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Document of
The World Bank
FOR OFFICIAL USE ONLY
Report No. 47916-PH
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
INTERNATIONAL FINANCE CORPORATION
MULTILATERAL INVESTMENT GUARANTEE AGENCY
COUNTRY ASSISTANCE STRATEGY
FOR
THE REPUBLIC OF THE PHILIPPINES
FOR THE PERIOD FY 2010-2012
April 2, 2009
Philippines Country Team, World Bank
East Asia and Pacific Region
International Finance Corporation
East Asia and Pacific Department
Multilateral Investment Guarantee Agency
East Asia and Pacific Department
This document has a restricted distribution and may be used by recipients only in the performance of
their official duties. Its contents may not otherwise be disclosed without World Bank authorization.
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The last Country Assistance Strategy (CAS) Report No. 32141-PH was discussed by the Board on May 17, 2005, and the last CAS Progress Report No. 40085-PH was dated June 21, 2007 World Bank IFC MIGA Vice President James W. Adams Rashad-R. Kaldany
Karin Finkelston Izumi Kobayashi
Country Director/ Resident Representative
Bert Hofman Jesse Ang Frank Lysy
Task Team Leader Co-Task Team Leader
Lada Strelkova Andrew Parker
Magdi Amin Conor Healy
CURRENCY EQUIVALENTS
Currency unit: Pesos (Php) as of April 2, 2009
US$1 = Php 48.27
FISCAL YEAR
January 1 – December 31
This Country Assistance Strategy (CAS) was prepared under the guidance of Bert Hofman, IBRD Country Director, and Jesse Ang, IFC Resident Representative, by a team led by Lada Strelkova, Task Team Leader (TTL) and Andrew Parker, co-TTL. The IFC team integral to the development of this CAS was led by Magdi Amin, Principal Strategy Officer. MIGA participation was led by Conor Healy, Risk Management Officer. Nigel Twose provided overall guidance on the joint IFC-IBRD strategy development.
The CAS Core Team included: David Llorito, Leonora Gonzales, Lilanie Magdamo, Maribelle Zonaga, Maryse Gautier and Yolanda Azarcon and the following Working Group Leaders: Ben Eijbergen, Carol Figueroa-Geron, Eduardo Banzon, Eric Le Borgne, Jehan Arulpragasam, Josefina Esguerra, Karl Kendrick Chua, Kim Henares, Maria Loreto Padua, Mukami Kariuki, Swati Ghosh, and Yasuhiko Matsuda. Core team support was provided by: Cynthia Manalastas, Grace Borja, Maria K. Hermoso, Maria Liberty Cardenas, Ludy Anducta, and Necitas Garcia from IBRD; Andrey Manalo from IFC; and Yoshine Uchimura, and Zafar Ahmed (consultants).
The following CAS Working Group members and other colleagues have also made important contributions to this strategy: Agnes Albert-Loth, Cecille Vales, Christopher Pablo, Fabrizio Bresciani, Florian Lazaro, Hamid Alavi, Hiroshi Tsubota, Josefo Tuyor, Felizardo Virtucio, Jr., Iain Shuker, Jonas Bautista, Lynnette Dela Cruz Perez, Mark Woodward, Mario Suardi, Mary Judd, Ma. Bella Tumaliwan-Belizario, Matthew Stephens, Maya Villaluz, Miguel Navarro-Martin, Rashiel Velarde, Rayah Sarah Judy Padilla, Rey Ancheta, Rosechin Olfindo, Salvador Rivera, Sameer Goyal, Sheryll P. Namingit, Simon Gregorio, Maria Theresa Quinones, Timothy Johnston, Ulrich Lachler, Victor Dato, and Zahid Hasnain from IBRD; and Aileen Ruiz, Ali Naqvi, Colin Taylor, Deepa Chakrapani, Euan Marshall, Gerlin Catangui, Julie Bayking, Lulu Baclagon, Matthew Gamser, Patricia Wycoco, Rafael Dominguez, Val Bagatsing, Will Beloe, and William Haworth from IFC. Other members of the Bank-wide Philippines Country Team (including IBRD, IFC and MIGA) have also contributed.
Special thanks are extended to the Government of the Philippines counterpart team and World Bank Group development partners for their contributions.
ACRONYMS AND ABBREVIATIONS
AAA Analytical and Advisory Activities
ADB Asian Development Bank
AIDS Acquired Immune Deficiency Syndrome
ARCDP2 Agrarian Reform Communities Development Project 2
ARMM Autonomous Region in Muslim Mindanao
AusAID Australian Agency for International Development
BSP Bangko Sentral ng Pilipinas (Central Bank of the Philippines)
BEIS Basic Education Information System
BIR Bureau of Internal Revenue
BOC Bureau of Customs
BTr Bureau of Treasury
CALABARZON Cavite, Laguna, Batangas, Rizal and Quezon provinces
CAS Country Assistance Strategy
CCT Conditional Cash Transfer
CDD Community-Driven Development
CDS City Development Strategy
CGAC Country Governance and Anticorruption
CIDA Canadian International Development Agency
CMU Country Management Unit
CLT Country Leadership Team
COA Commission on Audit
CPBD Congressional Planning and Budget Department
CPI Consumer Price Index
CSOs Civil Society Organizations
DBM Department of Budget and Management
DBPLID Development Bank of the Philippines/ Local Infrastructure Development
DENR Department of Environment and Natural Resources
DepED Department of Education
DFIMDP Diversified Farm Income and Market Development Project
DILG Department of Interior and Local Government
DOE Department of Energy
DOF Department of Finance
DOH Department of Health
DPL Development Policy Loan
DPWH Department of Public Works and Highways
DRM Disaster Risk Management
EAP East Asia and Pacific
ECSLRP Electric Cooperatives System Loss Reduction Project
EC European Commission
FDI Foreign Direct Investment
FIES Family Income and Expenditure Survey
FM Financial Management
FSAP Financial Sector Assessment Program
JICA Japan International Cooperation Agency
GAD Gender and Development
GDP Gross Domestic Product
GFDRR Global Facility for Disaster Reduction and Recovery
GFIs Government Financial Institutions
GIFMIS Government Integrated Financial Management Information System
GNP Gross National Product
GOCC Government Owned and Controlled Corporations
IBRD International Bank for Reconstruction and Development
ICT Information and Communication Technology
IEG Independent Evaluation Group
IFC International Finance Corporation
IMF International Monetary Fund
INT Department of Institutional Integrity
FY10-12 Country Assistance Strategy for the Philippines April 2, 2009
ii
IPs Indigenous Peoples
ISRs Implementation Status and Results Reports
IRA Internal Revenue Allotment
KALAHI-CIDSS Kapit Bisig Laban sa Kahirapan-Comprehensive and Integrated Delivery of
Social Services
LGC Local Government Code
LGUs Local Government Units
LISCOP Laguna De Bay Institutional Strengthening and Community Participation
MDFO Municipal Development Fund Office
MDGs Millennium Development Goals
MIGA Multilateral Investment Guarantee Agency
MILF Moro Islamic Liberation Front
MIMAROPA Mindoro, Marinduque, Romblon, and Palawan provinces
MRDP2 Mindanao Rural Development Project 2
MMURTRIP Metro Manila Urban Transport Integration Project
MTEF Medium Term Expenditure Framework
MTF-RDP Mindanao Trust Fund-Reconstruction and Development Project
MTPDP Medium-Term Philippines Development Plan
MTPIP Medium-Term Philippines Investment Plan
MWSS Metro Water Sewerage Systems
NAPC National Anti-Poverty Commission
NCR National Capital Region
NEDA National Economic and Development Authority
NER Net Enrolment Rate
NG National Government
NGO Non-Governmental Organization
NPS National Program Support
NPL Non Performing Loan
NRIMP2 National Roads Improvement Management Project 2
NSCB National Statistical Coordination Board
NTC National Telecommunications Commission
ODA-GAD Official Development Assistance-Gender and Development
PCN Project Concept Note
PDF Philippines Development Forum
PEFA Public Expenditure and Financial Accountability
PEM Public Expenditure Management
PFM Public Financial Management
PGAT Philippines Governance Advisory Team
PIDP Participatory Irrigation Development Project
PPP Public-Private Partnership
PSP Private Sector Participation
RPP Rural Power Project
SME Small and Medium Enterprise
SOCCSKSARGEN South Cotabato, Sarangani, North Cotabato, and Sultan Kudarat provinces
SSLDIP Support for Strategic Local Development and Investment Project
TA Technical Assistance
TB Tuberculosis
TF Trust Fund
UN United Nations
USAID United States Agency for International Development
UT Urban Transport
VAT Value Added Tax
WBI World Bank Institute
WBG World Bank Group
WDDP Water District Development Project
WHO World Health Organization
WGI World Governance Indicators
WPA Work Program Agreement
JOINT IBRD/IFC/MIGA
COUNTRY ASSISTANCE STRATEGY (CAS) FOR
THE REPUBLIC OF THE PHILIPPINES
TABLE OF CONTENTS
EXECUTIVE SUMMARY ............................................................................................ I
I. INTRODUCTION ................................................................................................ 1
II. PHILIPPINES CONTEXT AND DEVELOPMENT AGENDA ............................. 1 Social and Political Context ........................................................................................................................... 1 Recent Economic Developments .................................................................................................................... 3 Macroeconomic Prospects .............................................................................................................................. 4 Poverty Profile and Trends ............................................................................................................................. 6 Philippines Development Challenges and Opportunities ............................................................................... 9 Updated 2004-10 Medium-Term Philippines Development Plan (MTPDP) ............................................... 11
III. BANK GROUP ASSISTANCE STRATEGY FOR THE PHILIPPINES .............. 12
A. Lessons Learned from FY06-09 CAS and Stakeholder Feedback ......................................................... 12 Lessons from FY06-09 CAS Completion Report......................................................................................... 12 Findings from Recent IEG Evaluations ........................................................................................................ 12 World Bank FY09 Client Survey and Multistakeholder Consultations ....................................................... 13
B. Proposed World Bank Group Assistance Strategy ................................................................................. 14 World Bank Group Assistance Strategy Overview ...................................................................................... 14 World Bank Group Program Integration ...................................................................................................... 17 Strategic Objectives and Results Areas ........................................................................................................ 18 - Strategic Objective 1: Stable Macro Economy .......................................................................................... 18 - Strategic Objective 2: Improved Investment Climate ................................................................................ 20 - Strategic Objective 3: Better Public Service Delivery ............................................................................... 22 - Strategic Objective 4: Reduced Vulnerabilities ......................................................................................... 24 Cross-Cutting Theme: Good Governance .................................................................................................... 27
C. Implementing the FY10-12 Country Assistance Strategy ....................................................................... 29 Operationalizing Governance ....................................................................................................................... 29 Managing the Program ................................................................................................................................. 31 Fostering Stronger Partnerships ................................................................................................................... 34 Mainstreaming Gender ................................................................................................................................. 36
IV. MANAGING RISKS ......................................................................................... 37
FY10-12 Country Assistance Strategy for the Philippines April 2, 2009
ii
TEXT TABLES
Table 1: Medium-Term Macroeconomic Framework
Table 2: Poverty by Urban-Rural Areas and Sector of Employment, 2003 and 2006
Table 3: Estimates of Growth Elasticity of Poverty
TEXT BOXES
Box 1: Key Messages from Multistakeholder Consultations
Box 2: World Bank Group’s Response to the Global Economic Crisis
Box 3: One Bank Group: IFC-IBRD Integrated Programs
Box 4: Enhancing Conflict Sensitivity
Box 5: Governance Filters
Box 6: CAS Results Monitoring
TEXT FIGURES
Figure 1: Poverty Reduction in the Philippines versus East Asian Neighbors
Figure 2: Poverty Incidence versus Magnitude of Poverty, 1985 and 2006
CAS ANNEXES
Annex 1: Poverty, Inequality and Progress toward the MDGs
Annex 2: Governance Challenges, Opportunities and Risks
Annex 3: FY06-08 Country Assistance Strategy Completion Report
Annex 4: World Bank FY09 Client Survey and CAS Multistakeholder Consultations
Annex 5: FY10-12 Country Assistance Strategy Results Framework
Annex 6: Indicative World Bank Group (WBG) Program by Results Area
Annex 7: Official Development Assistance (ODA) Programs in the Context of the CAS
Annex 8: World Bank Group-Managed Trust Funds in the Philippines
Annex 9: Philippines Harmonization Agenda
Annex 10: Country Financing Parameters for the Philippines
CAS STANDARD ANNEX TABLES
Annex A2: Country At-A-Glance
Annex B2: Selected Indicators of Bank Portfolio Performance and Management
Annex B3: IFC Investment Operations Program
Annex B3 IBRD Indicative Financing Program, FY10-12
Annex B4 IBRD Indicative Program of Analytical and Advisory Activities, FY10-12
Annex B5: Philippines – Social Indicators
Annex B6: Philippines – Key Economic Indicators
Annex B7: Philippines – Key Exposure Indicators
Annex B8: Operations Portfolio (IBRD and Grants)
Annex B8: IFC Committed and Disbursed Outstanding Investment Portfolio
MAP OF THE PHILIPPINES (IBRD NO. 33466R3)
FY10-12 Country Assistance Strategy for the Philippines April 2, 2009
i
EXECUTIVE SUMMARY
i. The Philippines’ Development Challenges. In recent years, the Philippines’ economic
growth has rebounded on the back of fiscal consolidation, macroeconomic stability and a strong
international economic environment. Higher growth has, however, not translated into less poverty: the
share of the population below the poverty line is the same as it was a decade ago and has increased
between 2003 and 2006. Income inequality remains high, and the country risks missing MDGs on
education and maternal health. Weak governance is a recognized constraint to sustained growth and
poverty reduction. The country’s main development challenge, therefore, is to achieve more inclusive
growth. In the short- and medium-term, the external environment for the Philippines is likely to
deteriorate, and the country may face slower growth and renewed fiscal pressures. Furthermore, the
elections in 2010, typical of such elections, may slow down decision-making and program
implementation. At the same time, an incoming administration can be expected to engage with the
World Bank Group on the policies and initiatives it gives priority to.
ii. The World Bank Group Strategy. The updated 2004-10 Medium-Term Philippines
Development Plan (MTPDP) provides the framework for the Bank Group’s CAS for the Philippines.
The MTPDP focuses on economic growth and job creation; energy; education and youth opportunity;
and anticorruption and good governance. It highlights the need for agriculture sector modernization to
raise farmers’ incomes and to upgrade rural welfare; supports sustained investments in infrastructure;
and gives priority to protecting the poor through more employment opportunities, shelter, health
insurance, microfinance, low-cost medicines, and cash transfers. Over the CAS period, the World
Bank Group will contribute to achieving more inclusive growth by supporting the Philippines to (i)
maintain macroeconomic stability and cope with increased macroeconomic uncertainty through a
stronger revenue base, improved expenditure efficiency and targeting, and responsive financing; (ii)
improve the investment climate through an enabling business environment that promotes
competitiveness, productivity and employment, especially for sectors of particular importance to the
poor, such as agriculture and fisheries, and developing better models of infrastructure finance and
management; (iii) increase access to better public services for the poor by deepening the reform
agendas in key public services sectors and expanding basic service delivery directly to the poor; and
(iv) reduce vulnerabilities by expanding and rationalizing the country’s social safety net, improving
disaster risk management, piloting climate change adaptation measures and expanding climate change
mitigation programs. In line with the Bank’s country governance and anticorruption framework
(CGAC), the Bank Group will promote good governance as a cross-cutting theme by supporting more
capable and accountable government at the national, local, and agency level to strengthen core
governance systems in public financial management, procurement and decentralization.
iii. The World Bank Group Program. The Bank Group's program focuses on core results areas
through engagements at the national, local, and private sector level. The CAS proposes an IBRD
lending program in the order of US$700 million-US$1 billion per year, which would reverse the recent
trend of negative net transfers and could increase IBRD exposure to the Philippines from US$2.7
billion in FY08 to US$3.9 billion in FY12. The proposed lending plan is indicative as IBRD’s
capacity to lend can change over time. There is higher degree of certainty for the lending plans for the
earlier years of the CAS period. The IFC investment program is expected to be in the order of
US$250-300 million per year, while advisory services will be supported by funding of approximately
US$3 million per year. The Bank Group will support efforts to counter the effects of the global
economic crisis by financing faster-disbursing poverty alleviation programs such as the conditional
cash transfers (CCT), the community driven development (CDD) project KALAHI-CIDDS, the
national program support (NPS) for health and education, additional financing to ongoing operations,
and repeater projects. The Bank has committed to support a possible government program for
increasing revenues and fiscal transparency in calendar year 2009. Beyond current commitments for a
development policy loan (DPL) with a possible draw-down option to mitigate the impact of the global
economic crisis, the Bank will use development policy operations in support of disaster risk
FY10-12 Country Assistance Strategy for the Philippines April 2, 2009
ii
management and in the context of a strong reform program in government financial management. The
World Bank Group will also continue to support increasing local government access to finance
through more diversified financial instruments. IBRD investment loans and IFC investment and
advice will support the development of new models of financing and management for critical
infrastructure. IFC’s response to the global crisis will also include access to four financing facilities.
The World Bank Group, in collaboration with other development partners, will increasingly emphasize
knowledge cooperation and formalize a rolling knowledge program with the Government and in
partnerships with consortia of think tanks and universities. A central aim of the program for the CAS
period is to provide input into the MTPDP (2011-15) to be approved after the 2010 elections.
iv. One Bank Group. The Philippines CAS pilots deeper integration of IBRD and IFC efforts by
building on lessons of successful World Bank Group integration, such as a shared assessment and a
shared strategy developed jointly by a mixed IBRD and IFC team. IBRD and IFC will pursue joint
programs in three areas: infrastructure, agribusiness, and financial sector. MIGA will also continue to
offer its guarantee products, ensuring consistency with the overall Bank Group goals.
v. Implementing the Program. The World Bank Group will organize its Philippines program
and its country team along the lines of the four strategic objectives, one cross-cutting theme, and
eleven core results areas. For each of these, the Bank Group will organize, budget for, and monitor an
integrated program of AAA, lending, trust funds and partnership activities. The Bank will flexibly
adjust resource allocation among results areas depending on progress and emerging opportunities in
those areas. IFC’s resources will be integrated in the results areas that will be jointly pursued. The
Philippines Governance Advisory Team (PGAT) will prioritize activities in governance reforms, and
will advise task teams on governance improvements in specific activities, including through use of
―Governance Filters‖. The World Bank Group will strengthen existing partnerships with civil society
and academe and with other development partners within the overall framework of the Government-
led Philippines Development Forum, which the Bank co-chairs. In delivering the program, the World
Bank Group will pay special attention to strengthening the portfolio, improving lending efficiency,
furthering the knowledge agenda, and leveraging its resources through strategic partnerships and trust
funds. The Bank has identified, and agreed with the Government, a set of early ―Readiness Filters‖
that will be used to screen projects during the regular programming discussions.
vi. Managing Risks. There are considerable risks, both internal and external, that may affect
the implementation of the Philippines CAS. Political risks stem from the upcoming national elections
and associated transitions, which may influence commitment to ongoing and planned programs. The
World Bank Group will maintain dialogue with the administration to ensure continuity in its programs
and help inform the development agenda of the incoming government. The ongoing global recession
and financial turmoil is expected to affect negatively the Philippines, particularly through reduced
remittances, exports, and possibly, lower revenues. The World Bank Group, together with the IMF
and other partners, will assist the Government to manage fiscal and financial sector risks and external
vulnerabilities through policy advice and monitoring of economic and social developments including
through support for improved statistics. In case of a sharper-than-expected deterioration in the
economy, the World Bank Group stands ready to use IFC crisis facilities, and IBRD financing for
quick disbursing budget support within the broad parameters of the CAS lending range. The World
Bank Group support will proceed once there is clarity on agendas and commitments, and projects meet
the Bank’s processing filters. Commitment to governance reforms is a major focus of these filters,
including at the decentralized level.
Suggested Items for Board Discussion
(i) Is the CAS adequately positioned to help the Philippines cope with emerging global
uncertainties and likely shocks to economic management and prospects?
(ii) Is the proposed indicative program and choice of instruments appropriate, considering the
country circumstances and the Bank's comparative advantages?
(iii) Is the CAS approach to operationalizing governance sufficiently strong?
FY10-12 Country Assistance Strategy for the Philippines April 2, 2009
1
I. INTRODUCTION
1. The current World Bank Group CAS for the Philippines covers the period up to June
2009. It was discussed by the Bank’s Board in May 2005 and was originally planned to cover the
period FY06-08. The turn-around in the country’s fiscal position in the two years that followed the
preparation of the CAS opened a window of opportunity for broader policy reforms for the
Philippines. In 2007, the World Bank Group, in agreement with the Philippine Government, decided
to extend the CAS to June 2009. The CAS Progress Report prepared in June 2007 reaffirmed the
relevance of the CAS theme of Supporting Islands of Good Governance in national government
agencies, local governments, and dynamic sectors in the Philippines that demonstrate how improved
accountability and service delivery can lead to better economic and social outcomes. The Progress
Report also anticipated more Bank lending based on the increased fiscal space and government
demand for more Bank assistance.
2. Beyond the institutional requirement, the period of political transition lying ahead, the
rapidly deteriorating external economic environment, and the emerging shifts in the Bank
Group strategy provide the rationale for moving ahead with a new CAS. Launching a new CAS
in the first half of calendar year 2009 will allow the Bank Group one year of implementation before
the May 2010 elections, and would provide an opportunity to contribute to the new MTPDP 2011-15,1
the Government’s main guide for development policy. A CAS Progress Report in FY2011 would
allow the Bank Group to align priorities with those of the incoming government. At the request of
Government, the subsequent Bank Group CAS will be synchronized with the new MTPDP. Other
development partners have been closely involved in developing the CAS, and some expressed interest
in a joint Partnership Strategy beyond 2012.
3. The proposed strategy is grounded in the EAP Regional Strategy and the Bank Group’s
strategic themes. Many of the Bank Group’s current strategic priority agendas are relevant to the
Philippines. The country’s middle-income country (MIC) status, yet continuing high rates of poverty
and inequality; struggles with the effects of climate change; challenges to bring peace to areas of
enduring conflict; and requests for the Bank to bring to bear the best global knowledge all provide
clear links to the Bank’s strategic priorities and the core areas of EAP’s strategy, such as MIC agenda,
fragile/conflict states, global public goods, and the knowledge agenda.
II. PHILIPPINES CONTEXT AND DEVELOPMENT AGENDA
Social and Political Context
4. The Philippines is an archipelago of 7,107 islands located in Southeast Asia. With a
population of about 89 million in 2007, the Philippines is the world’s 12th most populous country. The
Philippines is the fastest urbanizing country in East Asia: fueled by in-migration and natural
population growth, the urban population has already passed the 50 percent mark and is expected to rise
to 75 percent of the country’s population by 2030. The country is divided into three island groups:
Luzon, Visayas, and Mindanao. Metro Manila, the capital, is the 11th most populous metropolitan area
in the world. A per capita GDP of US$ 1,624 in 2007 ranks the Philippines as a low-middle income
country.
5. The Philippines has a strong potential for development in terms of natural and human
resources, but overall development outcomes have fallen short of potential. The Philippines is
considered to be one of the most biologically rich and diverse countries in the world, with substantial
mineral, oil, gas and geothermal potential. Its human resource base is strong, with many leaders in
1 The Philippines National Economic and Development Authority (NEDA) has requested Bank Group inputs
into the next MTPDP, which will be completed after the 2010 elections.
FY10-12 Country Assistance Strategy for the Philippines April 2, 2009
2
Government, industries, and academe possessing world-class talents. The country has a vibrant
private sector and an active civil society, which are both important partners in development. Modern
productive sectors such as electronics manufacturing, business processing operations and
telecommunications have experienced rapid growth in recent years. The value of the country’s
English-speaking work force is reflected in the rapid growth of the business process outsourcing and
other services in the country, as well as in the international demand for its labor force and the resulting
high level of overseas employment.2 As of December 2007, around 8.7 million Filipinos, about 10
percent of the total population, were permanent residents or temporary residents/workers overseas,
with annual remittances reaching US$14.4 billion, or more than 10 percent of the country’s GDP.
However, the country has seen a relative decline in its income per capita compared to its neighbors
since the 1950s, when it was second only to Japan. Compared to its ASEAN neighbors, the
Philippines has exhibited higher unemployment rates and greater income inequality.
6. The next Philippine general elections are scheduled to be held on May 10, 2010. At the
national level, the presidency, vice-presidency, half the Senate seats, and all House seats are up for
election. In addition, all provinces, cities and municipalities (including 41,995 barangays), will also
hold elections. Current President Gloria Macapagal-Arroyo came to power in 2001 after she, as then
vice president, replaced then-President Estrada who was forced to leave his post amid popular protests
and pending impeachment procedures against him on the grounds of alleged corruption. He was later
convicted of plunder, and subsequently pardoned. The current president was elected in 2004 in a
victory that has been contested by some parties and civil society coalitions. President Arroyo faced
two attempted military coups, several impeachment attempts, and repeated widespread popular
protests against her rule, but she retains strong support in the House of Representatives and among a
majority of governors and mayors. Several high-profile corruption cases involving political figures
remain unresolved. A debate on possible changes in the constitution for several reasons, including a
possible second term for a president and a change to a parliamentary system of democracy, is a
recurrent theme in Philippine politics.
7. Weak incentives embedded in the country’s political institutions may continue to
hamper reforms. The fragmented political structure and politicization of the government
bureaucracy is seen as one of the constraints to promote and implement reforms. In recent years, a
number of reforms to strengthen the institutional capacity of the state have been launched, often with
strong support from civil society. The work of civil society, both in advocacy and in project
implementation and monitoring, has contributed to the successful promotion of specific reforms,
especially in the fields of procurement, textbook delivery, budget transparency, community
infrastructure, etc.
8. Weak governance has long been recognized as a key constraint to sustained growth and
poverty reduction in the Philippines. In the MTPDP 2004-10, the Government diagnosed various
governance challenges, ranging from the lack of independence, capacity and integrity of government
institutions, and regulatory capture, to built-in checks and balances that allegedly tended to slow down
policy-making and policy implementation. The Plan attributed the limited effectiveness of the
government bureaucracy to the pernicious influence of vested interests and a system of patronage.
Recognizing these challenges, the Government embarked on reforms on a number of fronts, including
anticorruption efforts and bureaucratic reforms. Similarly, a variety of civil society organizations have
engaged in advocating and/or supporting governance reforms of various kinds. At the local level,
some commentators have observed the prevalence of patronage politics, with consequent implications
for poor provision of public services. At the same time, a growing number of local leaders have
2 Some would argue that the large number of migrant workers is a mixed blessing. On the one hand, their
remittances bring in much-needed foreign exchange, but on the other they reflect the incapability of the domestic
economy to generate sufficient number of jobs, their remittances keep the real exchange rate high, so export
oriented industries develop more slowly, and their absence from home delays the formation of a domestic middle
class that in other countries is considered to be instrumental in developing stronger governance.
FY10-12 Country Assistance Strategy for the Philippines April 2, 2009
3
demonstrated good governance and effective management. The challenge is how to expand these
innovations and scale them up to benefit more people across more local governments.
Recent Economic Developments
9. Philippine economic growth during 2000-08 averaged around 5.1 percent. Economic
growth picked up gradually from 2002 to 2007 when it peaked at 7.2 percent—the highest growth in
three decades—and slowed down to 4.6 percent in 2008 as the twin shocks of the food and fuel crisis
and global slowdown took their toll on the economy. Notwithstanding the improved growth
performance, the Philippines growth has been noticeably below other developing East Asian countries,
which grew at an average of 8.7 percent during 2000-08. With population growth at more than 2
percent per annum in the Philippines, growth in per capita income has also been lower relative to most
of its neighbors.
10. Growth during the period was driven by private consumption and the services sector.
Demand growth was largely driven by consumer spending, with public sector expenditures more
recently providing an extra boost. In recent years, around 70 percent of the growth can be attributed to
private consumption, supported in part by growing overseas Filipino workers’ remittances. The
services sector comprises more than half of GDP and employs more than half of the workforce. The
contribution of private investment to GDP growth, at around 5 percent during 2004-08 has been
relatively weak. During 2004-06, the Government focused on fiscal consolidation and reforms which
entailed a cut in public investment expenditures, and the contribution of the public sector to growth
was around negative 3.6 percent. Since then the significant progress made in fiscal consolidation,
together with hefty privatization receipts, permitted the Government to increase spending.
11. In 2008, growth slowed down to 4.6 percent as higher oil and food prices and the onset of
the financial crisis reduced real incomes and slowed the growth of private consumption,
investments, and exports. In the first half of 2008, public sector spending lagged, and contracted in
real terms. In May, the Government announced that, in response to the increases in oil and food
prices, it intended to postpone its balanced budget goal to allow for higher spending on infrastructure,
social protection, and subsidies to the poor. Public spending, in particular infrastructure spending,
accelerated in the second half and buoyed overall growth. The relatively weak demand has resulted in
slower growth of the services sector. Inflation, which had been falling over the past few years and
averaged only 2.8 percent in 2007, rose sharply in the first half of 2008, peaking at 12.5 percent in
August 2008, but receded almost as quickly to 7 percent in January 2009. However, the inflation
faced by the poor, especially the urban poor, is estimated to be about 2 to 3 percentage points higher
given the high share of food in their consumption basket (up to 70 percent). Food prices rose sharply
through 2008—rice prices, in particular, rose by almost 50 percent.3
12. The balance of payments position weakened, following several years of strong
performance, but remained in surplus. The higher oil and food prices in 2008 increased the import
bill, while the global slowdown began to take its toll on exports. Remittances, however, still remained
robust in 2008, keeping the current account in moderate surplus. Direct investment inflows have
diminished but remain positive. Portfolio investment was more adversely affected by the financial
market turmoil and global risk aversion. Nonetheless, the overall balance of payments remained in
surplus in 2008 and enabled the country to continue to accumulate international reserves.
13. As in other emerging markets, the Philippines has seen a decline in stock market and
asset prices, higher spreads on its international bonds, and a depreciation of the currency
against the US dollar. Following the strong appreciation of the peso in 2007, the currency
depreciated by about 15 percent against the US dollar during 2008, despite interventions by the central
3 It is estimated that the food crisis may have pushed up the poverty incidence by 3.2 percentage points and is
equivalent to 2.7 million more poor people during the height of the food crisis. Lower inflation since September
of last year is likely to have reversed some of this increase.
FY10-12 Country Assistance Strategy for the Philippines April 2, 2009
4
bank. Stock market prices have nearly halved since the end of 2007, a decline comparable to that in
other East Asian economies. Meanwhile, spreads on international treasury bonds issues increased by
around 500 basis points. Nevertheless, the Philippines successfully issued a US $1.5 billion
international bond in January 2009, as the first Asian country to return to the international markets
after the September 2008 crash, giving off an important signal of confidence in the country and the
region.
14. So far the impact of the global financial turmoil on domestic financial markets has been
relatively contained. The Philippines’ direct exposure to distressed credit products appears to be
limited. Overall exposure to structured products is estimated at about 2 percent of banking sector
assets and a sizable portion have provisions for loss. A key vulnerability to the turmoil in the global
financial markets arises from its still relatively high stock of public sector debt. About one-third of
Philippines foreign currency denominated debt is held by domestic banks, which makes them
vulnerable to global re-pricing of risks and interest rate increases. However, the banks appear to have
appropriate cushions to weather the shocks—with reported capital adequacy ratios of over 14 percent
as of the first half of 2008 and declining non-performing loan ratios. Moreover, recent changes in
accounting rules cushion the impact on capital of bank losses on their investments. Nevertheless, bank
profits, though positive, have fallen significantly.
Macroeconomic Prospects
15. Macroeconomic prospects for 2009 and 2010 have clearly become less favorable than the
preceding CAS period. Overall, the economy is in a stronger position than before to weather the
uncertainties brought about by the recent turmoil. The fiscal reforms and current account surpluses of
the last few years have served to improve investor confidence and boost the level of international
reserves. Nevertheless, the Philippines will be affected by the projected slowdown in the global
economy and growth is likely to slow considerably given the country’s high degree of trade and
capital openness. Weaker domestic demand due to lower real income, rising unemployment and
underemployment, slowing remittances, and falling exports of key products such as electronics are
expected to limit growth severely in 2009 with only a very gradual recovery in sight in 2010 (see the
base-case projections in Table 1). At this stage, risks for further slowdown remain real.
16. Over the medium- to long-term, economic growth is projected to recover to around 5
percent. Its sustainability, however, will depend on further progress in structural reforms. In
particular, turning around low investment and productivity are essential for sustaining economic
growth. Domestic investment as a share of GDP is expected to fall in 2009 due to tighter global credit
and financing conditions, followed by a gradual recovery in response to future improvements in
governance and the investment climate.
17. The current account of the Balance of Payments is projected to remain in surplus in the
near term. Under the current assumption that the global economy may take up to two years to
recover, exports are expected to contract significantly before improving while the import bill would
also contract given the high content of electronics parts and falling commodity prices. Slower exports
and imports would lead to a lower trade deficit in the near-term followed by an increase in the trade
deficit as imports pick up again. Exports of manufactured goods, dominated by highly cyclical
electronics, remain vulnerable to global demand conditions. While the growth in remittances is
expected to slow significantly, remittances are nonetheless expected to remain relatively strong,
because a sizable share of the migrants is employed in sectors (such as health care) that may be less
vulnerable to cyclical downturns. This is expected to help keep the current account in surplus. A
current account deficit might arise in the long-term however, should export competitiveness lag,
commodity prices increase, and growth in remittances declines further.
18. The global uncertainties and risks will continue to pose threats to net investment inflows. Net inflows of direct investments are expected to be minimal this year and next. Over the medium
term, attracting significant inflows of FDI will depend on further improvements in the investment
FY10-12 Country Assistance Strategy for the Philippines April 2, 2009
5
climate. Consistent with global financial volatility, net portfolio investments are expected to be
minimal as well. The net outflow in 2008 could be reversed if the interest rate differential rises in the
coming months and if global prospects become less pessimistic. Overall, though, the combined
strength of the current, and capital and financial accounts would still contribute to further reserve
accumulation in the medium-term.
Table 1: Philippines – Key Macroeconomic Indicators and Projections
(As percentage of GDP, unless indicated otherwise)
2005 2006 2007 2008 2009 2010 2011 2012 2013
Est.
Output and Prices
GDP growth (% Δ) 5.0 5.4 7.2 4.6 1.9 2.8 4.0 4.5 5.0
CPI Inflation (ave, % Δ) 7.6 6.2 2.8 9.3 4.5 4.0 4.0 4.0 4.0
REER (% Δ, + = apprec.) 5.9 11.8 8.8 7.6 … … … … …
Savings and Investment
Gross Domestic Investment 14.6 14.5 15.3 15.3 14.9 15.1 15.5 15.8 16.1
Gross National Savings 16.6 19.0 19.7 17.7 16.9 16.4 16.6 16.7 16.6
Balance of Payments
Current Account Balance 2.0 4.5 4.4 2.4 2.0 1.3 1.1 0.9 0.5
Trade Balance -7.9 -5.7 -5.7 -6.4 -6.9 -7.2 -7.4 -7.6 -7.8
Exp. (merchandise fob) 40.7 39.6 34.2 28.4 25.8 25.4 25.1 25.2 25.7
Imp. (merchandise cif) 48.6 45.3 40.0 34.8 32.7 32.5 32.5 32.9 33.4
Foreign Direct Investment 1.7 2.4 -0.4 0.6 0.1 0.3 0.6 0.8 1.0
Public Sector Finances
Consolidated Pub. Sec. Balance -1.9 0.2 0.6 -0.5 -1.5 -2.0 -1.9 -1.9 -1.8
National Government balance -2.7 -1.1 -0.2 -0.9 -2.3 -2.3 -2.2 -2.0 -1.9
Primary balance 2.8 4.1 3.8 2.7 2.7 1.6 1.6 1.7 1.8
Total Revenues 15.0 16.2 17.1 16.0 15.0 15.0 15.0 15.2 15.4
o/w Tax revenues 13.0 14.3 14.0 14.0 13.3 13.4 13.6 13.9 14.1
Total Expenditures 17.7 17.3 17.3 17.0 17.2 17.3 17.2 17.2 17.3
Net Interest 5.5 5.1 4.0 3.6 3.9 3.9 3.9 3.8 3.8
Debt
Non-Financial Public Sector Debt 85.9 73.9 61.1 63.3 64.1 63.1 61.7 60.7 59.0
External Debt 1/ 62.4 51.3 45.7 39.9 42.3 40.3 38.1 36.6 35.1
Memorandum item:
Nominal GDP (billions of US$) 98.8 117.6 144.1 168.6 161.3 167.4 177.5 189.3 202.9
Soures: Government of the Philippines and World Bank staff calculations
1/ Based on The World Bank's definition
----------Actual---------- -------------------Projected-------------------
19. In response to the global economic slowdown, the Government has prepared an
economic resiliency plan to stimulate the economy. In February 2009, the Government announced
a stimulus package of Php330 billion of which about Php200 billion is estimated to come from a 15
percent increase in national government spending and from previously scheduled tax cuts. This is to be
complemented by about Php100 billion in contributions from government financial institutions, social
security institutions (SSIs), and private banks to fund additional infrastructure projects. The balance of
about Php30 billion is to come from the Social Security System in the form of new and temporary
extra benefits to members. The Plan indicates the Government’s intention to: (a) front load spending;
(b) shift resources from slow to fast-moving projects; and (c) implement/upscale quick-disbursing high
impact projects. Implementing agencies are expected to spend 60-80 percent of their calendar year
2009 discretionary budget totalling 1.2 percent of GDP in the first half of 2009.
20. The public sector’s fiscal position is expected to remain manageable, but fiscal risks
could materialize. For 2009, the Government projects a deficit of about 2.1 percent of GDP. Tax
FY10-12 Country Assistance Strategy for the Philippines April 2, 2009
6
collections this year will be more challenging because of several policy measures already taken4 and
lower oil prices. In the absence of new measures, tax revenues as a share of GDP are projected to
decline well below the ratio achieved in 2008. Under these circumstances, reforms to improve tax
administration will be critical for keeping the deficit within sustainable levels. A further source of risk
is the gross financing needs of the non-financial public sector, which are large and rising, thereby
generating significant rollover risk (18.5 percent of GDP in 2009 and 19.7 percent of GDP in 2010).5
With considerably higher and more volatile interest rates in the domestic and international capital
markets, financing such large amounts could become more challenging.
21. The public sector debt-to-GDP ratio is projected to continue to fall over the medium-
term, in spite of the global financial turmoil. Non-financial public sector debt fell from over 100
percent of GDP in 2003 to about 62 percent of GDP in 2008. This ratio is projected to fall further over
the coming years, albeit at a markedly slower pace. While the projected pace of decline is sensitive to
various macroeconomic parameters, especially GDP growth and the exchange rate, the overall trend of
a declining debt burden is broadly robust to various scenarios.
Poverty Profile and Trends
22. The Philippines has made significant progress in the fight against poverty over the last
two decades. The share of the population living below the national poverty line, which almost reached
50 percent in the mid-1980s, was brought down to less than a third in recent years (Figure 1)6. Poverty
measured using the international benchmark shows a similar trend. The proportion of the population
living below US$1.25-a-day declined from 34.9 percent in 1985 to 22.6 percent in 2006, or a reduction
of about 2 percent per year over the two decades. While significant, these gains are lower than those
recorded in some neighboring countries, particularly Indonesia, Thailand, Vietnam, and China.
Moreover, the absolute number of the poor based on the $1.25/day poverty line increased from 18.5
million poor people in 1985 to 19.7 million in 2006.
Figure 1: Poverty Reduction in the Philippines versus East Asian Neighbors
Phil
Phi Off'l
Indo
Rural China
Viet
Thai
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
100.0
mid-1980 mid-1990 early-2000 2006 (latest)
Povert
y I
ncid
ence (
%)
Note: Figures refer to the proportion of the population with income per capita below the new
international benchmark of US$1.25 a day in 2005 Purchasing Power Parity, except Philippine official
poverty incidence which is based on national poverty lines.
Sources: World Bank and NCSB
4 These included the 5 percentage point reduction in the corporate income tax rate, a full year impact of the
personal income tax threshold increase, and tax exemptions arising from personal equity and retirement account. 5 IMF Article IV Consultations 2008.
6 Data used in the analysis reflect the latest government and Bank staff estimates and may differ from Annex A2
and Annex B5, which present data from the DECDG database and other standard sources.
FY10-12 Country Assistance Strategy for the Philippines April 2, 2009
7
23. Income poverty hardly fell in recent years. The latest estimates show that between 2003
and 2006 income poverty as measured against the country’s own poverty line increased from 30
percent to 32.9 percent, back to its level in 2000. The incidence of poverty based on alternative
measures of the poverty line also show similar increases during that period, consistent with the official
statistics. Between 2003 and 2006, the US$1.25-a-day poverty increased from 22 percent to 22.6
percent7, and consumption-based poverty estimates increased from 26 percent to 28.1 percent
8.
Furthermore, self-rated hunger indicators showed steady increase since 1998 and rose to an all-time
high of 19 percent by the end of 20069.
24. Non-income dimensions of poverty and welfare are lagging behind, specifically in health
and education. The latest statistics show that the Philippines has made good progress in reducing
child mortality, combating tuberculosis and other diseases, improving access to water and sanitation,
and protecting the environment, but has done poorly in achieving universal primary education and
maternal health (see further analysis of progress in achieving MDGs in Annex 1).
25. Regional poverty rates vary significantly. Although the national poverty rate increased
between 2003 and 2006, official estimates of poverty declined in four of the country’s 17
administrative regions. Poverty declined in three regions in Mindanao: Zamboanga from 49.2 percent
to 45.3 percent, Caraga from 54 percent to 52.6 percent, and Northern Mindanao from 44 percent to
43.1 percent. Poverty in Western Visayas also declined from 39.2 percent to 38.6 percent. In contrast,
poverty headcounts in the other 13 regions increased in 2006 compared to 2003. In particular, poverty
in conflict-affected Autonomous Region of Muslim Mindanao (ARMM) swelled by almost 10
percentage points (to 61.8 percent).
26. Poverty remains predominantly a rural phenomenon in the Philippines, but urban
poverty is on the rise. In 2006, about three-quarters of the poor resided in rural areas (Table 2).
Estimates also show that rural poverty increased (although marginally) between 2003 and 2006 and
that poverty among agricultural households is about three times higher than poverty in other sectors.
While rural poverty remains more than double that of urban poverty, the share of urban poor to total
poverty has been increasing since 2000 due to rapid urbanization and inequitable income distribution.
Between 2003 and 2006, the share of the poor population living in the urban areas increased from 23.2
percent to 28.8 percent. With rural-urban migration and rapid population growth, this trend can be
expected to continue over time unless rapid urbanization is accompanied by better income distribution.
Table 2: Poverty by Urban-Rural Areas and Sector of Employment
Poverty Headcount (%) Share to Poverty (%) Share to population (%)
2003 2006 2003 2006 2003 2006
Area
Urban 14.2 19.3 23.2 28.8 49.1 49.3
Rural 45.5 46.2 77.0 71.2 51.0 50.7
Sector of Employment of the Household Head
Agriculture 53.6 55.5 66.5 59.4 37.4 35.3
Industry 23.1 28.8 11.9 12.7 15.5 14.4
Services 14.2 18.8 16.3 20.2 34.7 35.4
Not Employed 13.1 17.1 5.4 7.7 12.5 14.9
Total 30.0 32.9 100.0 100.0 100.0 100.0 Source: World Bank staff estimates based on official poverty lines for 2003 and 2006; FIES 2003 and 2006.
7 Chen, S. and M. Ravallion (2008). ―The Developing World is Poorer than We Thought, But No Less
Successful in the Fight Against Poverty.‖ 8 Balisacan, A. (2008). "Poverty Reduction: What We Know and Don't?" University of the Philippines
Centennial Lecture Series. 9 Social Weather Stations (July 2008). Report on Self-Rated Poverty and Hunger.
FY10-12 Country Assistance Strategy for the Philippines April 2, 2009
8
27. High levels of inequality partly explain why growth translated into limited poverty
reduction. The country’s Gini coefficient remains high relative to its neighbors in the region (45.8
percent in 2006), and large variation in economic opportunities persist at the sub-national level.
Geographically, the National Capital Region and two adjacent regions, which account for more than
half of GDP, have above average per capita income and have seen the fastest decline in poverty
headcount. In contrast, per capita incomes in the poorest regions (ARMM and Caraga), are only 50-60
percent of the national average. Estimates suggest that the Philippine's growth elasticity of poverty is
greater than unity, but has been declining in recent years (Table 3)10
. Between 1985 and 2000 when
growth averaged 3 percent per year, poverty declined by about 2.2 percent annually. In the period
2000-2006, when the country posted about 5 percent growth per year, the pace of poverty reduction
dropped to 0.1 percent per year.
Table 3: Estimates of Growth Elasticity of Poverty
Data Years World E. Asia CHN INDO PHL THA VNM
Besley and
Burgess (2003)
Varies by country
(1980-1998)
-0.73
(0.24)
-1.06
(0.25)
-0.60
(0.14)
-1.12
(0.38) -0.70
(0.12)
-1.72
(0.48)
World Bank
(2008)*
1990-2000
-2.12
(0.42)
-1.20
(0.14)
-2.60
(0.74) -1.85
(0.21)
-5.15
(0.46)
-2.13
(0.10)
World Bank
(2008)*
2000-2006
-2.19
(0.34)
-1.29
(0.07)
-1.85
(0.36) -1.27
(0.45)
-4.55
(0.81)
-3.04
(0.18)
* Fujii and Velarde (forthcoming)
28. High population growth may have slowed poverty reduction efforts over the past two
decades. While the trend in poverty incidence has generally been downward over the years, the gains
in poverty reduction may have been affected by the country’s high population growth, which averaged
about 2.2 percent, compared to less than 2 percent in neighboring countries like Indonesia, Vietnam,
and Thailand. Rapid population growth puts high demand on education and health services, and on
the economy’s capacity to generate jobs. Recent growth has generated more jobs, but not enough to
absorb the increase in the working-age population. Consequently, even though the share of population
living in poverty declined from nearly half of the population in 1985 to only one-third in 2006, the
absolute number of poor increased from 26.2 million to 27.6 million (Figure 2).
Figure 2: Poverty Incidence versus Magnitude of Poverty, 1985 and 2006
27,61726,231
32.9%
49.3%
-
20.0
40.0
60.0
1985 2006
Inci
den
ce (%
)
-
10,000
20,000
30,000
40,000
Mag
nitu
de
('000
)
Magnitude of poor population
Poverty incidence of Population (%)
Note: Figures refer to official poverty estimates that are not directly comparable across time
but they give a consistent trend with the $1.25/day poverty estimates.
Source: NSCB
10
See also Ravallion, M. (2001). ―Growth, Inequality, and Poverty: Looking Beyond Averages.‖ World
Development, 29: 1803-15; and Cline, W.R. (2004). "Technical Correction" in Trade Policy and Global Poverty,
Institute of International Economics, Washington DC.
FY10-12 Country Assistance Strategy for the Philippines April 2, 2009
9
29. It is estimated that 45 percent of Filipinos are vulnerable to poverty11
, and that half of
poor households became poor because of an income shock12
. For example, the sharp increase in
food prices between July 2007 and July 2008 is estimated to have increased poverty incidence by 3.6
percentage points, an additional 3 million people. Household spending patterns shed light on their
degree of vulnerability to shocks. An average household spends 41 percent on food, making them
highly susceptible to falling into poverty with sudden increases in food prices, and only 2.9 percent on
health and 4.4 percent on education of its total expenditures. The poor, meanwhile, spend even more
on food (60 percent) and less on health (1.4 percent) and education (1.7 percent) making them more at-
risk to future shocks and less equipped to exit poverty. Some of the factors that drove the increase in
poverty in recent years are further discussed in Annex 1.
Philippines Development Challenges and Opportunities
30. The proposed new CAS for the Philippines will be addressing many of the same
development challenges that the country has been struggling with for decades. The country’s
main achievement over the past years has undoubtedly been the hard-fought improvements in the
country’s fiscal position and resulting macroeconomic stability and higher growth rates. Yet, poverty
is proving to be relatively insensitive to growth in the Philippines and has even drifted upwards in
times when the highest economic growth in three decades was recorded. Indeed, in absolute numbers,
the Philippines now has more people in poverty than three decades ago. While public investments
have started to increase again, supported by growing fiscal space, private investment continues to be
lackluster in an investment climate that many consider as weaker than that of most of its neighbors.
And while rising budget allocations to and recent progress in reforms in the social sectors promise
better services, for now the Philippines is at risk of missing its targets on basic education and maternal
health. Many observers in the Philippines see weak governance as an underlying cause in all of these
development challenges, even though some notable progress has been made in this area—progress,
which was on occasion overshadowed by headline grabbing corruption scandals.
31. Ensuring sustainable growth in the Philippines will require addressing the key
challenges to progress on critical structural reforms. Recent improvements in macroeconomic
management, especially fiscal consolidation, will need to be put on a sustainable and permanent
footing by improving tax administration and tax policy on the revenue side, as well as by improving
expenditure management and the management of fiscal risks. Underinvestment in infrastructure, and
the poor quality and maintenance of services, transport in particular, limit overall competitiveness,
increase the cost of doing business, and adversely affect trade-related transactions. Private sector
development is further impeded by a constrictive policy and regulatory environment, particularly in
areas such as rice trade where policies favor the public sector; inter-island shipping and port services;
land administration and management; and access to credit. Strengthening the investment climate,
improving the policy and regulatory framework, and creating a more competitive financial sector will
provide opportunities for enhancing productivity and ensuring sustainable and broad-based longer-
term growth. Given the decentralized nature of the country, much of the reforms (including revisions
of local fiscal and revenue authority, and the Local Government Code) and improvements will need to
be at the local government level, in particular, in the large and expanding urban areas.
32. While considerable progress has been made in human development outcomes, achieving
some of the key Millennium Development Goals (MDGs) remains a major challenge. The
country is on track to halving poverty by 2015 (the proportion of the population living below the
national poverty line is down to a third), and has made good progress on reaching the MDGs on
nutrition, gender equality, reducing infant and child mortality (infant mortality fell to 23 per thousand
live births in 2006 from 57 in 1990; under-five mortality in 2006 fell to 31 per thousand live births
from 80 in 1990), water supply and sanitation, and combating AIDS and other diseases. However, the
11
NAPC and NSCB (2005). "Assessment of Vulnerability to Poverty in the Philippines." 12
Reyes, C. (2002) "The Poverty Fight: Have We Made an Impact?"
FY10-12 Country Assistance Strategy for the Philippines April 2, 2009
10
net enrolment rate (NER) for elementary education has been falling, and that for secondary education
is stagnating at a low 58-60 percent, whereas completion rates at both levels were declining until 2006.
Despite a decline from 209 per hundred thousand live births in 1990 to 162 in 2006, maternal
mortality remains high. Achieving the MDGs for primary education and maternal mortality remain
major challenges and are increasingly unlikely to be met. The incidence of malnutrition is also an
issue. There are significant opportunities to improve the efficiency of increasing budgets in the social
sectors, as well as further raising allocations as efficiency and fiscal space improve.
33. There are significant inequalities in the access to basic infrastructure and social services
by regions and income groups. Income disparities at the sub-national level translate into
significantly lower access to vital infrastructure services such as electricity, water supply, paved roads,
and telephone service. Less prosperous regions, mostly in Mindanao, have much lower levels of
access. Gaps are also largest in urban areas where many poor households often lack access to services
due to their informal status. There are also persistent gaps in educational and health outcomes, as well
as access to good quality schools and health services and inputs, between poor and non-poor areas, and
between poor and non-poor families.
34. A key feature of the recent Philippines’s economic story has been the weak response of
poverty reduction to income growth and persistent vulnerability. Official estimates show that
nearly half of the population is vulnerable to falling into poverty as a result of shocks, including rising
prices. Analyzing and understanding the causes and nature of poverty are critical to responding to the
challenge of how the poor can better benefit from growth. Factors for the disconnect between growth
and poverty reduction include the impact of cumulative inflation on real incomes of households; the
compression of public expenditures, including both infrastructure and social spending, in the face of
unsustainable budget deficits in the early years of this decade; the quality of growth which accrued
largely to the corporate sector compared to households; and, insufficient job creation for low skilled
labor with growth favoring the services sector. Poverty is also driven through the nexus with the
environment and climate change, as well as with natural disasters. A poorly coordinated and
inaccurate social protection system further reduces the effectiveness of poverty targeting programs.
35. The overarching and cross-cutting challenge of weak governance remains a key
constraint to sustainable growth and poverty reduction. The Government recognizes this
challenge and there has been considerable progress in strengthening the overall framework for good
governance. Governance reforms have encompassed anticorruption drives, bureaucratic reforms,
strengthening of public procurement and fiduciary processes, promotion of local government
oversight, and the engagement of strong civil society groups, communities, and lawmakers in
providing checks and balances. For example, following up on the findings of an INT investigation of
the first phase of the National Roads Improvement Program, the Government and the World Bank
designed for the second phase of the project a battery of stringent anti-corruption measures and
governance mechanisms, such as the use of independent procurement evaluation, tighter procurement
controls, building the agency’s capacity for internal audit, and independent monitoring by a civil
society group. An example of the Government’s recent administrative reform efforts is Oplan
Kandado (Operations Padlock) launched in January 2009 and aiming to strictly enforce administrative
sanctions for noncompliance by taxpayers. However, governance challenges continue to overshadow
these achievements. Key challenges include the need to further strengthen public institutions and make
them more accountable and transparent; intensify the demand and political impetus for reforms; and,
consolidate and expand the engagement of the vibrant civil society. See further analysis in Annex 2.
36. Finally, the conflict-affected areas in Mindanao pose a particular challenge. The
decades-long intermittent conflict between government forces and separatist groups have resulted in
loss of life and displacement of people, destroyed infrastructure, slowed development, below-average
human development, and stagnating economic outcomes far below potential in the affected regions.
This potential is somewhat evident in the island’s growth centers where there is relatively better
economic performance. The World Bank Group, along with many other development partners, has
FY10-12 Country Assistance Strategy for the Philippines April 2, 2009
11
been supporting development activities in Mindanao, but the various short-term initiatives need to be
better coordinated to result in improved outcomes and more sustainable longer-term development.
37. Addressing the country’s development challenges is likely to become more demanding in
the coming CAS period. As for most developing countries, the external environment for the
Philippines is deteriorating rapidly and is likely to be less benevolent in the coming years. Although
better prepared than in the past, and better prepared than some other middle income countries, the
Philippines is likely to face slower growth in the years ahead, and renewed fiscal pressures are already
emerging. The country needs to manage these additional pressures in times of political change. The
elections scheduled for May 2010 offer risks as well as opportunities: on the one hand, elections in the
Philippines traditionally slow down decision making, reform initiatives and program implementation.
On the other hand, though, the upcoming elections offer an opportunity for a renewed political
mandate for the incoming administration, the potential for new policy directions, and new coalitions
for needed reforms. The baseline expectation therefore is that the CAS will operate in a rapidly
changing and often challenging political environment.
Updated 2004-10 Medium-Term Philippines Development Plan (MTPDP)
38. With a fresh mandate in 2004, the Government outlined the country’s MTPDP for the
period 2004-2010 with a macroeconomic framework designed to maintain economic stability. Starting in 2005, the Government implemented crucial reforms to improve tax collection, increase
revenues and prudently manage expenditures. Fiscal reforms resulted in stabilized public finances,
large prepayments and lesser dependence on external borrowings. Consequently, the budget deficit
was contained, in turn resulting in lower interest rates. Record levels of overseas remittances coupled
with increasing export earnings led to an improvement in the country's credit outlook. These further
attracted foreign investments and boosted the peso's strength. Hence, an economy once struggling to
recover after the Asian crisis began to show a turn-around in 2007. However, the momentum receded
by mid-2008 in the wake of global shocks: soaring food and fuel prices, and a downturn in the U.S.
economy.
39. The MTPDP was updated in 2008 to review past performance, attend to remaining
commitments in the Plan, and reformulate policies to address the new challenges. The update
was undergoing final review during the CAS preparation time. The updated MTPDP focuses on the
areas of: economic growth and job creation; energy; education and youth opportunity; and
anticorruption and good governance. It highlights the need for the agriculture sector to become more
competitive in view of the liberalized global economy and stresses the need to decentralize
development by decongesting Metro Manila through the establishment of new centers of government,
business and housing in Luzon, Visayas and Mindanao. It aims for the nation to become more self-
reliant in its energy mix, becoming a world leader in renewable energy. It puts new emphasis on
science, technology, and innovation, and speaks of boosting the outsourcing industry and establishing
regional ICT centers. The MTPDP supports sustained investments in infrastructure, pursuing an urban
rail-based mass transport system, and linking the islands via more Roll-on-Roll-off ports. It highlights
actions to manage inflation, as well as to address the relatively high rates of unemployment and
underemployment. The Plan gives priority to protecting the poor through more shelter, health
insurance, microfinance, low-cost medicines, and cash transfers.
40. The overall goals of the MTPDP provide the country framework for the Bank’s CAS for
the Philippines. The CAS will be broadly aligned with the themes under the updated MTPDP, and
will serve as early input to the next MTPDP that is to be approved by the incoming government after
the 2010 elections. At the Government’s request, the Bank will provide input in the preparation of the
new plan that is expected to start in the coming year. Given the possibility of a shifting focus with the
change of administration after elections, the alignment will be measured in terms of adequate
responsiveness to changing client requests, within a selective framework that focuses on areas in
which the Bank can best serve the country’s development and poverty reduction goals.
FY10-12 Country Assistance Strategy for the Philippines April 2, 2009
12
III. BANK GROUP ASSISTANCE STRATEGY FOR THE PHILIPPINES
A. LESSONS LEARNED FROM FY06-09 CAS AND STAKEHOLDER FEEDBACK
Lessons from FY06-09 CAS Completion Report
41. The FY06-09 CAS Completion Report (Annex 3) presents an assessment of the strategy
that aimed to achieve fiscal stability, generate economic growth, ensure social inclusion and
improve governance. The following lessons have been learned that have implications for the design
and implementation of next FY10-12 CAS:
The overall strategic direction of the CAS was sound. Sound fiscal management and
improved governance will continue to be critical for ensuring sustained economic growth and
poverty reduction. The next CAS will need to ensure that the gains made in revenue
generation, public expenditure management, and procurement are sustained while pursuing
further improvements in governance. Continued focus on implementing the project portfolio
will be critical to success during the next CAS. Going forward, the Bank will need to
understand better the factors explaining the relationship between the country’s economic
performance and lack of poverty reduction, and ensure that Bank-supported operations
emphasize the needs of the poor.
Continued engagement is a critical element for success, but at the same time the Bank
needs to develop criteria for strategic and selective engagement. The Bank has a long
history in the Philippines and has been able to develop relationships and trust with many
government agencies, which has enhanced the Bank’s effectiveness. The Bank would need to
build on these relationships with counterparts in pursuing results during the next CAS.
However, the Bank, jointly with the Government, would need to be strategically selective and
develop criteria to determine when the Bank should disengage given the extent of current
engagements and Bank resource constraints.
Monitoring (and evaluation) of AAA needs to be strengthened. Knowledge transfers are
an important part of the Bank engagement with the Philippines. But the Philippine program
has not been adequately monitored and the possible impact of its AAA program has not been
assessed. There also needs to be a stronger link between the Bank’s AAA program with that
of the priority analytical study needs of the Government.
The CAS results framework needs to be strengthened. The FY06-08 CAS results
framework has not proven useful in monitoring, managing and evaluating the CAS. The Bank
can make the results framework into an effective CAS management, monitoring and
evaluation tool by clearly stating the expected CAS outcomes, including specific, measurable,
achievable, relevant and time-bound indicators to allow for better monitoring, and making
explicit the link between expected CAS outcomes and Bank instruments. Linking CAS
monitoring and operational (including AAA) monitoring would facilitate data collection.
Closer strategic monitoring of progress towards CAS strategic objectives should facilitate
decisions on engagement. These lessons have been reflected in the new results framework.
Findings from Recent IEG Evaluations
42. The Independent Evaluation Group (IEG) prepared a country brief for the Philippines
in April 2008. IEG’s country brief provides the following highlights:
The main challenges identified in the Philippines have been the Bank’s late response to
clients’ demands for more programmatic lending and the lack of synchronization with the
FY10-12 Country Assistance Strategy for the Philippines April 2, 2009
13
budget process. Going forward, government officials were optimistic that the new
programmatic loans which started in 2006 would allow for appropriate flexibility.
Clients appreciated the Bank’s high-quality knowledge work. At the same time, they lamented
the lack of applicability and appreciation of country dynamics.
At the project level, a weak regulatory framework for Local Government Unit (LGU) finance
and private sector participation has hampered participation of LGUs in Bank projects.
43. Overall Value of the Bank. More specifically, IEGs’ 2006 Development Results in Middle-
Income Countries (MIC) report indicated that Philippine partners value the Bank for its longstanding
relationship and consider the Bank to have an intimate knowledge of the country. Appreciation was
universally high for the Philippine Development Forum and the Bank’s role in it; this relationship
helped assure the relevance of the Bank’s strategy.
44. Operational Challenge. One of the main challenges identified in the MIC report was the
Bank’s late response to clients’ demands for more programmatic lending. The new National Program
Support operations, which were started in 2006, were designed to respond to these challenges and
provide the needed flexibility. This type of loan instrument continues to be relevant under the new
CAS given continuous feedback on the preference of the Government for programmatic lending.
45. Knowledge Agenda. IEG’s evaluation highlighted the clients’ appreciation for the Bank’s
high-quality knowledge work, particularly its power to bring its international experiences in its
advisory work. Bank reports were considered to be of good quality and holding weight in political
debates. Still, clients noted that the Bank’s knowledge work sometimes lacked applicability to the
country situation, and insufficiently account for country dynamics. Bank documents were sometimes
seen as too ambitious, identifying issues of which the Government was already aware, and
timelines/procedures did not take into consideration the culture and traditions of the Philippines. The
new CAS emphasizes a flexible knowledge agenda consistent with the main strategic objectives.
46. IFC-IBRD Collaboration. From the IEG evaluation, it was concluded that some clients had
not observed much coordination between the Bank and IFC, and government officials expressed that
better coordination would be welcome and could lead to enhanced public-private partnerships,
particularly in the infrastructure and power sectors. This particular feedback has been one of the
driving forces for the stronger IFC-IBRD strategy component of the new CAS.
World Bank FY09 Client Survey and Multistakeholder Consultations
47. The FY10-12 World Bank Group CAS was prepared by drawing on various dialogue
and feedback mechanisms. Instruments that gave qualitative and quantitative information were also
part of the preparation process. In addition to the CAS Completion Report (Annex 3), these included a
World Bank Client Survey and a series of formal and informal meetings with participants from
different parts of the country, with national and local government officials from oversight and
implementing agencies, and with other development partners. (See Annex 4 for more details on the
multistakeholder consultations, the World Bank FY09 Client Survey for the Philippines, and the
overall CAS preparation process.)
48. The FY09 World Bank Client Survey was conducted in the Philippines in August 2008
with a total of 337 respondents. The results of the survey indicate that the Bank’s work in the
country was valued, and stakeholders were eager for the Bank to be involved in the most critical
development challenges that the country faces. In terms of development issues, corruption and poverty
were considered the key development priorities in the Philippines. In terms of value of the World
Bank to the clients, the results indicated that the Bank was mostly valued for its lending to finance
development projects. The survey indicated that the Bank’s knowledge was less valued in the
Philippines than in many other countries surveyed. Similar to the IEG findings, the client survey
FY10-12 Country Assistance Strategy for the Philippines April 2, 2009
14
indicated that the Bank’s greatest weakness was perceived to be its disregard of political realities on
the ground and its bureaucratic way of conducting business that is not attuned to country conditions.
49. A series of meetings were held with top government officials and leaders from civil
society organizations (CSOs) and private sector, as well as with other development partners,
both bilateral and multilateral agencies. Eight CAS Working Groups, (growth/fiscal, investment
climate, poverty/social, governance/anticorruption, environment/climate change/disaster risk
management, food policy issues/rural development, decentralization, and political issues) also met
with partners from government, civil society, and bilateral and multilateral development agencies.
The key messages and implications for Bank Group assistance gathered from the consultation
workshops are summarized in Box 1. As the goal was to listen to a wide spectrum of voices, these
details show some divergent views and opinions of various groups across the country. A detailed
feedback report was sent to all the participants and was posted on the Bank’s Philippines website to
inform the public about the messages and recommendations.
Box 1: Key Messages from Multistakeholder Consultations
Poverty. The main causes for increasing poverty are: (a) bad governance; (b) the poor quality of
education, particularly in rural areas; and (c) lack of livelihood and employment opportunities.
Governance. The inadequate performance of public institutions is caused by: (a) the prevalence of
corruption at all levels; (b) weak citizen participation in governance; (c) lack of professionalism and
inadequate leadership and management capacities of political leaders; and (d) a bloated and inefficient
bureaucracy that results in lack of communication and coordination and hampers the delivery of public
services.
Suggestions for Bank Group involvement. Ideas for priority programs for the new CAS included: (a)
basic education, health and other social services at the grassroots level; (b) food sufficiency and
security programs that will improve productivity and agricultural market development; (c) capacity-
building to improve local governance, including programs that improve transparency and accountability
in government agencies (e.g., strengthening of civil society participation in oversight roles, prosecution
of erring public officials, etc.); (d) electoral reforms to strengthen democratic processes (e.g., voters’
education); and (e) social protection.
Issues that the Bank Group should avoid. Conversely, the World Bank should avoid programs
related to: (a) political intervention, including engagement in partisan politics, giving in to political
pressure or direct involvement in conflict resolution and the war against terrorism; (b) mining projects
that are not supported by communities, and (c) human rights violations, including support for
enterprises or industries that encourage human trafficking, sex slavery and those that employ minors.
Divergent views on Bank Group involvement. A number of issues surfaced where consultation
participants had divergent views on World Bank involvement. While the majority felt that the World
Bank should avoid these issues, some participants felt that there were opportunities for Bank
involvement in the following: (a) policy making on procurement, taxes and tariffs; (b) family planning
programs; (c) cash grants and subsidies; and (d) project identification and prioritization.
B. PROPOSED WORLD BANK GROUP ASSISTANCE STRATEGY
World Bank Group Assistance Strategy Overview
50. Based on the context presented above, the forthcoming CAS proposes to shift emphasis
within the existing overarching goal rather than introduce a radically different approach from
past CASs. The following key strategic shifts form the basis of the new CAS:
i. Intensifying the focus on poverty reduction in light of its importance for the Philippines
development agenda, the lack of progress on this front despite higher growth, and the
vulnerability of the poor to the impact of the global slowdown.
ii. Further operationalizing governance in all Bank-supported activities. Improving
governance is considered critical for better development outcomes in the Philippines, and
is an area in which government and non-government groups alike consider the Bank’s
experience and contribution of value to the Philippines.
FY10-12 Country Assistance Strategy for the Philippines April 2, 2009
15
iii. Including emerging global challenges with particular relevance for the Philippines e.g.,
mitigation of, and adaptation to, climate change, and reducing the risks associated with
increasing intensity and frequency of natural disasters to which the country is already
prone.
iv. Emphasizing the knowledge agenda, because the Philippines as a middle income country
is facing increasingly sophisticated development policy challenges, and because the Bank
has in the past shown to be effective in producing relevant knowledge and in convening
the development community to achieve results.
51. Over the CAS period, the World Bank Group will contribute to achieving more inclusive
growth in the Philippines. It will do so by supporting the Government to: (i) maintain macro-
economic stability and cope with increased macroeconomic uncertainty through a stronger revenue
base, improved expenditure efficiency and targeting, and responsive financing; (ii) improve the
investment climate through an enabling business environment that promotes competitiveness,
productivity and employment, especially for sectors of particular importance to the poor, such as
agriculture and fisheries, and developing better models of infrastructure finance and management at
national and local level to reduce transaction costs for the poor; (iii) increase access to better public
services for the poor by deepening the reform agendas in key public services sectors, and expanding
basic service delivery directly to the poor; and (iv) reduce vulnerabilities by expanding and
rationalizing the country’s social safety net, improving disaster risk management, piloting climate
change adaptation measures and expanding climate change mitigation programs in key sectors.
52. The World Bank Group will promote good governance by supporting more capable and
accountable government. To achieve this goal, the Bank Group will pursue an engagement strategy
at the national, local, and agency level. It will support cross-cutting as well as agency-specific reforms
to strengthen core governance systems in public financial management, procurement, and
decentralization. It will make use of certain types of poverty-reduction interventions, such as
community-driven development (CDD) and conditional cash transfers (CCT) to increase the demand
for better governance and better services. The Bank Group will also facilitate empowerment of the
Philippines’ civil society and academe by promoting more transparency in Bank-supported operations
as well as in public finance and public procurement in general. The Bank will use the Philippines’
own governance systems to assess the capabilities of prospective implementing agencies of Bank-
financed projects, and will carefully consider new engagements with agencies that cannot meet the
country’s own standards of good governance.
53. The World Bank Group's program focuses on core results areas through engagements at
the national, local, and private sector level. IBRD will aim for a lending program in the order of
US$700 million-US$1 billion per year, with lower commitments expected for FY10 due to the May
2010 elections. The proposed lending would reverse the recent trend of negative net transfers and
could increase IBRD exposure to the Philippines from US$2.7 billion in FY08 to US$3.9 billion in
FY12. The proposed lending plan is indicative as IBRD’s capacity to lend can change over time.
There is higher degree of certainty for the lending plans for the earlier years of the CAS period.
During the CAS period, IFC will support recognized and replicable successes in the country. Success
will be measured by the development impact in key selected sectors, jointly or in coordination with
IBRD, wherein IFC services would maximize and catalyze impact. In recognition that impact from
IFC's engagement is significantly greater when investment and advisory services are properly aligned,
the IFC strategy clearly incorporates both. The IFC investment program is expected to be in the order
of US$250-300 million per year, while advisory services will be supported by funding of
approximately US$3 million per year. MIGA will continue to offer its guarantee products. Annexes 5
and 6 present the CAS results framework and the Bank Group program by results areas.
54. The World Bank Group will support efforts to counter the effects of the global economic
crisis (see Box 2).
FY10-12 Country Assistance Strategy for the Philippines April 2, 2009
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Box 2. World Bank Group’s Response to the Global Economic Crisis
In terms of financial assistance to the Philippines for addressing the impact of the financial turmoil and the
global crisis, the Government has asked the Bank to focus on faster-disbursing assistance in a variety of areas
so as to contribute to key programs for alleviating the impact as well as general budget financing. The World
Bank Group support will proceed once there is clarity on agendas and commitments, and projects meet the
Bank’s processing filters. Commitment to governance reforms is a major focus of these filters, including at
the decentralized level.
IBRD expanded support in the short-term includes:
- Scaled up support for the Government’s new Conditional Cash Transfer (CCT) program. The
planned loan amount in support of the CCT program was increased from US$50 million to US$405
million. The objective is to strengthen the effectiveness of the Department of Social Welfare and
Development (DSWD) as a social protection agency to efficiently implement the CCT and to
improve the national household targeting system for social protection programs in selected areas.
- Accelerated disbursement under the National Program Support loans for Health and
Education. Through accelerated disbursement and additional financing in these sector-wide
operations, the Bank could contribute more financing.
- Additional financing for the community-driven development project KALAHI-CIDSS. This
program that helps build community infrastructure and income generating investments is an ongoing
program for which the Government has requested additional financing.
- Continued program of development policy loans (DPL). The 2006 DPL series focused on
increased fiscal revenues and fiscal transparency. A DPL2 planned for 2007 was postponed because
the Government fell short of its objectives, and the DPL series closed in December 2008. The
program could be continued with a $250 million new DPL for calendar year 2009, with a possible
additional US$250 million as a deferred drawdown option, supporting the objectives of fiscal
revenues and transparency, complemented by measures to improve the Philippines’ response to the
crisis.
IFC Crisis Response Initiatives. IFC will aim to address increased risk and liquidity constraints
through a series of instruments devised to help countries and firms respond to the global economic crisis.
These instruments include Advisory Services to help strengthen insolvency regimes, improve corporate
governance and strengthen risk management capacity in banks, and four recently approved or expanded
financing facilities:
- Bank Recapitalization Fund – global equity fund to recapitalize distressed banks
- Expanded Trade Finance Program – existing IFC program that guarantees the trade-related
payment obligations of approved financial institutions in emerging markets
- Infrastructure Crisis Facility – to bridge the gap in available financing for viable, privately funded
infrastructure projects facing financial distress
- Global Microfinance Funding Initiative – to assist the microfinance sector in terms of filling
funding gaps despite sound fundamental and continued strong performance.
MIGA Response. MIGA’s ongoing commitment to the country will seek to reassure private sector
investors through its political risk insurance product. MIGA’s standard products address risks of Transfer
Restriction, Expropriation, Breach of Contract and War and Civil Disturbance. In addition, the Small
Investment Program (SIP) offers a more streamlined product for smaller scale investments in the country.
55. The global uncertainties as well as the Philippines’ political environment and transition
require the Bank Group to be flexible, and adapt to changing circumstances. The Bank Group
will be engaged in a relatively broad set of result areas, but the intensity of engagement will vary
depending on the progress made and emerging opportunities for reforms, as well as on the
opportunities that the Bank’s global initiatives offer. Beyond current commitments for a DPL with a
possible draw-down option to mitigate the impact of the global economic crisis, the Bank will use
development policy operations in support of disaster risk management and in the context of a strong
reform program in government financial management. The Bank Group will also continue to support
increasing local government access to finance through more diversified financial instruments. IBRD
investment loans and guarantees and IFC investment and advice would support the development of
new models of financing and management for critical infrastructure, including good practice Public
FY10-12 Country Assistance Strategy for the Philippines April 2, 2009
17
Private Partnerships (PPPs). The World Bank Group will adapt its financing share of those PPPs in
light of availability of private financing. MIGA guarantees may also offer reassurance for foreign
investors, especially those concerned about turbulence in foreign exchange markets. To increase
flexibility in a time of global uncertainties, the Bank Group will aim to reduce preparation times and
increase the responsiveness in the lending program by better aligning it with the Government’s
evolving priorities through more frequent lending program discussions and review, and by scaling up
successful operations through additional financing and repeater loans, and by using national program
support loans as platforms for innovation and reforms. A CAS Progress Report in FY11 will align the
Bank Group’s program with that of the incoming government.
56. The Bank Group, in partnership with other development partners, will increasingly
emphasize knowledge cooperation and formalize a rolling AAA program with the Government. A central aim of the AAA program for the CAS period is to provide inputs into the 2011-16 MTPDP.
Implementation of the knowledge agenda will increasingly be done in cooperation with local institutes
through programmatic partnerships in key results areas.
World Bank Group Program Integration
57. A number of the development challenges facing the Philippines call for solutions that
involve both “public goods” such as improved policies, institutions and incentives, as well as
private sector investments. The business case for IBRD-IFC-MIGA collaboration results from the
possibility of more effective use of financial and technical resources for the delivery of those public
and private goods, and potential innovation through a public/private funding mix. The Philippines
CAS pilots deeper integration of IBRD and IFC efforts by building on lessons of successful World
Bank Group integration, including a shared assessment and strategy developed jointly by mixed IBRD
and IFC teams (see Box 3).
Box 3. One Bank Group: IFC-IBRD Integrated Programs
The IFC-IBRD CAS team considered joint programs in several key sectors seen as having significant potential
development impact, where a combination of public and private sector actions are needed to realize the
potential. The team agreed to pursue joint programs in three sectors:
In infrastructure, new ideas in subsectors of joint interest will complement the significant number of
ongoing operations. A key priority is the support for the implementation of the current reforms in the
electricity sector. IBRD and IFC have also defined specific roles and synergies to more effectively help
catalyze private participation in household water service delivery in specific localities, and in the transport
sector through the preparation of well-developed transactions and in defining enabling policies and better
institutional processes and arrangements for procuring and implementing PPPs within the current legal
framework. The overall program has the potential to contribute to significant improvements in the risk
allocation and the division of labor between the public and private sectors.
In agribusiness, the challenges of low productivity and poor integration into global supply chains limit
job creation and income growth for farmers. These challenges will be addressed through a joint IFC-
IBRD program designed to increase rural and farmer access to credit through expansion of a menu of
innovative financing instruments (e.g., partial credit guarantee, index-based weather insurance, etc.), and
improve market access in domestic and international markets for agriculture and agribusiness through
better quality assurance, more efficient logistics and supply chains for agribusiness development. This
planned collaboration will build initially on IFC's current program in the banana sector and expand
gradually to other export crops, as well as in IBRD’s operational experience in supporting the
Government’s rural finance agenda and agricultural diversification efforts.
In the financial sector, the program will support increased access to financial services; banking sector
competitiveness and reach; and financial literacy. The joint framework includes work on financial sector
infrastructure including credit, payment and collateral systems, leveling the playing field between
government and private financial institutions, and promoting consolidation in the sector. In addition to
addressing the cross-cutting issues, specific operations will provide access to finance for LGU initiatives,
microenterprises, farmers, fishers, SMEs, housing and energy efficiency projects.
FY10-12 Country Assistance Strategy for the Philippines April 2, 2009
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58. MIGA will also continue to offer its guarantee products. It will make sure it is operating
consistently with the overall Bank Group goals, and coordinating with IBRD and IFC where this is
necessary or appropriate. The areas of joint and coordinated work are captured in the integrated
results framework (Annex 5) and will be jointly managed and monitored.
Strategic Objectives and Results Areas
59. The Bank Group's contribution to addressing the intertwined development challenges of
poverty and governance will comprise eleven core results areas through engagements at the national,
local, and private sector level. The anticipated outcomes presented below are the result of both
ongoing operations and the new ones proposed in this CAS.
- Strategic Objective 1: Stable Macro Economy
MTPDP Goal: Maintain economic stability through further fiscal consolidation (improved revenue
generation as well as strengthened expenditure management), rationalized national government spending for
devolved services, and reduced debt.
Results Area and Outcomes
1.1 Fiscal and financial stability through consolidation and improved macroeconomic risk
management
Outcome 1: Maintain tax effort through strengthened tax administration and tax policy reform
Outcome 2: Improved efficiency and targeting of public expenditures
Outcome 3: Improved management of key fiscal and financial sector risks
60. The first CAS objective supports the Government’s efforts to encourage growth and
maintain macro-stability while coping with increased macroeconomic uncertainty. Although the
Philippines may not be as vulnerable to global economic conditions as some neighboring countries,
growth prospects are likely to diminish over the short- to medium-term as the current global recession
is likely to be deep and protracted and is expected to impact on the Philippines’ economy with a lag
compared to other regional economies—remittances are a key factor in delaying the immediate
impact. Given limited fiscal space, a modest and well-targeted fiscal stimulus package will likely be
needed, and the government is working on such a plan (the Economic Resiliency Plan). To enable its
delivery and without jeopardizing fiscal stability, a significantly enhanced effort to improve tax
administration and implement tax policy reforms will be essential for the country to both protect the
poor and preserve its hard-gained macro-fiscal stability.
61. Outcome 1: Maintained tax effort through strengthened tax administration and tax
policy reform. The fiscal improvement of recent years needs to be placed onto a more permanent
footing. The fiscal consolidation that took place since 2002 resulted in substantial improvements in
revenue collections from 2004 and 2006. There is still considerable scope for increasing the efficiency
of the tax collection system. Estimates suggest that the Government only collects about 60 percent of
tax revenues due, because of widespread tax evasion and avoidance. Current global developments
warrant a countercyclical fiscal policy stance, and the Government’s initial response in part included
tax cuts that have set back previous gains in tax collection. The need to protect the most vulnerable
members of society from the impact of the global economic crisis, however, argues more in favor of
applying countercyclical pressure through an expansion of targeted social spending than by allowing
tax revenues to decline. Accordingly, the World Bank Group will focus on supporting government
efforts to avoid protracted slippages in the tax revenues to GDP ratio—through support for both tax
administration and policy reforms—to allow enough fiscal space for expanding targeted social
spending without raising the fiscal deficit to unsustainable levels. This would allow the non-
financial public sector debt ratio to fall further over the CAS period to a less burdensome level. The
eventual aim is to move to a broad-based, low rate, simplified tax structure that minimizes distortions,
increases horizontal equity, facilitates tax administration and fosters compliance. The Bank will
engage in this area through lending (through the ongoing NPS for tax administration), technical
assistance, policy notes, the Philippines Development Report, and quarterly economic reports, which
FY10-12 Country Assistance Strategy for the Philippines April 2, 2009
19
would also help raise public awareness of these issues. The Bank could reform and scale up its NPS
for tax administration once credible reform plans gain more traction. Complementary to efforts to
increasing the tax base and improving tax administration, key official statistics such as the system of
national accounts and industry surveys would be improved to support more evidence-based policy
making, broaden the tax base, and improve tax revenue forecasting, goal setting, and allocation.
62. Outcome 2: Improved management and greater transparency in public expenditures.
On the expenditure side, the Philippine Government has generally been effective in controlling the
aggregate level of spending in line with the country’s fiscal capacity. But in a number of priority
sectors such as education, health and infrastructure, the levels of spending tend to be insufficient for
the country to achieve its own stated policy goals such as the MDGs or rapid infrastructure
development. The fiscal turnaround in the past few years has reversed the trend of mandatory
expenditure cuts that compress discretionary spending items including capital outlays. Yet capital
outlays still remain below 2 percent of GDP, compared to almost 3 percent of GDP a decade ago. In
terms of sectoral allocation, the Government has increased the budgets of several priority agencies,
including Public Works and Highways, Education, Health, Agriculture, and Social Welfare and
Development over the past few years following annual reviews of expenditure programs in the
respective sectoral agencies. These allocation decisions generally improved the composition of
spending within these agencies, but there still appears to be scope for improving the efficiency of
expenditures in general. For example, social safety net programs are still dispersed across agencies
and poorly coordinated. The inefficient nature of part of the agriculture budget has repeatedly been
pointed out but the realignment of the budget composition has progressed slowly. The public works
budget is littered with small, fragmented projects with limited strategic thrust. The Bank’s technical
assistance will focus on improving expenditure allocation through introduction of DBM-led annual
budget strategy papers and medium-term expenditure plans for the Departments of Education, Health,
and Social Welfare and Development. The Bank will also be supporting the Government in improving
the targeting of key social protection spending such as the conditional cash transfer program. The
ongoing TA will be supplemented with a programmatic AAA on public expenditure issues in close
coordination with relevant government agencies.
63. Outcome 3: Improved management of key fiscal and financial sector risks. The
Philippines’ public sector debt has come down significantly since 2003 when it peaked at over 100
percent of GDP. Recent debt sustainability analyses undertaken by both the IMF and the World Bank
find that debt is broadly sustainable, with exchange rates and growth shocks having the most impact
on debt dynamics. Nevertheless, at an estimated 62 percent of GDP at end-2008, public debt remains
at an elevated level for an emerging market, especially in the current global environment of heightened
risk aversion and pullout from emerging markets. The composition also exposes the Government to
significant fiscal risks. Key among these are exchange rate shocks as close to 60 percent of public
debt is denominated in foreign currency, and rollover and interest rate risks given that a large share of
the debt is short term; this results in large and growing gross financing requirements for the public
sector (15.7; 18.5; and 19.7 percent of GDP for 2008, 2009, and 2010, respectively). There are also
potentially important fiscal risks from contingent liabilities (e.g., PPPs), and GOCCs, and possible
macro-financial risks arising from large exposure to government securities and balance sheet
mismatches in the financial sector either directly or indirectly thorough their lending to the corporate
sector and/or household sectors. The Bank and IFC (through its Advisory Services) can provide
expertise and cross-country experience in matters related to fiscal and financial risk assessment and
management, crisis response, managing insolvencies, and advice on risk reduction strategies and
capital market development.
64. Part or much of this segment of the results area would likely be done in partnership with
the IMF (e.g., the financial sector assessment program (FSAP) on which the assessment of macro-
financial vulnerabilities would rest). In the fiscal area, a public statement of fiscal risks could be an
important outcome. In the current global environment, the Department of Finance (DOF), the Central
Bank of the Philippines (Bangko Sentral ng Pilipinas – BSP), and Treasury are likely to be interested
FY10-12 Country Assistance Strategy for the Philippines April 2, 2009
20
in better macro-fiscal and macro-financial risk management, and the Bank will engage them through
policy notes as well as the FSAP, the Philippines Development Report and the Philippines
Development Forum (PDF), and potentially, technical assistance.
- Strategic Objective 2: Improved Investment Climate
MTPDP Goals: Encourage the private sector to improve productivity, strengthen trade and investment and
attain national investment rates of about 25-28 percent of GDP; continue with the integration of the transport
system, and develop and diversify the energy mix; ensure smooth financing for entrepreneurs, including
microfinance for underserved areas.
Results Areas and Outcomes
2.1 Enabling business environment to promote competitiveness, productivity and employment
Outcome 1: Increased and improved delivery of infrastructure
Outcome 2: Enhanced regulatory policy frameworks and institutional capacity for investment, service
delivery, and trade
Outcome 3: Increased investment and employment in rural and urban development
2.2 Financial services
Outcome 1: Increased delivery and access to financial services
65. A better investment climate remains a key challenge for the Philippines, and one that is
becoming more pertinent as risk aversion increases and availability of investment finance could
decline. There is a need to adopt policy reforms and implement programs that would help increase
competitiveness and improve governance in order to attract more investment, which would lead to
higher productivity and employment. The key constraints to improving the investment climate
include, among others, the lack of infrastructure, a weak regulatory framework, and limited access to
finance. As the pace of urbanization in the Philippines gains momentum, the Bank Group will expand
its focus on the urban dimensions of development. Urban centers, cities in particular, have an
increasingly important role to play in improving the investment climate and improving
competitiveness. In addition to establishing business friendly environments—including conducive
regulatory frameworks and quality infrastructure and services—cities and towns must also become
more adept at managing complex and large-scale development programs.
Results Area 2.1: Enabling environment for competitiveness, productivity, and employment
66. Outcome 1: Increased and improved delivery of infrastructure. The Bank Group will help
deliver more tangible transport results linked to improvements in governance through the ongoing
Second National Roads Improvement and Management Program (NRIMP2), and will support
expansion of this approach to the management of secondary and rural roads. In urban areas, such as
Metro Manila, the Bank will support the integration of the transport infrastructure improvement
programs within a broader metropolitan development context and local government planning
processes. Investments in road upgrading and maintenance will increase their levels of service to
facilitate efficient movement of people, goods and commerce along major corridors. In rural areas,
better roads will increase access to basic services, places of employment, and markets for products. In
addition, to operationalize the framework for PPPs with better risk-sharing between the public and
private sector, the Bank Group will support one model PPP for a national toll road and one for a light
rail project. In response to a possible reduction in the availability of private financing due to the
current global downturn, the Bank Group could provide risk mitigation products and assistance in
preparing financing and implementation packages for public investments. The Bank Group will
continue to support the public sector reform process in the sector dialogue under the Philippines
Development Forum. Better access to reliable and affordable power will promote investment in SMEs
in rural and urban areas. It will also help to reduce the constraints to and the cost of doing business;
improve the attractiveness of smaller urban and rural centers as engines of growth; expand coverage of
business and service delivery; and, extend services to the underserved poor who reside in remote and
isolated areas. The Bank will continue its support for rural electrification and, together with IFC, will
explore opportunities for new power investments. A particular emphasis will be placed on supporting
FY10-12 Country Assistance Strategy for the Philippines April 2, 2009
21
investments on renewable energy sources such as solar, hydro, geothermal, waste-to-energy and
helping develop a program on renewable energy to access carbon credits from the new carbon finance
facilities managed by the Bank. To address issues of inadequate connectivity, the Bank Group will
also explore innovative applications of ICT to achieve results, especially in rural areas.
67. Outcome 2: Enhanced regulatory policy frameworks and institutional capacity for
investment, service delivery, and trade. In sectors where the Bank Group is providing investment
financing—including transport, power, water, and waste management—the development of more
transparent and stable regulatory frameworks will continue to be supported, including the
strengthening of regulatory agencies for transport and power, solid waste, water supply and sanitation
to balance investor concerns and consumer welfare; support for multi-year infrastructure investment
programming, planning and strengthened budgeting at the national and local level including adequate
technical capacity and financial resources in line agencies to prepare projects for implementation, for
which private firms can bid competitively; development of trade and transport facilitation policies;
and, increased private investment in renewable energy technologies. The Bank Group will continue its
efforts to support the reform of the institutional and legislative framework through bi-lateral and multi-
lateral engagements such as the infrastructure working group of the PDF. If successful, these reforms
could trigger increased financing from the World Bank and other partners (e.g., by creating a common
policy for financing of operationally and financially sound water and sanitation providers) leading to
significant scaling up of investments in the medium term. IFC will continue to benchmark the
Philippines’ overall investment climate through the Doing Business indicators, particularly in highly
urbanized cities, to improve their administrative processes to reduce transaction costs for businesses.
IFC will also seek to scale up Advisory Services in key sectors such as water supply, building on
success of the Manila Water Company privatization. This will be complemented by MIGA’s political
risk insurance product which seeks to reassure private investors, and standard products for Transfer
Restriction, Expropriation, Breach of Contract and War and Civil Disturbance. In addition, the MIGA
Small Investment Program (SIP) offers a more streamlined product for smaller scale investments in
the country.
68. Outcome 3: Increased investment and employment in rural and urban development. In
rural areas, the Bank Group will focus on both farm and non-farm sources of growth. Efforts to scale
up agriculture and agribusiness development through public investment opportunities that promote
market-based approaches will be stepped up, including through joint effort of IFC and IBRD. MIGA
will continue to offer its guarantee product, and IBRD will also continue to support targeted local
infrastructure development programs through the Second Mindanao Rural Development Project, the
Second Agrarian Reform Communities Development Project, the LISCOP, the ARMM Social Fund
Project and the KALAHI-CIDSS Project, and a proposed Secondary/Local roads project. The Bank
Group will intensify its focus on urban development through a broad-based engagement with urban
practitioners and decision makers to identify strategic actions. The forum for urban dialogue will also
ensure broad consensus, and lay the foundation for a joint Government-Development Partner program
of technical assistance, and analytical and advisory services to increase knowledge and shape public
policy. The Bank’s ongoing support to the League of Cities’ ―City Development Strategy‖ (CDS)
program will be continued and a broader partnership with the Housing and Urban Development
Corporation, Department of Interior and Local Government (DILG) and NEDA built with funding
support from Cities Alliance and other development partners. IBRD will also continue to support
urban investments through the Support for Strategic Local Investment and Development Project
(SSLDIP), Metro Manila Urban Transport Project (MMURTRIP) and other new lending windows.
IFC will explore a limited number of transactions in mining, an industry with high potential, but with
considerable challenges and risks. IFC will seek transactions that can demonstrate the feasibility of
environmentally sustainable and socially responsible mining in the Philippines, and can be
implemented in full compliance with industry best practice and the IFC's Social and Environmental
Performance Standards.
FY10-12 Country Assistance Strategy for the Philippines April 2, 2009
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Results Area 2.2: Financial services
69. Outcome 1: Increased delivery and access to financial services. The investment climate
will improve when sources of financing, especially in the countryside and underserved areas, are
available and accessible to the private sector, service providers, LGUs, and other entities for various
types of investments, ranging from micro-small-medium enterprises to major capital expenditures. In
addition to increasing access to financing, refinements and innovations will also be required to better
tailor financing instruments to particular segments of the market; allow the entry of new financial
service providers; and encourage borrowers to improve their credit worthiness. To address weak
capacity and limited access to affordable finance for LGUs, the Bank Group will facilitate access to
additional sources of finance, such as commercial banks and sub-sovereign lending. Increased access
to grants and concessional financing will be provided, especially for LGUs with low-income and for
complex public goods, such as sanitation and solid waste management. In addition, LGUs will be
supported in their efforts to increase own-source revenue through better business tax and real property
tax collection. Improvements in the overall regulatory framework for credit will also be supported to
encourage greater private sector provision of credit, for example, through a single Credit Information
Bureau for SME credit and increased coverage of the public credit registry. Access to credit for small
farmers will be improved by the development and adoption of guidelines and transparency
mechanisms for the publicly-managed farm credit guarantee facility. The Bank Group will promote
options for increasing access to finance by private agribusiness. Innovations will include the pilot
testing of a long-term credit facility for agriculture/agribusiness and an index (weather) based
agricultural insurance system to mitigate weather-related risks.
- Strategic Objective 3: Better Public Service Delivery
MTPDP Goals: Improve governance of service delivery to support reforms of social welfare and
development; continue to pursue implementation of the health and basic education sector reform agenda to
increase access to quality basic education, health services, and water and sanitation by the poor.
Results Areas and Outcomes
3.1 Public service delivery in key sectors
Outcome 1: Improved access to quality basic education services
Outcome 2: Improved access to health services
Outcome 3: Increased household access to safe drinking water and sanitation services
3.2 Basic service delivery in poor areas
Outcome 1: Scaled-up provision of basic services through a nationwide community-driven development
program
Outcome 2: Enhanced effectiveness of public service delivery through more coordinated area-based
approaches
70. The third CAS objective focuses on improving public service delivery, especially for the
poor. Ensuring adequate access to and quality of public services, especially for the poor, remains a
major challenge. Improved access to and quality of public services in education, health, and water and
sanitation are key to achieving social sector MDGs, some of which are lagging in the Philippines. In
poor areas, a multi-sectoral set of basic public services is needed to address poverty in a
comprehensive manner. As national and local governments share responsibility for achieving the
MDGs, better coordination of activities is essential. Well-targeted and transparent CDD programs that
empower the poor to participate in local decision-making are effective instruments to strengthen
transparency, coordination and cooperation, and promote social inclusion, leading to improved service
delivery and outcomes for the poor. Improved inter-agency coordination and institutional
strengthening are also needed to realize greater synergy between anti-poverty initiatives in both rural
and urban areas. Further refinement of the overall decentralization framework is also needed to clarify
the roles, responsibilities and funding arrangements at each level of government (see also strategic
objective 5.3).
FY10-12 Country Assistance Strategy for the Philippines April 2, 2009
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Results Area 3.1: Public services delivery in key sectors
71. Outcome 1: Improved access to quality basic education services. The Bank will continue
to support DepEd’s reform program—the Basic Education Reform Agenda (BESRA)—as part of a
multi-partner effort, through the National Program Support project. The education reform agenda is
based on improving institutional performance linked to attainment of MDGs for education. While
access—measured by enrolment rates—remains a concern, improving the quality of education services
is also a priority given high drop-out and repetition rates, as well as low completion and achievement
rates compared to other middle-income countries. To achieve greater equity in access to basic
education services and to support quality improvements in public schools nationwide, BESRA also
supports school-based management, with corresponding decentralization of resources to local schools.
A quality assurance and accountability framework with defined minimum service standards for inputs,
outputs and outcomes, and a rigorous monitoring and evaluation mechanism at all DepEd levels are
key elements of the reform initiatives undertaken across all public schools. In addition, LGUs’ role in
the delivery of education services will be strengthened by ensuring that local special education funds
are properly mobilized to support education needs, that LGUs will lead the processes of education
governance in their municipalities/cities, and that schools are well managed.
72. Outcome 2: Improved access to health services. In health, the Bank is supporting the
Department of Health (DOH) reform program (FOURMULA 1) through the National Program
Support project, which promotes the improvement of health outcomes and the attainment of MDGs for
health through increased public investments in health care delivery, specifically investments to support
an increased number of facility-based births, and improved immunization rates and treatment rates of
tuberculosis, particularly of the poor. It also calls for universal social health insurance coverage and
enhanced insurance benefits, and the use of performance-based financing to support local level service
delivery and improved performance of public hospitals. It is also strengthening the regulatory
capacity to assure access by the poor to quality medicines and other health goods and services. The
role of LGUs in ensuring access to health services will be strengthened. At the provincial level,
funding for health services is one of the largest expenditure items and plays a significant role in
leveraging health services. Incentives for LGU participation in the delivery of quality health services
will be strengthened through various mechanisms, including performance-based measures.
73. Outcome 3: Increased household access to safe drinking water and sanitation services.
In addition to its support for regulatory reforms in the water supply and sanitation sector (see strategic
objective 2), the Bank Group will continue to support the expansion of access through investments: in
Metro Manila’s water supply and sanitation systems, including output based subsidies to enable poor
households to connect; in secondary cities through GFI project sub-projects for expansion of water
supply, solid waste and septage and sewerage systems; and in community-level infrastructure through
various community-driven development initiatives. In the context of these engagements, the World
Bank Group will continue to innovate and develop new instruments for engaging water and sanitation
providers (WSPs) including Advisory Services for PPPs, scaling up existing output-based aid
programs to include sanitation and reach poor households in other cities, financing small scale private
providers of water supply, and scaling up investments in solid waste management facilities.
Results Area 3.2: Basic service delivery in poor areas
74. Outcome 1: Scaled-up provision of basic services through a nationwide community-
driven development program. Poor communities typically lack adequate access to a range of basic
public services, such as elementary schools, health clinics, day care centers, water supply and
sanitation, access roads and bridges, electricity, small scale irrigation, livelihood support and others.
To accelerate the delivery of public services to targeted poor communities, the Bank will partner with
national government agencies, LGUs, development partners, NGOs and other civil society
organizations to support a scaled-up CDD program with nationwide coverage, including a focus on
areas and groups with specific characteristics that make service delivery especially challenging, such
as disaster-prone areas; conflict-affected communities, especially in Mindanao; environmentally
FY10-12 Country Assistance Strategy for the Philippines April 2, 2009
24
fragile areas; rural and urban poor communities, and vulnerable and marginalized groups, such as
indigenous peoples.
75. Outcome 2: Enhanced effectiveness of service delivery through more coordinated area-
based approaches. The effective delivery of services to the poor is hampered by weak inter-agency
and inter-governmental coordination, and a fragmentation of funding sources. Previous efforts to
promote ―convergence‖ across the Government’s anti-poverty initiatives relied on top-down direction
and have not been sustained. A renewed effort is needed to promote greater synergy between
programs designed to benefit the poor within specific geographic areas. Utilizing an area-based focus,
the Bank will explore opportunities to enhance the coordination between core anti-poverty initiatives,
such as the conditional cash transfer program, community-driven development initiatives, and the
reform programs of the education and health sectors, as well as improved inter-governmental
coordination, especially between municipalities, provinces, and regions.
- Strategic Objective 4: Reduced Vulnerabilities
MTPDP Goal: Reduce poverty and increase welfare, particularly in rural areas; sustainably manage the
environment and natural resources; reduce disaster risk and improve recovery management.
Results Areas and Outcomes
4.1 Social protection system
Outcome 1: National household poverty targeting system in place and used
Outcome 2: Conditional Cash Transfer (CCT) program fully operational
4.2 Disaster risk management and climate change
Outcome 1: Disaster- and climate change-related risks reduced
Outcome 2: Greenhouse gas emissions reduced through expansion of mitigation programs in key sectors
and LGUs
4.3 Stability and peace
Outcome 1: Enhanced impact and conflict-sensitivity of development programs implemented in
communities in Mindanao affected by armed or violent conflict
Outcome 2: Scaled-up provision of basic services and livelihood support through community-driven
development (CDD) in communities affected by armed or violent conflict
76. The fourth strategic objective supports the Government’s efforts to reduce
vulnerabilities for a large part of the population. This objective is aligned with the MTPDP goals
of reducing poverty and increasing welfare, particularly in the rural areas; managing disaster risks
which disproportionately affect the poor and vulnerable; and sustainably managing the environment
and natural resources to safeguard livelihoods.
Results Area 4.1: Social protection system
77. Outcome 1: National household poverty targeting system in place and used. This
outcome addresses the challenge of persistent high poverty incidence in the country by providing the
Government as well as the Bank and other development partners with a more systematic and strategic
framework for poverty reduction. Currently, existing social assistance programs are not accurately
reaching the poorest and most vulnerable households. A strengthened national targeting system would
increase access to social assistance for those who are actually poor; and conversely reduce the leakage
of budgets allocated for this purpose to non-poor households. As a milestone towards this outcome,
and to take advantage of the opening provided by the coming change in administration and the
formulation of a new MTPDP, the Bank will assist in ensuring that a strong anti-poverty program
framework and policies, for both rural and urban poor, are adopted in the MTPDP. The poverty
targeting system will strengthen the coherence, synergy and effectiveness in the design and
implementation of poverty reduction policies and measures shared across various government
programs (e.g., MTPDP, MTPIP, plans, budgets). It will also help to ensure that planned poverty
reduction investments to be financed by the Bank are more coordinated, consistent, properly
sequenced, and responsive to national and local development policy contexts.
FY10-12 Country Assistance Strategy for the Philippines April 2, 2009
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78. Outcome 2: Conditional Cash Transfer (CCT) program fully operational. The
Government is implementing a CCT program. Under the CAS, the WBG will support the improved
design and operation of a well-functioning CCT program. The CCT program will address
vulnerabilities by: (i) providing income support and protection to the poor to shocks, including recent
food price increases; (ii) helping to reverse deteriorating educational indicators (primary enrolment
and drop-out rates) which are likely reactions to households coping with increasing destitution; (iii)
helping to improve health outcomes in critical areas, including maternal mortality and childhood
morbidity; (iv) improving the governance of social assistance programs in general, by raising the bar
as a program that is based on enhanced transparency and accountability; (v) increasing the supply-side
responsiveness and accountability (by DepEd, DOH, and LGUs) to address stimulated demand; and,
(vi) providing a ―convergence framework‖ that allows the relevant agencies to work in tandem on the
supply and demand side measures in order to get social services to work for the poor.
Results Area 4.2: Disaster risk management and climate change
79. Outcome 1: Disaster- and climate change-related risks reduced. The Philippines is
extremely vulnerable to natural disasters due to a high incidence of severe weather conditions—
especially floods, typhoons, and drought—and a large number of earthquakes and active volcanoes.
This inherently high disaster risk is likely to be exacerbated by the effects of global climate change.
The resultant human and economic costs of disasters are significant, with estimates suggesting 0.5
percent of GDP lost annually due to natural disasters. The country has begun to develop more in-
depth strategies for disaster risk management and climate change adaptation to address the dimensions
of: (i) strengthening preparedness and adaptation at the local level with a focus on improving planning
and capacity, knowledge and understanding of measures to reduce disaster risk, including adaptation
to climate variability; (ii) reducing vulnerability of farmers to crop risk through support for innovative
solutions such as weather risk insurance schemes for assisting small farmers to cope with the
economic losses stemming from disasters; and, (iii) improving disaster risk financing strategy at
national and local level through support for identification of appropriate instruments and establishment
of new financing windows for preparedness, response and recovery. Bank support for these initiatives
is through the Global Fund for Disaster Reduction and Recovery (GFDRR) technical assistance to
enhance the development of disaster risk management and climate change strategies; new financing
instruments, such as a CAT-DDO; and GEF grant-funded activities, including a possible Climate
Change Adaptation project, which would integrate climate risk management into national and local
development planning in agriculture and natural resource management and would demonstrate cost-
effective adaptation measures to strengthen the resilience of investments, initially in those sectors.
These measures may be expanded to other vulnerable sectors or regions such as in coastal areas, where
an integrated coastal zone management approach could contribute to reducing vulnerability to natural
disasters and other hazards while promoting sustainable livelihoods and poverty reduction.
80. Outcome 2: Greenhouse gas emissions reduced through expansion of mitigation
programs in key sectors and LGUs. While the Philippines is a minor emitter of greenhouse gases, it
is committed to continue to pursue cost-effective solutions for reducing emissions. The emergence of
new mitigation financing instruments—particularly the Carbon Partnership Facility and the Clean
Technology Fund—opens up the potential for developing broader mitigation programs in areas such as
renewable energy, reducing air and water pollution, and solid waste management. Building on the
experience and successes of ongoing mitigation projects in the Philippines supported by the Bank,
such as geothermal and wind projects and wastewater treatment projects which already commit to an
emission reduction of about 2 Mt CO2e, opportunities will be pursued in the power, transport and
waste management sectors. In cooperation with other development partners, the World Bank will
assist the Philippines in mobilizing existing and future sources of international financing assistance.
FY10-12 Country Assistance Strategy for the Philippines April 2, 2009
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Results Area 4.3: Stability and peace
81. The Philippines continues to be adversely affected by violent and armed conflict in some
parts of the country, especially in the Mindanao region. Sustained growth and development for the
Mindanao region as a whole cannot take place without giving considerable attention to the
development needs of identified conflict-affected areas, which comprise a sizeable portion of the
island. However, recent armed conflict during 2008, which resulted in hundreds of thousands of
internally displaced persons and destruction of livelihood and property, and weak governance in many
parts of the region reduce the effectiveness of development programs. The complexity of the situation
in Mindanao requires a flexible approach in designing and supporting development programs.
82. Outcome 1: Enhanced impact and conflict-sensitivity of development programs
implemented in communities in Mindanao affected by armed or violent conflict. The goal will be
to support, through the Mindanao Trust Fund, rehabilitation of homes for returning Internally
Displaced Persons (IDPs) from recent and previous fighting between the Armed Forces of the
Philippines and the Moro Islamic Liberation Front. The program will be implemented in joint
coordination with LGUs, NGOs and key development stakeholders under a coordinated approach with
development partners. The CAS period will see a major push to enhance the conflict sensitivity of
Bank operations in conflict-affected areas in Mindanao and elsewhere in the Philippines to support the
creation of an environment conducive to peace through more cohesive communities and stronger local
governance (see Box 4).
Box 4. Enhancing Conflict Sensitivity
Future activities will have enhanced conflict sensitivity defined by one or more of the following
characteristics: (i) transparent and equitable distribution of development resources; (ii) broad-based
consultations with different parties to the conflict over development needs; (iii) conflict-related needs are met
(IDPs, rehabilitation of damaged assets, etc); (iv) strong grievance redress system is in place to capture
problems and mitigate the risk of corruption; (v) focus on opportunities to bring conflicting communities
together around neutral activities like identifying development needs and joint project execution (if
appropriate); and (vi) strengthened local dispute resolution mechanisms.
The enhanced conflict sensitivity will be achieved through three primary means: firstly, significant AAA
work to generate systematic analysis on conflict typology, incidence and patterns; public expenditure to track
development resources; impact evaluation to measure the effectiveness of development operations; and finally,
detailed analyses of local conflict dynamics, including communal land and natural resource disputes; secondly,
working closely with major development partners, harmonizing community driven development approaches to
strengthen communities, enhancing local governance, and creating economic opportunities; and thirdly,
adapting operations to conflict conditions, including through activities to encourage inter-communal
cooperation and strengthen local dispute resolution mechanisms.
83. Outcome 2: Scaled-up provision of basic services and livelihood support through
community-driven development (CDD) in communities affected by armed or violent conflict.
The goal will be to scale up provision of basic services, livelihood and peace programs through
community driven development including capacity building for LGUs, People’s Organizations and
other local groups. This can be accomplished through additional financing (loan) for ARMM Social
Fund and/or an expanded MTF-RDP (grant). The CDD approach will assist in mainstreaming good
governance at the local level through improved transparency in budgeting, allocation, and
management of public resources and accountability in the effective use of these resources to improve
services at the community level. For non-conflict-affected areas, there is a need to work with
Regional NEDA and LGUs to identify areas for development and investment. A detailed evaluation
of community development approaches utilized by the Bank and key partners in conflict-affected areas
will also be undertaken to assess what has and has not been working. Results from this evaluation will
be used to harmonize development approaches, based on a strong understanding of effectiveness.
FY10-12 Country Assistance Strategy for the Philippines April 2, 2009
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Cross-Cutting Theme: Good Governance
MTPDP Goals: Strengthen partnerships and accountability among government, civil society, and the private
sector; fully operationalize the Government Electronic Procurement System; conduct integrity development
reviews in government agencies, and expand and institutionalize lifestyle-checks.
Results Areas and Outcomes
5.1 Governance and anticorruption in selected national government agencies
Outcome 1: Core business systems, processes and capacities in selected agencies improved
5.2 Procurement and public financial management reforms at national and local levels
Outcome 1: The Procurement Law more strictly enforced
Outcome 2: Improved management and greater transparency of public finances
5.3 Better local governance through effective decentralization
Outcome 1: Deepened and refined decentralization through broad-based reforms
Outcome 2: Strengthened LGU performance for more effective service delivery
84. Faced with the considerable governance challenges in the Philippines, the Bank has
pursued strengthening public institutions as a key objective in the current CAS13
. While
continuing to pursue this objective, the Bank’s new governance strategy for the Philippines
emphasizes systematic efforts to increase transparency, accountability and participation at both
national and local levels as a cross-cutting approach in pursuit of each of the results areas described
below. This is in line with the Bank’s country governance and anticorruption framework (CGAC),
which emphasizes both government capacity and demand for good governance. The new strategic
emphasis takes advantage of the well-known strengths of the Philippine civil society as both advocates
of governance reforms and partners in the Government’s own good governance initiatives.
85. Strong political commitment backed by a broad consensus is essential for successful
governance reforms. The first two years of the CAS period offer an opportunity for building
consensus and setting a clear agenda for governance reforms to be pursued by the next administration.
During this period, the Bank will engage a broad spectrum of Filipino stakeholders and external
development partners to help galvanize drivers of change for governance reform, so that efforts aimed
at building a capable and accountable state are more consistent and sustained. The Bank will pilot
non-traditional and innovative approaches to promoting and supporting governance reforms, including
working with actors outside the Executive branch of the national government. There will be particular
emphasis on strengthening the analytical bases for governance reform advocacy by a broad coalition
of CSOs. In partnership with other interested partners, the Bank will pursue the establishment of a
consortium of CSOs and local academic institutions to carry out rigorous analysis and systematic
documentation of political economy and governance-related topics.
Results Area 5.1: Governance and anticorruption in selected national government agencies
86. Outcome 1: Core business systems, processes and capacities in selected agencies
improved. In the new CAS, specific criteria will be utilized to determine agencies where Bank-
supported TA for agency-level governance improvements is likely to have greatest impact, including
the intrinsic importance of the agencies for the CAS’s renewed emphasis on direct poverty reduction
and governance improvements, as well as reform commitment and fiduciary benchmarking. The Bank
will explore ways to use the Government’s own mechanisms, such as annual agency audit reports, as a
basis for assessing the quality of agencies’ governance. The Bank will work with a small number of
relatively well-performing agencies to ensure governance gains are sustained and their capacities are
enhanced further. In addition, a few agencies which occupy important roles in the public sector and yet
are known for their governance challenges would also be included as long as there is commitment to a
governance reform agenda. Agencies initially prioritized include: (i) the Departments of Education
(DepEd), Health (DOH), Social Welfare and Development (DSWD), which are considered to be well-
managed agencies and each having a relatively coherent sectoral reform framework critical for poverty
reduction; the Bank is already providing support to the internal audit units at those departments; (ii)
13
See further analysis of governance challenges, opportunities and risks in Annex 2.
FY10-12 Country Assistance Strategy for the Philippines April 2, 2009
28
Department of Public Works and Highways (DPWH) and the Bureau of Internal Revenue (BIR),
which are often cited as among the most corruption-prone agencies but have taken steps to put in place
governance reforms; and, (iii) the Judiciary, which is responsible for fundamental functions of good
governance.
Results Area 5.2: Procurement and public financial management reforms at national and local
levels
87. Outcome 1: The Procurement Law more strictly enforced. A well-functioning public
procurement system is critical to overall government effectiveness. The reform agenda for
procurement has been clearly articulated as the complete implementation of the Government
Procurement Reform Act (2003). Much has already been achieved in reforming the legislative and
regulatory framework; however, important challenges remain in strengthening the institutional
framework and management capacity; enhancing the competitiveness of the public procurement
market; and, improving the integrity and transparency of the system. In the recently concluded 2008
Country Procurement Assessment Review (CPAR), actions by government agencies and development
partners have been well-organized and coordinated resulting in agreed actions to further improve the
public procurement system, including the issuance of improved Implementing Rules and Regulations.
The Bank will continue its support to the Government’s effort at harmonizing the implementing rules
and regulations for the procurement law. Significant technical assistance and support from
development partners will still be needed to further strengthen implementation and enforcement. The
Bank has played an active role in the procurement reform agenda and will continue to do so under the
new CAS. The Bank will work to improve the overall quality of procurement through its national and
local development projects, by providing support to further strengthen civil society oversight and
improve public access to procurement information; expand the e-Government Procurement; roll out a
professionalization program for practitioners; improve procurement audit; and, bring down
implementation of the procurement law to the sub-national level.
88. Outcome 2: Improved management and greater transparency of public finances.
Effective public financial management (PFM) systems form the core of a country’s national public
management framework. While a major component of the reform agendas discussed in Results Area
5.1 aims to improve agency-level PFM performance, these reforms are not likely to have a significant
impact unless accompanied by broader, government-wide efforts at both the national and local levels
to strengthen the overall PFM framework. Government efforts in the area of PFM reform have so far
been fragmented and progressed more slowly in some important dimensions, such as improved
accountability and transparency in budget execution and financial management. The Philippines
would benefit from having a modernized public financial management law that more clearly regulates
and disciplines the management of public money. Once a new law is in place, it is expected that
subsequent efforts to support full implementation of the new law would be more coherently organized
to avoid unnecessary fragmentation of efforts. Another critical ingredient for good PFM is a
comprehensive government financial management information system which would allow the
Government to track, manage and report on financial transactions in a timely and transparent manner.
The absence of such a system is currently a major impediment to budget transparency as well as
operational efficiency. The Bank is positioned to support PFM reform depending on demand from
relevant government agencies in charge of PFM and work with civil society groups to promote
increased budget transparency, such as through formation of a consortium of CSOs to monitor and
analyze government expenditures. A major challenge will be to improve inter-agency coordination
among key oversight agencies to expand support for the cross-cutting PFM agendas.
Results Area 5.3: Better local governance through more effective decentralization
89. Given the country’s decentralized democratic system, effective and accountable local
government units (LGUs) provide the foundation for good governance. Despite the emergence of
some LGUs as strong champions of good governance since the introduction of the Local Government
Code (LGC) in 1991, the overall decentralization framework is not conducive to promoting better
FY10-12 Country Assistance Strategy for the Philippines April 2, 2009
29
local governance on a wide scale. Assignments of service delivery responsibilities across different
levels of government remain ambiguous for some services, and the internal revenue allotment (IRA)
formula acts as a disincentive for increased local revenue effort for many LGUs. In addition, the IRA
formula does not take full account of LGUs’ relative fiscal capacities, service delivery needs or
poverty status. The Philippine Development Forum (PDF) Decentralization and Local Government
Working Group, which the Department of Interior and Local Government convenes and the Bank co-
convenes, is the principal venue for engagement on these discussions and for coordinating actions by
both the Government and development partners around a four-point agenda: (i) local government
finance; (ii) capacity building; (iii) performance benchmarking; and (iv) policy reforms on devolution.
The Bank—together with other development partners active in this area—contributes to the
discussions, conducts studies, and aligns its financial and technical assistance to the broad agenda set
by the Working Group.
90. Outcome 1: Deepened and refined decentralization through broad-based reforms. There
is a general awareness among the stakeholders involved in the decentralization debate that the
fundamental policy framework, as embodied in the LGC, needs improvements. Through the PDF
Working Group, the Government, assisted by the Bank and the other development partners, has
initiated several efforts to reform the LGC; however, progress to date has been slow and incremental.
While prospects for a major overhaul of the decentralization framework through revision of the LGC
are currently limited, it is important to work toward a technical level consensus on a medium-term
reform agenda. Under the proposed CAS, the Bank will engage more frontally in debating pros and
cons of the current arrangements and proactively suggest possible options for improving the overall
intergovernmental arrangements. The Bank will undertake a programmatic series of analytical
activities and advocacy work in support of the PDF Working Group agenda.
91. Outcome 2: Strengthened LGU performance for effective service delivery. The capacity
of LGUs to respond effectively to the needs of the poor is often undermined by weak incentives and
poor governance. Although the problems of incentives and governance result largely from the
patronage-driven nature of local politics and partly from the deficiencies in the design and
implementation of the decentralization framework, there is still significant scope for enhancing LGUs’
incentives for service delivery within the existing decentralization framework. The Bank will support
the development of a more explicit strategy for LGU service delivery improvement using a
combination of top-down incentives—through support for a performance-based grants system that
links the availability of additional grants to the attainment of pre-specified performance criteria of
good governance—and bottom-up initiatives—through the scaling up of the KALAHI-CIDSS project
into a nationwide program as the primary vehicle for promoting community empowerment,
strengthening bottom-up planning and budgeting, and enhancing social accountability. Other tools to
be introduced include scorecards and benchmarking systems. In addition, the Bank will seek other
opportunities to enhance citizens’ participation, and involve NGOs in addressing specific governance
objectives.
C. IMPLEMENTING THE FY10-12 COUNTRY ASSISTANCE STRATEGY
Operationalizing Governance
92. A major innovation of the new CAS is to mainstream systematic approaches to
addressing governance challenges and operationalize them across the portfolio and at each step
of the project cycle. In line with the Bank’s CGAC framework, the Bank will apply upstream
governance/political economy diagnostics to all new operations at the pre-concept stage so that the
decision to move forward to the PCN stage would be substantiated. Thus, proper measures to mitigate
governance risks are included in the project design and at the same time the project can maximize its
impact on governance improvements. All Bank projects will abide by an enhanced standard of
information disclosure. All new projects will be designed to contribute to governance improvements
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30
in ways that are appropriate to the specific context of the sector and the operation but still following a
systematic strategic framework. During implementation, the activities will be reviewed to ensure that
the governance and anticorruption measures generate the expected results. The review will be
conducted on a sample of projects identified from the risk level at entry or on a case-by-case basis if
issues arise. Finally, at completion, the Bank will make sure that the completion report will assess the
achievements in governance, hence providing basis for the next Bank investments in the sector.
93. The Country Office has strengthened the fiduciary team and created a Philippine
Governance Advisory Team (PGAT) to better operationalize governance considerations in
project design. The fiduciary team has been expanded with additional staff, leading to a strong
international expertise on transactions. PGAT, a multi-disciplinary team led by the Portfolio Manager
and composed of Manila-based governance specialists and senior operations staff, will offer advice to
the task teams to address project governance risks and opportunities appropriately and systematically.
The PGAT, supported by the Bangkok Governance Hub and an additional full-time governance
advisor, will prioritize activities in nationwide and sectoral governance reforms, and will advise task
teams on governance improvements in specific activities, including through the use of ―Governance
Filters‖ (see Box 5).
Box 5: Governance Filters
The Governance Filters will help task teams in charge of developing new activities identify the level of
governance risks they should expect to face. The filters will facilitate the decision process for the lending
program and will provide the information needed to build a mitigation plan when the project concept has been
approved. They will include government data such as the COA audits for the corresponding government
agency, and the Integrity Action Plan of the Presidential Anti-Graft Commission (PAGC). In addition, the
teams will carry out additional risk analysis, varying in substance according to the level of preparation. At the
pre-concept stage, the teams will complement the government criteria with an analysis of the political risk of
the potential activity. While a high risk can lead to a decision not to pursue the idea, management may also
decide to take a calculated risk, and ask for further analysis in the next stage. At the concept stage, risk
assessment can then relate to the project concept. The analysis will assess the capacity versus corruption risk,
and provide a mitigation program aimed at reducing the potential sources of corruption. At this stage,
management can again make the decision not to pursue project preparation, with still a limited impact on Bank
expenses. Finally, the Governance Filters apply at the last stage, the decision review meeting, with the main
objective of strengthening the mitigation action plan. The overall process would then ensure a comprehensive
analysis of governance risk leading to a well documented decision of management to accept or reject it with
limited cost.
94. Recognizing the need to improve performance, the Government has taken steps to
address some of the bottlenecks in project implementation. These focus on: (i) reviewing budget
execution practices of both the Department of Budget and Management (DBM) and implementing
agencies with the view to simplifying the allocation of resources; (ii) ensuring the sustainability of
policies, organizational structures and skills from project design, preparation and implementation; (iii)
strengthening project implementation capacity of government agencies; and (iv) addressing issues in
the financing and implementation of devolved activities by clarifying the roles and implementing
mechanisms for MDFO, LGUs and national agencies in LGU subprojects.
95. Another area of Bank support would be in strengthening the Government’s monitoring
process and systems. The Government recognizes the need to put in place a more systematic
monitoring process and review of projects, particularly those in problem status so that early follow-up
action will be taken. Also of concern are the budget execution practices of the DBM and
implementing agencies. A number of budget-related issues have been raised as one of the main causes
of project implementation delays. The Bank may also need to provide technical assistance to improve
budget execution not only to the DBM but also to the implementing agencies.
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Managing the Program
96. The World Bank Group will organize its Philippines program and its country team
along the lines of the four strategic objectives, one cross-cutting theme, and eleven core results
areas. For each of these the Bank will organize, budget for, and monitor an integrated program of
lending, AAA, trust funds and partnership activities. Individual products remain the responsibility of
sector units, but management of the key results will be done by multi-sectoral teams, coordinated
through the Country Leadership Team (CLT). The World Bank Group will flexibly adjust resource
allocation among results areas depending on progress and emerging opportunities in those areas.
IFC’s resources will be integrated in the results areas that will be jointly pursued, notably in
infrastructure, agribusiness and financial sector. Consistent with the overall strategy, MIGA will also
continue to offer its guarantee products.
Box 6. CAS Results Monitoring
Monitoring of the CAS will be carried out by the Country Leadership Team (CLT), with a designated
leader responsible for each of the strategic objectives of the CAS. Reporting for the different CAS results
will be consolidated at the level of the four CAS strategic objectives and the cross-cutting theme of
governance, and will form a central part of the mid-year and year-end reviews of the Work Program
Agreements and CAS progress. To support this effort, a quarterly report detailing expenditures and
disbursements under each of the activity codes mapped to each of the specific results areas and strategic
objectives and a semi-annual qualitative review of progress on each of the five strategic objectives will be
prepared. As part of this process, task teams will be asked to provide brief updates on progress achieved on
individual activities.
97. In delivering its program, the World Bank Group will pay special attention to
strengthening the portfolio, improving lending efficiency, furthering the knowledge agenda, and
leveraging its resources through strategic partnerships and trust funds. This will be part of an
implementation approach with clear indicators and commitments for bringing down the cost of doing
business with the Bank as well as the cost of business for the Bank itself in terms of preparation time
and budget. The World Bank Group will actively mobilize other funding sources to support
analytical, advisory and supervision work, and will use resources more efficiently through risk-based
approaches to fiduciary supervision to achieve enhanced implementation efficiencies.
Loan Portfolio and Pipeline Management
98. The IBRD’s ongoing portfolio consists of 18 active loans with total loan commitments of
US$1.2 billion, of which US$871 million undisbursed, and 78 country specific grant projects with
a total value of US$140 million. Nine loans (including one DPL) totaling US$1.05 billion were
approved during the period FY06-08. This was higher than the US$450 million - US$900 million
anticipated in the CAS and the US$852 million approved lending between FY00-05. The increase was
due to Government’s improved fiscal position starting in FY06, which allowed adequate budget space
to accommodate requirements of new projects. Improved fiscal performance also resulted in the
processing of the first Development Policy Loan (DPL1) to the Philippines amounting to US$250
million in FY06. Nine projects exited the portfolio during the same period. The trust fund portfolio
has likewise grown and evolved in recent years, with free-standing recipient-executed trust funds
accounting for 41 percent of total trust fund commitments as of mid-FY09, representing a marked
increase from FY06 when these types of trust funds accounted for only 17 percent of the Philippines
trust fund portfolio.
99. Despite the improved lending commitment for the FY06-08 period, portfolio
performance reflects a slow start for the majority of projects and overall disbursements lower
than expected. Portfolio review findings indicate that similar issues cause delays in both regular and
national program support (NPS) operations, as well as trust funds, and adversely affect portfolio
performance. In FY08, 16.7 percent of projects by number and 7.8 percent by amount were at risk.
FY10-12 Country Assistance Strategy for the Philippines April 2, 2009
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The Government has been taking steps to address some of these implementation issues through
important policy actions and has intervened in some cases in order to secure renewed ownership and
support from government agency champions. These interventions have started to exhibit positive
results, including the favorable FY08 disbursement ratio (20.1 percent compared to 15.2 percent in
FY07), but the portfolio continues to face challenges. None of the projects evaluated by IEG during
the last five years was rated unsatisfactory. Both the Bank and the Government recognize the
importance of maintaining performance momentum and the need to formulate and institutionalize
sustainable measures so that commitment levels will be matched with disbursements and eventually
achieve desired results.
100. Efforts will also continue to improve and strengthen partnerships with the Government,
the Asian Development Bank (ADB) and the Japan International Cooperation Agency (JICA) aimed at harmonizing and aligning processes between financial institutions and government agencies
to further enhance aid effectiveness and reduce transaction costs. Ongoing harmonization work on
environmental and social safeguards will be a continuing activity and further harmonization work on
government procurement system will be pursued even as the Philippines is being considered as one of
the candidates to be a pilot country for the ―Use of Country Systems‖ in the Bank-Supported
Operations Piloting Program. The Bank will sustain coordination with oversight agencies through
quarterly meetings and the conduct of joint portfolio reviews and will continue to work with the
Government Procurement Policy Board (GPPB) and development partners on procurement reform to
improve the government’s public procurement system in line with the recommendations of the CPAR.
Annex 9 contains further information on the Philippines harmonization agenda.
101. The Bank Group will actively engage with the Government in a dialogue aimed at
addressing weak technical capacity of implementing agencies, including measures to improve
quality at entry and project implementation. The Government recognizes the need to improve
existing monitoring practices, particularly for projects in problem status, so that early follow-up action
can be taken. The Bank has offered to provide technical assistance to strengthen institutional capacity
and monitoring processes and systems to help improve government fiduciary functions. The Bank has
also been providing assistance to improve budget execution practices of both the Department of
Budget and Management (DBM) and selected executing agencies. The Bank will also help the
Government to identify the main constraints to building and retaining capacity in government
agencies, including issues linked to implementation of the government-wide rationalization process.
102. Going forward, the Bank will adopt strong performance criteria for project preparation
and portfolio operations building on keen engagement and a strong interest shared with
government agencies to improve efficiency and responsiveness. This will require making more
strategic choices and agreeing to engage only in areas where the Bank has strong partners and
joint/shared commitment to deliver results. The CMU will take an active hand in shaping the pipeline
by encouraging teams to pursue additional financing for well-functioning operations and engaging
with teams during the pre-identification stage. Opportunities to pursue additional financing for well
functioning projects will be actively evaluated with a view to reducing transactions costs, deepening
and broadening successful reform efforts and building on tested fiduciary and implementation
arrangements.
103. New project ideas will be screened early in the process and preparation resources will be
allocated incrementally based on project complexity and demonstrated progress and traction
with counterparts. Teams will initially be allocated modest budgets to develop the business case for
new and potentially innovative project ideas. These initial assessments will cover the critical issues
and progress of ongoing reforms in the sector and the likelihood of success in proposed new reform
areas. As part of the WPA process, all project ideas will be subject to an initial CMU and Sector
Management Unit (SMU) review before they are cleared and provided with additional resources to
move to the pre-identification stage, leading to the PCN preparation phase. The Governance Filters
and the PGAT’s inputs during the PCN review will also guide further preparation work.
FY10-12 Country Assistance Strategy for the Philippines April 2, 2009
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104. The Bank has identified a set of early “Readiness Filters”, agreed with the Government,
which will be used to screen projects during the regular programming discussions. This process
will allow both the Government and the Bank to effectively determine ―ready-to-go‖ projects and
decide to postpone or drop those that will not pass the filters. Only project ideas that pass the early
Readiness Filters will be listed in the Bank’s annual program and will receive full preparation budgets.
Project preparation activities will subsequently be monitored closely and expected to be completed
efficiently and within Bank standards.
105. The Bank has also identified a set of country team objectives for project implementation
and supervision. The CMU will continue to monitor progress of ongoing projects and pursue
improvements in portfolio management in order to accelerate disbursements. The Bank may also
decide to refocus engagement in some problematic sectors depending on country portfolio review
results. The Bank will aim to further strengthen implementation and M&E review practices in project
supervision and monitoring. Timely ISR reporting for all projects will be strictly imposed and
increased supervision budgets will be provided, if necessary, for projects that are considered high risk
or in problem status. The practice of integrated fiduciary performance reviews will be continued but
using a more risk-based approach, with increased attention to team composition and thematic reviews
for high risk projects. The Bank will also pursue a broader post review strategy that will include
periodic reviews of country systems and processes, in addition to transactions review processes, in
order to better assess agency performance, including governance practices and challenges of
implementing agencies. The Bank will also proactively work with INT to address specific project
complaints.
Knowledge Agenda
106. The Bank will pursue an expanded and re-focused knowledge agenda through close
coordination with the Government and by establishing partnerships with (consortia) of think-
tanks and universities. This will maximize the developmental impact of its analytical work in the
Philippines, taking into account the context of a new administration and plans for a new MTPDP. The
knowledge agenda will also involve and build on a network of Knowledge for Development Centers in
leading state and private universities. Understanding the underlying causes of poverty and how the
poor can better benefit from growth are critical questions for the Philippines. The World Bank, along
with other partners, has embarked on a study to further analyze the nature and causes of recent poverty
and to assess how growth could result in greater reductions in poverty.
107. The AAA program will be developed around thematic areas that are consistent with the
CAS objectives. The AAA program will focus on deepening the Bank’s knowledge of and
engagement in the key strategic areas identified in the CAS without being restrictive. The AAA
program would therefore focus on aspects of one or more of the following themes: (i) macro/fiscal
stability; (ii) investment climate; (iii) better service delivery for the poor; (iv) reducing vulnerabilities;
and (v) governance.
108. A more consultative process to identify and agree on priority AAA activities will be
established with government and other stakeholders. The Bank will aim at a more demand-driven
AAA program, while acknowledging the difficulty of satisfying multiple sources of demand. A
process would be established to capture demand for AAA and respond in a constructive and strategic
way, combining efforts with other partners whenever possible. This will address concerns identified
in IEG evaluations. Some AAA will also respond to Bank needs to further knowledge in critical areas
where policy and operational response would be needed. AAA work focused on innovative ideas and
business development would be important to guide the Bank program in the Philippines as well as to
ensure the Bank stays relevant and anticipates future demand by government and other stakeholders.
The Bank is planning to establish an "Advisory Council" of eminent Filipino intellectuals to provide
advice on the Bank’s AAA work. Such an Advisory Council will be in addition to the broader
consultations with government and other stakeholders and may eventually broaden its focus to advise
the Bank team on the whole country program.
FY10-12 Country Assistance Strategy for the Philippines April 2, 2009
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109. Monitoring the AAA at all stages will be improved. The Bank will assign dedicated senior
staff to ensure that AAA monitoring is carried out more effectively in order to improve
implementation and enhance impact. The AAA leader will coordinate the overall AAA portfolio to
ensure that the activities undertaken are in line with priorities agreed between the Government and the
Bank, and will form a cohesive support structure for the achievement of the strategic objectives of the
CAS.
Trust Fund Portfolio Management
110. The Country Management Unit manages the trust fund portfolio jointly with the loan
portfolio. The country trust fund coordinator monitors trust funds in the pipeline and progress on trust
funds under implementation and alerts task teams when action is needed through the monthly
management reporting process. Trust funds are also incorporated in other management reports on the
overall country program, including the CAS, the Memorandum of Understanding on the annual work
program and annual retrospective reports. In addition, the Portfolio and Quality Team conducts
periodic reviews of the country’s combined loans and grants portfolio together with implementing and
oversight agencies and shares its findings with Japan and the Asian Development Bank (ADB) to
identify cross cutting issues and solutions. Annex 8 contains a list of World Bank Group-managed
Trust Funds in the Philippines.
111. The Bank team is working toward integrating trust fund planning and management with
overall business processes. The Bank will use the WPA process to get an indicative list of lending
and non-lending activities planned along with the proposed funding sources for such activities (Bank
budget, trust funds, or other) to allow the CMU to assess their strategic fit with the CAS in advance of
the formal submission of trust fund proposals. The Bank will work closely with program managers of
trust fund programs managed by the networks or at the regional level to ensure that CMU inputs and
sign off are secured prior to the approval of trust fund proposals to be implemented in the Philippines.
112. Trust fund proposals are currently put through a rigorous review process during which
the Country Leadership Team reviews and prioritizes new proposals to ensure alignment with
country priorities and the CAS. In the case of free standing jumbo trust funds involving partners,
such as the Mindanao Trust Fund, the task teams pursue a formal due diligence and review process
similar to the one applied to regular Bank operations, comprising a concept review, decision meeting
and appraisal prior to the execution of legal agreements to formally establish the trust funds.
113. Active involvement of country and regional trust fund coordinators at the conceptual
stage has proved effective in anticipating questions or issues, facilitating the approval process,
and helping ensure smooth implementation. Further, country management, sector specialists and
fiduciary staff conduct training on Bank policies and fiduciary procedures relating to trust funds
shortly before, or immediately after grant signing to facilitate start up of grant implementation. The
training is customized to the specific needs and circumstances of the agency/ies implementing the
grant, making it more effective compared to generic training. Fiduciary and disbursements staff are
also available to provide hands on coaching and trouble shooting to implementing agencies.
Fostering Stronger Partnerships
114. The Bank has established strong partnerships in the country with Government and other
stakeholders, and intends to sustain and further deepen these to help achieve core results under
the new CAS. At the policy level, the Bank will continue to draw on its strong convening power in
the Philippines through support of the PDF, which is chaired by the Government and co-chaired by the
World Bank. The PDF is recognized by the multistakeholder participants as an effective forum for
facilitating dialogue on critical policy reforms as well as for providing an overall framework for
partnerships not just with the Government but among other PDF players. As the co-chair of the PDF,
the Bank will continue to ensure the effectiveness of the PDF process, and will continue to be an
FY10-12 Country Assistance Strategy for the Philippines April 2, 2009
35
active co-convener or participant in all of the eight PDF working groups whose thematic areas cut
across all the new CAS strategic objectives.
115. At the program level, the World Bank Group continues to be a key player in the
Philippines and intends to sustain this position in the next CAS. Official Development Assistance
(ODA) in the Philippines as of end calendar year 2008 was at the level of US$9.7 billion. Together,
Japan, ADB and the World Bank provide approximately 75 percent of total ODA. Japan’s share is 43
percent, while the World Bank and ADB have equal shares of 16 percent each. Within the context of
the ODA composition in the country, partnerships with other players will continue to be an important
element of the strategy. (See Annex 7 on the mapping of development partners’ programs.)
116. At the operational level, scaling up of existing partnerships with various stakeholders
will be a key element of the strategy. The Bank will pursue complementarity of our lending
programs with those of ADB and Japan, the two other large ODA contributors in the country, in areas
of common interest. Cofinancing with multilateral as well as bilateral agencies will be explored
particularly for large program loans. As a specialized member of the United Nations, the Bank will
continue to cooperate with the UN country team on addressing the MDGs and other common
activities. In portfolio monitoring, the Bank will continue to collaborate with ADB and JICA through
the government-led country portfolio review to harmonize and align processes among development
partners and government agencies.
117. The operational collaboration with other international and national development
partners has been strengthened through the establishment and implementation of jumbo trust
funds administered by the Bank in recent years, and will be continued under the new CAS. The
Bank Group’s close partnership with Australia, whose program in the Philippines has increased
significantly in the last two years, is especially significant. A number of externally financed outputs
with AusAID financing were activated in FY09, and a new country level programmatic trust fund is
expected to be activated soon. The European Commission (EC) is another close partner of the Bank in
the Philippines, with two ongoing jumbo trust funds for the health sector, one specifically focused on
Mindanao. Under its governance and anticorruption initiatives, the Bank will seek active partnerships
with JICA and ADB and with the Government on harmonization of procedures on procurement, and a
new set of coordination on financial management activities with the Government. The Bank will also
pursue partnerships with CIDA, Spain, and other interested partners on a proposed multidonor trust
fund on Decentralization and Local Government. The Bank will continue to implement the first phase
of the multidonor trust fund for Mindanao, which includes contributions from Australia, Canada, EC,
Sweden, New Zealand, and the United States and which has focused on capacity building in the local
post-conflict communities of Mindanao. Annex 8 contains the list of the major World Bank-managed
Trust Funds in the Philippines.
118. A network of strong partnerships is critical to delivering not only Bank lending, but the
knowledge agenda as well. In partnership with other development partners, the World Bank Group
will increasingly emphasize knowledge cooperation and formalize a rolling AAA program with the
Government. The country team will also proactively pursue new partnerships and trust funds to
mobilize additional resources and expertise for the Philippines country program.
119. The Philippines is known to have an active and vibrant civil society, and the Bank
recognizes the potential partnerships this offers. Building on the consultations conducted for this
CAS, the Bank will enhance its existing partnerships with CSOs at the project level, as well as on the
knowledge agenda, through more informal but regular dialogues with think-tanks and academe on
current policy issues. The Bank will strategically use the eleven Knowledge for Development Centers
around the country for policy dialogue at the local levels and with the local CSOs. The Bank will
continue to support specific themes under the CAS (e.g., inclusive growth) through the Panibagong
Paraan program (Development Marketplace) on a bi-annual basis by providing small grants to a broad
range of civil society groups, local governments and grassroots organizations. The next Panibagong
Paraan may be held in FY10.
FY10-12 Country Assistance Strategy for the Philippines April 2, 2009
36
120. Looking ahead, there is scope for closer collaboration and synchronized efforts in several
new areas being supported under the CAS, including on global issues such as climate change
adaptation and disaster risk management. The Bank Group will continue to expand ongoing
partnerships and explore new activities with global programs such as the Public-Private Infrastructure
Advisory Facility (PPIAF), Global Environment Facility (GEF), Water and Sanitation Program,
Carbon Finance Funds, Monteral Protocol, Cities Alliance, and others. On the global economic crisis,
closer collaboration with local and global partners will be needed with the expected higher levels of
lending and advisory services, including continued close coordination with the IMF on the assessment
of macroeconomic policies and conditions.
Mainstreaming Gender
121. The Bank Group will continue to ensure that gender considerations are mainstreamed
into operations, consistent with government policy. Development partners are required by the
Government to report annually on how they mainstream gender into their programs, and a government
report is prepared in conjunction with the Philippines Development Forum, the country’s main aid
coordination vehicle. The Bank’s portfolio in the Philippines is being continuously monitored as part
of regular Gender and Development (GAD) assessments by the Government. The Bank Group will
continue to support this process through the Gender Focal Person, designated to champion the focus
on gender issues in the Bank’s program and to participate in the Government-led GAD network, and
other mechanisms already in place. See further details on gender mainstreaming and harmonization in
Annex 9.
122. Going forward, the CAS will support the Philippines in the promotion of gender equality
as part of the Government’s commitment to the Millennium Declaration. The target of
eliminating gender disparity in primary and secondary education, preferably by 2005, and all levels of
education not later than 2015, is projected to be reached or even surpassed by the Philippines. Hence,
the main challenge for the Philippines is to ensure that the development programs already in place, as
well as new ones, will continue to support this positive trend in reaching the specific MDG on gender
equality. The 2008 Joint Country Gender Assessment14
also identified the following major GAD
challenges/agenda: (i) policy support for alternative social protection mechanisms/services; (ii)
increased investment for more inclusive education; (iii) passage of policies and increased services on
reproductive health; (iv) coordinated response to address gender-based violence; and (v) sharpening
gender lens of disaster management. Specific IBRD projects that will be started or continued under
the CAS that respond to the emerging GAD challenges include:
The National Program Support for Basic Education involves alternative delivery
modes to achieve gender-balanced education.
The National Program Support for Health Sector Reform promotes maternal health
care that seeks to reduce maternal mortality rate.
The Mindanao Trust Fund-Reconstruction and Development Project (MTF-RDP)
undertakes various initiatives on gender and peace building work such as implementation
of Female Functional Literacy program; engagement of NGOs on GAD in conflict
communities through a small-grant facility, and the training of trainers on gender and
peace building. These types of activities will continue as the program extends into this
CAS period.
The Second Mindanao Rural Development Program and Second Agrarian Reform
Community Development Project involves economic empowerment of women in
agrarian reform communities.
14
Jointly prepared and published by Asian Development Bank, Canadian International Development Agency,
European Commission, National Commission on the Role of Filipino Women, United Nations Children’s Fund,
United Nations Development Fund for Women, and United Nations Population Fund.
FY10-12 Country Assistance Strategy for the Philippines April 2, 2009
37
The Community-Driven Development or KALAHI-CIDSS Project promotes women’s
empowerment through participation in the planning and decision-making in "barangay"
(local district) governance, and developing their capacity to design, implement, and
manage development activities that reduce poverty.
The Social Welfare and Development Reform Project (Conditional Cash Transfers)
will contribute to economic empowerment of women since the expected recipients of the
actual cash transfers in the targeted households are the mothers, who are assumed to take a
more hands-on approach to the health and education needs of the children.
IV. MANAGING RISKS
123. Political risks. The FY10-12 CAS for the Philippines will be implemented during a period
fraught with considerable risks that may undermine its results, or at the least, affect outcomes in an
adverse way. Among them, political risks feature very prominently as the CAS will be implemented
in a period of elections and government transition that could influence commitment to the ongoing
program and continuity, as well as ownership and buy-in for the proposed future program. However,
the elections will also put pressure for delivering results, especially in areas such as governance,
community development, social protection, infrastructure, and investment climate. Elections could
also open up political space for reforms as new leaders with new mandates form their agendas. The
CAS will position the Bank Group to best support the preparation of the next MTPDP and to suggest
ways for addressing key development challenges that the country faces.
124. Conflict in Mindanao. There is an ongoing risk that development gains made may be eroded
by spikes in violent conflict despite a ceasefire. Government agencies may be constrained in
implementing a common framework for peace and development in Mindanao. Sufficient resources
from the Government may not be forthcoming for scaling up of basic services in Mindanao, especially
in conflict-affected areas, which will threaten the sustainability of assistance. Development partners,
including the Bank Group, will have to commit to work on stability and peace for the long haul and
stay the course as much as possible. While the prevention of spikes in violent conflict and peace
negotiations are beyond the bounds of the Bank's program, a number of steps will be taken to mitigate
direct risks and support an environment conducive to peace. During the CAS period, the Bank will
increase the sophistication of its security and risk analysis, including through the establishment of a
conflict monitoring database that will track conflict incidence and typology. The conflict sensitivity of
Bank-financed projects will be enhanced by increasing attention on strengthening community
cohesion and equity in the distribution of resources in conflict-affected areas.
125. Vulnerability to the external environment, external shocks, and changes in investor
sentiment. The Philippines, as all other open developing countries, is being affected by the ongoing
global recession and continuing deep financial turmoil. Three key sources of uncertainty are the
impact of the global environment on remittances, exports, and the fiscal sector. So far, remittance
flows have held up well, reaching about US$16 billion in 2008 (about 10 percent of GDP). The
geographical distribution of overseas Filipino workers is relatively well diversified; nonetheless, the
US still accounts for 33 percent of total overseas workers and 68 percent of permanent overseas
workers, and the slowdown in the US economy will have a negative impact. Exports, on the other
hand, contracted by 2.9 percent in 2008 as key electronics exports plummeted by a third. The
composition of Philippines’ exports has changed significantly since the early 1990s, and is now
heavily skewed towards machinery and transport equipment, particularly high-tech exports. While the
high-tech industry has its own sector dynamics, demand is relatively income elastic and sensitive to
global growth conditions. Also, while China’s rise has provided opportunities for exports in its own
market, it has also heightened competitive pressures and cut into the Philippines’ exports shares. The
recent increase in private capital inflows has included sizable portfolio flows which are sensitive to
cyclical factors and global downturns. FDI flows, which are less affected by short-term cyclical
factors, are still relatively low. Finally, concerns about falling tax effort, large and rising public sector
FY10-12 Country Assistance Strategy for the Philippines April 2, 2009
38
gross financing needs for 2009 and 2010,15
and the potential for fiscal risks to materialize in a
downturn could trigger a reassessment of the country’s fiscal sustainability and affect overall
confidence in the economy. These vulnerabilities underline the need for prudent macroeconomic
management, including robust fiscal and financial policies which ensure continued growth, reduce
poverty, and protect the vulnerable. In case of a sharper-than-expected deterioration in the economy,
the World Bank Group stands ready to use IFC crisis facilities, and IBRD financing for quick
disbursing budget support within the broad parameters of the CAS lending range. The CAS would
continue to focus on assisting the Government address fiscal and external vulnerabilities through a
continuation of its policy advice to the Government on tax policy and administration and on a more
timely manner, strengthening the design and implementation of the tax reform project, and constant
dialogue with the Government on managing fiscal and financial risks. To improve data collection and
reporting, the Bank would engage the Government in a program to improve its statistical reporting
systems beginning with improvements in the country’s system of national accounts to adequately
measure economic and sectoral performance.
126. Concerns about continued commitment to the reform agenda. There are a number of
areas where the proposed CAS engagements are prone to risks emanating from any possible
discontinuity or weakening of commitments to the reform agendas, particularly given the upcoming
election-related transitions. For example, in the social sectors, it is critical that the reform agendas of
national agencies, such as the Departments of Education, Health, and Social Welfare, continue to be
articulated, and there is ownership and commitment for implementation. Bank support for
implementation will proceed once there is clarity on the agendas and clear signs of commitment, and
when projects meet the Bank’s selection and processing filters. Absence of consensus with the next
administration and inadequate capacity to implement may weaken the desirable pro-poor focus of the
MTPDP under the social protection framework. These concerns will be addressed by early and
constant coordination with the Government through policy dialogue and AAA, as well as through the
development of framework operationalization instruments (e.g., revisions of planning
/programming/budgeting guidelines).
127. Risks posed by weak implementation capacity at the LGUs. A separate set of risks are
associated with the various Bank engagements where most of the implementation activities are at the
LGU level with weak capacities. Risks also arise from the often weak institutional framework
governing national government management of LGU implementation of programs, and the extent of
LGU support and cooperation. The absence of an appropriate incentive and sanction regime raises the
risk whether LGUs will buy into the performance monitoring scheme being proposed for social sector
service delivery, and the monitoring indicators will need to be vetted properly. The management
capacities of CSOs also need addressing. The Bank will mitigate the risks of local-level capture of
public resources (including development assistance) by enhancing emphasis on transparency and
participation in its lending operations, especially by scaling up these measures in some of the CDD
operations, while also investing in development of transparency enhancing measures such as local-
level citizens' scorecards and service delivery impact evaluations. The Bank is providing an IDF for
the reform of the Local Government Academy (LGA) aiming at changing its role from service
provider to broker of capacity building services that LGUs can access.
128. Possible impediments to implementing disaster risk management mechanisms. The
Philippines is particularly vulnerable to frequent and devastating natural disasters, and the proposed ex
ante and ex post mitigation and management mechanisms need to be carefully designed and
implemented. Earlier efforts to support the reform of risk finance tools and instruments were not fully
successful and the Government may still be reluctant to introduce options outlined in the disaster risk
finance strategy. The possible inability to effect legislative changes required to modernize DRM
15
Gross public sector financing needs are projected to increase from 15.7 percent of GDP in 2008 to 18.5
percent of GDP in 2009 and 19.7 in 2010.
FY10-12 Country Assistance Strategy for the Philippines April 2, 2009
39
systems, lack of LGU buy-in to financing DRM activities, and the unwillingness of the national
government to establish financing mechanisms for LGUs, are also to be considered. The Bank will
support the Government’s efforts to reduce disaster risk, by developing and rolling out a program of
capacity development assistance to highly vulnerable LGUs; and developing financing facilities to
enable LGUs prepare for and mitigate disaster risk. In addition, the Bank will support the preparation
of a disaster risk finance strategy to help the Government put in place appropriate insurance and risk
transfer schemes.
129. Risks concerning implementation of governance reforms. The centrality of the CAS
support for the Government’s governance reform agenda raises some risks. A major source of risk is
the concern that the new administration may choose to emphasize a new set of priorities and under-
invest in the ongoing reforms. In particular, in the run-up to the elections there might be a shift to
lower priority, politically-driven projects within the context of more relaxed fiscal discipline. Public-
private partnerships have their own governance problems arising from the opportunities for special
deals awarded to politically favored clients, and the impact of such negotiations on the preparation of
bankable projects. Another high risk area is tax administration reform, where there are signs of
capture by various vested interests, and it is uncertain that the new administration will be able to push
it much more aggressively. In other governance reform areas, it is possible that key stakeholders will
not be able to form a shared view on reform priorities or, worse yet, fragmentation and factionalism
may stymie joint actions. Efforts to promote better local governance could be frustrated by clientelist
politics at the local level. Demanding good governance in some areas, especially those in conflict
areas and areas where powerful clans dominate politics, may be seen by communities as a low-reward
high-risk activity. Targeting poverty programs in conflict-affected areas also has its own risks. The
proposed engagements under the cross-cutting theme of good governance in the strategy, together with
the implementation measures to operationalize governance (e.g., ―Governance Filters‖) and the
systematic efforts to increase transparency, accountability and participation at both national and local
levels, including through fostering partnerships with CSOs, form the core of the mitigation approach
to risks concerning implementation of governance reforms.
FY10-12 Country Assistance Strategy for the Philippines April 2, 2009
40
ANNEXES
CAS ANNEXES
Annex 1: Poverty, Inequality and Progress toward the MDGs
Annex 2: Governance Challenges, Opportunities and Risks
Annex 3: FY06-08 Country Assistance Strategy Completion Report
Annex 4: World Bank FY09 Client Survey and CAS Multistakeholder Consultations
Annex 5: FY10-12 Country Assistance Strategy Results Framework
Annex 6: Indicative World Bank Group (WBG) Program by Results Area
Annex 7: Official Development Assistance (ODA) Programs in the Context of the CAS
Annex 8: World Bank Group-Managed Trust Funds in the Philippines
Annex 9: Philippines Harmonization Agenda
Annex 10: Country Financing Parameters for the Philippines
CAS STANDARD ANNEX TABLES
Annex A2: Country At-A-Glance
Annex B2: Selected Indicators of Bank Portfolio Performance and Management
Annex B3: IFC Investment Operations Program
Annex B3 IBRD Indicative Financing Program, FY10-12
Annex B4 IBRD Indicative Program of Analytical and Advisory Activities, FY10-12
Annex B5: Philippines – Social Indicators
Annex B6: Philippines – Key Economic Indicators
Annex B7: Philippines – Key Exposure Indicators
Annex B8: Operations Portfolio (IBRD and Grants)
Annex B8: IFC Committed and Disbursed Outstanding Investment Portfolio
MAP OF THE PHILIPPINES (IBRD NO. 33466R3)
Annex 1
Poverty, Inequality and Progress toward the MDGs
Progress and Challenges in Achieving MDGs
1. The Millennium Development Goals (MDGs) provide an important reference point for
achieving the Philippines’ objectives with regards to human development outcomes. Halfway
through the 2015 target of achieving the MDGs, the Philippines has made considerable progress in
some goals, particularly in poverty reduction, nutrition, gender equality, reducing infant and child
mortality, water supply and sanitation, and combating AIDS and other diseases (see Annex A2). 1
However, in addition to slow progress in reducing income poverty, there has been mixed progress in
addressing the non-income dimensions of poverty in the Philippines, particularly as they relate to
human development outcomes. More specifically, the Philippines needs to intensify its efforts to
achieve lagging key social MDG targets, especially universal access to primary education, maternal
mortality, and reproductive health services, and address the uneven progress at the local level.
2. The Philippines remains on-track in halving poverty by 2015, but must step up efforts to
preserve the gains it achieved in the past two decades. The incidence of poverty and the poverty
gap ratio have been reduced significantly over the years. From about half of the population two
decades ago, the proportion of the population living below the national poverty line has now gone
down to a third. At this rate, the Philippines may well be on its way to achieving its target of reducing
national poverty to 22.7 percent of the population by 2015. However, the recent increase in poverty
would require a more progressive approach from the Government to preserve the gains it realized in
the past two decades and to maintain, if not accelerate, the pace of reducing poverty moving forward.
3. Clear gains have been made in reducing infant and child mortality, as well as mortality
from tuberculosis and other diseases. Infant and under-five mortality rates have also declined
considerably. From 80 deaths per thousand live births in 1990, under-five mortality in 2006 fell to 31.
Infant mortality was also reduced from 57 per thousand live births in 1990 to 23 in 2006.
Improvements in the immunization program of the Government, however, are needed to hasten the
pace of progress in increasing the proportion of 1-year old children protected against measles.
Prevalence rates of tuberculosis (TB) and other diseases have also remained within target. While TB
remains a major public health concern, being the sixth leading cause of death in 20032, the prevalence
of TB was nearly halved since 1990. Through the Government’s re-energized National TB Control
Program, case detection and cure rates for TB increased to 63 percent and 82 percent in 2006 from 53
percent and 73 percent in 2001, respectively. Similarly, prevalence of malaria declined to a quarter of
its level in 1990 and deaths controlled to three persons for every million from 15 in 1990. The
prevalence of human immunodeficiency virus and acquired immune deficiency syndrome (HIV and
AIDS) based on recorded cases has been kept below 1 percent of the population3.
4. Access to safe drinking water and sanitation has also improved. Based on the latest
Annual Poverty Indicators Survey (2004), access to safe drinking water increased to 80.2 percent from
73 percent in 1990, while the incidence of using sealed water and closed pit toilet facilities increased
to 86.2 percent from 67.6 percent in 1990. However, at the current pace of development the
Philippines is unlikely to meet the MDG targets for water supply.
1 Data used in the analysis reflect the latest government and Bank staff estimates and may differ from Annex A2
and Annex B5 which present data from the DECDG database and other standard sources. 2 Source: Department of Health (http://www.doh.gov.ph/kp/statistics/leading_mortality)
3 Source: National Economic and Development Authority- United Nations Development Programme, (2007)
“Philippines Midterm Progress Report on the Millennium Development Goals 2007.”
Poverty, Inequality, and Progress toward the MDGs Philippines FY10-12 CAS - Annex 1
Page 2 of 6
5. Meanwhile, efforts to meet the MDGs are challenged by poor performance in key
education and health targets:
In education, net enrolment rate (NER) at the elementary level has been declining since 2002
and moving farther away from meeting the MDG target. At the secondary level, NER barely
improved between 2006 and 2007 and remained low at 58-60 percent in the last five years.
Completion rates in both elementary and secondary levels have also been on the decline since
2002 until a reversal in 2006, but still remains low and far from achieving the target of 81
percent by 2015. The quality of education has also been deteriorating. Overall achievement
rate for the elementary level has remained low at 59.9 percent in 2006 while it remained
stagnant at 45 percent at the secondary level.
In health, maternal health is considered to be the goal least likely to be achieved by the
Philippines by 2015. Despite the decline from 209 per hundred thousand live births in 1990 to
162 per hundred thousand in 2006, maternal mortality remains higher than in neighboring
countries4. Latest health surveys revealed that while 88 percent of mothers received prenatal
check-ups, only 66 percent received postnatal care and only a few obtained complete care.
The low incidence of contraceptive usage and the resulting high population growth also
contribute to the low likelihood of meeting the MDG target on maternal health. As of 2006,
only half of married women of reproductive age use contraceptives and practice family
planning while the unmet need for family planning was at 15.7 percent, reflecting the need to
scale up efforts to provide universal access to reproductive health education and information.
Meanwhile, immunization rates are not close to universal, improving only marginally in the
last two decades. Malnutrition also remains a major issue, especially among school children.
In 2006, malnutrition incidence was at 21 percent of children in public elementary schools.
6. Across the various regions, human development outcomes vary significantly. Most of the
lagging regions are in Mindanao while those which have been progressing are in Luzon. Consistently
on-track in almost all the regions were targets on poverty, infant and child mortality rates, access to
safe drinking water, and sanitation. Meanwhile, consistently off-track were indicators of primary
participation and survival, maternal mortality, and contraceptive prevalence. This is reflected by wide
geographical disparities in the availability of good schools. Latest data on teacher distribution across
schools and regions show the difficulty of attracting good teachers to schools that serve poor,
backward areas and schools that have few resources. Meanwhile, latest surveys on health showed that
while more than 85 percent of births in NCR and Central Luzon were attended by a skilled health
professional, less than 30 percent of births were similarly attended in the ARMM and MIMAROPA
regions. There is a need for investing further in service delivery in lagging or poorer regions.
Reaching the poor requires geographic targeting of supply-side interventions in areas where the poor
live.
7. The key challenge is to improve the efficiency in the use of the increasing budgets for
education and health, and other social sectors. Between 2004 and 2008, the real budget of the
Department of Education increased by 6 percent and that of the Department of Health by 18 percent
(CPBD 2007). Nevertheless, government spending in basic education and health remains way below
that of other developing countries5. In education, interventions addressing declining net enrolment
rates, high dropout and low completion rates, and poor transition rates between the two levels of
education, need to be prioritized. In health, budget allocations need to be prioritized for investing in
4 For instance, Thailand is at 110 per 100,000 live births while Malaysia is at 62, China at 45, and Vietnam at
150 (Source: www.unicef.org). 5 Developing countries spend about 4 to 6 percent of GDP on education and 3 percent on health, while the
Philippines only spends about 2.5 percent of GDP and 0.3 percent on education and health, respectively.
Poverty, Inequality, and Progress toward the MDGs Philippines FY10-12 CAS - Annex 1
Page 3 of 6
health facilities and professionals who will attend to mothers during delivery. The emphasis on
governance and public expenditure reforms is the right one. An important challenge will be to find
effective ways of devolving further responsibility to local governments who share the responsibility
for health and education outcomes with the national government.
8. To the extent that the poor find it hard to afford schooling and health care, targeted
demand-side interventions to increase the ability of the poor to access health and education will
also be key. On this front, several demand-side transfer programs have already been initiated by the
Government, including the Food-for-School Program and the PhilHealth Indigent Program aimed at
subsidizing health insurance of poor households. The operationalization and effectiveness of these
programs, however, have been compromised by a lack of a good targeting mechanism. Indeed,
improved targeting of the poor is critical to the efficiency of using public funds for poverty reduction
and attainment of key MDGs. The conditional cash transfer (CCT) program (Pantawid Pamilyang
Pilipino Program or 4Ps) that is currently being designed by the Government with several attractive
dimensions, including adopting a targeting system of poor households based on a proxy means test
that can also be used by other programs, shows promise.
9. The attainment of the MDG outcomes depends critically on the ability of the central
government to work in close coordination with local government units and communities.
Ongoing reform agendas in key national agencies need to focus on interventions that also integrate
community-driven development (CDD) tools and involve communities in their design. Indeed,
targeted demand side interventions, including CDD tools and increased access to information, will
increase the ability of poor households to demand and access health care and education services and
will trigger improved delivery of public services to the poor. The availability of a functional
information system that can provide timely and accurate data on the performance of LGUs and of
national agencies is similarly important, as is building up local capacities.
Inequality in Access to Basic Services
10. Large inequalities in access to basic infrastructure services persist. Wide income
disparities at the sub-national level reflect the uneven access to vital infrastructure and human
capabilities. Least prosperous regions, mostly areas in Mindanao, have the least access to
infrastructure and basic services while areas where economic activity is concentrated and poverty rates
are lower have better access to such services (Table 1). As of 2006, 30 percent of those living in the
Mindanao regions remain without access to electricity compared to 11.2 percent among regions in
Luzon. Yet even within Luzon, large variations in access to electricity exist. More recent data also
show that even within areas covered by electrical cooperatives in the country, about one-third of
households remain without access6. Same is true for access to water, communication facilities, and
good roads.
11. Educational gaps between poor and non-poor areas and between poor and non-poor
families likewise persist, in terms of children’s access to schools of good quality and other inputs,
as well as in terms of outcomes7. Visits to schools in poor areas reveal basic supply shortages. In
poor, overcrowded urban areas, pupil-teacher ratios are as high as 1:80 in many NCR schools8, and
school shifts are too short (three to four class shifts in highly urbanized areas such as in NCR, Cebu
and CALABARZON). In poor rural areas, many students sit in classrooms without the rudiments of
instruction, including a teacher who has mastered the curriculum. In health, the latest National
Demographic and Health Survey showed that while more than 85 percent of births in National Capital
6 National Electrification Administration.
7 World Bank Philippines Education Policy Notes 2004.
8 DepEd, BEIS 2006.
Poverty, Inequality, and Progress toward the MDGs Philippines FY10-12 CAS - Annex 1
Page 4 of 6
Region (NCR) and Central Luzon were attended by a skilled health professional, less than 30 percent
of births were similarly attended in the ARMM and MIMAROPA regions.
Table 1. Access to Basic Services, 2006
Region /
Island Group
Proportion (%) of the
Population
without Access to
Proportion of
Concrete &
Asphalted
Telephone
Density*
Electricity Water Source Roads (%)
Region XIII – NCR 2.3 10.9 100.0 31.1
Region XIV – CAR 21.2 23.3 35.7 5.5
Region I - Ilocos Region 9.7 6.8 90.0 3.8
Region II - Cagayan Valley 19.1 16.4 69.5 1.4
Region III – Central Luzon 5.5 4.2 87.2 4.5
Region IVA – CALABARZON 7.7 14.5 85.8 10.2
Region IVB – MIMAROPA 38.0 19.9 46.1 10.2
Region V- Bicol 27.9 26.9 72.2 2.3
Region VI - Western Visayas 23.1 33.6 75.6 6.3
Region VII – Central Visayas 21.5 27.3 85.7 7.4
Region VIII – Eastern Visayas 26.2 19.3 81.3 3.7
Region IX – Zamboanga Peninsula 34.1 34.5 68.6 1.1
Region X - Northern Mindanao 23.8 18.1 69.5 3.8
Region XI – Davao 24.2 19.9 62.9 7.9
Region XII - SOCCSKSARGEN 30.8 19.5 62.4 2.1
Region XV – ARMM 50.1 64.9 46.3 5.4
Region XVI – Caraga 20.3 16.9 - 1.0
Luzon 11.2 13.0 71.5 11.7
Luzon (excluding NCR) 13.9 13.6 69.4 5.6
NCR 2.3 10.9 100.0 31.1
Visayas 23.2 27.8 80.3 6.1
Mindanao 30.3 28.0 62.2 3.6
Total 18.0 19.4 71.5 8.3 * Number of telephone lines installed per 100 persons.
Sources: 2006 FIES; NTC; DPWH
Weak Response of Poverty Reduction to Growth and Increased Vulnerabilities
12. The weak response of poverty reduction to growth and increased vulnerabilities are key
challenges that the Philippines faces. Government estimates reveal that 45 percent of all Filipinos
are vulnerable to falling into poverty due to shocks, particularly those related to financial crises,
health, unemployment, natural disasters, civil unrest, and prices that are likely to throw vulnerable
households into poverty, and increase the severity of poverty among those already in poverty. For
example, it is estimated that the 18 percent increase in prices of all food items by July 2007 may have
increased poverty by 3.6 percentage points, equivalent to about 3 million people.
13. Understanding the underlying causes of poverty and how the poor can better benefit
from growth are critical questions for the Philippines. The World Bank, along with other partners,
has embarked on a study to further analyze the nature and causes of recent poverty and to assess how
growth could result in greater reductions in poverty. While more careful analysis is required, there are
several apparent factors that drove the increase in poverty in recent years.
Poverty, Inequality, and Progress toward the MDGs Philippines FY10-12 CAS - Annex 1
Page 5 of 6
First, the increase in the poverty headcount in 2006 has been partly caused by a fall in real
income of households. While nominal income rose by 17.5 percent between 2003 and 2006,
cumulative inflation in the period was higher at 21.1 percent. In particular, cumulative food
inflation of 19.3 percent was more than double the cumulative food inflation of 9.5 percent in
2000-2003. These translated into falling average real income for all deciles. Average real
family income declined by 3.7 percent between 2003 and 2006, while average family
expenditures declined by 2.4 percent. Efforts aimed at increasing incomes and opportunities
for the poor, while maintaining a stable macroeconomic environment, will be key to poverty
reduction.
Second, the fiscal crisis would also have contributed to higher poverty between 2003 and
2006. The Government had an unsustainable budget deficit by 2002 and consolidated public
sector debt exceeded 100 percent of GDP the following year9. As revenues had been falling in
real terms since 1997, the Government had no recourse but to compress spending. At the
same time, the share of interest payment increased from 4.2 percent of GDP in 2000 to 5
percent between 2003 and 2006. Consequently, both capital and social spending fell
significantly. The enhanced delivery of social services to the poor, both through increased
spending in sectors that are important to the poor as well as improved accountability and
service delivery by the public sector, will also be critical to reducing poverty in the context of
the current fiscal situation.
Third, there are also indications that the quality of growth has not favored poverty
reduction. While growth averaged 5.4 percent between the conduct of the FIES in 2003 and
2006, GDP by factor shares of institutions shows that growth accrued largely to the corporate
sector which grew by 27.7 percent on average over the three years (in nominal terms). In
contrast, the household sector grew by only 3.6 percent on average over these years.
Consequently, the share of the corporate sector to GDP increased from 43 percent to 55
percent, while households’ share to total GDP fell from 47 percent to 37 percent.
Fourth, the pattern of growth creates insufficient jobs for the low-skilled labor the poor are
relying on. Sector GDP growth, and consequently employment growth, was largest in
services, especially in financial services and business processing services, for which the poor’s
education levels often fall short. Agriculture has been growing at 4 percent in recent years,
but without creating many additional jobs, as labor is not the constraining factor in that sector.
Growth in manufacturing industry and employment, often a pathway out of poverty for low-
skilled labor in other countries, remained modest in the Philippines because of constraints in
the investment climate.
14. Most poor households in the Philippines are also susceptible to shocks driven by climate
change and natural disasters. Many of the poor live in naturally hazard-prone areas and are largely
dependent on natural resources for their livelihoods. Being an archipelagic country with a tropical
climate, the Philippines is highly vulnerable to the adverse impacts of climate change, including
increases in the frequency and intensity of floods, droughts, typhoons; alteration of agricultural and
coastal marine ecosystem output and productivity; reduction of water availability and quality; and
increases in the incidence of climate-sensitive infectious diseases. The progression of climate change
has accelerated the susceptibility of the country to natural disasters and underscores the need to start
adapting to this phenomenon.
15. The effectiveness of social protection and poverty reduction efforts is severely
compromised by the lack of an accurate and legitimate system to target poor households. There
is also a lack of policy and institutional coordination and capacity in the broad area of social
9 Source: Department of Finance (http://www.dof.gov.ph/stat/OPSD%202000-2005.pdf)
Poverty, Inequality, and Progress toward the MDGs Philippines FY10-12 CAS - Annex 1
Page 6 of 6
protection, as well as disaster management. Different targeting schemes are being used for different
programs and have relied on faulty targeting systems which resulted in high leakage rates to the non-
poor and under-coverage of the poor. Conflicting provisions of various laws and their implementing
rules and regulations and the overlapping mandates of agencies have hampered the effectiveness of
government action in these areas. This has been compounded by the lack of clarity in the mandates
and responsibilities, or actual functions, of national versus local government in the provision of
services related to reducing risks, including those of social protection and disaster risk management, as
well as poverty reduction in general.
Challenges in Conflict-Affected Areas in Mindanao
16. In Mindanao, the intermittent conflict between government forces and separatist groups
has been ongoing for more than three decades. It has resulted in the destruction of infrastructure,
population displacements, deferred development, and lack of trust among people at the local level and
between these and government authorities. There is a consensus among Filipino policymakers and the
public that political instability and/or absence of peace in parts of Mindanao are major impediments
for the island to attain its full development potential.
17. Mindanao has two faces: the growth centers and the lagging areas in conflict-affected
communities. The former exhibit relatively healthy economic performance, and by doing so, have
become the island’s centers of manufacturing, trade and commerce. However, they are far from their
potential of high growth. On the other hand, the latter demonstrate an underdeveloped and stagnating
economy caused largely by the persistent conflict and neglect that have made them lagging areas.
Most of the conflict-affected areas, as listed by the Government of the Philippines and the Moro
Islamic Liberation Front (MILF) Peace Negotiating Panels, are also located in the poorest regions in
Mindanao. These regions are: the Autonomous Region in Muslim Mindanao (ARMM), Western
Mindanao, and Central Mindanao. The ARMM and Western Mindanao have the highest percentage of
poor among their respective population, with about 70 percent and a little under 50 percent
respectively; Central Mindanao has over 40 percent.
18. The Autonomous Region in Muslim Mindanao (ARMM) has the poorest human
development outcomes among the 16 regions in the Philippines. Poverty incidence is twice that of
the nation as a whole. Life expectancies for men and women are more than 10 years below the
national rates. Infant and maternal mortality are 30 percent and 80 percent higher than the national
rates. And net primary and secondary enrolment rates are 14 and 33 percentage points lower than the
national rates.10
19. Many development partners are operating in Mindanao such as USAID, AusAID, CIDA,
JICA, ADB, EU, and the World Bank Group. Most of them are engaged in implementing small
and community-based infrastructure, social development and livelihood projects. Although such
projects are valuable in rebuilding trust and confidence among community members, and within and
among communities, the positive gains of such engagement need to be translated into sustainable
livelihood activities that will provide employment and decent incomes to residents of conflict-affected
and poor communities. The short-term initiatives need to be linked to medium and long-term plans in
order to achieve sustained growth and development of Mindanao in general and of the conflict-
affected areas in particular.
10
Human Development for Peace and Prosperity in the Autonomous Region in Muslim Mindanao, World Bank,
November 2003.
Annex 2
Governance Challenges, Opportunities and Risks
The Governance Challenge
1. The Government has recognized the governance challenges as obstacles to development and in its MTPDP (2004-2010) diagnosed various dimensions of poor governance. The Plan candidly assessed the governance situations at the beginning of the current presidential term, covering a range of topics from corruption as a threat to development, the government institutions’ lack of capacities and integrity as well as their capture by vested interests, and even certain aspects of the constitutional structure which were seen to hamper efficient and coherent decision-making and coordinated policy implementation (Box 1).
Box 1: Governance Assessments in the MTPDP 2004-2010
On corruption (Chapter 21): Graft and corruption are increasingly viewed as threats to the sustained growth and development of the country. Corruption distorts access to services for the poor, results in government’s poor performance and, consequently, low public confidence in government. The culture of corruption in the country breeds the vicious cycles of poverty and underdevelopment.
On the need for bureaucratic reform (Chapter 22):
• The independence, capacities and integrity of government institutions are not enough to provide quality and efficient public services. Regulatory capture works as powerful brakes on various government initiatives, eroding their effectiveness and sustainability. The bureaucracy is largely perceived to be beholden to vested interests which interfere in the bureaucracy’s functioning, rendering it unable to perform its functions and undertake its programs unhampered. The entrenched system of patronage and payback in the political landscape is the source of such particularistic interests.
• The institutional design, systems and processes of government pose a challenge on the quality of public goods and services. A number of factors impinge on this quality; these are: (a) redundant, duplicating and overlapping programs/activities, (b) diffused resources to nonessential undertakings, (c) uncoordinated policy and program implementation, (d) poor sector management, (e) proliferation of special task bodies or interagency committees, (f) ineffective performance management system, and (g) highly politicized bureaucracy.
• Despite previous efforts to trim the bureaucracy, the Government is still weighed down by unclear delineation and overlapping of functions. This results in high transaction costs internalized by government, business, nongovernment organizations and the general public as a result of poor coordination in policy and program implementation, weak sector management and wastage of resources.
• The perception of a “bloated” bureaucracy lies not only in the distribution of government employees in terms of national vis-à-vis the local government units (LGUs), but also its maintenance cost. Neighboring Asian countries have higher government personnel ratios, but they deploy greater number of civil servants to local areas and frontline services. The other issue is more of efficiency and cost.
On the country’s constitutional structure and its effects on governance (Chapter 25):
• The country’s political institutions have become less effective to address problems under the present presidential setup. The separation of powers and checks and balances between the Executive and Legislative branches often result in delays in legislation and policymaking. The Executive has to resort to compromise and concession to pass the annual appropriations bill and the other major initiatives. But even when good legislation is passed, it may suffer from execution problems because of the lack of legislative support to impose or raise taxes that are needed for its implementation. National policymaking has come to depend on the lowest-common-denominator of agreement among Executive and Legislative branches of the
Philippines Governance Challenges and Risks Philippines FY10-12 CAS - Annex 2 Page 2 of 7
Government.
• The national government remains highly centralized, slow and unresponsive to the needs of the people in the rural areas and cultural communities. Although local governments are supposed to enjoy local autonomy under the 1987 Constitution and the Local Government Code, they are in fact controlled in many ways by the national government on which many of them have become habitually dependent for guidance and resources. This inhibits local initiative and resourcefulness to effect progress and development within their territories and communities.
Source: Medium-Term Philippine Development Plan 2004-2010 (2004)
2. The importance of addressing the governance challenges as noted in the MTPDP was echoed in the CAS consultations and in the Bank’s 2008 Global Poll1. In the Global Poll, the Philippines is the only country in East Asia where “improving governance” was identified as the most important means to generate faster growth. It is also the only country in the region where “improving governance” was mentioned as one of the top two priorities for poverty reduction. Similar messages were received in the series of consultations on the CAS formulation and the FY09 Client Survey (see Annex 4). Government Responses
3. The MTPDP included corresponding reform goals, strategies and action plans. For anticorruption, the Government’s priorities included turning the BIR and the BOC, two agencies with the highest perceived levels of corruption according to local polls, as “showcases in the fight against graft and corruption”, conducting comprehensive corruption risk assessments (Integrity Development Reviews) in government agencies to devise agency-specific anticorruption action plans, and strengthening the investigative capacity of the Office of the Ombudsman, modeling it after Hong Kong’s Independent Commission Against Corruption (ICAC). To improve the incentives and the capabilities of the government bureaucracy to perform its functions effectively, the Plan aimed to rationalize functions and organizations of government agencies, professionalize the public service through pay reforms and introduction of performance management systems, and institutionalize merit-based promotion as a means to ensure the bureaucracy’s independence from political influence. Finally, the Plan proposed constitutional changes and called for legislating ways to enforce the constitutional prohibition of “dynasties” (i.e., clans and families which dominate local politics in given geographic areas), which are widely seen as a source of corruption and clientelism.
4. Following this ambitious agenda, the Government launched a number of reforms. While some programs are yet to yield notable results, others have achieved partial results to date, such as the government-launched innovative anticorruption program called the Revenue Integrity Protection Service (RIPS) which intends to control corruption in the revenue agencies and the conduct of Integrity Development Reviews in 17 national government agencies. In January 2009, the Government launched Oplan Kandado (Operation Padlock) which aims to strictly enforce administrative sanctions for non-compliance by taxpayers. As reported by Government, this program has started yielding good feedback and promising outcomes in terms of compelling taxpayers to abide by the rules, thereby generating revenue.
5. To enhance performance of the bureaucracy, the Government initiated a government-wide agency rationalization program in 2003. This is a long-term reform program, and to date,
1 The 2008 World Bank Global Poll was carried out in 42 countries, covering 2,611 “opinion leaders” from government, media, academe, private sector and NGO/CSOs. For the Philippines, 60 phone interviews and 16 web interviews formed the basis for the data collected.
Philippines Governance Challenges and Risks Philippines FY10-12 CAS - Annex 2 Page 3 of 7
relatively few national government agencies have actually completed the exercise. Thus its effects on improving agency performance have yet to be assessed and firmly established. The planned civil service pay reform requires new legislation. Several bills for this purpose have been filed but this has not yet resulted in a new Salary Standardization Law.
6. While not explicitly highlighted in the MTPDP, reform of the public financial management became one of the priorities throughout the Plan period. Efforts have tended to focus on improving the policy base of budgeting and development of organizational performance indicators framework (OPIF), which has now been officially adopted in the national budget process. In terms of the MTEF, the Government envisions this to be fully institutionalized within the CAS period. In contrast, reforms to enhance budget transparency and improve efficiency and accountability in budget execution have lagged behind. The Commission on Audit (COA) developed an electronic accounting system (eNGAS) and had started installing them in government agencies some years ago, but the roll-out had not been completed in all agencies for various reasons before the COA recently announced its suspension due to a policy change. Follow-through on COA audits and the mandated internal audit units in ministries are constrained by limited capacity and personnel.
7. In sum, despite the reforms launched on a variety of fronts, some of which require longer-term implementation, desired improvements in governance and public sector performance have not yet come about. The MTPDP agenda of enhancing government institutions’ independence, integrity and capacity remains as relevant today as in 2004, and so does the need to continue to address systemic causes of corruption as well as appropriate responses to specific cases of graft.
8. Given the obstacles to reforms, a strategy for governance reforms needs to go beyond a simple call for institutional development and capacity building. It is necessary that reform efforts be guided by sober assessments of the obstacles to reforms as well as judicious identification of windows of opportunities.
Opportunities for Governance Reforms
9. Despite the obstacles to reforms as demonstrated in the difficulties a number of the attempted reforms have faced in the recent past, there are positive developments that can provide opportunities for incremental governance reforms in the country. Procurement reform is arguably the most coherent and sustained governance reform in the Philippines in the last decade. The reform agenda is clearly articulated and broadly understood and shared among key government agencies, civil society groups, and external development partners. Because a serious procurement reform addresses one of the most abused sources of rent seeking, the challenge of fully implementing the core elements of the reform cannot be under-estimated. Against the odds, however, much has been accomplished already. The 2003 Procurement Reform Law is widely considered a sound legal framework which unified procurement-related provisions hitherto covered under various uncoordinated legal instruments. The Law includes various provisions intended to increase transparency in government procurement processes, using both civil society oversight and increased disclosure of procurement information through the electronic procurement system. Equally important is the Law’s role in clarifying and organizing pending reform actions to be implemented by various government agencies, with support from CSOs and external development partners. The Bank has played a central role in articulating the reform agenda and tracking its progress through periodic country procurement assessments conducted in a participatory manner. Although the Philippines’ procurement system is not yet perfect and procurement-related corruption continues to be uncovered, these are considerable achievements by any international standard. In the Philippine context, having coherent reform legislation passed can be a challenge on its own. However, the case of the
Philippines Governance Challenges and Risks Philippines FY10-12 CAS - Annex 2 Page 4 of 7
procurement reform suggests that once such a law is in place it could galvanize reform momentum and channel energy and resources in pursuit of clear objectives commonly shared among key stakeholders. In this CAS, the Bank’s governance strategy partly relies on this insight and pursues broad-based policy dialogue to promote major legislative reforms in a few key areas: public financial management and decentralization, as detailed below.
10. Decentralization creates challenges, but also provides additional opportunities for improving governance. Some of the most promising governance innovations have emerged in local government units (LGUs) at the provincial, city, and municipal levels. Despite having to deal with often entrenched patronage politics, endemic corruption and poor public service delivery, there are a growing number of Governors and Mayors who, as local reform champions, have demonstrated leadership and commitment to governance reform and have been successful in improving development outcomes. Success stories come from a wide variety of LGUs and include provinces such as Bohol, which has implemented a comprehensive development planning system; cities such as Naga City, which has supported transparent and participatory governance, and Marikina City, which has promoted managerial innovations (see Box 2); and poverty-stricken municipalities such as Talaignod near Davao, Mulanay in southern Quezon, Asipulo in the Cordillera region, Mondragon in Northern Samar, Balangiga in Eastern Samar, Pinabacdao in Samar, Juban in Sorsogon and many others that have promoted greater citizen’s participation in governance. Key instruments of Bank support have included the City Development Strategy process, LGU support projects, and community-driven development programs.
Box 2: Managerial Innovation in Marikina City
Marikina City has been a leader in governance reforms and a role model for LGUs. Its latest innovation was the creation of a central warehouse with bar coding system and wide area network (WAN) designed with the experience of the best private warehouses as well as leading hardware enterprises in the country. The objective was to enable quick inventory as well as proper and quick release of supplies and materials online to all its 45 departments – each of which had originally been conducting procurement separately. The computerized system has enabled strategic positioning and priority purchase of fast moving items and allows management to inspect the inventory of supplies, while also complying with the procurement law. It has reduced the number of staff involved in supplies management from 135 to 34 and provides a better safeguard against pilferage through closer monitoring of materials and even the retrieval of excess materials from completed projects. Hence, wastage has been reduced or even eliminated and significant savings realized.
11. Civil society continues to play a critical role in promoting good governance. The Philippines’ most well-known governance “endowment” is its vibrant civil society organizations. CSO activism has not only kept problems of governance and corruption high in public awareness but has also contributed constructively to strengthening some of the Government’s own reform initiatives. This has resulted in some of the best-publicized successes in curbing corruption and increasing government accountability such as the mobilization of the Boy Scouts in monitoring delivery of textbooks. CSOs are also active in partnering with reform-minded LGUs, providing training to LGU officials and serving as a zealous watchdog of public affairs in specific regions or localities. The freedom of the press and a free media in the Philippines also have a positive impact on accountability.
12. Replication of promising governance initiatives needs to step up. A challenge facing both CSO activism and local governance innovations is to find a way to replicate and scale up proven or promising individual initiatives so that their positive effects can transcend sectoral and geographic boundaries. While local governments such as Marikina and Naga have been sought after as beacons of good governance and developed programs for training and transferring knowledge and experience to other LGUs, the high degree of geographic and social fragmentation limits the effective reach of replication of good practice to a handful of LGUs. The various leagues of LGUs are playing an
Philippines Governance Challenges and Risks Philippines FY10-12 CAS - Annex 2 Page 5 of 7
important role in sharing successful experiences but more needs to be done to spread good practice to a greater number of LGUs.
Relevance of the Proposed Bank Governance Strategy
13. While continuing to pursue the objective of strengthening government institutions, the Bank’s new governance strategy for the Philippines emphasizes systematic efforts to increase transparency, accountability and participation at both national and local levels as a cross-cutting approach. Taking account of the obstacles and opportunities discussed above, the new strategic emphasis takes advantage of the well-known strengths of the Philippine civil society as both advocates of governance reforms and partners in the Government’s own good governance initiatives. The challenge is considerable, but the perceived relevance of Bank assistance in improving governance is high. Both local stakeholders and the Global Poll respondents expect the Bank to address governance issues as a key constraint to development in the Philippines (Table 1).
Table 1: Relevance through WBG work
What do you think the two main objectives of the WBG should be in your country? TOP 12 LISTED
East Asia/
PacificChina Indonesia Lao Philippines Vietnam
Poverty Reduction 52 63 42 29 68 37 Growth/Strengthening Economy 25 18 39 36 27 12
Environmental 23 43 9 9 5 15 Infrastructure Development 20 13 14 10 15 58 Improving Education 12 6 14 35 7 12 Agriculture and Rural Development 11 11 12 14 8 10
Improving Governance and Government 10 3 7 - 37 10
Private Sector Development 8 8 9 12 2 12
Reducing corruption 6 6 2 5 13 10
Strengthening Civil Society 5 13 9 - - -
Job/Employment/Labor 4 2 4 3 - 6
Health 3 3 - 3 5 2
Source: World Bank Global Poll (see footnote 1)
14. Although these perceptions are encouraging, these are obviously not sufficient for successful governance reforms. What is essential is strong political commitment backed by a broad consensus on reforms without which reforms will likely remain incremental. The first two years of the CAS period offer an opportunity for building consensus and proposing a clear agenda for governance reforms to be pursued by the next administration. During this period, the Bank will engage a broad spectrum of Filipino stakeholders and external development partners to help galvanize drivers of change for governance reform so that efforts aimed at building a capable and accountable state are more consistent and sustained. The Bank will pilot nontraditional and innovative approaches to promoting and supporting governance reforms, including working with actors outside the Executive branch of the national government.
Philippines Governance Challenges and Risks Philippines FY10-12 CAS - Annex 2 Page 6 of 7
Political Context and Risks Concerning Implementation of Governance Reforms
15. The new CAS will be implemented through a critical period of political transition, as the next Philippine general elections are scheduled to be held on May 10, 2010. All of the elected offices at both the national and the local levels, except half of the Senate, are up for elections.2
Box 3: The Constitutional Design of the Philippine Political System
The 1987 Constitution, approved after the removal of President Ferdinand Marcos in 1986, restored the Presidential system with separation of powers among the Executive, the Legislature and the Judiciary. The directly elected President is the chief executive with extensive regulatory, administrative and budgetary powers. The country's inter-governmental arrangement was defined subsequently in the 1991 Local Government Code (LGC) which decentralized considerable powers and administrative responsibilities to the Local Government Units (LGUs), which consist of 81 provinces, some 1500 municipalities, 118 cities, and almost 42,000 Barangays or villages,, the lowest political unit of the country.
To be elected President requires a plurality among the candidates in a one-round nationwide election. Presidents are elected for one six-year term only; the vice president is elected separately from the president, not as part of an election ticket. Legislation requires the approval of Congress, which consists of a 24-member Senate whose members are elected at large for a six-year term, and a 238-member House whose members are elected for a three-year term, the vast majority in US-style single-member district voting system and a small minority on the basis of a party-list voting system. At the local level, provincial, city or municipal chief executives, as well as provincial, city and town councils are also up for elections. Political parties play a minor role in developing political platforms and hardly impose party discipline, while “list hopping” from one party to the next is common among members of Congress and legislative initiatives often rely on ad-hoc coalitions of individual members of congress rather than on party alliances. The President’s considerable powers in implementing the budget are often instrumental in forging such coalitions.
Provincial governors, city/municipal mayors and barangay captains are directly elected and are overseen by elected local councils. Many LGUs belong to provincial, municipal, and city leagues, which are member organizations recognized and institutionalized under the local government code. Central government has deconcentrated limited executive powers to the Regions, which consist of a number of provinces, and to the Super Regions, consisting of a collection of Regions. In many local jurisdictions, politics has for decades been dominated by a few families, thus increasing the risk of elite capture.
16. The inherent uncertainty in the electoral process and the tendency for national debates to be politicized and the Government to slow down are some of the risks inherent in an electoral period. In addition, an important source of risk is the concern that the new administration may choose to emphasize a new set of priorities and under-invest in the ongoing reforms, such as in tax administration reform and in other sectors such as transport and agriculture, where there have been recent incidences of corruption scandals.
17. The Bank as well as other international development partners can best promote governance reforms in an environment with strong political support and consensus on reforms. Although the Bank’s strategy is not to shy away from difficult sectors if these are of strategic importance to the CAS objectives, the application of the Governance Filters will reduce the Bank’s exposure to high-risk sectors where development outcomes are unlikely to be achieved because of the prevailing governance environment. In such sectors, the Bank will continue to engage in dialogue through analytical work (e.g., sector political economy analysis) and support for reform advocacy by
2 Specifically, these elected offices are the presidency, vice-presidency, half the Senate seats, and all House seats at the national level and all the provincial governors’, city/municipal mayors’ and barangay (village) captains’ offices as well as provincial, city, municipal and barangay legislatures.
Philippines Governance Challenges and Risks Philippines FY10-12 CAS - Annex 2 Page 7 of 7
civil society and private sector actors in the country. In other sectors (e.g., social sectors) where there is strong support for reforms, the Bank’s approach is to pursue governance improvements within a framework of sector-wide reform agendas with multidonor involvement, as already practiced in health (with EU), education (with AusAID), and social safety net (with AusAID).
18. In other governance reform areas, it is possible that key stakeholders will not be able to form a shared view on reform priorities. To mitigate these risks, the CAS proposes to invest in multistakeholder engagements on priority governance reform issues with the intent of contributing to formation of a solid reform consensus, similar to what the Philippines has been able to establish in the area of procurement reform with the Bank’s continued analytical input. Here, again, selectivity is key and hence Bank efforts at reform consensus-building will focus particularly on public financial management reform and budget transparency as well as local governance and decentralization, given the Bank’s technical expertise and comparative advantage in these areas. The Bank will mitigate the risks of clientelism and local-level capture of public resources (including development assistance) by enhancing emphasis on transparency and participation in its lending operations, especially by scaling up these measures in some of the CDD operations, while also investing in development of transparency enhancing measures such as local-level citizens’ scorecards and service delivery impact evaluations.
Annex 3
PHILIPPINES: Country Assistance Strategy FY2006-2009
Completion Report
Date of CAS: May 17, 2005 (Report No. 32141-PH)
Date of Progress Report: June 21, 2007 (Report No. 40085-PH)
Period Covered by the CAS Completion Report: July 2005 to December 2008
CAS Completion Report prepared by:
Yoshine Uchimura, Consultant, EACPQ
Yolanda Azarcon, Operations Officer, EACPF
Lilanie Magdamo, Operations Officer, EACPF
under the guidance of: Lada Strelkova, Country Program Coordinator, EACPQ
Maryse Gautier, Portfolio and Operations Manager, EACPF
with inputs from members of the Philippines Country Team
A. Introduction
1. This report assesses the effectiveness of the Bank’s assistance program to the
Philippines for FY06-09 and draws lessons learned for incorporation into the new Country
Assistance Strategy (CAS). The report is based on the Bank’s CAS for the Philippines (Report
No. 32141-PH, discussed by the Board on May 17, 2005), and the CAS Progress Report (Report
No. 40085-PH, June 21, 2007) which expanded the Bank program and extended the CAS to end-
FY09.
B. Philippine’s Development Objectives
2. The Bank’s 2006 CAS saw the Philippines as a country not living up to its potential. The country was endowed with mineral, oil, gas and geothermal potential. Government, business
and academe benefited from world class talent. The Philippines had experienced growth in GDP of
over 4 percent per annum in real terms since 2001. But this growth was driven largely by
consumption, supported by overseas remittances, which raised questions over its sustainability.
Investment remained low, reflecting investor concerns over perceived corruption, inadequate
infrastructure, uncertainty and inconsistency in the application of regulations, and the overall cost
of doing business in the Philippines. Total factor productivity and per capita GDP growth lagged
behind other East Asian countries. Over one quarter of the population remained poor and
inequality remained high.
3. The Government’s weak fiscal position was seen as a key constraint. Public debt and
interest payments had been increasing since the mid-1990s. In 2003, non-financial public sector
debt reached 101 percent of GDP and the debt of the national government was nearly five times its
revenue. By 2004, national government interest obligations had reached 37 percent of revenue and
accounted for nearly 30 percent of expenditure. Tax revenue continued to fall from 17 percent of
GDP in 1997 to 12 percent in 2004, contributing to the problem. A continuation of these trends
was expected to squeeze further government expenditures on infrastructure and social services and
adversely impact investor confidence and private investment. Start-up and implementation of Bank
investment projects were also constrained by a lack of budget and counterpart funding.
FY06-09 CAS Completion Report Philippines FY10-12 CAS – Annex 3
Page 2 of 33
4. Poor governance was another constraint. The Philippines compared poorly to other East
Asian countries in corruption, rule of law, government effectiveness and political stability1. There
was a perception that public institutions were captured by special interests and did not necessarily
work effectively for the common good. This created a vicious cycle of weak public services, lack
of trust in the Government, and an unwillingness to provide adequate resources to it. Poor
governance limited the effectiveness of public institutions.
5. The Medium Term Philippines Development Plan (MTPDP) 2004-2010 laid out the
Government’s goals, strategies and action plans for the CAS2. The plan corresponded to
President Gloria Macapagal-Arroyo’s term in office and reflected her priorities - livelihood
(employment generation), education, fiscal strength, decentralized development, and national
harmony3. The plan consisted of five parts: Economic Growth and Job Creation; Energy; Social
Justice and Basic Needs; Education and Youth; and Anticorruption and Good Governance.
Addressing the fiscal problem was seen as essential in sustaining and accelerating economic
growth. Addressing infrastructure deficiencies, power sector reforms, improving knowledge,
tackling corruption and simplifying business procedures were expected to promote investment and
exports which would drive economic growth. This in turn was expected to create around 10
million jobs and reduce poverty to 18 percent by 2010. The plan was comprehensive and did not
reflect clear priorities which were supported by the budget, limiting its effectiveness.
C. The Bank Country Assistance Strategy
6. The FY06-08 CAS aimed to support the MTPDP and focused on four strategic areas:
economic growth, social inclusion, fiscal stability, and improved governance. It had the
following objectives4:
Achieving fiscal stability to generate resources aimed at spurring growth and raising
investments in the social and infrastructure sectors;
Generating economic growth to accelerate job creation and poverty alleviation;
Ensuring social inclusion and the improved delivery of basic services; and
Improving governance.
7. Fiscal stability and improved governance were considered to be two levers which would
promote economic growth and social inclusion. Economic growth would create jobs and income
generation opportunities which would contribute to poverty reduction (although there was a
concern that high income inequality would lessen the effect of growth on the poor). More social
inclusion would empower the poor and enable them to participate in the opportunities afforded by
economic growth, supported by public spending targeted to the poor. Fiscal reforms were essential
1 Based on the WBI Governance Indicators for 2004.
2 The National Economic and Development Authority, Medium Term Philippines Development Plan 2004-
2010, 2004. The plan was quite comprehensive and covered 277 pages. 3 The MTPDP was based on the President’s 10 point agenda which laid out 10 outcomes that she wanted to
achieve during her term. 4 The FY06-08 CAS had two objectives (economic growth and social inclusion) and two levers (fiscal
stability and governance), in that fiscal stability and good governance contribute to economic growth and
social inclusion. The CAS Progress Report restated these as four strategic objective statements. These are
presented in this Completion Report.
FY06-09 CAS Completion Report Philippines FY10-12 CAS – Annex 3
Page 3 of 33
for growth and for building-up of effective social spending that reaches the poor. Governance
improvements were needed to deliver core services to all citizens, especially the poor.
8. The CAS adopted a “back to basics” approach, focusing on the ability of agencies to
deliver services on the ground and make real implementation progress, rather than on
sophisticated reform design. The strategy required the Bank to be more selective in its approach,
but opportunistic in specific engagements5. It focused on ―Islands of Good Governance‖ – national
agencies, local governments, or economic sectors for which the basic governance arrangements are
sufficiently sound to provide a reasonable chance of success. Bank engagement would be as
follows:
At the national level, the Bank would focus on working through and improving in-country
systems and processes, with more Bank operations focused on agency core mandates,
functions, and service delivery improvements within the budget. The Bank would also
focus on making decentralization more operational, representing a critical link to the local
government agenda.
At the local level, there would be an integrated cross-sectoral focus on local governments
as the direct client. Developing a performance framework and capacity building program
for local governments that is consistent across local governments would be central to this
effort. Linking financing and capacity building to a clear performance framework in a
practical way would also facilitate good governance at the local level.
At the private sector level, there would be greater coordination between the Bank and IFC
to promote private investments by strengthening regulatory agencies, reducing the cost of
doing business, improving financial intermediation, and financing investments for public-
private partnerships projects as well as investments in sectors with high growth potential.
9. The CAS anticipated a lower level of lending, compared to past CASs, and the
continuation of a robust non-lending program. The base case program for FY06-08 was
expected to range from US$450-900 million, lower than the US$1.1-1.3 billion in previous CASs.
The level of Bank commitments would be determined by the progress on fiscal reforms, especially
a reduction in the consolidated public sector deficit (CPSD) and improved tax effort, going up to
US$1.8 billion under the high case6. The Bank would continue knowledge transfers through its
economic and sector work and non-lending technical assistance program, mobilization of trust
funds, and the network of Knowledge Development Centers. Greater emphasis would be given to
―just-in-time‖ knowledge transfers to respond to immediate client needs.
10. The Government strengthened its fiscal position by 2006 and the Bank scaled up
lending and extended the CAS to end FY09. The Government reduced the CPSD, turning it into
a surplus of 0.1 percent of GDP in 2006. The bulk of the adjustment was due to enhanced tax
revenues, with the tax-to-GDP ratio increasing from 13 percent in 2005 to 14 percent in 2006.
Reflecting the improved situation, the Region issued a CAS Progress Report which confirmed the
continued relevance of the strategy and approaches taken, extended the CAS by one year to end-
FY09, and proposed a new base case of US$1.7 billion for FY08-09. The larger program was
based on increased fiscal space, the need for more public investment, and strong demand for Bank
5 Selectivity under the CAS would be functional and not sectoral.
6 The triggers for the high case were (a) a CPSD reduction of 2 percent of GDP relative to 2004, (b)
compatible with a CPSD reduction of 3 percent during 2005-07, (c) with a significant portion of the
adjustment due to increase in the ratio of tax revenue to GDP.
FY06-09 CAS Completion Report Philippines FY10-12 CAS – Annex 3
Page 4 of 33
support. The CAS Progress Report was distributed to the Board on a lapse-of-time basis7 on
August 2, 2007.
11. A results framework was developed, but design weaknesses limited its usefulness. The
CAS identified 12 outcomes: one outcome corresponding to each of the four objectives
(governance, fiscal stability, growth and social inclusion) by one of three platforms (national, local
and private sector development). These country outcomes were presented in a 4x3 matrix (Table
13 in the CAS) which is replicated in Table 1 of this report. The results framework did not,
however, include baselines or targets with which to measure progress against CAS outcomes.
Therefore, it was not possible to determine what changes the Bank expected to achieve during the
CAS period. The results framework did include ―Milestones‖ which reflected the expected
outcomes of the Bank Group assistance. But the milestones were generally framed as outcomes or
objectives without baselines or targets which again made it difficult to assess whether they had
been met. The CAS included a separate annex table (Annex B-10) mapping Bank interventions
(lending and non-lending) by goal and platform.
12. The country team tried to use and refine the results framework by defining baselines
and targets during annual portfolio reviews. The weaknesses in the design of the results
framework made the task of monitoring and evaluating the CAS unwieldy. While the periodic
monitoring of CAS milestones was useful in confirming the overall consistency and direction of
progress and in increasing country team ownership of CAS results, it did not allow calibration of
Bank Group interventions to meet pre-agreed targets. Many of these milestones were subsequently
updated and/or formally revised in the CAS Progress Report to reflect evolution in the Bank
program.
D. Relevance of the Bank Program
13. Aligning the CAS with government priorities and maintaining the relevance of the
Bank program is a dynamic (not static) process. The CAS was aligned with the MTPDP, both
plans acknowledging the importance of addressing the need to tackle the fiscal situation. A
consultative process, the Philippine Development Forum (PDF), proved to be effective in aligning
government and Bank priorities and maintaining (and enhancing) the relevance of the Bank country
program. In 2005, the Government and the Bank started the PDF by widening the Consultative
Group meetings to include civil society, private sector, legislators and other stakeholders. In order
to make the PDF into a continuous dialogue rather than an annual event, working groups (co-
chaired by the Government and a development partner) were set up to follow up on issues and
agreements during the last meeting8. The PDF has proven effective in building consensus and
aligning development partners around key challenges. Interviewing government counterparts, IEG
found that there was almost universally positive appreciation of the PDF9 and the Bank’s convener
role. The IEG report noted that one senior government official considered the forum to maintain ―a
good concentration on strategy and implementation rather than the pledging and positioning of
donors.‖
7 In the absence of a request by Executive Directors to schedule a CAS Progress Report for discussions, the
minutes of a subsequent Board meeting record that Executive Directors noted the report. 8 Working groups are set up in seven thematic areas: MDGs and social progress; growth and investment
climate; economic and fiscal reforms; governance and anti-corruption; decentralization and local
government; Mindanao; and infrastructure. 9 The Independent Evaluation Group, Philippines Client Perspectives on Elements of Bank Support: Working
Paper for Development Results in Middle-Income Countries: An Evaluation of the World Bank’s Support,
2007
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Page 5 of 33
E. CAS Outcomes
14. This section assesses the progress made towards the CAS objectives and the results
achieved by the Bank. The Philippines has made significant progress in addressing the fiscal
situation, turning the consolidated public sector deficit into a surplus in 2006 and achieving an
economic growth rate of over 5 percent in 2006 and 2007. On the other hand, poverty increased
between 2003 and 2006 despite the strong economic performance, raising concerns both in the
country and the Bank. Progress is being made on government procurement reform and
strengthening budgeting, but corruption continues to be a major concern and investment has
continued to decline. There are growing concerns that the tax revenue increases will not be
sustained. The Bank not only implemented its program of lending and Analytical and Advisory
Activities (AAA), but also played a key convener role around the PDF and mobilized grants to
supplement its lending and AAA program.
15. Overall, Bank program outcomes are considered to be “moderately satisfactory”.
This is based on the assessment of each of the four CAS objectives. The results for fiscal stability
is rated ―satisfactory‖ (bordering on ―highly satisfactory‖), economic growth ―satisfactory‖ (but
bordering on ―moderately satisfactory‖), and ensuring social inclusion and governance ―moderately
satisfactory‖. The CAS objective assessments were based, in turn, on assessments of the individual
CAS outcomes under each platform (national, local and private). The assessments for each CAS
outcome are discussed below and the summary results are presented in Table 1. A more detailed
results summary by outcome is presented in Appendix 1. Bank performance is assessed in the
following section. The poor design of the results framework (noted above), however, made the
assessment of the CAS outcomes more difficult.
Table 1: Summary of CAS Assessment by Goal
National Platform Local Platform Private Platform
Governance
Improving
governance
Moderately
Satisfactory
Systems and processes for
allocating and executing
budgetary resources are more
transparent and efficient.
Moderately Satisfactory:
Progress is being made in
improving budgeting (MTEF,
etc.) and procurement. Bank
operations supporting
department level efforts to
improve budgeting and
procurement. However, there
are concerns over the pace of
implementation.
Systems and processes of
local governments for
planning, budgeting, and
delivering services and
investments are transparent
and efficient.
Moderately Satisfactory:
Bank projects are providing
training and capacity
development in planning,
budgeting, and service
delivery, through formal
training and technical
assistance provided through
project planning and
implementation. But it is not
clear if this will lead to system
improvements outside of the
projects.
Improve governance of
corporate sector and
infrastructure regulatory
agencies.
Satisfactory: The Bank
continues to support Metro
Manila Water Supply and
Sanitation System Regulatory
Office to oversee water and
sanitation concession in
Metro Manila and the Energy
Regulatory Commission to
oversee the power sector.
Fiscal Stability
Achieving
fiscal stability
to generate
resources
aimed at
Improved public revenue
mobilization, public expenditure
management, and management
of state-owned enterprises.
Satisfactory: The turn-around
in the fiscal situation has been
Expanded local revenue base
and increased revenues from
local sources in at least 20
local governments.
Satisfactory: Local revenues
have increased in local
Reduced fiscal burden through
financial strengthening of
government corporations and
financial institutions.
Satisfactory: Improvement in
the financial position of
FY06-09 CAS Completion Report Philippines FY10-12 CAS – Annex 3
Page 6 of 33
National Platform Local Platform Private Platform
spurring
growth and
raising
investments in
social and
infrastructure
sectors
Satisfactory
impressive. The Bank and its
development partners have been
making the case for revenue
reform. Improving tax effort was
part of DPL1. The Bank is
assisting the Bureau of Internal
Revenue to improve tax
collections through the NPS on
Tax Administration, an IDF
grant, and policy notes. In
addition, the Bank has been
supporting government efforts to
privatize the power sector, with
a positive impact on government
finances. However, the slow
down in tax revenue increases in
2007 is a concern.
governments participating in
Bank supported local revenue
training and undertaking
revenue enhancement
programs. Furthermore, the
Bank is assisting the
Government to develop a
performance based grant
system for local government,
linked to improved revenue
performance.
Government Owned and
Controlled Corporations have
contributed to the improve-
ment in the Government’s
fiscal situation. IFC has
played an important role by
furthering power sector
privatization and facilitating
the sale of non-performing
assets owned by the National
Home Mortgage Corporation
and other government entities.
Growth
Generating
economic
growth to
accelerate job
creating and
poverty
alleviation
Satisfactory
Competitiveness of the economy
improved by increasing
investment, upgrading
infrastructure, and adopting
reforms aimed at improving
productivity of firms.
Moderately Satisfactory: Bank
infrastructure projects are
improving major road networks
and, with IFC, promoting rural
electrification. Efforts to
modernize support to agriculture
and improve agricultural
productivity have not progressed
as planned. Bank reports have
raised the need to promote
investment and address
governance and other
constraints to improving the
investment climate, but private
investment continues to lag.
Productivity increased through
local provision of
infrastructure and services.
Satisfactory: Bank projects
continue to provide local
governments with access to
financing for local
investments. Preliminary
assessments indicate that
these investments are having a
positive impact on local
communities
Catalyze private investment in
key sectors including
infrastructure.
Satisfactory: The Bank and
IFC support the Government’s
efforts to increase private
provision of infrastructure.
Both the Bank and IFC
provide funding for private
provision of water and
sanitation in Metro Manila.
IFC has made several
investments in private
provision of electricity. The
Bank continues to pursue
additional public-private
operations in power, water,
and transport.
Social
Inclusion
Ensuring social
inclusion and
the improved
delivery of
basic services
Moderately
Satisfactory
Improved performance of
national institutions and
increased access for the poor and
disadvantaged to basic services.
Satisfactory: Bank operations
continue to support sector
reforms in education, health, and
social welfare development.
Bank provided opportunities to
pilot agency reforms (e.g.,
school based management,
procurement) through its
projects and transferred
knowledge (e.g., conditional
cash transfers).
Greater voice and improved
access for the poor and
disadvantaged in the planning
and delivery of education,
health and other basic services
at the local level.
Satisfactory: The Bank is
promoting greater community
involvement, especially to the
poor in disadvantaged groups,
in local decision making
through several of its
community based projects.
Increased access to financing
of micro-enterprises,
cooperatives, and small &
medium enterprises (SMEs)
and increased private delivery
of basic social services.
Moderately Satisfactory: The Bank’s Rural Finance III
project (closed) provided
rural micro-enterprises and
SMEs with access to credit.
SME operations are shifting to
IFC.
FY06-09 CAS Completion Report Philippines FY10-12 CAS – Annex 3
Page 7 of 33
Improving Governance
16. The Government has been taking steps to improve governance. A key development
has been the strengthening of the procurement process. The Government Procurement Reform Act
(2003) created a single legal framework for procurement and streamlined and modernized
procurement. The Act resulted in the harmonization of national procurement procedures between
government and its three main development partners, the World Bank, the Asian Development
Bank (ADB) and the Japan Bank for International Cooperation (JBIC). It created an e-procurement
system which was deemed to increase transparency. The Government also addressed the concern
over the fragmentation of rules and regulations by preparing a unique set of rules for all
procurement activities covered by the Act. Similarly, the Government has taken steps to improve
budgeting by piloting of a results-oriented Organizational Performance Indicator Framework,
introducing Medium Term Expenditure Frameworks (MTEFs), and linking government priorities
and resources through the Budget Strategy Paper.
17. But challenges remain. Civil service reform, another area identified for improvement,
remains stalled. While the frameworks for procurement and budget improvements are in place,
corruption continues to be an issue: the Philippines ranked 112 out of 125 in a list of countries
where irregular payments are required for public contracts according to the Global Competitiveness
Report 2006-07 and the Bank’s 2008 CPAR noted that by one estimate possibly 20 percent to 30
percent of each contract goes to leakages. The challenge is to ensure implementation of the
procurement and budgetary reforms throughout the Government. However, there are concerns
over slippages, such as the delay in making public budget utilization data (see below).
18. The Bank has supported the Government’s efforts to improve governance. The Bank
has contributed to the budget reforms by providing analysis through its analytical and advisory
activities (AAA) and by using the PDF as a forum to discuss key public expenditure and
governance issues. Bank operations are supporting agency efforts to internalize and implement
many of the changes. At the national level, the Departments of Education (DepEd), Health (DoH),
two agencies with Bank National Program Support (NPS) operations, and the Department of Social
Welfare and Development (DSWD), have adopted MTEFs. The Bank has provided grants to the
Government Policy and Procurement Board, the Office of the Ombudsman, and the Presidential
Anti-Graft Commission to strengthen their capacity to oversee procurement and fight corruption
(see Box 1). Finally, governance improvement is a key objective of the Bank’s program of
Development Policy Loans (DPLs). Increasing the number of postings under the Government’s e-
procurement system was a prior condition for the first loan (DPL1, FY07). However, lack of
progress on disclosing budget execution information is one of the reasons, which delayed the
second DPL (DPL2).
19. Individual Bank projects strengthen agency capacity in budgeting, procurement
and/or financial management, both at the national and local levels. At the national level, the
Second Social Expenditure Management Project (SEMP2, completed in FY07) focused on
strengthening fiduciary and procurement systems in DepEd, DoH and DSWD and demonstrated the
benefits of competitive bidding10
. The Second National Roads Improvement and Management
Project (NRIMP2) includes an Integrity Strengthening Action Plan for the Department of Public
Works and Highways (see Box 1). At the local level, officials from 979 local government units
(LGUs) have been trained in planning, finance, construction supervision and other municipal
management areas under the Local Government Finance and Development Project (LGFDP-
Logofind). The Bank’s community-driven development projects have engaged communities in the
10
ICB under the project resulted in improved quality and cost savings.
FY06-09 CAS Completion Report Philippines FY10-12 CAS – Annex 3
Page 8 of 33
planning and implementation of local investment and service delivery. It is not clear, however,
whether all these individual project level efforts would be sustainable and would lead to system-
wide improvements at the local level. The Bank is addressing these concerns by working through
the PDF to refine the local government performance framework and assisting the Department of
Interior and Local Government to review local government training through an IDF grant.
Box 1: Fighting Corruption in the Philippines The Bank has been assisting government agencies to enhance their capacities to oversee procurement
and tackle corruption through various grants to procurement and anticorruption agencies. The Bank
provided the Government Policy and Procurement Board (GPPB) with two consecutive grants which helped
GPPB develop and pilot test generic procurement manuals (which were harmonized with the Asian
Development Bank, the Japan Bank for International Cooperation, and the Bank), institute a national
procurement training program through state universities and colleges, and prepare and pilot test Agency
Procurement Performance Indicators. GPPB is currently developing further training and certification
programs for public procurement professionals. The Office of the Ombudsman received an ASEM grant
with which the Office conducted field investigation training and developed an electronic data bank for the
Statements of Assets and Liabilities and Net Worth and an electronic case tracking system for use by the
Office of the Special Prosecutor. The Bank also provided IDF grants to the Bureau of Internal Revenue to
strengthen its revenue administration capacity and reduce opportunities for graft and to the Presidential Anti-
Graft Commission to strengthen agency internal audit units for effective procurement monitoring and
enforcement.
At the project level, the Bank is conducting due diligence in procurement and financial management,
tackling corruption when it arises, and working with agencies to improve their controls and
procedures. For example, the Bank rejected road contracts in 2003, 2004, and 2006 due to signs of bid
rigging under the First National Roads Improvement and Management Project (NRIMP1). These cases were
referred to the Bank’s Department of Institutional Integrity which found that a cartel of contractors had
engaged in corrupt and collusive practices in all three rounds of bidding. The findings were disclosed to the
Government in November 2007 for possible follow-up under Philippines law. This also led to tightening of
procedures within the Department of Public Works and Highways and in the follow-up project, NRIMP2.
The Department adopted an Integrity Strengthening Action Plan which is supported by a range of measures
incorporated into the Bank project, such as the use of an independent procurement evaluator, independent
oversight by a coalition of citizens and road user groups (―Road Watch‖), strengthening of procurement and
financial controls, and business process improvements to reduce opportunities for interference.
20. The Bank is strengthening the oversight functions of the regulatory agencies in the
power sector and in Metro Manila water and sanitation. The Government has been pursuing
the privatization of power, and water and sanitation since the 1990s, changing the role of
government from service delivery to policy and oversight. Strengthening the regulatory agencies is
critical to increasing private investment in infrastructure. The Electricity and Power Reform Act
(2001) provided the framework for restructuring the power sector. The Bank has been supporting
the implementation of the Act, most recently in assisting the Energy Regulatory Commission to
develop rules and regulations for a concession agreement for power transmission. Similarly, the
Government divided the provision of water supply and sanitation in Metro Manila into two
concessions in the late 1990s with technical assistance from IFC. The Bank has since been
assisting the Metro Manila Water Supply and Sanitation System Regulatory Office carry out the
rebasing of the tariffs through the Third Manila Sewerage Project and is extending financing to one
of the concessionaires through one of its projects.
FY06-09 CAS Completion Report Philippines FY10-12 CAS – Annex 3
Page 9 of 33
Achieving Fiscal Stability to Generate Resources Aimed at Spurring Growth and Raising
Investments in the Social and Infrastructure Sectors
21. The Philippines has experienced a turn-around in its fiscal position. The consolidated
public sector balance went from a deficit of 4.8 percent of GDP in 2004 to a surplus of 0.2 percent
in 2006 and an estimated surplus of 1.4 percent for the first three quarters of 2007 (Figure 1).
Increase in tax revenues was a major factor behind this turn-around. The Government
implemented various measures to improve tax revenues between 2004-2006, such as the passage of
the reformed value-added tax law which removed exemptions and increased the tax rate by 2
percent effective in 2006; increase in the corporate tax rate; and, the enactment of a ―Sin Tax‖ law
which raised excise taxes on cigarettes, tobacco, and alcohol. Tax revenues increased from 12.4
percent of GDP in 2004 to 14.3 percent in 2006 (Figure 2). Improvements in the financial position
of public corporations and revenues from privatization in the power sector also contributed to the
improvement in the Government’s fiscal position. There is a concern, however, that the tax effort
is stalling with tax revenues as a percentage of GDP in 2007 dipping slightly below the level
reached in 2006.
Figure 1 Figure 2
Public sector financial position, % of GDP
-6%
-5%
-4%
-3%
-2%
-1%
0%
1%
2%
2001 2002 2003 2004 2005 2006 2007
National government
Consolidated public sector*
*CPSD for J-Sep07. Source of basic data: Bureau of the Treasury, NSCB
Tax revenues, % of GDP
0%
2%
4%
6%
8%
10%
12%
14%
16%
2001 2002 2003 2004 2005 2006 2007
2007 target
Tax effort
Source of basic data: Bureau of the Treasury, NSCB
22. The Bank and IFC have supported the Government’s efforts to improve revenue
generation, both at the national and local government levels, and reduce the fiscal burden of
public corporations through increased cost recovery and privatization. Bank economic reports
have been making the case for fiscal improvements: fiscal reform was discussed in detail in the
2005, 2007, and 2008 economic reports11
which served as inputs into the PDF. The PDF acted as a
forum to raise awareness and develop a consensus for tax increases. The Bank, together with
Filipino academics and development partners, helped develop and sustain the momentum for fiscal
reform. Operationally, the Bank supported the Bureau of Internal Revenue to improve collections
through the NPS on Tax Administration Reform (FY07), an IDF grant, and short policy notes.
Improving tax effort was one of the objectives of DPL1. However, there are concerns.
Implementation of the NPS on tax reform is not progressing as originally anticipated and the
stalling of the tax effort in 2007 is one of the factors behind the Bank’s decision to delay DPL212
.
11
Report No. 32055-PH, Philippines: From Short-Term Growth to Sustained Development, 2005; Report No.
39226-PH, Philippines Invigorating Growth, Enhancing Its Impact, 2007; Accelerating Inclusive Growth and
Deepening Fiscal Stability, 2008. 12
―Tax revenue on track to increase by 0.5 percent of GDP in 2007 over 2006‖ is one of the triggers for
DPL2. This was not met.
FY06-09 CAS Completion Report Philippines FY10-12 CAS – Annex 3
Page 10 of 33
23. At the local government level, the Bank is working with local government units
(LGUs) to improve their ability to raise revenues. A total of 535 LGUs have participated in
training on real property tax and the local revenue code under the LGFDP-Logofind. These LGUs
increased their local revenues by Php 8.7 billion or by 114 percent between 2000 (the baseline) and
2007, although it is not possible to establish how much the training contributed to this increase. In
addition, participating LGUs improved revenues by investing in bus terminals and markets and by
implementing business and real property tax enhancement programs. The Bank is also assisting the
Government to develop performance based grants to improve local government revenue
mobilization by providing information on performance based grant systems and their possible
application to the Philippines through an IDF grant13
, and developing a project designed around
performance based grants to LGUs.
24. The Bank and IFC are furthering privatization of the power sector which contributes
to improvements in the Government’s fiscal position. Improving the financial viability of the
power sector is one of the objectives of the Bank’s DPLs14
. As mentioned above, the Bank is
supporting the Government on a concession agreement for power transmission. IFC has increased
private participation in the National Power Corporation’s Small Power Utility Groups (SPUGs)
which service off-grid areas (mainly rural and isolated communities), took an equity stake in the
Philippines National Oil Company Energy Development Corporation’s (PNOC-EDC) initial public
offering, and financed the privatization of two power generating facilities. In addition, IFC helped
reduce the Government’s fiscal burden through the sales of non-performing assets held by the
National Home Mortgage Corporation and the National Development Corporation and government
equity investments in listed and non-listed companies.
Generating Economic Growth to Accelerate Job Creation and Poverty Alleviation
25. The Philippines continues to experience high economic growth, but declining
investments raise concerns over its sustainability. GDP grew at over 5 percent in 2006 and 2007,
driven by demand which in turn was fueled in part by overseas worker remittances (Figure 3).
Economic growth, however, has not led to significant employment generation or poverty reduction:
unemployment remained around 8 percent and poverty increased (see ―Social Inclusion‖ below).
Investment also continued to decline (Figure 4). The 2008 economic report15
noted that the recent
growth was facilitated by an uptake of spare capacity, but that this capacity was mostly exhausted,
requiring higher investment to sustain economic growth. The 2006 CAS had questioned the
sustainability of consumption-driven growth and raised the lackluster investment climate as an
issue; the challenge of increasing private investment remains.
26. The Bank Group is assisting the Government to address the infrastructure needed to
promote growth. The CAS identified lack of infrastructure as a serious constraint to investment
and economic growth. At the national level, the Bank and IFC are supporting government efforts
to improve the national highway network, address the transportation needs of Metro Manila, and
strengthen power supply, including rural electrification.
13
TF056331, ―Developing Governance Performance Frameworks for Local Government.‖ 14
Increase in tariffs and the publication of the guidelines for the universal charge for stranded costs and
stranded debt were recognized as prior actions for DPL1. 15
Accelerating Inclusive Growth and Deepening Fiscal Stability, 2008
FY06-09 CAS Completion Report Philippines FY10-12 CAS – Annex 3
Page 11 of 33
Figure 3 Figure 4
Contribution to real GDP growth
-10%
-5%
0%
5%
10%
15%
2001 2002 2003 2004 2005 2006 2007
C G I X-M GDP
Source of basic data: NSCB
Fixed capital formation, % of GDP
0%
5%
10%
15%
20%
25%
2001 2002 2003 2004 2005 2006 2007
Public construction
Private investments*
* Fixed capital formation less public construction. Source of basic data:
27. In transport, NRIMP1 (completed FY07), upgraded 382 km of national roads, conducted
preventive maintenance on 721 km of national roads, piloted performance based maintenance
contracts on another 254 km, helped to establish a Road Board and Road Fund, and carried out
business process improvements in the Department of Public Works and Highways. The follow up
project (NRIMP2) was approved in FY08 with a noteworthy approach to improving governance
and reducing corruption in the implementing agency (see Box 1). The Metro Manila Urban
Transportation Project improved access to the Marikina Valley and made intersection
improvements along major thoroughfares. In addition, the Bank and IFC are exploring support for
the expansion of the Light Rail Transit System in Metro Manila.
28. In the power sector, the Bank Group is furthering the Government’s privatization of the
sector. IFC has invested in the privatization of two power generation plants. Both the Bank and
IFC are promoting rural electrification by financing and strengthening rural Electrical Cooperatives,
promoting off-grid systems (e.g., solar power), and furthering sector reforms through the Rural
Power Development Program, GEF grants, and IFC investments and advisory services.
29. At the local level, the Bank is providing LGUs with access to financing for infrastructure
and service improvements through financial intermediaries and geographic or sectoral projects. As
of June 2008, 462 LGUs have obtained financing through the Municipal Development Fund and
653,141 households have gained access to basic infrastructure and services through the LGFDP-
Logofind. LGUs are also funding rural roads and bridges, small-scale irrigation, rural water and
other infrastructure and facilities under the Second Agrarian Reform Communities Development
Project (ARCDP2) and the Second Mindanao Rural Development Project (MRDP2, approved
FY07). These rural investments are seen to have a positive effect - Agrarian Reform Communities
that have participated in ARCDP2 for at least three years have reported a 21 percent increase in
real income due to, among others, rural infrastructure.
30. The overall effect of Bank support is difficult to determine. Improving infrastructure is
still seen as a major challenge. The 2008 economic report noted that the Philippines fares poorly in
many infrastructure indicators in the Global Competitiveness Index and that the quality of transport
infrastructure was a particularly serious concern.
31. Bank efforts to improve the investment climate and the productivity of firms have
been less successful. The Bank has been emphasizing the need to address corruption and reduce
FY06-09 CAS Completion Report Philippines FY10-12 CAS – Annex 3
Page 12 of 33
the cost of doing business through its economic reports. The Government passed an Anti-Red Tape
Law in 2007 and is taking steps to improve the productivity of local businesses, but it is not clear
whether the Bank had any influence. The Bank is supporting the Department of Agriculture to
strengthen its marketing and regulatory functions in order to promote new products, diversify
production, and encourage private investment in agriculture under the Diversified Farm Income
and Market Development Project. Progress of reforms and the project have been much slower than
originally anticipated.
Ensuring Social Inclusion and the Improved Delivery of Basic Services
32. Despite high economic growth, poverty increased between 2003 and 2006. While the
Philippine economy grew at an average of 5 percent per annum since 2000, the poverty incidence
increased from 30 percent in 2003 to 32.9 percent in 2006 or the level in 2000 (33 percent). In
2006, 27.6 million Filipinos lived below the poverty level, more than ever before. Some possible
reasons for the drop are a fall in real incomes of households, economic growth which favored the
corporate sector, and low government social spending caused by the fiscal crisis.
33. The Bank works with national government agencies and LGUs to improve access to
basic services for the poor and social protection. The poor rely more on the Government for
education, health and basic services since they cannot afford to obtain them from private providers.
The Bank has been working with DoH, DepEd and DSWD, piloting school based management
under the Third Elementary Education Project (closed FY06) and procurement and financial
management reforms under SEMP2 (closed FY07). These projects contributed to improvements in
test scores in project schools; improvements in textbook to pupil ratio in math, science and other
key subjects; improvement in TB cure rates; and reduction in the incidence of measles. Both
projects laid the foundations for sector-wide approaches: the NPS for Basic Education (FY06)
furthers school based management and improves teacher competency and the NPS for Health
(FY06) aims to increase the enrolment of indigent people in national health insurance and improve
health service delivery. The proposed support to government on the conditional cash transfer
(CCT) should also provide substantial benefit to the poorest, and, more broadly, reform the poverty
reduction program.
34. At the local level, the Bank is promoting greater community empowerment through
participation, accountability, and transparency in local decision making, especially of the
poor and disadvantaged groups. Using a community-driven development (CDD) approach,
where communities identify priorities and manage sub-project implementation, the KALAHI-
CIDSS Project has financed more than 4,200 small scale investments in infrastructure and other
facilities in 184 of the poorest municipalities. LGUs provide technical support and counterpart
funding with responsibility for operation and maintenance being shared between communities and
LGUs. Two projects, the Autonomous Region in Muslim Mindanao (ARMM) Social Fund and
MRDP2, focus on Mindanao, one of the poorer regions which is experiencing conflict. In addition,
the Bank has helped to establish and get off the ground a multi-donor Mindanao Trust Fund.
35. The Bank also anticipated increasing access to financing for micro- and small and
medium enterprises (SMEs). The Third Rural Finance Project (closed FY08) made 546 subloans
to SMEs, creating around 17,000 jobs, and around 115,000 subloans to micro-enterprises.
However, no new initiatives were started during the CAS period. IFC has concluded advisory
agreements with private financial institutions on SME support in 2008.
FY06-09 CAS Completion Report Philippines FY10-12 CAS – Annex 3
Page 13 of 33
F. Bank Performance
36. The Bank’s performance during the CAS period is rated “Satisfactory”. The Bank
has been able to deliver a program in line with the country needs. Improvement in the fiscal
situation allowed the Bank to expand its lending, committing US$1.3 billion, including a DPL and
several NPS operations. The Bank reacted to the typhoon damage in Bicol region with a power
restoration project and to the food crisis with a development policy operation under the Global
Food Crisis Response Program. The Bank has been delivering knowledge products through AAA
and trust funded activities which have been appreciated by the client, but it is not possible to assess
their effect. Project implementation has not always been smooth in the Philippines, but the Bank is
proactively managing its portfolio, both lending and trust funds, with the Government.
Non-lending
37. The Bank plays an important role in the transfer of knowledge to the Philippines. The Bank’s ability to bring knowledge on international experiences, especially in carrying out
complex reforms, is valued by government counterparts16
. In addition, the Bank was able to
provide multi-sectoral analysis, provide consistent policy advice, and maintain continuity during
times of frequent changes in government, i.e., to act as ―an important policy anchor‖ in the view of
a senior government official17
.
38. The Bank’s non-lending program has evolved from a number of formal studies to a
mix of formal economic and sector work, smaller “just-in-time” policy notes and studies,
training and technical assistance. The Bank’s economic reports provided background for the
PDF discussions. In addition, the Bank’s involvement in the various PDF working groups has also
provided opportunities to transfer knowledge to government counterparts and other stakeholders.
Many of the non-lending activities have been funded by both Bank executed and recipient executed
trust funds. The FY06-08 CAS saw the AAA program evolving over the CAS period, as the Bank
adjusted to evolving client priorities and opportunities, and did not provide a definitive list of new
AAA tasks. The major AAA outputs are listed in Appendix 2.
39. Trust funds have been critical in the Bank’s support to the Philippines by providing
technical assistance to build the Government’s capacity and to support sector-specific and
cross-sectoral initiatives. The Philippines country team supported the Government’s efforts to
pursue trust fund opportunities from other donors in order to complement Bank operations and to
help address areas that the Government has not been inclined to borrow for. Strategic partnerships
between the Government, concerned donors and the Bank, have built on and further reinforced
coordinated policy dialogue on sector issues and reform agendas, especially in education and health
and in extending support to the conflict affected areas of Mindanao. Besides providing support to
lending operations, trust funds have allowed the Government and the country team to undertake a
range of strategically positioned analytical, advisory and capacity building activities and have
served as effective vehicles for strengthening country systems and advancing harmonization
initiatives.
40. The Bank’s monitoring and evaluation of the effect of its AAA program has not kept
pace with the changes. Approximately one-quarter of the Bank’s budget was spent on AAA
16
In interviews with IEG, a senior government official said ―The Bank is more than just money . . . [It is] an
independent source of advice‖ and another said ―I personally valued the advice more than the money.‖ From
IEG, Philippines Client Perspectives on Elements of Bank Support: Working Paper for Development Results
in Middle Income Countries An Evaluation of the World Bank’s Support, 2007 17
IEG, ibid.
FY06-09 CAS Completion Report Philippines FY10-12 CAS – Annex 3
Page 14 of 33
during the CAS period. Feedback from government officials indicates that the Bank’s work is
appreciated. However, it is difficult to get a good overview of the AAA program or assess the
effect it may have had on the Government and other audiences. Compared to the project portfolio
and the trust fund program, the monitoring and evaluation of AAA activities is less structured. At
present, the Bank is not able to answer the questions: ―What worked, what did not, and why?‖
Going forward, the Bank will need to strengthen the management of its AAA program.
41. Finally, knowledge transfer is not limited only to AAA. The Bank’s external country
website features not only economic reports and some sector reports, but also reports produced by
the Networks and DEC on the Philippines. The Bank is also making development information
more accessible to the population through Knowledge Development Centers (KDCs) which are
established in partnership with academic institutions throughout the Philippines. The 11th Center
was established in Iloilo City in September 2008 in partnership with the Philippines Central
University.
Lending
42. Bank lending over FY06 through the second quarter of FY09 was US$1,250 million,
higher than the US$450 - US$900 million anticipated in the CAS and the US$852 million
committed between FY00-05. The improvement in the Government’s fiscal situation allowed the
Bank to increase the amount of lending and deliver DPL1 in FY06. The Bank increased the base
case to US$1.7 billion and extended the CAS period by one year to end-FY09 in 2007. Actual
deliveries in FY08, however, were below expectations because of insufficient progress in reforms
or due to availability of alternative financing. The DPL series closed in December 2008 without
completing DPL2. A new DPL might be considered in calendar 2009 in response to the financial
crisis. The Bank was able to respond swiftly to rehabilitate power after a typhoon devastated the
Bicol region in 2006 (Bicol Power Restoration). The Bank quickly developed a Food Crisis
Response Development Policy Operation (US$200 million) under the Bank’s Global Food Crisis
Response Program in 2008. Planned and actual lending is listed in Appendix 3.
43. At the national level, the Bank has been responsive to government demand, shifting
its focus from investment lending to national program support or sector wide approach
(SWAp) operations and, most recently, to additional financing. NPS operations were approved
in basic education, health, tax administration, and environment and natural resource management in
FY06 and FY0718
. These operations aim to strengthen the agency’s institutional capacity by
supporting critical policy and institutional reforms and by using government procedures for fund
releases. One project, the NPS on Participatory Irrigation, originally scheduled for FY06, has been
delayed due to lack of progress on rationalizing staffing within the implementing agency, a critical
step for improved efficiency. The NPS operations have gotten off to a slower start than anticipated,
in part, because of the need to set up the internal procedures and policy issuances to support the
institutional reforms and system level changes supported by the projects. While there are concerns
over uneven support from high level management in the implementing agencies, the NPS approach
enjoys strong support from the core government oversight agencies19
who have introduced a
number of innovations in budget processes in response to analysis and agreements reached in
workshops organized in 2007 and 2008 to improve the performance of NPS projects. The sector
reform agendas supported by these NPS operations have also served as good platforms for forging
strategic partnerships and mobilizing additional resources (see Partnerships below). In the last year
18
While not designated a NPS operation, NRIMP2 follows a similar approach, focusing on institutional
capacity development and reform. 19
The Department of Finance, the Department of Budget and Management, and the National Economic
Development Agency.
FY06-09 CAS Completion Report Philippines FY10-12 CAS – Annex 3
Page 15 of 33
of the CAS, the Bank is increasing the number of additional financing projects, bringing a quick
answer to a demand for supplemental resources in successful sectors.
Portfolio
44. The Bank has been proactively managing its project and trust fund portfolio with the
Government. The Bank conducts regular, annual implementation reviews of both its project and
trust fund portfolios with the core government oversight agencies. These reviews include not only
implementation, but also outputs and expected outcomes and the likelihood of projects achieving
their stated development outcomes. In FY08, the Government carried out a country portfolio
review, including major development partners such as ADB and JBIC as well as the Bank, to better
understand implementation issues and identify areas needing further attention. As mentioned
above, a separate review of the NPS operations was conducted in FY08 to address the slower than
anticipated start-up of these projects. In FY09, the portfolio review focused on activities financed
at the local level, e.g., involving LGUs and CDD approach.
45. The Bank’s project portfolio during the CAS period is mixed. From FY06 to FY08, a
total of 12 new projects, including GEF projects but excluding DPL1, with a total commitment of
US$856.8 million entered the portfolio and nine projects, including two GEF projects, for a total of
US$601 million exited the portfolio. As of end FY08, the Bank’s on-going portfolio stood at 24
active projects, with a net loan commitment of US$1.4 billion. The disbursement ratio has ranged
from 15.2 percent (FY07) to 21.1 percent (FY06)20
which is within the historical range of the
Philippines 12 percent to 23 percent. The share of problem projects has increased from 13 percent
in FY06 to 16.7 percent in FY08. Portfolio indicators are presented in Appendix 4. It is not
unusual for projects in the Philippines to encounter problems some time during their
implementation. Of the nine Bank projects closed between FY06-08, three have rated as a problem
for development outcome sometime during their life time. All three projects were rated
satisfactory or moderately satisfactory for development outcome in the Implementation Completion
Report21
.
CAS Monitoring
46. The Bank has been proactively monitoring the CAS, however the results framework
has not necessarily proven to be an effective management tool. The data in the results matrix
were updated annually to identify priorities for the remainder of the CAS period and some
milestones were formally revised in the CAS Progress Report. The design of the results framework,
however, has made it less effective as a strategic management and learning tool. Updating the data
has not necessarily been easy because they do not correspond directly to project level indicators.
As discussed under CAS outcomes above, the lack of baselines and clear targets had made it
difficult to assess whether progress is being made relative to original expectations. Nonetheless,
the CAS results framework has been used in making broad decisions on country team priorities and
resource allocations, but not necessarily in calibrating the team’s response in specific sectors or
outcome areas.
20
In FY08, disbursement was 20.1%. 21
The Independent Evaluation Group (IEG) rated five of the seven closed projects. The Outcome Rating for
one project, the Water District Development Project, was downgraded from Satisfactory in the
Implementation Completion Report to Moderately Unsatisfactory. This project, however, was not rated as a
problem during implementation.
FY06-09 CAS Completion Report Philippines FY10-12 CAS – Annex 3
Page 16 of 33
G. Partnerships
47. The Bank strategy has emphasized partnerships: working closely with the
Government, development partners, and civil society, leveraging the Bank’s presence in the
Philippines. The PDF has been an effective mechanism in engaging the various government,
donor and civil society partners and in developing a coordinated approach. The Bank has actively
engaged development partners and consulted widely with local stakeholders and civil society in the
preparation of its CASs. At the operational level, the Bank has worked closely with other
development partners active in that area: e.g., the Bank is coordinating with ADB in power sector
reform and the NPS operations in education and health are part of a coordinated effort to support
the Government’s basic education and health reform agendas.
48. The Bank and its development partners are using their resources more effectively
through partnerships supported by trust funds. As a middle income country, the Philippines
has not been a major recipient of donor financing, increasing the importance of coordination and
the effective use of limited resources. Recipient executed jumbo trust funds have emerged as a
significant new business line for the Bank during the CAS period, helping to achieve major
benefits across a number of sectors as well as in advancing harmonization among development
partners.
Mindanao Trust Fund for Reconstruction and Development (MTF-RDP): The MTF-
RDP was established in 2006, following a joint needs assessment in 200522
. Close to US$9
million has been mobilized including a grant from the Bank’s Development Grant Facility.
The MTF-RDP provides a single channel for donors, making it easier for smaller donors to
contribute, and a single interface with the development community for trust fund recipients.
It has helped establish better accountability mechanisms to manage the flow of funds and
information in a post-conflict setting. MTF-RDP is supporting stabilization, training and
capacity building in the Bangsamoro Development Agency, conflict-affected communities,
and municipal governments in Mindanao.
European Commission Trust Fund for Health Sector Reform: The trust fund,
amounting to 13.45 million Euros, supports the implementation of the health reform
strategy at the provincial level and capacity building for DoH at the national level,
complementing the Bank’s National Program Support for Health Reform Project. Both
initiatives form part of DoH’s broader health reform program.
The Trust Fund Supporting Philippines Basic Education Reforms (SPHERE): The trust
fund provides US$35 million equivalent to DepEd to support its basic education sector
reforms. SPHERE is administered by the Bank and complements the National Program
Support in Basic Education Project.
49. The Bank has been harmonizing its procedures around government regulations
together with ADB and JBIC. The Government and its largest development partners (ADB,
JBIC and the Bank) agreed to align their national procurement rules and regulations with the
Government’s new procurement system following the passage of the Government Procurement
Reform Act in 2003. As a result, the agencies agreed on a common set of: implementing rules and
regulations; bidding documents for works, goods and consulting services; procurement manuals;
training for procurement staff; and procurement reporting and monitoring.
22
The joint needs assessment was financed by Australia, Canada, New Zealand, UN, ADB and the EC.
FY06-09 CAS Completion Report Philippines FY10-12 CAS – Annex 3
Page 17 of 33
50. Success of harmonization in procurement has led to similar efforts in financial
management and safeguards. The Government developed a new government accounting system
in 2002 to simplify financial accounting and to ensure consistent application of accounting
principles across government agencies. Financial reporting for Bank projects utilizes the new
government accounting principles, with some adjustments, for financial reporting. The ADB,
JBIC and the Bank are exploring ways to harmonize financial management and reporting with the
Commission on Audit. The Bank conducted a diagnostic review, together with the Government
and other stakeholders, of the country’s safeguard systems on environmental assessment,
indigenous peoples, and involuntary resettlement. The objectives of the reviews were to
recommend measures to strengthen local capacity for undertaking safeguards work and to identify
areas where local processes, practices and policies could be harmonized with that of global good
practice. The assessments of environmental safeguards and indigenous peoples were completed in
2007 and involuntary resettlement in 2008. The reviews identified areas for improvement and
some of the key recommendations have been adopted through the issuance of administrative orders
by the relevant agencies or will be implemented under proposed Bank operations23
. Based on the
partial success achieved, the Bank has identified the Philippines as a pilot country to complete
harmonization on environment and indigenous people standards and to extend the harmonization of
procurement to International Competitive Bidding. Work has already started in both cases.
51. An active civil society is one of the Philippines’ key assets in promoting better and
more accountable governance. In addition to engaging with development partners, the Bank took
several steps to expand its engagements with civil society organizations (CSOs) during the 2006
CAS period.
52. First, the Bank helped create additional space for dialogue with CSOs. At the local
level, the Bank organized dialogue sessions held in KDCs around specific development topics,
such as empowering marginalized communities in implementing procurement reform, peace and
development in conflict-affected areas, disaster risk-management, anticorruption initiatives, as well
as consultations for the Bank’s new CAS. These sessions were well attended by local government
officials, businessmen, non-governmental organizations, and citizens. At a national level, the PDF
encouraged CSO participation, both at the plenary and the working group level, providing CSOs a
venue to give their perspectives on a national stage. The Panibagong Paraan (local Development
Marketplace) provided selected CSOs with resources for their projects. The 2008 Panibagong
Paraan, ―Building Partnerships for Effective Local Governance,‖ not only provided grants to
CSOs, but also organized discussions around topics which CSOs identified as relevant to
governance issues, such as assessing the impact of political dynasties, transparency and
accountability in local governance, youth involvement in governance, and cutting the ―red tape‖ at
the local level.
53. Second, the role of the CSOs in Bank operation was expanded. The Bank engaged the
CSOs in improving the reach and quality of its operations and in results monitoring. For example,
DepEd has a nationwide partnership with CSOs among the youth, including the Boy Scouts and
Girl Scouts, in monitoring procurement of key educational inputs such as textbooks. In the
23
The results of the review indicated that the legal bases, policy and institutional frameworks of the country’s
safeguard systems for environmental assessment and indigenous peoples are strong and sound, but suffer
from weak implementation due to capacity and financial constraints and overly bureaucratic procedures and
processes. The country’s involuntary resettlement system has huge gaps with global principles and good
practices. The Bank is providing support to the Government on environmental assessment through the NPS
for the Environment and Natural Resource Management and on indigenous peoples through grant-funded
technical assistance to the National Commission on Indigenous Peoples.
FY06-09 CAS Completion Report Philippines FY10-12 CAS – Annex 3
Page 18 of 33
NRIMP2 design, ―Road Watch‖/―Bantay Lansangan‖ will play an active role in monitoring the
progress of the project, improve transparency and accountability. In the MTF-RDP, international
NGOs are working with the Bank to implement capacity building initiatives and pilot projects
aimed at stabilizing, training and building the capacity of the Bangsamoro Development Agency,
conflict-affected communities and municipal governments. The KALAHI-CIDSS project
empowers local communities to participate in the selection, design, implementation, and
monitoring of projects that respond to their priority needs. Aside from improving community
infrastructure, in drawing on the enthusiasm and commitment of community volunteers, KALAHI-
CIDSS has also helped to put in place more transparent and accountable systems of governance in
communities where it is active and has enhanced local capacities in planning, procurement,
financial management, and operation and maintenance.
54. Finally, the Bank is forging strategic partnerships to scale up better governance.
Working with selected network-based CSOs using different grant mechanisms, such as the Japan
Social Development Fund and Development Grant Facility, the Bank is supporting the expansion
of capacity development initiatives for improved governance. A partnership with the Philippines
Council for NGO Certification is helping to expand the institutionalization of better governance
practices in NGOs through a globally-recognized system of certification. The Affiliated Network
on Social Accountability–East Asia and Pacific—a regional DGF-supported program based in the
Philippines—is designed to support and advance demand-side governance initiatives drawing on
the experience of well-established regional NGOs, delivering capacity building initiatives and
technical assistance for both CSOs and governments across the region. Through partnerships with
urban poor communities, local NGOs and city governments in five sites nationwide, the Bank has
been able to support the provision of infrastructure and the upgrading and renewal of slum
communities.
H. Conclusions and Lessons Going Forward
55. The results under the 2006 CAS are mixed. The Bank has been able to make progress in
assisting the Government to address the fiscal deficit and make progress on procurement and
budget formulation. Bank knowledge transfers (including those provided through trust funded
technical assistance) and convening role, working through the PDF, are seen to have played a role.
The Bank and IFC have been supporting power sector privatization that has contributed to the
reduction in the public sector deficit and improvements in service delivery. Bank projects continue
to finance needed infrastructure and services, oftentimes engaging local communities and aligning
delivery closer to the residents’ needs. The Bank is now moving to NPS operations that align Bank
support directly with the agency’s core agenda. However, poverty in the country not only
continues to be a concern, but worsened between 2003 and 2006. There is concern that the
improvements in tax revenues will not be sustained. Implementation of Bank projects continue to
be a concern with actual disbursements lagging significantly behind appraisal estimates. Some
NPSs have not resulted in faster disbursements as expected. As discussed in the sections above, on
balance, CAS outcomes are considered to be ―moderately satisfactory‖ and Bank performance
―satisfactory‖.
56. The following lessons have been learned from the experience to date under the 2006
CAS. These have implications for the design and implementation of the next FY2010-12 CAS.
Overall strategic direction of the CAS is sound. Sound fiscal management and
improved governance will continue to be critical for ensuring sustained economic growth
and poverty reduction. The next CAS will need to maintain the gains made in revenue
generation, public expenditure management, and procurement while pursuing further
FY06-09 CAS Completion Report Philippines FY10-12 CAS – Annex 3
Page 19 of 33
improvements in governance. Continued focus on implementing the project portfolio will
be critical to success during the next CAS: the NPSs in education and health can result in
improved educational outcomes in basic education and improved access to health care for
the poor; NRIMP can improve management of the national highway system; various Bank
LGU projects can increase local residents’ access to infrastructure and basic services in
line with their perceived needs. Going forward, the Bank will need to get a better
understanding of the link (or lack thereof) between the country’s economic performance
and lack of poverty reduction and ensure that its operations emphasize the needs of the
poor.
Continued engagement is a critical element for success. The Bank has a long history in
the Philippines and has been able to develop relationships and trust with government
counterpart agencies. The Bank has been engaging in a continuous dialogue with the
Government on many of the challenges facing the Philippines and the basis for results
under the 2006 CAS has been laid during previous CAS periods. For example, the Bank
has been emphasizing the need to address the fiscal deficit through revenue generation and
not just through reductions in expenditure. The Bank’s CPARs, the latest prepared in 2008,
have pointed out issues with the Government’s system. The Bank’s Social Expenditure
Management Projects demonstrated the benefits of competitive bidding in terms of quality
improvement and cost savings at the agency level. The Bank would need to build on and
continue to develop relationships at both the national and local government levels in
pursuing results during the next CAS.
But the Bank needs to develop criteria for disengagement. While continued
engagement is necessary, it is also important to develop criteria to determine when the
Bank should disengage. The Bank is working with close to 20 national departments and
GOCCs and a larger number of LGUs through its operations. Given Bank resource
constraints, the Bank will need to be selective. There may be many reasons for
disengagement. It could be because there is limited support for and progress on the
objectives that the Bank may be pursuing with the agency. Alternatively, operations may
be proceeding smoothly and the relationship may have matured to the point that continued
Bank engagement may no longer be necessary (i.e., generate insufficient benefit for both
parties). In some cases, it may be important to continue working with an agency although
progress may be limited. The decision to engage or disengage will need to be made on the
possible impact to the Bank’s strategy.
Strengthen monitoring (and evaluation) of AAA. Knowledge transfers are an important
part of the Bank engagement with the Philippines. It is also an area where it is possible for
the country team to make direct impact during the CAS period – project results achieved
during FY10-12 would most likely come from projects already underway or in advanced
stages of preparation and projects developed during the next CAS period would most likely
start generating results beyond FY12. The Philippine program has not been adequately
monitoring nor assessing the possible impact of its AAA program. The move from larger
reports to smaller and targeted notes makes monitoring and evaluation more difficult. But
given the importance of knowledge transfers to the Bank’s effectiveness, it is important
that the country program strengthen its management of AAA.
Strengthen the CAS results framework. The current results framework has not proven
useful in monitoring, managing and evaluating the CAS. As mentioned above, the lack of
baselines and targets made it difficult to assess whether the Bank was making progress
FY06-09 CAS Completion Report Philippines FY10-12 CAS – Annex 3
Page 20 of 33
towards its stated objectives and country outcomes. Another issue was that the underlying
―development logic‖ (link between Bank instruments, outputs and CAS outcomes) was not
necessarily clear. The Bank can make the results framework into an effective CAS
management, monitoring and evaluation tool by: (a) clearly stating the expected CAS
outcomes; (b) including specific, measurable, achievable, relevant and time-bound
(SMART) indicators to allow for better monitoring; and (c) making explicit the link
between expected CAS outcomes and Bank instruments (i.e., making clear the
development logic underlying the CAS). Linking CAS monitoring with project, trust fund
and AAA monitoring would facilitate data collection. Closer strategic monitoring of
progress towards CAS objectives should facilitate decisions on the appropriate level of
engagement.
APPENDICES:
1. FY06-09 CAS Results Summary
2. Analytical and Advisory Activities, FY06-08
3. Philippines Lending Program, FY06-09
4. Selected Indicators of Bank Portfolio Performance and Management
FY06-09 CAS Completion Report Philippines FY10-12 CAS – Annex 3
Page 21 of 33
Appendix 1: FY06-09 CAS Results Summary
CAS Outcome: Systems and processes for allocating and executing budgetary resources are more
transparent and efficient (Governance: National Platform)
Status at CAS Design Current Status
The Government had been reforming the budget
process - strengthening the links between policy,
planning and budgeting; increasing transparency;
and placing a greater emphasis on results. The
Organizational Performance Indicator Framework
was introduced in 2005 and results-based
planning and monitoring piloted in 13
departments.
The Government was improving procurement and
addressing corruption. The Government
Procurement Reform Act (2003) created a single
legal framework for procurement and streamlined
and modernized the procurement process. The
Government instituted ―lifestyle checks‖ for
public servants which led to the dismissal of
several senior bureaucrats. However, there were
concerns over capacity building, transparency and
dispute resolution, and monitoring of
procurement.
The Government initiated a program to rationalize
the bureaucracy. It issued Executive Order 366 in
2003 on procedures and benefit packages for staff
rationalization, developed implementing rules,
and initiated agency restructuring plans.
The Government is proceeding with budget reforms,
introducing MTEFs with the 2007 budget (linking
policies, plans and budgets) and the Budget Strategy
Paper and forward estimates with the 2008 budget
(clarifying the Government’s priorities and resources
prior to the preparation of budget).
The Government continues to strengthen procurement
and address corruption. The Bank’s recent Country
Procurement Assessment Report (2008) noted that the
public procurement system has become more efficient,
many loopholes have been closed, and the promotion
of e-procurement (the Philippine Government
Electronic Procurement System) improved
transparency and efficiency.
While progress is being made, challenges remain.
The most recent economic report (2008) noted that not
all agencies are implementing MTEFs, progress on
rationalizing the bureaucracy has been very slow, and
corruption continues to be an issue: e.g., the
Philippines ranked 112 out of 125 in a list of countries
where irregular payments are required for public
contracts according to the Global Competitiveness
Report 2006-2007
Bank Contribution & Lessons Learned
The Bank contributed to government budget reforms by providing analysis through its economic reports (as
background documents to the PDF) and using the PDF as a forum to discuss key public expenditure and
governance issues with the Government, development partners and other stakeholders.
The Bank plays an important role in operationalizing budget reforms at the agency level where it was
supporting the implementation or preparation of National Program Support operations (DepEd, DoH,
DENR, DSWD) or providing agency-wide support (DPWH).
The Bank provided the Government Policy and Procurement Board (GPPB) with two consecutive grants
(TF053254, closed FY07, and TF057655, ongoing) which helped GPPB develop and pilot test generic
procurement manuals (which were harmonized with ADB, JBIC and the Bank), institute a national
procurement training program through state universities and colleges, and prepare and pilot test Agency
Procurement Performance Indicators. GPPB is currently developing further training and certification
programs for public procurement professionals. The Office of the Ombudsman received an ASEM grant
(TF054210, closed FY07) with which the Office conducted field investigation training and developed a
data bank for the Statements of Assets and Liabilities and Net Worth and a case tracking system for use by
the Office of the Special Prosecutor. The Bank also provided an IDF grant (TF055185, ongoing) to the
Presidential Anti-Graft Commission to strengthen agency internal audit units for effective procurement
monitoring and enforcement.
FY06-09 CAS Completion Report Philippines FY10-12 CAS – Annex 3
Page 22 of 33
Appendix 1: FY06-09 CAS Results Summary
CAS Outcome: System and process of Local Government Units (LGUs) for planning, budgeting,
delivering services, and investments are transparent and efficient (Governance: Local Platform)
Status at CAS Design Current Status
LGUs include 78 provinces, 68 cities and over
1,500 municipalities whose resources and
capabilities vary significantly. Generally,
planning was weak (especially in environmental
protection) and budget formulation and execution
were largely non-transparent. The PDF included
a working group on Decentralization and Local
Government (co-chaired by DILG and the Bank)
which addressed local government finance,
capacity building, benchmarking and
harmonization. The Local Government
Performance Management System (LGPMS) was
developed and rolled out in 2006.
Various projects are developing local government
capacity. The PDF working group contributed to
improvements in planning, budgeting and
management in local governments: e.g., the national
government agencies with oversight functions over
local governments harmonized their procedures for
planning, investment programming, revenue
administration and budgeting, eliminating overlapping
and conflicting guidance and reducing the
administrative burden on the LGUs. The working
group is also supporting efforts to improve data
quality and operationalize the LGPMS. Over 80
percent of the LGUs use the LGPMS.
Bank Contribution & Lessons Learned:
Various Bank operations including trust funds have supported LGUs’ efforts to strengthen planning,
budgeting and the delivery of services. The LGFDP-Logofind trained officials from 979 LGUs in planning,
finance, construction supervision and other management areas as of March 2008. LISCOP resulted in 57
LGUs in 24 micro-watersheds adopting multistakeholder micro-watershed planning as part of municipal
development planning. SSLDIP (approved FY06) includes funding for participating LGU capacity building
in construction supervision and management of municipal enterprises and services. MRDP1 demonstrated
the success of community engagement in natural planning and management which has been scaled up
under MRDP2. Bank financed-projects also help strengthen procurement and financial management in
participating LGUs. The Bank has also assisted 61 cities develop city strategies using participatory
approaches through the Cities Alliance Program with many investments being funded by the Bank or other
sources. While capacity is being developed under various Bank projects, it is not clear whether this is
having a wider impact – i.e., sustainable capacity development in LGUs as a group.
The Bank has provided an IDF grant to DILG’s Local Government Academy to review and strengthen their
role in local capacity building.
CAS Outcome: Improved governance of corporate sector and infrastructure regulatory agencies
(Governance: Private Sector Platform)
Status at CAS Design Current Status
The Philippines had been pursuing a policy of
privatization in infrastructure since the 1990s.
Water supply and sanitation in Metro Manila had
been provided by two private concessions since
1997. The Electricity Power Industry Reform Act
(2001) provided a framework for restructuring the
power sector - creating the National Transmission
Corporation (Transco) to assume the transmission
assets and functions of the National Power
Corporation (NPC); creating the Power Assets
and Liabilities Management Corporation
(PSALM) to own Transco and other NPC assets
and assume NPC’s liabilities; and replacing the
Energy Regulatory Board with the Energy
The Government continues to pursue its policy of
private provision of infrastructure. One of the water
and sanitation concessions (Manila Water Company
Inc.) is considered to be a major success. A major
development in the power sector was the creation of a
wholesale electricity spot market in Luzon in 2006
(this was one of the prior actions for DPL1). The
Government is proceeding with a concession for
Transco’s transmission function.
FY06-09 CAS Completion Report Philippines FY10-12 CAS – Annex 3
Page 23 of 33
Appendix 1: FY06-09 CAS Results Summary
Regulatory Commission (ERC). The Government
is transitioning from a provision to an oversight
role. Strengthening the regulatory agencies was
seen as a priority.
Bank Contribution & Lessons Learned:
The Bank has been assisting the Government strengthen its regulatory functions. The Bank is supporting
Metro Manila Water Supply and Sanitation System Regulatory Office through the Third Metro Manila
Sewerage Project, most recently in rebasing tariffs for 2008.
The Bank is assisting ERC develop the regulations for the Transco concession through a PHRD grant for a
partial risk guarantee.
In terms of corporate governance, the Bank has conducted a ROSC on Accounting Standards and training
on corporate governance, but the effect of these interventions is not well understood.
CAS Outcome: Improve public revenue mobilization, public expenditure management and management of
state owned enterprises (Fiscal Stability: National Platform)
Status at CAS Design Current Status
Unsustainable growth in the public sector deficit
due primarily to declining tax collection was seen
as a major constraint to development. Non-
financial public sector debt exceeded 101 percent
of GDP in 2003. The increase in debt was driven
by public sector deficits due primarily to
declining tax collection and rising power sector
losses through 2004. The CAS identified the lack
of political will for reform and the pace of change
as risks and noted that ―failure to rein in fiscal
deficits would create greater economic
vulnerabilities and reduce further expenditure
contraction‖.
The Philippines has experienced a turn-around in its
fiscal position. The consolidated public sector
balance went from a deficit of 4.8 percent of GDP in
2004 to a surplus of 0.2 percent in 2006 and an
estimated surplus of 1.4 percent in 2007. Increase in
tax revenues was a major factor behind this turn-
around. The Government implemented various
measures to improve tax revenues between 2004-
2006, such as the passage of the reformed value-added
tax law which removed exemptions and increased the
tax rate by 2 percent effective in 2006, an increase in
the corporate tax rate, and the enactment of a ―Sin
Tax‖ law which raised excise taxes on cigarettes,
tobacco and alcohol. Tax revenues increased from
12.4 percent of GDP in 2004 to 14.3 percent in 2006.
Improvements in the fiscal position of public
corporations and revenues from privatization in the
power sector contributed to the improvement in the
Government’s fiscal position. There is a concern,
however, that the tax effort is stalling with tax
revenues as a percentage of GDP in 2007 dipping
slightly below the level reached in 2007.
Bank Contribution & Lessons Learned:
The Bank emphasized the importance of increasing tax revenues (and not just cutting expenditures) in
addressing the deficit. The Bank consistently conveyed this message through its economic reports, policy
notes, and other outreach. The Bank helped develop and sustain momentum for fiscal reforms together
with local academics, opinion leaders and development partners. Improving the tax effort was one of the
objectives of DPL1. The Bank also approved a National Program Support (NPS) for Tax Administration
Reform Project in FY07 to strengthen the Bureau of Internal Revenue (BIR) and is assisting the BIR
improve tax administration through an IDF grant and policy notes on increasing excise tax rates and tax
administration. Implementation of the NPS, however, is progressing slower than anticipated.
FY06-09 CAS Completion Report Philippines FY10-12 CAS – Annex 3
Page 24 of 33
Appendix 1: FY06-09 CAS Results Summary
CAS Outcome: Expanded local revenue base and increased revenues from local resources in at least 20
LGUs (Fiscal Stability: Local Platform)
Status at CAS Design Current Status
LGUs depend heavily on transfers from national
government and have limited incentives to raise
own revenues.
Overall, LGUs continue to depend on national
government transfers. But there is diversity among
LGUs. Cities and larger municipalities in more
developed locations (especially in Metro Manila) have
more opportunities to and raise more local revenues.
Poorer (4th
and 5th
class) municipalities with limited
economic bases will continue to rely on national
government revenue sharing for their revenues.
Bank Contribution & Lessons Learned:
Bank-supported projects include measures to improve local revenue generation. LGFDP-Logofind
financed improvements in real property tax administration and training on implementing local revenue codes and increasing local revenues. Five hundred-thirty five LGUs have participated in the training to
date. These LGUs increased their local revenues by Php 8.7 billion or by 114 percent and increased the
share of local source revenue from 24 percent to 26 percent between 2000 and 2007, although it is not
possible to differentiate the impact of the training from other influences. In addition, LGUs participating in
the project increased revenues through investments in bus terminals and markets and through
implementation of business and real property tax enhancement programs.
The Bank is also piloting performance based grants to improve local government revenue mobilization. .
An IDF grant provided the Government with information on performance based grant systems and their
possible application to the Philippines. The Bank is currently developing a Local Government Support for
Performance Project which is expected to provide, among others, a performance based supplement to the
Internal Revenue Allotment (revenue sharing).
CAS Outcome: Reduced fiscal burden through financial strengthening of government corporation and
financial institutions (Fiscal Stability: Private Sector Platform)
Status at CAS Design Current Status
Deficits in Government Owned and Controlled
Corporations (GOCCs) were another contributing
factor to the public sector deficit. Deficits in the
National Power Corporation (NPC) were of
special concern. NPC deficits increased from 0.2
percent of GDP in 2001 to 1.1 percent in 2003
and an estimated 1.8 percent in 2004, as power
tariffs were allowed to erode. The Government
had initiated power tariff increases starting in
2004, but its impact was not fully known at the
time of CAS development.
The GOCCs’ financial position improved. The
GOCCs faced a deficit of 1.9 percent of GDP in 2004,
but eliminated it in 2006 and are estimated to have a
surplus in 2007. A 30 percent increase in generation
tariffs in 2004-05 and the resulting reduction in NPC’s
deficit was a key factor.
Bank Contribution & Lessons Learned:
Improving the financial viability of the power sector is one of the objectives the Bank’s DPLs. This
increase in tariffs and the publication of the guidelines for the universal charge for stranded costs and
stranded debt were recognized as prior actions for DPL1. As mentioned above, the Bank is supporting
further privatization of the power sector through the Transco concession.
IFC made several contributions to the reduction in the Government’s fiscal burden. IFC has supported the
FY06-09 CAS Completion Report Philippines FY10-12 CAS – Annex 3
Page 25 of 33
Appendix 1: FY06-09 CAS Results Summary
privatization of power sector by (a) advising the Government on the privatization of NPC’s Small Power
Utility Groups (SPUGs) which service off-grid areas (mainly rural and isolated communities); (b) taking an
equity stake in the Philippines National Oil Company Energy Development Corporation’s (PNOC-EDC)
initial public offering; and (c) financing part of the privatization on the Masinloc coal-fired power plant and
the Magat hydo-electric power plant. IFC’s SPUG projects have reduced subsidies from NPC. PNOC-
EDC was eventually fully privatized in 2007. In addition, IFC has reduced the Government’s fiscal burden
through the sales of non-performing assets held by the National Home Mortgage Corporation and the
National Development Corporation and government equity investments in listed and non-listed companies.
The Bank provided technical assistance through an ASEM grant (TF053181, closed FY06) to the Central
Bank to improve consolidated supervision in the market risk area and establish an IT examination unit.
The Bank also provided ASEM grants (TF052298- Bank executed, closed FY07 and TF052349 – Recipient
executed, closed FY06) supporting the Government’s pension reforms.
CAS Outcome: Competitiveness of the economy improved by increasing investment, upgrading
infrastructure, and adopting reforms aimed at improving productivity of firms (Growth: National
Platform)
Status at CAS Design Current Status
The Philippines had been enjoying rising
economic growth, which averaged 4-5 percent in
2002-03 and accelerated to 6.1 percent (the fastest
pace in 15 years). The Philippines was
benefitting from the economic restructuring since
the late 1980s which helped the country better
integrate with regional and global trade and
investment, and a favorable external environment.
However, the question remained on the
sustainability of higher growth because it was
driven by consumption, supported by remittances.
Concerns were raised about the low level of
domestic and foreign investment compared to
other East Asian countries. Lackluster investment
was seen as the result of a fragile fiscal and debt
position, perceived corruption, infrastructure
weaknesses, concerns over law and order, and a
sluggish financial system.
The Philippines continues to experience high
economic growth. GDP grew at over 5 percent in
2006 and 2007, driven by demand which in turn was
fueled in part by overseas worker remittances.
Economic growth, however, has not led to significant
employment generation or poverty reduction:
unemployment remained around 8 percent and
poverty increased.
Investment also continued to decline, raising concerns
over the sustainability of growth. The 2008
economic report noted that the recent growth was
facilitated by an uptake of spare capacity, but that this
capacity was mostly exhausted, requiring higher
investment to sustain economic growth.
The report also noted that weak infrastructure was still
seen as one of the important constraints to doing
business in the Philippines and that substantial
additional expenditures are required to bring the
quality of infrastructure up to acceptable standards.
Bank Contribution & Lessons Learned:
Bank-supported projects have assisted the Government meet key transportation infrastructure needs and
strengthen the management of the road network. NRIMP1 (closed FY07): (a) updated 382 km of national
roads; (b) conducted preventive maintenance on 721 km of national roads; (c) piloted performance based
maintenance contracts on another 254 km; (d) helped establish the Road Board and Road Fund; and (e)
made business process improvements in DPWH. The follow up project, NRIMP2, was approved in FY08.
The Bank-financed Metro Manila Urban Transportation Project improved access to the Marikina Valley
and improved several intersection improvements on major thoroughfares. The Bank is now focusing on
larger private financing of transportation infrastructure in Metro Manila and the surrounding areas together
with IFC – the Light Rail Transit System Line 1 extension and the CALA highway.
The Bank group is supporting the Government’s efforts to improve rural electrification by financing and
strengthening rural Electrical Cooperatives, promoting off-grid systems (e.g., solar power), and furthering
FY06-09 CAS Completion Report Philippines FY10-12 CAS – Annex 3
Page 26 of 33
Appendix 1: FY06-09 CAS Results Summary
sector reforms through the Rural Power Development Program, GEF grants and IFC investments and
advisory services. Progress to date has been mixed. Through advisory services, IFC has been able to bring
in private generation in a number of SPUGs which are responsible for power in remote areas. The Bank-
financed Rural Electrification Project has provided access to finance for Electrical Cooperatives through
the Development Bank of the Philippines, with all of participating cooperatives having a debt-service
coverage ratio of at least one. All the funds are committed and 1,265 new customers have received
electricity as of March 2008. A program to pilot the use of investment management contracts in Electrical
Cooperatives with a partial guarantee is yet to get off the ground.
In agriculture, the Diversified Farm Income and Market Development Project supports the transformation
of Department of Agriculture into a service and market-oriented agency. However, progress on reforms
and implementation of the project has been slow. The project enjoys strong support from the Department
of Finance, Budget and Management and other core agencies.
Finally, the Bank has been making the case for the need for private investment and for ―strengthening the
investment climate‖ through its AAA work, but it is difficult to assess whether it has had an impact.
CAS Outcome: Productivity increased through local provision of infrastructure and services (Growth:
Local Platform)
Status at CAS Design Current Status
Despite increase in LGU spending, wide
disparities persist in coverage, quality, and
availability of public services delivered by LGUs.
While data does not exist to allow an analysis of
service provision across LGUs, disparities most likely
continue to persist between LGUs given their
differences in resources and capabilities. Projects
supported by the Bank and other development partners
are most likely having an impact in their participating
LGUs.
Bank Contribution & Lessons Learned:
Bank funds are on-lent to LGUs through intermediaries for infrastructure and service improvements:
LGFDP-Logofind through the Municipal Development Fund (MDFO) and SSLDIP through the Land Bank
of the Philippines. As of June 2008, 462 LGUs have obtained financing through the MDFO and an
additional 653,141 households have gained access to basic infrastructure and services through LGPS-
Logofind. As of July 2008, 27 projects are ongoing and another 40 are in the pipeline under SSLDIP.
The Bank is also providing financing to the LGUs for water and sanitation improvements through the
Development Bank of the Philippines (DBP) under the LGU-UWSSP2. Under the project, water supply
and sanitation improvements have been made or are ongoing in 12 LGUs, seven of which are being carried
out as lease and management contracts, increasing private sector involvement in cities outside of Metro
Manila. A consumer assessment study carried out in 2008 found that 87 percent of respondents expressed
satisfaction with water services (compared to a target of 80 percent), 16 percent of households without
sanitation showed improvement (compared to a target of 10 percent) and 46 percent of households were
considered poor based on their self-reported income and provincial poverty thresholds.
In addition, LGUs receive financing for rural roads and other local investments as participants in Bank-
financed sectoral projects. ARCDP2 provides financing for rural roads and bridges, small scale irrigation,
potable water systems and facilities in agrarian reform communities. MRDP2 provides financing for rural
roads, communal irrigation and rural water systems in participating LGUs. As of October 2007, agrarian
reform communities that have participated in ARCDP2 for at least three years have reported a 21 percent
increase in real income due to, among others, rural infrastructure improvements.
FY06-09 CAS Completion Report Philippines FY10-12 CAS – Annex 3
Page 27 of 33
Appendix 1: FY06-09 CAS Results Summary
CAS Outcome: Catalyze private investment in key sectors including infrastructure (Growth: Private
Sector Platform)
Status at CAS Design Current Status
As mentioned above, a fragile fiscal and debt
position, perceived corruption, infrastructure
weaknesses, concerns over law and order, and a
sluggish financial system were seen as
constraining investment. Private provision of
infrastructure was taking place in the power and
in water and sanitation in Metro Manila.
Low levels of investment continue to be a concern.
Progress is being made in individual infrastructure
projects involving the private sector.
Bank Contribution & Lessons Learned:
The Metro Manila Sewerage Projects financed by the Bank have supported the private provision of water
and sanitation in Metro Manila. The Third Manila Sewage Project provides financing through the Land
Bank of the Philippines to the Manila Water Company Inc., one of the two concessionaires, for sewage and
septic management. In addition, the Bank has been promoting private management of water systems in
cities outside of Metro Manila through the LGU-UWSP2.
IFC is active in private provision of infrastructure. IFC has invested in hydro-power generation in Magat
and power-generation in Masinloc and provided technical assistance to rural electrical cooperatives in
support of the Government’s power sector privatization. IFC has invested in MWCI to help it develop new
water sources, expand its water and sanitation services, and improve and maintain its network. IFC is also
advising the Light Rail Transit Authority (LRTA) on the extension of the LRT1 Line. This project is
designed as a public-private partnership with the Bank expected to provide financing for the public part.
The Bank is supporting the preparation of additional operations to further private participation in
infrastructure. The Bank is exploring the possibility of supporting the expansion of the LRT1 line and the
Cavite-Laguna (Cala) North-South Highway in transport. Another effort, the MWSS Water Supply
Distribution System Project with the second concessionaire, Maynilad Water Service Inc., was dropped
from the Bank’s pipeline because of availability of alternative sources of funding. It is not clear whether
the ongoing efforts in energy and transport will result in Bank operations, but the Bank has been providing
important knowledge to the Government in overseeing and managing private participation in infrastructure
as part of preparation.
CAS Outcome: Improved performance of national institutions and increased access for the poor and
disadvantaged groups to basic services (Social Inclusion: National Platform)
Status at CAS Design Current Status
Lack of social inclusion was a serious obstacle to
development. Inequality remained high: the
richest 5 percent of the households accounted for
nearly one third of the national income while the
poorest 20 percent accounted for only 6 percent.
The poor were often not able to access quality
public services, implying that they were likely to
benefit less from national programs and subsidies,
although they were more likely to rely on
government services since they could not afford
private alternatives (e.g., education, health care).
The poor also suffered worse social outcomes.
Compared to the richest 20 percent, the poorest
20 percent of households had: (a) higher infant
Despite high economic growth, poverty increased
between 2003 and 2006. While the Philippine
economy grew at an average of 5 percent per annum
since 2000, the poverty incidence increased from 30
percent in 2003 to 32.9 percent in 2006 or the level in
2000 (33 percent). In 2006, 27.6 million Filipinos
lived below the poverty level, more than ever before.
Some of possible reasons for the drop are a fall in real
incomes of households, economic growth which
favored the corporate sector, and low government
social spending caused by the fiscal crisis.
The 2008 economic report noted that overall
investment in developing the human capital of
Filipinos through investments in health, education and
FY06-09 CAS Completion Report Philippines FY10-12 CAS – Annex 3
Page 28 of 33
Appendix 1: FY06-09 CAS Results Summary
and under-five mortality rates, 2.3 and 2.7 times
higher respectively; (b) 28 percent lower
enrolment rates; and (c) 9 percent lower female
literacy rates (ages 15-49).
social protection is low, despite recent increases in
spending in the social sectors.
Bank Contribution & Lessons Learned:
The Bank worked with national government agencies to improve access to basic social services for the
poor, building on the experience gained in previous projects. The Third Elementary Education Project
(closed FY06) pilot tested innovative approaches such as school-based management. Under TEEP, test
scores and completion rates improved between 2003-05 at rates higher than non-project schools. SEMP2
(closed FY07) provided key inputs in education and health, supported community based services in the
poorest barangays, and enhanced performance and governance in three social sector departments (DepEd,
DOH and DSWD). The project contributed to: (a) an improvement in the textbook to pupil ratio for math,
science, English and Filipino from 1:2.5 in 2003 to 1:1.32 for elementary and 1:1.35 for high schools in
2007; (b) improvement in the TB cure rate from 73 percent in 2003 to 82 percent in 2006; and (c) a
reduction in measles from 7,194 cases in 2003 to 173 cases in 2006. It also demonstrated the effectiveness
of procurement reforms - ICB resulted not only in an improvement in quality but also a reduction in cost of
46 percent.
Both projects laid the foundations for sector wide approaches - NPS operations in Basic Education
(approved FY06) and in Health (approved FY06). Both operations support sector reform and efficiency
improvements in DepEd and DOH respectively: i.e., school based management, teacher competency
standards and reduction in disparities between schools for education; and increased enrolment of indigent
people in the National Health Insurance Program, health services delivery (supply side) improvements and
stronger regulations. Start up of both projects is taking longer than planned so no results are available as
yet.
CAS Outcome: Greater voice and improved access for the poor and disadvantaged in planning and
delivery of education, health, and other basic services at the local level (Social Inclusion: Local Platform)
Status at CAS Design Current Status
In addition to disparities between the rich and
poor (outlined above), disparities exists between
different parts of the countries. For example,
poverty incidence in 2003 was 61 percent in the
Autonomous Region in Muslim Mindanao
(ARMM) and 49 percent in Western Mindanao
compared to a national average of 26 percent.
Life expectancy in ARMM was 10 years lower in
2000.
Poor service delivery was seen as leading to lack
of engagement in government by the poor, which
in turn resulted in poorer services.
The 2008 economic report noted that there continues
to be a pressing need to target human capital
interventions to the poorest households. It noted
continued disparities in education and health service
levels between developed and poor regions in the
Philippines.
Bank Contribution & Lessons Learned:
The Bank has been engaging local communities directly in the delivery of local services and infrastructure,
targeted to the poor. Several Bank-financed projects take a participatory approach where local
communities identify their priorities, with support from project and local government staff, and select
project investments from a menu of options (generally including roads, water systems, school buildings,
and other facilities). These could be part of a national program, e.g., promoting better natural resource
management (CBRMP) or land reform (ARCDP2), or these could be community-driven operations, e.g.,
FY06-09 CAS Completion Report Philippines FY10-12 CAS – Annex 3
Page 29 of 33
Appendix 1: FY06-09 CAS Results Summary
Kalahi-CIDSS, ARMM Social Fund, MRDP2, and the Mindanao Trust Fund. The Kalahi-CIDSS is a
national program targeted to the poorest provinces and municipalities. The ARMM Social Fund, MRDP2
and the Mindanao Trust Fund target Mindanao.
These community oriented projects have had positive impact on beneficiaries. Sixty-five percent of
participating households in CBRMP experienced an increase in income (compared to a project target of 25
percent). Participating households in ARCDP2 are estimated to have experienced a 21 percent increase in
real income three years after joining the project. An economic analysis of Kalahi-CIDSS investments at
mid-term estimated economic rates of return of 22 percent for rural (farm to market) roads and 65 percent
for small water supply investments.
CAS Outcome: Increased access to financing of micro-enterprises, cooperatives, and small and medium
enterprises and increased private service delivery of basic social services (Social Inclusion: Private Sector
Platform)
Status at CAS Design Current Status
The poor were seen as not benefiting from
economic growth. While economic growth
increased employment in the formal sector, a
heavy pool of under-employed labor and new-
entrants kept the unemployment rate around 11
percent.
The Philippines continues to experience high
economic growth. Economic growth, however, has
not led to significant employment generation:
unemployment remained around 8 percent.
Bank Contribution & Lessons Learned:
The Bank provided credit to rural micro-, small and medium enterprises (SMEs) through Rural Finance 3
(closed FY08). A total of 546 subloans were made to rural enterprises through the Land Bank of the
Philippines for a total investment of Php 11.1 million, creating close to 17,000 jobs. Another 114,902
micro-loans for US$15 million were made to rural micro-enterprises through the People’s Credit and
Finance Corporation.
IFC is playing a role in small scale private sector development and the private sector provision to social
services. In 2008, IFC signed advisory agreements with a mid-tier commercial bank and the largest micro-
finance institution in the Philippines, both of which are interested in greater involvement with SMEs, under
IFC’s SME Banking program. IFC is advocating for increased private investment in Mindanao and is
providing advisory services to the banana export industry in southeastern Mindanao with the overall
objective of improving the take home pay of banana farmers. In terms of social services, IFC has invested
in Asia Hospital, serving Metro Manila, southern Cavite, Laguna, and Batangas.
FY06-09 CAS Completion Report Philippines FY10-12 CAS – Annex 3
Page 30 of 33
Appendix 2: Major Analytical and Advisory Activities, FY06-08
Economic and Sector Work a/ Non-Lending
Technical Assistance Planned Actual FY2006 Philippines Analytical
Work on Poverty
Environmental Monitor
Local Government
Finance and Development
Accounts and Audit
Corporate Governance
Investment Climate
Accounts and Audit
Corporate Governance
Social Inclusion
Mindanao Program
Partners for
Development Forum
Meeting Infrastructure
Needs
Youth Development
FY2007 Philippines Political
Economy of Reform
Public Expenditure
Review
Public Expenditure
Tracking - Education
Agriculture Public
Expenditure Review
Environmental Monitor
Development Policy
Review (Invigorating
Growth, Enhancing Its
Impact )
Investment Climate
Meeting Infrastructure
Needs (Power)
Gender and Conflict in
Mindanao
Health Policy Dialogue
Social Protection
Country Systems
Mainstreaming and
Social Safeguards
FY2008 Development Policy
Update
Political Economy of
Reform
Country Procurement
Assessment
Country Environment
Assessment
Development Policy
Update 2007
Country Procurement
Assessment
PEM Reform Support
OECD Procurement
Assessment Report
Law & Regulation for
Bankruptcy Procedures
Note a/ The CAS considered the AAA program evolving over time and did not provide a schedule of ESW. The
planned deliveries and actuals are based on the annual Memorandums of Agreement between the Country
Management Unit and the Region.
FY06-09 CAS Completion Report Philippines FY10-12 CAS – Annex 3
Page 31 of 33
Appendix 3: Philippines Lending Program FY06-09
Planned Actual
Project US$ M Project SUS$ M
FY2006 NPS for Basic Education 100 NPS for Basic Education 200
NPS for Health 40 NPS for Health 110
NPS for Public Expenditure
Rationalization
80 Support for Strategic Local
Dev. & Investment
100
NPS for Participatory Irrigation 30
Local Govt. Support for Cities
Development
35
285 410
FY2007 NPS for National Roads 2
(NRIMP2)
200 NPS for Tax Administration 11
NPS for the Environment & Nat.
Resources Mgmt
30 NPS for the Environment &
Nat. Resources Mgmt
50
NPS for Mindanao Rural
Development 2 (MRDP2)
75 Mindanao Rural
Development 2
84
Local Govt. Support for Municipal
Finance
50 Development Policy Loan 1 250
PSD Support for MWSS Financial
Rehabilitation
100
455 395
FY2008 NPS for Social Protection
(currently CCT)
50 National Roads Improvement
and Management 2
232
(Original) Local Govt. Support for LGUs
through Performance Grants
50 Bicol Power Restoration 13
Local Govt. Support for Regional
Water Supply
50
PSD Support for Rural Power 2 40
PSD Support for
Logistics/Infrastructure
75
265
FY2008 National Roads Improvement &
Management 2
232
(Updated) PSD Support/PPP Transport
(LRT1)
260
MWSS Water Distribution System
Rehabilitation
125
Participatory Irrigation
Development APL1
50
Bicol Power Restoration 13
Development Policy Loan 2 Tbd
(680) 245
FY2009 Local Govt. Support for LGUs
Through Performance Grants
100 Food Crisis Response
Development Policy Op.
200
PSD Support for CALA North-
South National Road
140
Judicial Reform Support 2 40
Support for Regional and Local
Water Supply
50
National Sector Support for Social
Welfare & Development Reform
(currently CCT)
50
FY06-09 CAS Completion Report Philippines FY10-12 CAS – Annex 3
Page 32 of 33
Appendix 3: Philippines Lending Program FY06-09
Planned Actual
Project US$ M Project SUS$ M
PSD Support for Rural Power 2 100
Support for Transco Concession 63
NPS for Integrated Financial
Mgmt. & Accounting
Tbd
Development Policy Loan 3 Tbd
(543) 200
Note: NPS = National Program Support
PSD = Private Sector Development
Actuals for FY09 as of February 2009
FY06-09 CAS Completion Report Philippines FY10-12 CAS – Annex 3
Page 33 of 33
Appendix 4: Selected Indicators of Bank Portfolio Performance and Management **
FY06 FY07 FY08
Number of Projects under Implementation
23 23 24
Total Net Commitment
US$1.44 bn US$1.41 US$1.43 bn
Portfolio Status
Projects at Risk a/ 3 3 4
13.0% 13.0% 16.7%
Commitments at Risk US$94.6 m US$84.0 m US$107.0 m
6.6% 6.6% 7.8%
Of which Actual Problem Projects 3 3 4
13.0% 13.0% 16.7%
Projects in problem status for one year or more 0 0 2
Performance Indicators
SPN Resources per project (US$000) 65 63 76
Disbursement Amount US$138.8 m US$137.2 m US$188.3 m
Disbursement Ratio b/ 21.1% 15.2% 20.1%
Overdue Audit Reports 0 0 0
a/ Projects rated U or HU on development objectives (DO) and/or implementation progress (IP).
b/ Ratio of disbursements during the year to the undisbursed balance of the Bank’s portfolio at the
beginning of the year: Investment projects only.
** All indicators are for projects active in the portfolio, with the exception of the Disbursement Ratio which
includes all active project and project which existed during the FY.
Annex 4
World Bank FY09 Client Survey
and CAS Multistakeholder Consultations
World Bank FY09 Client Survey for the Philippines
1. Background. A Client Survey was conducted in August 2008, which was timed to provide
some initial client perceptions prior to the face-to-face stakeholder consultations on the CAS. The
survey was designed to assist the World Bank in gaining a better understanding of how stakeholders in
the Philippines perceive the Bank, as well as use data to inform the CAS formulation process that the
country team was about to embark on. The survey asked about: overall attitudes toward the Bank; the
importance of specific areas of the Bank’s work and the Bank’s effectiveness in those areas; the
respondents’ level of agreement with the way the World Bank does business; general issues facing the
Philippines; and the Bank’s communication and outreach efforts in the Philippines.
2. Process. Approximately 1,500 stakeholders of the World Bank in the Philippines were
invited, through mailed questionnaires, to provide their opinions on the Bank’s assistance to the
country. Participants in the survey were drawn from among national government officials or staff,
local government officials or staff, members of Congress or staff, government-owned corporations or
financial institutions, agencies implementing Bank-supported projects, bilateral and multilateral
development agencies, private sector organizations or businesses, civil society organizations, the
media, and members of academe or research institutes. A total of 337 stakeholders participated in the
client survey (22 percent response rate), mostly from the Government. This response rate is a little
higher than the standard response rate in the Philippines for mailed questionnaires, according to the
local expert firm which handled the logistics for the survey. The analysis of the results was conducted
by the World Bank team in headquarters which supports the client surveys globally.
3. Results. The FY09 Client Survey results in the Philippines indicated that, overall: the Bank
was very well regarded in the Philippines; the Bank’s work in the country was valued; and that
stakeholders were eager for the Bank to be involved in the most critical development challenges facing
the country. The Bank was very well regarded in most areas including: relevance, results, and
alignment with stakeholders’ development priorities; work on poverty; and in its collaboration with
other development partners. Stakeholders were quite positive about the Bank’s work specifically in
poverty. The Bank was considered responsive and collaborative with other donors.
4. Areas of Focus. In terms of areas of focus, the Client Survey indicated that corruption and
poverty were considered the key development priorities in the Philippines; a plurality of stakeholders
believed the Bank should focus primarily on corruption, followed by poverty. Stakeholders clearly
recognized the connection between corruption and poverty; when asked what would contribute most to
poverty reduction, corruption and jobs emerge at the top of the list. The results of the Philippines
Client Survey demonstrated a clear interest in Bank involvement in supporting efforts to reduce
corruption in the country, not only in terms of its overall support, but also, according to the data, in its
knowledge and research.
5. Value to the Clients. In terms of value of the World Bank to the clients, the results indicate
that the Bank is mostly valued for its lending to finance development projects. The Bank’s knowledge
is less valued in the Philippines than in many other countries surveyed. The Bank’s greatest weakness
is perceived to be its disregard of political realities on the ground and its bureaucratic way of
conducting business that is not attuned to country conditions.
FY09 Client Survey/CAS Multistakeholder Consultations Philippines FY10-12 CAS - Annex 4
Page 2 of 9
6. Responses to key questions in the FY09 Client Survey:
“What are the first and second greatest
“What are the first and second greatest
“Where would it be most productive for WB to focus most of its resources?”
27%
23%
19%
1%
2%
2%
3%
5%
6%
7%
19%
16%
7%
8%
8%
8%
16%
12%
9%
0% 5% 10% 15% 20% 25% 30%
Reducing corruption
Reducing poverty
Increasing employment
Government effectiveness/ governance
Improving basic infrastructure
Providing quality education to children
Modernizing agriculture
Economic growth
Improving delivery of health services
Improving effectiveness of LGUs
Reducing population growth
Food security
Improving environmental quality/ protecting
natural resources
Improving investment/business climate
Strengthening public finances
Improve effectiveness of law & justice
system
Climate change
Implementing land reform
Reducing crime/violence
Percentage of Respondents
(N=327)
“Which two areas do you think would be most valuable for the Bank to focus its research efforts on in the next few years in the Philippines?”
24%
23%
21%
2%
2%
2%
3%
4%
4%
5%
5%
6%
19%
16%
6%
7%
9%
9%
15%
10%
10%
0% 5% 10% 15% 20% 25%
Anti-corruption
Poverty
Education
Governance
Environmental sustainability/natural
resources management
Rural development
Labor markets/job creation
Enhanced business environment for private
sector development
Improving equality of opportunity
Public sector performance
Public expenditure
Urban/metropolitan development
Agri-business
Energy
Social protection
Health
Water and sanitation
Monitoring and evaluation
Other
Financial markets
Transport
Percentage of Respondents
(N=324)
“What are the first and second greatest values brought by the WB to the Philippines?”
50%
10%
12%
18%
17%
2%
1%
6%
3%
10%
16%
3%
8%
8%
11%
24%
0% 10% 20% 30% 40% 50% 60% 70%
Providing loans to
finance development
projects
Technical support
Ability to mobilize
resources for
development work
Providing loans to
promote policy
reforms
The Bank's
knowledge
Convener/facilitator
Ability to build
implementation
capacity
Donor coordination
Percentage of Respondents
(N=319)
Greatest value brought to the Philippines by the Bank Second greatest value
62%
34%
34
27%
14%
9%
5%
14%
“Which of the following are the Bank’s two greatest weaknesses in its work in the Philippines?”
48%
34%
25%
24%
19%
9%
18%
14%
10%
0% 10% 20% 30% 40% 50%
Imposing technocratic solutions without
regard to political realities
Too bureaucratic in its operational policies
and procedures
Analyses/ recommendations not attuned to
country conditions and culture
Not exploring alternative policy options
Too influenced by the US
Imposing solutions which aren't practical
Too small a player relative to the
Philippines' economy
Staff too inaccessible
Is arrogant in its approach
Percentage of Respondents
(N=288)
FY09 Client Survey/CAS Multistakeholder Consultations Philippines FY10-12 CAS - Annex 4
Page 3 of 9
CAS Multistakeholder Consultations
7. Background. The multistakeholder consultations were the main instrument for early
consultations about the key challenges and possible CAS themes. Building on the experience in the
past CAS period and on its regular outreach and dialogue activities, the Bank Group, together with the
Knowledge for Development Centers (KDCs, which are partnerships between the World Bank and
leading state and private universities), organized multistakeholder consultation workshops across the
country in September and October 2008. These workshops involved national and local governments,
civil society, the business community/private sector, academe, labor groups, and other development
partners.
8. Process. Four consultations were co-organized with the Ateneo de Naga KDC for the
consultation in the Bicol Region; Central Philippine University KDC in Iloilo City for Central and
Eastern Visayas; University of Southeastern Philippines KDC in Davao City for Mindanao; and Asian
Institute of Management KDC in Makati City for Metro Manila and neighboring areas in Luzon.
Participating in the consultations were 288 representatives, of which 42 percent was from government,
36 percent from civil society, 16 percent from academe, 3 percent from the private sector; and 3
percent from development partners. These representatives were chosen from the Bank’s wide network
of contacts and partners at the national, regional, and local levels.
9. The consultations provided a venue for a meaningful exchange of views with government and
various stakeholders on the critical development challenges as well as policy options and programs
that would address these challenges. They also helped increase government’s and stakeholders’
understanding of the Bank’s work in the Philippines. Four questions were tackled in small group
discussions, using a format called Knowledge Café. These questions referred to the causes of
worsening poverty; causes of the inadequate performance of public institutions in delivering public
services to citizens; priority programs that should be included in the new CAS; and issues that the
Bank should not be involved in. A consultant organization facilitated the workshop, and key staff from
the World Bank participated in the discussions.
10. Results. The issue of governance surfaced throughout all the four consultations. In the
discussion of poverty, three causes were identified: bad governance, poor quality of education, and
lack of livelihood and employment opportunities. In the discussion of the failure to deliver public
services, governance-related causes were again identified, specifically corruption, weak citizen
participation, weak leadership, and a bloated and inefficient bureaucracy. A wide range of solutions
were recommended, including electoral reforms, strengthening local governments, streamlining the
bureaucracy, decentralization, and increased investment in human capital. The priority areas
recommended for the new CAS were along the same theme of governance: electoral reforms,
transparency, and improving local governance. Also identified as priority areas were education, health,
and social protection. The Bank, the participants said, should not engage in any form of political
intervention and should not be involved in mining.
11. The following is a summary of the key messages from the four regional multi-stakeholder
consultations for the new CAS:
FY09 Client Survey/CAS Multistakeholder Consultations Philippines FY10-12 CAS - Annex 4
Page 4 of 9
A. Causes of Worsening Poverty and Recommended Solutions:
Causes Solutions
Bad governance, including: (a) the
dysfunctional system of governance in
BLGU, LGU, national governments; and (b)
corruption at all levels of government
Continue education for electoral reforms (educate
voters, communities) and promote strong political
parties
Strengthen regulatory agencies (COA, CSC, etc)
Reform the justice system to make government
officials accountable and impose corresponding
punishment on corrupt officials
Institute a well-defined transparency and
accountability program within the Government and
all its agencies
Set up an institute for leadership to train and
educate, mentor and coach government leaders
Promote vigilance in the community; set up
“community watch”
Make the national budget transparent and open to
public scrutiny. If possible, this should be accessible
on-line
Poor quality of education, particularly in the
rural areas, results in high illiteracy rate,
weak political voice, unemployment, and
continuing poverty
Increase investments in human capital, particularly
for health and education
Provide scholarships for formal and vocational
training
Improve the educational system and facilities
(including training of teachers)
Lessen political intervention, particularly in hiring
teachers
Provide incentives to students to increase their
participation rate, such as the “Food for School
Program”
Improve statistical systems as planning and
development tools for more responsive programs
Lack of livelihood and employment
opportunities
Implement microfinance projects with social
insurance and capacity building for micro enterprises
Develop livelihood opportunities in the rural
areas to stop rural people from migrating to urban
areas
Encourage big companies to practice corporate
social responsibility
Pursue asset reforms (i.e., Agrarian Reform,
Fisheries Program, Certificate for Ancestral Domains,
etc)
Promote micro & SMEs to generate employment
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B. Causes of the Inadequate Performance of Public Institutions and Recommended
Solutions:
Causes Solutions
The prevalence of corruption at all levels,
which results in the high cost of doing
business. This is due to the lack of
transparency in transactions and lack of
community vigilance
Ensure transparency and disclosure of public
budgets, programs/projects and disbursement through
posting of information, publication or on-line
disclosure on the internet
Strengthen the current judicial system
Strengthen people’s participation and
involvement in the identification and prosecution of
corrupt officials
Ensure the active participation of business and
private sector in anticorruption campaigns
Strengthen the auditing system
Institutionalize close monitoring and regular
evaluation of programs and projects
Cut red tape
Increase corruption penalties
Implement lifestyle checks and use results as
basis for funding
Discourage solicitations from government
personalities and institutions
Lack of or weak citizen participation in all
aspects of local governance
Strengthen local development councils and local
special bodies
Professionalize elective leaders
Upgrade qualification standards for elective
officials
Focus support on lower-level government units
and communities
Government should engage the private sector and
civil society in identifying priorities that truly address
development needs of the community
Provide continuous capacity building for NGOs
and POs
Lack of professionalism and inadequate
leadership and management capacities of
political leaders and public servants
Conduct values education and capacity building
activities for government officials and workers
Implement rewards-based performance system
Develop an integrated and institutionalized
Performance Management System for government,
e.g., public disclosure or report card system for
national government agencies and LGUs (there are
existing practices but should be done in all
institutions)
Advocate for electoral reforms to make the
appointment process transparent and based on merit
and performance,
Advocate for civil service reforms, e.g., to
improve compensation package for public servants
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Causes Solutions
A bloated and inefficient bureaucracy that
results in the lack of communication and
coordination and hampers the delivery of
public services
Streamline the bureaucracy – both in offices and
processes
Further decentralize the governmental system in
order to give rise to a more local government system
Shorten time in processing government
transactions and lessen minimum requirements
Upgrade computer systems and maximize ICT
infrastructure
Professionalize the bureaucracy by ensuring
competitive salaries for civil servants
Better implement “rationalization policy”
C. Proposed Priority Programs for the New World Bank CAS:
Basic education, health and other social services at the grassroots level.
Food sufficiency and security programs that will improve farm gate prices of the produce
of farmers and promote collaboration between the government and private sector.
Capacity-building to improve local governance (e.g., institutionalization of social
accountability mechanisms, replication and/or scaling up of and replication of best
practices in local governance).
Programs that improve transparency and accountability in government agencies (e.g.,
strengthening of civil society participation in oversight roles, prosecution of erring public
officials, etc.).
Electoral reforms to strengthen democratic processes (e.g., voters’ education).1
Social protection (e.g., poverty maps and improved targeting mechanisms and conditional
cash transfers through municipal LGUs).2
D. Issues that the World Bank Should Avoid:
Political intervention, whether engagement in partisan politics, giving in to political
pressure or direct involvement in conflict resolution and the war against terrorism.
Mining. Large-scale mining is against sustainable development. “Responsible mining” is
still a vague concept. In one consultation, however, a workshop group qualified its
opposition as follows: “mining projects that are not supported by communities.”
Policy of government on the importation of goods. The rice importation program of
government (DA) is a failure. At the same time, technologies developed in the Philippines
have been copied by foreigners and Filipinos have ended up as consumers of goods
produced by these technologies.
Human rights violations. The World Bank should not support or fund enterprises or
industries that encourage human trafficking, sex slavery and those that employ minors.
Use of foreign consultants. The World Bank should minimize the use of foreign
consultants and maximize the use of local experts.
1 While electoral reforms was suggested as a priority program for World Bank support, this recommendation
must be viewed against the concern of some participants that the World Bank should avoid engagement in
partisan politics (see succeeding section on Issues that the World Bank Should Avoid). 2 There were no objections to World Bank support for social protection in general. However, some participants
expressed disagreement with CCT programs (see Section E: Issues Where There Were Divergent Views on
World Bank Involvement).
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E. Issues Where There Were Divergent Views on World Bank Involvement:
Participants had divergent views on World Bank involvement in several issues. While many
felt that the World Bank should avoid these issues, some participants felt that there was
opportunity for World Bank involvement:
Policy making on bidding, procurement, taxes, tariff. While the majority felt that the
World Bank should not be involved in policy-making, one participant disagreed that the
Bank should refrain from engaging in issues such as taxation since, for example, the
value-added tax, or VAT, has reaped many benefits.
Microfinance assistance with NGAs, LGUs. One participant commented that one
workshop group had recommended World Bank support for microfinance, while another
group had recommended against World Bank support. Another participant clarified that
there is no conflict because the other group had said that World Bank should not support
microfinance implemented by the Government.
Partisan politics in 2010. Many felt that partisan involvement in the 2010 elections
would erode the credibility of the World Bank. However, a participant commented that the
World Bank could contribute to electoral reforms through: (a) policy reforms (e.g., putting
in place a nomination process); (b) examining the comparative advantages of a two-party
vs. multi-party system; and (c) leveling the playing field, e.g., supporting qualified
candidates who do not have the resources to run.
Indigenous peoples. A participant sought clarification on why the World Bank should
avoid issues related to IPs. Another participant responded that it is all right for the World
Bank to help IPs as long as the cultural heritage of the latter is preserved.
Family planning programs. There was divergence in participants’ views whenever this
issue was brought up in the regional consultations. In Bicol, a participant commented
(during the open forum) that one workshop group had objected to the Reproductive Health
Bill, while another group had identified it as a solution to the problem. In the NCR
consultation, while population control was identified as an issue that the World Bank
should avoid, two measures were proposed for World Bank support to address the
population issue: (a) pass laws on population control; and (b) include population education
in World Bank projects.
Cash grants and subsidies. Sustained social security measures must be put in place
instead. If conditional cash transfer (CCT) programs are to be implemented, these should
be implemented by municipal LGUs (who are closer to the ground) than provincial LGUs.
Project identification and prioritization. A participant clarified that, as an operating
procedure, all projects approved by World Bank are proposed by national government and
therefore, are assumed to be for the betterment of the nation. However, the World Bank
should look into these projects and make sure that these are what the people really need.
12. A detailed feedback report was sent to all the participants of the multistakeholder
consultations and was posted on the Bank’s Philippines website to inform the public about the
messages and recommendations. A second round of meetings was held with top government officials
and leaders from civil society organizations (CSOs) and private sector, as well as with other
development partners, both bilateral and multilateral agencies in January 2009. The meetings
provided a venue for the Bank to present the issues it heard from the nationwide consultations and
Bank management, and for the groups to give insights on key policy directions. The groups identified
the need to factor in the economic and political climate on the magnitude, distribution, timing, and
prioritization of lending and non-lending programs in the country. There is also an expressed interest
in developing valid and reliable systems for collecting and analyzing data as the basis for development
intervention as well as instituting a monitoring and evaluation system for development projects. The
FY09 Client Survey/CAS Multistakeholder Consultations Philippines FY10-12 CAS - Annex 4
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groups indicated that critical to M&E system is the institutionalization of disclosure of information in
the public sector.
CAS Formulation and Consultation Process
13. The CAS process was launched internally through a retreat of the Country Leadership Team in
April 2008. The discussions on the CAS then went through various stages of brainstorming, debating,
working group discussions, government and external consultations, and internal reviews.
Organizationally, a CAS leadership team and core team served as the nucleus for the work which, at
many points, involved the entire country team.
14. Following is a summary of major events that took place throughout the almost year-long CAS
formulation and consultation process, including the major highlights of each activity. In addition to
the list below, a CAS team meeting was held on a bi-weekly basis during the period June 2008 to
April 2009. It should also be noted that many other external consultations happened through bilateral
meetings with development partners and other stakeholders, as well as internal consultations through
virtual meetings not captured in the table below.
Main CAS Preparation Steps Highlights
April 1, 2008 - Country Leadership Team
(CLT) Retreat: Resource persons from
academe provided outside perspectives on
governance and poverty.
- Discussed:
- - Meeting the governance challenge
- Getting the poverty agenda in focus
- - Toward leaner and better operations
June 2, 2008 - CAS Team Retreat: Selected
development partners and resource persons,
including a government representative, attended
part of the retreat.
Reviewed: Accomplishments, gaps and opportunities in the
various sectors
Discussed: Composition of the CAS team, structure of the
working groups, and the CAS workplan /timeline
June 4, 2008 - CAS Session at the Country
Team Staff Retreat, Aklan
Held a simulation with the country team of the CAS external
consultation process
June 20, 2008 - First Meeting with
Representatives of the Oversight Agencies -
Department of Finance (DOF), National
Economic and Development Authority
(NEDA), and Department of Budget and
Management (DBM)
Exchanged views with Government on the proposed CAS
objectives, and the processing timetable for the CAS
formulation and consultation
July 8, 2008 - CAS Debate “Revolutionaries”
vs “Tweakies” (with participation of CAS
team members in Manila and DC via videocon)
Debated two possible approaches to the CAS:
- “Revolutionaries”: A radical shift toward poverty agenda
and AAA, applying governance and poverty filters
- “Tweakies”: Stronger focus on direct poverty reduction and
slight adjustments in the current conceptual framework
August 13, 2008 - Review of CAS Completion
Report (with participation of CAS team
members in Manila and DC via videocon)
Discussed the first draft CASCR, including initial results
assessments
August 14, 2008 - CAS Workshop on
Working Groups Reports
Discussed outputs from each of the initial CAS working
groups. Defined new working groups according to five
strategic objectives: Stable Macro Economy; Improved
Investment Climate, Better Public Service Delivery, Reduced
Vulnerabilities, and Good Governance
August 21, 2008 - Second Meeting with
Representatives of the Oversight Agencies
Briefed the Government oversight agencies on the progress to
date and initial thinking on the strategy
FY09 Client Survey/CAS Multistakeholder Consultations Philippines FY10-12 CAS - Annex 4
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Main CAS Preparation Steps Highlights
September 17-18, 2008 - Consultations with
Heads of Agencies
Held focused discussions on the Bank Group’s initial thinking
on the CAS, and implementing agency heads’ suggestions on
the strategy
Multistakeholder CAS Consultations:
- September 24, 2008 Davao Consultation
- September 26, 2008 Iloilo Consultation
- September 29, 2008 Naga Consultation
- October 3, 2008 Manila Consultation
(See details in earlier section of the Annex)
October 14, 2008 - Philippines Day in
Washington, D.C. (DOF Sec. Margarito Teves
delivered opening remarks)
Discussed the emerging framework of the CAS with the full
country team and other HQ-based colleagues
November 3-6, 2008 - Presentations by the
CAS Working Groups to the Country
Director
Each CAS working group presented to the CD the results of
working group discussions to date
November 26, 2008 - CAS Consultation with
Business/Private Sector Representatives
Focused discussion to obtain private sector views on the CAS
December 8-9, 2008 - IFC-IBRD Strategy
Meeting, Manila (with participation of CAS
team members in Manila and DC via videocon)
Undertook a SWOT analysis, identified sectors for possible
joint programs, and discussed shared vision and results for the
country program
December 11, 2008 - Upstream Review
(Regional Operations Committee)
Received overall guidance from management on moving
forward with the current directions of the CAS
January 26, 2009 - Third Meeting with
Representatives of the Oversight Agencies on
the draft CAS and CAS Completion Report
Updated DOF and NEDA on the emerging CAS, and heard
from DOF and NEDA on their comments on the draft CAS
document (Written comments from NEDA followed)
January 26, 2009 - Meeting with Development
Partners
Updated development partners on the emerging CAS, and
solicited their inputs to the strategy and particularly to Annex
7 of the strategy
January 29, 2009 - Philippines CAS Team
Workhop, Manila
Focused on the identification and prioritization of the
operations under the CAS lending and non-lending programs
January 30, 2009 - Meeting with Civil Society
Organizations (CSOs)
Updated selected CSO partners on the emerging CAS, and
solicited their views
February 24, 2009 - CAS Programming
Discussions with the Oversight Agencies
Discussed with government oversight agencies (including
Office of the President and BSP) the revised CAS draft, and
agreed on its flexibility and on indicative lending and non-
lending programs under the CAS
March 9, 2009 - Final CAS Review (Regional
Operations Committee)
Received additional guidance, and overall support from
management to proceed with CAS processing for Board
discussion
March 16, 2009 - Working-level meeting with
Representatives of Oversight Agencies
Discussed with the government counterparts the changes in
the CAS that were made in response to government
comments, as well as additional refinements in the document
March 19, 2009 - Wrap-Up Meeting with
NEDA on the CAS
Discussed with NEDA latest changes to the CAS document,
and agreed on the next steps, including a press release
March 19, 2009 - Submission of CAS for final
internal clearances
Philippines FY10-12 CAS – Annex 5 Page 1 of 12
Philippines FY10-12 CAS Results Framework
1.1 Fiscal and financial stability through consolidation and improved macroeconomic risk management • Outcome 1: Maintained tax effort through strengthened tax administration and tax policy reform • Outcome 2: Improved efficiency and targeting of public expenditures • Outcome 3: Improved management of key fiscal and financial sector risks
5.1 Governance and anticorruption in selected national government agencies Outcome 1: Core business systems, processes and capacities in selected agencies improved
5.2 Procurement and public financial management reforms at national and local levels Outcome 1: The Procurement Law more strictly enforced Outcome 2: Improved management and greater transparency in public finances
5.3 Better local governance through more effective decentralization Outcome 1: Deepened and refined decentralization through broad-based reforms Outcome 2: Strengthened LGU performance for more effective service delivery
Engagements: National and Local Level
Private Sector
Strategic Objective 3: Better Public Service Delivery
Strategic Objective 2: Improved Investment Climate
Strategic Objective 1: Stable Macro Economy
Strategic Objective 4: Reduced Vulnerabilities
Inclusive Growth
2.1 Enabling business environment to promote competitiveness, productivity and employment • Outcome 1: Increased and improved delivery of infrastructure • Outcome 2: Enhanced regulatory policy frameworks and institutional capacity for investment, service delivery, and trade • Outcome 3: Increased investment and employment in rural and urban development 2.2 Financial services • Outcome 1: Increased delivery and access to financial services
3.1 Public service delivery in key sectors • Outcome 1: Improved access to quality basic education services • Outcome 2: Improved access to health services • Outcome 3: Increased household access to safe drinking water and sanitation services 3.2 Basic service delivery in poor areas • Outcome 1: Scaled-up provision of basic services through a nationwide community-driven development program • Outcome 2: Enhanced effectiveness of public service delivery through more coordinated area-based approaches
4.1 Social protection system • Outcome 1: National household poverty targeting system in place and used • Outcome 2: Conditional Cash Transfer (CCT) program fully operational 4.2 Disaster risk management and climate change • Outcome 1: Disaster- and climate change-related risks reduced • Outcome 2: Greenhouse gas emissions reduced through expansion of mitigation programs in key sectors and LGUs 4.3 Stability and peace • Outcome 1: Enhanced impact and conflict-sensitivity of development programs implemented in communities in Mindanao affected by armed or violent conflict • Outcome 2: Scaled up provision of basic services and livelihood support through CDD in communities affected by armed or violent conflict
Cross-Cutting Theme: G o o d G o v e r n a n c e
Improved income opportunities and enhanced abilities of households and communities, especially of the poor, to participate in markets through strengthened human capital, reduced vulnerability to shocks and increased economic empowerment
Philippines FY10-12 CAS Results Framework Philippines FY10-12 CAS - Annex 5 Page 2 of 12
PHILIPPINES: FY10-12 CAS Results Framework
End-FY12 CAS Results Areas and Outcomes Indicative Milestones World Bank Group Program
Overall CAS Theme: Inclusive Growth Improved income opportunities and enhanced abilities of households and communities, especially of the poor, to participate in markets
through strengthened human capital, reduced vulnerability to shocks, and increased economic empowerment
CAS Objective 1: Stable Macro Economy MTPDP Goals: Maintain economic stability through further fiscal consolidation (improved revenue generation as well as strengthened expenditure management), rationalized national government spending for devolved services, and reduced debt. Issues and Obstacles:
Despite recent progress, external and public debt levels are still high Recent fiscal improvements need to be placed on a more sustainable basis through increased tax revenues and improved expenditure management Vulnerability to external shocks, fiscal, and macro financial risks Underdeveloped financial MIS limits ability to track and report data in timely manner as basis for policy
1.1 Fiscal and financial stability through consolidation and improved macroeconomic risk management
Outcome 1: Maintained tax effort through strengthened tax administration and tax policy reform1 Indicator 1: Tax/GDP Baseline: 13.3% (2009, est.) Target: 13.9% (2012) Indicator 2: Nonfinancial public sector debt/GDP Baseline: 62.4% (2008) Target: 57.7% (2012)
Outcome 2: Improved efficiency and targeting of public expenditures Indicator: Forward Estimates (FE) and Paper on Budget Strategy (PBS) as input for annual budget formulation Baseline: Not being used Target: Fully used (2012)
Outcome 3: Improved management of key fiscal and financial sector risks Indicator 1: Regulatory requirements (for capital adequacy ratio, liquidity, non-performing loan provisioning) Baseline: Being met (2008) Target: Continue to be met (2009-2012) Indicator 2: Commercial banks’ distressed asset ratio Baseline: 12.5% (9/2008) Target: Below baseline (2012)
Fiscal incentives and tobacco excise tax rationalization laws passed Tax ratio in 2010 is as high as or greater than in 2009 Strengthened Large Taxpayer Service Department of Budget Management (DBM) ready to prepare Forward Estimates (FE) and Paper on Budget Strategy (PBS) on their own Fiscal risk statement established and published (2010)
Ongoing Financing: National Program Support (NPS) for Tax Administration Reform (NPSTAR) TF Strengthening of Revenue Administration and Collection Efficiency (Institutional Development Fund - IDF) TF Policy-Based Budgeting Medium-Term Framework (IDF) Indicative Financing: Development Policy Loan (DPL) Development Policy Loan – Deferred Drawdown Option (DPL DDO) Indicative AAA/Others: Philippines Development Reports Quarterly Economic Updates Programmatic AAA on Public Expenditure Issues Development of the Philippines Statistical Development Plan (including grant to improve quality and usefulness of Philippine household surveys) IFC Advisory Services (AS) on crisis/insolvency management
1 Tax policy measures approved earlier and the ongoing economic slowdown are expected to push the tax/GDP ratio to 13.3% in 2009, so that subsequent reform measures to reverse this trend are projected to generate a gain of 0.6% of GDP through 2012 relative to the 2009 baseline outcome.
Philippines FY10-12 CAS Results Framework Philippines FY10-12 CAS - Annex 5 Page 3 of 12
End-FY12 CAS Results Areas and Outcomes Indicative Milestones World Bank Group Program
CAS Objective 2: Improved Investment Climate MTPDP Goals: Encourage the private sector to strengthen trade and investment and attain national investment rates of about 25-28 percent of GDP; continue with the integration of the transport system, and develop and diversify the energy mix; ensure smooth financing for entrepreneurs, including microfinance for underserved areas. Issues and Obstacles:
Spending on quality infrastructure (for both maintenance of existing assets and new capacity) is inadequate to meet current and future requirements and ensure greater access to rural areas
Investment climate constrained by nontransparent and unstable regulatory framework Lack of coherent, socially acceptable and environmentally sustainable policy frameworks and strategies consistent with international best practices
constrain investment climate for growth areas 2.1 Enabling business environment to promote competitiveness, productivity, and employment Outcome 1: Increased and improved delivery of infrastructure Indicator 1: National Road System (NRS) paved length in fair condition or better Baseline: To be determined during project formulation Target: 75% (2012) Indicator 2: New customers in rural areas with access to minigrid or Renewable Energy Technology (RET) under the Rural Power Project Baseline: 4,750 (end-2008) Target: 20,000 additional (2012) Indicator 3: Number of projects and total MW privatized (IFC involvement) Baseline: 3 plants privatized totaling 1,135 MW (2009) Target: 3-4 plants privatized, generating 1,135-1,500 MW (2011) Indicator 4: Levels of system loss for Mindanao Electrical Cooperatives (ECs) which are target of IFC Rural Electrification Project Baseline: 11.9% (2008) Target: 9.9% (2010) Indicator 5: Long-run IFC average Development Outcome Tracking System (DOTS) success rate for all mature power projects Baseline: 60% (2008) Target: 65% (2012)
A sustainable financing and maintenance regime developed for rural and secondary roads Urban transport management plan developed and ready for implementation in Metro Manila and for one major secondary city in Visayas or Mindanao Share of annual road program of Department of Public Works and Highways (DPWH) evaluated by technical and economic criteria increased to 80% Urban strategy developed that provides a framework for integrated infrastructure investment within the context of overall urban development Increased power capacity of 20 MW through RETs (Renewable Energy Technology) providing services to minigrids Increased power generation of about 775-1,375 MW by 3-4 IFC-supported power plants Achieved financial viability of 85% of supported Electrical Cooperatives (EC) Continued power sector privatizations involving Small Power Utilization Group (SPUG) with a special focus on renewable power generation Increased private sector investments in electricity generation and distribution, including geo-thermal Enhanced awareness among Small and Medium Enterprises (SMEs), national and local governments, manufacturers and developers about energy efficiency Six Electrical Cooperatives (ECs) assisted with
Ongoing Financing: Second Agrarian Reform Communities Development Project (ARCDP2) Diversified Farm Income and Market Development Project (DFIMD) Land Administration and Management Project 2 (LAMP2) Metro Manila Urban Transport Integration Project (MMURTRIP) National Roads Improvement and Management Project 2 (NRIMP2) Rural Power Project (RPP) Mindanao Rural Development Project – Phase 2 (MRDP2) IFC SN Aboitiz Power (SNAP) IFC Aboitiz Power Benguet, Ambuklao-Birga Hydro Plant (SNAPB) IFC Masinloc Power IFC Cagayan de Oro Power & Light Company (CEPALCO) IFC Philippines National Oil Company – Energy Development Corporation (PNOC-EDC, PNOC-EDC2, geothermal) IFC Eastwood (cyber-park) IFC South Luzon Tollway Corporation (SLTC) TF Rural Power Project (Global Environment Facility – Full Size Project - GEF FSP) TF Electric Cooperative System Loss Reduction Project (Global Environment Facility – Full Size project - GEF FSP) TF National Roads Improvement and Management Program (NRIMP2) – Enhanced Supervision (EAP Infrastructure for Growth TF - EAIIG)
Philippines FY10-12 CAS Results Framework Philippines FY10-12 CAS - Annex 5 Page 4 of 12
End-FY12 CAS Results Areas and Outcomes Indicative Milestones World Bank Group Program Outcome 2: Enhanced regulatory policy frameworks and institutional capacity for investment, service delivery, and trade Indicator 1: PPP/BOTs (Public Private Partnership/ Build Operate Transfer) in (i) national infrastructure; (ii) local infrastructure Baseline: None (2008) Target: (i) 1-2; (ii) 5-10 (2012) Indicator 2: Commercial banks providing loans to Electrical Cooperatives (EC) Baseline: None (2008) Target: 4 (2012) Indicator 3: Private investment in Electrical Cooperatives (ECs) and Renewable Energy Technology (RET) Baseline: 0 (2008) Target: US$20m (2012) Indicator 4: Number of clustered subtransmission facilities for supply to Electrical Cooperatives (ECs) Baseline: 0 (2008) Target: 4 (2012) Outcome 3: Increased investment and employment in rural and urban development Indicator 1: Total household incomes of target beneficiaries in WBG-assisted projects Baseline: (i) MRDP: To be determined during project formulation; (ii) ARCDP2: Php 67,086 Target: (i) 20% increase in average household incomes of beneficiary communities over baseline and 10% increase over control group in MRDP; (ii) 20% increase three years after ARC (Agrarian Reforms Community) joins ARCDP2 Indicator 2: Business assets of target households Baseline: Php 33,640 (ARCDP2) Target: 10% increase in real value three years after household joins ARCDP2 (2012) Indicator 3: Agricultural productivity
capital expansion and structuring power supply aggregation agreements Extractive Industries Transparency Initiative (EITI) adopted Policy framework (including greater transparency) for structuring, financing, and implementing Public Private Partnership (PPP) projects in infrastructure strengthened, adopted, and introduced 1-2 Public Private Partnership (PPP) pilot/ demonstration projects with IFC support launched Regulatory capacity improved in 1-2 regulatory agencies in infrastructure Multiyear infrastructure investment programming, planning and budgeting strengthened through 1-2 line agencies in cooperation with National Economic and Development Authority (NEDA) and Department of Budget Management (DBM) and at the local level with Department of Interior and Local Government (DILG) and Local Government Unit (LGU) Leagues Increased capacity and budgets for project development in line agencies, particularly for Build-Own-Transfer (BOT) projects on a solicited basis Trade and transport facilitation policy developed and adopted Agri infrastructure logistics bottlenecks for high value crops identified in Mindanao Logistics/ supply chain management improvement program developed and adopted Introduced regulatory reforms to increase competition and efficiency in agri logistics (e.g., inter-island shipping, ports services) Adopted strategic policy reform road map for the liberalization of rice import regime to increase private sector participation Rural development strategy framework developed and adopted Strategic urban directions outlined and inputs provided to next Medium-Term Philippines
TF Lead Transaction Adviser for Cala Toll Road – Supervision Budget (Public Private Infrastructure Advisory Facility – PPIAF) TF Public Private Participation in Transport Infrastructure (Policy and Human Resources Development – PHRD) TF Agribusiness Value Chain, Logistics, and Infrastructure Study (EAP Infrastructure for Growth TF - EAIIG) TF Public Private Partnership (PPP) Support to Enhance the Capacity of the Toll Regulatory Board to be an Effective Regulator of Toll Facilities (EAP Infrastructure for Growth TF - EAIIG) TF Philippines Electrification: Best Practices in Subtransmission Development (EAP Infrastructure for Growth TF - EAIIG) TF IFC Private Sector Participation Project in Provision of Power Supply to Rural Nongrid Areas (Norway and USA) TF IFC Philippines Olongapo Power (Spain Technical Assistance Trust Fund – TATF) TF IFC ‘Doing Business’ Plus (USA) TF IFC Private Enterprise Partnership (PEP) (CIDA, AusAID, IFC) Indicative Financing: Light Rail Transit 1 South Extension Public Private Partnership (LRT-PPP) Tollway – Public Private Partnership (Cavite-Laguna) Urban Transport (Metro Manila and other cities) Secondary/Local Roads Rural Power Adaptable Program Loan 2 (APL 2) Agriculture and Agribusiness Support Mindanao Development Urban Renewal (Metro Manila Cities) Sub-National Water Public Private Partnership (with IFC) Participatory Irrigation Development Project (PIDP) IFC projects in power (generation, transmission, distribution, rural power), renewable energy (solar, hydro, geothermal), energy sector privatizations, supply-chain linkages in agribusiness (e.g., bananas), financial services, banking
Indicative AAA/Others : Trade Facilitation/ Transport/ Logistics
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End-FY12 CAS Results Areas and Outcomes Indicative Milestones World Bank Group Program Baseline: ARCDP2: 100% cropping intensity in target irrigated areas; 3.76 metric tons per hectare (MT/ha) for rice; 2.34 MT/ha for corn; 1.92 MT/ha for coconuts Target: 140% increase in cropping intensity and 15% increase in yields three years after joining ARCDP2 (2012)
Development Plan (MTPDP) and National Urban Development and Housing Framework (NUDHF)
Investment Climate for the Poor (with IFC) Energy Sector Reform Public Private Partnership (PPP) Regulatory and Policy Support (IFC and Public Private Infrastructure Advisory Facility -PPIAF) Environmental Safeguards (including Environmental Assessments) Agricultural Productivity Growth Urban Strategy (including resettlement issues) IFC Advisory Services (financial services, SME banking, sustainable energy finance, energy efficiency, energy sector privatizations, structuring power concessions, Mindanao banana value chain, Business Enabling Environment (BEE), ‘Doing Business’, sub-national ‘Doing Business’, other sectors and areas) Continue to offer MIGA’s guarantee products (including Streamlined Small Investment Program for smaller scale projects)
2.2 Financial services Outcome 1: Increased delivery and access to financial services Indicator 1: Public and private credit bureau coverage of adult population Baseline: 5.4% (2008) Target: 30% (2012) Indicator 2: Number of new small-holder farmers receiving credit from partner banks due to WBG-supported projects and volume of credit Baseline: To be determined based on actual projects Target: To be determined; at least 2 IFC-supported projects/investments envisaged (2012) Indicator 3: Number/volume of MSME (Micro and Small and Medium Enterprise) loans from WBG supported banks Baseline: 0 Target: 10% increase per year Indicator 4: Volume of new housing finance loans Baseline: US$6.4m (2005) Target: US$12.5m (2012) Indicator 5: Volume of lending by Government Finance Institutions (GFI) to 2nd to 4th class LGUs Baseline: To be determined during project formulation Target: 30% increase (2012) Indicator 6: Participation of Private Financial Institutions
Enhanced effective single credit information bureau established Increased share of funding requirements of Micro and Small and Medium Enterprise (MSME) obtained through formal banking institutions (from a baseline of about 11-21%) Developed and adopted guidelines and transparency mechanisms for government farm credit guarantee facility Successful pilot testing of a First Loss Guarantee Facility for agriculture/ agribusiness Weather-based (index) agricultural insurance system pilot-tested in at least one region Enhanced access to housing finance products Mortgage toolkit for financial institutions introduced Enhanced access to risk mitigation and insurance services, especially for housing finance Risk-sharing facilities to support sustainable energy investments and Small and Medium
Ongoing Financing: Support for Strategic Local Development and Investment Project (SSLDIP) IFC Banco de Oro (BDO, banking), Bank of the Philippines Islands - BPI, Metrobank, East West Bank, Rizal Commercial Banking Corporation, Security Bank IFC Paramount Life and General Holding Corporation (PLGHC) TF Credit Rating for Selected Cities (Public Private Infrastructure Advisory Facility- Sub-National Technical Assistance – PPIAF SNTA) TF Small Water Utilities Financing (Public Private Infrastructure Advisory Facility- Sub-National Technical Assistance – PPIAF SNTA) TF IFC Asian Commercial Bank – Strengthening Financial Institutions in East Asia ((Japan Technical Assistance Trust Fund – TATF) Indicative Financing: Sub-National Finance (SSLDIP2, or Development Bank of the Philippines DBP3 - Regional Infrastructure for Growth) Sub-Sovereign Financing Facility (with IFC)
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End-FY12 CAS Results Areas and Outcomes Indicative Milestones World Bank Group Program (PFIs) in financing sub-national projects (number of loans) Baseline: To be determined during project formulation Target: 5 additional (2012)
Enterprise (SME) finance promoted Improved access to grants and concessional financing to meet needs of low income Local Government Units (LGUs) and poor communities Increased reliance on own source revenue through better business tax and real property tax collections
IFC projects with banks supporting MSME access to credit IFC projects with major Philippine universal banks (consolidation, capital raising, liquidity and risk sharing facilities) IFC projects in housing finance, recovery of bad assets, mortgage restructuring, provision of insurance IFC investments in direct support of top tier Local Government Units (LGU) Indicative AAA/Others : Financing Innovation Facility (with IFC, including First Loss Facility for agriculture/ agribusiness, and Remittances for Development) IFC Advisory Services (financial services, SME banking, Business Enabling Environment – BEE, central bank, sustainable energy finance, other sectors and areas)
CAS Objective 3: Better Public Service Delivery MTPDP Goals: Improve governance of service delivery to support reforms of social welfare and development; continue to pursue implementation of the health and basic education sector reform agenda to increase access to quality basic education, health services, and water and sanitation by the poor. Issues and Obstacles:
The country is having difficulty in attaining several of the MDGs: prevalence of underweight children; primary enrolment ratio (which has declined); under-five, infant, and maternal mortality rates. However, there have been gains in combating TB and malaria
Improved efficiency is needed in the use of increasing budgetary allocations for social sector programs There are significant disparities among geographical and population groups: social indicators are particularly worse in ARMM
3.1 Public service delivery in key sectors Outcome 1: Improved access to quality basic education services Indicator 1: Net primary enrolment rate Baseline: 85 (2008) Target: 90 (2011) Indicator 2: Primary completion rate Baseline: 73 (2008) Target: 77 (2011) Indicator 3: Net secondary enrolment rate Baseline: 62 (2008) Target: 70 (2011) Indicator 4: Secondary completion rate Baseline: 75.4 (2008) Target: 76 (2011) Outcome 2: Improved access to health services
Minimum standards for inputs, outputs, and outcomes developed and monitored School Based Management (SBM) rolled out with shift of resources to schools
Ongoing Financing: National Program Support (NPS) for Basic Education National Program Support (NPS) for Health Sector Second Women’s Health and Safe Motherhood Project (WHSMP) Manila Third Sewerage Project (MTSP3) IFC Manila Water Company (MWC) IFC Asian Hospital TF Manila Third Sewerage Project (Global Environment Facility – Full Size Project - GEF FSP) TF Support to Philippine Basic Education Reforms (AusAID) TF for Health Sector Reform (European Community – EC) TF Local Government Support for Regional Water Supply Project (Policy and Human Resources Development – PHRD)
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End-FY12 CAS Results Areas and Outcomes Indicative Milestones World Bank Group Program Indicator 1: Children (age 1) immunized with DPT3 (Diphtheria- Pertussis- Tetanus Third Dose) (i) nationally; (ii) poorest quintile Baseline: (i) 77% (2007); (ii) To be determined by findings of 2008 National Demographic Health Survey Target: (i) 90% (2012); (ii) 90% (2013) Indicator 2: Share of facility deliveries (i) nationally; (ii) poorest quintile of women Baseline: (i) 39% (2007); (ii) To be determined by findings of 2008 National Demographic Health Survey Target: (i) 80% (2012); (ii) 80% (2013) Indicator 3: Enrolment coverage of the National Health Insurance Program (i) total population; (ii) indigent population Baseline: (i) 76% (2008); (ii) 55% (2008) Target: (i) 85% (2012); (ii) 100% (2012) Outcome 3: Increased household access to safe drinking water and sanitation services Indicator 1: Share of poor households in project areas with access to safe drinking water services (MDG)/ connected to network services Baseline: To be determined as part of project formulation Target: 80% (2012) Indicator 2: Share of poor households in project areas with access to communal or public sanitation facilities (MDG) Baseline: To be determined as part of project formulation Target: 80% (2012) Indicator 3: Number of LGUs closing open dumpsites and opening sanitary landfills (MDG) Baseline: <1% of LGUs Target: 20 LGUs (2012)
Performance-based financing and monitoring system developed and piloted (i) in at least 16 provinces, with particular focus on improving maternal, child, and reproductive health; (ii) for at least 12 public hospitals Establishment of a common financing approach for the water sector agreed with other multilateral and bilateral financing institutions
TF Concessional Financing Facility for Water and Sanitation Service Providers (EAP Infrastructure for Growth TF - EAIIG) TF Metro Iloilo Water District Options Study (Public Private Infrastructure Advisory Facility – PPIAF) TF Program for Sustainable Sanitation – Philippines Component (Water and Sanitation Program – WSP) TF IFC Private Sector Participation in the Water Sector in the Philippines (France, USA, IFC Technical Assistance Trust Funds – TATF) Indicative Financing: National Program Support (NPS) for Education National Program Support (NPS) for Health Grant: Output-Based Aid (OBA) Facility for Urban Services IFC investments in water supply Indicative AAA/Others: Programmatic AAA for Education Programmatic AAA for Health Programmatic AAA for Water Supply and Sanitation Support (including Best Management Practices in Water Pollution Control) IFC Advisory Services
3.2 Basic service delivery in poor areas Outcome 1: Scaled-up provision of basic services through a nationwide community driven development program Indicator: Number of poor municipalities supported by national Community Driven Development (CDD) program Baseline: 184 Target: 500 (2012) Outcome 2: Enhanced effectiveness of public service delivery through more coordinated area-based
Increased proportion of poor households with access to basic social services Increased proportion of budgets in targeted Local Government Units (LGUs) allocated to poorer areas
Ongoing Financing: Kapit Bisig Laban sa Kahirapan - Comprehensive and Integrated Delivery of Social Services (KALAHI-CIDDS) TF Implementation – Philippines KALAHI-CIDSS (Policy and Human Resources Development – PHRD) TF Urban Partnership for Sustainable Upliftment, Renewal, Governance, and Empowerment – UPSURGE (Japan Social Development Fund – JSDF)
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End-FY12 CAS Results Areas and Outcomes Indicative Milestones World Bank Group Program approaches Indicator: Number of poorer provinces with enhanced mechanism to coordinate inter-agency anti-poverty programs Baseline: 0 Target: 3 (2012)
Agreements reached to improve inter-agency and inter-governmental coordination and specifying the nature of coordination Provincial compact executed to improve inter-agency coordination
Indicative Financing: National Program Support (NPS) for CDD (Community Driven Development) Indicative AAA/Others: Indigenous Peoples and Vulnerable Groups Philippines Population Report Synergies for Service Delivery (Conditional Cash Transfer – CCT, Community Driven Development – CDD, National Program Support- NPS)
CAS Objective 4: Reduced Vulnerabilities MTPDP Goals: Reduce poverty and increase welfare, particularly in rural areas; sustainably manage the environment and natural resources; reduce disaster risk and improve recovery management. Issues and Obstacles:
Low response of poverty reduction to growth; poverty is estimated to be increasing and inequality remains relatively high Effectiveness of social protection and poverty reduction efforts is compromised by lack of an efficient system to target the poor and by weak coordination
and capacity 45% of population are vulnerable to falling into poverty due to shocks Most poor households live in natural hazard-prone areas and are susceptible to climate change and disaster shocks
4.1 Social protection system Outcome 1: National household poverty targeting system in place and used Indicator 1: Share of poor households registered in the targeting system Baseline: 9% (2008) Target: 33% (2012) Indicator 2: Number of national programs that are using the targeting system for selecting their beneficiaries Baseline: 1 (2008) Target: 2 (2012) Outcome 2: Conditional Cash Transfer (CCT) program fully operational Indicator 1: Share of 4Ps (Pantawid Pamilyang Pilipino Program – CCT program) grants that go to beneficiaries belonging to the two poorest quintiles Baseline: 0 (2008) Target: 70% (2012) Indicator 2: Share of the 4Ps (Pantawid Pamilyang Pilipino Program – CCT program) grants transferred to the
Management Information System (MIS) designed and in operation including integrated data entry application, Proxy Means Testing (PMT) processing and data management, and sharing capabilities properly functioning Management Information System (MIS) developed and functioning to support payments, verification, updates, and grievance system Spot checks for 4Ps (Pantawid Pamilyang Pilipino Program – CCT program) of schools, clinics, municipal links, and beneficiary households carried out annually
Ongoing Financing: IFC Balikatan Housing Finance IFC Bahay Financial (mortgage finance) IFC Filinvest Land (real estate – middle income housing) TF Philippines Country Study (Diagnostic Facility for Shared Growth – DFSG) Indicative Financing: Social Welfare and Development Reform (SWDR) - Conditional Cash Transfers (CCT) Indicative AAA/Others: Programmatic AAA for Social Protection and Poverty Reduction IFC Advisory Services World Bank Institute (WBI) partnerships
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End-FY12 CAS Results Areas and Outcomes Indicative Milestones World Bank Group Program beneficiaries that are based on conditionalities met for health (0-14 years old and/or pregnant women) and education (6-14 years old) Baseline: 60% (2008) Target: 80% (2012)4.2 Disaster risk management and climate change Outcome 1: Disaster- and climate change-related risks reduced Indicator 1: Share of vulnerable Local Government Units (LGUs) that integrate Disaster Risk Reduction (DRR) and/or Climate Change Adaptation (CCA) into their local plans and budgets Baseline: To be determined by ongoing Global Facility for Disaster Reduction and Recovery (GFDRR) work Target: 60% increase (2012) Indicator 2: Volume of investments in Disaster Risk Reduction and/or Climate Change Adaptation measures in participating Local Government Units (LGUs) Baseline: To be determined by ongoing Global Facility for Disaster Reduction and Recovery (GFDRR) work Target: 40% increase (2012) Indicator 3: Number of WBG projects that incorporate Disaster Risk Reduction, Climate Change Adaptation, and/or contingent components Baseline: 5 projects (2008) Target: 50% increase (2012) Outcome 2: Greenhouse gas emissions reduced through expansion of mitigation programs in key sectors and LGUs Indicator: Volume of Bank-assisted Emission Reductions Purchase Agreements (ERPAs) Baseline: 2 Mt CO2e committed in WBG-assisted ERPAs (2/2009) Target: At least double the volume of new ERPAs (2012)
Government has adopted a new risk financing strategy and mechanism Enhanced access to risk financing instruments High risk Local Government Units (LGUs) have functioning disaster coordinating councils Medium Term Philippines Development Plan (MTPDP, 2010) and high risk Local Government Units (LGUs) incorporate Disaster Risk Reduction (DRR) issues into programs and investment projects Climate Change Adaptation framework, strategy, plan, and program for agriculture and natural resources developed and adopted Climate proofing strategies and measures identified and piloted in the following WBG-assisted projects: Mindanao Rural Development Project 2, Participatory Irrigation Development Project, National Program Support (NPS) for Environment and Natural Resource Management Project Critical sectors and Local Government Units (LGUs) in the most vulnerable areas accorded priority Weather-based (index) agricultural insurance system pilot-tested in at least one region Carbon finance program on waste management in Mindanao developed and approved Emission Reductions Purchase Agreements (ERPAs) signed for new carbon finance operations
Ongoing Financing: National Program Support (NPS) for Environment and Natural Resource Management Project (ENRMP) Laguna De Bay Institutional Strengthening and Community Participation (LISCOP) IFC Philippines National Oil Company -Energy Development Corporation (PNOC -EDC) (geothermal) TF NPS ENRMP (Global Environment Facility – GEF) TF Ozone Depletion Substance (ODS) Phase Out Investment Project (Ozone Trust Fund - OTF) TF Country Environmental Analysis TF Clean Development Mechanism TA for Philippines TF Preparation of Climate Change Adaptation Phase I Project (Global Environment Facility) TF Supporting Local Government Capacity to Manage Natural Disasters (Global Facility for Disaster Reduction and Recovery - GFDRR) TF Climate Change in Coastal Areas (Norwegian Trust Fund for Private Sector and Infrastructure – NTFPSI) TF Laguna De Bay Institutional Strengthening and Community Participation Project (Dutch cofinancing) TF National CFC (chlorofluorocarbon) Phase Out Plan (Sweden) TF Grant for Preparation of Integrated Persistent Organic Pollutants Management (Dioxin and Furans, PCB and Contaminated Sites) Project (Global Environment Facility - GEF) TF Disaster Risk Management Project TF IFC Philippines Asian Conservation Company Indicative Financing: Water Quality Management Disaster Risk Management (DRM) Financing (including Catastrophe Deferred Drawdown Option (CAT DDO)) IFC projects in renewable energy (e.g., geothermal, hydro, solar), power (including in Mindanao) TF Chillers Energy Efficiency (Global Environment Facility -
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End-FY12 CAS Results Areas and Outcomes Indicative Milestones World Bank Group Program GEF, Carbon Fund - CF) TF Climate Change Scale-up in Coastal Areas (Global Environment Facility - GEF) TF Climate Change Mitigation Program through Waste Management and Renewable Energy (Global Environment Facility - GEF, Carbon Fund - CF) TF Groundwater (Global Environment Facility - GEF) TF Philippines Climate Change Adaptation (Global Environment Facility - GEF) TF Integrated Persistent Organic Pollutants Management Indicative AAA/Others: Programmatic AAA for Disaster Risk Management (DRM), including Climate Change Issues IFC Advisory Services World Bank Institute (WBI) partnerships
4.3 Stability and peace Outcome 1: Enhanced impact and conflict-sensitivity of development programs implemented in communities in Mindanao affected by armed or violent conflict Indicator 1: Number of IDP (Internally Displaced Persons) families from recent conflict with homes rebuilt Baseline: 15,392 recent IDP (Internally Displaced Person) families (reported in National Disaster Coordinating Council, 12/2008) with estimated 3,000 families with homes destroyed Target: At least 20% of families of the latter group with assistance provided for reconstruction of structures and rehabilitation of basic services (2012) Indicator 2: Development and use of simple and user friendly conflict sensitivity tool for assessment of more programs in Mindanao Baseline: 1 PCIA (Peace and Conflict Impact Assessment) tool for community sub-projects Target: 1 Conflict sensitivity tool developed for Local Government Unit (LGU) programs in areas of armed and violent conflict in Mindanao (2012) Outcome 2: Scaled-up provision of basic services and livelihood support through community driven development (CDD) in communities affected by armed or
Community programs using Community Driven Development (CDD) approach implemented in more conflict-affected municipalities Project preparation (whether through grants and/or loans) are based on close coordination and planning with government and development partners Improved transparency in budgeting, allocation, and management of public resources and accountability
Ongoing Financing: Mindanao Rural Development Project – Phase 2 (MRDP2) Autonomous Region in Muslim Mindanao (ARMM) Social Fund Project TF Mindanao Regional Development in Conflict-Affected Areas TF Mindanao Reconstruction and Development Program TF Preparation of Mindanao Rural Development Project Phase II – Coastal and Marine Ecosystem Conservation Component (Global Environmental Facility – GEF) TF Rural Infrastructure Component of the Mindanao Rural Development Program Phase II (EAP Infrastructure for Growth TF - EAIIG) Indicative Financing: Fund for Peace and Development IFC projects in power generation in Mindanao including support to Electrical Cooperatives for capital expansion Indicative AAA/Others: Encouraging more resilient communities in conflict- affected areas (State and Peace-building Fund - SPF) IFC Advisory Services (e.g., rural electrification, power supply aggregation agreements, banana value chain)
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End-FY12 CAS Results Areas and Outcomes Indicative Milestones World Bank Group Program violent conflict Indicator: Number of conflict- affected communities having one or more CDD sub-projects Baseline: 53 Target: 100 (2012)
Scaled-up provision of community infrastructure including power generation capacity and increased efficiency in distribution
Cross-Cutting Theme: Good Governance MTPDP Goals: Strengthen partnerships and accountability among government, civil society, and the private sector; fully operationalize the Government Electronic Procurement System; conduct integrity development reviews in government agencies, and expand and institutionalize lifestyle-checks. Issues and Obstacles:
Public perceptions of government sincerity to reduce corruption remain negative Weak government institutions and lack of real progress in efforts to improve their performance and accountability Weak political impetus for reforms While CSOs are active in demanding transparency and better governance, their efforts tend to be fragmented Investment climate is constrained by lack of trust that institutions have functional self-regulatory mechanisms, that transparency and disclosure principles
are respected and governance mechanisms are effective 5.1 Governance and anticorruption in selected national government agencies Outcome 1: Core business systems, processes, and capacities in selected agencies improved Indicator: Number of national government agencies with a functioning internal audit unit out of 22 national agencies Baseline: 12 or 56% (2008) Target: 18 or 82% (2012)
Agency-specific indicators developed to monitor one or more of the following governance areas: Public Expenditures and Financial Accountability (PEFA), internal and external audit functions; operational efficiency
Ongoing Financing: Judicial Reform Support Project (JRSP) TF Strengthening of Monitoring and Evaluation Capacities in Agriculture (Institutional Development Fund - IDF) TF Strengthening the Institutional Effectiveness of the National Commission of Indigenous Peoples (IDF) Indicative Financing: Judicial Reform 2 Indicative AAA/Others: TA for Agency Institutional Strengthening Programmatic AAA on Sector Governance Assessments (for various sectors/ SOs - Strategic Objectives) IFC Advisory Services (e.g., ‘Doing Business’, sub-national ‘Doing Business’, Business Enabling Environment - BEE, regulatory simplification, Corporate Social Responsibility)
5.2 Procurement and public financial management reforms at national and local levels Outcome 1: The Procurement Law more strictly enforced Indicator: Procurement operations and public procurement market (Country Procurement Assessment Report - CPAR scores)
Government procurement system assessed as part of country systems pilot
Ongoing Financing: TF Professionalization of Public Procurement Practitioners and Functions Project (Institutional Development Fund - IDF) TF Strengthening the Capacity of the Procurement Service in Implementing the Philippine Government Electronic Procurement System (Institutional Development Fund - IDF)
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End-FY12 CAS Results Areas and Outcomes Indicative Milestones World Bank Group Program Baseline: 16/30 points or 53% (2007) Target: 24/30 points or 80% (2012) Outcome 2: Improved management and greater transparency in public finances Indicator: Public Expenditures and Financial Accountability (PEFA) scores (i) Predictability and Control in Budget Execution; (ii) Accounting, Recording and Reporting Baseline: (i) 4 out of 9 indicators rated as D+ (ii) all 4 indicators rated as D/D+ Target: (i) 3 out of 9 rated as D+ (ii) 3 out of 4 rated as D/D+ (2012)
New omnibus Public Financial Management (PFM) law in place, or, a coherent PFM reform strategy adopted Coherent Public Expenditure Management (PEM) reform agenda developed with functioning Financial Management Information System (FMIS) (2011) Comprehensive Public Expenditure Management (PEM) reform strategy with draft organic budget law and Government Finance Management Information System (GFMIS) action plan in place Improved PEFA (Public Expenditure and Financial Accountability) scores related to budget formulation and execution
TF Support Creation of Accounting Oversight Board (Financial Sector Reform and Strengthening Initiative - FIRST) TF Strengthening the Capacity and Effectiveness of the Commission on Audit (Institutional Development Fund - IDF) Indicative Financing: Government Integrated Financial Management Information System (GIFMIS) Indicative AAA/Others: Support for Procurement Reforms (including update of Country Procurement Assessment Report – CPAR, and study of Approved Budget for Contract (ABC) effectiveness) Public Finance Management (Government Integrated Financial Management Information System –GIFMIS; Department of Budget Management – DBM; Bureau of Treasury – BTr; Budget Watch)
5.3 Better local governance through more effective decentralization Outcome 1: Deepened and refined decentralization through broad-based reforms Indicator: Consensus built around revisions to key legislation affecting decentralization Baseline: No comprehensive review of decentralization laws Target: Philippines Development Forum (PDF) adopts legislative reform agenda (2012) Outcome 2: Strengthened LGU performance for more effective service delivery Indicator: Number of Local Government Units (LGUs) participating in performance-based programs Baseline: To be determined during project formulation Target: Participating LGUs meeting at least 50% of performance targets (2012)
Developed a simplified local governance indicator set to better monitor Bank-supported interventions designed to improve TAP (Transparency, Accountability, and Participation) Citizen’s scorecards used to monitor public satisfaction on Local Government Unit (LGU) service delivery Performance-based financing and monitoring system developed and piloted in Local Government Units (LGUs)
Ongoing Financing: TF Strengthening the Capacity of the Local Government Academy to Coordinate and Oversee Local Government Training and Capacity Building Project (Institutional Development Fund - IDF) TF Non-Governmental Organization (NGO) Sector Efficiency and Accountability to Strengthen Service Delivery to the Poor (Japan Social Development Fund - JSDF) Indicative Financing: Local Government Unit Performance Grants/ Capacity Building for Local Government Indicative AAA/Others: Programmatic AAA on Decentralization (e.g., revenue mobilization) IFC Advisory Services (e.g., ‘Doing Business’, sub-national ‘Doing Business’)
Note: Support through multidonor trust funds and global funds such as GEF, PPIAF, Carbon Finance Funds, Cities Alliance, Water and Sanitation Program, and others is not all necessarily reflected in the matrix.
Annex 6
Indicative World Bank Group (WBG) Program by Results Areas
Strategic Objective 1: Stable Macro Economy
MTPDP Goals: Maintain economic stability through further fiscal consolidation (improved revenue generation as well as
strengthened expenditure management), rationalized national government spending for devolved services, and reduced debt.
CAS Results Areas and Outcomes Indicative Financing and AAA /Other
1.1 Fiscal and financial stability through
consolidation and improved
macroeconomic risk management
Outcome 1: Maintain tax effort through
strengthened tax administration and tax
policy reform
Outcome 2: Improved efficiency and
targeting of public expenditures
Outcome 3: Improved management of
key fiscal and financial sector risks
Ongoing Financing: (See Annex 5: Results Framework)
Indicative Financing:
Development Policy Loan (DPL)
Development Policy Loan – Deferred Drawdown Option (DPL DDO)
Indicative AAA/Others:
Philippines Development Reports
Quarterly Economic Updates
Programmatic AAA on Public Expenditure Issues
Development of the Philippines Statistical Development Plan (including
grant to improve quality and usefulness of Philippine household surveys)
IFC Advisory Services (AS) on crisis/insolvency management
1.1 Fiscal and financial stability through consolidation and improved macroeconomic risk
management
Indicative financing: The World Bank Group will support the objective of maintaining macroeconomic
stability with a combination of instruments including rapid-disbursing financing, diagnostic AAA, economic
monitoring, focused TA, and policy advice. The close collaboration with other international financial
institutions, in particular the IMF, will continue, and the Philippines Development Forum (PDF) will be
used as a platform for dialogue in addition to regular policy discussions. The Bank will use development
policy operations in support of a strong reform program in government financial management. Along with
the ongoing National Program Support (NPS) for Tax Administration Reform, these operations can provide
quick-disbursing financing.
Indicative AAA/Others: The regular economic monitoring reports and updates, as well as the annual
flagship reports (which in the coming years could focus on topics such as the political economy of reforms
and competition policy, governance, and medium-term development issues) will be supplemented by
programmatic AAA on public expenditure management. It will be essential to provide support (with the
IMF) to the Government to assess and manage fiscal risks including debt. The IFC may also provide
advisory services to clients on crisis response and management of insolvencies. Grants and trust funds will
be provided to strengthen the statistical capacity in the country (e.g., in areas such as the drawing up of a
statistical development plan; the quality, timeliness, and usefulness of household surveys; industrial surveys
to improve the tax base; and national accounts).
The Bank will generate selected briefing notes for the new administration which should ultimately lead to
action-oriented policy briefs for the government on a range of topics covering all key results areas under the
strategic objectives of the CAS. The task would follow an intensive engagement approach which would
entail encouraging public and policy debates on issues prior to the election, and put forward the Bank’s
policy recommendations in an appropriate manner. It would also link up with work on the next Medium-
Term Philippines Development Plan (MTPDP).
Indicative World Bank Group Program by Results Areas Philippines FY10-12 CAS - Annex 6
Page 2 of 8
Strategic Objective 2: Improved Investment Climate
MTPDP Goals: Encourage the private sector to strengthen trade and investment and attain national investment rates of about
25-28 percent of GDP; continue with the integration of the transport system, and develop and diversify the energy mix; ensure
smooth financing for entrepreneurs, including microfinance for underserved areas.
CAS Results Areas Indicative Financing and AAA/Other
2.1 Enabling business environment to
promote competitiveness, productivity,
and employment
Outcome 1: Increased and improved
delivery of infrastructure
Outcome 2: Enhanced regulatory policy
frameworks and institutional capacity for
investment, service delivery, and trade
Outcome 3: Increased investment and
employment in rural and urban
development
2.2 Financial services
Outcome 1: Increased delivery and
access to financial services
Ongoing Financing: (See Annex 5: Results Framework)
Indicative Financing:
Light Rail Transit 1 South Extension Public Private Partnership (LRT-PPP)
Tollway – Public Private Partnership (Cavite-Laguna)
Urban Transport (Metro Manila and other cities)
Secondary/Local Roads
Rural Power Adaptable Program Loan 2 (APL 2)
Agriculture and Agribusiness Support
Mindanao Development
Urban Renewal (Metro Manila Cities)
Sub-National Water - Public Private Partnership (with IFC)
Participatory Irrigation Development Project (PIDP)
Sub-National Finance (SSLDIP2, or Development Bank of the Philippines 3
(DBP3) - Regional Infrastructure for Growth)
Sub-Sovereign Financing Facility (with IFC)
IFC projects in power (generation, transmission, distribution, rural power),
renewable energy (solar, hydro, geothermal), energy sector privatizations,
supply-chain linkages in agribusiness (e.g., bananas), financial services,
banking
IFC projects with banks supporting MSME (Micro and Small and Medium
Enterprise) access to credit
IFC projects with major Philippine universal banks (consolidation, capital
raising, liquidity and risk sharing facilities)
IFC projects in housing finance, recovery of bad assets, mortgage
restructuring, provision of insurance
IFC investments in direct support of top tier Local Government Units (LGU)
Indicative AAA/Others:
Trade Facilitation/Transport/Logistics
Investment Climate for the Poor (with IFC)
Energy Sector Reform
Public Private Partnership (PPP) Regulatory and Policy Support (IFC and
Public Private Infrastructure Advisory Facility - PPIAF)
Environmental Safeguards (including Environmental Assessments)
Agricultural Productivity Growth
Urban Strategy (including resettlement issues)
Financing Innovation Facility (with IFC, including First Loss Facility for
agriculture/agribusiness, and Remittances for Development)
IFC Advisory Services (financial services, Small and Medium Enterprise -
SME banking, central bank, sustainable energy finance, energy efficiency,
energy sector privatizations, structuring power concessions, Mindanao banana
value chain, Business Enabling Environment (BEE), ‘Doing Business’, sub-
national ‘Doing Business’, other sectors and areas)
Continue to offer MIGA’s guarantee products (including Streamlined Small
Investment Program for smaller scale projects)
Indicative World Bank Group Program by Results Areas Philippines FY10-12 CAS - Annex 6
Page 3 of 8
2.1 Enabling business environment to promote competitiveness, productivity, and employment
Indicative financing: The outcomes in this result area are being supported by instruments in the ongoing
WBG portfolio and will be further strengthened and deepened, as well as selectively broadened during the
coming CAS period. Several current projects support CAS objectives in the agricultural sector,
infrastructure (transport and power, including in the rural areas), and rural development. IFC is also
involved in infrastructure, particularly in energy and in transport. Going forward, envisaged transport
projects under the CAS include Light Rail Transit 1 (South Extension) with Public-Private Partnership
(PPP); Metro Manila/and other cities transport integration as a follow-up to MMUTRIP; and Cavite-Laguna
tollway in a growing urban community as a model PPP. In the energy sector, Rural Power APL2 will
support implementation of the Electric Power Industry Reforms and Renewable Energy Act. IFC
participation will have a particular focus on renewable energy development including geothermal, and stress
privatization of power generation. WBG-financed projects will also focus on urban development and
renewal (e.g., Metro Manila Cities); and, water supply at sub-national levels (with IFC). Rural and area
development objectives will be supported through: the Mindanao Development Project; support for
agriculture and agribusiness (e.g., projects to improve market access, product quality, access to technical
support services); and participatory development of irrigation. IFC will work with clients to support supply-
chain linkages in agribusiness (e.g., bananas).
Indicative AAA/Others: Planned AAA will emphasize assessments of the investment climate and policies
for greater private sector participation in investment, growth, and employment generation, particularly in
underserved regions, poorer populations, and subsectors with high potential for development (including
agriculture and agribusiness). The findings of an ongoing study on infrastructure constraints to the
development of the nonfarm sector will underpin activities. The WBG will support the development and
strengthening of the policy frameworks for trade facilitation, transport and logistics, energy efficiency, PPP
regulations, legal and institutional settings, agrarian reform, agricultural productivity, urban strategy, and
power sector reforms. A proposed TA will pilot the use of country systems for environmental safeguards
(including EA, physical cultural resources, natural habitats, and pest management) to institute good
governance. These activities are expected to be supplemented by grant funds and TF resources (e.g., PHRD
grants, GEF) for project development and cofinancing, as well as for studies and TAs. IFC’s Advisory
Services will complement Bank efforts and fill gaps. MIGA’s services and guarantees will continue to be
on offer.
2.2 Increased delivery and access to financial services
Indicative financing: Outcomes in this results area will be supported by IBRD lending through a sub-
national finance project and a sub-sovereign financing facility in collaboration with IFC during the later
years of the CAS. These may include, among other components, increased provision of credit to
creditworthy LGUs and the local private sector for the development of key infrastructure and services. IFC
has ongoing collaborations in the banking sector, and going forward, IFC envisages the promotion of risk
sharing facilities to support sustainable energy investments; MSME finance; the provision of mortgage
toolkits to financial institutions; enabling increased housing finance for middle-income families; and
contributions to private bank financing of credit-worthy LGUs.
Indicative AAA/Others: Studies and TAs will explore a Financing Innovation Facility jointly with IFC
(including components for a First Loss Facility for agriculture and agribusiness, and Remittances for
Development), and the implications of sub-national financing. IFC Advisory Services will emphasize
strengthening of the financial sector, SME banking, financing for sustainable and renewable energy projects,
and improving the business environment. A weather-based (index) agricultural insurance system will be
pilot-tested in at least one region.
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Strategic Objective 3: Better Public Service Delivery
MTPDP Goals: Improve governance of service delivery to support reforms of social welfare and development; continue to
pursue implementation of the health and basic education sector reform agenda to increase access to quality basic education,
health services, and water and sanitation by the poor.
CAS Results Areas Indicative Financing and AAA/Other
3.1 Public service delivery in key sectors
Outcome 1: Improved access to quality
basic education services
Outcome 2: Improved access to health
services
Outcome 3: Increased household access
to safe drinking water and sanitation
services
3.2 Basic service delivery in poor areas
Outcome 1: Scaled-up provision of basic
services through a nationwide
community-driven development program
Outcome 2: Enhanced effectiveness of
public service delivery through more
coordinated area-based approaches
Ongoing Financing: (See Annex 5: Results Framework)
Indicative Financing:
National Program Support (NPS) for Education
National Program Support (NPS) for Health
National Program Support (NPS) for CDD (Community Driven
Development)
Grant: Output-Based Aid (OBA) Facility for Urban Services
IFC investments in water supply
Indicative AAA/Others:
Programmatic AAA for Education
Programmatic AAA for Health
Programmatic AAA for Water Supply and Sanitation Support (including
Best Management Practices in Water Pollution Control)
Indigenous Peoples and Vulnerable Groups
Philippines Population Report
Synergies for Service Delivery (Conditional Cash Transfer – CCT,
Community Driven Development – CDD, National Program Support- NPS)
IFC Advisory Services
3.1 Public service delivery in key sectors
Indicative financing: Future IBRD financing in support of these outcomes will emphasize the National
Program Support (NPS) instrument for both health and education. NPS for Education will increase access
to quality basic education services and support the Basic Education Reform Agenda; and NPS for Health
will finance budget items of the Department of Health in implementing the health sector reform agenda. An
innovative Output-Based Aid (OBA) Facility for Urban Services is proposed in FY10 to support the
extension of water and sanitation service coverage through a connection charge subsidy for the poor.
Current WBG support in this results area includes the ongoing education and health NPSs, the Second
Women’s Health Project, and the Manila Third Sewerage Project (with supplemental GEF funding). Bank-
managed trust funds support sector objectives and projects as well as studies and technical assistance (e.g.,
AusAID support to Philippines Basic Education Reforms; European Commission TF for Health Sector
Reform; a PHRD grant for Local Government Support for the Regional Water Supply Project, and a PPIAF
grant for the Metro Iloilo Water District Options Study). IFC is a partner of the Manila Water Company and
the Asian Hospital.
Indicative AAA/Others: Programmatic AAA for both health and education are planned in the coming years
(moving away from multiple small activities to a comprehensive AAA program to help in designing the
proposed NPSs), as well as a study of best management practices in water pollution control. IFC will
contribute to a water sector strategy note. Advisory Services and TA will emphasize strengthening the
capacity for undertaking PPPs in the water and sanitation subsectors.
3.2 Basic service delivery in poor areas
Indicative financing: The key IBRD lending instrument will be the NPS for CDD (Community Driven
Development) which will finance the scaling up of the existing KALAHI-CIDSS as a core approach to
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poverty reduction through increased access to basic public goods and services in targeted poor communities.
The operation will increase basic services to the poor such as community infrastructure, water supply and
sanitation, education and health services, and community electrification; enhance community empowerment
to engage LGUs in meeting basic needs; and, strengthen participation and accountability consistent with the
Local Government Code. Other donors and partners, including NGOs and civil society organizations, will
also be supporting the CDD operation.
Indicative AAA/Others: The implementation of the current KALAHI-CIDSS is supported by two JSDF
grants on strengthening the capacity of NGOs and community procurement, and a PHRD grant. Urban CDD
activities are supported through the Urban Partnership for Sustainable Upliftment, Renewal, Governance and
Empowerment (UPSURGE) funded by a JSDF grant. AAA tasks are planned to study issues relating to
indigenous people, population growth, and the interactions and coordination among key poverty reduction
interventions such as CDD, CCT, NPS, and sector reform programs.
Strategic Objective 4: Reduced Vulnerabilities
MTPDP Goal: Reduce poverty and increase welfare, particularly in rural areas; sustainably manage the environment and
natural resources; reduce disaster risk and improve recovery management.
CAS Results Areas and Outcomes Indicative Financing and AAA/Other
4.1 Social protection system
Outcome 1: National household poverty targeting
system in place and used
Outcome 2: Conditional Cash Transfer (CCT)
program fully operational
4.2 Disaster risk management and climate change
Outcome 1: Disaster- and climate change-related
risks reduced
Outcome 2: Greenhouse gas emissions reduced
through expansion of mitigation programs in key
sectors and LGUs
4.3 Stability and peace
Outcome 1: Enhanced impact and conflict-
sensitivity of development programs implemented
in communities in Mindanao affected by armed or
violent conflict
Outcome 2: Scaled-up provision of basic services
and livelihood support through community-driven
development (CDD) in communities affected by
armed or violent conflict
Ongoing Financing: (See Annex 5: Results Framework)
Indicative Financing:
Social Welfare and Development Reform (SWDR) - Conditional
Cash Transfers (CCT)
Water Quality Management
Disaster Risk Management (DRM) Financing (including
Catastrophe Deferred Drawdown Option (CAT DDO)
Fund for Peace and Development
TF Chillers Energy Efficiency (Global Environment Facility -
GEF, Carbon Fund)
TF Climate Change Scale-up in Coastal Areas (Global
Environment Facility - GEF)
TF Climate Change Mitigation Program through Waste
Management and Renewable Energy (Global Environment Facility -
GEF, Carbon Fund)
TF Groundwater (Global Environment Facility - GEF)
TF Philippines Climate Change Adaptation (Global Environment
Facility - GEF)
TF Integrated Persistent Organic Pollutants Management
IFC projects in renewable energy (e.g., geothermal, hydro, solar),
power (including in Mindanao)
IFC projects in power generation in Mindanao including support to
Electrical Cooperatives for capital expansion
Indicative AAA/Others:
Programmatic AAA for Social Protection and Poverty Reduction
Programmatic AAA for Disaster Risk Management (DRM),
including Climate Change issues
Encouraging More Resilient Communities in Conflict- Affected
Areas (State and Peace-building Fund - SPF)
IFC Advisory Services (e.g., rural electrification, power supply
aggregation agreements, banana value chain)
World Bank Institute (WBI) partnerships
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4.1 Social protection system
Indicative financing: WBG will financially support the outcomes in this result area with a loan for the
Government’s Social Welfare and Development Reform (SWDR) - Conditional Cash Transfers (CCT)
program. The CCT will provide income support to the poor and protection from shocks, address
deteriorating education and health indicators for the poor, and work on both the supply and demand sides of
social services for the poor.
Indicative AAA/Others: Non-lending support for the SWDR program will be provided through TA to the
Government in strengthening the design and implementation of the CCT program and the roll-out of the
National Household Targeting System for Poverty Reduction. The TA will assist in the proper operational
implementation of these programs and support the intensive inter-agency policy dialogue that would be
required for success. Programmatic AAA for social protection and poverty reduction would undertake key
pieces of new knowledge generation to advise the Government on policies and actions, conduct continued
core poverty diagnostics, and provide a roadmap for the development of poverty monitoring systems and
statistics. This is particularly critical given the context of the unfolding global economic crisis. IFC is
currently partnering with several real estate and mortgage finance institutions that provide middle-income
housing. Future involvement will also be through support to credit financing agencies that cater to
underserved clients.
4.2 Disaster risk management and climate change
Indicative financing: The CAS proposes increased IBRD financing for disaster risk management (DRM)
including a disaster risk reduction Catastrophe Deferred Drawdown Option (CAT-DDO) operation in FY11
and related TAs. The CAT-DDO would provide immediate liquidity for post-disaster reconstruction to
allow for rapid recovery and encourage mitigation investments. A drawdown option for LGUs that
demonstrate commitment to implementing a DRM plan would be created. Support for disaster mitigation
activities, such as flood protection infrastructure, slope stabilization, and retrofitting of schools and hospitals
in hazard-prone areas, could also be provided. The Global Facility for Disaster Reduction and Recovery
(GFDRR) is funding a TA program to support LGUs to enhance their capacity to manage natural disasters
and similar support is expected to continue. Bank-managed trust fund resources are expected to address
issues relating to land use-based climate change adaptation measures and assist the Philippines (along with
other countries in EAP) to formulate strategies and programs to mitigate greenhouse gas (GhG) emissions
from current land use practices (the major source of GhG in developing countries). Global public funds,
GEF, and bilateral trust funds are also expected to continue the funding of selected high priority DRM and
climate change mitigation/adaptation activities as at present. Activities under consideration include
improving energy efficiency of chillers to reduce carbon emissions, addressing climate change concerns for
coastal areas and climate change impacts through waste management, groundwater management, and
integrated management of Persistent Organic Pollutants (POPs).
Indicative AAA/Others: AAA tasks will support the WBG financing program with studies related to both
disaster risk management and climate change issues. IFC Advisory Services will also be relevant in topics
such as electrification and Renewable Energy Technologies (RET). An innovative weather-based (index)
agricultural insurance system will be pilot-tested. The World Bank Institute (WBI) has considerable
expertise and cross-country experience in these areas, and the partnership with the Philippines will be
strengthened.
4.3 Stability and peace
Indicative financing: Currently, WBG resources to conflict-affected areas are being provided through
several channels such as the Mindanao Rural Development Project Phase 2 (MRDP2), the Autonomous
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Region in Muslim Mindanao (ARMM) Social Fund Project, and a Multi-Donor Trust Fund (MDTF) for
Mindanao Reconstruction and Development Program. Going forward, a Fund for Peace and Development
is envisaged in the outer years of the CAS. The fund would reduce gaps in development assistance, improve
basic services and livelihoods in vulnerable areas, achieve convergence in the implementation of various
assistance approaches, and strengthen the pivotal role of LGUs as the focal point for peace and development
assistance in their municipalities. A Mindanao Development Project could also be pursued to further
strengthen infrastructure and basic services. It is expected that some IFC operations would include activities
(such as in the energy sector) in the area.
Indicative AAA/Others: A key piece of AAA will focus on the topic of encouraging more resilient
communities in conflict-affected areas in the Philippines to enhance the understanding of local conflict
dynamics and typologies, develop a more harmonized and conflict-sensitive framework for CDD
approaches in line with those at use by the Bank and others, and strengthen LGU capacity for development
planning and project execution with improved governance in targeted conflict-affected areas. GEF and
various TF resources are expected to continue their support for preparatory work and various project
components or stand-alone activities.
Cross-Cutting Theme: Good Governance
MTPDP Goals: Strengthen partnerships and accountability among government, civil society, and the private sector; fully
operationalize the Government Electronic Procurement System; conduct integrity development reviews in government
agencies, and expand and institutionalize lifestyle-checks.
CAS Results Areas Indicative Financing and AAA/Other
5.1 Governance and anticorruption in
selected national government agencies
Outcome 1: Core business systems,
processes and capacities in selected
agencies improved
5.2 Procurement and public financial
management reforms at national and local
levels
Outcome 1: The Procurement Law more
strictly enforced
Outcome 2: Improved management and
greater transparency in public finances
5.3 Better local governance through
effective decentralization
Outcome 1: Deepened and refined
decentralization through broad-based
reforms
Outcome 2: Strengthened LGU
performance for more effective service
delivery
Ongoing Financing: (See Annex 5: Results Framework)
Indicative Financing:
Judicial Reform 2
Government Integrated Financial Management Information System
(GIFMIS)
Local Government Unit Performance Grants/ Capacity Building for Local
Government
Indicative AAA/Others:
TA for Agency Institutional Strengthening
Programmatic AAA on Sector Governance Assessments (for various sectors/
SOs - Strategic Objectives)
Support for Procurement Reforms (including update of Country Procurement
Assessment Report – CPAR, and study of Approved Budget for Contract
(ABC) effectiveness)
Public Finance Management (Government Integrated Financial Management
Information System –GIFMIS; Department of Budget Management – DBM;
Bureau of Treasury – BTr; Budget Watch)
Programmatic AAA on Decentralization (e.g., revenue mobilization)
IFC Advisory Services (e.g., ‘Doing Business’, sub-national ‘Doing
Business’, Business Enabling Environment - BEE, regulatory simplification,
Corporate Social Responsibility
5.1 Governance and anticorruption in selected national government agencies
Indicative financing: A World Bank-financed Judicial Reform Support Project (JRSP) has been under
implementation since 2004. Under the CAS, a second JRSP operation is proposed for FY12. A proposed
grant-funded TA for Agency Institutional Strengthening would support selected agencies to develop
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coherent institutional development and anti-corruption plans, and provide technical support for their
implementation. The focus will be on strengthening the agencies’ core PFM and procurement functions, but
could also include broader institutional development needs on a case-by-case basis. The TA would
complement ongoing or planned lending operations (such as the NPSs in the social sectors) to reinforce
Bank support for strengthening governance systems.
Indicative AAA/Others: Selected institutional strengthening efforts would be pursued through the use of
TFs (including IDFs) as at present, and IFC would also address the issue of reducing corruption through
dialogue related to its transactions. A programmatic AAA is planned for Sector Governance Assessments for
some selected sectors.
5.2 Procurement and public financial management reforms at national and local levels
Indicative financing: The WBG has an active dialogue and engagement on procurement issues related to
the implementation of the Bank-financed and managed portfolio of operations. To support the PFM
outcomes under this results area, the WBG will finance a Government Integrated Financial Management
Information System (GIFMIS) Project in FY11 focusing on integrating core FMIS for the Department of
Budget Management (DBM), Bureau of Treasury (BTr), line agencies, and possibly the Commission on
Audit (COA). The Bank will continue to support the implementation of the Government’s procurement
reforms and procurement systems (including e-procurement).
Indicative AAA/Others: The ongoing programmatic AAA on PFM Reform Support would continue with
the details and outputs to be determined during annual concept and progress reviews. Future subjects could
include government-wide and specific PFM issues, PEFA updates, agency-PEFAs, agency budget
management reviews, topical PFM workshops, and PFM policy notes. IDFs currently support the
Professionalization of Public Procurement Practitioners, the implementation of the Government’s e-
procurement system, and capacity building of COA; similar and other TF-funded activities will continue
during the CAS period. Follow-up support for the implementation of the main recommendations of the
Report on Observance of Standards and Codes (ROSC) accounting and auditing will continue.
5.3 Better local governance through effective decentralization
Indicative financing: LGU performance grants and capacity building for local government will spearhead
WBG efforts to support better governance through decentralization in addition to various sub-national and
local level components in other Bank engagements. The activity would build core competencies of the
LGUs in financial management, procurement, planning, and administrative functions by linking incentives
to the achievements of pre-identified performance targets. A secondary objective would be to target poorer
provinces to help them bridge the growing gaps within LGU groupings.
Indicative AAA/Others: A series of reports on various aspects of decentralization in the Philippines and its
effectiveness under the current design of intergovernmental arrangements will be undertaken within a
programmatic AAA. Programmatic AAA will also be undertaken on sector governance assessments .
Analytical work will underpin the development of a country action plan for demand for good governance.
Local government capacity strengthening will be supported through a TA focusing on support to LGUs for
implementing difficult investments, (e.g., PPP), complex projects, and institutional reforms. Trust funds,
including IDFs, currently support various LGU capacity strengthening activities, governance performance
frameworks, and CSO/NGO effectiveness, and such support will continue.
Note: Support through multidonor trust funds and global funds such as GEF, PPIAF, Carbon Finance Funds, Cities Alliance, Water
and Sanitation Program, Private Enterprise Partnership (IFC), and others is not necessarily all reflected in this annex.
Annex 7
Official Development Assistance (ODA) Programs in the Context of the CAS
1. This Annex provides an overview of major official development assistance (ODA) activities in the Philippines, organized according to the four strategic objectives and one cross-cutting theme of the CAS. The mapping was based on records of ODA programs from the National Economic and Development Authority (NEDA), as well as updates from the ODA agencies. The purpose of this Annex is to present an overview of the broad distribution of ODA activities along the CAS objectives and results areas to help indicate areas where there is potential for further Bank engagements, as well as where the role of the Bank Group needs to be delineated against that of other ODA partners.
2. Based on NEDA figures as of December 2008, Japan provides the largest portion of ODA to the Philippines, accounting for approximately 43 percent of the total ODA net commitments of around US$9.7 billion. The Bank ranks second (tied with the Asian Development Bank) with a 16 percent share. Together, Japan, ADB and the World Bank Group provide an estimated 75 percent of all ODA to the Philippines. China, which is ranked fourth, accounts for 11 percent of the total ODA. The remaining 14 percent is comprised of ODA from other agencies, mostly bilateral organizations which provide grants to the national government, local governments, communities, and/or to NGOs under their respective programs/strategies.
3. It should be noted that the mapping presented in this Annex may not capture activities of development partners which have smaller programs in the Philippines. In addition, many development partners participate in the policy dialogue under the Philippines Development Forum (PDF), which may not be captured in specific programs or projects reflected in the matrix (see Attachment 1). Thus, it should be stressed that this write-up is not necessarily a comprehensive picture of all the development partners active in the Philippines, nor of the areas of involvement of the development partners.
Strategic Objective 1: Stable Macroeconomy
4. The ADB, Australia, Japan, Sweden and the USA are the major development partners with strategies/thrusts that directly support macroeconomic stability through technical cooperation, grants, project loans, and/or policy-based program loans that relate to tax revenues, tax administration, tax policies, finance and public expenditure management, and management of fiscal and financial sector risks. ADB-financed Development Policy Support Programs (DPSP) and TA projects support policy reforms related to, among others, revenue administration, macroeconomic management, and public expenditure issues. Japan, through its Japan International Cooperation Agency (JICA), has recently committed to co-finance the ADB-financed DPSP. JICA also supports customs administration reforms at the Bureau of Customs. USA supports tax and customs administration reform, revenue forecasting, and budget oversight management. Sweden has a small grants program in support of tax policy and tax-related statistics work with the Bureau of Internal Revenue (BIR) which is coordinated under the same framework as the Bank-financed National Program Support for Tax Administration Reform. Australia has supported various relevant work under its Partnership for Economic Governance Reforms program, and has assisted the BIR in putting together the results framework for the Tax Administration Reform project, as well as provided capacity-building for the BIR. In addition, Australia has partnered with the World Bank Group on joint analytical work related to public expenditure management, an area with strong potential for continuing partnerships. The IMF is also involved in this strategic objective through its ongoing annual Article IV consultations, and it is
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expected that the World Bank Group will coordinate with the IMF on financial sector assessments as well as on the policy advice and TA that the IMF provides to the Government on tax administration reforms and other related matters. Aside from partnerships on specific operations, the World Bank Group coordinates at the policy level with all the active players in this area through its co-chair role in the PDF Working Group on Fiscal and Economic Reforms.
Strategic Objective 2: Improved Investment Climate
5. Given the broad coverage of the CAS results area of Enabling Business Environment to Promote Competitiveness, Productivity and Employment, this area has the biggest confluence of ODA programs. The programs which support this results area include those of ADB, Australia, China, France, Korea, Japan, and the UK which support relatively large infrastructure projects such as national roads/highways, railways, airports, fish ports, rural roads, bridges, irrigation, water supply and sanitation projects, power and rural electrification, including power sector reforms through a program loan by ADB. Additional bilateral support for infrastructure is coursed through global programs administered by the Bank, such as the Public-Private Infrastructure Advisory Facility which is a multi-donor technical assistance facility aimed at helping developing countries improve the quality of their infrastructure through private sector involvement, and (specifically for the water sector) the Water and Sanitation Program. The EC and Canada have trade facilitation and other trade-related assistance that support the country’s overall investment climate and competitiveness. Other partners, such as the USA and the UN, support activities that indirectly address productivity, livelihood, and competitiveness through various entry points such as support for agricultural productivity, youth employability, sustainable livelihoods, community enterprises, and other interventions mostly at the grassroots level. Canada and Australia have provided support to the World Bank Group through the IFC’s Private Enterprise Partnership facility for small and medium enterprises (SMEs). The World Bank Group, including through, as well as jointly with IFC programs, seeks to increase private sector investments in infrastructure through actual investment operations, promotion of public-private partnerships, and support to SMEs and micro-enterprise growth.
6. On Financial Services, ADB is assisting in financial market regulation and intermediation through a program loan, as well as capacity building for housing micro-finance, while Spain and USA are supporting micro-enterprise development through various types of projects. Germany is supporting various credit lines to private financial institutions for the SME sector, as well as on-lending through government financial institutions to local governments for local infrastructure needs. . All these related programs to improve the investment climate are being coordinated at the policy level through the PDF working groups on Growth and Investment Climate and on Infrastructure, which are co-chaired by the World Bank Group and by Japan respectively.
Strategic Objective 3: Better Public Service Delivery
7. ADB, Australia, Canada, EC, Germany, Japan, Korea, New Zealand, Spain, UN, and the USA all have programs that focus on Public Service Delivery in Key Sectors specifically related to health, education, water and sanitation services. The ADB, Australia, EC, Germany and the USA have substantial programs in the health sector. The ADB, aside from technical assistance, is funding a health project which was recently restructured to support the same health sector reform agenda supported by the World Bank Group under the National Program Support for the Health Sector Reform Agenda. Australia’s investment in health is focused on maternal and child health, reproductive health and malaria prevention, delivered through partnerships with UN agencies. The EC is funding two ongoing trust funds administered by the World Bank Group to support implementation of health sector reforms in selected provinces, one specifically for Mindanao provinces. In the basic education sector, Australia is providing support to the Philippine Basic Education Reforms through a
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jumbo trust fund administered by the World Bank Group as well as through projects to improve the quality of access to basic education in Mindanao and the Visayas, including specifically for Muslim education and disadvantaged groups. USA’s assistance in education is aimed at increasing access to quality basic education for children. For both the health and education sectors, the World Bank Group is financing budget support-type operations within the framework of the Government’s reform agendas for the sector. The other development partners mentioned above support a variety of interventions (loans, grants, analytical and advisory activities, and technical assistance/cooperation) to support access to basic services at the national and local government levels, and at the community levels.
8. In terms of the results area of Basic Service Delivery in Poor Areas, almost all partners are involved: ADB, Australia, Canada, the Czech Republic, EC, France, Germany, Japan, Spain, UN, and the USA. The programs include various forms of assistance targeted at poor communities/municipalities/cities/provinces/regions, including agrarian reform communities. Many of the programs/activities are directly related to addressing the MDGs, particularly on health, education and poverty levels. Programs in health and education (as well as social protection) are coordinated at the policy level through the PDF Working Group on MDGs and Social Progress, of which the Bank is an active member. The Banks’ major engagement in this results area is through support to the nationwide community-driven development project (KALAHI) which provides opportunities for closer partnerships in targeted communities, as well as in enhancing effectiveness of public service delivery through more coordinated area-based approaches.
Strategic Objective 4: Reduced Vulnerabilities
9. The results area of Social Protection System is one where there are no other major ODA programs in place that directly address social protection systems, although Australia, EC, Germany, New Zealand, Spain, UN, and USA have various activities that support increased and more equitable access to basic social services by the poor and the vulnerable, as well as programs specifically targeted to vulnerable groups such as children, women, the poor, and indigenous peoples. In particular, the EC is supporting the Philippines Health Insurance Corporation to increase financial protection of the poor. In terms of analytical work, the ADB has an ongoing technical assistance for the assessment of poverty reduction which would be an important analytical tool for designing and targeting social protection systems. The Government’s Conditional Cash Transfer (CCT) program is envisioned to serve as the framework for all ODA support to social protection. The upcoming World Bank-supported Social Welfare and Development Reform Project is expected to be the major ODA program in the social protection area. In partnership with the Bank, Australia is providing technical assistance to strengthen the design of the CCT pilot’s targeting and other related operational mechanisms.
10. Relatively fewer partners have specific programs/thrusts relating to Disaster Risk Management -- Australia, Japan, EC, Spain, and the USA. Such projects include Australia’s support for geo-hazard mapping and building disaster risk management capacity in the Philippines; in addition, Australia is also supporting the Bank’s Global Fund for Disaster Risk Reduction. On the more general area of climate change and environment, ADB, Australia, Germany, Korea, Spain and the UN support specific programs that help address these issues including environmental programs, water resources or river basin management, and programs that address sustainable development and management of natural resources at the national, local and community levels. The EC is considering providing some support to climate change adaptation, and depending on the specific focus, this could be a potential area for partnership with the World Bank Group. The Netherlands is co-financing the Bank-supported Laguna de Bay institutional strengthening project. Various bilateral organizations are supporting climate change initiatives through multi-donor global programs such as the Global Environment Facility, the Global Climate Change Fund, and the Carbon Finance Funds
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administered by the Bank and for which specific activities in the Philippines are ongoing and planned. The PDF Working Group on Sustainable Rural Development, of which the Bank is a member, facilitates the policy coordination for ODA-supported environmental programs/projects.
11. On Stability and Peace, Australia, Canada, EC, Germany, Japan, New Zealand, Spain, Sweden, UN and the USA have active programs that support the peace and development of Mindanao, as well as other interventions related to conflict-affected areas through community-driven development. Some of the support is provided through the multi-donor Mindanao Trust Fund administered by the World Bank Group (with contributions from Australia, Canada, EC, New Zealand, Sweden and the US), as well as through the development partners’ own programs. Assistance may be in the form of targeted programs for specific areas in Mindanao and/or for specific sectors in Mindanao. The range of programs include almost all types of interventions -- from large to small-scale infrastructure, from national government- to LGU- or community-based assistance, from sector-specific operations (e.g., health, education) to cross-sectoral operations, from livelihood to institution-building activities, and from post-conflict to peace and development interventions. The Bank plays an active role in coordinating ODA for Mindanao in partnership with the Government and other ODA partners as co-chair of the PDF Working Group on Mindanao, as well as through chairmanship of the steering committee for the Mindanao Trust Fund.
Cross Cutting Theme: Good Governance
12. Under the cross-cutting theme of Good Governance, many development partners are involved but spread out across the three results areas. Under Governance and Anticorruption in Selected Agencies, ADB, Australia, Canada, Germany, Japan, Korea, and the USA are providing assistance to specific agencies. The ADB has a large Justice Sector Reform program loan, while Canada and the USA are providing support for other related interventions (mediation, alternative dispute resolution, legal education reform, etc.). Since a strong civil service has a positive impact on good governance, Japan’s support through JICA to the BIR in human resource development aspects and Korea’s program for capacity building in policy development and public administration covering various agencies are mapped under the governance agenda. Australia is providing parallel support to the World Bank-supported Land Administration Project which has a strong governance aspect, and is supporting enhanced supervision of the World Bank-financed roads project. In addition, Australia is providing support for the design and pilot test of governance and anticorruption measures relating to the upcoming World Bank-supported Social Welfare and Development Reform Project, which would be a major program for which the anticorruption component would be key to success. Coordination of ODA programs/projects at the policy level is undertaken through the PDF Working Group on Governance and Anticorruption, of which the Bank is an active member.
13. On Procurement and Public Financial Management Reforms, ADB, Canada EC and Korea have limited, but strategic, involvement in the area. Canada will be supporting an ICT component of the Government Procurement Policy Board (GPPB) operations, while Australia and the EC are actively supporting PFM reforms through various grants. ADB has ongoing technical assistance to strengthen the Government’s electronic procurement system, and a separate technical assistance to support the harmonization agenda which is primarily focused in this results area. Many other partners participate more actively in the policy dialogue through the sub-group on procurement co-chaired by the Bank under the PDF Governance and Anti-Corruption Working Group.
14. The results area of Better Local Governance Through More Effective Decentralization is another area where multiple partners are engaged, and the forms of engagement include technical assistance for local planning and expenditure management, local government financing, and budget reforms at the provincial and municipal levels. Active development partners here include ADB,
ODA Programs in the Context of the CAS Philippines FY10-12 CAS - Annex 7 Page 5 of 6
Australia, Austria, Canada, EC, Germany, Japan, New Zealand, Spain, UN and the USA. ADB has a program loan and technical assistance for local government financing, and budget reforms. Canada continues its long term assistance through its local governance support program currently in the Autonomous Region of Muslim Mindanao and for local economic development. Also, Canada and Spain are planning to provide funding for a Dialogue Fund, to be administered by the World Bank Group, to support the decentralization and local government agenda. The World Bank Group plays a key role in coordinating the dialogue on decentralization through its co-chairmanship of the PDF Working Group on Local Government and Decentralization.
15. The following matrix indicates the presence of ODA partners in each strategic objective and results area of the CAS. Overall, it will be noted that there are some results areas where there is a proliferation of ODA activities while in others there may be only a few. This could be due to the large financing requirements in one sector relative to others, as well as the availability of government financing and/or private sector assistance in some areas compared to others. Because of the varying degrees of detail available for each organization’s programs (some have general strategic thrusts while others include details up to the activity level), the mapping does not differentiate on the levels of involvement of the various development partners, but should be able to give a snapshot of the presence of ODA in each strategic objective and results area.
ODA Programs in the Context of the CAS Philippines FY10-12 CAS - Annex 7 Page 6 of 6
Attachment 1: PHILIPPINES : PROGRAMS OF OTHER DEVELOPMENT PARTNERS
(Mapped into the CAS Strategic Objectives and Results Areas)
Overall Objective: Inclusive Growth
Strategic Objective 1: Stable Macro
Economy
Strategic Objective 2: Improved Investment
Climate
Strategic Objective 3: Better Public Service
Delivery
Strategic Objective 4: Reduced Vulnerabilities
Cross Cutting Theme: Good Governance
Fisc
al a
nd fi
nanc
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stab
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thro
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cons
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and
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ADB x x x x x x x x x x Australia x x x x x x x x x x Austria x x
Canada x x x x x x x
China x
Czech Republic x x
European Comm. x x x x x x x x x
France x x
Germany x x x x x x x x
IMF x
Japan x x x x x x x x x x
Korea x x x x x x
New Zealand x x x x
Netherlands x
Spain x x x x x x x
Sweden x x
UK x
UN Agencies x x x x x x x x x
USA x x x x x x x x x x Note: For some countries, the matrix may not reflect support provided through global programs such as the Public-Private Infrastructure Advisory Facility, Global Environment Facility, Water and Sanitation Program, Carbon Finance Funds, Cities Alliance Program, and others. Also, some entries are based on the development partners’ strategic areas in the Philippines and not necessarily on specific programs.
Annex 8
World Bank Group-Managed Trust Funds in the Philippines
TF Number Trust Fund Closing
FY
US$
000s
BE/RE1
Strategic Objective 1: Stable Macro Economy
1.1 Fiscal and financial stability through consolidation and improved macroeconomic risk management
TF056828 IDF - Strengthening of Revenue Administration and Collection
Efficiency
FY10 250 RE
TF092308 IDF - Policy-Based Budgeting Medium-Term Framework FY12 300 RE
Strategic Objective 2: Improved Investment Climate
2.1 Enabling business environment to promote competitiveness, productivity, and employment
TF093078 EAIIG - National Roads Improvement and Management Program
(NRIMP2) - Enhanced Supervision
FY09 75 BE
TF093078 EAIIG - PPP Support to Enhance the Capacity of the Toll
Regulatory Board to be an Effective Regulator of Toll Facilities
FY10 200 BE
TF093318 PPIAF - Philippines: Lead Transaction Adviser for Cala Toll Road –
Supervision Budget
FY10 90 BE
TF057138 PHRD - Philippines - Public Private Participation in Transport
Infrastructure
FY10 1,000 RE
TF092525 EAIIG - Philippines Agribusiness Value Chain, Logistics and
Infrastructure Study
FY10 300 BE
TF052188 GEF FSP - Philippines: Rural Power Project FY10 9,000 RE
TF093636 EAIIG - Philippines Electrification: Best Practices in
Subtransmission Development
FY10 90 BE
TF053361/
TF053360
TF053607
TF053613
TF092038
TF090729
TF055841
GEF FSP - Philippines: Electric Cooperative System Loss Reduction
Project
IFC/Norway - Private Sector Participation Project in Provision of
Power Supply to Rural Nongrid Areas
IFC/USA - Private Sector Participation Project in Provision of Power
Supply to Rural Nongrid Areas
IFC/Spain TATF - Philippines Olongapo Power
IFC/USA - ‘Doing Business’ Plus
IFC/CIDA/AusAID – Private Enterprise Partnersip (PEP) -
Philippines
FY12
FY09
FY09
FY10
FY09
FY10
12,877
275
15
60
10
10,000
RE
BE
BE
BE
BE
BE
2.2 Financial services
TF090611 PPIAF-SNTA - Credit Rating for Selected Cities FY09 390 BE
TF090611
TF054893
PPIAF-SNTA - Small Water Utilities Financing
IFC/Japan TATF – Asian Commercial Bank – Strengthening
Financial Institutions in East Asia
FY09
FY09
69
40
BE
BE
Strategic Objective 3: Better Public Service Delivery
3.1 Public service delivery in key sectors
TF091695 AusAid TF for Support to Philippine Basic Education Reforms FY11 36,482 RE
TF090182 EC TF for Health Sector Reform FY11 9,319 RE
TF057794 PHRD - Local Government Support for Regional Water Supply
Project
FY09 1,000 RE
TF093730 EAIIG - Concessional Financing Facility for Water and Sanitation
Service Providers
FY09 185 BE
TF092713 PPIAF - Philippines: Metro Iloilo Water District Options Study FY10 245 BE
TF055264
TF055295
IFC/France TATF - Private Sector Participation in the Water Sector
in the Philippines
IFC/USA TATF - Private Sector Participation in the Water Sector in
the Philippines
FY09
FY09
43
12
BE
BE
TF057488 WSP - Program for Sustainable Sanitation – Philippines Component FY11 1,566 BE
TF057296 GEF FSP - Manila Third Sewerage Project
FY13 5,000 RE
1 BE: Bank Group (including IFC) Executed; RE: Recipient Executed
World Bank-Managed Trust Funds in the Philippines Philippines FY10-12 CAS - Annex 8
Page 2 of 2
TF Number Trust Fund Closing
FY
US$
000s
BE/RE1
3.2 Basic service delivery in poor areas
TF056975 PHRD - Implementation- Philippines: KALAHI-CIDSS FY09 199 RE
TF058161/
TF058154
JSDF - Urban Partnership for Sustainable Upliftment, Renewal,
Governance and Empowerment (UPSURGE)
FY12 2,090 BE/RE
Strategic Objective 4: Reduced Vulnerabilities
4.1 Social protection system
TF092347 DFSG - Philippines Country Study FY10 50 BE
4.2 Disaster risk management system and climate change
TF091357 Philippines: Country Environmental Analysis FY09 78 BE
TF055016 Clean Development Mechanism TA for Philippines FY10 406 BE
TF090241 GEF PDF B - Philippines: Preparation of Climate Change
Adaptation Phase I Project
FY09 283 RE
TF091752 GFDRR - Philippines: Supporting Local Government Capacity to
Manage Natural Disasters
FY09 1,000 BE/RE
TF092836 NTFPSI- Climate Change in Coastal Areas FY12 330 BE
TF052826 Dutch Cofinancing - Laguna De Bay Institutional Strengthening and
Community Participation Project
FY10 5,000 RE
TF021931 OTF - Philippines ODS Phase Out Investment Project FY10 30,000 RE
TF056617 Swedish Contribution to the Philippine National CFC Phase Out
Plan
FY10 291 RE
TF092354 GEF PPG - Philippines: Grant for Preparation of Integrated
Persistent Organic Pollutants Management (Dioxins and Furans,
PCB and Contaminated Sites) Project
FY10 240 RE
TF092603
TF054138
Philippines Disaster Risk Management Project
IFC Philippines Asian Conservation Company
FY10
FY11
75
1,600
BE
BE
4.3 Stability and peace
TF091787 Mindanao Regional Development in Conflict-Affected Areas FY09 300 BE
Various TFs Mindanao Reconstruction and Development Program FY14 4,540
TF091669 GEF PPG - Philippines: Grant for Preparation of Mindanao Rural
Development Project Phase II - Coastal and Marine Ecosystem
Conservation Component
FY09 135 RE
TF092858 EAIIG - Rural Infrastructure Component of the Mindanao Rural
Development Program Phase 2
FY10 150 BE
Cross-Cutting Theme: Good Governance
5.1 Governance and anti-corruption in selected national government agencies
TF056626 IDF - Philippines: Strengthening of Monitoring and Evaluation
(M&E) Capacities in Agriculture
FY09 300 RE
TF090551 IDF - Strengthening the Institutional Effectiveness of the National
Commission of Indigenous Peoples
FY10 170 RE
5.2 Procurement and public financial management reforms at national and local levels
TF057655 IDF - Philippines: Professionalization of Public Procurement
Practitioners and Functions Project
FY10 300 RE
TF092211 IDF - Strengthening the Capacity of the Procurement Service in
Implementing the Philippine Government Electronic Procurement
System
FY12 300 RE
TF091036 FIRST - TA to Support Creation of Accounting Oversight Board FY10 245 BE
TF092158 IDF - Strengthening the Capacity and Effectiveness of the
Commission on Audit
FY12 300 RE
5.3 Better local governance through effective decentralization
TF092492 IDF - Philippines: Strengthening the Capacity of the Local
Government Academy to Coordinate and Oversee Local Government
Training and Capacity Building Project
FY12 260 RE
TF056159 JSDF - Philippines: NGO Sector Efficiency and Accountability to
Strengthen Service Delivery to the Poor
FY10 361 RE
Annex 9
Philippines Harmonization Agenda
Procurement Reform
1. Procurement reform continues to be pursued by its champions in the Government since the
passage of the Government Procurement Reform Act in January 2003. The commitment to
sustaining progress in the pursuit of reform has been clearly demonstrated since the passage of the
Procurement Law, and has benefited from the Bank’s continuing technical assistance and financial
support.
2. The Government Procurement Policy Board (GPPB) has developed as an active, efficient
and effective procurement policy oversight body. The GPPB has so far issued more than 70 rules that
clarify and interpret provisions of the Procurement Law to aid implementation at the agency and local
government levels. The Bank supported the creation of the GPPB and its early years of operation through
a US$300,000 IDF grant that closed in 2005.
3. The Government has standardized and harmonized with ADB, JBIC and WBG
procurement documents and forms, which are now being used in all ODA assisted projects. The
Procurement Law requires the development of standardized procurement documents and forms.
Moreover, the country is a signatory to the 2003 Paris Declaration for Aid Effectiveness that calls for
harmonization and alignment to achieve better aid effectiveness, and has also endorsed the Accra Agenda
for Action to further strengthen development effectiveness. The Government harmonized with the three
development partners successively the Philippine Bidding Documents in August 2005 and the Generic
Procurement Manuals in July 2007. With only a few differences with international procurement practice,
as recorded in the 2007 CPAR, the country’s public procurement system can now be described as
substantially aligned with international standards. In supporting the attainment of these initiatives, the
Bank has provided Technical Assistance to the GPPB through an ASEM grant of US$796,000 that closed
in 2007.
4. Efforts by the Government to improve transparency in procurement biddings include the
operationalization of the central E-Government Procurement (e-GP) portal and participation of
civil society observers in the bidding process. The Government operates a central e-GP portal, the
Philippine Government Electronic Procurement System (PhilGEPS), for all procurement biddings. The
World Bank and Asian Development Bank carried out an assessment of its acceptability for MDB-funded
procurement in November 2006, leading to an agreement to modify five areas of the system to suit MDB
Procurement Guidelines. The five changes were substantially completed. Six implementing agencies have
conducted a pilot harmonization program of e-GP system application. The PhilGEPS provides, under its
Phase 1, a centralized web portal for publication of notices, registration of suppliers, issuing procurement
documents, and publication of contract awards. The Bank approved an IDF grant of about US$300,000 in
2008 to develop Phases 2 to 5 which will expand the capacity of the system to virtual store, e-payment, e-
charging of fees, and e-bidding. The law requires every bidding process to be observed by civil society
representatives. While there is a challenge in sustaining this requirement of the law, there are CSOs that
are committed. A JSDF was recently approved with a funding of about US$1 million to find ways of
strengthening GPPB and the Transparency Accountability Network (TAN) towards providing appropriate
incentives to the CSO observers in local and community procurement.
5. The GPPB, having a vital role in monitoring implementation of the procurement law, has
also initiated moves to strengthen procurement monitoring and evaluation which significantly
improve transparency in procurement activities. GPPB monitors procurement performance of
Philippines Harmonization Agenda Philippines FY10-12 CAS - Annex 9
Page 2 of 6
government agencies through three channels: (a) Online Monitoring and Evaluation System – a self-
monitoring tool for agencies online at www.gppb.com to find out their level of compliance with the law;
(b) Agency Compliance and Performance Indicator System, a set of indicators based on the OECD-DAC
Baseline Indicator System, which assess the performance of an agency compared with a set of
internationally accepted good procurement practices; and (c) e-procurement system, through PhilGEPS.
In promoting transparency, PhilGEPS now posts procurement notices by more than 50 percent of all the
agencies and local government units (excluding barangays or the lowest unit of government). More than
15 percent of them have started posting the award notices as well, including 90 percent of the GPPB
member agencies. Most recently, the Transparency Accountability Network (TAN) developed a
monitoring system that would encourage each agency to maintain good records management systems
such that documents evidencing the procurement process will be available for scrutiny by the civil society
members. The project is financed by a portion of the recently completed IDF grant on Strengthening
Internal Audit Units.
6. Recognizing the importance of effectively enforcing the intent of the Procurement Law, the
Bank and the Government supported programs to strengthen the procurement audit systems. The
Bank’s IDF of US$300,000 which closed in June 2008, supported the “Strengthening of Internal Audit
Units toward Effective Procurement Monitoring and Enforcement”. It was executed by the Presidential
Anti-Graft Commission under the Office of the President. The IDF funded activities that produced: a
mapping of the quality of existing internal audit units, a generic internal audit manual (GIAM), a
certification study for government internal auditors, and a procurement record monitoring system from
the perspective of CSO observers. The GIAM has been accepted by the Bank as substantially meeting
international standards for the practice of internal auditing. Moreover, the Bank in its July 2008 letter
informed the Government that the GIAM will be prescribed to agencies implementing Bank-assisted
projects as part of project financial management arrangements, and as an anticorruption measure. A new
IDF grant for the strengthening of Commission on Audit (COA) intends to provide financial resources for
the development of a Procurement Audit Guide for COA auditors to provide guidance on audits
appropriate for the new public procurement system. The grant is being executed by COA.
7. The Bank supported a capacity building program for marginalized communities and local
government units to improve their know-how in correctly applying the Procurement Law in their
bidding processes. The Procurement Law covers all units of government including local government
units and communities or barangays. While officials and staff of national agencies have easy access to
training, procurement practitioners in the LGUs and barangays have difficulty in availing good
procurement training. Moreover, they have found it difficult to apply the Procurement Law correctly. To
address this issue, and as agreed in the 2007 CPAR, a capacity building project involving marginalized
communities and LGUs will be supported by the Bank. A JSDF grant of about US$1 million was
recently approved to support the activities of the project.
8. Good fiduciary practices have now been increasingly linked with governance and
anticorruption measures and have found their way to a number of strategies applied in various
Bank-financed projects. Innovative anticorruption measures were included in the National Road
Improvement Management Project (NRIMP) including the use of an independent procurement evaluator,
civil society observers in bidding and contract implementation called the Road Watch, and the
strengthening of internal audits. A Generic Internal Audit Manual with focus on procurement audit
programs was completed in June 2008 and is now being used in the Departments of Public Works and
Highways, Education, and Social Services. Project Appraisal Documents (PADs) include an annex on
how to address the issue of governance and anticorruption and a governance and anticorruption team in
the World Bank Office has been established. In the Department of Education, the Bank-financed Third
Elementary Education and the National Program Support for Elementary Education have used CSOs as
observers in the bidding process. Moreover, CSOs such as the G-Watch, Boys’ and Girls’ Scouts,
Philippines Harmonization Agenda Philippines FY10-12 CAS - Annex 9
Page 3 of 6
NAMFREL, and others, have participated in the Textbook Count ensuring that the books are delivered to
schools.
9. The Government, together with the WBG, ADB, and JBIC, has raised the bar in achieving
harmonization, standardization, simplification and alignment of procurement rules and procedures
through the recent move of revising the existing Implementing Rules and Regulations (IRR) of
Republic Act (RA) 9184 with the view of having only one IRR instead of the previous two IRRs. In
2003 when the IRR of the law was first crafted, there were major differences between the legislative
framers of the law and the development partners funding foreign assisted projects, such as the ADB, JBIC
and WBG. The IRR, which is supposed to cover all types of procurement regardless of funding source,
ended up as an IRR-A covering only domestically funded projects, with foreign assisted project
procurement to be covered by an IRR-B, which has not yet been formulated. From 2003 to 2008,
procurement reform made significant progress towards greater standardization, simplification,
harmonization, and alignment. In the April 2008 Philippine Development Forum, the Government and
the development partners agreed to formulate the IRR-B for foreign-funded projects. The preparation of
IRR-B promoted greater harmonization, simplification of rules, rendering the IRR-A obsolete and
therefore needing major revisions. As such, the GPPB decided to consolidate the two sets of IRRs for
foreign and locally funded projects into a single IRR which it intends to adopt formally during the next
PDF meeting in April 2009.
10. To ensure that the civil service has the capacity to deliver under the new public
procurement system, the law mandated the professionalization of the procurement function. The
GPPB, through the support of an ongoing IDF grant of US$300,000, has contracted the Asian Institute of
Management to develop the modules for a certification program for procurement practitioners. These
modular training programs are expected to be offered by accredited learning institutions leading to
certification as procurement professionals. The parameters of the certification program have been agreed
with the Civil Service Commission and discussions are underway on the establishment of objective
qualification standards for procurement positions in government. Once these standards have been
established and adopted by the Civil Service Commission, only certified procurement practitioners will be
eligible for government procurement positions.
11. The Bank has nominated the Philippines as a candidate in the Piloting Program on the Use
of Country System given the Government’s proven commitment to procurement reform and the
demonstrated successes achieved so far. With proven government commitment to reform, and
demonstrated successes in harmonization and alignment, substantial use of country systems has been
accepted by development partners in the procurement arrangements of projects financed by them. Only a
few differences with international procurement practice were recorded in the 2007 CPAR. The country
has also scored well in the OECD-DAC Baseline Indicator System. Thus, the country’s public
procurement system can be described as substantially aligned with international standards for the use of
National Competitive Bidding method. The Bank, in December 2008, nominated the Philippines as a
candidate for the Piloting Program on the Use of Country System (UCS). The UCS intends to cover the
procedures for International Competitive Bidding.
Financial Management and Public Expenditure Management
12. Recent changes in Bank policies have enabled the Bank to place greater reliance on
countries’ financial management systems, including budgeting, financial reporting, and external
auditing. The Bank has issued guidelines that strongly encourage the use of country systems in the
public financial management (PFM) area when circumstances permit. Indeed, the default position in
Bank-financed operations is to use existing PFM institutional frameworks unless the country context
Philippines Harmonization Agenda Philippines FY10-12 CAS - Annex 9
Page 4 of 6
requires the use of special-purpose implementing entities or particular capacity-strengthening measures.
The Bank’s reliance on country systems in the Philippines has been focused on financial management.
13. The Bank’s own Public Expenditure and Financial Accountability (PEFA) assessment
report (2008) provides a comprehensive diagnostic overview of the full PFM cycle and other key
dimensions. The PEFA report identifies the following areas of relative strengths in the Philippines’ PFM
system: (i) a reasonably comprehensive budget (i.e., limited extra-budgetary operations or unreported
government operations); (ii) an incipient effort to introduce a medium-term expenditure framework into
the annual budget process; (iii) a strengthened procurement legal framework and a credible program of
reform implementation; and (iv) comprehensive annual audit practices, although legislative oversight and
follow-up of audit findings are weak.
14. There is, however, room for improvement, and in recent years, the Government has been
implementing several reform programs to strengthen various aspects of PFM. Aspects of the PFM
covered in these efforts range from budget formulation (e.g., introduction of a medium-term expenditure
framework as part of the annual budget process) to accounting (e.g., adoption of the New Government
Accounting System, or NGAS) and auditing (e.g., use of a risk-based approach to audit selection). A
dialogue has been initiated with the authorities to strengthen financial reporting requirements and
effective oversight function (external and internal auditing). Other areas still require attention. One in
particular relates to an integrated financial management and information system (IFMIS). To improve on
the somewhat piecemeal approach to PFM reforms, the Bank and several development partners active in
this area are offering support to the Government to develop a comprehensive medium-term PFM reform
strategy, based on the PEFA findings and other diagnostic inputs.
15. PEFA assessments and other PFM diagnostics have revealed the need for strengthening the
Commission on Audit (COA). The Bank is providing technical assistance to support COA in its efforts
in reviewing and modernizing audit approaches to improve the effectiveness and efficiency of COA in the
audit of government revenues and expenditures through the development and adoption of a results-based
integrated audit methodology that will focus on the outputs and outcome of public expenditures, using a
risk-based audit approach.
16. In 2006, the Bank, through the Accounting and Auditing Report on the Observance of
Standards and Codes (ROSC), reviewed the Philippines’ private sector accounting and auditing
practices with an emphasis on compliance with international standards and codes. An action plan to
improve corporate financial reporting practices in the Philippines was developed and adopted by the key
players in the Philippines corporate financial reporting architecture. The Bank, through the Financial
Sector Reform and Strengthening Initiative (FIRST), is providing technical assistance toward organizing
preparatory activities that will build institutional capacity and strengthen the corporate accounting and
auditing practices of the Philippines. The activities supported are expected to lead to the development of
a regulatory framework of accounting and auditing in line with international good practices. These
improvements will contribute to financial and private sector development in the Philippines and are fully
consistent with the Philippines’ current initiatives on accelerating private-sector led-growth.
17. The Bank will also address fiduciary risk through a multi-year program of fiduciary
analytical work aimed at strengthening the policy dialogue in financial management and
procurement (particularly at the sub-national level) and raising general awareness. This program
will consist of (i) a national level CFAA update; (ii) a sub-national level financial management and
procurement ESW; and (iii) policy notes on specific areas of interest to the Government. These analytical
products will be conducted in close coordination with all relevant sectors. The main emphasis of the
CFAA update will be the assessment of the control environment, aid management, and the budget process.
Specific analytic work to provide a more systematic assessment of financial management risks at the sub-
Philippines Harmonization Agenda Philippines FY10-12 CAS - Annex 9
Page 5 of 6
national level is planned for FY 2009/2010. This will aim to design relevant indicators and measure
fiduciary performance at the sub-national level. The Bank will conduct the sub-national ESW jointly with
the Government and other development partners.
Safeguards
18. The Bank has been conducting regular Safeguards Fora for Bank-assisted projects with
implementing agencies, safeguard oversight agencies as well as other stakeholders. These fora aim
to present and share good practice examples, identify and address common and systemic issues and
develop a network of safeguards practitioners with the ultimate objective of developing capacity, and
improving outcomes and sustainability. Through these fora, safeguards instruments, e.g., use of
frameworks and guidelines, and processes for community driven development (CDD)-types of projects
across the Bank portfolio have been harmonized. Increased project compliance on safeguard processes
and requirements during implementation is also noted.
19. Following the issuance of Operational Policy 4.00 in 2005 on the piloting of the use of
borrower systems for environmental and social safeguards, the Bank, in partnership with the
Government and ADB, and in consultation with other bilaterals and stakeholders, conducted a diagnostic
review of the country’s safeguard systems on environmental assessment (EA), indigenous peoples (IP),
and involuntary resettlement (IR). The objectives of the review are to assess the strengths and weaknesses
of the country systems vis-à-vis global principles and good practice in order to recommend measures to
strengthen local capacity for implementing safeguards work and to identify areas where local policies,
processes and practices could be harmonized with those of global principles and good practice. The
review for EA and IP was completed in 2007 and for IR in 2008.
20. The results of the reviews indicated that the legal bases, policies, and institutional
frameworks of the country’s EA and IP safeguard systems are strong and sound, but suffer from
weak implementation due to capacity and financial constraints and overly bureaucratic procedures
and processes. The country’s IR system, on one hand, has huge gaps with global principles and good
practice. The Government has responded to some of the key recommendations through the issuance of
administrative orders by the relevant agencies and through existing projects, for example, the NPS-
ENRMP for EA, and the grant-funded TA for the National Commission on Indigenous Peoples for the IP.
The Bank also continues to support the Government’s efforts to adopt more uniform policies and
practices for involuntary resettlement through its support and participation in the Government’s Technical
Working Group on Involuntary Resettlement.
Gender
21. The National Economic and Development Authority (NEDA) and the National Commission
on the Role of Filipino Women (NCRFW) have adopted the Harmonized Gender and Development
Guidelines for Project Development, Implementation, Monitoring and Evaluation which was prepared
in partnership with the ODA-GAD Network. The ODA-GAD Network, composed of more than 15
development partners, considers the Guidelines as a vital contribution to the process of gender
mainstreaming. It provides for the integration of the GAD perspective in development planning processes
and at various stages of the project cycle.
22. The Guidelines have been used by the NEDA and NCRFW to regularly assess the gender-
responsiveness of all official development assistance (ODA) projects. The World Bank report of
March 2008 showed that of 19 projects financed by the World Bank in the Philippines, 84 percent have
been rated as either gender-responsive or gender-sensitive on both the project design and implementation
aspects, with the remaining 16 percent rated as “with promising GAD prospects”. None of the projects
Philippines Harmonization Agenda Philippines FY10-12 CAS - Annex 9
Page 6 of 6
has been rated as gender-blind. Consequently, the GAD aspects of World Bank-supported projects, using
the NEDA-NCRFW Guidelines, will be monitored as part of the supervision missions and safeguards fora.
Mutual Accountability and Managing for Results
23. The Philippine Development Forum (PDF) has served as an effective mechanism for
facilitating substantive policy dialogue on the country’s development agenda. The PDF has evolved
from the Consultative Group to broaden representation at the annual meetings to include representatives
from civil society, academe, private sector and the legislature.
24. Aside from the annual PDF event, working group meetings are held around thematic areas - MDGs and social progress; growth and investment climate; economic and fiscal reforms; governance
and anticorruption; decentralization and local government; sustainable rural development; and Mindanao
– throughout the year to follow through on issues and agreements reached and facilitate consultations
across a broad range of stakeholders. Each working group is convened by the head of the relevant
government agency and a development partner as co-convenor. Key initiatives and achievements of the
Working Group on Decentralization and Local Government, which is one of the active PDF Working
Groups, are discussed in the section below.
25. NEDA has been leading the conduct of joint ODA portfolio reviews among government
implementing and oversight agencies and the Philippines’ major development partners – ADB, JBIC and
the Bank. It prepares an annual report to the legislature on the performance of the ODA portfolio.
Local Governments and Decentralization
26. The establishment of the Working Group on Decentralization and Local Government under
the Philippine Development Forum has led to better harmonization of development partners’
efforts. The Working Group is convened by the Department of Interior and Local Government and co-
convened by the WBG and has membership from various international development agencies and
government agencies. The working group has a website, which provides a good sense of the kind of
activities that have been undertaken to harmonize activities/approaches, etc. The Working Group is
currently addressing the issue of establishment of a multi-donor trust fund to support its activities.
27. The Working Group focuses on four themes: local government finance (accelerating revenue
mobilization and improving LGU access to financing, and better expenditure management), capacity
building (improving delivery of training to LGUs, national oversight agencies and other agencies),
performance benchmarking (improving the integrity and credibility of monitoring systems), and policy
reforms on devolution. Key achievements include improved information sharing between the BIR and
the LGUs through Executive Order 646: Accessibility of Information on Taxpayers between the Bureau
of Internal Revenue and the Local Government Units for Tax Collection Purposes signed by the President
in August 2007; integrating the financial monitoring indicators with a broader performance monitoring
system; identifying measures to improve the integrity and quality of data collection at the LGU level; and
enhancing the capacity of the DILG and the DOF-BLGF to maintain the performance systems.
28. Most recently, the Working Group supported an effort by the four oversight agencies to
harmonize local planning, budgeting, and revenue mobilization manuals; and jointly disseminate,
train and brief local governments on the harmonized system. Efforts are currently focused on
streamlining and synchronizing duplications and contradictions in training programs for local
governments offered by various agencies and supported by international development agencies.
Annex 10
Country Financing Parameters for the Philippines (January, 2005)
The country financing parameters for the Philippines below have been approved by the Regional
Vice President, East Asia and Pacific Region.
Item Parameter Remarks / Explanation
Cost sharing Limit on the proportion
of individual project costs that the
Bank may finance.
Up to
100 percent
The Bank’s overall financing share is
not expected to change significantly in
aggregate level, with expected increase
in sector-wide assistance (in which the
Bank’s financing share is typically
low). Projects implemented by local
governments will likely include some
counterpart funding. For projects
implemented by government-owned
corporations, evidence of ownership
and commitment would be assessed,
taking account of budget and planning
processes and project cost sharing. One
hundred percent Bank financing could
be provided for some projects and
activities with strong evidence of
ownership and commitment.
Recurrent cost financing Any limits
that would apply to the overall amount
of recurrent expenditures that the Bank
may finance.
No country
limit, but
strong
emphasis on
arrangements
to ensure
sustainability
Integration of Bank financing in the
budget process ensures that increased
recurrent cost financing would not
jeopardize overall debt and fiscal
sustainability. The Bank will continue
to monitor the overall fiscal situation
and its implications for recurrent cost
financing. At the project level,
recurrent cost financing could be
considered if consistent with project
objectives, provided there is strong
demonstration of arrangements to
ensure sustainability after Bank
financing ceases.
Country Financing Parameters Philippines FY10-12 CAS - Annex 10
Page 2 of 2
Item Parameter Remarks / Explanation
Local cost financing Are the
requirements for Bank financing of
local expenditures met, namely that: (i)
financing requirements for the
country’s development program would
exceed the public sector’s own
resources (e.g., from taxation and other
revenues) and expected domestic
borrowing; and (ii) the financing of
foreign expenditures alone would not
enable the Bank to assist in the
financing of individual projects.
Yes The two requirements for Bank local
cost financing are met. Therefore the
Bank may finance local costs in the
proportions needed in individual
projects.
Taxes and duties Are there any taxes
and duties that the Bank would not
finance?
None Taxes and duties are considered
reasonable. At the project level, the
Bank would consider whether taxes and
duties constitute an excessively high
share of projects costs. The Bank
would monitor local taxes for possible
distortions and that these maintain
consistent acceptable practices.
Country At-A-Glance Annex A2
Page 1 of 3
Note: Data used in the main text and annexes may differ as they also draw on latest government and Bank staff estimates.
Country At-A-Glance Annex A2
Page 2 of 3
Country At-A-Glance Annex A2
Page 3 of 3
Annex B2
Page 1 of 1
Philippines
Selected Indicators* of Bank Portfolio Performance and Management
As of March 17, 2009
Indicator FY06 FY07 FY08 FY09
Portfolio Assessment
Number of Projects Under Implementation a 23 23 24 23
Average Implementation Period (years) b 4.3 4.0 4.3 4.9
Percent of Problem Projects by Number a, c 13.0 13.0 16.7 23.8
Percent of Problem Projects by Amount a, c 6.6 6.6 7.8 9.2
Percent of Projects at Risk by Number a, d 13.0 13.0 16.7 28.6
Percent of Projects at Risk by Amount a, d 6.6 6.6 7.8 13.6
Disbursement Ratio (%) e 21.1 15.2 20.1 10.0
Portfolio Management
CPPR during the year (yes/no) yes yes yes
Supervision Resources (total US$) 1,498 1,569 1,681
Average Supervision (US$/project) 65 63 76
Memorandum Item
Since
FY80
Last Five
FYs
Proj Eval by OED by Number 140 10
Proj Eval by OED by Amt (US$ millions) 8,922.8 617.7
% of OED Projects Rated U or HU by Number 28.1 0.0
% of OED Projects Rated U or HU by Amount 29.3 0.0
a. As shown in the Annual Report on Portfolio Performance (except for current FY). Includes
GEF-funded projects.
b. Average age of projects in the Bank's country portfolio.
c. Percent of projects rated U or HU on development objectives (DO) and/or implementation
progress (IP).
d. As defined under the Portfolio Improvement Program.
e. Ratio of disbursements during the year to the undisbursed balance of the Bank's portfolio at
the beginning of the year: Investment projects only.
* All indicators are for projects active in the Portfolio, with the exception of Disbursement
Ratio, which includes all active projects as well as projects which exited during the fiscal
year.
Annex B3
Page 1 of 1
Philippines
IFC Investment Operations Program
2006 2007 2008 2009*
Commitments (US$m)
Gross 0.69 130.18 564.32 183.50
Net** 0.69 130.18 564.32 183.50
Net Commitments by Sector (%)
Utilities 0.00 61.46 67.34 100.00
Transportation and
Warehousing 0.00 38.54 0.00 0.00
Finance & Insurance 100.00 0.00 27.17 0.00
Health Care 0.00 0.00 5.49 0.00
Total 100 100 100 100
Net Commitments by Investment Instrument (%)
Equity 23.92 38.41 3.92
Loan 76.08 61.59 66.63 91.83
Quasi loan 29.45 8.17
Total 100.00 100 100 100
* As of March 31, 2009
** IFC's Own Account only
Annex B3
Page 1 of 2
Philippines
IBRD Indicative Financing Program, FY10-12
(US$ million)
Product Title Fiscal Year
2010 2011 2012
Strategic Objective 1: Stable Macro Economy
RA 1.1: Fiscal and financial stability through consolidation and improved
macroeconomic risk management
Development Policy Loan (DPL) 250
Development Policy Loan (DPL) – Deferred Drawdown Option (DDO) [250] x
TOTAL FOR SO 1 250 -500 x
Strategic Objective 2: Improved Investment Climate
RA 2.1: Enabling business environment to promote competitiveness,
productivity and employment
Light Rail Transit 1 South Extension Public-Private Partnership (LRT-PPP) 260
Tollway-PPP (Cavite-Laguna) x
Urban Transport (Metro Manila and other cities) x
Secondary/Local Roads x
Rural Power Adaptable Program Loan 2 (APL 2) x
Agriculture and Agribusiness Support x
Mindanao Development x
Urban Renewal (Metro Manila Cities) x
Sub-National Water Public-Private Partnership (with IFC) x
Participatory Irrigation Development Project (PIDP) – FY09 [$70m]
RA 2.2: Financial services
Sub-National Finance (SSLDIP2 or DBP3-Regional Infrastructure for Growth) x
Sub-Sovereign Financing Facility (with IFC)
TOTAL FOR SO 2 260 x x
Strategic Objective 3: Better Public Service Delivery
RA 3.1: Public service delivery in key sectors
National Program Support for Education x
National Program Support for Health x
RA 3.2: Basic service delivery in poor areas
National Program Support for CDD x
TOTAL FOR SO 3 x x
Strategic Objective 4: Reduced Vulnerabilities
RA 4.1: Social protection system
Social Welfare and Development Reform (SWDR) - Conditional Cash Transfers (CCT)
– FY09 [$405m]
RA 4.2: Disaster risk management and climate change
Water Quality Management x
Disaster Risk Management (DRM) Financing [including Catastrophe Deferred
Drawdown Option (CAT DDO)]
x
RA 4.3: Stability and peace
Fund for Peace and Development x
TOTAL FOR SO 4 x
Strategic Objective 5: Good Governance
RA 5.1: Governance and anticorruption in selected agencies
Judicial Reform 2 x
RA 5.2: Procurement and public financial management reforms at national and
local levels
Government Integrated Financial Management Information System (GIFMIS) x
RA 5.3: Better local governance through more effective decentralization
Local Government Unit Performance Grants/Capacity Building for Local Government 50
TOTAL FOR SO 5 50 x x
TOTAL FOR LENDING 560 -
810
700 –
1,000
800 –
1,100
Philippines IBRD Indicative Financing Program, FY10-12 Annex B3
Page 2 of 2
NOTES:
1. Additional Financing (AF) operations are not included in the table, but it should be noted that the following
are planned for FY09/FY10:
Rural Power Project (US$40m), supporting RA 2.1
Agrarian Reform Communities Development Project (US$10m), supporting RA 2.2
Judicial Reform Support Project (US$20m), supporting RA 5.1
KALAHI Project (US$70m), supporting RA 3.2
2. There are six large trust funds (over US$5m each) currently planned for FY10 under the Global Environment
Facility (GEF) which all support RA 4.2, and a grant-funded Output-Based Aid for Urban Services
supporting RA 3.2. All of these trust-funded activities would be monitored as part of the portfolio.
Annex B4
Page 1 of 1
Philippines
Indicative Analytical and Advisory Activities Program, FY10-12 *
Product Title Fiscal Year
2010 2011 2012
Strategic Objective 1: Stable Macro Economy
RA 1.1: Fiscal and financial stability through consolidation and improved
macroeconomic risk management
Philippines Development Report x x x
Quarterly Economic Update x x x
Programmatic AAA on Public Expenditure Issues x x x
Development of the Philippine Statistical Development Plan (including grant to improve
quality and usefulness of Philippine household surveys)
x x
IFC Advisory Services on crisis/insolvency management
Strategic Objective 2: Improved Investment Climate
RA 2.1: Enabling business environment to promote competitiveness, productivity and
employment
Trade Facilitation/Transport/Logistics x
Investment Climate for the Poor (with IFC) x
AAA on Energy Sector Reform x
TA on PPP Regulatory and Policy Support (IFC and PPIAF) x x x
AAA on Environmental Safeguards (including Environmental Assessments) x
Agricultural Productivity Growth x
Urban Strategy (including resettlement issues) x
RA 2.2: Financial services
Financing Innovation Facility (with IFC) x
Strategic Objective 3: Better Public Service Delivery
RA 3.1: Public service delivery in key sectors
Programmatic AAA for Health x x x
Programmatic AAA for Education x x x
Programmatic AAA for Water Supply and Sanitation Support (including Water Pollution
Control)
x x x
RA 3.2: Basic service delivery in poor areas
AAA on Indigenous Peoples and Vulnerable Groups x
Philippines Population Report x
Synergies for Service Delivery (CCT, CDD, NPS) x
Strategic Objective 4: Reduced Vulnerabilities
RA 4.1: Social protection system
Programmatic AAA for Social Protection and Poverty Reduction x x x
RA 4.2: Disaster risk management and climate change
Programmatic AAA for Disaster Risk Management (DRM), including Climate Change Issues x x x
RA 4.3: Stability and peace
Encouraging More Resilient Communities in Conflict-Affected Areas (SPF) x x x
Strategic Objective 5: Good Governance
RA 5.1: Governance and anticorruption in selected agencies
TA for Agency Institutional Strengthening x
Programmatic AAA on Sector Governance Assessments (for various sectors/SOs) x x x
RA 5.2: Procurement and public financial management reforms at national and local
levels
Support for Procurement Reforms (including update of CPAR and study of ABC effectiveness) x
PFM AAA (GIFMIS, DBM, BTr, Budget Watch) x
RA 5.3: Better local governance through more effective decentralization
Programmatic AAA on Decentralization (e.g., revenue mobilization) x x x
Cross-Cutting AAA:
Briefing Notes for the Incoming Administration x
Innovation Notes x x x
* For a list of major recent AAA products, please see Annex 3, Appendix 2.
Annex B5
Page 1 of 1
Note: Data used in the main text and annexes may differ as they also draw on latest government and Bank staff estimates.
Annex B6
Page 1 of 2
Philippines – Key Economic Indicators
Actual Projected
Indicator 2004 2005 2006 2007 2008 2009 2010 2011 2012
National accounts (as % of GDP)
Gross domestic
producta 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Agriculture 15.1 14.3 14.1 14.1 14.7 14.8 14.8 14.5 14.2
Industry 31.7 31.9 31.7 31.7 31.6 31.9 31.7 31.3 31.1
Services 53.2 53.8 54.2 54.2 53.7 53.3 53.5 54.2 54.7
Total Consumption 86.9 89.6 86.2 84.3 84.9 84.3 84.4 84.3 84.4
Gross domestic fixed
investment 16.1 14.4 14.0 14.8 14.8 14.7 14.9 15.3 15.6
Government
investment 2.6 2.3 2.2 2.6 2.6 2.7 2.7 2.7 2.8
Private investment 13.5 12.1 11.8 12.2 12.2 12.0 12.2 12.6 12.8
Exports (GNFS)b 49.3 45.4 45.1 40.1 34.2 31.7 31.5 31.4 31.6
Imports (GNFS) 57.9 54.6 50.7 45.0 40.1 38.5 38.6 38.8 39.4
Gross domestic
savings 13.1 10.4 13.8 15.7 15.1 15.7 15.6 15.7 15.6
Gross national
savingsc 18.6 16.6 19.0 19.7 17.7 16.9 16.4 16.6 16.7
Memorandum items
Gross domestic
product
86,930 98,824 117,566 144,062 168,580 161,289 167,365 177,541 189,311
(US$ million at
current prices)
GNI per capita (US$,
Atlas method) 1,180 1,270 1,390 1,620 1,670 1,780 1,840 1,860 1,950
Real annual growth rates (%, calculated from 85 prices)
Gross domestic
product at market
prices 6.4 5.0 5.4 7.2 4.6 1.9 2.8 4.0 4.5
Gross Domestic
Income 4.8 3.0 3.5 3.4 -2.6 3.8 3.5 4.9 5.2
Real annual per capita growth rates (%, calculated from 85 prices)
Gross domestic
product at market
prices 4.2 2.8 3.3 5.2 2.1 0.2 1.2 2.4 2.9
Total Consumption -0.3 4.5 -2.8 -1.7 1.1 2.1 1.8 3.1 3.7
Private Consumption -0.3 4.8 -3.6 -2.4 0.5 2.6 1.7 3.2 3.8
Balance of Payments (US$ millions)
Exports (GNFS)b 42,837 44,788 52,970 57,769 57,690 51,159 52,713 55,668 59,836
Merchandise FOB 38,794 40,263 46,526 49,321 47,891 41,617 42,443 44,562 47,770
Imports (GNFS)b 50,298 53,901 59,565 64,928 67,526 62,148 64,655 68,847 74,610
Merchandise FOB 44,478 48,036 53,258 57,557 58,681 52,813 54,426 57,692 62,196
Resource balance (7,461) (9,113) (6,595) (7,159) (9,836) (10,989) (11,942) (13,179) (14,774)
Net current transfers 9,160 11,391 13,197 13,977 15,891 15,573 15,885 16,679 18,013
Current account
balance
1,626 1,984 5,297 6,351 4,111 3,190 2,203 1,869 1,701
Net private foreign
direct investment 109 1,665 2,818 (514) 1,000 100 500 1,000 1,500
Long-term loans (net) (562) (488) (2,621) 2,664 1,022 1,062 (978) 54 1,647
Official (522) (643) (17) 266 799 913 443 113 333
Private (40) 155 (2,604) 2,398 223 149 (1,421) (59) 1,313
Philippines – Key Economic Indicators Annex B6
Page 2 of 2
Actual Projected
Indicator 2004 2005 2006 2007 2008 2009 2010 2011 2012
Other capital (net,
incl. errors &
ommissions) (1,453) (751) (1,725) 75 (2,796) (4,005) (1,551) (2,412) (4,324)
Change in reservesd 280 (2,410) (3,769) (8,576) (3,337) (347) (174) (512) (524)
Memorandum items
Resource balance (%
of GDP) -8.6 -9.2 -5.6 -5.0 -5.8 -6.8 -7.1 -7.4 -7.8
Real annual growth rates (YR85
prices)
Merchandise exports
(FOB)
.. .. .. .. .. .. .. .. ..
Primary .. .. .. .. .. .. .. .. ..
Manufactures .. .. .. .. .. .. .. .. ..
Merchandise imports
(CIF)
.. .. .. .. .. .. .. .. ..
Public finance (as % of GDP at market prices)e
Current revenues 14.5 14.9 16.1 15.7 16.0 15.0 15.0 15.0 15.2
Current expenditures 15.5 15.3 15.0 14.5 14.3 14.5 14.5 14.4 14.4
Current account
surplus (+) or deficit
(-) -1.0 -0.3 1.2 1.3 1.7 0.5 0.5 0.6 0.8
Capital expenditure 2.8 2.4 2.3 2.8 2.6 2.7 2.8 2.8 2.8
Foreign financing 1.7 1.7 2.0 0.8 0.8 1.3 0.5 0.0 0.6
Monetary indicators
M2/GDP 38.6 37.7 41.5 41.6 40.0 40.0 40.8 41.7 42.6
Growth of M2 (%) 9.4 9.0 21.9 10.5 8.5 6.5 9.1 10.4 11.0
Private sector credit
growth / 55.0 31.5 64.6 47.8 78.2 2.7 30.5 40.4 49.1
total credit growth
(%)
Price indices (YR85
=100)
Merchandise export
price index
.. .. .. .. .. .. .. .. ..
Merchandise import
price index
.. .. .. .. .. .. .. .. ..
Merchandise terms of
trade index
.. .. .. .. .. .. .. .. ..
Real exchange rate
(US$/LCU)f 86.2 92.3 102.5 112.3
118.5
..
..
..
..
Consumer price
index (% change) 6.0 7.6 6.2 2.8 9.3 4.5 4.0 4.0 4.0
GDP deflator (%
change) 6.1 6.5 5.1 2.8 7.8 4.5 4.0 4.0 4.0
a. GDP at market prices.
b. “GNFS” denotes “goods and nonfactor services”.
c. Includes net unrequited transfers excluding official capital grants.
d. Includes use of IMF resources.
e. Consolidated central government.
f. “LCU” denotes “local currency units.” An increase in US$/LCU denotes appreciation.
Annex B7
Page 1 of 1
Philippines – Key Exposure Indicators
Actual Estimated Projected
Indicator (by calendar year) 2004 2005 2006 2007 2008 2009 2010 2011 2012
Total debt outstanding and 60,968 61,658 60,282 65,845 67,327 68,240 67,412 67,566 69,363
disbursed (TDO) (US$m)a
Net disbursements (US$m)a 315 123 (1,406) 2,818 1,522 912 (828) 154 1,797
Total debt service (TDS) 11,478 9,962 13,699 10,480 10,084 10,078 12,345 11,264 10,008
(US$m)a
Debt & debt service indicators (%)
TDO/XGSb 110.5 103.8 86.4 86.0 86.3 95.7 92.3 88.0 84.3
TDO/GDP 70.1 62.4 51.3 45.7 39.9 42.3 40.3 38.1 36.6
TDS/XGS 20.8 16.8 19.6 13.7 12.9 14.1 16.9 14.7 12.2
Concessional/TDO 23.5 20.4 20.7 20.0 18.1 18.7 19.3 19.4 19.2
IBRD exposure indicators (%)
IBRD DS/public DS 6.7 8.2 5.9 10.4 13.9 10.3 7.5 7.0 9.2
Preferred creditor DS/public 18.6 20.3 16.7 17.7 25.1 19.9 16.3 16.9 23.1
DS (%)c
IBRD DS/XGS 0.9 0.8 0.8 0.7 0.8 0.8 0.7 0.6 0.5
IBRD TDO (US$m)d 3,317 2,885 2,690 2,726 2,633 3,042 3,315 3,826 4,251
Share of IBRD portfolio (%) 2.7 2.4 2.3 2.5 2.6 2.6 2.5 2.7 2.9
IDA TDO (US$m)d 214 197 196 195 188 181 174 167 158
IFC (US$m)
Loans 281 342 286 271 578 613 750 908 1,077
Equity and quasi-equity /c 153 119 121 140 319 384 464 539 619
MIGA
MIGA guarantees (US$m) 112 92 68 5 0 0 .. .. ..
a. Includes public and publicly guaranteed debt, private nonguaranteed, use of IMF credits and net short-term capital.
b. "XGS" denotes exports of goods and services, including workers' remittances.
c. Preferred creditors are defined as IBRD, IDA, the regional multilateral development banks, the IMF, and the Bank
for International Settlements.
d. Includes present value of guarantees.
e. Includes equity and quasi-equity types of both loan and equity instruments.
Annex B8
Page 1 of 1
Philippines
Operations Portfolio (IBRD and Grants)
As of 03/17/2009
a/ Intended disbursements to date minus actual disbursements to date as projected at appraisal.
Closed Projects 165 IBRD/IDA (US$m) Total Disbursed (Active) 395.35
Of which has been repaid 0.00
Total Disbursed (Closed) 9,740.62 Of which has been repaid 8,634.92
Total Disbursed (Active + Closed) 10,135.97
Of which has been repaid 8,634.92 Total Undisbursed (Active) 840.25
Total Undisbursed (Closed) 15.40
Total Undisbursed (Active + Closed) 855.66
Active Projects
Difference between
Expected and Actual Last PSR
Supervision Rating Original Amount in US$ Millions Disbursements a/
Project
ID Project Name
Development
Objectives Implementation
Progress
Fiscal
Year IBRD IDA Grant Cancel. Undisb. Orig.
Frm
Rev'd
Strategic Objective 1: Stable Macro Economy
P101964 National Program Support (NPS) for Tax Administration Reform MS MU 2007 11.00 10.59 5.37
Strategic Objective 2: Improved Investment Climate
P057731 Metro Manila Urban Transport Integration Project (MMURTRIP) MS MS 2001 60.00 11.90 11.90 11.90
P066397 Rural Power Project (RPP) S S 2004 10.00 0.07 -4.21
P072096 GEF-Rural Power Project (RPP) S S 2004 9.00 4.56 1.56 P066532 GEF-Electric Cooperative System Loss Reduction Project U U 2004 12.00 6.40 6.15
P079935 National Roads Improvement Management Project 2 (NRIMP2) S S 2008 232.00 232.00
P071007 Second Agrarian Reform Communities Development (ARCDP2) S S 2003 50.00 5.34 5.34 3.72 P075184 Diversified Farm Income & Market Development (DFIMD) MU MU 2004 60.00 32.29 24.79
P073206 Land Administration and Management Project II (LAMP2) MU MU 2005 19.00 13.31 5.21
P084967 Mindanao Rural Development Project - Phase 2 (MRDP2) S S 2007 83.75 79.21 12.71 P064925 Support for Strategic Local Development and Investment Project (SSLDIP) MS MS 2006 100.00 99.34 -0.33
Strategic Objective 3: Better Public Service Delivery
P079628 Second Women’s Health and Safe Motherhood Project (WHSMP) MS MU 2005 16.00 14.85 4.21
P094063 National Program Support (NPS) for Basic Education S MS 2006 200.00 122.12 77.12 P075464 National Program Support (NPS) for Health Sector S MS 2006 110.00 91.68 22.03
P079661 Manila Third Sewerage Project 3 (MTSP3) S S 2005 64.00 44.81 28.59
P089082 GEF- Supplemental Project to the MTSP3 S S 2007 5.00 4.08 1.07 P077012
Kapit Bisig Laban sa Kahirapan-Comprehensive and Integrated Delivery of
Social Services (KALAHI-CIDSS) Project MS MS 2003 100.00 20.96 20.96
Strategic Objective 4: Reduced Vulnerability
P004406 Ozone Depleting Substances (ODS) Investment Project MS MS 1995 30.00 9.28 9.28 -10.14 P073488 Autonomous Region in Muslim Mindanao (ARMM) Social Fund S S 2003 33.60 2.74 2.74
P070899
Laguna De Bay Institutional Strengthening & Community Participation
(LISCOP) S MS 2004 5.00 2.95 2.90 0.37 P096174 NPS for Environment & Natural Resources Management Project (ENRMP) S MS 2007 50.00 45.00 13.00
P091147 GEF- NPS for ENRMP S MS 2007 7.00 6.66 2.66
Cross-cutting Theme: Good Governance
P066076 Judicial Reform Support Project (JRSP) S S 2004 21.90 11.10 10.81
Overall Result 1,226.25 63.00 871.23 263.87 5.85
Annex B8
Page 1 of 1
Philippines
IFC: Committed and Disbursed Outstanding Investment Portfolio
As of 02/28/2009
(In US$ Millions)
Committed Disbursed Outstanding
FY
Approval Company Loan Equity
**Quasi
Equity
*GT/R
M Participant Loan Equity
**Quasi
Equity *GT/RM Participant
1989/93 Hambrecht and Quist Philippine Ventures (H&Q PV) I 0 0.08 0 0 0 0 0.08 0 0 0
1993/01 Pilipinas Shell 0 1.56 0 0 0 0 1.56 0 0 0
1994 Hambrecht and Quist Philippine Ventures (H&Q PV) II 0 0.05 0 0 0 0 0.05 0 0 0 1993/94/95 Mindanao Power 0 2.22 0 0 0 0 2.22 0 0 0
1995 Walden Management 0 0.02 0 0 0 0 0.02 0 0 0
1995/98 Walden Ventures 0 0.01 0 0 0 0 0.01 0 0 0 1999 Hambrecht and Quist Philippine Ventures (H&Q PV) III 0 0.76 0 0 0 0 0.76 0 0 0
1999/00 Pryce Gases 9.30 0 3.39 0 3.08 9.30 0 3.39 0 3.08
2000 Mariwasa 7.38 0 0 0 0 7.38 0 0 0 0 2001 Plantersbank 0 0.11 0 0 0 0 0.11 0 0 0
2001/02/08 Asian Hospital 26.22 0 1.00 0 0 20.97 0 1.00 0 0
2002 Avalon Professional Web (APW) Trade 0 0 0.28 0 0 0 0 0.28 0 0 2002/05 Eastwood 7.38 0 0 0 0 7.38 0 0 0 0
2002/03/08 Banco de Oro (BDO) 0 14.10 140.45 0 0 0 14.10 83.23 0 0
2003/04/07 Manila Water Company Inc. (MWC) 58.27 13.72 0 0 0 58.27 13.72 0 0 0 2005/06 Balikatan Housing Finance (HF) 0 1.89 38.71 0 0 0 1.89 36.59 0 0
2005 Cagayan de Oro Power and Light Company (CEPALCO) 16.91 0 0 0 0 0 0 0 0 0
2005 Filinvest Land 46.82 0 0 0 0 46.82 0 0 0 0 2005 Paramount Life and General Holding Corporation (PLGHC) 0 1.50 0 0 0 0 1.50 0 0 0
2006 Bahay Financial 0 0.16 0 0 0 0 0.16 0 0 0 2007/09 Philippine National Oil Company-Energy Development
Corporation (PNOC-EDC)
85.31 29.76 0 0 0 85.31 29.76 0 0 0
2007 South Luzon Tollway Corporation (SLTC) 52.02 0 0 0 0 0 0 0 0 0 2008 Masinloc Power 232.00 22.13 13.77 0 0 206.00 22.13 13.77 0 0
2008 SN Aboitiz Power, Inc (SNAP) 98.00 0 0 0 0 98.00 0 0 0 0
2009 SN Aboitiz Power, Inc. Benguet (SNAPB) 85.00 0 15.00 0 0 67.91 0 15.00 0 0
Total Portfolio:
724.61
88.07
212.60
0
3.08
607.34
88.07
153.26
0
3.08
* Denotes Guarantee and Risk Management Products. ** Quasi Equity includes both loan and equity types.
MAP SECTION