World Bank Documentdocuments.worldbank.org/curated/en/...May 12, 2017 · DOT Department of Tourism PCN Project Concept Note DPL Development Policy Loan PD Project Document DPWH Department

Document of

The World Bank

Report No. ICR00003450

IMPLEMENTATION COMPLETION AND RESULTS REPORT

(IBRD-80500, IBRD-82380, IBRD-83280, IBRD-84350)

ON A

LOAN

IN THE AMOUNT OF

US$ 250.00 MILLION, US$ 800.00 MILLION, AND US$ 300.00 MILLION

TO THE

REPUBLIC OF THE PHILIPPINES

FOR THE

PHILIPPINES DEVELOPMENT POLICY LOAN TO FOSTER MORE

INCLUSIVE GROWTH (PROGRAMMATIC SERIES I TO III)

May 12, 2017

Macroeconomics and Fiscal Management

East Asia and Pacific Region

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CURRENCY EQUIVALENTS

(Exchange Rate Effective May 12, 2017)

Currency Unit = PhP

PhP 1.00 = US$ 0.02

US$ 1.00 = PhP 49.81

FISCAL YEAR January to December

ACRONYMS AND ABBREVIATIONS

CAS Country Assistance Strategy MILF Moro Islamic Liberation Front

COA Commission on Audit MTEF Medium-Term Expenditure

Framework

DA Department of Agriculture NDRRF National Disaster Risk Reduction

Framework

DAP Disbursement Acceleration Program NEDA National Economic and

Development Authority

DBCC Development Budget and Coordination

Committee

NHIP National Health Insurance

Program

DepEd Department of Education NHTS-PR National Household Targeting

System for Poverty Reduction

DOF Department of Finance PAG-IBIG Home Development Mutual Fund

DOH Department of Health PBR Philippine Business Registry

DOJ Department of Justice PCB Primary Care Benefit

DOT Department of Tourism PCN Project Concept Note

DPL Development Policy Loan PD Project Document

DPWH Department of Public Works and

Highways

PDAF Priority Development Assistance

Fund

DTI Department of Trade and Industry PDO Program Development Objectives

ESC Education Service Contracting PDP Philippine Development Plan

FIES Family Income and Expenditure

Survey

PEFA Public Expenditure and Financial

Accountability

FMR Farm to Market Roads PFM Public Financial Management

FRS Fiscal Risk Statement Phil

Health

Philippine Health Insurance

Corporation

GAA General Appropriations Act PHP Philippine Peso

GASTPE Government Assistance to Students

and Teachers in Private Education

PPP Public-Private Partnership

GCG Governance Commission for GOCCs SAOB Statements of Allotments,

Obligations, and Balances

GIFMIS Government Integrated Financial

Information Management System

SC Supreme Court

GOCC Government-Owned and Controlled

Corporations

SEC Securities and Exchange

Commission

IAC Inter-Agency Committee SSS Social Security System

ICR Implementation Completion and

Results Report

SY School Year

IFC International Finance Corporation TES Tax Expenditure Statement

ISR Implementation Status and Results

Report

TRIP Tourism Road Infrastructure

Program

LEDAC Legislative-Executive Development

Advisory Council

TTL Task Team Leader

LGU Local Government Unit UACS Unified Account Code Structure

LTS Large Taxpayer Service UHC Universal Health Care

Regional Vice President: Victoria Kwakwa (EAPVP)

Country Director: Mara Warwick (EACPF)

Senior Global Practice Director: Carlos Felipe Jaramillo (GMFDR)

Practice Managers: Ndiame Diop (GMFDR)

Project Team Leader: Kai Kaiser (GGODR)

ICR Team Leader: Saeeda Sabah Rashid (GGODR)

ICR Main Author: David Stephen Knight (GMFDR)

Acknowledgements

This Implementation Completion and Results (ICR) Report was prepared by a team led by Saeeda Sabah

Rashid (Senior Public Sector Specialist, GGODR) and the following:

GMFDR: David Knight (Senior Economist and ICR Main Author), Karl Kendrick Chua (former Senior

Economist), Kevin C. Chua (Economist)

GGODR: Kai Kaiser (Senior Economist), Bonnie Ann Sirois (Senior Financial Management Specialist),

Tomas Sta. Maria (Financial Management Specialist), Noel Sta. Ines (Senior Procurement Specialist)

GFADR: Carolina Figueroa-Geron (Lead Rural Development Specialist)

GTIDR: Victor Dato (Senior Infrastructure Specialist)

GTCDR: Hans Shrader (Senior Operations Officer), Roberto Galang (Operations Officer)

GHNDR: Caryn Bredenkamp (Senior Health Specialist), Roberto Rosadia (former Health Specialist)

GEDDR: Lynnette Perez (former Senior Education Specialist)

EACPF: Aleksandra Posarac (Program Leader - HD), Hanif Anilmohamed Rahemtulla (Senior Operations

Officer), Maria Consuelo Sy and Reinaluz Ona (Program Assistants)

The team worked under the guidance of Rogier van den Brink and Birgit Hansl (Program Leaders - EFI),

Mathew Verghis and Ndiame Diop (Practice Managers – MFM GP), Robert R. Taliercio (Practice Manager

– GOV GP), and Mara K. Warwick (Country Director).

5

PHILIPPINES

Philippines Development Policy Loan to Foster More

Inclusive Growth (Programmatic Series I to III)

CONTENTS

A. Basic Information ................................................................................................................................... 6 B. Key Dates ............................................................................................................................................ 7

C. Ratings Summary ............................................................................................................................... 7

D. Sector and Theme Codes ................................................................................................................... 8

E. Bank Staff .......................................................................................................................................... 10

F. Results Framework Analysis ........................................................................................................... 11

G. Ratings of Program Performance in ISRs ..................................................................................... 18

H. Restructuring (if any) ...................................................................................................................... 18

1. Program context, program development objectives (PDO), and design .......................................... 19 1.1 Context at appraisal ........................................................................................................................... 19

1.2 Original PDO and key indicators ...................................................................................................... 24

1.3 Revised PDO and key indicators, and reasons/justifications ............................................................ 26

1.4 Original policy areas supported by the program ............................................................................... 32

1.5 Revised policy areas .......................................................................................................................... 35

1.6 Other significant changes .................................................................................................................. 36

2. Key factors affecting implementation and outcomes ......................................................................... 36 2.1 Program performance ........................................................................................................................ 36

2.2 Major factors affecting implementation ............................................................................................ 45

2.3 Monitoring and evaluation design, implementation, and utilization ................................................. 48

2.4 Expected next phase/follow-up operation ......................................................................................... 49

3. Assessment of outcomes ........................................................................................................................ 50 3.1 Relevance of objectives, design, and implementation ...................................................................... 50

3.2 Achievement of PDOs ...................................................................................................................... 51

3.3 Justification of overall outcome rating .............................................................................................. 60

3.4 Overarching themes, other outcomes and impacts ............................................................................ 60

4. Assessment of risk to development outcomes ..................................................................................... 62 5. Assessment of Bank and Borrower performance ............................................................................... 64

5.1 Bank performance ............................................................................................................................. 64

5.2 Borrower performance ...................................................................................................................... 65

6. Lessons learned ..................................................................................................................................... 66 Annex 1: Comments from the Government ........................................................................................... 69 Map ............................................................................................................................................................ 70

6

A. Basic Information

Program 1

Country Philippines Program Name

Philippines Development

Policy Loan to Foster

More Inclusive Growth

Program ID P118931 L/C/TF Number(s) IBRD-80500

ICR Date 12/19/2016 ICR Type Core ICR

Lending Instrument DPL Borrower REPUBLIC OF THE

PHILIPPINES

Original Total

Commitment USD 250.00M Disbursed Amount USD 250.00M

Implementing Agencies

Department of Finance

Cofinanciers and Other External Partners

Program 2

Country Philippines Program Name PH - PH Development

Policy Loan 2

Program ID P126580 L/C/TF Number(s) IBRD-80500,IBRD-

82380,IBRD-83280


Lending Instrument DPL Borrower REPUBLIC OF THE

PHILIPPINES

Original Total





Program 3

Country Philippines Program Name

Third Philippines

Development Policy

Loan

Program ID P147803 L/C/TF Number(s) IBRD-82380,IBRD-

83280,IBRD-84350


Lending Instrument DPL Borrower GOVERNMENT OF

THE PHILIPPINES

7

Original Total





B. Key Dates

Philippines Development Policy Loan to Foster More Inclusive Growth - P118931

Process Date Process Original Date Revised / Actual

Date(s)

Concept Review: 01/05/2011 Effectiveness: 08/08/2011

Appraisal: 03/07/2011 Restructuring(s):

Approval: 05/19/2011 Mid-term Review: 11/01/2011

Closing: 03/31/2012 03/31/2012

PH - PH Development Policy Loan 2 - P126580


Date(s)

Concept Review: 12/05/2011 Effectiveness:


Approval: 03/19/2013 Mid-term Review: 03/24/2014 03/24/2014

Closing: 02/28/2014 06/30/2015

Third Philippines Development Policy Loan - P147803


Date(s)

Concept Review: 04/08/2014 Effectiveness: 01/12/2015


Approval: 09/26/2014 Mid-term Review:

Closing: 12/31/2015 12/31/2015

C. Ratings Summary

C.1 Performance Rating by ICR

Overall Program Rating

Outcomes Satisfactory

Risk to Development Outcome Low or Negligible

Bank Performance Satisfactory

Borrower Performance Satisfactory

8

C.2 Detailed Ratings of Bank and Borrower Performance (by ICR)

Overall Program Rating

Bank Ratings Borrower Ratings

Quality at Entry Satisfactory Government: Satisfactory

Quality of Supervision: Moderately Satisfactory Implementing

Agency/Agencies: Satisfactory

Overall Bank

Performance Satisfactory

Overall Borrower

Performance Satisfactory

C.3 Quality at Entry and Implementation Performance Indicators


Implementation

Performance Indicators

QAG Assessments (if

any) Rating:

Potential Problem Program

at any time (Yes/No): No Quality at Entry (QEA) None

Problem Program at any

time (Yes/No): No

Quality of Supervision

(QSA) None

DO rating before

Closing/Inactive status Satisfactory


Implementation


QAG Assessments (if

any) Rating:




time (Yes/No): No


(QSA) None

DO rating before

Closing/Inactive status Satisfactory


Implementation


QAG Assessments (if

any) Rating:




time (Yes/No): No


(QSA) None

DO rating before

Closing/Inactive status

D. Sector and Theme Codes


Original Actual

Sector Code (as % of total Bank financing)

Central Government (Central Agencies) 56 56

Other Education 22 22

Health 11 11

Other Industry, Trade and Services 11 11

9

Theme Code (as % of total Bank financing)

Debt management and fiscal sustainability 13 13

Education for all 37 37

Public expenditure, financial management and procurement 12 12

Regulation and competition policy 13 13

Tax policy and administration 25 25


Original Actual


Central Government (Central Agencies) 43 43

Other Education 14 14

Health 14 14

Other Transportation 7 7




Health system performance 14 14

Infrastructure services for private sector development 14 14




Original Actual


Other Agriculture, Fishing and Forestry 9 9

Other Public Administration 46 46

Secondary Education 9 9

Health 18 18




Health system performance 18 18

Infrastructure services for private sector development 27 27



10

E. Bank Staff


Positions At ICR At Approval

Vice President: Victoria Kwakwa James W. Adams

Country Director: Mara K. Warwick Bert Hofman

Practice Manager/Manager: Ndiame Diop Vikram Nehru

Task Team Leader: Kai-Alexander Kaiser Ulrich Lachler

ICR Team Leader: Saeeda Sabah Rashid

ICR Primary Author: David Stephen Knight

Karl Kendrick Tiu Chua

Saeeda Sabah Rashid

Joseph Louie C. Limkin



Vice President: Victoria Kwakwa Axel van Trotsenburg

Country Director: Mara K. Warwick Motoo Konishi

Practice Manager/Manager: Ndiame Diop Sudhir Shetty

Task Team Leader: Kai-Alexander Kaiser Kai-Alexander Kaiser




Saeeda Sabah Rashid




Vice President: Victoria Kwakwa Axel van Trotsenburg

Country Director: Mara K. Warwick Motoo Konishi

Practice Manager/Manager: Ndiame Diop Mathew A. Verghis

Task Team Leader: Kai-Alexander Kaiser Kai-Alexander Kaiser




Saeeda Sabah Rashid


11

F. Results Framework Analysis

Program Development Objectives (from Program Document) The overall goal of this series of DPLs is to help the Philippines achieve sustained inclusive

growth through (i) better fiscal management, and improved investment climate and better

governance for faster growth, and (ii) investments in human capital to enable the poor to take

better advantage of emerging growth opportunities.

Revised Program Development Objectives (as approved by original approving authority)

The PDO is defined as fostering inclusive growth by: (Pillar 1) Strengthening Priority Public

Investment Implementation; (Pillar 2) Reducing the Cost of Doing Business for Jobs Creation

and Poverty Reduction; (Pillar 3) Developing the Human Capital of the Poor by Strengthening

the Basic Education and Health Sector; (Pillar 4) Fiscal Transparency and Good Governance;

and (Pillar 5) Consolidating Fiscal Sustainability, Revenue Mobilization, and Risk Management.

Indicator(s)


Indicator Baseline Value

Original Target

Values (from

approval

documents)

Formally

Revised

Target Values

Actual Value

Achieved at

Completion or

Target Years



Original Target

Values (from

approval

documents)

Formally

Revised

Target Values

Actual Value

Achieved at

Completion or

Target Years



Original Target

Values (from

approval

documents)

Formally

Revised

Target Values

Actual Value

Achieved at

Completion or

Target Years

Indicator 1: Public infrastructure investment (from the budget)

Value

(quantitative or

Qualitative)

1.8 percent of

GDP

>3.5 percent of

GDP

2.7 percent of GDP

Date achieved 12/31/2010 12/31/2014 12/31/2014

Comments

(incl. %

achievement)

Indicator under Pillar 1 (Public Investment). Indicator is met at project

completion. In 2015, public infrastructure investment from the budget

was 4.3 percent of GDP.

12

Indicator 2: DPWH public infrastructure investment

Value

(quantitative or

Qualitative)

1.5 percent of

GDP

>1.5 percent of

GDP

1.4 percent of GDP

Date achieved 12/31/2010 12/31/2014 12/31/2014

Comments

(incl. %

achievement)

Indicator under Pillar 1 (Public Investment). Indicator is met at project

completion. In 2015, DPWH public infrastructure investment was 2.1

percent.

Indicator 3:

DPWH public investment project portfolio prioritization improved, as

measured by percent value of budgeted contracts bid in first half

Value

(quantitative or

Qualitative)

31 percent of

GAA

>50 percent of

GAA

51 percent of GAA

Date achieved 12/31/2010 12/31/2014 12/31/2014

Comments

(incl. %

achievement)

Indicator under Pillar 1 (Public Investment). Indicator is met before

target. Latest available data is 2013. Budget for DPWH was scaled up

and effort for early contracting made. Declaration of DAP as

unconstitutional in late 2014 slowed down execution.

Indicator 4:

Spatial targeting clarified and project selection transparency enhanced

as evidenced by operational network plans and implementation by

DPWH for two major priority road programs

Value

(quantitative or

Qualitative)

0

2/4

4/4

Date achieved 12/31/2010 12/31/2014 12/31/2014

Comments

(incl. %

achievement)

Indicator under Pillar 1 (Public Investment). Indicator is met and

exceeded in target year. Examples of operational network plans include

the tourism road infrastructure program [TRIP], farm to market roads

[FMR], school building program [SBP], and health facilities

enhancement program [HFEP].

13

Indicator 5:

The average number of days required to register a sole proprietorship

business has been reduced to under 10 days for selected cities

Value

(quantitative or

Qualitative)

>10 days

<10 days

<10 days (98% of

480 target LGUs);

1,221 LGUs have

finished

streamlining the

Business Permit

and Licensing

System

Date achieved 12/31/2010 12/31/2014 12/31/2014

Comments

(incl. %

achievement)

Indicator under Pillar 2 (Doing Business). Indicator was met in target

year. In 2015, the average number of days to register a sole

proprietorship is 3 days in Quezon City, and 1-3 days in Manila,

Mandaluyong, Pasig, Puerto Princesa, and Tuguegarao cities.

Indicator 6:

Reduction in the student-teacher ratio at the top 25th percentile of its

distribution, primary

Value

(quantitative or

Qualitative)

40.4

<40.4

29.8

Date achieved 12/31/2010 12/31/2014 12/31/2014

Comments

(incl. %

achievement)

Indicator under Pillar 3 (Human Capital of the Poor). Indicator was met

in School year 2013-14. Education sector has been one of the biggest

recipients of the budget in 2013 and 2014.Resources were allocated for

the hiring of teachers, construction, repairs and maintenance of

classrooms and school facilities.

Indicator 7:

Reduction in the student-teacher ratio at the top 25th percentile of its

distribution, secondary

Value

(quantitative or

Qualitative)

42.0

<42.0

25.4

Date achieved 12/31/2010 12/31/2014 12/31/2014

Comments

(incl. %

achievement)






14

Indicator 8:

Reduction in the student-classroom ratio at the top 25th percentile of its


Value

(quantitative or

Qualitative)

43.8

<43.8

26.9

Date achieved 12/31/2014 12/31/2014 12/31/2014

Comments

(incl. %

achievement)






Indicator 9:

Reduction in the student-classroom ratio at the top 25th percentile of its

distribution, secondary

Value

(quantitative or

Qualitative)

60.0

<60.0

31.6

Date achieved 12/31/2010 12/31/2014 12/31/2014

Comments

(incl. %

achievement)






Indicator 10: Net enrollment ratio, primary

Value

(quantitative or

Qualitative)

88.1

>94.0

95.2

Date achieved 12/31/2010 12/31/2014 12/31/2014

Comments

(incl. %

achievement)

Indicator under Pillar 3 (Human Capital of the Poor). Indicator met and

exceeded in School year 2013-14. Aided by expanded CCT program,

progress in improving enrollment and learning environment for school

children is likely to be strongly supportive of inclusive growth over the

medium term.

Indicator 11: Net enrollment ratio, secondary

Value

(quantitative or

Qualitative)

59.6

>76.0

64.6

Date achieved 12/31/2010 12/31/2014 12/31/2014

Comments

(incl. %

achievement)

Indicator under Pillar 3 (Human Capital of the Poor). Indicator unmet.

Target set very high representing a 16.4% increase in NER within 4

years. In comparison, target for primary NER is raised by only 6% from

15

baseline. Enrollment data available for 2015 but data on school age

population still unavailable.

Indicator 12: Number of NHTS-PR individuals covered by PhilHealth (millions)

Value

(quantitative or

Qualitative)

22.1

47.8

92.6

Date achieved 12/31/2010 12/31/2014 12/31/2015

Comments

(incl. %

achievement)


and exceeded as at project completion. The 2015 figure represents all

individuals with PhilHealth coverage, including the CCT recipients who

are automatically enrolled.

Indicator 13:

Number of NHTS-PR individuals enlisted with a primary care benefit

provider (millions)

Value

(quantitative or

Qualitative)

0

9.5

28.2

Date achieved 12/31/2010 12/31/2014 12/31/2015

Comments

(incl. %

achievement)


and exceeded by project completion date. The 2015 figure represents the

total number of individuals i.e. both members and their dependents.

Indicator 14:

Number of claims by NHTS-PR families at PhilHealth-accredited

providers in the previous year (share of total)

Value

(quantitative or

Qualitative)

20 percent

>27 percent

32 percent

Date achieved 12/31/2010 12/31/2014 12/31/2015

Comments

(incl. %

achievement)


and exceeded by project completion date. The 2015 figure is based on

paid claims by admission dates from January 1, 2015 to December 31,

2015; and total claims amount paid under Unified Claims Processing

System budget table.

Indicator 15: Improvement in the PEFA indicator score: PI 5 - classification of budget

Value

(quantitative or

Qualitative)

D

Score improves

C

Date achieved 12/31/2010 12/31/2014 12/31/2015

Comments

(incl. %

achievement)

16

Indicator 16:

Improvement in the PEFA indicator score: PI 10 - public access to key

fiscal information

Value

(quantitative or

Qualitative)

C

Score improves

A

Date achieved 12/31/2010 12/31/2014 12/31/2015

Comments

(incl. %

achievement)

Indicator under Pillar 4 (Fiscal Transparency). Indicator was met at

project completion. PEFA assessment conducted in 2016 using data for

the completed fiscal years till 2015.

Indicator 17:

Improvement in the PEFA indicator score: PI 24 - quality and timeliness

of in-year budget reports

Value

(quantitative or

Qualitative)

D

Score improves

D+

Date achieved 12/31/2010 12/31/2014 12/31/2015

Comments

(incl. %

achievement)

Indicator under Pillar 4 (Fiscal Transparency). Indicator was met at

project completion. PEFA assessment conducted in early 2016 using

data for the completed fiscal years till 2015.

Indicator 18:

Enhanced budget transparency through the existence of a unified

account code structure, and the timely publication of budget execution

data

Value

(quantitative or

Qualitative)

Does not exist/not

timely

Yes

Yes

Date achieved 12/31/2010 12/31/2014 12/31/2014

Comments

(incl. %

achievement)

Indicator under Pillar 4 (Fiscal Transparency). Indicator was met in

target year. UACS is being used for the budget formulation and

financial reporting. Acceptable budget execution reports are being

regularly uploaded on DBM website. Completeness is still a challenge.

Indicator 19: Tax administration gains by BIR (percent of GDP)

Value

(quantitative or

Qualitative)

9.1 percent of

GDP

1 percentage point

(PPT) of GDP

increase

10.6 percent of

GDP (1.5 PPT

increase)

Date achieved 12/31/2010 12/31/2014 12/31/2014

Comments

(incl. %

achievement)

Indicator under Pillar 5 (Fiscal Sustainability). Indicator was met in

target year. In 2015, tax collection reached 10.8 percent of GDP,

representing a 1.7 ppt increase from the baseline value.

17

Indicator 20: Excises from alcohol and tobacco (percent of GDP)

Value

(quantitative or

Qualitative)

0.63 percent of

GDP

0.4 PPT of GDP

increase

0.95 percent of

GDP (0.32 PPT

increase)

Date achieved 12/31/2010 12/31/2014 12/31/2014

Comments

(incl. %

achievement)

Indicator under Pillar 5 (Fiscal Sustainability). Indicator was met.

Indicator is met as at project completion. In 2015, excises from alcohol

and tobacco reached 1.2 percent of GDP, representing a 0.57 ppt

increase from the baseline value.

Indicator 21:

Enhanced evidence based stakeholder awareness of key tax

expenditures and fiscal risks

Value

(quantitative or

Qualitative)

Low (Awareness

is rated low for

the baseline given

that no fiscal risk

statement is

prepared prior to

20

Basic (Basic

refers to a basic

understanding of

the key tax

expenditures and

fiscal risks in

the country based

on awareness of

the existence of a

published Fiscal

Risk Statement

which includes

this information)

Basic

Date achieved 12/31/2010 12/31/2014 12/31/2014

Comments

(incl. %

achievement)


target year and sustained. Online survey conducted in 2016 among

members of the Fiscal Risk Statement (FRS) Technical Working Group

reveals awareness among its core members.

Indicator 22: GOCC contribution to consolidated public sector deficit

Value

(quantitative or

Qualitative)

-0.7 percent of

GDP

0 percent of GDP

0 percent of GDP

Date achieved 12/31/2010 12/31/2014 12/31/2014

Comments

(incl. %

achievement)


target year. GOCCs contributed a surplus of 0.2 percent of GDP in

2014.

18

Indicator 23:

Majority of top 20 GOCCs as measured by government transfers

between 2010-2013 are subject to completed GCG performance

evaluation contracts for 2013/14

Value

(quantitative or

Qualitative)

0

15/20 or 75

percent

16/20 or 80 percent

Date achieved 12/31/2010 12/31/2014 12/31/2014

Comments

(incl. %

achievement)


target year. Starting 2014, a majority of top 20 GOCCs in terms of

subsidies received from the national government are governed by

performance evaluation contracts under the Governance Commission

for GOCCs. All are covered in 2016.

G. Ratings of Program Performance in ISRs


No. Date ISR

Archived DO IP

Actual Disbursements

(USD millions)

1 06/15/2011 Satisfactory Satisfactory 250.00


No. Date ISR

Archived DO IP


(USD millions)

1 07/23/2014 Satisfactory Satisfactory 800.00


No. Date ISR

Archived DO IP


(USD millions)

1 01/15/2015 Moderately Satisfactory Moderately Satisfactory 300.00

H. Restructuring (if any)

19

1. Program context, program development objectives (PDO), and design

1.1 Context at appraisal

1. This programmatic development policy loan (DPL) series consisted of three

operations, and was the second DPL program in the Philippines. The first program was a

standalone DPL in 2007 which primarily supported reforms aimed at restoring macroeconomic

stability under the previous (Arroyo) administration. The second program supported the Aquino

Administration's inclusive growth agenda, which was articulated in the Philippine Development

Plan (PDP) 2011-1016 as “high growth that is sustained…that massively creates jobs, and reduces

poverty.”

2. The Philippines managed to emerge from the global financial crisis only moderately

affected, given earlier fiscal consolidation. In 2009, expansionary fiscal policy resulted in higher

deficit of 3.7 percent of GDP but the fiscal position remained broadly sustainable. Debt levels had

declined from 96 to 54 percent of GDP between 2003 and 2010. In 2010, GDP growth, which had

fallen to around 1 percent in 2009, quickly recovered (Table 1). By the end of the Arroyo

Administration, macroeconomic instability was no longer a major concern and investors’ concerns

had shifted to corruption and infrastructure gaps, the next two biggest constraints.

3. However, despite progress in the macroeconomic environment, it was clear that

growth was far from being inclusive. For instance, between 2003 and 2009, higher average

growth of around five percent compared to four percent in the previous decade did not result in

poverty reduction. In fact poverty incidence1 increased from 30 to 32.6 percent and the number of

people living in poverty increased by 4.7 million. The government’s strategy of keeping

expenditure levels low, given its inability to raise revenues, managed to lower deficit and debt

levels significantly but had negative on poverty reduction and job creation.

4. In 2010, the Aquino Administration commenced office with a strong focus on

improving governance (Figure 1). Its campaign promise was “kung walang corrupt, walang

mahirap,” or “if there is no corruption, there is no poverty.” Immediately, it embarked on a number

of “housekeeping” reforms. Persons of generally accepted competence and integrity were

appointed by the president to head key governance agencies such as the Supreme Court (SC),

Commission on Audit (COA), Department of Budget and Management (DBM), Department of

Justice (DOJ), the Office of the Ombudsman (OOB), and the Bureau of Internal Revenue (BIR).

He also ordered sweeping reforms in the budget process. For the first time in many years, budgets

were passed on time. Lump sum funds were reduced and converted into clear budget line items.

The list of eligible spending under the congressional “pork barrel” fund and special purpose funds

were tightened and published online. Quarterly reports on budget execution (i.e., statements of

allotments, obligations, and balances) were regularly posted. Finally, the budget preparation

process was opened to civil society organizations. At the same time, the government improved its

poverty programs by reducing expensive subsidies which were poorly targeted and replacing them

with a scaled-up conditional cash transfer program which relied on an objective means of

1 This is based on the previous national poverty estimation methodology. Based on the latest methodology, the poverty

headcount ratio in 2009 was 26.3 percent but the incidence for 2003 is not available.

20

identifying the poor through the national household targeting system for poverty reduction (NHTS-

PR).2

Box 1. The Macroeconomic Context of the first and second DPL

The first standalone DPL supported the government’s program to restore macroeconomic

stability. In 2004, the Philippines was on the verge of a fiscal collapse, the consequence of fiscal

indiscipline after the 1997 Asian financial crisis, which included the enactment of significant

tax eroding measures equivalent to three percent of GDP.3 At its height in the early 2000s, non-

financial public sector debt reached 95 percent of GDP,4 the consolidated public sector deficit

breached five percent, debt servicing was equivalent to over 85 percent of revenues, and

borrowing spreads surpassed 600 basis points (bps). In 2004, fresh from the elections, the

Arroyo Administration embarked on a fiscal consolidation program aimed at raising tax

revenues, controlling government spending, and addressing fiscal risks from government-owned

and controlled corporations (GOCCs), notably in the power sector. These reforms gradually

improved macroeconomic stability and created the conditions for a development policy loan in

2007.

In 2008, a second DPL under a programmatic series was considered but did not materialize

given the weak policy environment, notably in the area of revenue mobilization. Between

2005 and 2010, the governance environment deteriorated, reducing traction for reforms, notably

in tax enhancing measures. Instead, a number of tax eroding measures were enacted. Private

investment stagnated at around 17 percent of GDP as the private sector took a wait-and-see

stance. In 2008 and 2009, economic prospects deteriorated following international oil and rice

price spikes, the global financial crisis, and the global slowdown.

5. With a government which showed a strong focus on governance and a commitment

to reforms, the Bank reengaged with a new DPL series. The first operation in 2011 (DPL I)

supported the government’s governance agenda and reforms to strengthen macroeconomic

stability. Following the 2009 country assistance strategy (CAS) priorities, DPL I focused on

deepening fiscal reforms by strengthening revenue mobilization and fiscal risk management. In

tandem with fiscal stability, the CAS and the DPL series supported the government’s reforms in

public financial management. At the same time, the CAS and the DPL series began to put more

focus on structural reforms such as improving the investment climate by reducing the cost of doing

business, addressing infrastructure bottlenecks,5 and ramping up education and health spending.

Inheriting a treasury with limited revenues, the Aquino Administration immediately pursued

2 Also known as Listahanan. 3 See the program document and the ICR of the 2007 DPL for more discussion. 4 Before the revision to the GDP series in 2011, non-financial public sector debt was equivalent to over 100 percent of GDP during its height. 5 As DPL I was about to be discussed in the Board in April 2011, revisions to the national accounts revealed that

investments had been underestimated by around three percent of GDP, pushing up the average investment to GDP

ratio from 15.6 to 20.5 percent. However, most of this gain was contributed by private investment. This may have

reduced the urgency to ramp up investment spending in the succeeding years.

21

public-private partnership (PPP) projects to address infrastructure bottlenecks by crowding in

private capital.

Table 1. Selected macroeconomic indicators

6. These reforms restored confidence and positively affected growth momentum. Under

a process called zero-based budgeting, governance reforms were making the budget more

transparent, and efficient, resulting in significant fiscal savings. However, by 2011, it became

evident that these reforms were slowing down project implementation significantly, resulting in

slower economic growth despite the uptick in private investment. Associated reforms in public

financial management (PFM) were slow materialize, particularly the long awaited automation

through a financial management information system (FMIS) which remained stalled at the

procurement stage. The government responded by introducing the Disbursement Acceleration

Program (DAP) to move funds from slow moving projects to fast moving projects.6 This added

flexibility contributed to higher growth in 2012 and 2013.

7. A second DPL supported sustained reform progress through 2013. DPL II focused on

deepening governance reforms and improving social service delivery, primarily through larger

budget allocation and better targeting. A historic sin tax reform, better tax administration, and more

6 In reality, the budget practices formalized in the DAP were widely used in the past. This formalization likely caught

the attention of the opposition, which filed a case before the Supreme Court questioning its legality.

22

prudent spending resulted in higher revenues and rapidly falling deficit and debt levels. By end

2013, the consolidated public sector balance turned to a surplus (0.2 percent of GDP)7 while debt-

to-GDP fell to 51 percent of GDP. To further reduce fiscal risk from GOCCs, the government

created the Governance Commission for GOCCs (GCG).

8. With the national government’s fiscal stance improving, international credit rating

agencies upgraded the country to two notches above investment grade—the first for the

Philippines. The macroeconomic stability and better governance boosted growth, confidence, and

ratings, but their impact on poverty was not apparent. Poverty incidence hardly declined between

2009 and 2012 even as the macroeconomy and the governance environment improved

significantly.8

9. On November 8, 2013, Typhoon Yolanda, a category five typhoon, hit central

Philippines, and caused immense damages and casualties. On December 4, 2013, supplemental

financing under DPL II assisted in addressing the unanticipated financing gap caused by the

unprecedented magnitude of the typhoon which risked jeopardizing the government’s reform

program. The disaster also led to a major rethinking in a number of government programs and

policies. This included: i) factoring in disaster risk as a central element of macroeconomic risk, ii)

improving expenditure tracking, especially to account for aid provided for relief and

reconstruction, iii) improving social safety nets for disaster-affected and vulnerable people, and

iv) accelerating delivery of reconstruction projects.

10. In 2014, as the Philippines recovered from the devastation caused by Typhoon

Yolanda, DPL III was prepared to help the government strengthen implementation of

reforms to support inclusive growth. To accelerate poverty reduction, the government sought to

improve the targeting of infrastructure and anti-poverty programs to ensure that significant

increases in the budget were reaching the intended beneficiaries. In this regard, DPL III supported

ramping up infrastructure spending, and targeted investments in tourism and farm-to-market

(FMR) roads, scaling up the conditional cash transfer (CCT) program to cover high school

students, and using the national household targeting system for poverty reduction (NHTS-PR) to

target health insurance beneficiaries. As in previous operations, DPL III also supported reforms to

strengthen fiscal transparency and sustainability.

11. By 2015, the reform efforts started paying off. Economic growth is more inclusive and

is translating into stronger job creation and faster poverty reduction. Between January 2014

and 2015, more than a million jobs were created as the unemployment rate fell to 6.6 percent,

significantly lower than the seven to eight percent recorded in the previous decade. Official poverty

incidence among Filipinos dropped to 21.6 percent in 2015 from 25.2 percent in 2012, representing

a feat of 1.8 million Filipinos lifted out of poverty in three years. The decline in the number of

poor can be attributed to improved incomes, higher employment rate and the generally stable

inflation environment. Another significant contributor has been the government’s conditional cash

transfer program, the Pantawid Pamilyang Pilipino Program, whose budget increased by almost

200 percent to Php 62.3 billion, and whose household coverage almost doubled to 4.4 million

7 The consolidated public sector position turned into a surplus in 2013, while the general government deficit decreased

to 1.4 percent in the same year. 8 Philippines ranking in the Corruption Perception Index improved from 134 (2010 report) to 94 (2013 report).

23

households between 2011 and 2015. Meanwhile, the 2015 Family Income and Expenditure Survey

(FIES) revealed that average family incomes increased for all income deciles from 2012 to 2015.

The first four deciles experienced the largest increase, averaging 13.4 percent increase in real

terms, compared to an average of 4.5 percent for the fifth to tenth decile. Moreover, the real income

of the bottom 20 percent grew much faster than the rest of the population through substantial

growth of domestic cash transfers to this quintile, confirming that the government’s CCT program

is well targeted.

12. Sustaining recent gains through focused reforms, especially in the economic sector,

can help the government achieve eradication of extreme poverty within one generation. The

country is increasingly characterized with robust economic growth, stable inflation, healthy current

account surpluses, more-than-adequate international reserves, and a sustainable fiscal position.

With a solid macro economy that has proven resilient against shocks, the country can focus on

crucial structural reforms that address extreme poverty. Recent poverty reduction translates into a

growth elasticity of poverty of -0.9, meaning for every one percent increase in per capita growth,

poverty incidence declines by 0.9 percent. Sustaining this level of elasticity and achieving growth

of at least seven percent can keep the country on track to eradicate extreme poverty in one

generation (i.e., by 2045).

24

Figure 1. Philippine Development Policy Engagement Since 2007

1.2 Original PDO and key indicators

13. The program development objectives (PDO) for the overall program, as set out in

DPL I, is to help the Philippines achieve sustained inclusive growth through i) better fiscal

management, ii) an improved investment climate, iii) better governance, and iv) increased

investments in human capital. Key outcomes and indicators were specified for each of these pillars

(Table 2).

25

Table 2. Original PDO Key Outcomes and Indicators

Outcome Indicator

Strengthened public revenue mobilization Total tax revenues increase from 12.8% of

GDP in 2010 in line with the Government’s

Philippine Development Program target

(14.4% in 2013).

The amount of revenues generated by the LTS

increases from 54% of total BIR collection in

2010 to at least 70% in 2013.

Strengthened fiscal risk management Total NFPS debt as a % of GDP has declined

below 60.7% (2009 baseline).

Fiscal risk is reduced, as reflected by

improvement in the ratings of sovereign credit

by any of S&P, Moody’s or Fitch.

Improve the business climate by reducing the

cost of doing business

The average number of days required to start

a business has been reduced to 10 days, based

on the Doing Business methodology for

business entry.

Addressed infrastructure bottlenecks Total fixed investment increases above 15.7%

of GDP (2010 baseline).

Improved public financial management,

budget transparency, and accountability

Enhanced transparency through the existence

of a unified Chart of Accounts and the regular

publication of budget execution data.

Strengthened the basic education sector Reductions of the (i) Students-to-Teacher

ratio and the (ii) Students-to-Classroom ratio

at the top 25th percentile point of their

respective distributions. (Baseline

2010/2011: 40.37 and 43.8 for public

elementary schools, and 42.03 and 59.98 for

public secondary schools.)

Net enrolment ratios increase. (Baselines

2009/10: 88.1% for elementary and 59.6%

secondary. Targets 2013/14: 94% for

elementary and 76% for secondary.)

Strengthened the health sector Increased utilization of health services among

poor and near-poor households from 1.0

outpatient visits per capita to at least 1.5 visits

per capita.

Improved financial protection for the poor, as

measured by reduced out-of-pocket payments

for health care among insured poor

households.

26

1.3 Revised PDO and key indicators, and reasons/justifications

14. The PDO remained consistent throughout the DPL series but underwent some

refinement to increase its relevance to the policy framework as it developed over the course

of the program. Slight tweaks to the high level PDO were made, such as explicitly defining

inclusive growth to mean job creation, and linking the formulation of the pillars to the policy

framework, for instance replacing “better fiscal management” with the more specific objectives of

“raising revenues and reducing fiscal risk” (Table 3). Pillar I was divided into two pillars to

explicitly capture the focus on public investment and private investment, each with its own results

indicators.

Table 3. Summary of the DPL PDO and Pillars under the Series

DPL I DPL II DPL III

Help achieve sustained

inclusive growth

Help achieve sustained

inclusive growth

Support sustained inclusive

growth and job creation

Pillar 1: Improved

investment climate

Pillar 1: Increase private and

public investment, notably to

help job creation

Pillar 1: Strengthening priority

public investments

implementation

Pillar 2: Reducing the Cost of

Doing Business for Jobs

Creation and Poverty Reduction

Pillar 2: Investments in

human capital to enable the

poor to better take

advantage of emerging

growth opportunities

Pillar 2: Strengthen public

resource allocation for

education and health

outcomes

Pillar 3: Develop the human

capital of the poor by

strengthening the Basic

Education and Health Sector

Pillar 3: Better governance

for faster growth

Pillar 3: Improve public

financial management (PFM)

to enhance the accountability

and effectiveness of public

spending more broadly

Pillar 4: Fiscal transparency

and good governance

Pillar 4: Better fiscal

management

Pillar 4: Enhance public

revenue mobilization and

strengthen fiscal risk/debt

management

Pillar 5: Consolidating fiscal

sustainability, revenue

mobilization and risk

management

15. Further details of the changes in the pillars, including their impact and justifications

are provided below.

Fiscal – The formulation of the PDO was made more explicit by attributing better fiscal

management to two key reforms: increasing revenues and strengthening fiscal risk

27

management. This change meant that the PDO was more clearly related to results indicators

in each of these two areas of reform.

Investment climate – The PDO was expanded in the second operation to more explicitly

cover public investment bottlenecks. In the third operation, this distinction was further

developed by splitting the area to create two distinct sub-pillars that sought to address

constraints to private and public investment, respectively. On public investment, the

development of the operation-specific PDOs is consistent with the evolution of the

government’s program, which began with a focus on PPP projects and then evolved to

raising public investment execution and finally better targeting of public investment. On

the private sector side, the focus on reducing the cost of doing business was sustained.

Governance – The formulation of the PDO was refined in the second and third operation

based on their respective policy content. The changes more clearly linked the objective to

measurable policy areas. A general focus on good governance in DPL I was made more

explicit in DPL II by highlighting the role of public financial management (PFM) reforms.

The increased clarity is also reflected in the description of the outcomes of this pillar which

went from generally supporting “faster growth” to “effectiveness of public spending more

broadly” in DPL II and DPL III.

Human capital – The formulation of the PDO changed slightly in the second operation,

before returning to the original formulation in the third year, so overall there were no

substantial revisions in the final formulation.

16. The results framework underwent significant changes over the course of the program,

particularly in the final operation. Of the 17 results indicators in the original results framework

for the program, nine remained in the final results framework, of which six are education

indicators. Thirteen new indicators were added in DPL II and DPL III, giving rise to 23 indicators

in the final results framework.

17. Changes to the result indicators were geared towards improving measurement and

attribution of results to supported policies. (Table 4). Many of the new indicators were more

explicit and focused, such as tax collection from sin tax, DPWH contracts signed, and coverage of

primary care providers, whereas removed indicators were more high-level, such as overall revenue

mobilization, investment levels, and household healthcare costs. These changes improved

measurement and attribution. However, in reducing the focus on higher level outcomes and in

some cases reducing the ambition of targets, the program became somewhat less ambitious and

less strongly linked to the high level objective of inclusive growth. In some cases, the specificity

is consistent with the refinement in the PDO components (e.g., supporting public investment led

to a focusing down of results on public infrastructure execution). However, in other cases, the final

results framework leaves some relevant policy objectives uncaptured, such as overall revenue

mobilization, aggregate investment, and healthcare costs for the poor. To ensure that these changes

are captured, this ICR also assessed the indicators from previous operations in the program where

they do not appear in the final results framework.

28

Table 4. Impact of Changes in Results Indicators

Pillar Original indicators Revised indicators Impact of changes

1 Total fixed investment

increases above 15.7% of

GDP (2010 baseline)

Public infrastructure

investment

DPWH Public infrastructure

investment (% GDP)

DPWH Program Contract

Signed in H1 (by value)

Number of major DPWH

convergence infrastructure

programs with poverty and

jobs targeting

Narrowing of one part of

the results can potentially

reduce confidence that the

PDO has been achieved

but is consistent with the

completion policy

framework.

2 The average number of

days required to start a

business has been

reduced by 10 days,

based on the Doing

Business methodology

for business entry

The average number of days

required to register a sole

proprietorship business

3 Reductions of the (i)

Students-to-Teacher ratio

and the (ii) Students-to-

Classroom ratio at the top

25th percentile point of

their respective

distributions. (Baseline

2010/2011: 40.37 and

43.8 for public

elementary schools, and

42.03 and 59.98 for

public secondary

schools)

Net enrolment ratios

increase. (Baselines

2009/10: 88.1% for

elementary and 59.6%

secondary. Targets

2013/14: 94% for

Student Teacher Ratio, Top

25th pct, primary

Student Teacher Ratio, top

25th pct, secondary

Students-to-Classroom ratio,

Top 25th pct, elementary

Students-to-Classroom ratio,

Top 25th pct, secondary

Net Enrollment (Primary)

Net Enrollment (Secondary)

Number of NHTS-PR

individuals/families covered

by Philhealth (millions)

Education unchanged.

Health results framework

changed focus and no

longer directly measures

impact on poor and near-

poor and can potentially

reduce confidence that the

PDO has been achieved.

29


elementary and 76% for

secondary)

Increased utilization of

health services among

poor and near-poor

households from 1.0

outpatient visits per

capita to at least 1.5 visits

per capita

Improved financial

protection for the poor,

as measured by reduced

out-of-pocket payments

for health care among

insured poor households

Number of NHTS-PR

members/families enlisted

with a primary care benefit

(PCB) provider (millions)

Number of claims by NHTS-

PR families at Philhealth-

accredited providers in the

previous year (share of total)

4 Enhanced transparency

through the existence of a

unified Chart of

Accounts and the timely

publication of budget

execution data

PEFA indicators score for:

PI5 – classification of budget

PI10 – Public access to key

fiscal information

PI24 – Quality and

timeliness of in-year budget

reports

Enhanced budget

transparency through the

existence of a unified

account code structure, and

the timely publication of

budget execution data.

Additional results

indicators improve

confidence that the PDO

has been met, but may be

a challenge to measure.

5 Total tax revenues

increased from 12.8% of

GDP in 2010 in line with

the Government’s

Philippine Development

Program target (14.4% in

2013)

The amount of revenues

generated by the LTS

increases from 54% of

total BIR collection in

Tax administration gains by

BIR yield 1 percentage point

net gain in revenues (from

9.1 percent of GDP 2010

baseline)

Policy impacts: Excises from

alcohol and tobacco (% GDP

gain)

Enhanced evidence based

stakeholder awareness of key

The result indicators were

made more explicit and

narrow. However, this

may have excluded the

impact of some policy

actions and can potentially

reduce the confidence that

the PDO has been

achieved.

30


2010 to at least 70% in

2013

Total NFPS debt as a %

of GDP has declined

below 60.7% (2009

baseline)

Fiscal risk is reduced, as

reflected by improvement

in the ratings of

sovereign credit by any

of S&P, Moody’s or

Fitch

tax expenditures and fiscal

risks (PPP, natural disasters,

GOCCs)

GOCC contribution to

consolidated public sector

deficit (% GDP)

Majority of top 20 GOCCs

as measured by government

transfers between 2010-2013

are subject to completed

GCG Performance

Evaluation Contracts for

2013/14 (0 to >75 %)

18. The indicators dropped from the final results framework are described, along with

explanations, in Table 5.

Table 5. Removed Results Indicators

Indicator Explanation

The amount of revenues generated by the

Large Taxpayer Service (LTS) increases from

54 percent of total Bureau of Internal

Revenue (BIR) collection in 2010 to at least

70 percent in 2013.

The reasons given in DPL II for removing this

indicator are that it is subsumed in the broader

revenue collection indicator (but was

subsequently also dropped), and it was only

an imperfect proxy of LTS tax administration

capability.

Fiscal risk is reduced, as reflected by

improvements in the ratings of sovereign

credit by any of S&P, Moody’s, or Fitch.

The peer reviewers noted that sovereign debt

ratings were driven by many things, and

hence could not be attributed to the

operation. Also, given the recent financial

crisis history, there was some concerns about

their accuracy.

Total tax revenues increase by two percentage

points of GDP from the 2010 baseline of 12.1

percent of GDP in line with the government’s

Philippine Development Plan (PDP) target.

This indicator was dropped in DPL III on the

basis that it was too aggregate and replaced

with a more specific indicator on BIR tax

administration gains. Moreover, the Bank had

no engagement with BOC, thus narrowing the

indicator was prudent.

The non-financial public sector debt, as a

percentage of GDP, has declined below 54.8

percent (2009 baseline).

This indicator was dropped because it was

deemed too aggregate a measure. It was also

deemed an inadequate measure of the PDO. It

was replaced with a more specific indicator

on GOCC contribution to the fiscal deficit.

31


Total fixed investment increases above 20.2

percent of GDP (2010 baseline).

This indicator was dropped because it was

deemed too aggregate a measure. In its place,

a more specific indicator on public investment

was used, which was well within the control

of the government.

Increased utilization of health services among

poor and near-poor households from less than

1 outpatient visit per capita to at least 1.5 per

capita.

This indicator was dropped on the basis that it

was not measurable. Since the

commencement of the program, no baseline

had been defined. It was replaced by a more

measurable indicator (discussed below).

Reduced out-of-pocket payments for health

care among insured poor households.

This indicator was dropped on the basis that it

was not measurable. Since the

commencement of the program, no baseline

had been defined. It was replaced by a more

measurable indicator (discussed below).

19. The indicators that were added to the program, all in DPL III, and the justification

for their inclusion, are shown in Table 6.

Table 6. Added Results Indicators


Public infrastructure investment increased to

over 3.5 percent of GDP per annum (from

<2.5 percent).

In lieu of the removed indicator for total

investment, a number of indicators that more

specifically targeted the execution of public

investment were included. This indicator was

added to measure results against the

government’s targeted scale up of public

investment.

Project portfolio prioritization improved, as

measured by percent value of budgeted

contracts bid in first half (to over >50

percent).

Similarly, to the previous indicator, this

indicator was added since its achievement

was under the control of the government. The

indicator focuses on the timely contracting of

projects in the first half of the fiscal year,

given that late contracting has been a key

constraint in delivering public works in the

past.

Spatial targeting clarified and project

selection transparency enhanced as evidenced

by operational network plans and

implementation by the Department of Public

Works and Highway (DPWH) for two major

priority road programs.

This is the third of the indicators added to

capture the results of public investment

reforms. This indicator specifically measures

a key aspect of project planning, the

introduction of network plans for priority road

projects.

32


Number of major DPWH convergence

infrastructure programs with poverty and jobs

targeting.

This is the fourth and last indicator on public

investment that was added to capture another

aspect of planning, major programs that have

poverty and jobs targeting integrated into

their design.

Number of NHTS-PR individuals/families

covered by Philhealth (100 percent of those

defined eligible in millions).

This is the first of three indicators in lieu of

the two indicators that were removed due to

their immeasurability. This indicator

measures the number of families that are

covered by Philhealth by automatic and free

enrollment based on their poverty status.

Number of NHTS-PR families enlisted with a

primary care benefit (PCB) provider (9.54

million or 65 percent of total from 0).

This indicator captures the number of lower

income households enrolled in Philhealth that

have taken steps to actively use the program

by enrolling with a primary care benefit

provider. This is considered to be a better

indicator of whether the household are able to

draw on Philhealth services.

Number of claims by NHTS-PR families at

Philhealth-accredited providers in the

previous year (>27 percent share).

This final indicator on health measures the

actual utilization of Philhealth benefits by

lower income families, as measured by the

number of claims they make as part of the

scheme.

Improvement in the following public

expenditure and financial accountability

(PEFA) indicators score (2010 base year):

PI 5 – classification of budget (D in 2010).

PI 10 – Public access to key fiscal information

(C in 2010).

PI 24 – Quality and timeliness of in-year

budget reports (D in 2010)

This set of indicators was added to improve

the coverage and measurability of the results

indicators in the areas of government

financial transparency and quality of budget

information.

1.4 Original policy areas supported by the program

20. This DPL series supported key government reform programs identified in the

Philippine Development Plan (PDP) 2011–2016. The PDP envisions a Philippines with “high

growth that is sustained…that massively creates jobs…and reduces poverty.” To achieve this goal,

the government intends to i) invest heavily in physical infrastructure, ii) improve governance, iii)

enhance human development, and iv) accelerate employment generation. These PDP pillars form

the basis for organizing the PDO pillars, which are i) maintaining a stable macroeconomic

environment, ii) improving competitiveness and increasing infrastructure investment, iii)

improving governance, and iv) developing the human capital of the poor.

33

A. Maintaining a stable macroeconomic environment

21. At the outset of the DPL program, maintaining fiscal sustainability was a clear

priority as the country was just recovering from the impact of the global downturn and

needed to wind down stimulus and set a sustainable path to support medium-term growth. The path to fiscal sustainability was to be achieved by: i) strengthening revenue mobilization, and

ii) strengthening fiscal risk management.

22. Strengthening revenue – The program document of DPL I notes that revenue mobilization

had declined from 17 percent of GDP in 1997 to less than 13 percent in 2003 which, coupled with

unsustainable spending, led to a rapid escalation of non-financial public sector debt to 95 percent

of GDP. The risk of an impending fiscal crisis led to a series of tax policy and administration

measures intended to consolidate public finances. While the crisis was averted and the decline in

revenues arrested, tax revenue collections remained weak due to a number of policy reversals and

weak tax administration and by 2010, revenues were still below 13 percent of GDP. Under this

policy area, the program supported efforts of the government to raise tax revenues, primarily

through tax administration reforms, with tax policy measures only to be considered after the

potential for tax administration gains was exhausted.

23. Strengthening fiscal risk management – To strengthen fiscal stability in the medium

term, the DPL series highlighted the need to increase proactive analysis and management of fiscal

risks, and incorporate elements of risk management into fiscal planning. An overarching element

of this approach was the publication of an annual fiscal risk statement, which is a forward-looking

document that identifies risk and mitigating measures to inform fiscal planning. There was also a

set of institutional reforms to strengthen risk management, which included the establishment of a

Debt and Risk Management Office, the publication of a medium-term debt management strategy,

public disclosure of PPP risk assessment, and new GOCC management systems. For GOCCs, the

program envisioned a new web-based financial performance management system for GOCCs and

legislation to promote financial viability and fiscal discipline in GOCCs. Taken together, the

ultimate objective was a further lowering of deficit and debt levels to more sustainable levels.

B. Improving competitiveness and increasing infrastructure investment

24. The PDP identified lack of investment as a key constraint towards achieving long-

term growth potential in the Philippines. At the beginning of the program, total investment was

slightly below 15 percent of GDP, compared to an average of 25 percent of GDP in the East Asia

and Pacific region. Improving competitiveness was to be achieved by reducing the cost of doing

business and addressing infrastructure bottlenecks.

25. Reducing the costs involved in starting small businesses – Difficulties associated with

doing business were identified as a major impediment to higher private investment. In 2011, the

Philippines was ranked in the bottom quartile of countries in the World Bank Group’s Ease of

Doing Business Report. The tedious process of starting a business and getting construction permits,

for instance, was a considerable deterrent to businesses. With the aim of reducing these barriers,

the program supported reforms to simplify the procedures for starting a business through system

34

modernization, consolidation of steps, and a reduction in the time and cost involved. The program

also outlined planned steps the government intended to take to review the National Building Code,

the Fire Code, and procedures to obtain construction permits. Further steps, including the review

of local government ordinances to bring them in line with national law, and trade facilitation

reform to improve efficiency of customs operations were also set out.

26. Addressing infrastructure bottlenecks – Lack of infrastructure is cited by businesses as

one of the key factors which reduces the Philippines’ attractiveness to investors. Following the

Asian financial crisis, public infrastructure investment declined from 2.9 percent of GDP in 1997

to as low as 1.1 percent of GDP in 2005, and remained low, constrained by limited government

revenues and weak public investment management. The program set out in DPL I focused on PPP

projects as a temporary means to jumpstart investment while revenues were limited. Steps taken

included the establishment of a dedicated PPP unit in the government, strengthening the National

Economic and Development Authority’s (NEDA) oversight and planning capacity, and the

identification of 10 PPP projects to be supported under DPL II.

C. Improving governance

27. Policy reforms under this pillar were aimed at supporting the government’s drive for

increased transparency to enhance accountability and effectiveness in public expenditures.

Good governance was the mainstay of the administration’s agenda. Several steps were taken to

improve quality of spending by improving both budget formulation and execution practices. While

successes were achieved in the first aspect, a large unfinished agenda remained on the second till

the end of the Aquino administration.

28. The policy area under this pillar was to promote better public financial management,

budget transparency, and accountability. Reforms under this area were intended to improve the

governance of public expenditure as set out in the public financial management (PFM) roadmap,

particularly with a view to strengthen the budget preparation process, disclose budget execution

data, and improve management of the budget. Key reforms envisioned for addressing

shortcomings in these areas were the development and implementation of a government-wide

integrated financial management information system (FMIS), the preparation and adoption of a

unified chart of accounts for budget preparation and execution, and the public dissemination of

expenditure information on major projects, including the priority development assistant fund

(PDAF), popularly known as “pork barrel,” and the special purpose fund.

D. Developing the human capital of the poor

29. Policy reforms under this pillar aimed to increase human capital of the poor by i)

expanding coverage of social services, and ii) moving to a targeted system of identifying

beneficiaries, including through a scale-up resources allocated to the social sectors.

30. Expanding the coverage and quality of basic education services – The program sought

to arrest the stagnation in educational outcomes, such as declining enrollment rates and low

completion rates, by scaling up resources and reforming the educational curriculum and facilities.

First, the program targeted real increases in education resources over the course of the program,

35

particularly in the second operation. Second, it sought to improve implementation efficiency by

launching a new sector medium-term expenditure framework (MTEF) and an improved and more

integrated information system. A key program supported was the education service contracting

program, which sought to decongest public schools by providing subsidies to public school

students to enroll in private schools, which have excess capacity. The scale-up of the budget helped

accelerate construction of the much-needed classrooms and launch the K to 12 program, which

increased the mandatory curriculum by two years.

31. Expanding the coverage and quality of health services – The program highlighted that

while the Philippines has made progress in health outcomes, there remained significant disparities

across income groups and overall the Philippines still lagged other countries at similar levels of

development. As a result, the program supported the government’s policy of ensuring universal

access to healthcare. The primary policy reform envisioned to achieve this was extending

subsidized health insurance to the poor using the NHTS-PR. To complement this, the program

included planned measures to ensure the effective utilization of health benefits by the poor and

near-poor, including a strengthened outpatient program with identified primary healthcare

providers and streamlined administrative and contracting systems in the healthcare sector.

1.5 Revised policy areas

32. Policy areas remained broadly consistent throughout the program, with policy

triggers appropriately evolving as the program progressed. The majority of policy areas

envisaged at the commencement of the program were continued throughout and new policy areas

were introduced based on their relevance to and impact on the PDOs. The more notable changes

were in the formulation of the policy actions, which were mostly revised to adjust to the emerging

priorities of the government.

A. Maintaining a stable macroeconomic environment

33. Strengthening public revenue mobilization – The policy areas were broadly unchanged.

The main adjustment was the reformulation of the general tax policy trigger in the third operation

to cover more specifically the implementation of the sin tax. This is a notable development because

the rationale for this measure is primarily longer-term improvements in health, although it would

also be expected to have, at least in the short-term, a positive impact on revenues.

34. Strengthening fiscal risk management – This policy area proceeded as originally

designed.

B. Improving competitiveness and increasing infrastructure investment

35. Improving the investment climate – This policy area proceeded broadly as originally

designed, although the extent to which the Philippine Business Registry is linked with LGUs was

not evident. In its place, a reform to introduce integrated online payment was introduced, which

had not been explicitly recognized as a policy reform at the outset of the program.

36

36. Addressing infrastructure bottlenecks – There was a significant change to this policy

area. At the outset, it focused on progressive steps to support PPP projects with an indicative trigger

for the second operation. However, progress on the PPP agenda was slow given the realization that

good PPP projects take time to design and implement, and contingent liabilities from PPPs needed

to be better managed. By the second year, in lieu of PPP projects, the policy area was reoriented

to focus on public investment implementation, particularly reforms to improve the execution of

the DPWH infrastructure program.

C. Improving governance

37. Promoting better public financial management, budget transparency, and

accountability – The reform program set out under this policy area was broadly completed as

envisaged, with an additional policy area, the Philippines open data portal, added to the program.

D. Developing the human capital of the poor

38. Expanding coverage and quality of basic education services – There were no substantial

changes to the policy program in this area, except for the inclusion of a policy action in the final

operation that related to the update of the NHTS-PR that was not originally envisaged in the

program. This prior action is consistent with the overall goal of expanding coverage of the poor.

39. Expanding coverage and quality of health services – In this policy area, the trigger for

DPL II was amended from the implementation of a partial subsidy scheme in 20 provinces to full

national health insurance program (NHIP) enrollment for all CCT beneficiaries. This changed

reflected the availability of the NHTS-PR with nationwide coverage. Moreover, DPL III

introduced a prior action not envisaged at the outset, the use of the NHTS-PR to target at least

three major government programs for the bottom 40 percent.

1.6 Other significant changes

40. There were no other significant changes.

2. Key factors affecting implementation and outcomes

2.1 Program performance

41. The DPL program consisted of three operations comprising a total of 29 prior actions

that were all achieved – nine in the first operation, nine in the second operation, and 11 in

the third operation. Tables 7 to 11 summarize the implementation status of these prior actions by

PDO pillar.

42. Under the fiscal sustainability pillar, eight prior actions were achieved. There were

five different policy areas supported by the prior actions: i) tax administration reforms, ii) tax

incentives management, iii) tax policy reforms, iv) general fiscal risk management, and v) GOCC

fiscal risk management. Tax administration reforms were supported in the first two operations as

37

envisaged and are being actively followed-through by the BIR. Fiscal risk management through

the preparation of a fiscal risk statement was supported in DPL I and further developed in DPL III.

Tax incentives reform was a struggle over the period, with the initially supported preparation of

the fiscal incentives bill still stalled in congress at end of the program. Tax expenditure publication

was supported in the final operation. Finally, GOCC fiscal risk management reform was sustained

over the course of the program with policy actions in the first two operations that supported the

development of a new monitoring and reporting framework which is now operational.

Table 7. Consolidating Fiscal Sustainability through Revenue Mobilization and Risk

Management

Operation Prior action Implementation status

I The government has commenced

restructuring the Large Taxpayer

Service (LTS) under the approved LTS

rationalization plan, has approved its

Revenue Regulation No 17-2010,

which broadens the selection criteria

for large taxpayers, and had added

about 747 taxpayers to the LTS as of

Jan 1, 2011.

Efforts to strengthen the LTS were

sustained and the LTS was successful

in adding additional large taxpayers.

The number of large taxpayers rose

from 1,943 in 2011 to 2,287 in 2015,

reflecting annual growth of 4.2 percent.

BIR tax revenues from these taxpayers

rose from Php569.9 billion in 2011 to

Php881.5 billion in 2015, an annual

increase of 11.5 percent.

I The government has submitted a

revised fiscal incentives rationalization

bill to congress and has identified it as

a priority bill.

The bill was submitted as a priority bill

in 2011 but was not passed into law

before the closing of the 15th Congress

in June 2013, thereby rendering it

obsolete. Under the 16th Congress, the

Department of Finance (DOF) and the

Department of Trade and Industry

(DTI) each submitted separate versions

of the bill and reconciliation of the

differences remained pending.

I The Development Budget and

Coordination Committee (DBCC) has

published a fiscal risk statement as a

reference for the 2011 budget.

The fiscal risks statement was

published each year from 2012 to 2014

and continues to inform budget

formulation. The government is now

issuing this bi-annual starting with the

2015-16 statement issued already.

There has also been expansion in

coverage to include disaster risk and

remaining risks from the public sector.

I Senate Bill No. 2640, whose objectives

are, among other things, to promote

financial viability and fiscal discipline

in government owned and controlled

corporations, in part through temporary

The bill was enacted into law in 2011

as the GOCC Governance Act (RA

10149). The Governance Commission

for GOCCs was subsequently created

38


delegation of reform power from

congress to the executive, has been

filed in congress.

and is effectively monitoring GOCC

performance.

II BIR has adopted a strategic plan for

2011-2016 and an agency-level set of

key performance indicators (KPIs) that

conform to good international

standards of tax administration, and has

collected baseline data for the year

2011.

BIR continues to actively monitor and

report KPIs, which include collection

efficiency, taxpayer compliance and

service quality, process efficiency,

resource utilization, and integrity.

These are available in the BIR website

(www.bir.gov.ph).

II DOF has implemented the web-based

financial monitoring framework for

GOCCs.

The gcg.gov.ph website is operational

and reports performance evaluation

agreements and results for GOCCs.

III The borrower has implemented a series

of revenue related reforms: i) the

implementation of a tobacco and

alcohol excise tax reform, and ii) the

completion and on-line publication of a

tax expenditure statement (TES)

concerning fiscal incentives for

investment.

The annual increase in tobacco and

alcohol excise tax rates proceeded in

accordance with the law, with tobacco

tax rates increasing more than fourfold.

The 2014 tax expenditure statement

reporting data on 2011 supported

greater fiscal transparency but has not

yet led to substantive action to address

fiscal leakages. The challenge going

forward is sustaining the TES and

expanding it to cover more incentive

areas.

III Fiscal risk management strengthened

through disclosure of broad risks

(annual fiscal risk statement) and

explicit/increased contingency

allocations in 2014 budget (risk

management program + national

disaster risk reduction framework

[NDRRF]).

The government was more explicit

about contingent allocations and risk

management, especially in the wake of

Typhoon Yolanda. The fiscal risk

statement is of good quality and covers

all major risks. Challenges remain in

further institutionalizing the fiscal risk

management function in government

and putting in place various

mechanisms to better insulate against

fiscal risk.

43. Under the cost of doing business pillar, three prior actions were achieved over the

program. These actions involved successive measures to support improvements in business

registration, which saw marked improvement in both cost and time for businesses that avail of this

procedure. However, the new online system is still only one of multiple business registration

routes, with a separately managed system for limited liability companies and paper-based option

39

still available. Given multiple systems, the full benefit of the reforms supported by the program

has yet to be realized.

Table 8. Reducing the Cost of Doing Business


I The new web-based enhanced business

name registration system adopted by

DTI has reduced the average time

required for a business name

registration by 15 minutes.

The new online system

(business.gov.ph) is operational. While

the system is functional, a follow-up

technical evaluation in January 2015

suggested that a large number of the

initial name registrations are going

through a parallel paper-based process.

II The Philippine Business Registry

(PBR) has been uploaded online and is

functioning; PBR is linked with the

online Business Permit and Licensing

systems of two local government units

(LGUs).

The PBR and LGU systems were

linked in two LGUs with large amount

of business activity with new

businesses in those areas benefitting

from streamlined procedures. However,

in the rest of the country, linkages

between the PBR and LGU systems

remains poor and the challenge is now

to extend this functionality to more

LGUs.

III DTI has improved online functionality

of the PBR for national registration,

including ePayments.

The ePayments system is operational.

The ability to pay registration fees

online has further integrated previously

separate steps in registering a business

and thereby helped reduce red tape.

However, a significant agenda remains

to enhance information sharing across

LGUs and national government offices.

44. The public investment reforms under the program began in DPL II with one action

and was expanded to three actions in DPL III. Reforms were focused on improving the project

execution framework, including informed project selection and timely delivery of projects. The

performance of the program in this area was affected by the freezing of DAP-funded projects,

which adversely affected project execution. Nevertheless, reforms have supported a strengthened

framework, and if this can be maintained and built upon over time, public investment execution is

expected to improve.

Table 9. Strengthening Priority Public Investment Implementation


II The Department of Public Works and

Highway (DPWH) has strengthened

project preparation and implementation

This action was built upon by

subsequent action in the following

operation (see next item).

40


methodologies, and has quantified

performance targets, including

completing over 90 percent of project

bids for the 2012 general appropriations

act (GAA) allotments in the first

semester.

III The implementation of DPWH public

infrastructure program has advanced: i)

by January 1, 2014, over 80 percent of

the combined 2012 and 2013 capital

expenditure budget has been contracted,

and over 60 percent of these projects

have been completed, and ii) over 50

percent of the 2014 capital expenditure

budget has been contracted by June 30,

2014.

DPWH saw major scaling up of its

budget and worked to ensure early

contracting. A supreme court ruling

that declared aspects of the

Disbursement Acceleration Program

(DAP) unconstitutional led to stalled

execution in the second half of 2014,

causing public investment spending to

collapse, and thereby pulling down

economic growth. The government is

taking proactive steps to accelerate

execution by addressing key

absorptive capacity issues, such as

right of way, procurement, and

technical design.

III DPWH has delivered contract of works

under the tourism road infrastructure

program (TRIP) network preparation

process and resulting plan.

TRIP was expanded in the 2015

budget covering 149 new projects and

the completion rate of the existing

portfolio up to 2014 is above 50

percent.

III The 2014 GAA requires that DPWH

implements the regular farm-to-market

road (FMRs) program with the

Department of Agriculture (DA)

providing and disclosing the network

plan for these projects.

The reforms revealed significant

shortcomings in the extent of network

planning for the FMR program. All

projects have now been geo-tagged

but completing this pre-requisite

enforced by DBM led to a delay in

implementation in 2014.

45. Improved governance through public accountability and transparency was an

ongoing policy program, with five policy actions supported over the course of the DPL

program. The program supported two budget transparency measures in the first two years on clear

reporting and accountability of major government programs and public investments. These

measures helped inform public debates which led to the identification of policy priorities. The two

measures supporting PFM reform were completed but the broader reform of an integrated

information system stalled. The final policy area which featured in DPL III was the implementation

of an online data portal. A number of good practices were introduced in the budget formulation

and the budget calendar was pushed earlier to include additional rigor in review of the budget

proposals from line agencies. Additional conditions for some aspects like zero-based budgeting

and the need to provide geo spatial information for road projects in fact led to a slowdown in the

41

spending. Institutional fragmentation of the central finance functions required extensive

coordination efforts around the PFM Reform Roadmap. Each DPL’s preparation process itself

served to repeatedly convene the key oversight agencies, and key line agencies. The Bank kept

emphasizing the need to strengthen institutional mechanisms, including around FMIS to improve

the working coordination among DOF, CoA and DBM. The PFM Steering Committee was the

main counterpart mechanism for this. A Public Finance Law or act was one mechanism considered

at the end of the series, but the enabling environment for enactment was not present.

46. A major setback to the PFM reforms was the failure to proceed with implementation

of FMIS as planned. Several benefits hinged on the FMIS did not materialize since this could not

be procured after three attempts. The first round yielded a few bids but these were all declared

invalid due to various technical reasons regarding fulfillment of procedural requirements. In the

second round, one bid was successful and after necessary clearances, the final contract was sent to

the President’s office for approval and signature. At this point, political economy issues came into

play and it was realized that sufficient effort had not been made to secure the support and

ownership of stakeholders beyond DBM. The contract was scrutinized and eventually not

approved largely, it is perceived, due to lack of support from other oversight agencies. The

underlying bid expired. The scope of the contract was then reduced drastically to limit

implementation to BTr and DBM only. Again technical formalities were not properly completed

in the first procurement process and success was achieved in the second attempt. This scaled down

version comprising only core treasury functions was contracted at the tail end of the administration

and remains in development stage at the end of 2016. In the absence of timely, complete and

reliable information on the budget execution, reforms in budget formulation and transparency

demonstrated little impact.

Table 10. Fiscal Transparency and Good Governance


I To strengthen transparency and

accountability, the 2011 general

appropriations act adopted by congress

has mandated that the implementation

status and fund utilization of major

programs and projects be posted by

departments and agencies on their

official websites and that the

Department of Budget and Management

(DBM) post on its website all releases

and realignments under priority

development assistance fund (PDAF).

Government agencies were selectively

reporting on major programs. Prior to

the supreme court decision that

declared the priority development

assistance fund (PDAF)

unconstitutional, DBM published

details of the PDAF program, which

received significant public scrutiny.

Therefore, this transparency measure

can be considered to have had

substantial impact. Beginning with the

2014 GAA, PDAF is no longer a

government program.

42


II The interagency committee (IAC) has

approved an action plan to implement

the public financial management (PFM)

reform roadmap, including the adoption

of a unified account code structure

(UACS) for accounting, treasury,

transactions, and auditing.

Under the PFM roadmap, significant

progress was made in rolling out the

treasury single account for revenue

and adopting the UACS. The major

setback was the failure of the

completion of procurement for an

FMIS which was a major component

in the PFM roadmap. UACS has been

fully adopted and is being used for

budget formulation and financial

reporting. In the absence of a FMIS,

its full benefits in the ability to drill

down and analyze budget execution is

very limited.

II DBM has published not later than two

months after the end of each quarter the

obligated expenditure data for the

2011/2012 budget required from line

agencies of the borrower, as well as

gaps from those that have not submitted

such data.

DBM continues to publish the

obligated data in the statement of

allotment, obligation, and balances

(SAOB) on a quarterly basis. At the

time of assessment, the series was up-

to-date with a lag of only slightly over

two months. Blank rows with

departmental headings identify

missing data submissions.

Nonetheless, this reform has led to

notable contribution towards

transparency.

III The borrower has adopted a unified

account code structure (UACS) for

accounting, budgetary, and treasury

transaction and implemented this as part

of the 2014 budget preparation and

implementation.

The UACS was used as the primary

coding structure for budget

formulation and execution. Starting

with 2014, budget is prepared using

this classification. Capturing the full

54-digit code at the transaction level is

challenging in a manual record

keeping system, but aggregate

reporting is compliant with UACS.

Complementary reforms on

automation have been delayed thereby

affecting timely release of execution

data by DBM.

III The Philippines open data portal

(data.gov.ph) is fully operational with

full electronic access to over 600

datasets.

The portal is operational and contains

more than 600 datasets. The next

challenge is analyzing usage statistics

and closing the feedback loop (i.e.,

facilitating mechanisms for the data to

43


be utilized by citizens for analysis and

verification resulting in feedback to

the government).

47. The DPL series supported nine prior actions on health and education reforms. These

reforms consistently built on previous operations and marked key milestones in the development

of landmark government policies on universal healthcare, poverty-targeting, and education service

delivery. In both education and health, the program reflected an evolution of the policy programs

to reach the stated objectives, which realistically reflected continued government focus on the

overall objectives. In health, an initial program to subsidize health insurance was broadened to

automatic and free enrollment for all poor households. In education, the constraint of limited public

school space was initially address by subsiding private school spaces, but then complemented by

a school building program. The roll-out of a new poverty targeting and social protection system

was supported and was further developed into a convergence program where pro-poor benefits

across the social sector were unified using a single targeting system. Overall, the policy areas under

this pillar indicated strong government ownership and rapid progress on major reforms.

Table 11. Developing the Human Capital of the Poor


I The Government Assistance to Students

and Teachers in Private Education

(GASTPE) budget allocation that funds

the education service contracting (ESC)

program of the Department of Education

(DepEd) has been increased by 48

percent in 2011 compared to 2010.

The ESC program was effective in

relieving pressure on the public

education system by providing

subsidies to public school students to

attend private schools where space in

public schools was not available. As

demand increases due to the K to 12

program, ESC will continue to be an

important program in ensuring access

for lower-income children.

I The medium term expenditure

framework (MTEF) of DepEd has been

updated to reflect the resources required

to implement its policies, programs and

strategies, including the K to 12

program.

The MTEF supported the rolling out

of major programs such as K to 12,

which has taken effect beginning

school year 2016-2017.

I PhilHealth has adopted Board

Resolution No. 1479 for the

implementation of the partial insurance

premium subsidy program for the near-

poor.

The board resolution was adopted and

further progress was made in reaching

both poor and near-poor. All

households in the lowest four income

deciles are now eligible for full

premium subsidies.

II The per-student subsidy provided to

participants in the ESC program has

been increased to enable greater

The per-student subsidy increase was

implemented and supports the

effective access of students to private

44


participation in the program by students

from low income households, based on a

program review conducted by DBM and

DepEd.

schools where space is not available in

public schools.

II The actual spending (adjusted for

inflation) of DepEd in 2011 has been

equal to or greater than its spending in

2010.

Additional DepEd expenditure (by 32

percent in real terms) led to more

teacher recruitment and classroom

construction that helped relax

constraints to better educational

outcomes.

II Households receiving conditional cash

transfers under the 4P program have

been enrolled in the national health

insurance program (NHIP) for receiving

an enhanced package of PhilHealth

benefits.

This action follows from DPL I.

PhilHealth benefits were extended to

more low-income households.

Although there is limited evidence at

present about these households’

utilization of benefits, a large number

are registered with local healthcare

providers.

III Expand the CCT coverage to children

up to 18 years of age.

In 2014, CCT coverage was expanded

to children aged between 14 and 18,

which supports reforms to extend

compulsory schooling to age 18 from

2016.

III The preparation for NHTS-PR II is

advanced: i) operational manual is

revised to reflect lessons learned from

the previous assessment, ii) field

workers are being hired and trained

using standard training tools, iii) IT-

enabled data collection and encoding is

developed and tested, and iv)

arrangements for spot checks to monitor

reassessment processes are in place.

While preparations for the NHTS-PR

update were well advanced, funding

was delayed in 2014 due to the

cancellation of the DAP, which meant

the project did not commence in 2014

as planned but began in early 2015

after supplemental budget was

provided. The update has now been

completed.

III NHTS-PR used to target at least three

major government programs to the

lowest 40 percent of the population,

including evidence that PhilHealth has

achieved effective enrollment of poor

and near poor in the bottom 40 percent

of the population.

A large number of government

programs are already utilizing the

NHTS-PR, including the major

government programs such as CCT,

Philhealth indigent program, and

social pension program.9 The next

challenge is ensuring availment of

services by the poor and measuring

impact on their health.

9 Under this program, a monthly stipend of PHP 500 is provided to indigent senior citizens 77 years old and above.

The age requirement was recently lowered to 65 years old.

45

2.2 Major factors affecting implementation

48. The DPL program reflected well the priorities of the Aquino Administration and as

a result most policy areas supported by the DPL series received sustained and high levels of

political commitment that help drive results. In particular, governance reforms in public

investment and social service delivery were the highest priority and got the most support in terms

of budget allocation, oversight, and technical assistance. This strong alignment between

government priority and the design of the DPL series was the single most important factor of

success.

49. Moreover, a strong analytical basis and good coordination with active sector

programs led to well-designed policy areas that supported implementation. The Bank has

invested significantly in analytical and advisory activities to support the program. On fiscal policy,

a comprehensive tax policy report was prepared in 2011 and substantially updated in 2014.

Technical assistance was provided to institutionalize program evaluation, manage the sin tax

reform, and prepare fiscal risk and tax expenditure statements. On business regulations, the

International Finance Corporation (IFC) continues to work with the National Competitiveness

Council in streamlining business procedures, though admittedly, they faced resistance from a

number of national government agencies and local government units who preferred the status quo.

On public investment, the Bank and IFC supported the PPP Center during its start-up and the Bank

engaged with DBM and DPWH to accelerate public infrastructure projects. The Bank also

continued earlier engagement with DBM, Bureau of Treasury (BTR), and Commission on Audit

(COA) to address PFM issues. A PEFA assessment was done in early 2016 and published prior to

the change in administration in June 2016. On the social sectors, significant technical assistance

was provided to launching and managing the CCT program, including expansion to health and

education sectors. In sum, analytical and advisory activities appear to be fully adequate to support

the program and any remaining gaps are largely attributed to implementation capacity.

50. On the other hand, some factors contributed to reducing the planned impact or

increased risks to the sustainability of outcomes. These are explained below.

51. Even with a reformist government, coordination challenges across government

agencies remain substantial. A major factor slowing down implementation was the difficulty of

coordinating among executive agencies, between the national government and the local

government, between the executive and congress, and between the executive and constitutional

offices. For instance, weak progress in passing the fiscal incentives bill stemmed from a lack of

consensus between the Department of Finance that is mandated to raise revenues, and the

Department of Trade and Industry that is mandated to raise investment. Several attempts to

reconcile their differences were either unsuccessful or led to significant watering down of the

DOF’s preferred bill. Weak progress in starting a business exemplifies both lack of coordination

among national government agencies involved in business start-up (e.g., Securities and Exchange

Commission [SEC], BIR, PhilHealth, Social Security System [SSS], Home Development Mutual

Fund [Pag-IBIG], etc.) and between the national and local government units (LGUs), the latter’s

autonomy from the national government was increased in 1991 with the passage of the Local

46

Government Code. Less frequent interaction between the executive and legislative branches,

notably through sub-optimal use of the Legislative-Executive Development Advisory Council

(LEDAC), has led to a slowdown in the passage of important bills, notably tax policy reforms.

Finally, a number of policies requires coordination with constitutional office, which have the

highest degree of autonomy. In particular, the mandate for various parts of PFM is fragmented

across DBM, DOF, NEDA, and COA, and any issue which leads to actual or perceived overlap in

authority gets stalled.

52. Strong resistance by vested interests against some reforms meant that progress stalled

to avoid expending limited political capital. Lack of progress in some areas is linked to the

challenges of building consensus among different interest groups. DPL II and III highlighted risks

arising from vested interests resisting change. The sin tax reform is a notable example, which

passed by only one vote at the bicameral committee despite very strong economic and health

rationale. While some positive steps were taken, there was little long-lasting change to sustainably

shore up tax revenues, measures which would see some losers at least in the short term, and

especially in the area of tax incentives, where a tightening of rules would have hit a number of

clearly defined groups and would have been politically unpopular.

53. Lack of donor coordination has added to implementation challenges. Major donors

have carried out budget support programs largely independently of one another, which has added

to the compliance and coordination burden for government. While lessons learnt from the previous

DPL on sufficient analytical underpinnings and appropriate sequencing have been well factored

into the program design, other areas such as ensuring development partner coordination have

remained unaddressed. Following a divergence in budget support operations in 2008, the major

development partners, World Bank, Asian Development Bank, and Japan International

Cooperation Agency, have provided separate budget support operations often with conflicting

policy priorities. Not only does this increase transaction costs, but focusing on different policy

areas reduces attention and potentially splinters reform effort, increasing the risk that reforms are

not institutionalized.

54. An ambitious program and at times vaguely-defined results framework reduced

clarity and focus on results during implementation. While the majority of the program was

appropriate and well designed, there is evidence of a high level of ambition in some areas,

especially in the outer years. DPL I was clear that some of the indicative triggers set, for instance

around the PPP projects, were “stretch targets” which both the government and the Bank thought

would be difficult to achieve, and these actions were subsequently removed from the program. The

fiscal incentives bill sought to address a major reform area but was also known to be controversial.

The attainment of program targets in some areas was challenging given a high level of ambition

in some areas, high risks in a number of areas, and some unrealistic result indicators. For instance,

the original results indicator in the area of tax reform targeted a large increase in tax of two

percentage points of GDP over the original program term of three years. However this was

contingent on further tax policy reforms, which did not materialize. If such areas were known to

be unlikely to succeed at the outset, it may be that other forms of support would have been more

appropriate or if retained, their timeframe could be made more realistic. Moreover, the results

framework exhibited some deficiencies, including poorly defined indicators which were not easily

measured (e.g., no baseline), results that were hard to attribute to supported reforms, and an overly

47

high level of ambition in the target values. This is a notable finding given one of the lessons learned

from the previous Philippines DPL ICR was to ensure an appropriate level of ambition.

55. Risks around macroeconomic and political instability did not materialize, which

might have otherwise put the program off-track. At the commencement of the program, the

Philippines was recovering from the global downturn that saw negative per capita growth and a

sharp decline in government revenues, raising the risk of fiscal instability. But due to good fiscal

management and favorable economic conditions, including an uptick in investment, the

government was able to maintain a steady economic and fiscal position over the course of the

program and as a result the risk of a fiscal crisis fell rapidly. A risk raised in DPL II was around

mid-term elections and the possible impact that they may have on the ability of the administration

to deliver on their reform program. But following the elections, the Aquino Administration

continued to receive the support of both houses on the majority of issues and remained popular in

the public’s view. A final source of risk is risk coming from natural disasters, as Typhoon Yolanda

highlighted. While the Philippines recovered well from the devastating typhoon, the disaster did

expose the weaknesses of the fiscal house with regard to disaster risk management.

56. Inefficient, unclear, and sometimes contradictory budget processes slow down

reform. The Aquino Administration’s ambitious governance and budget reforms aimed at

accelerating impact of government spending on growth and poverty ran into serious headwinds by

mid-term. The current government organization and budgeting law, known as the “Administrative

Code,” was enacted in 1987 and was hardly amended to take into account innovations in

technology and processes. The lack of budget flexibility, among other reasons, which contributed

to slower spending in 2011, was partially addressed by the Disbursement Acceleration Program

(DAP), which moved funds from slow moving projects to fast moving projects. At first, this

scheme was successful in accelerating spending in 2012 and 2013, but public scrutiny led to the

filing of a case before the Supreme Court, questioning its constitutionality. The Supreme Court,

while acknowledging its positive impact on economic growth, ruled some aspects of the DAP

unconstitutional. This led to a slowdown in spending. Both the Supreme Court ruling and its impact

on spending could not be foreseen during the preparation of DPL III which was approved shortly

after the 2014 Supreme Court decision. Moreover, Typhoon Yolanda further exposed the system’s

rigidity, which was hard pressed to support emergency spending for relief and reconstruction. The

government learned that stop gap measures do not address the root cause of the problem brought

about by the 28-year old obsolete system, which is already operating at capacity and is hard pressed

to support higher spending. There is strong realization of these constraints. The Aquino

administration starting review of processes to address spending, design, right of way, and

procurement bottlenecks, while also drafting a new organic budget law, which would clarify,

streamline, and harmonize the various pieces of legislation and executive orders on the budget

process to improve delivery of services. The new administration has continued this emphasis and

a Budget Reform Bill is under preparation.

48

2.3 Monitoring and evaluation design, implementation, and utilization

2.3.1 Monitoring and evaluation design

57. The results framework of the DPL series has undergone major changes. During the

preparation of DPL I, a set of 17 outcome indicators were identified. This was increased to 18 in

DPL II and finally expanded to 23 in DPL III (with 13 added indicators and seven removed relative

to DPL I). Indicators were selected in agreement with the government for the five pillars of the

DPL program.

58. The increase in the number of indicators reflects both improvements in the design of

the results framework, refinements in the prior actions, and alignment with the country

partnership strategy (CPS). The original design of the results framework was based on the 2009

CAS framework, which focused on achieving a stable macro economy, strengthening the

investment climate, improving public service delivery, reducing vulnerabilities, and supporting

good governance. It also took into consideration lessons learned from the first DPL operation in

2007. In particular, efforts were made to ensure that indicators were more measurable and that data

would be available for assessment at project completion. The design of the results framework went

through significant changes by DPL III, reflecting the new CPS framework (FY15-18), which in

turn reflects the shift in priorities from macroeconomic stability and governance to

implementation, pro-poor targeting, and other structural issues.

59. The original monitoring and evaluation framework exhibited some limitations due to

an overly ambitious design, which was partly addressed in later operations. In some cases,

the design of the monitoring framework was based on the expectation of new monitoring indicators

being prepared but which never materialized. Moreover, some were contingent on further reforms,

such as tax policy reforms, which also did not fully materialize. At the time of the ICR mission,

two10 of the original results indicators were still missing baseline and actual values and a third11

was missing any actual values. In each case, the inability to assess results indicators was due to

overreach at the design phase, rather than a lack of monitoring efforts, because the indicators were

not part of any standard information release. Two of these three indicators were removed in

subsequent operations, while the third (relating to starting a sole proprietorship) remains in the

results framework but could only be measured through specific efforts and not through routinely

available information which is available for corporates but not sole proprietorships.

2.3.2 Monitoring and evaluation implementation and utilization

60. The monitoring and evaluation framework design also struggled to balance the high

level PDO with attributable results against the prior actions. The overall PDO was to achieve

inclusive growth, but this was not defined as a measurable outcome in the results framework.

Instead, the original monitoring and evaluation framework included a number of relatively high

level outcomes as results indicators, such as total tax revenue as a proportion of GDP and total

10 Out-of-pocket healthcare payments amongst poor (indicator now removed) and average number of days required to

start a business. 11 Increased utilization of health services (indicator now removed).

49

investment as a proportion of GDP which are highly relevant to the overall PDO but somewhat

outside the direct influence of policies supported under the program. In subsequent operations,

many of the high level result indicators were removed and substituted with indicators that more

directly measure the effectiveness of various government programs supported under the policy

framework.

61. Monitoring and evaluation has been a regular activity throughout the course of the

DPL series. Results monitoring primarily took place through the implementation status report

(ISR) preparation for each DPL operation, during the preparation of DPL II and DPL III, and the

ICR preparation for the entire DPL series. Assessment of indicators occurred over the course of

the program. For some indicators, data collection has been a recurring issue. Specifically, for the

indicators related to improving the ease of doing business where a central data base of

improvements made by local governments is not available. Nonetheless, any revisions to baselines

and targets necessitated by this limitation remained aligned to the original purpose of the measures;

thereby, ensuring continuity.

62. The monitoring and evaluation framework provided valuable input into the design of

successive operation, and supported broader government and World Bank policy and

programming. The continued monitoring and reporting on results on many of the government’s

flagship policy areas has supported a continued critical discussion around policy implementation

and resource prioritization. The design of the results framework in DPL III took into consideration

a possible new DPL series and the preparation of any proposed program will be heavily informed

by the results of the previous operation and this ICR.

2.4 Expected next phase/follow-up operation

63. Engagement through a DPL series with the new administration is under discussion. Currently at a very preliminary stage, this would aim to support the government in the pursuit of

its 10-point socio-economic and reform agenda which continues the directions of the

macroeconomic policies of the previous administration. While the content is still under

formulation, the government has expressed interest to include therein the areas of tax policy and

administration reforms, customs and collection improvement, and reforms to support the newly-

formed Philippine Competition Commission. The government has recently steered the Philippine

Development Forum in Davao that will give substance to its reform agenda with the Philippines

Development Plan and Philippines Investment Plan under preparation for finalization in early

2017. Prior to the change in administration, the Bank started working on a draft DPL IV for

delivery in FY16 to support last mile reforms of the previous administration. This planned DPL,

however, could not materialize largely due to delays in the completion of approval processes

within the government.

50

3. Assessment of outcomes

3.1 Relevance of objectives, design, and implementation

64. Coming from a decade of fiscal instability, weak governance, and stubbornly

persistent poverty despite higher growth, the Aquino Administration appropriately focused

on achieving rapid, sustained, and inclusive growth as its development objective. In 2011, the

Aquino Administration’s campaign slogan “kung walang corrupt, walang mahirap” was translated

into the 2011-2016 Philippine development plan (PDP). The PDP envisions a Philippines with

“high growth that is sustained…that massively creates jobs…and reduces poverty.” To achieve

this goal, the government intends to i) invest heavily in physical infrastructure, ii) improve

governance, iii) enhance human development, and iv) accelerate employment generation. These

PDP pillars have been supported by the 2009 CAS and the 2014 CPS, which form the basis for the

DPL pillars.

65. The objectives pursued by the DPL series are fully consistent with the Bank’s 2009

CAS and the 2014 CPS. The 2009 CAS prioritizes achieving a stable macro-economy, while also

focusing on a strengthened investment climate, improved public service delivery, reduced

vulnerabilities, and better governance. The FY15-18 CPS builds on the 2009 CAS by emphasizing

the following pillars: i) supporting public sector reforms to improve transparency, accountability,

and governance, ii) empowering the poor and vulnerable, iii) achieving rapid, inclusive, and

sustained economic growth for more and better job creation, iv) addressing vulnerability from

climate change, environment, and disasters, and v) building peace and development.

66. These same objectives appear in the DPL series and even with the shift from the CAS

to the CPS, the DPL series’ PDO was not substantially altered. Even though fiscal policy

adjustments achieved in 2005 averted a fiscal crisis and represented a major step forward in

achieving these objectives, fiscal sustainability remained a concern through the early years of the

Aquino Administration. With this in mind, the DPL series continued to support reforms to deepen

macroeconomic stability such as raising tax revenues and further reducing fiscal risk. The DPL

series also continued to support governance reforms. On the other hand, the total investment ratio

in the Philippines continues to be relatively low and has constrained the ability of the Philippines

to sustain high and inclusive growth. Moreover, social services spending has significant room for

improvement. These have resulted in slower job creation and poverty reduction, albeit improving

in recent years. All these suggest that the policy focus adopted in the DPL series was justified in

terms of the country’s development needs.

67. To support the PDO, the government and the Bank agreed on a set of prior actions

for the DPL series which were believed to be attainable given the prevailing political

environment. Given past issues with reforms that require congressional approval, the prior actions

were limited to those that only require executive decision and fall under priority programs.

68. The results framework, while supportive of the PDO, was initially too high level and

quite ambitious. This reflected initial optimism of the government that reforms could be quickly

implemented given strong public support for the new government. However, the results framework

51

was eventually adjusted to cover more specific outcomes that are less ambitious, reflecting the

changing political dynamics especially after the mid-term election.

3.2 Achievement of PDOs

69. Sustained inclusive growth. The overall PDO was to “help the Philippines achieve

sustained inclusive growth”. Inclusive growth meant growth that creates more and better jobs and

reduces poverty at a faster rate. Reform efforts have been paying off. Between January 2014 and

2015, more than a million jobs were created as the unemployment rate fell to 6.6 percent,

significantly lower than the seven to eight percent recorded in the previous decade. Moreover,

poverty incidence among Filipinos dropped to 21.6 percent in 2015 from 25.2 percent in 2012,

representing a feat of 1.8 million Filipinos lifted out of poverty in three years. The decline in the

number of poor can be attributed to improved incomes, higher employment rate and the generally

stable inflation environment. Another significant contributor has been the government’s

conditional cash transfer program, the Pantawid Pamilyang Pilipino Program, whose budget

increased by almost 200 percent to Php 62.3 billion, and whose household coverage almost

doubled to 4.4 million households between 2011 and 2015. To further gauge the achievements of

the PDO, it will be assessed based on the more specific sub PDOs, and consideration about their

likely impact on inclusive growth.

70. Fiscal sustainability was supported through solid revenue gains, and improvements

in risk management and reporting. Almost all of the indicators under this pillar are rated

satisfactory or highly satisfactory, reflecting the fact that substantial progress was achieved in all

areas over the course of the program. Higher tax revenues reflected i) the effectiveness of the

government’s efforts to improve tax administration, ii) higher economic growth, iii) some tax

policy reforms, notably the sin tax reform, and iv) improvement in GOCC accountability.

Revenues from the Bureau of Internal Revenue (BIR), which account for 80 percent of tax

revenues, increased from 9.1 percent of GDP in 2010 to 10.6 percent of GDP in 2014. The 1.5

percentage points (ppt) increase in BIR revenues is roughly attributed to the following: 0.3 ppt

from excise taxes from alcohol and cigarette, -0.4 ppt from erosion in the tax base due to existing

fiscal incentives and unindexed petroleum excises, and 1.6 ppt from a combination of higher

economic growth and better tax administration. Excise tax revenues from alcohol and tobacco

nearly reached its target. Despite these gains, there is a significant risk that revenue gains achieved

so far could be reversed given a number of enacted and proposed tax breaks (e.g., higher exemption

threshold for bonuses, increase in the marginal threshold to PHP 1 million, and more fiscal

incentives). Moreover, an erosion in tax governance could weaken revenue mobilization. These

setbacks make achieving the government’s PDP target of 16 percent of GDP by 2016 unlikely.

71. Overall fiscal management was achieved through increased awareness of fiscal risks,

tax expenditure, and fiscal leakages reduced through better GOCC performance

measurement. The fiscal risk statement (FRS) was produced for three straight years, is available

online on the DBM website, and is being used to inform budget preparation. In 2014, the first tax

expenditure statement (TES) was published covering the period 2012 and made available in the

DOF website. It showed that fiscal incentives amounted to at least 1.5 percent of GDP annually. It

is now being used to inform the budget process. However, stakeholder awareness is estimated to

52

be basic as dissemination of the FRS and TES has been limited. Impact stemming from public

awareness of fiscal risks has yet to be observed, given the lack of further progress on reform on

tax exemptions, and the long time lags in publishing tax expenditure data. Finally, GOCC fiscal

performance has improved and is contributing less to the public sector deficit. From a contribution

of 0.7 percent of GDP to the deficit in 2010, the fiscal position of GOCCs have turned around to

post a surplus of 0.2 percent of GDP in 2014. In addition, the majority of the top 20 GOCCs in

terms of subsidies received from the national government are now governed by performance

evaluation contracts under the Governance Commission for GOCCs.

72. Fiscal sustainability results indicators removed from the final results framework

under this pillar also showed progress but were deemed not suitable because they either

exhibited design weaknesses or were overly ambitious. The removed indicator on overall tax

collections as a ratio to GDP showed a substantial increase from 12.1 percent in 2010 to 13.6

percent in 2014, albeit less than the initial target of two percentage points of GDP. The removed

indicator on public sector debt as a ratio to GDP showed a substantial improvement, falling from

58 percent to 49.8 percent, exceeding the target. The removed indicator on proportion of total

revenue from LTS improved from 54 percent to 64 percent, but fell somewhat short of the target

of 70 percent. Finally, the indicator of sovereign credit risk ratings was met as all three credit rating

agencies improved Philippines risk rating by one notch.

73. Impact of the program on reducing the cost of doing business for sole proprietorships

is assessed through a proxy variable – the nationwide LGU’s streamlining of the Business

Permits and Licensing System (BPLS). Spearheaded by the Department of Trade and Industry

(DTI) and the Department of Interior and Local Government (DILG), the BPLS mainstreaming

started in 2010 and required local government units to (i) adopt the unified form prescribed by the

joint memorandum circular no. 1 and do away with old forms, (ii) ensure processing time for

business application not to exceed 10 days for new applications and five days for renewals, (iii)

retain a maximum of five steps in the application process, and (iv) reduce the required signatories

to five or lower. These guidelines were applied nationwide. As of 2nd quarter of 2014, a total of

1,376 LGUs (137 cities and 1,239 municipalities) have been given training on how to streamline

their BPLS. Of these number, 1,221 have completed the streamlining process while 155 LGUs are

still undergoing reforms. There have been significant reforms at the local level, which have

contributed to reducing the number of days needed to register a sole proprietor business. In some

cities such as Manila, Mandaluyong, Quezon City, Pasig, Puerto Princesa, and Tuguegarao, the

number of days needed to register a sole proprietor business has now reduced to only one to three

days, down from 35 to 45 days previously.

74. Priority public investment implementation, both in terms of quantity and quality, has

continued to face challenges, but reforms have borne results. All of the four results indicators

in this area are rated as moderately satisfactory and above. Achieving these targets faced difficulty

in 2014, when increasing spending in line with the budget allocation was partially hampered by

the impact of a natural disaster over the period, and an inability to address constraints to

implementation of public investment projects. With stronger government focus, however, the

public investment reforms that have been set in motion have started to bear results. For instance,

a commitment to increase public investment from 1.8 percent of GDP to greater than 3.5 percent

of GDP resulted in public investment of 4.3 percent of GDP in 2015. Similarly, DPWH

53

infrastructure spending has risen from its baseline of 1.5 percent of GDP in 2013 to 2.1 percent of

GDP in 2015, 0.6 percent higher than the target. In terms of quality of spending, spatial targeting

has been introduced into four selected infrastructure programs, which marks good progress, and

there are indications that spending quality continues to improve given savings in procurement and

better targeting of projects especially in national roads, some local roads, and some facilities.

75. Fiscal transparency and good governance – The indicators under this pillar are rated

satisfactory. A public expenditure and financial accountability (PEFA) assessment conducted in

2016 evaluated the three PEFA indicators and found that the ratings for these improved. The score

for performance indicator (PI) 10, public access to key fiscal information, improved from C to A

as a result of publication of audit reports by COA and contract awards by DPWH. The score for

PI 24, quality and timeliness of in-year budget reports, marginally improved from D to D+. The

sub-indicators within this indicator however showed improvements in the scope and quality of the

reports. While the reports are being regularly disclosed, timeliness of submission by several

departments remains a challenge. For PI 5, classification of the budget, the adoption of UACS led

to improvement of the score. Since 2014 this is used for budget formulation and has progressively

been rolled out to financial reporting. Pending the anticipated automation of accounting and

financial reporting processes, applying the 54-digit code at the transaction level in a manual

recording environment is difficult. While the aggregate financial reporting is compliant with

UACS, the benefits regarding analysis and drill down of budget execution data are not yet

achieved. Improvements in the public availability of public finance information are significant and

if sustained are likely to support improved public debate over fiscal policy making and thus support

budgets which address constraints to growth in an inclusive manner.

76. Together with better management of schools, higher spending in education resulted

in notable gains in the education indicators. Five out of six indicators are rated as highly

satisfactory, with one rated as moderately unsatisfactory. Student-teacher ratios for both primary

and secondary schools fell from greater than 40 in 2010 to less than 30 in school year (SY) 2013-

14, while student-classroom ratios also fell substantially from 44 percent in 2010 to 27 percent in

SY 2013-14 in primary schools, and from 60 percent to 32 percent in secondary schools.

Meanwhile, net enrollment ratios in both primary and secondary schools increased from 88 and 60

percent in 2010 to 95 and 65 percent in 2014, respectively. Only net enrollment in secondary

schools, which registered a modest increase, did not reach the target of 76 percent by 2014. The

clear progress in improving the enrollment and learning environment for school children is likely

to be strongly supportive of inclusive growth over the medium term, as education is one of the

most important determinants of increased productivity and income in the future. As more children

attend and complete secondary school, aided by the expanded CCT program, these effects are

likely to strengthen.

77. In health, rapid progress has been achieved in rolling out of the NHTS-PR program,

which has helped extend access to millions more low-income households. Latest data indicates

that 92.6 million individuals targeted under NHTS-PR are now covered by PhilHealth, compared

to 21 million in 2010. While the target for this indicator was not clearly defined,12 the scale of the

12 The target was defined as “100 percent of eligible households”, however the eligibility criteria have been continually

adjusted to increase the scope of the program and include more low-income households with eligible households

54

increase has exceeded expectations and can be considered to be highly satisfactory. As of 2015,

28.2 million individuals were registered with a primary care benefit provider, compared to a target

of 9.5 million. Finally, the proportion of healthcare claims due to NHTS-PR families rose from 20

percent in 2010 to 32 percent in 2015, meeting the target of “greater than 27 percent.”

reportedly automatically enrolled. Therefore, while the target is automatically met, it is assumed that the intent of the

target was a scale up in the coverage of households of a level somewhat less than has actually been achieved.

Table 12. Achievement of Outcome Indicators

Indicator

Relates to actions

in: Baseline Target (2014) Outcome Rating

DPL

I

DPL

II

DPL

III

Pillar 1: Strengthening Priority Public Investment Implementation

Public infrastructure

investment (from the

budget) X X

1.8 percent of

GDP in 201013 >3.5 percent of GDP 4.3 percent of GDP in 2015 S

DPWH public

infrastructure

investment X X

1.5 percent of

GDP in 201014 >1.5 percent of GDP 2.1 percent of GDP in 2015 S

DPWH public

investment project

portfolio

prioritization

improved, as

measured by percent

value of budgeted

contracts bid in first

half

X 31 percent of GAA in 2010 >50 percent of GAA 51 percent of GAA in 2013 MS

Spatial targeting

clarified and project

selection

transparency

enhanced as

evidenced by

operational network

plans and

implementation by

DPWH for two

major priority road

programs

X 0 in 2010 2/4

4/4 in 2014

(e.g., Tourism road

infrastructure program

[TRIP], Farm to market

roads [FMR], School

building program [SBP],

and Health facilities

enhancement program

[HFEP])

HS

13 Baseline revised from “<2.5 percent of GDP” for greater precision to enable assessment of progress against the indicator. 14 Baseline revised from 1.1 percent of GDP due to data revisions during the program.

56

Indicator

Relates to actions


DPL

I

DPL

II

DPL

III

Pillar 2 : Reducing the Cost of Doing Business for Jobs Creation and Poverty Reduction

The average number

of days required to

register a sole

proprietorship

business has been

reduced to under 10

days for selected

cities

X X X >10 days (national + local) <10 days (national + local)

3 days (Quezon City)

1-3 days (Manila,

Mandaluyong, Pasig, Puerto

Princesa, and Tuguegarao)

<10 days (98% of 480 target

LGUs); 1,221 LGUs have

finished streamlining the

Business Permit and

Licensing System

S

Pillar 3: Developing the Human Capital of the Poor by Strengthening the Basic Education and Health Sector

Reduction in the

student-teacher ratio

at the top 25th

percentile of its


X X X 40.4 in 2010 <40.4 29.8 in SY 2013-14 HS

Reduction in the

student-teacher ratio

at the top 25th

percentile of its

distribution,

secondary

X X X 42.0 in 2010 <42.0 25.4 in SY 2013-14 HS

Reduction in the

student-classroom

ratio at the top 25th

percentile of its


X X X 43.8 in 2010 <43.8 26.9 in SY 2013-14 HS

Reduction in the

student-classroom

ratio at the top 25th

percentile of its

X X X 60.0 in 2010 <60.0 31.6 in SY 2013-14 HS

57

Indicator

Relates to actions


DPL

I

DPL

II

DPL

III

distribution,

secondary

Net enrollment ratio,

primary X X X 88.1 in 2010 >94.0 95.2 in SY 2013-14 HS

Net enrollment ratio,

secondary X X X 59.6 in 2010 >76.0 64.6 in SY 2013-14 U

Number of NHTS-

PR individuals

covered by

PhilHealth (millions)

X X X 22.1 million in 2010 47.8 million 92.6 million in 2015 HS

Number of NHTS-

PR individuals

enlisted with a

primary care benefit

provider (millions)

X X X 0 in 2010 9.5 million 28.2 million by 2015 HS

Number of claims by

NHTS-PR families

at PhilHealth-

accredited providers

in the previous year

(share of total)

X X X 20 percent in 2010 >27 percent 32 percent in 2015 HS

Pillar 4: Fiscal Transparency and Good Governance

Improvement in the

following PEFA

indicator scores:

PI 5 - classification

of budget

X X X

PI 5 - D in 2010

PI 10 - C in 2010

PI 24 - D in 2010

Two scores improve

PI 5 - C in 201515

PI 10 - A in 2015

PI 24 - D+ in 2015

(all preliminary ratings)

S

15 Based on PEFA assessment conducted early 2016.

58

Indicator

Relates to actions


DPL

I

DPL

II

DPL

III

PI 10 - public access

to key fiscal

information

PI 24 - quality and

timeliness of in-year

budget reports

Enhanced budget

transparency through

the existence of a

unified account code

structure, and the

timely publication of

budget execution

data

X X X Does not exist/not timely Yes Yes16 S

Pillar 5: Consolidating Fiscal Sustainability, Revenue Mobilization, and Risk Management

Tax administration

gains by BIR

(percent of GDP) X

9.1 percent of

GDP in 2010

1 percentage point (PPT) of

GDP increase

10.6 percent of GDP (1.5

PPT increase) in 2014 S

Excises from alcohol

and tobacco (percent

of GDP) X

0.63 percent of

GDP in 201017

0.4 PPT of GDP

increase

1.2 percent of GDP (0.57

PPT increase) in 2015 HS

Enhanced evidence

based stakeholder

awareness of key tax

expenditures and

fiscal risks

X X Low18 Basic19 Basic S

16 UACS is being used for the budget formulation and financial reporting. Acceptable budget execution reports are being regularly uploaded on DBM website.

Completeness is still a challenge. 17 Baseline revised from 0.5 percent of GDP due to data revisions during the program. 18 Awareness is rated low for the baseline given that no fiscal risk statement is prepared prior to 2011. 19 Basic refers to a basic understanding of the key tax expenditures and fiscal risks in the country based on awareness of the existence of a published Fiscal Risk

Statement which includes this information.

59

Indicator

Relates to actions


DPL

I

DPL

II

DPL

III

GOCC contribution

to consolidated

public sector deficit X X

-0.7 percent of

GDP in 201020

0 percent of

GDP by 201421

+0.2 percent of GDP

(surplus) in 2014 HS

Majority of top 20

GOCCs as measured

by government

transfers between

2010-2013 are

subject to completed

GCG performance

evaluation contracts

for 2013/14

X X 0 in 2010 15/20 or 75

percent

16/20 or

80 percent in 2014 S

20 Baseline revised from four percent of GDP due to data revisions during the program. 21 Target revised from -1.5 percent of GDP in light of a significantly improved baseline due to data revisions.

60

3.3 Justification of overall outcome rating

78. The overall outcome rating for this development policy program is Satisfactory.

79. The rating for relevance is substantial. The program was designed to closely follow the

Aquino Administration’s reform agenda. This was guided by the overarching goal of achieving

rapid, sustained, and inclusive growth. The development policy program’s achievements are

highly relevant to the administration’s strategy for inclusive growth – the type that creates more

and better jobs and reduces poverty at a faster rate – by: i) strengthening macroeconomic stability

through revenue mobilization and better management of fiscal risks as prerequisites of inclusive

growth, ii) strengthening governance by increasing transparency and accountability, iii)

accelerating reforms in business start-up and infrastructure delivery to strengthen the investment

climate, and iv) expanding access to education and health through better targeting of the poor.

The program was able to remain relevant as the government’s program evolved over time to cope

with implementation challenges by emphasizing new areas of reform.

80. The rating for achievement of PDOs is satisfactory. Across the five pillars of the PDO,

there were marked differences in performance against targets. The PDO for fiscal sustainability

was satisfactorily achieved, although a revision of results indicators meant that this was against

slightly less ambitious targets than originally envisaged. The fiscal transparency PDO was also

satisfactorily achieved. The PDO for human development of the poor was the most successful.

Under this pillar, education reforms were generally highly satisfactory, with results for all except

one indicator exceeding targets. Under health, most indicators were satisfactorily achieved, the

reforms are proceeding well and are having an impact on the ground. Overall the human

development pillar is rated as satisfactory. The investment pillar, split into public investment and

business environment, was the most problematic in the program. While reforms aimed at making

sole proprietorship start-up easier seem to have proceeded well, this can be assessed only through

proxy indicator and data from some selected cities. All of these however are positive. Finally, the

public investment pillar is rated satisfactory. Based on latest information two of the result

indicators were satisfactorily achieved and one was exceeded. Budget allocation for public

investment steadily increased but expenditures decreased. This was due to implementation

challenges, most particularly expenditure slowdown after Supreme Court ruling on DAP and lack

of progress in implementation of the FMIS reform supported by DFAT.

3.4 Overarching themes, other outcomes and impacts

(a) Poverty impacts, gender aspects, and social development

81. The operations’ prior actions were selected to enhance long-term welfare of the poor

and bottom 40 percent of the population through better job opportunities and enhanced

income protection. Three of the prior actions have direct poverty and social impact and are

highlighted in this section: farm-to-market roads, social protection, and the sin tax reform.

82. Better transparency and targeting of farm-to-market roads is expected to provide

better economic opportunities to the bottom 40 percent and the extreme poor as three out of

61

four poor people in the Philippines live in rural areas. Majority are subsistence farmers or farm

laborers. Better access to markets will increase their income earning opportunities. Analysis shows

that the poor are particularly vulnerable to weather-related shocks, including those brought about

by climate change, as well as those from natural disasters such as earthquakes. Improving

resilience of public infrastructure and enhancing disaster related risk management by the national

government in collaboration with local governments stands to lead to large positive poverty and

social impact.

83. The prior action related to the NHTS-PR aims to ensure that the database of poor

and vulnerable Filipino households is accurate and are used for all targeting all social

programs. The ultimate goal is to ensure that government programs that identify beneficiaries

using this database, such as the conditional cash transfer program, sponsored health insurance

program through PhilHealth, and other national and subnational anti-poverty programs, reach

those who need them the most. Enhanced targeting for health and improved service provision will

improve efficiency and effectiveness of public spending.

84. The sin tax reform prior action benefitted from a poverty and social impact

assessment (PSIA) analysis both in the design and implementation phase. The PSIA suggests

that while the tax incidence on tobacco excises is slightly regressive, the commensurate health

impacts and revenues used for health programs are progressive given the impact particularly to the

bottom 40 percent of the population. The design of the sin tax earmarked funds to promote

universal health care, notably health insurance for the bottom 40 percent of the population. The

Bank has supported the design of the sin tax implementing rules and regulations, including

cessation programs that are particularly likely to benefit the poor. A sin tax monitoring and

evaluation report has recently been completed and is showing marked reduction in consumption

of cigarettes by the poor.

85. The operation also builds on the analysis of the recent findings of the World Bank

country gender assessment. The assessment finds that gender gap in education in the Philippines

tends to be the reverse of what is found in many other countries. In this regard, the prior actions

on education and health seeks to improve gender equality.

(b) Institutional change/strengthening

86. Several institutions were involved in the implementation of prior actions across the

DPL series and achievements in institutional strengthening were encouraging. While

implementation hurdles and other factors have been discussed in other sections, it is important to

note the contribution of complimentary technical assistance resources. Progress through the health

and education sector related prior actions was particularly successful. The institutions involved

have all greatly benefited from continuing support available through Bank-funded projects like

Learning, Equity and Accountability Program Support (LEAPS) and the programmatic AAA for

social protection and labor as well as for health. In the latter, momentous strides were made

towards universal health coverage and the capacity for managing and running the insurance

program was built as the coverage numbers expanded. The experience gained during the proposal

and passage of the sin tax law has helped improve capacity at BIR to formulate and defend

contentious policy proposals. The initiative to develop the Philippine Business Registry, which

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allows linkage between the name registry at DTI and registration at required social agencies for

sole proprietors, has created a standing team in DTI that is responsible for the management,

maintenance, and advancement of the PBR. This team is seeking to establish itself as a formal

unit in DTI so that these roles will be formally recognized and PBR specific management will be

sustained. Enactment of the GOCC Governance Act resulted in establishment of the GCG which

is operational and fulfilling its mandate for monitoring the GOCC performance.

87. Fiscal risk statements have been produced and improved regularly since the prior

action in DPL I and capacity has been built in DBM in the area of fiscal risk management. Additionally, the significant ramping up of public disclosure of information has resulted in a

dedicated team preparing materials surrounding the budget proposal and approval as well as in-

year execution reports. The Bank is also supporting the institutional strengthening in the area of

‘open data’ through various platforms.

88. An area where institutional capacity improved but results are still lagging is in public

investment implementation. Technical assistance was provided to DPWH even prior to the DPL

series and continued in parallel. Capacity for planning and execution has been augmented through

training and equipment but much remains to be done to translate this into higher expenditures

which were also impacted by the DAP in 2014. While substantial efforts were made in the

formulation of UACS, the failure to move ahead on the development of a financial management

information system substantially limits its usefulness in ramping up budget execution through

identification of specific areas for intervention as well as an input to better budget preparation.

(c) Other unintended outcomes and impacts (positive or negative, if any)

None.

4. Assessment of risk to development outcomes

89. Overall rating: Low or Negligible – The risks are rated moderate for the outcomes on

public investment, starting a business and tax revenue mobilization. The risks are rated low for the

fiscal transparency, fiscal risk, education and health outcomes.

90. The main source of risk is sustainability of reforms with the change in administration. However, since this milestone has now passed, the risk is not considered significant since the new

administration has declared commitment to continuity of the macroeconomic policies. In addition,

revenue mobilization, improving business environment and investing in infrastructure remain

priorities. The new administration has also demonstrated commitment to transparency by issuance

of Executive Order for Freedom of Information while it still awaits enactment. The CCT program

and its targeting mechanism also remain in place for now and the risk of reversal of the reforms

supported by this DPL series is considered moderate.

91. Particular risks by pillar are as follows:

92. Infrastructure – Higher budget for DPWH’s infrastructure program (from 1 percent to 2.2

percent of GDP between 2010 and 2015) has not translated into commensurate increases in

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spending given a number of implementation issues discussed above. In recent years, there has been

significant push from the top to improve implementation performance and quality of infrastructure.

The risk that these indicators are reversed are moderate. While the new administration is fully

committed to deliver infrastructure, unresolved implementation constraints, particularly at the

local government level, reduce the ability to deliver on this ambition. Politicization of

infrastructure projects also remain a risk.

93. Starting a business – Reducing start-up business cost remains a significant challenge,

given the complexity of the process (up to 18 agencies are involved and interconnection is still

lacking). Unless these are addressed on a holistic manner rather than piece-meal, time spent in

registering a business is unlikely to improve significantly, thus making the risk significant.

94. Fiscal transparency – Significant strides have been made in fiscal transparency. The

program supported the launch of the open data portal which has since then spawned a series of

more focused open data platforms, such as reconstruction, the tourism road infrastructure program,

and the bottom-up budgeting initiative. These and the commitments of the government under the

Open Government Partnership significantly mitigate the risk of reversal of these reforms. While

detailed information on the enacted budget is available on the DBM website, posting it in an inter-

operable format has been a challenge and poses risk for sustainability. The new administration,

however, is committed to transparency. PFM reforms have had limited impact on performance in

terms of timely information to decision makers and efficiency in budget execution. Policies

supported through the DPL series have been slow in implementation. Sustained effort is required

to achieve progress without which these outcomes are at risk.

95. Education – Significant increases in the budget for education and better management of

resources, such as through the school-based management system, has significantly improved a

number of education outcomes. The risk of reversal is now moderate. Institutionalizing reforms

are now needed to lock-in the significant gains made.

96. Health – While full coverage of the poor in the health insurance program is expected, there

are concerns that beneficiaries are not getting adequate service given slow progress through 2013.

97. Revenues – Significant revenue gains have been achieved through better tax administration

and the enactment of the sin tax reform. These enabled the government to raise 1.5 ppt of GDP in

tax revenues. However, there is significant risk that this gain is reversed given a number of enacted

and proposed tax breaks (e.g., higher exemption threshold for bonuses, increase in the marginal

threshold to PHP 1 million, and more fiscal incentives). Moreover, an erosion in tax governance

could weaken revenue mobilization. These setbacks make achieving the government’s PDP target

of 16 percent of GDP by 2016 unlikely.

98. Fiscal risk – One of the biggest gains in the last decade is sustaining macroeconomic

stability through better management of fiscal resources, both at the national government level and

at the public sector at large. Institutionalization of reforms, for instance through the recently

created GCG, has reduced the risk of reversal. Deepening reforms to increase transparency of

GOCC operations and regular publication of the fiscal risk statement would help mitigate risks

further.

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5. Assessment of Bank and Borrower performance

5.1 Bank performance

Bank performance in ensuring quality at entry

Rating: Satisfactory.

99. The Bank made an overall positive contribution to the reform efforts of the Philippine

government. The program was well focused on a government-owned reform program, which was

relevant to the PDO and in the most part reflected a strategic and well-considered reform process.

The Bank’s contribution came through a range of analytical work and on-going technical

assistance across the operation’s pillars. An important contribution of the Bank was to help

promote converge of programs and objectives, in particular those that required actions by more

than one agency. Notable were efforts to leverage programmatic sectoral work, including through

Bank budget and trust fund support, for advancing the policy reform agenda both at the outset of

the program and over the course of the operation.

Quality of supervision (including M&E arrangements)

Rating: Moderately Satisfactory

100. The programmatic DPL gave the Bank the opportunity to take stock of progress made

between appraisal and effectiveness of the succeeding DPLs. The Bank was responsive to the

government’s evolving policy implementation priorities, for example in a shift in the latter part of

the program to delivering on public infrastructure investment execution (beyond the initial focus

on PPPs). Changes were made in successive programs to the prior actions and in some cases policy

areas supported to ensure the program remained relevant to the development objectives.

Supervisory inputs were well-targeted to areas of focus for government-led reform.

101. Despite adequacy of supervision, the monitoring and evaluation framework exhibited

a number of weaknesses, some of which were addressed during the course of the program. Some results indicators were difficult to assess, and these issues could have been better addressed

during the course of the program. Regular supervision was supported by cross-sectoral teams

engaged in a close dialogue with counterparts to assess progress on the indicators, as well as

validate strategies. Good transition arrangements were afforded between operations within the

program, with consistency of task leadership for the most part of the program and good knowledge-

sharing when there was a change in task team leader (TTL) between the first and second operation.

Moreover, the TTL for DPL II and III was based in Manila, which helped improve the quality of

supervision.

Justification of rating for overall Bank performance


102. Overall Bank performance is rated as satisfactory. In line with the harmonized

evaluation criteria, performance at entry is rated as satisfactory while quality of supervision is

rated as moderately satisfactory, giving an overall rating of satisfactory.

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5.2 Borrower performance

Government performance


103. The government showed strong commitment to increasing transparency and

improving investments for social protection and public infrastructure for inclusive growth. The passage of the sin tax reform with earmarking for universal health care (UHC) was emblematic

of a determination to tackle vested interests for the benefit of the bottom 40 percent. In addition,

public consultation increased significantly under this government, which helped improve support

for these reforms. Finally, implementation issues, while not always fully addressed, were identified

early on, allowing the government to address them early.

104. However, a number of reform areas, such as fiscal incentives rationalization, proved

to be more challenging in terms of reaching both political and technical agreement. The roll-

out of some systems reforms, for example the Philippines Business Registry (PBR) and the

adoption of the UACS suffered some delays during implementation. However, in all cases an

overall commitment to the reform trajectory was sustained.

105. The passage of a large number of PPP’s in the early part of the program was always

considered a stretch target, nonetheless this was realized by the end of the program.22

Integrating LGUs with national systems in the registration of sole proprietors has continued to

prove challenging. Overall government showed a strong commitment to realizing convergence

agendas across agencies and levels of government.

Implementing agency or agencies’ performance

Rating: Satisfactory

106. The Department of Finance provided satisfactory overall coordination and follow-up

on all dimensions of the program. The two other oversight agencies, DBM and NEDA, provided

strategic guidance for the program, as well as close engagement on specific parts of the program.

The main challenges were in areas that required legislative passages (e.g., fiscal incentives

rationalization), although some successes were achieved, such as GOCC oversight and the sin tax

reforms.

107. Line agency counterparts across all parts of the program (i.e., DPWH, Department

of Tourism [DOT], DA, GCG, DTI, Department of Health [DOH], BIR, and Department of

Education [DepEd]) continuously engaged and committed to delivering on their respective

components. The main challenges occurred when inter-agency/convergence collaboration was

required, notably in the absence of clear political and priority agreements (e.g., DTI-DOF on fiscal

incentives, DBM-DA-DPWH on FMRs).

22 Notwithstanding many delays, several PPP projects have been awarded, and a number have already started

construction. These projects are projected to raise investments by 0.6 and 0.8 percentage points of GDP in 2015 and

2016, respectively.

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Justification of rating for overall Borrower performance


108. Overall Borrower performance is rated as satisfactory. In line with the harmonized

evaluation criteria, both government performance and implementation agencies’ performance is

rated as satisfactory, giving an overall rating of satisfactory.

6. Lessons learned

109. Key lessons to inform any future engagement through DPO lending include the use of

programmatic, multi-year programs, complementing prior actions with implementation support

through other instruments and maintaining pragmatism in designing the monitoring and evaluation

framework.

110. A programmatic multi-year DPL can serve as an effective platform for promoting

reform opportunities and institutional development for inclusive growth. The DPL program

was launched at the outset of a new government with leadership committed to advancing major

reforms, particularly in the broader governance domain. In a context such as the Philippines, single

tranche “stroke of the pen” would not have supported the type of progressive medium term reform

trajectories the program was able to support. A medium term perspective however also required

calibration of actions to what was possible in terms of actions to support inclusive growth. The

challenge for the program was always striking a balance between the effort required to complete

an action rather than be distracted by starting pursuit of a new idea.

Within the context of a multi-year engagement, while a regular annual cycle would have been

ideal, financing needs and shocks entailed flexibility and more extended timelines in the program.

Despite the DPL program was an integral part of the government’s annual financing plan, timing

of uptake was quite variable. Particularly in the latter parts of the program, foreign financing was

no longer a major part of the financing constraint of the government. But shocks such as Typhoon

Yolanda required rapid access to new budget financing. A challenge for the DPL reform program

was therefore to effectively reconcile the timing around financing with the reform program.

111. Complementary technical assistance, economic and sector work, and close

coordination from sector teams and other development partners was vital for both a well-

informed program and in maintaining relevance over the course of the program. Given the

DPL’s strong emphasis on institutional and inter-agency convergence reforms, on-going policy

dialogue and technical assistance was needed to underpin the different reform tracks. For the team

it was therefore vital to leverage both project engagements and also Trust Funded policy

engagements. The Australian Umbrella TF proved vital in this regard especially its support to the

PFM agenda. Strong collaboration with the IMF, notably in the fiscal transparency and

sustainability pillars, also proved to be instrumental in advancing the policy reforms. Going

forward, supporting a package of policy and administrative reforms through a combination of DPO

and IPF or Program for Results would greatly increase the likelihood of achieving the intended

impact and institutionalize the reforms. Collaboration with other development partners can help

enhance this impact.

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112. Monitoring and evaluation frameworks need to be realistic in view of the data-

gathering constraints. The Philippines does not yet enjoy strong integrated systems to monitor

financial and physical progress of major government programs. Government and service-level

devolution also means that reporting indicators require collaboration across national and local

levels of governments (e.g., business registration, health). Such difficulties need to be factored into

the results framework at the design stage to ensure that monitoring is feasible and verifiable.

Throughout the duration of the DPL series, teams had to invest significant effort in securing and

validating monitoring indicators across the life of the program. Information should also be from

verifiable sources – either information releases subject to standard quality assurance or if drawn

from MIS sources, supported by dedicated technical resources to assist with the preparation of

appropriate data. Continued monitoring and reporting is important for the continuous dialogue

with the government and for the success of the programmatic approach. This also helps maintain

the relevance of this approach for a medium term inclusive growth agenda.

Other factors for consideration

113. Legislative reforms in the Philippines will remain as highly unpredictable yet critical

reform milestones. The DPL series encompassed a number of successful legislative reforms

(GCG and sin tax laws), but also some that have yet to come into effect (fiscal incentives

rationalization). In the Philippines, passing legislation will remain a drawn-out and politically-

difficult process as recognized in the previous DPL ICR, but may be nevertheless a critical step to

assure sustainable reform in some areas. Teams should weigh carefully the risk and criticality of

such actions. Given the overriding importance of consensus building for successful legislative

reform, teams should not only carry out detailed technical analysis of proposed reforms but also

political economy analysis of the likelihood of success of different options. The primary lesson is

that when DPLs support a step in legislative reform, subsequent progress through the legislature

is a very uncertain and risky action and should only be supported where teams are fully informed

and willing to take that risk.

114. The DPL series was a useful instrument for advancing convergence agendas both

across government but also within the Bank. The DPL series was one of the few instruments

the Bank had to focus cross-sectoral collaboration across agenda that involved more than one

agency. The DPL proved especially useful in advancing often contentious dialogues (e.g., FMR

oversight and prioritization). However, at times, this came with huge transaction cost. An

important lesson of the DPL series was that it was important to get progressive higher level

agreement on reform objectives, and then move to specific definitions of prior actions. Having a

multi-year program, versus single tranche operation, helped significantly in this regard.

115. Balanced emphasis on both revenue and expenditure improves likelihood of success. While increasing revenue collection through both policy and administrative measures is essential,

the argument is better made, especially in the political context, if it is accompanied with measures

to improve the quality of spending. Over the course of the DPL series, the administration faced the

issue of under-execution of the budget largely due to implementation constraints. This undermined

the significance of revenue enhancing measures since the government was unable to demonstrate

a shortage of funds for spending. As credibility of the budget i.e. ability to execute the budget as

approved, remained weak, the need to increase revenues became less urgent.

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116. Pressing actions on reform implementation versus intent remain vital to the success

of the program. Both the complex political economy and bureaucratic implementation challenges

in the Philippines tend to promote predilection of plans over execution measures. To show actual

outcomes, the DPL series needed to maintain a bias towards implementation, particularly as the

program matured. Support by CMU leadership was vital to aligning task teams to this line of

emphasis. At the same time, care needed to be taken that the DPL would not be used to force

through implementation that regular project or AAA dialogues had not succeeded in advancing

since this may circumvent ownership thereby reducing sustainability. In the end, policy, planning

and execution go together in delivering a successful DPL program.

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Annex 1: Comments from the Government

1. The Implementation Completion and Results Report was transmitted to the Department

of Finance for government comments on February 7, 2017. Comments were received on

April 1, 2017. They were primarily of editorial nature and requested the correction of a

few data points. The team incorporated these comments into the final draft.

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Map

Documents

World Bank Documentdocuments.worldbank.org/curated/en/...May 12, 2017 · DOT Department of Tourism PCN Project Concept Note DPL Development Policy Loan PD Project Document DPWH Department