now key features o f the M R D P 2 CFAD operations manual; and finally, Savings mobilization will strongly be encouraged to generate funds for the continued expansion and institutionalization o f CFAD activities and processes way beyond the Program life.
4 1. Institutional Arrangements for Implementation. Institutional arrangements emphasize the use o f permanent structures within Government to ensure that the gains and benefits o f CFAD implementation wi l l be mainstreamed and institutionalized in their regular operations. N e w municipalities wi l l set up the same implementing structures for CFAD. Multi-Sectoral Committees which proved to be very effective in rationalizing and depoliticizing decisions over MRDP and C F A D Beneficiary subprojects wi l l s t i l l be created in al l LGUs qualified to participate in C F A D implementation. The composition o f the M S C shall be maintained, with Peoples Organizations, the Private Sector and C iv i l Society comprising more than hal f o f the Committee members. Again, the Municipal Agriculturist, the Municipal Planning and Development Coordinator, the Chairpersons o f the Municipal Development Councils for Agriculture and Infrastructure will represent, among others, the government sector.
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42. Municipal and Barangay (the lowest geo-political unit o f governance o f the country). Facilitators will be selected using criteria stipulated in the Operations Manual, and provided the appropriate training through the Program’s Institutional Strengthening component, to enable them to acquire or enhance their knowledge o f participatory processes, organizing, mobil izing and developing P O capabilities for subproject management.
43. DA Regional and other support offices, together with their Provincial counterparts, shall organize themselves to respond to the technical assistance requirements o f the C F A D beneficiaries, starting f rom the identification o f appropriate interventions, designing them, implementing and managing them, up to sustaining the init ial beneficiary gains f rom the subprojects. In addition, supportive monitoring wi l l be done by the relevant LGU and DA organizational units, to ensure that expected benefits f rom the CFAD implementation are fully realized.
44. Cost-Sharing. MRDP2 shall maintain the original cost-sharing scheme for CFAD, with 80% o f the Fund coming f rom the GOP (60% from the Loan Proceeds, and another 20% representing the DA- GOP budget), while the remaining 20% drawn f rom the participating LGU. As illustrated in the C F A D Operations Manual, the Community Fund for Agricultural Development will have the fol lowing pattern per year, per municipality:
LGU Equity PhP 500,000.00 (20%) GOP (DA) Matching Fund 500,000.00 (20%) Loan Proceeds 1,500.000.00 (60%)
TOTAL PhP 2,500,000.00 (about US$48,000)
45. Beneficiary Equity. For income-generating and livelihood expansion subprojects, CFAD Beneficiaries shall be required to generate equity o f 25 % o f the total subproject cost. For small support infi-astructure subprojects, the CFAD Beneficiaries equity will be equivalent to 10 % o f the total subproject cost, which can either be in the form o f cash or in-kind.
46. In conflict-affected areas o f Mindanao where LGUs have neither the number o f municipal staff to do community organization and development work nor any experience implementing community-driven development projects, a Service Provider may be selected by the Program Support Office, to manage and disburse the C F A D account. Selection o f the Service Provider, which will enter into a Program Contract with the Municipal Local Chief Executive, will be done in collaboration with the concerned Multi-Sectoral Committee. Approval o f disbursements will, however, remain with the municipal Multi-Sectoral Committee.
Monitoring and Evaluation of CFAD Implementation Processes and Outputs
47. The Monitoring and Evaluation Manual o f Operations for MRDP2 include provisions for the monitoring and evaluation o f CFAD outputs and outcomes. Baseline data will be included as part o f the init ial LGU implementation requirements and beneficiary baseline information will be included in the beneficiaries’ subproject proposals. An improvement over the MRDP 1 monitoring and evaluation system i s the creation and subsequent training for community-based monitoring and evaluation committees. This will help ensure that problems in implementation are immediately captured and processed, to enable CFAD implementation to proceed with minimum deviation and achieve desired results. If these committees perform wel l according to Program expectations, they can be institutionalized to become part o f the governance structure o f the LGUs later on.
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Component 4: Natural Resources Management (US%5.4 million)
48. In Mindanao, as in the remainder o f the country, a large proportion o f the population depends o n the natural resource base for i t s livelihood. However, a range o f socio-economic factors, together with institutional and pol icy failures, are causing serious environmental degradation. The major environmental problems affecting coastal resources and habitats include: pollution and siltation o f coastal waters and estuaries; depletion o f l ive corals, sea grasses and mangroves; improper use o f foreshore lands, wetlands and estuarine areas; and depletion o f fish stocks. In the upland areas o f Mindanao, land degradation i s driven by legal and illegal logging, swidden agriculture (in turn driven by l imited access to resources by a growing population), poor soil management and improper use o f agrochemicals. A combination o f poor upland and coastal resource management i s degrading critical ecosystems that contain biodiversity o f global significance (e.g., sea turtles, dugong, rare corals, etc.). Inadequate upland management causes erosion that reduces the ferti l i ty and increases soil loss raising agricultural production costs; concurrently degrading downstream marine ecosystems (e.g., habitats such as coral reefs and sea grass beds). However, the linkages between upland and coastal systems and the need for sustainable management o f both are not wel l understood and integrated ecosystem management i s not practiced. T h i s situation, combined with related pol icy failures, i s degrading the natural ecosystems o n which many local communities depend and seriously threatening much o f Mindanao’s significant coastal and marine biodiversity.
49. Lessons learned f rom the GEF-assisted Coastal and Marine Biodiversity Conservation Project (CMBC), a component under the M R D P 1 demonstrated that sustainable, integrated management o f upland and coastal ecosystems can simultaneously raise community well-being and help to conserve marine and coastal biodiversity. It also illustrated that the direct engagement o f concerned communities in the formulation o f policies, design and implementation o f ecosystem management plans i s critical for the sustainability o f improved management practices. Further, i t showed that complementary action on an institutional level i s much needed to ensure that government systems and procedures support community marine resource management. These lessons are al l reflected in this component, and there will be continued effort to support C M B C l sites, specifically on: (a) institutional strengthening; (b) resource monitoring o f marine protected areas; and (c) subproject monitoring.
50. Component Objective. The objective o f the component will be to conserve coastal resources and marine biodiversity through co-management o f critical marine habitats, better resource management practices and the introduction o f improved, upstream land management practices that would arrest land degradation, enhance the integrity o f important ecosystems and benefit landholders who are mostly poor farmers, fisherfolk, andor indigenous people. The project will further remove the barriers to mainstreaming marine and coastal biodiversity conservation by: (a) establishing local community-based natural resource management mechanisms; (b) strengthening local capacity to address marine ecosystem and land use management issues; (c) enhancing the knowledge base for sound ecosystem management and decision- making, including monitoring and evaluation for sustainable long-term marine ecosystem management; (d) identifying key upstream land management malpractices and introducing and adopting better land use methods through the participatory involvement o f communities and households; and (e) developing and implementing institutional and community action plans and local policies for marine biodiversity conservation and sustainable land management and mainstreaming them into coastal development and land use plans, respectively. The concept i s based o n the precept and the experiences that show that integrated upland and marine management can simultaneously conserve and protect biodiversity and increase fisheries productivity as wel l as improve the economic efficiency and productivity o f land use practices.
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5 1. Outputs. The main outputs o f the component will be:
(a) Establishment and co-management o f marine sanctuaries and/or protected areas between communities, local government and national agencies with direct linkages to improving upland land management practices critical to protecting biodiversity through cooperative arrangements, between and among local communities, national and local government agencies and academic institutions.
reforestation initiatives l ike tree plantation establishment that can benefit land users as wel l as downstream users, especially fisherfolk, through controlling erosion, improving the ferti l i ty o f land and limiting the release o f agrochemicals (pesticides and chemical fertilizers) into coastal areas where critical marine habitats exist.
(c) Establishment o f streambank stabilization measures that minimize soil erosion that drains to coastal areas. Reduction o f streambank erosion can be done in several ways; vegetative measures, bio-engineering means, structural reinforcement, and combination o f any o f the cited measures.
increase awareness o f stakeholders on the direct linkages between upland management and downstream impacts to coastal ecosystems; mainstreamed into municipal policies and development plans, thereby reducing barriers to improved environmental management in a comprehensive manner that wil l foster synergies between sustainable land and coastal waters management.
(b) Introduction and demonstration o f sustainable land management practices l ike ago-forestry and
(d) Development o f appropriate knowledge management systems that o n a large-scale basis
52. Selection Criteria and Priority Sites for NRM. There are about 206 coastal municipalities in Mindanao, most o f which have been identified as requiring immediate coastal and marine resource management intervention. Around 180 o f these municipalities are located in zones identified as key conservation priority areas by the Philippine Biodiversity and Conservation Priority-Setting Program (Year 2000), al l o f which have global significance. Project site selection followed the criteria for MRDP2 to wit; (a) poverty level; (b) significance o f agriculture and/or fisheries to total local economy; (c) existence o f a BDP; (d) existence o f LGU NRM initiatives; (e) geography (must showcase interdependence o f upland and coastal areas and influence on apcu l tu re and fisheries productivity, including presence o f environmentally critical or sensitive areas & activities); and (0 presence o f similar projects. Preference i s given to those that are not recipients o f similar government or non-government programs. A total o f 25 municipalities will be selected out o f the total number o f municipalities participating under MRDP2.
53. Subcomponents. To achieve these results in selected new project areas, as wel l as some continued support to the two areas under CMBCl, the fol lowing subcomponents would be inter-phased with those o f other project components:
a. NRM Participatory Community Planning and Development: The main objective o f this subcomponent i s to foster NRM planning and mainstream this at the local development processes. I t also aims to provide a comprehensive and rational basis for sustainable use o f natural resources and proactive measures fkom the local community in favor o f protecting and conserving the local environment and remaining natural resources. Local communities are engaged through participatory resource and social assessment surveys with the assistance fkom a capacitated PSO and technical specialists assigned by the Project, as wel l as cooperating institutions l i ke DA (WUs, BFAR, and BSWM), DENR, academe, NGOs, etc. Baseline information wil l be generated at project onset to be used as reference points in achieving key targets. Results o f the participatory resource and social assessment will be utilized as bases for appropriate multi- stakeholder environmental action planning that either formulates new or enhances existing
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management plans. All information generated fkom the resource and social assessment and monitoring and evaluation activities will be managed by the stakeholders to modify practices to achieve optimal management o f the resources. By and large, the project will provide institutional support and targeted technical assistance to the DA, LGU and community implementersibene ficiaries.
b. Selective on-the-Ground Investments on Coastal/Marine and SLM Management Practices: Natural resources management investments to be eligible for MRDP-APL2 funding should be included in the barangay development plans (BDPs), and consequently in the comprehensive land use plans (CLUPs) at the municipal levels. On-the-ground investments involve infusing funds, effort, time and other resources to ensure appropriate balance between economic development and resource conservation and protection. Marine sanctuaries will be established and managed to conserve biodiversity whi le simultaneously improving land management practices in upland areas. Proper management o f critical marine habitats has direct benefit to coastal fishing communities as it effects upon fish population. On the other hand, interventions in sustainable land management may decrease water turbidity caused by siltation and sedimentation in coastal areas. This subcomponent has two major areas pipelined for possible on-the-ground investments that build upon results o f the first subcomponent; (i) marine and coastal interventions and (ii) sustainable land management interventions. Marine and coastal investments intend to establish and co-manage marine sanctuaries and/or protected areas between communities, local government and national agencies through the establishment o f marine protected areas and reforestatiordrehabilitation o f mangrove areas or reversion o f abandoned fishponds into mangrove areas by affected communities. There are three potential investment areas under sustainable land management; (i) establishment o f sustainable hilly land farming practices through agroforestry; (ii) rehabilitation o f degraded lands through reforestation, specifically establishment o f forest plantations; and (iii) establishment o f soil erosion measures directly affecting river systems that may include structural measures, vegetative, bio-engineering designs, and/or combination o f a l l three types. A possible option may be o n waste management, depending upon results o f subcomponent 1 assessments.
c. Assistance to the Development of Sustainable Income Generating Activities: Inasmuch as upfront support to community l ivelihood initiatives will be under the aegis o f CFAD, this subcomponent on sustainable income generating activities (SIGA) will provide technical assistance to communities to improve their capacity and capability to implement and sustain their alternative income generating activities. Site-suitable SIGA subprojects will be matched with communities based on results o f resource assessment as wel l as socially acceptable and capable NGO-PO partners and wil l build capacities and legitimize identified NGOs-POs. I t will improve on init ially prepared pre-FS grade SIGAs and train POs and communities to undertake activities by way o f l ivelihood resource assessment, SIGA identification and screening, financial feasibility assessment, final SIGA selection, fund mobilization, implementation strategies and sustainability plan, repayment, capital build-up and reinvestment, and the formulation o f responsible benefit sharing system. Once these systems are in place, and mature livelihoods projects are evident, further training will be conducted in support o f enterprise development. Said trainings may include savings/resource mobilization, product market/subsector analysis, enterprise feasibility analysis, business planning, basic accounting, financial management, and the like. The project will support the provision o f community development specialists/extension workers to undertake the needed capacity building activities o f communities and people's organizations.
d. Local Policy Development and Strengthened Partnerships in Community Enforcement: The fourth subcomponent intends to build and strengthen local partnerships among stakeholders as regards local pol icy development, advocacy, and enforcement o f NRM regulations. It i s
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envisaged that at the end o f the project cycle, community-based natural resource management plans, programs, projects, and policies linking marine ecosystems and S L M schemas are mainstreamed across various levels o f development initiatives and land use plans o f a l l target sites. The institutionalization o f Municipal Environment and Natural Resource Offices (MENROs) or enhancing the capabilities o f existing and appropriate local organic offices and staff within Project areas will be supported under this subcomponent. With stronger partnerships between communities and LGUs and national agencies o n enforcement and curbing i l legal fishing, there i s greater potential to stop i l legal extraction practices and exploitation in the no-take zones. The coordination o f the provision o f SIGA and strengthened community participation in enforcement, hopes to see less households engaged in destructive farming methods. Activities under this subcomponent may comprise the following: (i) establish venues for national and local pol icy consultations within the LGUs, (ii) create local partnerships or advocacy groups for NRM regulations enforcement, and (iii) advocate for integration and adoption o f NRM plans in LGU pol icy planning process. As such, this component will entail the conduct o f policy assessment/studies and consultations, as wel l as discussions o n national and local NRM pol icy issues. It will likewise advocate for the incorporation o f coastal and marine conservation and S L M into local development plans as wel l as the identification and enactment o f key municipal/provincial ordinances/regulations related to l aw enforcement. Partnerships may be established by way o f forging alliances with relevant national/regional agencies as regards l aw enforcement initiatives that provide support for the active participation o f existing institutions like FARMCs, Bantay Dagat/Gubat, community volunteers in surveillance and enforcement activities. Through this subcomponent, the project seeks to support LGUs in either establishing their respective MENRO positions or improving the capacities o f their organic offices to perform NRM. This will enable the LGUs to better facilitate municipal NRM and environmental planning and implementation, pol icy formulation and regulation, actualizing institutional linkages/partnerships, coordinating environmental activities between line agencies, and resource generation efforts. Through alliance building and networking, i t also aims to facilitate exchange o f assistance and ideas on NRM issues and develop local leadership in NRM advocacy.
e. Development and Conduct of NRM-Oriented Knowledge Management Program. The major objective o f this subcomponent is, through an appropriate and viable knowledge management program, to elevate the consciousness o f a l l sectors o f society at the local as well as regional and national levels with respect to environmental awareness, biodiversity conservation and the integrated management o f coastal and upland ecosystems. More specifically this subcomponent aims to instill in the public's mind the understanding on the significance o f linking CMBC and S L M by way of: (i) developing training modules on environmental awareness; (ii) training DEWBFAR officers, LGU/NGO/PO staff, and schoolteachers as eventual trainers in sustainable marine, fisheries and improved land management; and (iii) formulating, implementing and disseminating IEC programs and materials for continuous environmental public awareness and facilitating behavioral changes supportive o f sustainable resource management and utilization. As per specific objectives, training modules on CMBC, S L M and an integrated module linking both C M B C and S L M will be formulated and packaged, trainings will be conducted for DENR, DA-BFAR, DA-BSWM, and DA-RFU staff, LGUs, NGOs, POs, and schoolteachers as possible trainers in sustainable marine, fisheries and improved land management. A detailed IEC plan will be made, operationalized and sustained by trained participants in the previous subcomponent. Increase in public awareness and community participation in protection and monitoring o f endangered species and observed upland ecosystem management i s expected after 5 years o f project implementation.
54. Implementation Arrangements. The overall coordination o f the implementation o f the NRM component, including the potential GEF-assisted activities, will be led by the DA. The DA will
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ensure the proper coordination and adequate provision o f implementation o f technical support to participating LGUs and communities in implementing the various components o f MRDP2, through relevant national and regional offices such as the DENR and i t s related agencies, as wel l as through i t s o w n agencies such as the Bureau o f Fisheries and Aquatic Resources (BFAR), DA Regional Field Offices, Bureau o f Soils and Water Management (BSWM), etc.
SUBCOMPONENT
SUBCOMPONENT 1 : NRM Participatory Community Planning and Development
55 . The envisaged result would be to strengthen the capacities o f LGUs and local communities to design, implement, monitor and sustain their NRM initiatives. This will be ensured through the technical support f rom national agencies (such as the DENR and the DA) through co-management arrangements and institutionalizing comprehensive natural resources planning. Necessary tenure security instruments will be provided to ensure sustained ownership and accountability o f communities and LGUs over their NRM efforts. Technical assistance will be provided by partner agencies and preference i s for those organic to the participating institutions. Consultants may be individually hired should the expertise not be available for secondment f rom the participating institutions. Table 4 below indicates the types o f activities to be pursued per subcomponent:
ACTIVITY
(i) Technical review o f existing municipal and barangay LGU plans (ii) Training in, and conduct of, participatory resource assessment (iii) Formulatiodenhancement o f municipal and barangay development plans through participatory processes
SUBCOMPONENT 2: Selective on- I the-Ground Investments on
(iv) Conduct o f participatory NRM action planning workshous I (vi) Integration o f barangay development plans into municipal development plans or comprehensive land use plans (i) Detailed Site Assessment (PRA, Community Resource M a t m i n d
(v) Formulatiodenhancement o f barangay land use/development plans
CoastaVMarine and SLM Management Practices
. . -I
(ii) Identification, matching and adoption o f appropriate CMBC and S L M modules (iii) Conduct o f PO-based organizational diagnosis and training needs assessment for POs and LGUs (iv) Community organizing (PO formation and registration) and P O strengthening (v) Providing assistance on appropriate tenurial instruments (vi) Formulation o f long term development p lan (vii) Site development
1 Boundary delineation and demarcation Nursery establishment
1 Plantation development Maintenance and protection . Harvesting/utilization
(viii) Improv ing capacities o f beneficiaries and partners (ix) Providing support services on marketing and value-added
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urocessing
SUBCOMPONENT 3: Assistance to the Development o f Sustainable Income Generating Activities
SUBCOMPONENT 4: Local Policy Development and Strengthened Partnerships in Community Enforcement
SUBCOMPONENT 5: Development and Conduct o f NRM-Oriented Knowledge Management Program
(x) Monitoring o f on-site improvement: marine indicator species, condition o f seagrass, mangrove, and corals, rates o f soil erosion and seedling survival rates
(xi) Documentation and popularization o f learnings from pi lot sites (i) Identification o f site-suitable SIGAs and socially acceptable PO Partners
o f Menu o f SIGA Options.
training needs assessment for POs & LGUs
(ii) Improving capacities and legitimization o f SIGA NGO- PO partners
Training and capacity building o f POs and communities to undertake AIG activities
- Based on results o f Resource Assessment, preparation
Conduct o f PO-based organizational diagnosis and
1 Formation o f legitimate PO Partnerships
. Formulation o f resuonsible benefit sharing system 1 Traininglworkshops and capacity building o f
communities with mature livelihood projects in undertaking enterprise development
(i) Conduct o f PO-based organizational diagnosis and training needs assessment for POs and LGUs (ii) Formulation o f municipal level NRM capability-building plans for LGUs and the POs (iii) Assistance to institutionalization o f MENRO (iv) Review and formulation or enhancement o f local policies and instruments for the conservation o f upland and coastahmine resources, including development o f environmental code
(v) Networking for NRM (vi) Formation o f regional, provincial, municipal or ecological zone partnership forums (vii) Formulation and execution o f partnership agreements building on existing structures (i) Conduct o f Social Assessment in order to formulate Change Management Plan (ii) Conduct o f Mindanao-wide training-workshop for the participatory formulation o f framework Information, Education and Communication (IEC) and advocacy plans
(iii) Development o f prototype print, broadcast and multi- media IEC and advocacy materials and guides for non- mediated communication activities
(iv) Conduct o f regional echo training-workshop for the localization (by region) o f the IEC and Advocacy framework (v) Implementation o f the regional IEC and advocacy plans (vi) Documentation and dissemination o f NRM success stories
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Attachment 1 to Annex 4: Mechanism and Guidelines for Performance-Based Grants24
1.
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3.
4.
5.
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7.
8.
PHILIPPINES: Mindanao Rural Development Project - Phase 2
Availment of Performance-Based Grants. This mechanism was developed in response to the request o f the I C C for a transparent process o f providing incentives to Local Government Units instituting significant policy reforms objectives set by the national government, for the meantime that the “performance based grant system for LGUs” i s not yet developed.
Eligible for Infrastructure Projects. All local/devolved development infrastructure projects identified in the 2003 NEDA Board approved NG-LGU cost sharing scheme.
Treatment of Multiple Subprojects from Various NG ProgramsRrojects. If an LGU opts to engage more than one subproject f rom various programs/projects o f NGA involv ing devolved activities; the percentage targets shall be multiplied correspondingly. This i s to properly account the additional grant f rom one project to the other. Meaning, each additional 20% grant has a corresponding reform every time an LGU avails o f NG program(s) covering devolved activities.
Qualification to avail. All LGUs are qualified to avail o f the 20% additional grant for devolved activities f rom various NG programs or projects devolved to LGUs. However, LGUs should be allowed by the proper bodies to enter into a performance contract (this might require Council Resolution) with the implementing agency undertaking the project. The performance contract would contain the baseline data, timeframe and targets o f the LGU. Repeater LGUs availing o f the additional 20% grant can only be accommodated if it satisfactorily complied with the previous per formanc e contract (s) .
Monitoring mechanism. LGU has to monitor i t s performance and request for the evaluation o f i t s accomplishment f rom the agency(ies) who developed the reform targets (in the case o f MRDP2, BLGF with support staff f rom DA) to ins t i l l in them proper monitoring o f their targets and commitments. Otherwise, the LGU will be considered not interested to avail o f the additional 20% grant even if unknowingly they have achieved the reform targets.
Performance i s measured against the targets set in the performance contract as allowed under the Council Resolution. All targets should be met to qualify for the additional 20% grant, the implementing agency and the agency that established the baseline data shall determine whether or not the LGU has successfully met or complied with the agreed targets. As such, details o f evaluation criteria, milestones and processes will be formulated by the concerned agencies implementing the project and pushing for the reforms.
LGUs are encouraged to meet their annual target. Nevertheless, to give some flexibility, the LGU may opt to be evaluated after three years. However, the LGU should be able to meet the cumulative absolute amount o f activities computed from the agreed starting and end dates o f the performance contract .
Budgetary requirement. Budget cover for the Grant will be sourced from the agency’s ceiling. In the event that the reform targets are met, the additional 20% cash grant shall be sourced f rom the loan proceeds. Therefore, i t requires the implementing agencies should include in the project design the
The mechanism and guidelines have been endorsed by the DOF-MDFO to the ICC Secretariat in a letter (see 24
Project Files) dated February 12, 2007 by DOF Undersecretary Roberto Tan.
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provision o f cash grants as an eligible expense item. In addition, a leveraging mechanism should also be included in the project design in case o f a l o w additional grant availment to maximize the use o f the loan proceeds.
5-Year Average Growth Rate of LGU
General issues on providing the menu of reforms for LGUs
Target Growth Rate Indicator
9.
Rate 110% 10% <Rate 1 2 5 % 25% < Rate 150% 50% < Rate
BLGF’s expertise on local finance i s only appropriate to be utilized on the revenue reforms. Reforms for expenditure, governance, environment, planning, etc., should be handled and formulated by government agencies with expert knowledge on these reforms and has readily available baseline data. Policy decision should be made whether the LGUs could select one thematic reform or should the NG package a reform encompassing a l l o f the themes. The problem with the latter i s the implementation and monitoring arrangement and budget concerns.
5% 10% 15% 20%
Agreed Guidelines for LGUs Availing of the Additional 20% Grant under MRDP2
10. Target Growth Rate Indicator for Participant LGUs. The main target indicator that shall be the basis in giving the additional 20% grant to LGUs under MRDP2 i s the growth rate o f locally-sourced revenues on top o f the regular average growth rate (AGR) for the past f ive years. I t i s expected that the participating LGUs would have experienced additional growth in terms o f such local revenues after implementing local fiscal reform. These additional local resources will enable the participant LGU to ensure the sustainability o f i t s MRDP2 subprojects especially in terms o f maintenance costs.
1 1. A flat target rate may be considered as too encompassing especially i f applied across a l l LGUs. This flat rate may be discriminatory against lower class LGUs. At same time, such a flat rate may be too l o w and understated, making it easily achievable to higher class LGUs. I t i s thus suggested that a tiered structure o f AGR be considered in applying a graduated scheme o f target growth rates ranging from 5% to 20%. This i s to take into account the wide variance in the 5-year AGR o f the LGUs in Mindanao. The table below shows the possible target growth rate to be applied to the participating LGU depending on its 5-year AGR and the range where i t f i ts in.
12. Qualification Documents for Participant LGUs. Further to the participation o f the LGUs in the availment o f the additional 20% grant, other documents may have to be submitted aside f rom the usual documents submitted to the implementing agency in relation to MRDP2. Nonetheless, the fo l lowing basic documents may have to be obtained by LGUs in connection with the grant application:
(a) Letter oflntent. This i s a regular qualification document for loan applications duly signed by the local chief executive officially stating the intention o f the local government to both avail o f the MRDP2 and the additional 20% grant funding in relation to implementing local fiscal reforms. This document shall be submitted to the implementing agency, copy furnished to BLGF.
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(b) Local Sanggunian Resolution. Another common qualification document for loan applications stating the support o f the local sanggunian concerned in the intention of the local government to participate both in MRDP2 and the additional 20% grant funding. This will also include the authorization for the local chief executive to enter into a subproject loan agreement, as appropriate, provision o f counterpart equity, appropriation of loans and other necessary requirements.
(c) Certifzcation of Debt-Service Capacity, as appropriate. BLGF regularly issues this certification to al l LGUs applying for loan and other credit facilities including the forthcoming MRDP2. BLGF wil l also forward a copy o f this certification to the implementing agency.
(d) Certifzcation of Five (5)-Year Average Growth Rate (AGR). Owing to i t s existing database o f LGU Statements o f Income and Expenditures (SIE), BLGF in coordination with the participant LGU shall determine the average growth rate (AGR) o f a l l locally-sourced revenues in the last five (5) years. The BLGF will then issue an official certification o f the 5-year AGR o f the LGU that shall be the bases in the determination o f the target growth rate indicator as previously shown in Table 1. In absence o f an SIE record for certain fiscal years, the LGU may submit to BLGF for validation the relevant S I E duly certified by i t s local treasurer. For purposed o f evaluating the fiscal performance o f the participant LGU, BLGF will hmish a copy o f this certification to the implementing agency.
(e) Local Fiscal Reform Action Plan. The participating LGU should show i t s intention and desire to undertake local fiscal reform in relation to the availment o f the additional 20% grant. To concretize this endeavor, the participant LGU shall formulate an action plan o f local fiscal reforms that are proposed to be undertaken as part o f the program in coordination with BLGF and the implementing agency. This action plan shall serve as a guide to participating LGUs in their implementation o f local fiscal reforms during MRDP2 and even in similar initiatives as part o f other development assistance programs. A draft action plan i s shown below, which shall be accomplished by the participating LGU through the assistance o f BLGF and the implementing agency. This action plan may be finalized into a pro-forma document in consultation with the implementing agency to facilitate the approval, implementation and evaluation process o f a l l participant LGUs. I t i s understood that by undertaking these listed strategies in the timeframe o f MRDP2, the LGU would have achieved growth in i t s locally- sourced revenues on top o f i t s average growth rate.
Table 2. Draft Action Plan on Local fiscal Reforms of the LGU Participant
(0 Failure to submit the qualifzcation documents on time shall automatically mean that the participating L G U has waived its privilege to avail of the 20% additional grant on top of the NEDA Board-approved 50% grant under MRDP2. With the l imi ted time frame o f MRDP2, i t i s incumbent upon the participating LGU that the submission o f required documents i s done at the
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soonest possible time considering the volume o f LGU applications and consequent appraisal for this development program.
13. Evaluation of LGU Performance in i ts Local Fiscal Reforms. After a designated period subsequent to the implementation o f the local fiscal reforms, the LGU will have to officially request BLGF and the implementing agency for an appropriate evaluation o f such implemented reforms in relation to i t s target growth rate indicator o n top o f i t s regular annual average growth rate o f locally- sourced revenues. To this end, there will be two documents that will be essential to the evaluation o f the LGU fiscal performance, specifically:
(a) Post-Implementation SIEs Duly Certified by COA Local Ofice. When requesting for an evaluation o f i t s fiscal performance after the implementation period, the participating LGU will have to submit to BLGF i t s SIEs relevant to the evaluation period, duly certified by the C O A Local Office having jurisdiction over the LGU.
(b) CertiJcation of LGU Fiscal Performance. In coordination with the implementing agency and the participating LGU, BLGF wil l issue a certification that the participating LGU has achieved i t s target fiscal performance as a result o f undertaking local fiscal reforms relative to i t s desire to avail o f the additional 20% grant. With the evaluation o f the LGU fiscal performance as the basis, this certification shall be forwarded to the implementing agency, as wel l as to other concerned agencies to facilitate the award o f the additional 20% grant in the event o f LGU compliance in attaining the required target indicators.
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Attachment 2 to Annex 4: Anti-Corruption Plan
PHILIPPINES: Mindanao Rural Development Project - Phase 2
Overview of Anti-Corruption Plan
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A major theme that pervades project design i s improved governance at the local, regional and national levels. Consistent use o f transparent, accountable and participatory governance practices i s necessary to enhance and sustain the socio-economic and institutional improvements that will result f rom project implementation. The same practices also address the threat o f corruption at a l l levels. The anti-corruption policies, mechanisms and activities described below are embedded in to project design. Many o f these were successfully employed under MRDP1, and fine-tuned for replication during the next phase.
The Government o f the Philippines and the Wor ld Bank have both intensified anti-corruption campaigns that will be adopted in the project. Foremost o f these measures i s community-driven development - in an open society such as in the Philippines, the most effective deterrent to corruption i s a well-informed and duly organized citizenry. Anti-corruption programs clearly link corruption to the diminution o f benefits to a target community. Corruption will thrive only to the degree that it will be continually tolerated by the citizenry. MRDP capacity-building seeks to replace the community’s feeling o f helplessness and frustration, to one o f self-respect, self-reliance and self-determination.
Mainstreamed anti-corruption measures under MRDP2 will include (a) transparent financial management systems - controls, public disclosure, and sanctions for wrongdoing; (b) strengthening grassroots access to results o f regular audit reports on the project; and (c) procurement reform that requires, among others, that ordinary citizens be proactively informed about procurement processes, activities and results. In addition and as will be discussed below, some non-traditional measures, such as rewarding good governance, and community monitoring o f infrastructure construction, wil l also be adopted.
Overall responsibility for tracking the implementation and effectiveness o f anti-corruption activities wil l be vested on the Program Support Office (PSO). The PSO will establish reliable channels and mechanisms for communicating relevant information; ensuring confidentiality as appropriate; and overseeing the process for receiving and deciding on information about alleged corrupt practices. Mechanisms will include: (a) subproject billboards announcing the start and end date o f construction, budget and fund sourceh, name o f contractor/s; (b) mass media (especially radio) to broadcast project opportunities and highlights; and (c) indigenous fora such as barangay meetings.
The PSO M&E system will be one key to the anti-corruption plan because o f the range and frequency o f information to be generated. The PSO will be sensitive to seeming anomalies in data and reports that could suggest incipient corruption. The upward f l ow o f information f rom the community wil l be strengthened. The PSO will ensure that a l l legitimate reports/complaints are promptly and appropriately acted upon to encourage sustained public interest and participation. An anti-corruption campaign wil l break down as soon as it i s perceived by the public to be lacking in “political will”.
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Policies to Mitigate Corruption
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8.
9.
Community-Based - The threat o f being exposed by an aggrieved and agitated local community i s perhaps the single most potentially effective deterrent to any thought o f wrongdoing. The foundation o f the MRDP2 anti-corruption plan will therefore be the local communities that will be enabled not only to drive the resource allocation process but to perform a watchdog role in seeing to i t that earmarked resources are indeed used for the intended purpose, and that the benefits expected by the community wil l materialize. Anti-corruption policies and measures will be integrated into community planning and organizing activities particularly under the IGR and C F A D components.
Responsible Fiscalizing - While MRDP2 will employ concrete anti-corruption measures commensurate to the threat o f corruption at various levels, i t will also put in place safeguard mechanisms that will prevent abuse o f such measures. Sources o f abuse may include disgruntled bureaucrats, local polit ical officials, and misinformed NGOs/POs/ordinary citizens - any and al l o f whom can easily generate sufficient “noise” to clog channels for processing reports/complaints, prevent legitimate concerns f rom being addressed in an adequate and timely manner, and even severely disrupt overall project implementation. Complaints/reports will be validated before being coursed through the established procedure.
Combining Incentives and Disincentives - Purely punitive measures alone will not be effective in the fight against corruption, Good performance o f individuals, community groups, and public agencies should also be recognized or rewarded. Incentives and disincentives will be conceived in the context o f local norms o f social behavior. Case studies o f model citizens and local groups may be written for wide dissemination. Under the IGR component, LGUs that adhere to agreed governance reforms wil l be entitled to additional grant (see below) f rom the national government for subprojects under the Rural Infrastructure Component.
Independent Monitoring - The planned external impact studies during start-up, mid-term and end- of-project will include clients’ perception on corruption trends. The results - along with findings from other studies and audits - will be made accessible to community-based groups and to the general public through a variety o f print, audio, video and electronic channels. An inter-agency body composed o f oversight agency representatives wi l l monitor targets in local revenue and financial management, adoption o f e-procurement, and broadening the participation o f other public and non- government stakeholders in LGU planning and budgeting, subproject design and implementation, and community-based monitoring and evaluation.
Component Level Anti-Corruption Measures
10. Component 1 : Investments for Governance Reform and Program Administration. Under this component, incentives to participating LGUs to adopt cross-cutting best practices will be provided. Firstly, local revenue and financial management will balance flexibil i ty needed in the pursuit o f development objectives, with the need for tighter financial controls to reduce corruption. Software, Internet connection and training will be provided for LGUs to automate the current manual form o f the National Government Accounting System (NGAS). Secondly, procurement reform will involve technical assistance and training to provinces, cities and f irst and second class municipalities to adopt e-procurement as provided for under the Procurement Reform Ac t (Republic A c t 9 184). Thirdly, promoting “broad convergence” will draw more effective participation by other government and non- government institutions in local governance.
1 1. Component 2: Rural Infrastructure. Strengthening and capacity-building o f local institutions wil l include WUs, LGUs and community groups (such as irrigators’ associations and water users’
54
associations) that will be tasked to operate and maintain completed subprojects. These groups will also serve as fora for promoting and operationalizing anti-conuption practices that will prevent diminished and unsustainable subproject benefits to the community. Community monitoring and supervision o f the construction or rehabilitation o f infrastructure subprojects i s also an effective way to ensure that the approved design will be followed by the contractor, and that the subproject will be completed as scheduled. Community Monitor ing Groups within the existing and participating local groups will be formed, and would have clear channels for reporting and for triggering required action.
12. Component 3: Community Fund for Agricultural Development. C F A D wil l continue to strengthen the decision-making capabilities o f communities - including disadvantaged and vulnerable sectors - in the design and implementation o f local priorities, with DA and LGU programs and technical assistance better reflecting their needs and priorities. In so doing, local communities will be able to look after their own well-being by ensuring through close day-to-day observation o f governance processes that scarce resources are not misused at any stage o f the subproject cycle; and if misused, properly reported and sanctioned.
13, Component 4: Natural Resources Management: One common corrupt practice related to natural resources management i s for local (and non-local) rent-seeking elites to capture a substantial portion o f benefits f rom marine and forest resources, e.g., in securing forestland or foreshore lease agreements. This will be addressed by the NRM component by (a) establishing or strengthening community-based natural resource management systems; (b) strengthening local capacity to address marine ecosystem and land use management issues; and (c) enhancing the knowledge base for sound ecosystem management and decision-making including monitoring and evaluation for sustainable long-term marine ecosystem management.
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Annex 5: Project Costs
PHILIPPINES: Mindanao Rural Development Project - Phase 2
Local Foreign Total U S $million U S $million U S $million Project Cost By Component andor Activity
1. Investment for Governance Reforms & Program 4.300 0.100 4.400 Administration 2. Rural Infrastructure 83.852 83.852 3. Community Subprojects 2 1 .ooo 9.000 30.000 4. Natural Resource Management 3.800 1.600 5.400
Total Project Costs 112.952 10.700 123.652 Notes: Exchange Rate o f US$ 1 = PhP 52; Front-End Fee has been waived
Loan GOP m . . i oral Project Cost By Component andor Activity Proceeds Counterpart us $million
U S $million U S $million
1. Investment for Governance Reforms & Program 2.600 1.800 4.400 Administration 2. Rural Infrastructure 58.752 25.100 83.852 3. Community Fund for Agricultural Development 18,000 12.000 30.000 4. Natural Resource Management 4.400 1 .ooo 5.400
Total Project Costs 83.752 39.900 123.652 Notes: Exchange Rate o f U S $ 1 = PhP 52; Front-End Fee has been waived
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1.
Annex 6: Implementation Arrangements
PHILIPPINES: Mindanao Rural Development Project - Phase 2
Key Institutional Issues. Based o n the consultations with al l o f the six Mindanao DA-Regional Field Units (RFUs), representative group o f Mindanao Local Government Units (LGUs) and other national and local stakeholders, the following were identified as the main challenges in the delivery o f effective decentralized agricultural services.
(a) Improving coordination between the RFUs and the LGUs. The planning and programming activities o f LGUs and RFUs are not synchronized and plans are not integrated. Attempts have been made to improve the situation using the Strategic Agriculture and Fisheries Development Zone (SAFDZ) concept as the basis for preparing municipal and provincial Agriculture and Fisheries Modernization Plans (AFMPs). However, a number o f obstacles were encountered and in general the expected levels o f integration and synchronization have not materialized.
(b) Coordinating research functions and activities. A review o f on-going research activities at the national and regional levels revealed that the functions o f the various concerned agencies often overlap and are not well coordinated. Moreover, research activities at the regional level are similarly not wel l coordinated. The organizational arrangements are inefficient and confusing; and they are not as responsive as they should be to the real needs o f the LGUs and communities.
(c) Linking research and extension functions and activities. T h e weak link between the DA research community and LGU extension workers i s considered a major constraint in the delivery o f effective extension services. Under the decentralized system the DA established a Regional Integrated Agricultural Research Center (RIARC) in each region, intended to conduct mid-stream and downstream research and disseminate results to the LGU extension services. The level o f interaction between RIARCs and the extension workers has been below expectations. Improving the situation will require considerable work before links between research and extension functions may be considered satisfactory.
(d) Re-orienting research towards the markets. Very few research projects are oriented towards the markets and there i s very l itt le collaboration with the private sector to support such kind o f endeavor. There i s a need to ensure research activities will focus o n market requirements, l ike product quality and post-harvest processing, rather than on increasing production only.
(e) Commercializing research results. The managers o f N A R C S generally acknowledge that while they have developed new technologies that are relevant to farmers, they have not been able to ensure that these technologies are made available and used o n a commercial basis. The Bureau o f Agricultural Research (BAR) has recently introduced a program to speed up the commercialization o f new technologies and this program may serve as the basis for further efforts in this respect.
(0 Strengthening the LGUs ’ capacity to deliver devolved service. More training and mentoring i s s t i l l required to ensure that the extension workers themselves acquire the knowledge, ski l ls and resources to access and make use o f information available at the various research institutions and to work effectively with the local communities.
(g) Strengthening the LGUs ’ capability to generate their own resource. Ultimately, LGUs can only implement an effective extension service if they have sufficient funds. Mos t LGUs in Mindanao
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have extremely limited funds and are almost dependent o n the Internal Revenue Allocation (IRA) and only small amount i s available for development purposes. However, there were a number o f LGUs that have been able to strengthen their local tax base and identified other sources o f income, for example f rom service charges and fees, resulting in significant increases to the resources available
2. Design Considerations. Recognizing the need for more effective transition arrangements towards full decentralization within a fixed timeframe and within sustainable institutional framework, MRDP2 will enhance the partnership established between LGUs as provider o f devolved services and the DA as support agency to the LGUs through the following:
(a) Implementation and refinement o f institutional, financial and community-based planning and
(b) Strengthening and operationalization o f decentralized agricultural service system through the
(c) Addressing community priorities for sustainable rural development and agricultural productivity (d) Institutionalization o f community-based mechanismshystems to conserve or restore coastal and
management systems for supporting rural development
improvement o f capacities o f communities, LGUs and DA
terrestrial ecosystems
3. Forms of Intervention. T h e Program has been developed to constitute four distinct components which are a l l interconnected and interdependent with each other:
(a) Investments for Governance Reforms. This component will strengthen the capacities o f the institutions involved in the delivery o f decentralized services, integrate the planning process at the community level, institute governance reforms to increase locally-generated revenue, and improve fund utilization and coordinate the activities at the program level.
(b) Rural infrastructure (M)). The RI component will make investment funds available for local communities to build or rehabilitate local roads, irrigation systems and potable water supply systems, and other critical agriculture and fisheries related support infrastructure. These interventions will be supported by the beneficiaries’ capacity building program focused only o n the operations and maintenance for a l l the infrastructure and institutional development for Irrigators Associations.
component wi l l involve direct participation f rom the communities and will include subprojects such as food security interventions, community-managed livelihood and agribusiness activities, alternative income-generating enterprises, and small infrastructure.
(d) Natural Resource Management (N..). T h i s component wil l institutionalize community-based mechanismshystems to conserve and restore coastal and terrestrial ecosystems in Mindanao. I t will be supported by capability building o f DA-RFUs, participating LGUs and target communities on planning, subproject implementation and monitoring.
(c) Provision of Community Fund for Agricultural Development (CFAD) subprojects. This
4. Institutional and Implementation Mechanisms, Strategies and Approaches. MRDP2 will be implemented over 5 years across 27 provinces and 225 municipalities. The selection o f municipalities will be carried out using the agreed pre-condition which i s the commitment o f LGUs to participate by providing the equity for RI subprojects and other counterpart funds for other components. T o further trim down the number o f municipalities, selection criteria was also established and this includes poverty incidence, agricultural potential, absence o f foreign-assisted projects (FAPs) and availability o f development plans. APL1 LGUs that did not perform according to standards set under the Program are automatically disqualified.
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5.
6.
7.
8.
9.
Institutional arrangements emphasize the use o f permanent and existing structures within the government MRDP2 completely abides by this principle. DA will be the executing agency and will provide the overall management and supervision o f the Program. The MRDP Program Advisory Board (PAB) will provide the overall direction and oversight on the implementation o f MRDP2. With the geographic expansion o f the program under this second phase, the reconstituted P A B will have an expanded membership, and a new Executive Order, superseding the existing one (EO 474 signed by the President o f the Philippines in April 1998) will be issued on or beforeDecember 3 1, 200725.
The DA’s Special Project Coordination and Management Assistance Divis ion (SPCMAD), owing to i t s inherent function o f coordinating and providing assistance to DA’s foreign-assisted projects, will act as secretariat to the PAB. The regional counterpart o f the P A B will be the Regional Program Advisory Boards (RPABs) 26, already existing and operational in al l o f the Mindanao regions and presently functioning as the regional oversight o f the DFIMDP*’. The R P A B s ’ functions will be expanded to cover MRDP2. I t shall provide regional perspective for the prioritization and approval o f subprojects for funding under the Program.
Overall program support to coordination by the DA’s RFUs and the LGUs’ implementation under MRDP2 will be handled by a Program Support Office or the PSO (this was the Program Coordination Office or the PCO during MRDPl). The PCO’s main function will be re-focused f rom overall coordination to supporting overall program implementation. It i s acknowledged that the PSO i s a temporary and program-specific structure and the need to mainstream the program coordinating functions to regular u n i t s o f the DA i s critical28. To sustain the efforts done under the Program, the PSO, in the transition during MRDP2, will build capacities o f the DA RFUs o n program coordination, management and oversight o f project activities being implemented at the local levels by the LGUs and the communities.
For the DA RFUs to fulfill i t s coordination roles and responsibilities, i t will create the Regional Program Coordination Office (RPCO) using i t s existing regular and permanent staff. The six (6) RPCOs (of the 5 DA RFUs in Mindanao and the ARMM’s Department o f Agriculture and Fisheries) wil l be fully involved in project coordination and management for the various components o f MRDP2. Related to this, the DA Secretary has issued a Special Order (NO. 590, Series o f 2006, dated September 20,2006) on the constitution and roles and responsibilities o f the PSO and the RPCOS.
In general, MRDP2 will adhere to the valuable approaches applied in MRDPI . The learning-by- doing approach i s most appropriate when implementing a multi-faceted project l ike MRDP as the processes can easily be acquired and internalized. T o ensure efficient implementation, integrated and
zs The Program Management Board (PMB) under MRDPl will be reconstituted into a Program Advisory Board or PAB. It will still be chaired by the DA Secretary, co-chaired by the Director-General of the National Economic and Development Authority (NEDA), and composed of the Presidents of the Leagues o f Provinces, Municipalities, and Cities; Secretaries (or their representatives) of Finance (DOF), DENR, Budget and Management (DBM), Agrarian Reform (DAR), Trade and Industry (DTI) Public Works and Highways (DPWH) and Interior and Local Government (DILG); a representative from the Mindanao Economic and Development Coordinating Office (MEDCO); the Presidents (or their representatives) of the Regional Agricultural and Fisheries Councils (RAFCs) in Mindanao; the President (or hisiher representative) of the Philippine Association of State Colleges and Universities (PASUC); and representatives from Industry Associations in Mindanao. 26 The RPAB i s chaired by the DA Regional Executive Director and co-chaired by the NEDA Regional Director. Members include Governors of the participating provinces in the region, the President of the Provincial Leagues of Mayors, the RAFC Chair, BFAR Regional Director, Regional Directors of DENR, DAR, DILG and MEDCO, and representatives from industry associations. In the case of the Autonomous Region of Muslim Mindanao (ARMM), the RPAB shall be chaired by the Secretary of the ARMM Department of Agriculture and Fisheries. ” The Diversified Farm Income and Market Development Project i s a Bank-assisted project of the DA (Loan No. 7236-PH) which aims to assist the GOP to strengthen the capacity of its DA to provide market-oriented services to increase agricultural competitiveness and rural incomes. 28 This , again, i s a critical lesson learned under MRDP1, when focused institutional strengthening to DA RFUs was deemed inadequate; hence, under MRDP2 the important role of DA RFUs in strengthening the DA-LGU linkages would be given primary focus, especially through MRDP2’s institutional implementation arrangements.
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coordinated plan o f activities across components will be put in place so as to prevent overlapping and duplication. One o f the apparent flaws o f MRDP1 was the lack o f clear operational linkage between components, particularly o f the RDPAP and the CFAD. Bo th units were involved in developing the barangay development plans which instead o f becoming facilitative, it created more confusion to the beneficiaries and the communities. The implementing units under MRDP2 will now pursue activities with strategic focus and work collectively and with competence towards a common goal.
10. Another useful strategy o f MRDP1 was the development o f operation manuals for each and every component which details out the implementation procedures and processes. These same documents will also be used in MRDP2 but have been reviewed and updated to include f ie ld experiences as wel l as the new innovations that will be applied in the project. The operations manuals serve as guide to the implementing units for standardized and sequential procedures o f carrying out the various component activities.
1 1. In executing the project, a Program Contract will be forged with the implementing units, incorporating the roles, functions and responsibilities o f agreeing parties and various implementation and financial arrangements including compliance to the Wor ld Bank’s environmental and social safeguards, specifically for subprojects under RI, CFAD and NRM components.
12. Investments for Governance Reform and Program Administration. Program coordination was handled by the Program Coordination Office (PCO), which during MRDP1 implementation, was instrumental in realizing the Program objectives. However, under MRDP2, the PCO will be transformed into a Program Support Office (PSO) since i ts main function will be re-focused f rom coordinating to supporting program implementation. The basic function o f PSO i s to improved the capacities o f the five (5) Regional Field Units (RFUs) o f DA and the DAF-ARMM RPCO on coordinating and overseeing o f project activities implemented at the local level. As part o f the mid- term review o f APL 2, the PSO i s proposed to be evaluated and reviewed and eventually, options may be considered for transferring some o f i t s functions to DA-RFUs, depending o n the RFUs absorptive capacities. The functions that may l ikely be downloaded to RFUs are the monitoring on the compliance o f environmental and social safeguards under RI and CFAD subprojects, ensuring transparency in the conduct o f LGUs on bidding and awards o f subprojects, coordinating the integration o f plans f rom communities to MLGUs and PLGUs, and other functions that maybe identified during the mid-term review. Thereafter, the PSO wil l function as a technical advisory body to RFUs with a leaner and meaner structure.
13, The six (6) RFUs o f Mindanao include DA-RFUs 9, 10, 1 1, 12, 13 (CARAGA) and Autonomous Region o f Muslim Mindanao (ARMM). For the RFU to fulfill i t s roles and responsibilities, it has create the Regional Program Coordination Office (RPCO) using i t s existing regular and permanent staff and uti l izing the same structure as the PSO. Owing to i t s unique structure, ARMM will have a slightly different structure and implementation arrangements. The 6 RPCOs wil l take on the main responsibility for planning, project coordination and monitoring o f f ield activities for the various subcomponents o f the Program.
14. The institutional strengthening and capacity building activities will facilitate the DA’s systematic phase-out f rom directly performing devolved functions and shift towards providing support to the LGUs in planning and budgeting, research and extension, and monitoring and evaluation. Six months before the actual implementation, preparatory activities will be done and engagement o f both the LGUs and RFUs i s ensured to be o n the ground and by the time the Program i s implemented, these units o f implementers are ready to assume the various responsibilities required from them. The LGUs will be provided with the technical assistance to institutionalize demand-driven and participatory approach o f planning at the community level to ensure that the plan i s reflective o f the real needs and
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l ikewise developing the sense o f ownership within the communities. Under this component, i t i s expected to come-up with a harmonized Barangay Development Planning, that integrates a l l development plans at the barangay level including those for livelihood, food security, ancestral domain protection and natural resources management, and which will be called Barangay Agriculture and Fisheries Modernization Plan (Barangay AFMP). A model-based strategy wil l also be adopted for research and extension which was done during APL 1 but the assistance in APL 2 i s not l imi ted to showcasing production technologies alone. The effort under research and extension i s expected to be more o f market-oriented type which would enhance the communities’ income generation activities. The RFUs on the other hand will be capacitated in terms o f MFO-based planning and decision-driven monitoring and evaluation in support o f the decentralized delivery o f services.
15. The subcomponent on improving LGU resource management and service delivery systems centers on the enhancement o f local revenue generation o f participating LGUs. Incentives will be awarded to LGUs that will institute measures for enhancing governance systems and mechanisms. LGUs that wi l l initiate the reform measures wil l qualify for a 70:30 NG-LGU cost sharing under the RI component o f APL 2.
16. Rural Infrastructure @I). This component will be implemented by the Municipal LGUs (MLGUs) through the Municipal Program Management and Implementing (MPMIUs). The MLGUs will be supported by the Provincial LGUs and will also create the Provincial Program Management and Implementing Units (PPMIUs) that will oversee the implementation o f RI and other subprojects. As mentioned in the above discussions, the RI subprojects will adopt the national government’s (NG) pol icy o n cost-sharing scheme. The current pol icy o f 5050 sharing arrangement for NG and LGUs for infrastructure projects was highly problematic as most o f the LGUs even outside Mindanao are unable to provide the equity as experienced by other foreign-assisted projects. Aside f rom the current cost sharing, the oversight agencies has allowed DA to adopt a more implementable arrangement o f 70:30 NG-LGU cost sharing provided that LGUs will implement a set o f governance reforms subject to certain performance target indicators (see Annex 4).
17. On the staffing requirement at the W C O level, secondment o f staff f rom the participating PLGUs and MLGUs i s allowed for RI component since the mandates o f performing the function related to farm to market roads and communal irrigation has n o w been devolved to LGUs. T h i s arrangement i s more sustainable as it will further enhance the capacities o f LGUs in terms o f implementing infrastructure projects.
18. CFAD. This component opens opportunities for disadvantaged and vulnerable sectors and supports community-identified and managed subprojects for increased income. The APL 1 strategies for community participatory for decision-making shall be maintained for APL 2. CFAD shows respect to various ethnic groups and considers their own sets o f traditions, values and development priorities as important inputs in developing package o f technologies to attain food security. Likewise, the component will provide funds for agribusiness and livelihood enterprise that shall be covered by a targeted savings mobilization pol icy for CFAD. Specific terms and conditions for the Savings Mobil ization Plan shall be formulated with C F A D stakeholders’ participation during the pre- implementation Phase o f the Program
19. C F A D will also provide financial and technical assistance for the development o f agro-based Sustainable Income-Generating Activities (SIGA) for communities and POs f rom NRM participating municipalities. The component will make use o f the Multi-Sectoral Committees (MSCs) established under M R D P 1 for project review, appraisal and approval o f subprojects. During MRDPI, the active involvement o f the M S C in the CFAD processes has improved the transparency o f LGU transactions,
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hence communities would l ike to adopt and institutionalize this mechanism to become part o f the Municipal Development Council.
20. Under the component, the original scheme o f cost-sharing among government stakeholders will be maintained. Thus, the national government will provide 80% o f the PhP 2.5 M i l l i o n (with 60% coming from the loan proceeds, and 20% coming from the regular DA-GOP budget) for the CFAD Trust Account, and the Municipal LGU will put up the remaining 20% as i t s counterpart. For income- generating and livelihood expansion subprojects, Peoples Organizations (POs) shall be required to provide an equity o f 25% o f the total subproject cost; while for small support infrastructure, POs are expected to put up a minimum o f 10% equity, in cash or in-kind.
21. NRM. The critical feature o f this component i s mainstreaming NRM as one o f the regular functions o f LGUs and as such, i t i s focused on enhancing local mechanisms and appropriate technologies for conserving, rehabilitating and uti l izing natural resources in the coastal, marine and terrestrial habitats. The LGUs will be the direct implementers o f the NRM subprojects with technical assistance to be provided by DA-Bureau o f Fisheries and Aquatic Resources (BFAR), DA-Bureau o f Soils and Water Management (BSWM) and the Department o f Environment and Natural Resources (DENR). DA- BFAR shall provide technical assistance for fisheries and other marine and coastal concerns and B S W M shall provide assistance on land resource evaluation l ike soil characterization, determination o f topographic features, land management technologies, soil maps and other information materials. DENR on the other hand, shall provide TA on sustainable development and environmental related activities.
22. M&E System. In l ine with the mainstreaming efforts under the MRDP2, the M&E function will be lodged with the M&E units o f DA-RFUs and the respective planning and development offices o f PLGUs and MLGUs. The operational M&E system and framework o f National Government Agencies l ike DA, NEDA and DBM which i s l inked to the major f inal outputs (MFOs) as agreed with NEDA and DBM, will be adopted.
23. The project’s results framework provides outcome indicators which would be the basis during evaluation. T w o evaluation activities will be conducted under MRDP2. The Mid-term evaluation to be conducted in February 20 10 will focus on the implementation systems and procedures and o n the emerging effects o f project interventions. Case studies in selected project areas may be undertaken for a deeper analysis o f subprojects and component interventions. End-of-project evaluation will be done during the last year o f implementation and will look into the emerging results and outcomes arising f rom project implementation. The Wor ld Bank will undertake periodic review and supervision mission during the five-year implementation o f the project.
24. The baseline survey would be initiated during pre-implementation and should be completed prior to June 2008.
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Annex 7: Financial Management and Disbursement Arrangements
PHILIPPINES: Mindanao Rural Development Project - Phase 2
Executive Summary2’
A Financial Management Assessment Review o f the Department o f Agriculture (DA) was undertaken to ensure that there i s adequate financial management (FM) systems in place within the agency which satisfies the Wor ld Bank’s Operational Policy/ Business Procedure (OPBP) 10.02. Under OP/BP 10.02, the borrower and the project implementing entities should maintain adequate financial management systems (which include accounting, financial reporting, and auditing systems) to ensure that they can readily provide accurate and timely information regarding project resources and expenditures. The review was carried out in accordance with the Bank’s guidelines under Financial Management Practices in Wor ld Bank - Finance Investment Operations dated November 3,2005. It focused on the assessment o f DA’s FM system including those for foreign-assisted Projects and considered the country and the sector’s FM situation.
The FM review indicates that the FM system o f the DA does not comply with the Bank’s requirements as it has weaknesses in i t s Internal Control, lacks staffing at the Central Office to handle project FM requirements, has delays in Consolidation o f Accounts, and has n o Internal Audit function. The weaknesses in Internal Control resulted to the issuance o f an Adverse Audit Opinion on the 2005 Financial Statements o f DA, which enumerated the fol lowing deficiencies: unreconciled cash accounts; undocumented and unliquidated advances; unreconciled physical count o f inventories and properties; unrecorded payables; and erroneous transaction entries. With the deficiencies in the DA FM system and weak LGU FM capacity, as well as the perceived corruption in the country, there i s a high risk for the possibility o f misusing the loan funds.
In view o f the r isks involved and even during MRDP1, overall implementation support and coordination has been done through a Program Coordination Office (PCO) based in Cotabato Province, which included a separate FM Unit which supported and facilitated implementation. The PCO staff including i t s FM unit was staffed by regular FM staff f rom the Department o f Agriculture and the participating LGUs seconded to the Project, and supplemented by some contracted staff. MRDP1 was implemented satisfactorily, including i t s FM aspects. Since M R D P 1 formally closed in December 2004, the DA continued to maintain a leaner PCO staffing, which included FM staff which managed the MRDP2 PHRD project preparation grant resources and supported project preparation activities for MRDP2. The PCO FM Unit continues to be headed by a regular DA staff, backed up by seconded staff f rom LGUs.
Hence, under MRDP2, the DA has proposed a Financial Management arrangement similar to MRDP1. The fol lowing are i t s features:
The Project shall be implemented through the Financial Management function to be created at the Program Support Office (PSO), now to be based in Davao City. I t will use the N G A S accounting system including i t s Internal Control policies and procedures with changes in the Chart o f Accounts and financial reports based on project requirements. RFUs, LGUs and POs will maintain separate books o f accounts for the project and submit periodic financial reports, as required by the Bank. The PSO i s the main implementation support office for the Project. I t i s under the Special Projects Coordination Management and Assistance Divis ion (SPCMAD) o f DA, which in turn reports to the
29 Please see project f i les for the detailed Financial Management Assessment Review
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Undersecretary for Operations (who i s also the DA’s Project Implementation Officer). The PSO FM function shall also be reporting to the DA Finance function at the Central Office under the Director for Financial & Management Service (FMS). The PSO FM function i s currently staffed with experienced MRDP1 Project Coordination Off ice (PCO) FM staff. FM staffing at the MDFO, RFU & LGU levels will be handled by their respective FM functions with appointed staff for the Project
5. The following are the elements o f the FM Act ion Plan under the project:
a. PSO FM staffing shall be in place prior to implementation. FM staffing at the RFU, LGU and PO levels shall be in place pr ior to implementation o f their respective components. The PSO key FM staff shall be regular FM staff o f DNLGUs.
b. The Borrower through DA shall, by December 3 1,2007, establish and thereafter maintain throughout the period o f implementation o f the Project, an Internal Audit Service, with staffing, terms o f reference, and other resources acceptable to the Bank, to be responsible for conducting internal audit for the Project accounts by June 30 and December 3 1 o f each year, starting June 30,2008 and furnish a report to DA and the Bank upon completion o f each said internal audit.
C. The PSO will prepare simple FM guidelines for the Project at the PO, LGU, RFU, MDFO & PSO levels, which will adopt the lessons learned from MRDP1, The FM Guidelines would be broadly disseminated to al l concerned pr ior to project implementation.
6. The FM risk o f the Project would be mitigated to an acceptable level when the abovementioned measures are implemented and have shown effective impact.
7. The Project shall be preparing quarterly unaudited Interim Financial Reports (IFRs). I t will disburse through two Designated Accounts (DesAs) maintained at the PSO and at the MDFO.
8. Funds f low o f the loan proceeds will be f rom the Wor ld Bank to the Philippine Treasury, then to the DesAs o f the project after issuance o f a Notice o f Cash Allotment (NCA) issued by the Department o f Budget and Management (DBM). Payments o f eligible expenditures are paid out o f the DesAs.
9. Counterpart funds shall be through the normal government funds f low which i s through i t s common fund maintained at a Government authorized servicing Bank. This account i s funded by the Bureau o f Treasury with the issuance by the DBM o f the Notice o f Cash Allocation (NCA).
10. The Project shall be required to submit annual audited Project Financial Statements. I t s auditor will be the supreme audit institution o f the government, the Commission on Audit.
Financial Management Assessment
1 1. Country Issues. The issues identified are as follows:
a. Perceived corruption in the country - The country’s corruption rating by international institution monitoring corruption i s high. While the rating i s a perception, there i s a related risk involved in the country.
b. Weak internal audit capacity- Internal auditing in government agencies i s not a wel l developed function. Although they are authorized under the Internal Audit Code, very few
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government agencies have established their Internal Audit units mainly due to budgetary constraints. This i s a weakness in internal control o f the country and i t s Agencies.
Weak LGU FM capacity - FM capacity o f poor LGUs o f the 5th to 6th class category are generally weak. This i s basically brought about by their lack o f funding resources as wel l as the lack o f qualified FM staff who could accept l o w level salary rates.
C.
Risk Assessment & Mitigation
12. The Risk assessment table below gives details o f the High FM risk rating o f the DA FM system.
Risk Categofy I Main FM Risk
[nherent Risk Country : a. Perceived corruption
in the country
b. Weak Internal Audit function.
c. Weak Poor LGU FM capacity
Sector : None.
Implementing Entity (DA) - Adverse Audit opinion, delayed consolidation o f accounts, E M staffing not adequate, no Internal Audit function.
Project Level Wide geographical coverage with lots o f implementing entities involved.
Control Risk
Risk Rating
H H H
H
H
H
H
H
Risk mitigating Measures
The Bank is currently working with government o n [ntegrity Development Act ion Plans under i t s anti sorruption efforts. N o substantial progress o n this yet as it is in the early stages. In the mean time, the Project will be ring fenced as detailed under FM arrangements for the Project.
The Bank has init iated addressing this through i t s Grant on Strengthening the Internal Audit (IA) with the Philippine Anti Graft Commission as i ts implementing entity. This i s st i l l in i t s early stages. Please see IA arrangement for the Project below.
Include in new Phil ippine Projects FM capacity strengthening for LGUs
Proposed FM arrangements replicates Project phase 1 arrangements which has been satisfactory. Such arrangements included the staffing arrangement at the LGU & RFU levels.
RFU and LGU FM staff wil l be working with PSO office to ensure that proper communication, consolidation o f accounts and reporting o f expenditures and progress i s in place. PSO FM staff wil l be supervising the LGUs concerned including periodic visits.
Condition of Board or
Effectiveness
N N N
(Y/N?)
N
N
N Staffing under the I A Special Order
is already in place.
N
N
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Usk Category I l a i n FM Risk
Financial Planning and Funds F l o w
Staffing
Accounting Policies and Procedures
Internal Control
Reporting and Monitoring, Delayed reporting and consolidation o f DA financials.
Internal Audit (IA
External Audit I -High M - Mode
Risk Rating
H
H
M
H
H
H
____
Risk mitigating Measures
i d o p t Project financial planning, funds f l o w and ierformance based Program Contract with payment by ranches based o n milestones.
Ensure PSO, RPCOs and LGU FM staff in place.
Use N G A S with Chart o f Accounts & financial reporting adapted to the Project components.
Replicate the FM system o f M R D P 1 including i ts Internal Control Policies and Procedures to be documented in the Project’s FM ManualdGuidelines.
Require submission o f In ter im unaudited Financial Reports (IFRs) with periodic consolidation by FM coordinating and supervising staff at the PO, LGU, RFU, MDFO and PSO levels.
The DA will create an Internal Audit Service (IAS), headed by an Undersecretary o r Assistant Secretary with no incompatible functions and directly reporting to the DA Secretary, by December 3 1, 2007. The I A S wil l cover the Project in their review every 6 months with a report submitted to DA Management, with a copy furnished to the Bank. The first I A S report wil l be due no later than a year after project effectiveness. Progress in strengthening the Internal Audit wil l be monitored using the benchmarking tool supported by the Presidential Anti. Graft Commission.
M Continue use o f COA as auditors.
Strengths and Weaknesses
13, The strengths o f the DA Financial Management system are:
Condition of Board or
Effectiveness
N (Y/N?)
N FM staff already n place as named in the Special
Order issued by the DA
N
N Project FM
Manual l Guidelines
already in place and acceptable.
N IFR format
i lready submitted as part o f the FM
Manual and agreed.
N
N rhis i s considerec
under a dated covenant.
N
a. The use o f the N G A S has upgraded the accounting system o f the Agency to Internationally Accepted Accounting Standards. The Agency personnel have been trained in N G A S and they
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have now adopted the said system. This provides the foundation for good accounting o f Agency and project transactions. The Agency i s n o w in the process o f installing the electronic version o f the NGAS, the eNGAS at the Central office and later at i t s Regional Field Operating Units.
b. Documented policies and procedures as wel l as organization charts and j o b descriptions o f staff ensure clarity o f jobs and responsibilities.
14. The weaknesses o f the DA Financial Management system are:
a. There are deficiencies in the Internal Controls as reflected in the audit findings resulting to an Adverse Opinion on the Financial Statements o f DA. These are violations o f N G A S policies and procedures. The deficiencies pertain mainly to unreconciled cash accounts, undocumented and unliquidated advances, unreconciled physical count o f inventories and properties, unrecorded payables and erroneous transaction entries. The total amount o f these qualifications i s about PhP20 b i l l ion out o f a total assets o f about PhP68 bil l ion. This deficiency in Internal Control reflects the need for closer supervision o f the FM function.
b. The eNGAS chart o f accounts o f the N G A S has been hard coded into the computer system such that i t becomes inflexible for Project FM reporting.
c. Consolidation o f the Accounts i s delayed resulting to delayed submission o f financial statements.
d. The lack o f an Internal Audit function at DA weakens i t s risk management, control and governance review.
Financial Management Arrangements
15. The Financial Management arrangements for the project shall be mainly through the PSO FM function with coordination with the Finance and Management Service (FMS) at the DA Central Office. Fol lowing are the key FM arrangements:
Financial Management Organization and Staffing
16. The Financial Management arrangements for the Project shall mainly be implemented through the Financial Management function to be created at the Project Support Office (PSO), n o w to be based in Davao City. The PSO i s the main implementation support office for the project. The PSO i s under the Special Projects Coordination Management and Assistance Divis ion (SPCMAD) o f DA which in turn reports to the Undersecretary for Operations (who i s also the DA’s Project Implementation Officer). The PSO FM function shall also be reporting to the DA Finance function at the Central Office under the Director for Finance and Management Service (FMS). The PSO FM function shall be staffed with experienced MRDP1 Program Coordination Office (PCO) FM staff. FM staffing at the MDFO, RFU & LGU levels shall be handled by their respective FM functions with a dedicated staff for the Project.
17. The FM staffing for the Project shall be at the following levels: PSO, RFUs and LGUs. At the PSO level (based in Davao), an FM Unit shall be created and will be headed by a Finance Unit Head assisted by a Chief Accountant for the PSO books and an FM Specialist for the coordination, supervision and consolidation o f reports for MDFO, RFUs, and LGUs. The MDFO will have a devoted FM specialist for the Project. For the RFUs and the LGUs, this will be handled by their FM function. Should additional staffing be needed by MDFO, RFUs or LGUs, hiring shall be done chargeable to the project.
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18. Regional Offices have typical FM Organizational setup which mirrors the set up in the Central Office on a small-scale basis, as follows: The Finance Divis ion i s headed by a Chief who reports to an Assistant Director who in turn reports to the Regional Director. The Finance Divis ion i s composed o f three sections (Accounting, Budget and Cashiering Sections), each headed by Section Heads.
19. The Region’s Accounting Section has two Units, the Bookkeeping and Disbursements Units staffed by accountants, bookkeepers and accounting clerks. The Budget Section o n the other hand i s staffed by Budget Officers and clerks. The Cashiering Section i s staffed by cashiers, disbursing officers and clerks.
20. The sample Regional Office visited has need for additional FM Staffing, good accounting system using the NGAS, and an up to date Reporting system. Their internal control system ensures that there i s proper check and balance and approval o f transactions. There are n o incompatible functions combined. The audit reports, though having a qualified audit opinion, do not have findings that indicate a weak financial management system. The qualification o f the auditor on cash and Properties pertain to defunct Bureaus.
2 1. For every Region which will participate in the project, a similar assessment would need to be done by the Bank before they are approved for the Project.
22. For LGUs, they have a similar set up as the RFUs, except that these are at a smaller scale. An FM assessment would need to be done by the PSO and a corresponding Act ion Plan committed by the LGU before they are approved for the project.
23. At the community level, the community shall have a person who shall act as accountant for the project to do simple bookkeeping and reporting.
Planning and Budget
24. The project whi le doing i t s own planning will be integrated into the D A ’ s planning and budgeting process. Thus i t will be done consistent with the planning cycle and process o f the Government.
25. Under the Government system, budgets are prepared based on the budget call o f the DBM with indicative ceilings. Regions, Services, Bureaus and PMOS are required to submit their detailed plans for the year. A work and financial Plan i s required to support budget submissions with corresponding computations or assumptions. These are then reviewed by the respective Directors for discussion and adjustment by Management. These are checked as to their relevance with the mandate, programs and priorities o f the Agency. The Secretary would then have the final say o n the Budget and this i s endorsed to the DBM for further screening. After DBM approves o f the Budget, it transmits this to the office o f the president who in turn would transmit i t to Congress for i t s deliberation. After the budget i s approved by Congress, this i s sent to the President for f inal approval and issuance as the General Appropriations A c t (GAA). The GAA then becomes the basis o f the quarterly release o f funds (through the issuance o f a Notice o f Cash Allotment or N C A ) to the Agency or projects. Adequate budget registers to control budget implementation and reporting i s maintained through the NGAS.
Accounting Policies and Procedures
26. The project will use the N G A S accounting system including i t s Internal Control policies and procedures with changes in the Chart o f Accounts and financial reports based on Project
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requirements. RFUs, LGUs and POs will maintain separate books o f accounts for the project and submit periodic financial reports as required by the Bank. The PSO FM Unit shall provide a copy o f i t s quarterly Financial Statements to the Finance & Management Service Director o f DA’s Central Office.
Internal Control and Internal Audit
27. The following are the key Internal Control arrangements:
I t will follow the Internal Control applicable in the NGAS. Approval o f financial transactions shall be under the respective Heads o f the PSO, RFU and MDFO together with their FM Heads and thereafter fo l low the corresponding entity’s Cash disbursement procedures. Separate books o f accounts and subsidiary ledgers shall be used with periodic reconciliations. Designated Accounts shall be separately created for the disbursement centers o f the Project which i s in the PSO, and in the M D F O . Cash Advances shall not be allowed since a Designated Account will be set up. Month ly Bank Reconciliation Statements shall be prepared to be submitted n o later than the end o f the following month. A Financial Plan shall be prepared for the whole term o f the project with details per month for the current year. The PSO and the MDFO shall maintain copies o f supporting documents and contracts in addition to those submitted to Accounting/COA. When applicable, Properties and Inventories under the project shall be required to have a physical inventory taking annually with a report t o be submitted to DA Management on the results and reconciliation with recorded accountabilities and the disposition o f the differences. The responsibilities o f the FM staff for the project shall have a detailed l i s t o f the duties and responsibilities. The project shall be subject to a semi annual Internal Audit review by the I A S to be created by the DA (please see prior discussion on this).
Funds Flow and Disbursement Arrangements
28. The funds o f the Project come f rom loan proceeds and Government counterpart fund. The expenditure centers o f the Project would be at the PSO for Investments for Governance Reform and Program Administration and NRM components; and at the MDFO for Rural Infrastructure and CFAD components. Estimated amount o f loan funds to be channeled into each expenditure center are as follows:
MDFO US$ 76.752 mil l ion PSO (includes RFUs) US$ 7.000 mil l ion Total US$ 83.752 mil l ion
29. The f l ow o f funds i s as follows:
a. For loan hnds - Funds fi-om the Bank are remitted through the Bureau o f Treasury’s Account with the Bangko Sentral ng Pilipinas (Central Bank) which will in turn remit this to the Government Commercial bank where the Project’s Designated Accounts are maintained at the PSO, and MDFO;
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b. For the Government counterpart fund - Counterpart funds shall be through the normal government funds flow, which i s through i t s common fund maintained at a Government commercial bank. This account i s funded by the Bureau o f Treasury with the issuance by the DBM o f the Notice o f Cash Allocation (NCA). Counterpart fund expenditures are paid through a check issued from the Agency's account in the said Government authorized servicing Bank.
(3) Performance-based Grants
30. Funds to be released to LGUs shall be coming f rom the MDFO Designated Account. Funds are paid to LGUs based milestones to be developed under a signed Performance Contract. For funds for Communities, these are likewise paid based o n milestones to be developed under a signed Performance Contract. Reports are submitted by the communities to the LGUs, which in turn will consolidate these and submit to the PSO and MDFO, properly l inked to physical accomplishment (please see discussion o n Financial Reporting),
15,752,000 100% o f the Performance-based
3 1. MRDP2 shall be disbursed over a period o f 5 years as an Adaptable Program Loan in the amount o f US83 .752 mill ion. The disbursements o f the loan shall be in accordance with the Financial Plan for the project for the following categories (in US$ millions):
Under Part B o f the Project
(4) CFAD Block Grants Under Part C o f the Project
(5) Premia for Interest Rate Caps and Interest Rate Collars
(6) Front-end fee
TOTAL AMOUNT
Category
Grant amount disbursed
100% o f CFAD Block Grant amount disbursed
18,000,000
0 Amount due under Section 2.08 (c) o f this Agreement
03" Amount payable pursuant to Section 2.04 o f this Agreement in accordance with Section 2.07 (b) o f the General Conditions
83.752.ooo
(1) Goods, works, consultants' service, and Operating Costs) under Parts A and D o f the Project
(2) Civil Works
(a) under Parts B1, B2, and B4 o f the Project
(b) under Part B3 o f the Project
Amount o f the Loan Allocated
(expressed in USD)
7,000,000
40,000,000
3,000,000
Percentage o f Expenditures to be financed
100%
50%
70%
30 The fee i s based on a full waiver of the 1% fee which applies to all IBRD loans presented to the Board from August 11,2006 through the date on which the Board decides upon any front-end fee waiver for FY08 (likely, in August 2007).
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32. Designated Accounts (DesAs) shall be maintained at the Project at Expenditure centers at the PSO & M D F O with the Land Bank o f the Philippines (LBP). The DesAs allocation shall be US$6.2 mi l l ion broken down into US$2.0M for PSO, and US$4.4M for MDFO. Should the DesAs become insufficient for the operations o f the Project, a request with justification for an increase may be done. Thresholds for direct payments shall be applied on the individual DesAs and not o n their total.
33. Disbursement for the project shall be through the use o f a summary report in the fo rm o f a Statement o f Expenditure with option to convert to a summary report in the fo rm o f an unaudited interim financial report (IFR) with concurrence o f the Bank. In any case, IFRs shall be required to be submitted by the project, the format for which shall be agreed with the Bank.
34. Retroactive financing wil l be provided under the project for up to US$500,000 o f the Bank loan to finance eligible expenditures for project activities incurred on or after July 1,2006. Eligible expenditures are those under Category 1 which are Goods, works, consultants’ service, and Operating Costs under Parts A and D o f the Project; and Categories 2(a) and 2(b) which are Civil Works under Parts B1, B2, B3, and B4 o f the Project (please see Disbursement Schedule in the preceding page). During pre-implementation, a number o f activities have been done to ensure that Year 1 subprojects for rural infrastructure are ready for award and implementation upon project effectiveness, hence, this retroactive financing would be used for payment o f such eligible expenditures which the project have incurred o n or after July 1,2006, prior to loan effectiveness.
Financial Reporting
35. The project shall submit a consolidated unaudited Interim Financial Report (IFR) on a quarterly basis. The IFRs shall consist o f the following:
a. Balance Sheet - A report on the financial resources (assets & liabilities and government contributions) o f the project.
b. Statement o f Sources and Uses o f Funds - A report on the receipt and uses o f funds by project components by categories.
36. The IFRs should include both the loan and counterpart funds. Consolidations shall be done at the LGU, RFU, MDFO and PSO levels. The IFR should be l inked to the Project Progress Report, as required, as part o f the project operations report. Delays in the submission o f IFRs shall give the Bank the right not to remit funds. The quarterly submissions o f the IFRs shall be due n o later than the end o f the following month. Communities shall submit their simplified financial report to the LGUs who in turn consolidates and submits this to their respective RFUs attaching the Reports o f the Communities. The RFUs in turn consolidates these and submit these to the PSO.
37. The Financial reporting flow shall be as follows: MDFO - From communities to LGUs to RFUs then to PSO (Please note that every liquidation o f communities or LGUs are sent to RFUs and are consolidated into an SOE and submitted to MDFO. MDFO merely acts as an intermediary o f funds for LGUs). MDFO submits a report to PSO on the status o f budget and fund releases. RFUs - RFUs submit reports to the PSO. PSO then does the final consolidation o f reports and sends this to DA- FMS, SPCMAD and the Wor ld Bank.
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External Audit
38. The External Auditor o f the project shall be the Commission o n Audit (COA) and shall be required to submit audited Financial Statements o n the Loan as wel l as a Management Letter reflecting i t s audit findings and recommendations. The Financial Statements covered shall consist o f the Balance Sheet and the Sources & Uses o f Funds. The Audit Certificate to be issued shall use the Bank’s required pro forma audit certificate to be adopted depending on the findings o f the audit. The audit reports and the management letter shall be due n o later than 6 months after the end o f the fiscal year o f DA. Delay in the submission o f the Audit reports and the management letter shall automatically give the right to the Bank to suspend disbursements on the Loan.
39. Quarterly IFRs are required to be submitted to C O A so they could do progressive audit o f the accounts and a documented agreement with C O A on the detailed timetable for the audit o f the Project will be required.
Financial Management Action Plan
40. Fol lowing are the elements o f the said action plan:
Action 1. Hi re FM Staff as follows:
a. PSO FM staff.
b. FM staffing at the RFU, LGU and P O
2. The I A S wil l cover the Project in their review every 6 months with a report submitted to DA Management, with a copy fUrnished to the Bank. The first I A S report wil l be due n o later than a year after project effectiveness. Progress in strengthening the Internal Audit wil l be monitored using the benchmarking tool supported by the Presidential Anti-Graft Commission
3 , Preparation o f simple FM manuavguidelines for the Project at the PO, LGU, RFU & PSO levels and the format o f the IFRs
Loan Conditions
41. Project Management
Responsibility
DA Undersecretary for Operations
DA Undersecretary for Operations
Secretary
Director Financial & Management Service
Deadline
Substantially complied since October 2006
Creation o f I A S -by Dec. 3 1, 2007. IA review o f the Project and submission o f report - Every June and December o f each year, starting after one year o f Project effectiveness.
Substantially complied as o f October 2006.
The Borrower through DA shall, by December 3 1,2007, establish and thereafter maintain throughout the period o f implementation o f the Project, an Internal Audit Service, with staffing, terms o f reference, and other resources acceptable to the Bank, to be responsible for conducting internal audit for the Project accounts by June 30 and December 3 1 o f each year, starting June 30,2008 and furnish a report to DA and the Bank upon completion o f each said internal audit.
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42. Financial Covenants:
a. The Borrower shall maintain or cause to be maintained an adequate financial management system with appropriate books o f accounts in accordance with generally accepted accounting principles.
b. The IFRs shall be submitted to the Bank on a quarterly basis in a form and substance acceptable to the Bank.
c. The Auditor wi l l be COA and their TOR will be similar with the current Bank-assisted projects which they audit. The following shall be the required audit submissions:
Type o f Financial Statements 1. Project Financial
Statements
2. Audit Management Letter
Description
Composed o f 1. Consolidated Project Balance Sheet 2. Consolidated Project Sources & Uses o f Funds with audit certificate using Bank’s pro forma adapted to their audit findings.
Detailed audit findings and recommendations
Deadline
June 30 o f the following calendar year.
June 30 o f the following calendar year.
Audit Opinion coverage
To cover the whole Project on a consolidated basis.
To cover the whole Project on a consolidated basis
Supervision Plan
43. Objective & Nature: The FM supervision o f the project shall be periodically done to ensure that loan proceeds are used only for the purposes for which it was granted, with due regard to economy, efficiency, and the achievement o f the project’s objectives.
44. Coverage: The coverage o f the supervision should address the total project financial arrangements including those on the counterpart funds o f the national and local governments.
45. Frequency & Duration: The project should be supervised periodically, at least every 6 months. A more frequent supervision would be done should any deterioration o f the agreed FM system happen. By the nature o f the work required under Bank’s policy and depending o n the state o f the project’s financial management and the status o f the FM action plans, every supervision should be at a minimum o f 2 weeks. However, 2-to-3-day visi ts could be done on a more frequent basis addressing l imi ted FM concerns.
46. Staffing: The supervision should be done by at least a qualified FMS.
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Annex 8: Procurement Arrangements
PHILIPPINES: Mindanao Rural Development Project - Phase 2
General
1.
2.
3.
4.
Procurement for the proposed project would be carried out in accordance with the Wor ld Bank’s “Guidelines: Procurement under IBRD Loans and IDA Credits” dated M a y 2004, and “Guidelines: Selection and Employment o f Consultants by Wor ld Bank Borrowers” dated M a y 2004, and the provisions stipulated in the Legal Agreement. Whi le the new Philippine Procurement L a w (RA 9184) i s sufficiently in harmony with the Guidelines at the NCB level, the Procurement Schedule o f the Loan Agreement will include an annex detailing the procedures under the national l aw that are not acceptable to the Bank. Other than that, N C B procurement will be carried out in accordance with the country’s law. The general description o f various items under different expenditure categories for the f irst 18 months are described below and summarized in the attached Procurement Plan. For each contract to be financed by the Loan, the different procurement methods, estimated costs, prior review requirements, and time frame are agreed between the Borrower and the Bank task team in the Procurement Plan. The Procurement Plan will be a rol l ing plan that wil l be updated at least annually or as required to reflect the actual project implementation needs and improvements in the institutional capacity o f the implementing units.
Procurement of Works /Rural Infrastructure Subprojects (US$58.752 million): Works procured under this project would include construction and rehabilitation o f farm-to-market roads and bridges, irrigation canals, water supply system and other rural and environmental infrastructures. N o international competitive bidding (ICB) i s expected under the proposed project due to the small size and dispersed nature o f the contracts. Contracts estimated to cost US$50,000 or more will be procured following national competitive bidding (NCB) procedures using the Philippine Bidding Document (PBD) as harmonized with the Bank. The advertisement would include publication in at least one newspaper o f general circulation, and the government’s electronic procurement system website (PhilGEPS). Most o f the contracts are envisaged to be procured through NCB, however in cases o f smaller value contracts, widely dispersed works which are not efficiently and economically justif ied to package, Procurement o f Small Works costing below US$50,000 will be awarded based o n shopping procedures, by comparing price quotations obtained f rom several contractors, usually at least three, as defined in Para. 3.5 o f the Guidelines. Additionally, advertisement through the PhilGEPS would be required.
Procurement of Goods (US%US$O.5 million): Goods procured under this project would include office equipment and furniture, information and communication technology goods, resource monitoring equipment, agricultural extension kits, surveying equipment and vehicles. The procurement for contracts costing US$500,000 or more will be done through I C B using the Bank’s standard bidding document (SBD). Contracts estimated to cost US$50,000 up to less than US$500,000 will be procured fol lowing national competitive bidding (NCB) procedures using the Philippine Bidding Document (PBD) as harmonized with the Bank. The advertisement would include publication in at least one newspaper o f general circulation, and the PhilGEPS website. Procurement for off-the-shelf goods and small value contracts costing below US$50,000 will be awarded based o n shopping procedures, by comparing price quotations obtained f rom several suppliers, usually at least three, as defined in Para. 3.5 o f the Guidelines,
Selection of Consultants (US%0.5 million): Consultancy services to support implementation and operations o f the project will be financed under the program. F ixed budget selection (FBS) and quality and cost based selection (QCBS) procedures will be followed in the hiring o f consulting f i r m s with contracts estimated to cost the equivalent o f US$lOO,OOO or more. Contracts estimated to cost less than US$lOO,OOO equivalent may be procured through selection based o n consultants’
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5 .
6.
7.
8.
qualifications (CQ) fixed budget selection (FBS), or through single source selection (SSS), with the Bank’s pr ior Agreement, in accordance with the provisions o f the Consultant Guidelines. In view o f the unique knowledge o f the local environment and communities, non-government organizations (NGO’s) and state universities and research institutions may be contracted through SSS to undertake specific tasks. Individual Consultants necessary to support the program, meeting the requirements set forth in Section 5 o f the Consultant Guidelines, will be selected under contracts awarded on the basis o f competition in accordance with the provisions o f the Consultant Guidelines.
Community Fund for Agricultural Development (CFAD) Subprojects (US$18 million). A broad spectrum o f activities to be undertaken with the direct participation and involvement o f the C F A D beneficiaries will be financed by the project through grants. The main purchases to be made would consist of construction materials for small works such as pavements, trails, water supply system, storage facilities, etc., small equipment, agricultural related materials and supplies, small ruminants, plants and seeds, and local technical support. An Operations Manual for CFAD was used under the f i rst APL; this was revised and enhanced to incorporate lessons learned and innovations to make the C F A D more operationally functional to the intended CFAD beneficiaries. A dedicated section in the Operations Manual provides the procedures and processes involved in the procurement operations for the grants.
Natural Resource Management (NRM) Subprojects (US$4.4 million). A broad spectrum o f activities to be undertaken with the direct participation and involvement o f the LGUs and community- beneficiaries will be financed by the project through grants. The main purchases to be made would consist o f construction materials for small works and activities such as reforestation, embankment improvement, desiltation, dredging, small equipment, agricultural related materials and supplies, plants and seeds, local technical support, etc. An Operations Manual for NRM has been prepared to incorporate lessons learned under CMBC 1 and innovations to make the NRM Component more operationally functional to the intended beneficiaries. A dedicated section in the Operations Manual provides the procedures and processes involved in the procurement operations for the grants.
Training and Workshops (US$0.7 million): Training and workshops, including related expenditures for travel and accommodation, fees and materials, related to the project operations wil l be procured in accordance with existing government prescribed procedures and limits which are acceptable to the Bank.
Operating Costs (US$0.9 million). Activities relating to managing the project, including staff travel and office utilities and supporting the project operations will be provided in accordance with existing government prescribed limits and procedures acceptable to the Bank.
Assessment of the agency’s capacity to implement procurement
9. Procurement activities will be carried out by the Department o f Agriculture’s Regional Field Units (RFUs) and Project Support Office (PSO), and the participating local government units (LGUs). The bulk o f the procurement will be undertaken by the LGU’s under the Rural Infrastructure Component whi le the RFUs and PSO will be undertaking mostly minor goods and consultancy procurements. Each o f the project’s components will have operations manual in which procurement aspects are covered in the manuals to make the procurement mainstreamed in the project operations. The procurement chaptershections in the different components’ operations manuals will form part o f the consolidated procurement manual. The LGUs will implement the rural infkastructure component, and will undertake the related procurement activities. RFUs and PSO will provide support and oversight to the LGU’s implementing procurement activities. C F A D grants will be carried out either by the LGUs or the beneficiary communities depending o n the nature o f the expenditures and/or the required capacity. RFUs will also undertake their own procurement o f small value goods and specific
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consultancy contracts for the region while the PSO will undertake procurement o f consolidated requirements for goods, and technical assistance covering multiple regions.
10. The Procurement Specialist made an assessment, during the months o f June and September 2006, with the participation of DA and LGU staff of the capacity o f the implementing agencies to undertake procurement activities for the project. The assessment reviewed the organizational structure for implementing the project and the interaction among the project’s staff responsible for procurement. The assessment took into consideration various studies, including the Country Procurement Assessment Report (CPAR) and i t s recent update of March 2005, and the baseline indicator system (BIS) assessment in which an independent consultant determined that the country, in general, was substantially achieving the desirable standards for reliance o n i t s public procurement system. Based on the sampled LGUs’ and RFUs’ procurement performance indicators, adopted and customized f rom the DAC/OECD developed indicators, the implementing agencies have been diagnosed as generally acceptable in adopting the country system for i t s procurement undertakings. The implementing agencies have greatly benefited f rom the procurement and implementation reforms initiated under previous Bank-financed activities in M R D P 1, and the on-going government procurement reform programs. Appropriate trainings have been provided to the LGUs in relation to the new Procurement L a w (RA 9 184), and its implementing rules and regulations, and the use o f Philippine Bidding Documents.
identified, and these include lack o f capacity o f RFUs to undertake the oversight and supporting roles to LGUs, inadequate capacity o f the PSO to provide technical assistance to RFUs, weak procurement planning o f LGUs, and unclear project procurement process. The corrective measures which have been agreed upon include: designation o f procurement coordinators/specialists in the RFUs and in the PSO; capacity building in the areas o f procurement planning and monitoring, and bid evaluation; finalization o f the consolidated procurement manual. W h i l e PSO staff have experienced procurement operations for this type o f project under M R D P 1, there i s s t i l l a need to augment i t s procurement capacity due to the number o f LGUs involved and the init ial technical assistance i t will extend to the RFUs who will be the main oversight and support unit in the regions, and who will review the LGU procurement actions. A training o f trainors has been conducted in June 2006 to ensure appropriate capacities are present in the regions. The training and knowledge have been echoed by the participating LGU’s by the regional trainors. The overall project risk for procurement i s average.
11. Issues/risks concerning the procurement aspects for implementation o f the project have been
Procurement Plan
12. The DA developed a Procurement Plan for the first 18 months o f project implementation, which provides the basis for the procurement methods. The Borrower and the Project Team both agreed upon this plan on February 8, 2007; it i s available at the PSO o f DA and in the Project Files. I t i s also available through the Bank’s external website. The Procurement Plan will be updated in agreement with the Bank annually or as required to reflect the actual project implementation needs and improvements in institutional capacity.
Frequency of Procurement Supervision
13. Based on the overall risk assessment, twice a year field supervision missions including post review o f procurement action i s to be implemented in addition to the prior review to be carried out f rom the Bank’s Mani la office. With respect to each contract not subject to prior review, the procedures set forth in paragraph 4 o f Appendix 1 to the Procurement and Consultant Guidelines will apply at an init ial ratio o f not less than one (1) in five (5) contracts. This ratio may be adjusted based o n the performance o f the implementing units.
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Prior Review Thresholds:
14. The f irst contract for goods and works per region per year, and subsequent contracts estimated to cost
15. The f irst contract to be awarded following a particular selection method, and subsequent contracts
US$300,000 and above per contract will be subject to pr ior review by the Bank.
estimated to cost US$lOO,OOO and above for firm, and US$50,000 and above for individual consultants, per contract will be subject to prior review by the Bank.
may be composed entirely o f national consultants in accordance with the provisions o f paragraph 2.7 o f the Consultant Guidelines.
16. Shortlists o f consultants for services estimated to cost less than US$200,000 equivalent per contract
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Annex 9: Economic and Financial Analysis
PHILIPPINES: Mindanao Rural Development Project - Phase 2
Overview
1. The overall economic benefits o f the project would mainly be derived f rom (i) the rehabilitation o f farm to market roads and the subsequent savings in traveling time and reduction in vehicle operating costs; (ii) communal irrigation schemes which will generate an increase in farm productivity; (iii) improvements in the supply o f potable water resulting in increased time savings f rom collecting water and reduced incidence o f water-borne related sickness and disease; and (iv) community-based development through the availability o f community funds. In addition, investments to support governance reforms, local government and other institutional capacity building, as wel l as to strengthen decentralized and community based decision making, wil l facilitate better implementation o f rural development programs, create social capital, and strengthen staff sk i l ls o f implementing agencies at the local level.
2. The financial and economic analysis has been undertaken for investments in infrastructure and the community subproject components, f rom which quantifiable benefits can be estimated. The assumptions underpinning the analysis, the models for each subcomponent, key data and the results are based o n the feasibility study submitted by the DA and the Bank’s ICR for MRDP1.
Farm-to-Market Roads (FMRs)
3. The project aims to rehabilitate and construct some 1950 km and 200 km o f farm-to-market roads (i.e,, roads), respectively. Additionally, 1000 lineal meters o f bridges will also be built. Rural roads targeted for rehabilitation are feeder roads to production areas and are not otherwise classified as national, provincial or city roads. By rehabilitating these roads which are already part o f an existing network o f roads, the overall use and value o f the rural road network i s increased. By ensuring that these roads are passable on a year-round basis, greater benefits are generated in terms o f reducing the cost o f transporting people, transporting agricultural produce to the market and transporting non- agricultural produce. The proposed Year 1 rehabilitation works, covering some 42 k m s o f rural roads and 40 lm o f bridges, were proposed by the LGUs under APL1 but were not implemented as APL1 closed in December 2004. Succeeding targets will be selected, based on selection and prioritization criteria by the LGUs in close coordination with the RFUs concerned.
4. The economic analysis for the FMRs follows the consumer surplus approach. The approach makes use o f traffic counts which are easily collected and are direct indicators o f the level o f economic activity in a defined area. The benefits primarily considered in the analysis are the savings in Vehicle Operating Costs (VOC) and savings in travel time for rural commuters in view o f their abil ity t o take motorized transport once the roads are rehabilitated.
5. Other non-quantifiable economic and social benefits include: (a) improved access to inputs and output markets (b) reduced transport time in hauling produce to the market, and (c) improved access to education, health, communication and other technical and economic services, which are generally located in town centers.
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6. Model Assumptions: The economic models used are based o n the fol lowing assumptions:
a. Road Condition: The model indicates the l ikely costs and benefits f rom rehabilitating a “typical” project road. As per project selection criteria, the typical farm-to-market or Barangay road identified by the project has gravel or packed earth surface and i s in very bad or bad condition. Moreover, most project roads have stretches that are impassable and therefore require major reconstruction. It i s assumed that rehabilitation o f rural roads under the project will bring the typical project gravel road to a good condition.
b. Rehabilitation/Routine Maintenance costs: Estimated costs o f PhPl.8 mi l l ionf lun and PhPl.3 mill ionflun for rural road construction and rehabilitation are used, respectively. A routine maintenance cost per year equivalent o f PhP50,000/km. i s also used. An added cost to this relates to investments in capability enhancements for the local staff to implement routine maintenance works to ensure that the rehabilitated roads remain in good condition.
c. Investment Period: A 20-year life-span for newly constructed and rehabilitated rural road, maintained regularly by labor-based methods, i s assumed. Investments in road construction and rehabilitation start in Year 1 and routine maintenance in Year 2. Benefits are estimated and accrued as soon as the project FMR i s constructed or improved.
d. TrafJic Volume Projection: A 1.5% annual growth rate in both population and traffic i s assumed for each year following road rehabilitation.
e. Vehicle Operating Cost (VOC) Savings: The analysis o f the per kilometer cost associated with operating each type o f motorized and non-motorized vehicle traveling o n rural roads in the Philippines i s conducted by the Department o f Public Works and Highways (DPWH) on a regular basis. For the analysis, V O C savings per kilometer cost data are based o n the MRDP1 impact studies conducted in 2004 (adjusted to 2005 prices). However, n o benefits are assigned to savings in V O C for non-motorized traffic. Likewise, benefits accruing f rom savings using more cost- effective forms o f transport are not considered in the analysis.
f. Value of Time (VOT) Savings. The household survey conducted for the evaluation o f the rural roads for MRDPI ICR, showed an average savings o f 0.26 hour o f travel t ime among the beneficiaries as compared to the baseline. The survey further reveals that 54 percent o f the respondents reported a decrease in travel time by using the road. The analysis assumed an average daily wage rate o f PhP120 per day in computing the value o f the time saved.
g. Standard Conversion Factor (SCF): To convert financial cost to economic costs, a standard conversion factor o f 0.80 was applied to investment, O& M and VOC costs, and a C F o f 0.6 was applied to value the time savings.
Based on the assumptions and parameters above, the ERR for FMRs for traffic roads (used daily) i s estimated at 20% and for development roads (used seasonally) i s estimated at 33.5%. The estimate should be interpreted with caution as there are significant economic and social benefits not factored in the quantitative analysis. Sensitivity test results suggest that a 10% increase in cost and reduction in benefits would bring down the ERR to 17.52 % and 17.13%, respectively. A simultaneous occurrence o f these two events would result in an ERR o f 13.67%. Extending the analysis further, the switching values indicate that the rural (traffic) roads can withstand a cost (investment and 0 & M costs) overrun o f as much as 19% for the ERR to equal the required (Government NEDA) hurdle rate o f 15%. On the benefit side, VOC savings and savings in time need to aggregately fa l l by 15% before the project yields a rate lower than 15%.
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Communal Irrigation Subprojects
8. Agricultural productivity in the influence areas i s expected to improve since the project will support small-scale communal irrigation by rehabilitating existing gravity schemes which are no longer operational or are inefficient and constructing new ones. The proposed rehabilitation will affect a total o f 8,300 hectares. N e w construction o f CIS will bring in an additional 800 hectares under irrigation. Under MRDP1, a socio-economic Survey o f nine (9) municipalities in the provinces o f Maguindanao and Nor th Cotabato covering 3,052 respondents revealed that the average farm size per family i s 1.58 hectare^.^' The number o f farm households affected by proposed irrigation improvement interventions therefore may range f rom 5,253 to 5,759 families. At an average household size o f 6 members, the total number o f beneficiaries ranges from 3 1,520 to 34,557 individuals.
9. The rehabilitation o f existing schemes will enable farmers to shift f rom unimproved irrigation to improved irrigation hence increasing crop yields and cropping intensity as compared to the present farming situation. In some cases, i t i s expected that once the systems are rehabilitated, farmers will be able to bring into the service area additional areas which hitherto remain non-irrigated, or even plant a third crop, albeit on a much smaller scale.
10. The benefits that arise from: (a) an overall increase in cropping intensity as more area o f land i s brought under irrigated agriculture; (b) an improvement in farm productivity as adequate amounts o f water i s made available in a timely manner; and (c) crop diversification (i.e., vegetable growing) may likewise be an option that some beneficiaries might venture into at full development o f the project. The benefits f rom such farming system, however, are not considered in the analysis.
1 1. Financial Analysis: Representative crop budgets have been prepared based o n the baseline data and survey by project authorities, with key parameters and assumptions for crop budgets and farm income analysis are outlined below:
a. -Model Structure: Incremental benefits are assessed by comparing the net benefit (after a l l costs) f rom without to with intervention scenarios. Only benefits accrued to the farm area brought f rom unimproved irrigation to improved irrigation are considered under the analysis that focuses o n project rehabilitation. All agricultural area fall ing within the influence area o f a newly constructed scheme i s considered in the assessment o f new construction.
b. Agricultural Seasons: Whi le the Mindanao region as a whole i s classified as having rainfall more or less evenly distributed throughout the year, farmers recognize two distinct agricultural seasons, a wet season which spans M a y to September and a dry season which spans October to April. Moreover, wet season irrigation i s more productive with yields around 10% greater than those dry season yields in this region.
c. Cropping Intensity:-The model assumes that with project (WiP) there will be 100% cropping in the wet season and 100% cropping in the dry season; in the without project (WoP) scenario, the cropping intensity i s assumed to be 100% in the wet season and 50% in the dry season. Access to water for irrigation i s a wel l h o w n constraint to boosting farm productivity in the region.
d. Ful l development benefits: Full development benefits for newly-constructed and rehabilitated communal irrigation systems are accrued in the year immediately fo l lowing construction and rehabilitation works.
3' Proposed Liguasan Marsh Protected Area - Investment Program, DENR.
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12.
e. The estimated investment costs for rehabilitating existing irrigation systems and constructing a new system are PhP90,OOO and PhP140,OOO per hectare, respectively. Recurrent cost per annum i s estimated at PhP700 per hectare per year. Project lifespan i s pegged at 25 years.
Financial rate o f return calculation does not apply to individual schemes or subcomponent as a whole because n o schemes or the whole subcomponent qualify in regard to the investment as “profit earning entities”. In other words, the investment in the scheme rehabilitation and new construction represent transfer payment or subsidy to farmers in the service areas as long as the investment costs are not meant to be recovered. Therefore the farm income analysis has been undertaken to assess the profitabil ity for the households involved in the project. Based on the above, a representative farm size o f 1.6 hectares, incremental farm income i s estimated at PhP38,222 once the irrigation construction and improvement works are completed. T h i s i s based o n the farm income analysis which depicts the average farm beneficiary’s on-farm income improving substantially f rom PhP40,75 8 per year under the “without project” scenario to PhP78,980 per year under the “with project” scenario.
13. Economic Analysis: Based o n the financial analysis, the ERR calculation taken in account a l l the incremental benefits and costs in an aggregated economic cash flow, built up in l ine with physical achievements by year. The financial prices were converted into economic prices using the CFs as defined below: (a) For converting construction costs o f new schemes and rehabilitation o f existing schemes, the Standard Conversion Factor (SCF) o f 0.8 was applied; and for the major tradable goods ( paddy), the parity prices were used; (b) for agricultural labor, a conversion factor o f 0.60 i s used in assessing the ERR for the entire irrigation subproject; and (c) a conversion factor o f zero i s applied to irrigation user fees and land tax since they are transfer payments.
14. Based on the above assumptions, the ERR for the communal irrigation subcomponent i s estimated at 26.53% (NPV o f P320 mill ion, at a discount rate o f 15%). Sensitivity test results meanwhile reveal that this subcomponent would s t i l l y ie ld an acceptable ERR should any o f the fo l lowing events ensue: 20% reduction in benefits (ERR o f 14%); or 30% cost overrun (ERR o f 15%).
Improvement of Water Supply Systems
15. The project will support improvements o f domestic water supply for the upland and lowland communities in the participating LGUs. I t i s estimated that some 68,000 households are expected to benefit f rom this subcomponent starting o n Year 2 o f the project. The expected impact o f the component i s assessed using a simple model developed below. The capital expenditure requirement for the proposed development o f 342 water supply systems i s estimated at PhP239.4 m i l l i on or an average cost o f PhP700,OOO per unit for either a Level 1 or Level 2 water system. As with MRDP1 experience, unskilled labor and raw materials and supplies required for annual operation and maintenance o f the systems programmed for rehabilitation under MRDP2 will be provided by the beneficiary barangay. The estimated imputed annual operating and maintenance cost per household i s deemed equivalent to 1.0% o f the investment cost. Some 200 households will be served by each water system. Under ApL1, savings in time for fetching water was empirically measured at 36 minutes per day per household. For purposes o f analysis, this figure i s adopted in the estimation o f economic benefits.
16. The analysis i s based on benefits generated f rom avoided costs with the project with the fol lowing assumptions:
17. Benefits: The economic analysis for this subcomponent considered only the benefits derived f rom savings in time for fetching potable water as these could be used for income generating activities by the beneficiary households. The savings in time generated from the household survey was 36 minutes
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per day per household. Since water fetching i s usually done by women and children, the assumed wage rate was PhP120/day and only ha l f o f the time savings converted into economic price by using 0.6. Non-quantified benefits include increases in beneficiary household productivity as a result o f the availability o f water as an input for household activities and other social benefits, and avoidance o f waterborne diseases.
18. Costs: The financial investment costs are converted to economic costs using the standard conversion factor of 0.8 for the investment costs, while O&M costs and the benefit o f t ime savings are adjusted by the conversion factor o f 0.6. The assumed annual maintenance costs were 1% o f the total investment, which will be financed by the barangay, and a monthly water fee i s being collected from the beneficiaries for this purpose. A major repair cost o f 10% o f the original investment was also assumed in every ten years.
19. The net present value (NPV) and economic rate o f return (EIRR) are assessed assuming a discount rate of 15 % and a project life-span o f 15 years. Based o n the above, the estimated ERR for this subcomponent i s 46.5 percent.
20. As stated above, the non-quantified benefits such as increases in beneficiary household productivity as a result o f the availability o f water as an input for household activities and avoidance o f waterborne diseases are significant but not included in the analysis. The ERR therefore i s considered conservative and such n o sensitivity analysis i s needed.
Miscellaneous Small Rural Infrastructure
21. LGUs have a tendency to concentrate most o f their investment proposals in access infrastructure. During the Mindanao-wide consultations conducted by the APL2 Project Preparation Team, miscellaneous small rural infrastructures were brought out for possible financing under APL2. These include: (a) hanging bridges; (b) motor trails; (c) timber ports; (d) rock causeways and walkways; (e) pedestrian walkways; and ( f ) solar drying pavements. Since the demand for these infrastructure facilities i s much smaller than the three main subcomponents, their investment requirement i s lumped into one subcomponent. Under APL2, a total o f Php180.0 mi l l ion i s proposed to finance miscellaneous rural infrastructure projects over a five-year period. However, since the specific configurations, distribution, demand patterns and locations o f these miscellaneous rural infrastructure projects have yet to be established, this subcomponent can not lend itself to a substantive viabil ity analysis at this stage.
Rural Infrastructure - Component Analysis
22. The rates o f return analysis for the various subcomponents are indicated above. These indicators may be deemed conservative considering that the upper limits o f construction and rehabilitation cost estimates are used in the analysis. Benefits that are supposed to accrue f rom the implementation o f certain miscellaneous small infrastructure projects are also excluded.
Community Fund for Agricultural Development (CFAD) Subprojects
23. Building on the experience in MRDP1, the Project will continue to address the need for diverse and sustainable income generating projects in targeted poor and very poor communities in rural Mindanao by supporting the development o f micro-enterprises under the CFAD. The intent o f micro-enterprise development i s to address poverty by increasing agricultural production and enhancing agricultural productivity, creating l ivelihood and employment opportunities, and also providing access to assets
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(e.g., infrastructure) and production resources (e.g., financial and technical assistance). Operating within the scope o f the Agriculture and Fisheries Modernization A c t (AFMA) and supporting the implementation o f the Local Government Code, this component shall at the municipal level make available funds for community-based projects that reflect local priority needs. I t shall also draw lessons learned f i o m and best practices observed under the earlier phase.
24. A menu o f possible micro- and small-enterprises will be offered to the targeted communities. These will be undertaken with direct participation and financial contribution o f beneficiaries. Each o f the 225 municipalities identified under this phase will be involved in implementing this component with each one being allocated a block grant amounting to PhP1.5 m i l l i on and PhP0.5 mi l l ion for the loan proceeds and the Department o f Agriculture, respectively. Adding the LGU’s counterpart contributions o f PhP0.5 mill ion, each participating municipality carries a portfolio amounting to PhP2.5 mi l l ion.
Estimation Methodology and Results
25. Since the target communities will ultimately determine the type and scope o f each subproject, an ex- ante quantification o f costs and benefits can not be undertaken accurately. However, for the purpose o f analysis, four (4) likely subprojects are presented and examined in some detail. These subprojects include: (a) asparagus production, (b) high-value vegetable farming, (c) coconut ropes and twine production, (d) banana production and (e) cocoa fiber. Using the modular approach, the impact of these interventions i s estimated. The f i rs t step i s to examine the costs and the benefits o f the individual subprojects. With the amount allocated to each community used as a cap, the subprojects are then collectively analyzed as a component.
26. Based on this approach, the economic analysis conducted indicate that given an investment fund of PhP2.5 mi l l ion per municipality, the overall ERR “with project” stands at a robust 37.4%. T h i s estimate can vary depending on the combination o f subprojects adopted by each community. Regardless o f whatever combination o f subprojects i s adopted within the investment cap by a community, however, this component will be able to retain i t s economic viability.
Total project EFWNPV
27. At the component level, the farm-to-market roads investment yields an ERR o f 20.06 percent (for traffic roads) and 33.48% (for development roads); the investments in communal irrigation development generate an ERR o f 26.53%; communal water system development results in ERR of around 46.52%. The ERR for the Community Fund component at 37.4%. The overall project ERR and NPV aggregates the incremental benefits and costs f rom infrastructure and CFAD components, and included (a) total costs for project management, (b) 50% o f total costs for institutional strengthening and capacity building components, on the grounds that the benefits accrued f rom improved public services delivery will not only serve the project per se but wil l be shared by the local economy as whole. The NRM component i s not included in the analysis as the Cost- Benefit Analysis approach i s not applicable for this component. As such the overall project ERR i s estimated at about 21.51% with NPV at PhP 1.05 b i l l ion (OCC at 15%).
28. The project, either by component or as a whole i s economically viable. N o sensitivity analysis was carried out for the project as a whole as quantifiable benefits were estimated on a conservative basis and substantial unquantifiable benefits (and other beneficial externalities, see Section below) were not taken into account in the ERR calculation.
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Externalities
29. A multi-pronged development project such as the MRDP2 affects a large number o f people within and outside the region o f location. I t has primary and secondary benefits, each o f which creating i t s o w n multiplier effects. The term “external effects” or “secondary benefits” used in this study i s a catch-all term to describe the indirect contributions that M R D P 2 would make apart f rom those reflected in the direct utilization o f the project outputs.
30. Other than reinvestments, the principal source o f secondary benefits with respect to the regional objectives o f increasing aggregate consumption or promoting economic growth in the region i s private investments that would be induced by public projects such as MRDP2. For instance, the intensive operations in all affected landholdings o f beneficiaries (complemented by an effective delivery o f extension services, better farm-to-market roads and improved access to private capital) could lead to the adoption o f improved mix or diversified farming system in farms adjacent to the project sites, and consequently, to investments by farmers and their dependents in fertilizers, crop protection, conservation measures and agri-based livelihood enterprises.
3 1. Another source o f secondary benefit vis-a-vis the regional growth objective i s the consumption produced by the spending o f the beneficiaries o f the project in ancillary production activities. As APL2 raises the incomes o f beneficiary-families, they consume more and their expenditures give rise to additional employment, income and consumption. The consumption o f those who earn wages and profits f rom the sale o f goods and services to the target beneficiaries creates sti l l more employment, income and consumption, and so on in a chain reaction that i s diff icult to “internalize”.
Fiscal Impact
32. As with MRDP1, the Program by design, i s treated as “budget support” f rom central government with co-financing arrangement with local governments. The results o f the analysis o f the fiscal resources o f Mindanao LGUs highlight the crucial ro le that participating local government units will assume in implementing and “owning” the proposed subprojects o f MRDP2. The strengthened revenue generation and enhanced efficiency in allocating these resources to well-planned development initiatives alongside measured commitments to lessen their dependency o n the PRA wil l generate a significant positive fiscal impact for the project. With greater f lexibil i ty and willingness to provide a bigger share o f the Development Fund to rural development projects and to reallocate IRA resources for the much needed rural and economic infrastructure facilities in their respective localities, participating LGUs shall be able to meet their financial commitments to the project during i t s implementation. For the less financially endowed municipalities, securing the assistance o f provincial LGUs in augmenting municipal LGUs’ capability to provide the counterpart funds required can not be overemphasized. Over the l i fe o f the Project, these LGUs will be required to commit an aggregate amount o f some PhP1.66 b i l l ion or US $32,01million by way o f counterpart funds whi le the DA will be required to put up an estimated amount o f Php436.37 m i l l i on or US$8.39 mi l l ion towards financing the Project. I t becomes imperative therefore for the DA to ensure that i t s annual counterpart contribution to the Project i s appropriately covered by the agency annual budget.
33. Furthermore, a fundamental fiscal impact that can be achieved from the Project i s the effective and enhanced fiscal management and administration system, rural developmental planning and effective and organized community participation. These are l ikely to result in improved poverty alleviation in affected areas as rural communities’ access to social and rural infrastructures becomes better. The intensified implementation o f participatory community subprojects, which has an aggregate budget o f PhP 1.55 b i l l ion or US$29.8 mill ion, will strengthen agncultural support and socio-economic development initiatives o f the LGUs particularly in the bottom-up planning, governance and
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ownership. This will promote agribusiness, crop diversification and small scale-investments which in the long run will help sustain the gains o f the project. In addition, the implementation by contract, rather than by force account, o f the rural infrastructure component o f the project, which has a budget o f PhP4 bi l l ion or US$84 mill ion, will promote cost-effectiveness as wel l as cost-efficiency consciousness in project execution among LGUs. The LGUs’ intensified adoption o f this system could also ensue from improved fiscal management. These improved modalities in implementing both the CFAD subprojects and rural infrastructure components will ultimately lead to greater efficiency in the use o f both national and local government resources.
34. The future fiscal impact after project completion for national budget will be small as national level counterpart funds will already have been absorbed as part o f annual budget funding. On the part o f the LGUs, there will be further demand for fiscal resources to cover the O&M costs for FMRs and irrigation systems. Based on MRDP1 experiences, LGUs will be in a satisfactory position to meet their financial commitments towards the project. Furthermore, as mentioned above, positive fiscal impact can be expected from the project as a result o f improved rural development planning, increased community participation, and new and better ways o f allocating fiscal resources by LGUs while supporting rural development priorities viewed as important by rural communities.
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Annex 10: Safeguard Policy Issues, Social Assessment and Analysis
PHILIPPINES: Mindanao Rural Development Project - Phase 2
Background
1.
2.
3.
4.
5 .
6.
The first phase o f the MRDP provided the operational model to effectively “translate into action” the government’s policies toward rural poverty reduction, decentralization o f functions and responsibilities to Local Government Units (LGUs), and participatory development processes in local governance (targeted to include minority groups) in Mindanao, an area o f considerable socio- political, economic and policy significance.
The long-term rural development program was designed as a targeted poverty reduction program for the rural poor and indigenous communities o f Mindanao by improving incomes and food security in the targeted rural communities in the 27 provinces o f Mindanao. Poverty reduction efforts were to be directed not only in agricultural and fisheries-related rural development and biological diversity programs, but also in strengthening capabilities o f participating local government units to provide the needed agriculture and fisheries services to the rural communities. Between 2000 and 2004, MRDP1 set out to implement i t s development objectives using a multi-pronged approach towards rural development. I t la id the groundwork by setting up the processes in engaging the LGUs, rural poor communities, the Department o f Agriculture, and the Department o f Environment and Natural Resources (DENR) in planning, designing, and implementing rural development and coastal resource conservation programs.
Overall, MRDP1 i s regarded to have succeeded in reaching i t s objectives. Notable among i t s accomplishments are:
I t was instrumental in introducing vital “change processes” toward the institutional and operational decentralization and sustainability of vital agriculture services, and in enhancing core rural development skills of local government units.
M R D P 1 introduced a workable institutional model for localhational government engagement (through the integration o f community and LGU development plans into the Department o f Agriculture’s Agriculture and Fisheries Modernization Plans). The Program reinforced existing local mechanisms for rural development planning and tested participatory community planning models that enabled community priorities to be integrated in the local governments’ investment programs. Strong linkages were forged between municipalities and their provincial offices in the common pursuit o f a rural development agenda.
As indicated in the Implementation Completion Report (ICR) thirty-two participating municipalities in five provinces n o w have a better understanding o f LGU rational planning and financial processes and the principles o f fund and resource allocation; practice good procurement and contract supervision skills; and value the importance o f Operations and Maintenance in sustaining investments. In addition, LGUs have acquired sk i l ls in social and environmental compliance monitoring, and monitoring and evaluation (albeit to a l imi ted extent).
Further, participating municipalities established municipal multi-sectoral committees (MSCs) to ensure adequate representation o f the different sectors and the deliberate inclusion o f the Indigenous Peoples needs and priorities in the local investment plans. Lastly, a mechanism such as the Program Coordination Off ice gave the ultimate responsibilities for planning and implementation to LGUs
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7.
8.
9.
rather than the DA, which now assumed the coordination, facilitation and technical support roles which i t i s actually designed to play under the decentralized concept o f services delivery.
MRDP strengthened not only the decision-making knowledge and skills of LGUs, but also empowered communities and minority groups, instilling in them a strong sense of conJdence in planning for their communities.
Four years prior to MRDP, the budget allocated for agricultural and fisheries-related projects by the covered provincial and municipal local governments was at a level o f only PhP 40.2 mi l l ion. After MRDP1, expenditures o f these LGUs o n agriculture and fisheries rose to PhP 101.8 mi l l ion.
A significant change was also noted in the area o f decision-making by LGUs for developing their local investment plans. Currently, barangay priorities can only be considered at the municipal level if they went through the same rigorous participatory development planning processes which were demonstrated in the MRDP-covered barangays.
At the community level, external program evaluation findings showed that allowing access to Barangay decision-making has encouraged People’s Organizations (POs) to develop a stronger sense of accessibility, social inclusion and greater financial well-being. The 1,500 POs representing 17,000 people learned to expand their subprojects and apply the participatory planning, decision-making and problem-solving approaches acquired under the Program to other development initiatives in their localities.
MRPD -APL I significantly improved food security among the targeted rural communities, brought by the introduction of integrated food security technologies, and the creation of livelihood opportunities which augmented income of the poorest families. These families, prior to MRDP, were reported to be taking only one to two meals per day (as per the Social Assessment Report, 1999).
10. The I C R indicated that through the Community Fund for Agricultural Development (CFAD), MRDP 1 empowered vulnerable groups l ike women and indigenous people communities, by allowing them to express and develop higher levels o f awareness about their conditions, and actively and deliberately engaging them in planning, implementing and managing various subprojects. Approximately 1,5 83 income-generating and productivity- enhancing subprojects and small infrastructure subprojects benefited at least 37,000 households (for the food security and livelihood interventions) and 16,000 individuals (for the small infrastructure investments). Overall, the same report stated that C F A D was the “main driver for institutional development, sk i l ls transfer and capacity-building under MRDP 1 ”,
11. Positively influenced by Social Assessments and massive consultations with communities, C F A D subprojects deliberately targeted vulnerable groups like the women (representing 47% o f beneficiaries, o f whom IP women are included) and the Indigenous Peoples (22%). Independent ex- post household surveys which gauged beneficiary perceptions indicate that almost 70% consider themselves better-off, as compared to a mere 9% at mid-term.
Proposed MRDPZ Enhancements
12. MRDP2, as proposed in the Feasibility Study Report, shall proceed to cover more Mindanao rural communities with poverty alleviation s t i l l as i t s overall goal, implementing the same core strategies o f Integrated Rural Development Planning, Rural Infrastructure, and C F A D using Decentralized levels o f Coordinative Structures involving the DA as the institutional arrangement for Program delivery. For MRDP2, stronger emphasis on mainstreaming established integrated participatory processes for
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planning will be made, and shall be vigorously pursued under the proposed IGR Component. This improvement i s made based on the M R D P findings that Regional Field Units and other Technical Services Units o f the DA at the field level were not fully engaged during the MRDP1 implementation.
13. Sustainable development, which requires, among others, facilitating the development o f partnerships among various levels o f stakeholders occupying and governing different types o f agro-ecological systems, will take prominence in the MRDP2's Natural Resources Management Component. The component will adopt the same participatory processes developed in MRDP1 in the development and implementation o f biodiversity conservation plans across different ecosystems.
14. C F A D shall remain focused on responding to the needs and priorities o f vulnerable groups in high- poverty incidence communities, targeting 30% o f projected beneficiaries to comprise o f women and Indigenous Peoples at the end o f MRDP2. A proposed enhancement i s the financial and technical assistance to be provided to successful POs o f MRDP1 and other small farmers and fisheries groups, which involves marketing advisory services and other value-adding technologies to further enhance 'beneficiary incomes and productivity.
Social and Inst i tu t ional Analysis
15. The DA Inst i tu t ional Environment. The Agriculture Fisheries and Modernization A c t (AFMA) seeks to modernize the agriculture and fisheries sector by transforming these sectors f rom a resource- based to a technology-based industry. Extension services as mandated by AFMA cover the provision by the DA o f training services, farm and business advisory services, demonstration services, and information and communication services through multi-media. AFMA has also mandated that the delivery o f extension service shall be multi-disciplinary and shall involve the farmers, fisher folks and their organizations and those engaged in food and non-food production, processing, including the private and public sector. This i s a major shift in roles for the DA, and poses as a big institutional challenge to the Program as i t expands to the remaining 20 provinces and 3 regions o f Mindanao.
16. The ICR indicated that M R D P 1 did not satisfactorily involve the DA Regional F ie ld Units (RFUs) and other Research and Technical Units at the field level in the integrated planning process during the f irst ha l f o f implementation. Though late however, the R F U s actively pushedspearheaded the preparation and integration o f AFMPs up to the regional level for two consecutive planning periods. However, the allocation and disbursement o f local funds by the DA for the other non-MRDP-covered LGU-identif ied priorities has yet to be tested.
17. The DA seeks to address this through the clear development o f responsibility and authority sets for coordinating the different components o f the Program among i t s various levels o f Program Management. In various meetings during preparation, the DA Management recognizes that the presence o f competent management leadership (from the central office down to the RFUs) who value systems integration wil l spell the difference between Program success or failure. LGUs equally accept that competent and strong Program Management Leadership i s essential as various disciplines and cross traditional organizational boundaries are integrated.
18. Another M R D P 2 response i s the inclusion o f various integrated planning and on-the-job team development programs, involv ing not only the DA RFUs but also the LGUs, the Research, Development and Extension Units o f the DA Field Offices, and the communities as well. This i s reflected in the Institutional Strengthening Component o f the Project. Other key problem areas noted in M R D P 1 shall also be addressed, such as the following:
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a. The need to establish and institutionalize social participation technologies and communication for social action. An improvement on the planning model used in M R D P 1 for the Rural Development Planning for Agricultural Development Planning (RDPAP), which was fragmented and not integrated i s envisioned. Under the multi-level planning in MRDP2, stakeholders’ outputs are harmonized vertically and horizontally. Community-friendly tools and processes for planning wil l be manualized for wider dissemination and encourage uniformity in the outputs o f the planning exercise will be encouraged.
b. The need to institutionalize the regional research, development and extension system. Institutionalizing the Network will help promote a closer collaboration between the researchers o f the DA and the LGU extension workers. I t wil l also facilitate allocation by LGUs o f additional resources to support research and extension programs. Moreover, it will encourage convergence o f the different support institutions, including the LGUs, Department o f Science and Technology, and State Universities and Colleges.
The Vulnerable Groups: Women and the Indigenous Peoples
19. Profile o f Indigenous Peoples in Mindanao; Indigenous communities comprise a substantial segment o f the country’s population. As o f 1998,32 there were about 15 mi l l ion indigenous people in the country, making up approximately 20% o f the total population. The National Commission o n Indigenous Peoples or NCIP, the government’s main policy-making and implementing agency o n indigenous communities, located more than ha l f (61%) o f the indigenous peoples in Mindanao. In an Asian Development Bank (or ADB) comprise at least 40% o f the total regional population are in Mindanao. Region 10, which cover the provinces o f Misamis Occidental, Misamis Oriental, Bukidnon, and Camiguin, i s home to an estimated 1,470,000 indigenous peoples, nearly 60% o f the regional population. Around 4546% of the total population o f Region 1 134 and the Caraga are indigenous peoples. (Region 11 and Caraga region have 4,604,158 and 1,942,667 population, respectively.)
three o f the five regions where indigenous peoples
20. In more remote, interior areas o f Zamboanga l ive the Subanen; the Higaonon in Bukidnon uplands. The Bagobo, Manuvu, Mandaya, Matigsalug, and Ata comprise the indigenous populations in the provinces o f Bukidnon, Cotabato, Davao, and those o f Southeastern Mindanao. They l ive mostly in mountainous ranges and in remote coastal areas.
2 1. Marginalization of Indigenous Peoples: Economically and politically, indigenous peoples are one o f the country’s disadvantaged groups. They usually l ive in areas where poverty i s most severe. Marginalization o f the indigenous could be traced to the country’s colonization. Communal ownership o f resources, including land, thrived among tribal communities. However, Spanish settlers enforced o n the islands encomienda, a pol icy which expropriated the lands fkom the indio and, transferring a l l rights to the monarch’s control. Americans retained the encomienda system but also introduced market economy, where lands could also be private property. The spread and dominance o f Christianity, imposition and.institutiona1ization o f the Regalian doctrine, encroachment o f lowlanders and those coming from other towns, and pressures o f corporate interests further relegated indigenous peoples to the margins.
22. IP Communities Perceptions of Development Projects: Over the years, indigenous peoples have been displaced by the entry o f migrants, logging and mining activities, and reforestation projects.
l2 httu://adb.ore/Docunients/Reportsllndi~enous Peonles/I’HI/Chautel. 3.udf. l3 httu:Nadb.orW‘Doctinients/Reuorts/Indiecnoua Pcoulcs/PHI/Chauter 3.udf. 34 Region 11 consists o f the provinces o f Saranggani, South Cotabato, Davao Del Norte, Davao Oriental, and Davao del Sur
89
23.
Continuing loss o f their lands appears as a primary concern among indigenous peoples, as development i s being pursued in their areas. Natural Resource Management programs have disregarded them in most cases, at times even cutting them from the forests which i s their main source o f subsistence. And for those who do own their lands, a sense o f anxiety i s commonly felt. In the case o f the Higaonon in Bukidon, they reported that in the 1970s, many o f their community members, because o f grinding poverty, were forced to sell their lands to migrants for a few pieces o f clothing, canned goods, or alcoholic beverages. Indigenous peoples also have to contend with destruction o f crops by natural disasters and pests, recurring mi l i tary and insurgent operations, erosion o f indigenous practices and beliefs, and introduction o f technologies unfamiliar to them. Indigenous peoples also cited certain government development and reforestation projects that were carried out without their approval. Some indigenous communities recalled having been consulted only during the project proposal and that discussions were not followed through at the other stages o f the project.
Indigenous peoples, however, usually say that they do not regard themselves “poor” in the sense non- indigenous societies would use. According to the IPS in Northwestern Mindanao, they cannot be poor i f they can regain access to and control o f forests, acquire knowledge on forest use and management, in l ieu o f formal schooling, and revive indigenous systems. In a series o f discussions with indigenous communities about their situation, they identified the following development needs and aspirations:
I Ful l implementation of the Indigenous Peoples ’ Rights Act. Dispossession o f land, through legal and extralegal means, i s one o f the main sources o f hopelessness among the indigenous peoples about their plight. Education for their future generation. Indigenous peoples are willing to sell their land or a piece o f heirloom to be able to send their children to school. Rural Infrastructure. Indigenous peoples recognized the need for more roads and bridges for increased productivity. In addition to roads, the IPS want the local government to help them build “tribal halls,” where community members can meet regularly and discuss their communities’ development. Self-governance, Indigenous peoples have expressed strong interest in being involved in community development. They want to be engaged in planning and carrying out agricultural projects, provided that the activities do not compromise their indigenous cultures and traditional systems. Management and protection of forests. Indigenous peoples gave accounts o f government-led conservation projects that were implemented without their consent and restricted them access from forests. They want to be directly engaged in forest and resource conservation and management. Organization structures that wi l l protect indigenous peoples from outside forces. IP leaders want to protect their traditions and other cultural practices f rom the corrosive influence o f school and the media, and the entry o f corporate projects. Culture-sensitive interventions. Many development facilitators went into indigenous communities implementing subprojects, with limited knowledge o f local practices. Findings from stakeholder-workshops for APL 2 show that some community organizers, municipal, and barangay facilitators were ill-equipped with adaptive sk i l l s to respond to needs o f different IP communities. They expected the IP communities to grow at the same rate o f learning as their non-IP counterparts. There were few instances o f stereotyping o f indigenous peoples by local implementers o f projects.
1
1
1
1
1
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Safeguards
24. The following safeguards policies apply to MRDP2:
a. Indigenous Peoples Policy (OP/BP 4.10). Indigenous communities are known to inhabit in areas covered by the Project. They wil l be mostly beneficiaries o f the Project.
b. Involuntary Resettlement Policy (OP/BP 4.12). Resettlement i s not expected to occur in the Project. However, there may be minor land acquisition for the right-of-way o f access roads and in lands where some o f the subprojects will be constructed.
c. Environmental Assessment Policy (OP/BP 4.01). The Project will finance mostly rehabilitation and a number o f new constructions o f rural infrastructure, which will have localized environmental impacts during construction.
d. Pest Management (OP4.09). NRM interventions and community subprojects may support agricultural andor technological demonstration farms that may entail l imi ted or prudent use o f chemical pesticides, within the context o f Integrated Pest Management (IPM), which i s being actively promoted by the DA. The Screening mechanism for subproject selection will include provisions for pest management consistent with the operational policy. These are stated in the Environmental Guidelines and operations manuals.
25. Frameworks and operations guidelines have been developed for these safeguards policies under MRDP1. In MRDP2, these were enhanced based on the lessons o f M R D P 1 and on the recent social and environmental assessments conducted. The improved guidelines are mainstreamed in the manual o f operations o f a l l Program components.
Indigenous Peoples Policy
26. MRDP1 developed an IP Policy Framework and Operations Guidelines to direct the Program’s activities in so far as Indigenous People are concerned. The IP Operations Guidelines have been further improved based on the results o f an IP assessment conducted in 12 IP-inhabited communities across five M R D P 1 provinces (please see Project Files).
27. C F A D operationalized the policy through i t s deliberate inclusion o f IP communities in i t s targeted beneficiaries. In addition, IP consultation meetings were held consistently to ensure that subprojects affecting ancestral domains or IP communities were presented and meaningfully explained to IP communities, prior to their approval.
28. There are, however, reported cases (though very negligible) o f powerful interests undermining the IP development processes, and have taken over the management o f agri-based livelihood interventions f rom the IPS.
29. In response, MRDP2 will continue to enforce the same IP policy, but enhancements to the delivery structure for the Project’s components - especially CFAD Implementation in IP communities - will be added, to avoid migrants f rom taking over development assistance provided to IP communities. Measures will include the following:
(a) Technical Working Groups comprising the National Commission o n Indigenous Peoples and Federations o f IP Tribal Groups will be established at the Provincial LGU level to facilitate planning and consultation processes;
. 91
(b) Indigenous Peoples Ancestral Domain Sustainable Development and Protection Plans (ADSDPP)
(c) NGOs with track records in working with IP communities shall be tasked to deliver appropriate
(d) IP Facilitators selected by their respective Tribal Councils will be trained to facilitate IP
(e) IP women selected by the Tribal Councils shall be organized to take leadership for Food Security
will be integrated in the LGU development plans;
culture-responsive capability-building interventions in IP communities;
community mobilization processes and delivery o f extension services; and
interventions and as trainers for extension services.
30. These operational strategies are reflected in the Operations Manuals, and are further described as a special Chapter for IP Communities Engagement in the Manual o f Operations. Whi le CFAD will not be able to respond to the concerns over titling ancestral domains, these initiatives will further bring development o f IP communities to the frontlines.
Involuntary Resettlement
3 1. M R D P 2 has updated the Land Acquisition, Resettlement and Rehabilitation Policy Framework based o n the new OP 4.12 on involuntary resettlement. T o ensure that key stakeholders, especially project displaced persons, are meaningfully involved in key Project decision making, the Project has developed a social participation framework that cuts across project components and across levels and phases o f project management. The framework provides avenues for beneficiary groups to develop their individual capacities as wel l as their institutional capacities to become effective development partners o f the Project.
32. Given the nature o f the local and community subprojects, land acquisition and demolition o f houses/structures and displacement o f persons i s not anticipated in MRDP2. All farm-to-market- roads wil l fo l low current alignments, thus minimizing potential environmental impacts and land acquisition. Should these be necessary, e.g., in rehabilitation o f infrastructure (including any minor right o f way adjustments for roads or irrigation canals), they would be kept to a minimum; for new communal irrigation projects, the lands required for the canal system will be acquired in consultation with the benefiting communities and will be consistent with existing practice under MRDP1.
33. The DA has demonstrated capabilities for training LGUs to comply with the Policy Guidelines, and has exercised due diligence in monitoring and evaluating compliance by implementing units to the safeguard policy. The only improvement in M R D P 2 i s the development o f an Operations Manual for the LARR Policy, to guide the DA RFUs in training, monitoring and evaluating the LGUs’ adoption and strict observation o f the safeguard policy. Staff o f the M R D P 1 Planning Unit, who took leadership for the implementation and monitoring o f the LARR, shall twin with their RFU Counterparts during the first two years o f subproject implementation, to ensure that RFUs acquire the knowledge and sk i l ls to observe faithfully the requirements o f the LARR.
Environment (Category B)
34. The project will support mostly rehabilitation and few new construction o f rural infrastructure, such as farm-to-market roads, levels I and I1 water supply systems, communal irrigation systems, multi- purpose centers and solar dryers. I t wil l also support community subprojects, NRM interventions and sustainable income generating activities. The environmental impacts for these types o f subprojects and activities are assessed to be minor, localized and reversible. For these reasons, the project i s classified as Environment Category B.
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35. Environmental Impacts. A Mindanao-wide environmental assessment (EA) was conducted by the Department o f Agriculture (DA) as part o f project preparation. The EA took into account the types and scale o f subprojects and activities to be supported under MRDP2, and the experience and lessons learned in implementing subprojects under MRDP1. The results o f the EA indicated that environmental impacts o f subprojects and activities to be supported under MRDP2 are insignificant, localized and highly reversible. Impacts are mostly related to c iv i l works.
a. Civil works impacts: The rehabilitation and/or construction o f rural infrastructure may contribute to the short term degradation o f the environmental quality in the immediate vicinity o f the construction site. I t may increase the noise and dust levels that could affect the health o f construction workers and nearby settlements, degrade the quality o f nearby water bodies if earth spoils and solid wastes are not properly disposed o f and if sanitary facilities are not provided. I t could also endanger the lives o f the workers if occupational health and safety standards are not practiced at the construction site. These impacts, however, are short-term and l imi ted only during the construction phase and can be easily mitigated by adopting proper construction site management, practicing good housekeeping measures and properly adopting occupational and health safety standards.
b. Impacts on vegetation and natural habitats: Construction and/or rehabilitation o f rural infrastructure, if not properly sited and designed, may damage existing vegetation and ecologically-sensitive natural habitats.
36. Environmental Guidelines. As a result o f the EA, environmental guidelines were formulated both at the Project and the subproject levels, which would guide both the Department o f Agriculture and the subproject proponents on what environmental and sustainability considerations are to be taken into account when preparing, designing and implementing subprojects. The guidelines are mainstreamed into the Operations Manual o f each component. In general, the project will have the fol lowing guidelines:
a. Construction works wil l not be located in protected areas and other sensitive areas: Civil works activities will not be in environmentally-, culturally- and socially-sensitive areas. Any construction works that will pose significant environmental risk and/or those that encroach protected areas will not be funded by the project.
b. Contracts to include environmental measures: The contracts for c iv i l works activities will include clauses on proper construction site management, good housekeeping measures, provisions o f temporary sanitary facilities such as portalets, proper waste disposal, adherence to dust and noise standards and adoption o f occupational health and safety standards.
c. Huge civil works with adverse environmental impacts wi l l not be funded: The project will not support huge c iv i l works activities, land conversion, resource extraction, industrial production or any activity that could adversely affect the environment.
d. Purchase and massive use ofpesticides wi l l not be funded/supported: The project will not finance purchase o f chemical pesticides nor will i t support massive use o f pesticides. Instead, the project will encourage adoption o f integrated pest management (IF'M), which i s also being advocated by DA.
e. Mitigating measures: Subprojects and activities that may cause negative impacts o n the environment, based on the screening, will be required to prepare and implement relevant mitigating measures. For subprojects covered under the Philippine environmental impact
93
statement (EIS) system, proponents will be required to prepare the Ini t ia l Environmental Examination (IEE) for submission to and review by the Department o f Environment and Natural Resources (DENR) and the subsequent issuance o f environmental compliance certificate (ECC).
Implementation Arrangements
37. Subproject Proponents are the municipal local government units and communities. They will be responsible for ensuring that their subprojects and activities comply with the environmental guidelines and the social safeguards frameworks (IF and LARR) set forth in the Project’s Operations Manuals. Should their subprojects be covered by the Philippine EIS system, they will also be responsible for preparing the relevant IEE checklist or report for application and issuance o f ECC by the DENR. They will also monitor compliance o f contractors o n the environmental provisions o f the contract and impose penalties should there be violations in the contract.
3 8. DA-Regional Field Units/Project Coordination Office will be responsible for screening subproject proposals for environmental and social safeguards issues, coverage and non-coverage with the Philippine EL4 and compliance with environmental guidelines and social safeguards frameworks. They will also monitor subproject proponents’ compliance on environmental management plans, mitigating measures and social safeguards frameworks agreed during subproject preparation and appraisal. In addition, the DA-RFUsPCO in coordination with the PSO and the DENR will provide trainings and capacity building programs on safeguards for the subproject proponents.
39. Project Support Office (PSO) will, during the f i rs t year o f Project implementation, take the lead in subproject screening for environmental and social impacts and, with the DENR, train the Regional PCO until capacity has been built up. The PSO will also oversee and monitor the Project’s overall compliance to environmental guidelines and social safeguards frameworks.
40. Department of Environment and Natural Resources (DENR). Regional Offices o f the Environmental Management Bureau (EMB) o f the DENR, as part o f their mandates, will ensure that subprojects, especially those covered will comply with the Philippine EIA. DENR-EMB may also monitor compliance o f subproject proponents. They may be tapped by DA-RFUs to provide training to subproject proponents and DA-RFUs on environmental assessment and related matters.
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Annex 11: Project Preparation and Supervision
PHILIPPINES: Mindanao Rural Development Project - Phase 2
Planned Actual PCN review July 26,2005 June 14,2005 Initial P ID to PIC August 9,2005 August 8,2005 Init ial ISDS to PIC August 9,2005 August 8,2005 Appraisal October 2,2006 August 29,2006 Negotiations December 18 to 20,2006 February 13 to 14,2007 BoardRVP approval March 30,2007 March 29, 2007 Planned date o f effectiveness April 30, 2007 June 30,2007 Planned date o f mid-term review September 30,2009 March 20 10 Planned closing date September 30, 2012 December 31,2012
Key institution responsible for preparation of the project: Philippine Department o f Agriculture
Bank staff and consultants who worked on the project included:
Name 'Title Unit Carolina V. Figueroa-Geron Senior Operations Officer (Task EASRE
Mary Judd Senior Anthropologist EASSO Ronald Zweig Senior Agricultural Ecologist EASRE Samuel Wedderburn Senior Operations Officer ENVGC Josefo Tuyor Environmental Specialist EASRE Roberto Tordecilla Social Safeguards Specialist EASSO Gilbert Braganza Operations Officer EASRE Dominic Aumentado Procurement Specialist EAPCO Joseph G. Reyes Financial Management Specialist EAPCO Cordula Rastogi Engineer, Young Professional EASRE Idah Pswarayi-Riddihough Lead NRM Specialist EASRE Guzman Garcia-Rivero Operations Adviser EASRE Mei Wang Senior Counsel LEGEA Edward Daoud Senior Finance Officer L O A G 1 Cyprian Fisiy Sector Manager (Peer Reviewer) EASSO
Team Leader)
Marie-Helene Collion Lead Agriculture Services Specialist MNSRE (Peer Reviewer)
Reviewer) Sally Burningham Senior Transport Specialist (Peer EASTE
Esperanza Sadiua Program Assistant EACPF Andrew Mendoza Team Assistant EACPF Cynthia Dharmajaya Program Assistant EASRD Ajay Markanday Economist/M&E Specialist FAO-WB Cooperation Programme Liu Xueming Economist FAO-WB Cooperation Programme Ines Bagadion Institutional Development/ Consultant
Participation Specialist Salvador Jiao Rural Infrastructure Engineer Consultant Cesar Umal i Rural Development Planning Consultant Luningning Bondoc Project Development Analyst Consultant
95
Bank funds expended to date on project preparation:
1. Bank resources: US$193,078.37 (LEN-BB); US$89,100 (LEN-BB-FAO) 2. Trust funds: US$687,796.48 (PHRD Preparation Grant, Recipient-Executed) 3. Total: US$282,178.37 (Bank-Executed); US$687,796.48 (PHRD Preparation Grant, Recipient-Executed)
Estimated Approval and Supervision costs: 1. Remaining costs to approval: US$30,000 (LEN-BB) 2. Estimated annual supervision cost: US$75,000
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1.
2.
3.
4.
5 .
6.
7.
8.
9.
Annex 12: Documents in the Project File
PHILIPPINES: Mindanao Rural Development Project - Phase 2
Detailed Project Feasibility Proposal Submitted by the DA to the I C C
Detailed Financial Management Assessment conducted by Joseph Reyes, FM Specialist
Project Preparation Reports prepared by the DA
Operations Manuals Endorsed by the DA
Detailed Economic and Financial Analysis, including economic models
Detailed Project Costs
Regional Environmental Assessment for Mindanao
Social Assessment Report on Indigenous Peoples
LARR Framework
10. Indigenous Peoples Development Framework
1 1. Working Paper on Detailed Design and Activities under the IGR Component
12. Geographical Coverage and LGU Selection Criteria
13. DOF - MDFO Letter for the Mechanism and Guidelines for Performance-Based Grants dated February 12,2007.
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Annex 13: Statement o f Loans and Credits
PHILIPPINES: Mindanao Rural Development Project - Phase 2
Difference between expected and actual
disbursements Original Amount in US$ Millions
Project ID FY Purpose IBRD IDA SF GEF Cancel. Undisb. Orig. Frm. Rev'd
PO75464
PO64925
PO94063 PO79661
PO79628
PO73206
PO751 84
PO72096
PO70899
PO66076
PO66397 PO66532
PO77012
PO73488 PO71007
PO69491 PO69916
PO66509 PO57731
PO39019
PO57598 PO48588
PO04595 PO04576
2006
2006
2006
2005 2005
2005
2004
2004
2004
2004
2004
2004
2003 2003
2003
2002 2002
2001 2001
2000
1999 1999 1998
1998
PH-NP Support for HNP
PH-SUPPORT FOR STRATETIC LOCAL DEV & INV
PH-National Program Support for Basic Ed
PH-MANILA SEWERAGE 3 PH-2ND WOMEN'S HEALTH & SAFE MOTHERHOOD
PH LAND ADMINISTRATION AND MANAGEMENT I1
PH: Diversified Farm Income & Mkt. Devt
PH-GEF-Rural Power Project
PH LAGUNA DE BAY INSTITUTIONAL STRENGTHE JUDICIAL REFORM SUPPORT PROJECT PH-Rural Power Project
PH-GEF-Electric Cooprtv System Loss Redu PH KALAHI-CIDSS PROJECT
PH - ARMM Social Fund
Second Agrarian Reform Communities Dev PH-LGU URBAN WATER APL2
PH-2nd Social Expenditure Management PH-GEF-MMURTRIP-Bicycle Nwk
PH-MMURTRIP
PH-NAT'L ROADS IMPROVMT APLl PH-RURAL FINANCE I11
PH-LGU FINANCE & DEV. PH - COMMUNITY BASED R E S 0
PH-WATER DISTRICTS DEV.
110.00
100.00
200.00
64.00 16.00
19.00
60.00
0.00 5.00
21.90
10.00
0.00
100.00
33.60
50.00
30.00 100.00
0.00
60.00 150.00
150.00 100.00
50.00
56.80
0.00
0.00
0.00 0.00 0.00
0.00
0.00
0.00 0.00
0.00
0.00
0.00
0.00 0.00 0.00
0.00 0.00
0.00
0.00 0.00 0.00 0.00
0.00
0.00
0.00 0.00
0.00 0.00 0.00
0.00
0.00
0.00 0.00
0.00
0.00 0.00
0.00 0.00
0.00
0.00 0.00
0.00 0.00 0.00 0.00 0.00
0.00 0.00
0.00 0.00
0.00 0.00 0.00
0.00
0.00
9.00
0.00
0.00
0.00 12.00
0.00
0.00
0.00
0.00 0.00 1.30 0.00 0.00 0.00 0.00
0.00
0.00 0.00
0.00 0.00 0.00
0.00
0.00
0.00 0.00
0.00
0.00 0.00
0.00
0.00 0.00
17.28
0.00
0.00 0.00 0.00 0.00
40.00 12.00
0.00 15.73
110.00
100.73
200.00
54.73
15.62
18.10
56.40
8.07 4.80
19.43
8.40
6.77
68.65 21.70
37.83
12.54 14.46
0.32
39.26
3 1.08
18.67 35.25 8.01
6.36
0.00 0.00
0.00 0.00 0.12
0.45
11.40
I .57
2.30
10.98
0.50 5.90
51.50 15.20
27.09
23.41
14.46
1.06 39.26
31.08
18.67 75.25
20.01
22.09
0.00
0.00
0.00 0.00 0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00 0.00 0.00
0.62
0.00 0.00
0.00 -1.40
0.00 -0.37
8.01 2.61
Total: 1,486.30 0.00 0.00 22.30 85.01 897.18 372.30 9.47
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PHILIPPINES STATEMENT OF IFC’s
Held and Disbursed Portfolio In Millions o f US Dollars
Committed Disbursed
IFC IFC
FY Approval Company Loan Equity Quasi Partic. Loan Equity Quasi Partic.
2001 2002
2000
2005 2002
2005 1998 2002 2005 2001
2005 2004 1998
1989 1993 1992
2004 2000 2001 2003 2004 2000 1993
1993 2001
2005 1992
2000 I998 2000 2003 1995 1994 1994
AEI
APW Trade
Alaska Milk
Asian Hospital
Bahay Financial
Balikatan HF
Banco de Oro
Cepalco
Drysdale Food
Eastwood
Eastwood
Filinvest
Filinvest Lan...
Globe Telecom
H&Q PV 111 H&QPV-I
H&QPV-II
Holcim Phil
LARES
MFI MEP
MNTC
M WC
M WC
Mariwasa
Mindanao Power
Mirant Pagbilao
PEDF
PLGIC
Pilipinas Shell PlantersBank
Pryce Gases
STRADCOM
SVI Sua1 Power
Walden Mgmt
Walden Ventures
0.91
0.00 0.00 3.30
0.00 0.00 0.00
15.65 5.31 14.76 12.50
17.73 43.34 20.00 0.00
0.00 0.00 0.00
22.00 0.00
38.60 31.16 30.00 10.91 0.00
6.00 1.50 0.00 0.00 0.00 13.34 7.30 0.00 19.49
0.00 0.00
0.00 0.00
0.62 0.00 0.16 1.89 6.38
0.00 0.00 0.00 0.00 0.00 0.00 0.00
0.94
0.15 0.08 1.97 2.70 0.1 1
0.00 0.00
14.96 0.00
2.22
10.00 0.00
0.00 1.56 0.00 0.00 0.00 2.00 0.00
0.03 0.03
0.00
0.60 0.00 I .oo 0.00
33.21 10.00
0.00 0.00 0.00 0.00 0.00 0.00
0.00
0.00 0.00 0.00
0.00 0.00 0.00 0.00 0.00 0.00
3.52 0.00 0.00 0.00
1.50
0.00 2.32 1.70 0.00
0.00 0.00
0.00
0.00 0.00 0.00
0.00
0.00 0.00 0.00 0.00 2.60 0.00 0.00 0.00
0.00
0.00
0.00
0.00 0.00
0.00
0.00 0.00 0.00 0.00 0.00
0.00
0.00 0.00 0.00
0.00 0.00 0.00 5.82 0.00
0.00
25.51 0.00
0.00 0.00
0.91 0.00
0.00
3.30 0.00 0.00 0.00
0.00 5.31
14.76 0.00
17.73 21.67 0.00
0.00
0.00 0.00
0.00
0.00 0.00
38.60 31.16 0.00
10.91 0.00
6.00 0.75 0.00
0.00 0.00
13.34 7.30 0.00
19.49 0.00 0.00
0.00 0.00 0.62 0.00
0.16 1.89 6.38 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.94 0.15 0.08 1.97
0.00 0.1 I 0.00
0.00
14.96 0.00 2.22
10.00
0.00 0.00 1.56 0.00
0.00 0.00 0.00 0.00 0.03 0.03
0.00 0.60 0.00 1 .oo 0.00
3 1.05 10.00
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00 0.00
0.00
0.00 3.52 0.00 0.00
0.00 1.50 0.00
2.32 1.70 0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00
0.00 0.00 0.00 0.00
2.60 0.00 0.00
0.00 0.00 0.00
0.00
0.00 0.00 0.00
0.00
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
0.00 0.00 0.00 5.82 0.00
0.00 25.51 0.00
0.00 0.00
Total portfolio: 313.80 45.80 53.85 33.93 191.23 41.10 51.69 33.93
99
Approvals Pending Commitment
FY Approval Company Loan Equity Quasi Partic.
2001 PEDF
2002 Eastwood
~~
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
Total pending commitment: 0.00 0.00 0.00 0.00
100
Annex 14: Country at a Glance
PHILIPPINES: Mindanao Rural Development Project - Phase 2
POVERTY and SOCIAL
2004 Population, m id-year (miliio ns) GNI per capita (Atlas method, US$) GNI(Atlasmethod, US$ billions)
East Lower. Asla B mlddle.
P hlllpplnes Pacific Income
63.0 I 5 0 95.1
Average annual growth, 1998.04
Population (Yd Laborforce (%)
M o s t recent est lmate (latest year avallable, 1998-04)
Poverty (%of population belo wnationalpo verty line) /a Urban population (%of tote1 population) Life expectancyat birth (pars) Infant mortality(per lOOOlive birlhs) Child malnutrition (%ofchildren under5) Access to an improved wdter source (%ofpopulation) Literacy(%ofpopulationage $59 Gross primaryenrollment oof school-agepopulation)
Male Female
2.1 2.6
30 62
70 27 32 65 93 it? 10 it?
KEY ECONOMIC RATIOS and LONG-TERM TRENDS
1984 1994
GDP (US$ billions) 314 64 1 Gross capital formation1GDP 203 241 Exports of goods and serviceslGDP 240 336 Gross domestic savings/GDP 133 7 6 Gross national savings/GDP 8 6 218
Current account balance/GDP Interest payments/GDP Total debt/GDP Total debt sewicelexports Present value of debt/GDP Present value of debt/exports
-41 -46 6 2 3 3
775 626 335 130
1984.94 1994-04 2003 (average annual gm Mh) GDP 2.6 3 7 3.6 GDP per capita 0.5 15 16 Exports of goods and sewices 7.1 4.0 4.1
1,870 1260
2,369
0.9 11
41 70 32 15
76 90 10 10 1P
2003
77.7 7.0
50.5 14.9
33.3
18 3.7
60.7 20.4 64.2 00.4
2,430 1580 3.847
10 0.7
49 70 33 11
61 90 114 It5 10
2004
64.6 7 . 4 515 8 . 0
36.5
2.5 4.1
72.2 20.2
2004 2004.08
8.1 5.1 4.2 3.1 14.1 5.8
Development dlamond'
Life expectancy
Gross m a r y
GNI , ,& capita enrollment per
L
Access to improvedwatersource
-Philippines Lo wer-middieinco me gm up
Eco no m lc rat lo s*
Trade
T
Indebtedness
-Philippines Lower-middle-income O ~ U D
101
STRUCTURE o f the E C O N O M Y 1884 1884
(%of GDP) Agnculture 248 220 Industry 379 325
M anufactunng 248 233 Services 373 455
Household final consumption expenditure 737 714 General gov't final consumption expenditure 7 0 0 8 Imports of goods and sewices 251 401
(average annualgrodh) Agnculture Industry
Services Manufactunng
1884-84 1884-04
2 0 2 2 2 2 3 1 2 7 3 4 3 8 4 9
Household final consumption expenditure 3 5 4.2 Genera gov't final consumption expenditure 3.9 16 Gross capital formation 6.9 18 Imports of goods and services 112 3 5
2003
UO 32 6 23 8 544
73 7 113
52 8
2003
-18 3 8 4 2 5 8
7 7 2 5 2 3 9 8
2004
U 7 32 4 23 5 53 9
716 0 4
50 9
2004
5 1 5 2 5 1 7 1
15 0 0 9 5 5 9
Growth o f capltal and G D P ('4
40 T
1 -GCF -GDP
Growth o f exports and imports ('4 20
10
0
-10
.20
I I 3 O 1 -Expons - 0 - i W O r t S
Note 2004 data are preliminaryestimates a Family Income and Expenditure Survey2003 *Thediamonds showfour keyindicatom in thecountry(in bold)comparedwthits income-groupaverage lfdata are missing,thediamondvnll
be incomplete
PRICES andGOVERNMENT F INANCE
Domestic prices (%change) Consumer prices Implicit GDP deflator
Government finance ( % o f GDP, includes current grants) Current revenue Current budget balance Overall surplusldeficit
T R A D E
(US$ millions) Totalexports (fob)
Electronics Garments Manufactures
Total imports (cif) Food Fuel and energy Capital goods
Export price index (2000=WO) Import pnce index(2000=WO) Terms o f trade (2000=X)O)
1884
5.2 53.3
0 8 2 6 -19
1884
5,391
2,775 6,070
8 2 1,649 1,U3
1984
15.8 n.0
8 9 4.0 10
1884
0,483 4.984 2,375 0.615 21,333
953 2,040 6,888
2003
2.9 2.7
14.9 -2.0 4 .7
2003
35,342 24,989
2,265 32,022 40,797
1,340 3,761
15,023
2004
5.5 6.1
14.8 -14 -3.9
2004
38.728 27.787
2,172 35,444 45,09
1603 4,714 8.742
Philippines
Inflation (%) 15
10
5
99 W 01 02 03 04
Export and import levels (US$ mill.)
50,000 T
40,000
30,000
20,000
10,WO
0
I 88 89 00 01 02 03 04
BExports olmports
102
B A L A N C E o f P A Y M E N T S
(US$ miiiions) Egor ts of goods and services Imports of goods and services Resource balance
Net income Net current transfers
1984
7,033 7.238 -205
-1475 386
Current account balance -1294
Financing items (net) Changes in net reserves
846 448
M e m o : Reserves including gold (US$ miilions) Conversion rate (DEC,iocal/US$) 8 7
E X T E R N A L D E B T and RESOURCE FLOWS
(US$ millions) Total debt outstanding and disbursed
1984
24,357 IBRD 1865 IDA 71
Total debt service IBRD IDA
2,703 262
1
Composition of net resource flows Official grants 739 Official creditors 748 Pnvate creditors 209 Foreign direct investment (net inflows) 9 Portfolio equity(net inflows) 0
World Bank program Commitments Disbursements Pnncipal repayments Net flows interest payments Net transfers
333 301 93
209 7 0 38
1994
20251 26,000 -5,749
1863 936
-2,950
4,752 -1,802
6,995 26.4
1994
40,257 4.855
7 4
4,645 7 7
3
284 182
870 1,591
0
578 305 360 -55 360 45
2 0 0 3
38,641 45,821 -7.80
-226 8,802
1,396
-1511 115
7,063 542
2 0 0 3
62,724 3,445
215
D231 478
8
593 52
599 150
-1,305
116 202 345 -143 142
-285
2 0 0 4
42,829 50,492 -7,663
147 9,596
2,080
-1800 -280
6.228 56.0
2 0 0 4
61042 3 3 7
214
I t 5 8 494
9
6 8 -653
732 57
-1434
65 145
379 -233
Q3 -357
Cur ren t account balance to GDP ( O h )
QS 88 00 01 02 03 W I
C o m p o r l t l o n o f 2 0 0 4 debt (US$ mil l .)
c 756 D 3,538
: 13.971
A - IBRD E-Bilsterd 6 . IDA D. Other mltilaterd F - Private C. IMF G - Short-term
Develooment Economics 9/8/05
103
1
2
4
6
7
1111
1414
1717
1818
1919
2020
21212222
1616
2323
24242525
2727
3131
3939
4242 4646
4747
4949
5454
7575
5959
6262
6565
6666
7171
7373
7474
7676
8181
8080
7777
78787979
6363
3
5 9
1010
8
1212
1313
1515
2828
2929
3030
2626
3232
3333
3434
3535 3636
3737
3838
4040
4141
4343
4444 4545
4848
5050
5151
5252
5353
5555
5656
5858
6161
6464
6868
6969
7070
6060
6767
7272
5757
IliganIligan
PasigPasigQuezon Quezon
LucenaLucena
ViracViracBatangasBatangas
BoacBoacMamburaoMamburao
RomblonRomblon
Santa CruzSanta Cruz
AntipoloAntipolo
BalerBalerPalayan Palayan
TarlacTarlacIbaIba
MalolosMalolosBalangaBalanga
Trece MartiresTrece Martires
Laoag CityLaoag City
ViganViganBanguedBangued
TabukTabuk
IlaganIlagan
CabarroguisCabarroguis
BontocBontocLagaweLagawe
BayombongBayombongLa TrinidadLa Trinidad
LingayenLingayen
KabugaoKabugao
BascoBasco
Puerto PrincesaPuerto Princesa
PiliPili
SorsogonSorsogon
DaetDaet
MasbateMasbateCatarmanCatarman
BoronganBoronganCatbaloganCatbalogan
NavalNaval
MaasinMaasin
BacolodBacolod
DumagueteDumaguete SiquijorSiquijor
TagbilaranTagbilaran
MambajaoMambajao
SurigaoSurigao
San JoseSan Jose
TandagTandag
Tubod Tubod
ProsperidadProsperidad
TagumTagumNabunturanNabunturan
MatiMatiKidapawanKidapawan
DigosDigos
IsulanIsulan
Marawi Marawi
MalaybalayMalaybalay
OroquietaOroquietaDipologDipolog
IpilIpil
IsabelaIsabelaCityCity
JoloJolo
KaliboKaliboRoxas CityRoxas City
San Jose deSan Jose deBuenavistaBuenavista
JordanJordan
AlabelAlabel
KabuntalanKabuntalan
PanglimaPanglimaSugalaSugala
ZamboangaZamboanga
CalambaCalamba
San FernandoSan Fernando
TuguegaraoTuguegarao
BaguioBaguioSan FernandoSan Fernando
LegaspiLegaspi
TaclobanTacloban
CebuCebu
ButuanButuan
DavaoDavaoCotabatoCotabato
CagayanCagayande Oro de Oro
IloiloIloilo
PagadianPagadian
KoronadalKoronadal
CalapanCalapan
MANILAMANILA
Shariff AguakShariff Aguak(Maganoy)(Maganoy)
Sultan KudaratSultan Kudarat
1
2
4
6
7
11
14
17
18
19
20
2122
16
23
2425
27
31
39
42 46
47
49
54
75
59
62
65
66
71
73
74
76
81
80
77
7879
63
3
5 9
10
8
12
13
15
28
29
30
26
32
33
34
35 36
37
38
40
41
43
44 45
48
50
51
52
53
55
56
58
61
64
68
69
70
60
67
72
57
ICAR II
III
IV-A
V
IV-B VI VII
VIII
IX X
XIII
XI
XII
ARMM
NCR
Iligan
PasigQuezon
Lucena
ViracBatangas
BoacMamburao
Romblon
Santa Cruz
Antipolo
BalerPalayan
TarlacIba
MalolosBalanga
Trece Martires
Laoag City
ViganBangued
Tabuk
Ilagan
Cabarroguis
BontocLagawe
BayombongLa Trinidad
Lingayen
Kabugao
Basco
Puerto Princesa
Pili
Sorsogon
Daet
MasbateCatarman
BoronganCatbalogan
Naval
Maasin
Bacolod
Dumaguete Siquijor
Tagbilaran
Mambajao
Surigao
San Jose
Tandag
Tubod
Prosperidad
TagumNabunturan
MatiKidapawan
Digos
Isulan
Marawi
Malaybalay
OroquietaDipolog
Ipil
IsabelaCity
Jolo
KaliboRoxas City
San Jose deBuenavista
Jordan
Alabel
Kabuntalan
PanglimaSugala
Zamboanga
Shariff Aguak(Maganoy)
Sultan Kudarat
San Fernando
Tuguegarao
BaguioSan Fernando
Legaspi
Tacloban
Cebu
Butuan
DavaoCotabato
Cagayande Oro
Iloilo
Pagadian
Koronadal
Calapan
Calamba
MANILA
MALAYSIA
Celebes Sea
Moro
Sulu Sea
Leyte Gulf
Visayan
Sea
Mindoro Strait
SibuyanSea
Phi l ippineSea
Babuyan Channel
Luzon Strai t
Gulf DavaoGulf
Mindanao Sea
BatanIslands
BabuyanIslands
PolilloIslands
LubangIslands
Catanduanes
TicaoSibuyanTablas
Busuanga
SemiraraIslands
CuyoIslands
Culion
Linapacah
Bugsuk
Balabac
Cagayan Sulu
Tawi-Tawi
Sulu
Basilan
Mindanao
CamiguinSiquijor
Negros
Panay
Bohol
Cebu Leyte
SamarMasbate
Marinduque
BuriasMindoro
Palawan
Luzon
Dinagat
Siargao
Sarangani
20ºN
10ºN
5ºN125ºE
120ºE
125ºE
Project AreaFor detail, seeIBRD 35270
IlocosIlocos NorteIlocos SurLa UnionPangasinan
Cordillera Admin. Reg.AbraApayaoBenguetIfugaoKalingaMountain Province
Cagayan ValleyBatanesCagayanIsabelaNueva VizcayaQuirino
Central LuzonAuroraBataanBulacanNueva EcijaPampangaTarlacZambales
National Capital Reg.
CALABARZONBatangasCaviteLagunaQuezonRizal
MIMAROPAMarinduqueMindoro OccidentalMindoro OrientalPalawan*Romblon
BicolAlbayCamarines NorteCamarines SurCatanduanesMasbateSorsogon
Western VisayasAklanAntiqueCapizGuimarasIloiloNegros Occidental
Central VisayasBoholCebuNegros OrientalSiquijor
Eastern VisayasBiliranEastern SamarLeyteNorthern SamarSamarSouthern Leyte
Zamboanga PeninsulaZamboanga del NorteZamboanga del SurZamboanga Sibugay
I1234
CAR56789
10
II1112131415
III16171819202122
NCR
IV-A2324252627
IV-B2829303132
V333435363738
VI394041424344
VII45464748
VIII495051525354
IX555657
Northern MindanaoBukidnonCamiguinLanao del NorteMisamis OccidentalMisamis Oriental
Davao Reg.Compostela ValleyDavao del NorteDavao del SurDavao Oriental
SOCCSKSARGENNorth CotabatoSaranganiSouth CotabatoSultan Kudarat
CaragaAgusan del NorteAgusan del SurDinagat IslandsSurigao del NorteSurigao del Sur
Autonomous Reg. inMuslim MindanaoBasilanLanao del SurMaguindanao**Shariff KabunsuanSuluTawi-Tawi
X5859606162
XI63646566
XII67686970
XIII7172737475
ARMM
767778798081
**Shariff Aguak (Maganoy) andSultan Kudarat serve as co-capitalsof the province.
*Executive Order 429, May 23, 2005,provides for the transfer of Palawanprovince (#31) from Region IV toRegion VI; Administrative Order 129holds EO429 in abeyance until animplementation plan is approvedby the President.
PHILIPPINES
0 50 100
0 50 100 Miles
150 Kilometers
MARCH 2007
SELECTED CITIES
PROVINCE CAPITALS
REGION CAPITALS
NATIONAL CAPITAL
RIVERS
MAIN ROADS
RAILROADS
PROVINCE BOUNDARIES
REGION BOUNDARIES
INTERNATIONAL BOUNDARIES
This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries.
IBRD 35269
PHILIPPINES
MINDANAO RURALDEVELOPMENT PROJECT
PHASE 2
X XIII
XIXII
ARMM
IX
Butuan
DavaoCotabato
Cagayande Oro
Koronadal
Pagadian M i n d a n a o
Negros Bohol
CebuLeyte
Sarangani
Siquijor
Dinagat
Siargao
Basilan
Sulu
Tawi-Tawi
Agusan
R.
C e l e b e s S e a
S u l u S e a
G u l f D a v a o
G u l f
M o r o
M i n d a n a oS e a
10°
8°
6°
120° 122° 124° 126°
120° 122° 124° 126°
10°
8°
6°
P.N.G
.
AUSTRALIA
10°
20°
0°
10°
100° 110° 120° 140°
VIETNAMTHAILAND
CAMBODIA
LAOP.D.R.
BRUNEI
M A L A Y S I A
I N D O N E S I A
PALAU
Manila
PHILIPPINES
N O R T H P A C I F I C
O C E A N
INDIAN OCEAN
Java Sea
Timor Sea
Arafura Sea
P h i l i p p i n e
S e a
SINGAPORE
TIMOR-LESTE
0°
10°
20°
100° 110° 120°
10°
CHINA
Project Area.See main map.
ZamboangaZamboangaDel NorteDel Norte
ZamboangaZamboangaDel SurDel SurZamboangaZamboanga
SibugaySibugay
BukidnonBukidnon
CamiguinCamiguin
LanaoLanaoDel NorteDel Norte
MisamisMisamisOccidentalOccidental
MisamisMisamisOrientalOriental
CompostelaCompostelaValleyValleyDavaoDavao
Del NorteDel Norte
DavaoDavaoDel SurDel Sur
DavaoDavaoOrientalOrientalNorthNorth
CotabatoCotabato
SaranganiSarangani
SouthSouthCotabatoCotabato
SultanSultanKudaratKudarat
AgusanAgusanDel NorteDel Norte
AgusanAgusanDel SurDel Sur
DinagatDinagatIslandsIslands
SurigaoSurigaoDel NorteDel Norte
SurigaoSurigaoDel SurDel Sur
BasilanBasilan
LanaoLanaoDel SurDel Sur
MaguindanaoMaguindanao
ShariffShariffKabunsuanKabunsuan
SuluSulu
Tawi-tawiTawi-tawi
Zamboanga PeninsulaZamboanga del NorteZamboanga del SurZamboanga Sibugay
Northern MindanaoBukidnonCamiguinLanao del NorteMisamis OccidentalMisamis Oriental
Davao Reg.Compostela ValleyDavao del NorteDavao del SurDavao Oriental
SOCCSKSARGENNorth CotabatoSaranganiSouth CotabatoSultan Kudarat
CaragaAgusan del NorteAgusan del SurDinagat IslandsSurigao del NorteSurigao del Sur
Autonomous Reg. inMuslim MindanaoBasilanLanao del SurMaguindanaoShariff KabunsuanSuluTawi-Tawi
IX123
X45678
XI9
101112
XII13141516
XIII1718192021
ARMM
222324252627
ZamboangaDel Norte
ZamboangaDel SurZamboanga
Sibugay
Bukidnon
Camiguin
LanaoDel Norte
MisamisOccidental
MisamisOriental
CompostelaValleyDavao
Del Norte
DavaoDel Sur
DavaoOrientalNorth
Cotabato
Sarangani
SouthCotabato
SultanKudarat
AgusanDel Norte
AgusanDel Sur
DinagatIslands
SurigaoDel Norte
SurigaoDel Sur
Basilan
LanaoDel Sur
Maguindanao
ShariffKabunsuan
Sulu
Tawi-tawi
Regions and Provinces
PHILIPPINES
MINDANAO RURALDEVELOPMENT PROJECT
PHASE 2
PROJECT AREAS
PAN-PHILIPPINE HIGHWAY
OTHER MAIN ROADS
MAJOR PORTS
RIVERS
REGION CAPITALS
PROVINCE BOUNDARIES
REGION BOUNDARIES
This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other informationshown on this map do not imply, on the part of The World BankGroup, any judgment on the legal status of any territory, or anyendorsement or acceptance of such boundaries.
0 50 100 150
KILOMETERS
IBRD 35270
MARCH 2007
