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PHILIPPINES20918PH I LlIPP I N ES Volume1

RURAL DEVELOPMENT & NATURALRESOURCE MANAGEMENT:

TRENDS, STRATEGY IMPLEMENTATION,AND FRAMEWORK PERFORMANCE

INDICATOR SYSTEM

Volume I: Main Report May 2, 2000

A Joint Report of theGovernment of the Philippines and The World Bank

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The World BankRural Development and Natural Resources Sector Unit

East Asia and Pacific Region

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ABBREVIATIONS AND ACRONYMS

ACPC Agricultural Credit Policy Council (ACPC) LGU Local Government UnitAFMA Agricultural and Fisheries Modernization Act LBMRO Legislative Budget Review and Monitoring OfficeAGILE Accelerating Growth Investment and Liberalization with Equitv LFS Labor Force SurveyAIMCFP Agro-Industry Modern Credit and Facility Program M&E Monitoring and EvaluationAMICFP Agricultural Modernization Credit and Financing Program MOA Memorandum of AgreementAPIS Annual Poverty Indicator Survev MOU Memorandum of UnderstandingARB Agrarian Reforn Beneficiaries MTPDP Medium Term Philippines Development PlanARC Agrarian Reform Communities NAMRIA National Mapping and Resource Information Authority

BAS Bureau of Agricultural Statistics NAPC National Anti-Poverty CommissionBOT Build-Operate-Transfer NCC National Credit CouncilCARP Comprehensive Agrarian Reform Program NEDA National Economic and Development AuthorityCAS Country Assistance Strategy NFA National Food AuthorityCPBO Congressional Planning and Budgeting Office NGA National Government AgenciesDA Department of Agriculture NGO Non-Government OrganizationDAR Department of Agrarian Reform NTISD National Testing of Indicators for Sustainable Development

DBM Department of Budget and Management O&M Operation and MaintenanceDCP Directed Credit Programs OED Overseas Economic DevelopmentDENR Department of Environment and Natural Resources PAMB Protected Area Management BoardDILG Department of Interior and Local Government PC Planning CommitteeDOST Department of Science and Technology PCSD Philippine Council for Sustainable DevelopmentDSWD Department of Social Welfare and Development PD Presidential DecreeDTI Department of Trade and Industry Pi Project ImplementationFCC Fnvironmental Compliance Certificates PIDS Philippine Institute for Development StudiesENRAP Environmental and Natural Resources Accounting Project PMS Presidential Management StaffFAO Food and Agriculture Organization PPAPS Pilot Testing of a Participatory Agricultural Planning SvstemFIES Family Income and Expenditures Survey RD Rural DevelopmentGAA General Appropriations Act RDC Regional Development CouncilGDP Gross Domestic Product RDINRM Rural Development/Natural Resources ManagementGOP Government of the Philippines RFU Regional Field UnitGVA Gross Value Added SEER Sector Effectiveness and Efficiency ReviewHH Household SONA State of the Nation AddressHPAE High Performing Asian Economies TRP Unilateral Tariff Reform Program[CM Integrated Coa,tal Management UNDP United Nations Development ProgrammefDF Institutional Development Fund WB The World BankKRAs Key Result Areas WHO World Health OrganizationLGC Local Governmcnt Code WTO World Trade Organization

Photo Credit: (1) "Dfying Palay", by Ryan Anson; (2) "Class Under The Tree': by Nor Gonzales; (3) 'Carabao"; and (4)"Fishnet"from The World Bank Photo Archive.

PREFACE

This study is unique in several ways: it responds quickly to Government's request for assistancein a manner where the requesting group (NEDA/Agriculture Staff) becomes a central counterpart and"co-author"; it focuses on assessing the performance of a strategic sector by a premier team of Filipinoanalysts/consultants/advisers, who build upon and share their analysis and insights with an operationaland poverty reduction focus; it links an updated assessment and trends of implementing RD/NRM strategiesas outlined in the Medium Terrn Philippines Development Plan (MTPDP) with a proposed frameworkperformance indicator system aimed at promoting improved and sustained results and impacts; it includes10 Annex reports (Volume 2) on key indicator areas and are aimed at stimulating discussion and strategicactions by the relevant agencies and stakeholders; it follows a consultative process which enhances thecontent., involving a broad range of strategic rural stakeholders and the members of the Planning Committeeof the MTPDP; it is provid,ng a vehicle to facilitating a Filipino-led process of institutionalizing a RD/NRM performance indicator system, which also aims to support GOP's proposed performance-basedapproach to budgetary allocations.

The study team is very appreciative of the many valuable contributions provided by the "larger studyteam". It is hoped that readers will find the report useful in supporting the Philippines' efforts to promoteshared growth and reduced rural poverty.

Study Team Members: R. Anson (WB, Study Team Leader, and Sr. RD Specialist), C. Figueroa-Geron(RD Operations Officer), E. Guiang (NRM Specialist), J. Balbosa (Macro-economist/operations officer)(WB - Manila); Dr. A. de los Angeles (ENRAP), Professor A. Balisacan (UP/Dillman), Professor A. Brillantes(UP/Dillman), Dr. R. Clarete (AGILE Team), Dr. T. David (PIDS), Mr. R. Dy (U. Asia & Pacific),Ms. P. Geron (Consultant), Dr. A. Inocencio (PIDS), Ms. F. Mojica (U of Asia & Pacific), Dr. B. Tolentino(Consultant), Mr. E. Mercado (Consultant/stakeholder/communications expert), C. Umali (Consultant/Planning and M&E Expert). Ms. Marjorie Espiritu (RD Team Assistant) provided valuable assistance inthe production and logistical aspects of the study.

GOP Team and Review/Consultative Process: The study team's main GOP counterpart team was NEDAAgricultural Staff, under the overall leadership of its Director, Mr. Felizario Virtucio, who provided theinitial and on-going impetus for the study focus and process. The study team also acknowldges theoverall guidance and support provided by the MTPDP Planning Committee (PC) members, especiallyunder the guidance of it chairman, Honorable E. Angara (Secretary of Agriculture). Mr. Angara chairedthe PC's review meeting of the draft report, held on March 10, 2000. Two phases of regional consultationswere held with rural stakeholders in October, 1999 and March. 2000 which provided valuable inputs tothe study design and contents. Several follow-up discussions were held with selected members of the PCon key aspects of the revised report and whom also provided valuable contributions to the final report.

WB Reviewers: Overall Guidance: Mr. Malcolm Bale (Manager for RD/NRM Unit, E. Asia and PacificRegion. Peer Reviewers: N. Okidegbe (Principal Investment Specialist, RD Dept., WB); J. Heath(Principal Economist, OED, WB); K. Deininger (Economist, WB); S. Tabor (Consultant). Two reviewmeetings, several individual and written suggestions provided valuable inputs and guidance to thefinalization of the report.

PHILIPPINESRD/NRM: TRENDS, STRATEGY IMPLEMENTATION, AND FRAMEWORK

PERFORMANCE INDICATOR SYSTEM

TABLE OF CONTENTS

VOLUME IPage N

ACRONYMS

EXECUTIVE SUMMARY i(includes summary matrix of trends & performance indicators)

I) INTRODUCTION 1

A) Study Context 1B) Objectives of Study 2C) Participatory Approach 3D) Report Structure 4

II) THE PHILIPPINES RURAL SECTOR: BACKGROUND AND 5OVERVIEW OF THE MEDIUM TERM PHILIPPINESDEVELOPMENT PLAN (MTPDP)

A) Background: Importance and Performance of Rural Sector & 5Rural Poverty

B) MTPDP: Goals, Strategies and Key Result Areas 5C) MTPDP: Preliminary Assessment & Emerging Priorities 8

III) RDINRM STRATEGIES: UPDATED FRAMEWORK AND 10ASSESSMENT OF TRENDS AND STRATEGIC PRIORITIES

A) RD Strategy Framework (A Synthesis) 10

1) What is Rural Development? 102) Overview of Philippines RD Strategy Framework 10

B) Strategic RD/NRM Performance Indicator Areas: Trends, Issues, 12Strategies and Priority Performance Indicators

1) Agricultural Growth & Performance 142) Rural Poverty 173) Food Security 214) Agrarian Reform 24

5) Rural Sector Investments 26a) Public Sector (includes assessment of Medium Term Public 26

Investment Development Plan)* (Rural Roads) 30

b) Private Sector Investments 31c) Rural Finance 32

6) Natural Resource Management 357) Institutional Arrangements, Roles and Performance 39

a) Devolution 39b) Convergence 41

IV) RD/NRM PERFORMANCE: EMERGING CONCLUSIONS AND 43OPERATIONAL FRAMEWORK OF A PERFORMANCEINDICATOR SYSTEM

A) Emerging Conclusions and Recommendations 43

1) Mixed/Poor Performance 432) Need for Sharper Priorities and Sequencing and Suggested 44

Mid-Course Adjustments3) Potential for Improved Performance, Need for "Mindset" 47

Changes, and Role of Two Management Tools4) Benefits of an Improved Performance Indicator Monitoring 50

System5) Constraints to and Proposed Mechanisms to Enhance Functional 50

Performance Indicator System

B) Recommended Framework and Main Elements of Integrated 57RD/NRM Performance Indicator System

I) Guiding Principles 572) Recommended Framework and Key Elements of Performance 58

Indicator System

C) Recommended Action Plan for Institutionalizing the RD/NRM 60Performance Indicator System

1) Establish and Activate the Performance Indicator 60Sub-Committee

2) Prepare Detailed Operational Plan for Phase 1 613) Initiate First Phase 624) Implement Second Phase 625) Mobilize Funding 62

TEXT FIGURES, TABLES:

Figure 3.1: Illustrative Overlay between MTPDP KRAs and Synthesized 12RD/NRM Strategy

Figure 3.2: Rural Well-Being: Score Card Results for the Philippines 14Figure 3.3: Quarterly Wholesale Prices (1990 - 1990) 22

Table 3.1: Philippines: Growth Rates of Real Gross Value Added in 15Agriculture, Fishery, and Forestry, 1980 -1999

Table 3.2: Yield Performance of Selected Crops, 1980-98 (% p.a.) 17Table 3.3: Priority List of Rural Poverty Indicators 20Table 3.4: Land Distribution Status (1972-1999) 25Table 3.5: Accomplishment in Landowner's Compensation (1972-1999) 25Table 3.6: Incidence of Borrowing and Distribution of Borrowers 33

Among Farm Households (%)Table 4.1: RD/NRM Performance Indicator System: Recommended 53

Framework for Operational Plan of Primary PerformanceIndicators (Outcomes and Results)

ANNEXES (15):

1) Summary Report of Stakeholders Feedback Workshops (Phase 2, March, 2000)(by Elmer Mercado, Consultant/Communications Specialist)

2) Updated RD/NRM Strategies and Indicators: Summary Matrices According toPerformance Indicator Area (by study team members):

Table 1 : Agricultural Growth and PerformanceTable 2 : Rural Poverty ReductionTable 3 : Food SecurityTable 4 : Agrarian ReformTable 5 : Rural Sector Public ExpendituresTable 6 : Public Expenditures : Rural RoadsTable 7 : Private Investments in AgricultureTable 8 : Rural Financial SectorTable 9 : Natural Resources ManagementTable 10: Decentralization and Devolution

3) RD/NRM Performance Indicator System: Frameworks and Key Elements(by C. Umali):

Table 1: Recommended Framework for Operational Plan (Primary and SecondaryPIs, outcomes, outputs, data frequency and availability; institutionalresponsibility)

Table 2: Operational/Data Issues and Recommended ActionsTable 3: Data System Weaknesses and Recommended Actions

4) MTPDP: Overview and Summary Assessment

VOLUME II:

5) Agricultural Growth & Performance (by Dr. Tina David, Senior Research Fellow,Philippines Institute of Development Studies)

6) Rural Poverty (by Professor Arsi Balisacan, U. of the Philippines)

7) Food Security (by Dr. Ramon Clarete, Team Leader, AGILE Group)

8) Agrarian Reform (by Richard Anson, Sr. RD Specialist, WB)

9) Rural Public Sector Investments: Trends, Strategies and Performance Indicators(by Dr. Tina David (Sr. Research Fellow and Dr. Arlene Inocencio,Philippines Institute Development Studies)

10) Rural Sector Investments: Rural Roads (by Dr. Bruce Tolentino, Consultant)

11) Rural Private Sector Investments: Issues, Strategies and Performance Indicators(by Rolly Dy, Executive Director, Center for Food and Agri Business,University of Asia and Pacific)

12) Rural Finance: Trends, Strategies and Performance Indicators(by Payday Geron, Sr. Rural Credit Specialist/Consultant)

13) Natural Resource Management: Trends, Strategies and Performance Indicators(by Dr. Ann de los Angeles, Project Director/ENRAP)

14) Institutional Arrangements, Roles and Performance: Devolution(by Professor Alex Brillantes, University of the Philippines)

15) Institutional Arrangements, Roles and Performance: Convergence(by Dr. Bruce Tolentino, Consultant)

EXECUTIVE SUMMARY

INTRODUCTION

1. President Estrada's Government has declared war on poverty and accorded top priority to thestrategies and programs in support of sustainable rural development (RD). It targets a reduction in thepoverty incidence from 32% to 25% of total households (HHs) and expects to achieve average agriculturalgrowth rates of 3.7%-4.6% per annum by the end of 2004. Achieving these ambitious targets will requiremajor improvements in prioritizing and operationalizing RD and natural resource management (NRM)strategies and policies, some mid-course corrections in the implementation of the Medium-Term PhilippineDevelopment Plan (MTPDP), and especially more vigorous and effective implementation by the relevantagencies.

2. The Government of the Philippines (GOP) has generally sound strategies for addressing thechallenges of rural development and poverty alleviation, and these are embodied in the MTPDP. Theseare also generally reflected in the World Bank's (WB) Country Assistance Strategy (CAS) for thePhilippines (1999). The greater challenge, however, now lies in operationalizing and effectivelyimplementing prioritized strategies and supporting programs, based on available resources. Therefore, itis relevant to address together the priority strategies and corresponding measures of performance in orderto focus efforts on better implementation and results. Presently, the GOP needs an explicit and crediblemechanism to monitor, on a sustained and regular basis, the implementation of such strategies andperformance, within the framework of the MTPDP. Thus, the National Economic and DevelopmentAuthority (NEDA) requested the WB's assistance in assessing the RDINRM trends, determining theneed for any mid-course adjustments, and developing a strategic framework for monitoring theimplementation of the RD/NRM strategies. This study was conducted in response to this request.

3. Objectives of Study: In the light of the above mentioned context, the main objectives of thisconsultative and strategic-oriented "surveillance" study are:

to assess the trends in RD/NRM strategies as reflected by selected indicators;

to recommend relevant adjustments and improvements which would enhance the prospects forbetter achieving the stated RD/NRM objectives and impacts;

)01 to formulate a strategic and prioritized RD/NRM performance indicator system that can be a cost-effective, timely, and reliable management tool to catalyze strategic and timely actions toward achievingthe priority MTPDP/CAS objectives. The study team also recommends a framework and action plan forinstitutionalizing this RD/NRM performance indicator system by the relevant GOP agencies, withparticipation by other key stakeholders.

4. Participatory Approach. The study used innovative participatory approaches to enhancing bothits process and the content of its findings and recommendations. First, the study team was comprised ofwell-respected Filipino specialists who are policy and implementation analysts and advisors on RD/NRM. They are professionally committed and well qualified to assess trends and update priority strategies,as well as formulate an appropriate operational performance indicator system for the Philippines. Second,the study approach involved the participation of strategically selected stakeholders in the initial design ofthe study (Phase 1) and in forging a consensus on the priority strategies and performance indicator system

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based on the draft report (Phase 2). Additional funding from the Bank's Participation Grant Fund enabledthis participation. For each phase, a series of three regional consultation workshops with representativesof concerned government agencies at the national and regional levels, non-governmental organizations(NGOs), farmer organizations, and the private sector, was conducted to validate and gather feedback onthe design and results of the study. Annex I includes a summary of the main conclusions and contributionsfrom the Phase 2 stakeholder workshop. The study team also consulted key policy-makers andimplementors. These participatory approaches in effect made the stakeholders "co-authors" of the report'ssubstantive recommendations, thereby enhancing the ownership by key decision-makers and implementers.Accordingly, the study process and report is being used as a vehicle for facilitating consensus buildingand improved implementation and results by the relevant GOP agencies and rural stakeholders.

5. Report Structure. Chapter 2 summarizes the background, the main features and a preliminaryassessment of the MTPDP for the rural sector. The core of this report is presented in Chapters 3 and 4.Chapter 3 summarizes the results of in-depth analysis of RD/NRM trends and updated prioritized strategiesaccording to seven performance indicator areas. Chapter 4 pulls together the strategic and operationalimplications of these trends in terms of 5 major conclusions, with special emphasis on developing aframework for a RD/NRM Performance Indicator System to support an improved implementation of theMTPDP. It also outlines a proposed action plan for institutionalizing in a phased manner the RD/NRMperformance indicator monitoring system by the relevant agencies.

THE MTPDP AND RD/NRM

6. The main RD objectives of the GOP are reducing rural poverty, enhancing food security, andfostering agricultural modernization. Central to achieving these objectives of the MTPDP are theagriculture, agrarian reform and natural resources sectors whose growth have lagged over the last twentyyears, despite the implementation of broad policy reforms and the implementation of many ruraldevelopment programs and projects during the 1 980s and 1990s. To pursue the objectives, the MTPDPhas identified the following five (5) key result areas (KRAs):

productivity and competitiveness enhancement;diversification of production and resource use;access to land and other productive resources;promoting environmental sustainability; andrationalizing institutional structures and empowerment of stakeholders.

7. This plan is generally sound, but needs to be significantly prioritized and operationalized, withexplicit strategic linkages to public sector policies and expenditures.

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3. UPDATING PRIORITY RD/NRM STRATEGIES AND IMPROVEDRESULTS: EMERGING TRENDS, FRAMEWORK FOR A PERFORMANCE

INDICATOR SYSTEM, AND RECOMMENDED ACTION PLAN

8. The study team developed strategic performance indicators for the Philippines RD/NRM sectorand grouped them according to seven strategic performance indicator areas. These indicator areas generallycorrespond to the thrusts of the MTPDP's KRAs and the synthesized RD strategy framework outlined inthe report. These are: (a) Agricultural Growth and Performance (KRAs 1 and 2); (b) Rural Poverty (allKRAs); (c) Food Security (KRAs land 5); (d) Agrarian Reform (KRA 3); (e) Rural Sector Investments(all KRAs, including public and private sector investments, and rural finance; (f) Natural ResourceManagement (KRA 4); and (g) Institutional Arrangements, Roles and Performance (KRA 5). Thegroupings and their component indicators have been chosen to help assess the progress of theimplementation and attainment of the Philippines' RD goals and strategies. The trend analysis provideda foundation for the selection of appropriate yardsticks, taken in the context of a mid-course finetuning ofrural development strategy reforms. Accordingly, the assessment helped focus on showing outcomesrather than processes, and the direction of change over time rather than statistical comparisons per se.

9. Conclusions and Recommendations: The study team has generated five major conclusions andsupporting recommendations:

(a) Mixed/Poor Performance: Based on trends and the implementation of priority RD/NRM strategies,progress toward achieving the MTPDP targets and outcomes lags significantly behind (paras. 3.7 - 3.122;Annexes 5-15). Moreover, a recently developed "rural scorecard" for developing countries shows that acomposite index (both level and trend) of "rural well-being" for the Philippines is significantly below thecomposite index for other East Asian and Pacific developing countries;

(b) Need for Sharper Priorities and Sequencing, and Mid-Course Adjustments: There is an urgentneed for GOP RD/NRM agencies, especially the DA, DENR, DAR, to prioritize, operationalize, properlysequence, and monitor strategies and actions, supported by a more efficient and strategic allocation andutilization of public sector expenditures. Even prior to the mid-term review of the MTPDP, it isrecommended that the GOP update some of the RD/NRM strategies and targets to more realistic levelsand effective operational approaches. It then needs to prioritize and operationalize strategic interventionsand medium-term and annual public investment plans to support the timely and effective implementationof such interventions. The study team has recommended priority and updated RD/NRM strategies, andin some cases, suggested some mid-course adjustments to the MTPDP. In some cases, there is a need toimprove the strategic directions of certain policies (e.g., food security, CARP modalities, and budgetaryreforms). The following eight mid-course policy and strategy adjustments are recommended forconsideration by the GOP's Inter-Agency Rural Sector Planning Committee for the MTPDP (PlanningCommittee) (para. 4.4; Annexes 5-15):

Growth Targets: The GOP may consider to decrease the agricultural growth targets to more realisticlevels, while intensifying efforts to formulate and implement strategic action plans to achieve sustainablegrowth rates which exceed significantly the historical growth rates of about 2% p.a.;

Competitive and Diversified Rural Economy: The Department of Agriculture (DA) should translategeneral policies and strategies into specific policy decisions and operational action plans, and remove therelevant policy and institutional rigidities and constraints to achieving a more competitive and diversifiedrural economy,

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Food Security: The DA, with NEDA support, needs to adopt more sustainable policy andoperational approaches to achieving national and household food security. Rather than focus on the GOP's"de-facto" policy of rice self-sufficiency, there is a need to broaden operational strategies which promotethe enhanced purchasing power of households and more competitive trading system of inputs and outputs.Approving and implementing National Food Authority (NFA) reforms are overdue, and there is a needfor the GOP to proceed in a phased manner with a recently-formulated integrated package of reformsinvolving the NFA and productivity enhancing programs for a broad range of food and cash crops;

CARP: The Department of Agrarian Reform (DAR), in consultation with the relevant stakeholders,urgently needs to formulate improvements in the CARP modalities and approaches to expedite thecompletion of the program, while also promoting more efficient and equitable land markets which wouldbenefit large numbers of the landless;

Budgetary Reforms: The DA, Department of Environment and Natural Resources (DENR), andDAR, in close collaboration with the NEDA and Department of Budget Management (DBM), need toformulate operational action plans to reform the budgetary allocation system, initially focusing onimproving the utilization of existing allocations, and linking these action plans to the FY01 and FY02budgets and the three-year medium term expenditure program currently under preparation;

Sustainable Rural Finance: The Agricultural Credit Policy Council (ACPC), with the support ofthe National Credit Council (NCC) and enhanced commitment by the DA, should vigorously promoteand monitor the vigorous implementation of the Agro-Industry Modernization Credit and FinancingProgram; there is also a need to strengthen savings mobilization and financial intermediation to supporta more diversified rural economy;

Sustainable NRM: The DENR needs to sharpen its NRM strategies and operational programs to:(i) promote more effective and sustainable forest management, including the use of community-basedresource management strategies and tenurial instruments, and approaches to forest delineation; (ii)rationalize and implement sustainable timber harvesting policies; (iii) formulate and implement soundNRM pricing/cost recovery policies to promote sustainable resource use, such as the imposition of irrigationservice charges and user fees; and (iv) adopt sound operational policies for improved watershedmanagement;

Institutional Performance: Devolution and Convergence: The DA, DAR, DENR should fastrackpriority institutional reforms to deepen the devolution to local government units (LGUs)/rural communitiesof priority RD/NRM programs, and to operationalize the convergence strategy and interface betweenNGAs and LGUs. Greater support is needed to trigger expanded private sector roles in all aspects of RD/NRM, including enhanced capacity building and empowerment of LGUs and farmer groups.

(c) Potential for Improved Performance, Need for "Mindset" Changes, and Role of Two ManagementTools: The Philippines has the potential to significantly progress toward fulfilling many of the MTPDPtargets and KRAs. The GOP will, however, need to mobilize more vigorous, systematic, and coordinatedefforts to establish, operationalize, and implement sharper and more "do-able" strategic priorities andprograms. A major "mindset" change within Government is needed to get and sustain improved results.To facilitate this complex process, two management tools are recommended and generally endorsed bythe MTPDP Planning Committee and Phase 2 rural stakeholders: a performance indicator (PI) systemand a performance-based budgetary allocation system. There are a variety of performance indicatorsystems for budget, sector, and project monitoring. The DA's on-going initiative to integrate all

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three types of systems provides a good reference point to build upon. The DBM has issued the budgetcall for FY01, and is requesting that agencies prepare and submit their annual budgets according tostrategic directions and performance indicators, although the modalities for responding fully are in theinitial stages of being developed;

(d) Benefits of Improved Performance Indicator Monitoring System: There are major potential benefitsin investing in the formulation and implementation of an operational strategy and action plan to monitorstrategic rural sector performance indicators on a regular basis, and to use them as the basis forimplementing a performance-based public expenditure allocation system;

(e) Constraints to and Enhanced Mechanisms for Operationalizing the Performance Indicator System:Currently, there are limited explicit mechanisms in place to systematically monitor the implementationof the MTPDP, either at the global or sectoral levels. This is due to various underlying reasons, includingweak data systems, institutional/management "resistance," and weak institutional capacities. These,together with a number of recommendations, are outlined in the report, and need to be addressedsystematically. There also is a need to promote appropriate mechanisms and participation of other groupsthat would enhance the implementation of a credible PI system through carrying out parallel andcomplementary PI systems. These systems include those provided by suitably qualified NGO(s) thatwould represent broad rural stakeholder interests and possibly issue "Citizen Report Cards" on the RD/NRM sector, the Congressional Planning and Budgeting Office (CPBO) PI system as part of strengtheningCongress' oversight functions; and the Office of the President's (OP) Presidential Management Staff's(PMS) annual performance reviews of GOP departments. All of these systems would benefit from focusingon a common set of performance indicators, although there would be some differences in focus.

10. Table 1 outlines a summary of the study's updated RD/NRM priority strategies, the recent trends,MTPDP targets, and recommended outcome-oriented primary performance indicators. Table 4.1 providesa summary of the outcome and the corresponding "result" performance indicators; the latter ones aim toattribute results to the actions taken by the relevant agencies, and show the frequency of monitoring andinstitutional roles in data collection and analysis. While these results emerged from a consensus-buildingexercise with rural stakeholders during Phases 1 and 2, these indicators would be further validated, reducedto a more manageable number, and refined prior to and during the initial phase of implementing theproposed performance indicator system.

11. The recently completed consultation meetings (in March, 2000) with the MTPDP PlanningCommittee and with the RD/NRM stakeholders (Phase 2) discussed the draft report and generated strongsupport for institutionalizing a well designed RD/NRM performance indicator monitoring system. Theseconsultations emphasized that the framework for this system needs to be underpinned by prioritized RD/NRM strategies, and a strong and explicit link with a performance-based budgetary allocation system forRD/NRM. This scheme will encourage better performance by the relevant GOP agencies in achievingstrategic objectives and KRAs, as measured by the agreed performance indicators. Moreover, theparticipating agencies should be encouraged to "own" the performance indicator system, based on a"bottom-up" approach. The framework should likewise focus on priority RD/NRM strategies which willhave a "multiplier" effect; and formulating a manageable number of simple and measurable performanceindicators, with explicit linkages between the KRAs/strategic areas and priority strategic programs (e.g.,irrigation, research and extension, and forest management, and agrarian reform).

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12. Recommended Framework of PI System: Based on the results of the study and the consultationswith stakeholders and Planning Committee members, it is recommended that the PI system be based ona framework comprised of the following six elements:

(a) Priority Performance Indicators: There is a need to further develop an appropriate set of RD/NRM performance indicators which should include both outcome and result/management-performance-related indicators. Tables 1 and 4.1 provide an initial set of priority performance indicators that can berefined further along the lines discussed in para. 4.7.

(b) In-Depth Strategic Studies: There is a need to identify and conduct in-depth studies on strategicaspects of the priority PIs, to be carried out by suitably qualified groups with a proven track record (e.g.,PIDS and other research institutions). These studies could address relevant issues involving the prioritystrategic public sector investment programs. Some of these in-depth studies are already on-going (e.g.,Impact Assessment Study for Agrarian Reform/CARP). Other priority topics would require special studyand appropriate arrangements (e.g., operational plans for reforming the RD/NRM budgetary system;irrigation subsector; agricultural research and extension; and forest management policies and experiencesand approaches to building on successful community-based approaches).

(c) Data Systems: Weaknesses and Action Plan: There is an urgent need to address underlying datasystem weaknesses in order to ensure that reliable data underpin the performance indicator system. Annex2, Tables 2 and 3 highlight some of the more important data constraints and outline short- and medium-term actions to address them. The design and implementation of the initial PI system should aim atfocusing on those PIs whose data constraints are not severe, and where necessary, use "proxy" indicators.

(d) Implementation Arrangements and Roles: There is a need to work out appropriate implementationroles and arrangements within the PI system, including the parallel, collaborative and complementaryroles of the Planning Committee's subcommittee for the PI indicator system, Congress' CPBO, NGOs,and local-level bodies. The Planning Committee has endorsed the proposal to establish a subcommitteethat will take the main responsibility to formulate and recommend to the Planning Committee relevantmid-course corrections to the MTPDP, and to formulate and implement a RD/NRM perforrnance indicatorsystem. This initiative should build on relevant initiatives being taken by other departments, especiallythe DA.

(e) Institutional Capacities: There is a need to identify the institutional weaknesses of the abovementioned participants and to develop a supporting action plan for strengthening their capacity to steerand implement the proposed PI system. It is envisioned that the focus of the capacity-building activitiesshould be in-service training, with some limited support for degree training in sectoral and programmaticM&E systems.

(f) Phased Implementation: There is a need to work out an operational plan to implement the proposedPI system in a phased manner, under the day-to-day guidance of the PI subcommittee. It is recommendedthat the phasing be closely synchronized with the GOP's budgetary cycle, with an initial focus on linkingwith finalizing the on-going FY01 budget, and applying the system fully to the FY02 cycle. This linkwith the budgetary cycle will provide a strong incentive and "glue" for the agencies to participate. The PIsystem also needs to be "sectoralized" by department to focus monitoring and assessment on each agency'sperformance.

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13. Recommended Action Plan: Based on the strong consensus to proceed with the suggested RD/NRM performance indicator monitoring system, the following six (5) point action plan is recommendedin order to operationalize the PI system framework:

Establish Sub-Committee/Working Group: The MTPDP Planning Committee needs to formallyestablish and activate soonest a subcommittee which would take responsibility for recommending mid-course adjustments to the MTPDP targets and strategies and for operationalizing and implementing theproposed performance indicator system for RD/NRM. This subcommittee should be comprised ofrepresentatives from the DA, DENR, DAR, NEDA, DBM, and CPBO, and should be encouraged toinvolve and consult with other key stakeholders in formulating and implementing the system. It isunderstood that some of these agencies may also wish to carry out their own performance indicatorsystem to respond to their institutional mandates, and efforts should be made to cross-fertilize with thePC's subcommittee;

Prepare a Detailed Operational Plan for Phase 1: The PI subcommittee, with the support of therelevant departmental technical staff and possible short-term consultancy assistance, would work out adetailed operational plan for the initial Phase of the proposed performance monitoring system. Thisoperational plan could also address three key aspects: formulation of a phased capacity building actionplan; identification of the precise role and modality of rural stakeholders in supporting the performanceindicator system (including possible independent "audits" to encourage improved accountability by theagencies); identification of the priority areas where independent in-depth assessments on strategic topics(e.g., irrigation subsector, forest management, research and extension systems) should be carried out tocomplement the performance indicator assessments;

Initiate First Phase: It is suggested that this detailed operational planning phase focus on reachingconsensus on a manageable number of "primary" performance indicators (say, up to 15-20) to test andwork out the implementation modalities. The initial phase could be completed by end-2000. Specialattention should be given to developing indicators as part of finalizing the FY2001 budget for the ruralsector agencies, and preparing the FY02 budget;

Implement Phase 2: Based on the initial results of Phase 1, the application of the performanceindicators system could be applied during the full phase of the FY02 budget cycle beginning in late 2000.As the system shows positive results, it could be used by the relevant agencies to support their requests toCongress for increasing funding, and would provide a more objective basis for budget allocations anddecisions. Phase 2 would need to be supported by a more comprehensive capacity-building program ofthe participating agencies;

Mobilize Funding: The NEDA, in collaboration with interested donor agencies, could now mobilizefunding support in order to operationalize the above proposed action plan and RD/NRM performancemonitoring system, and its detailed design and initial phase. There are several options, including thefollowing choices which are not mutually exclusive:

* Tap support from an on-going Institutional Development Fund (IDF) being managed by theDBM (ref. "Expenditure Management Improvement Project");

* Mobilize grant funding from interested donors; and* Utilize existing NEDA funds and staff, although these funds are not likely to meet the full

requirements.

Table 1: Summary Framework of RD/NRM Trends, Updated Strategies and Outcome Performance Indicators"

STRATEGIC UPDATED PRIORITY RECOMMENDED PRIMARYPERFORMANCE STRATEGIC TRENDS MTPDP PERFORMANCE INDICATORS

INDICATOR AREA OBJECTIVES TARGET (OUTCOMES)

1. Agricultural * Increase public * GVA agri * GVA agri growth of 1) % Aggregate growth rate of: (a)Growth and investments in growth of 3.9 to 4.8% p.a. agric. value-added per ruralPerformance growth-enhancing 1.9% p.a. in worker; (b) yield per ha. by(KRA 1 & 2) public goods and the 1990s * Increase in budget major commodity

services allocation for R&D* Reduce dispersion of 0.34% -1% of

of agricultural GVAprice protection

* Increase publicsupport for marketinfrastructure,market * Negligible * N.A. (not available) 2) Measures of revealeddevelopment, R&D Improvements comparative advantage, tradeand extension openness, and price protectionactivities to (e.g. nominal and effectivepromote protection rates; QRs, tariffdiversification levels for rice, sugar)

11Based on the study team analysis (Annexes 5-15) and inputs from stakeholder consultations.



2. Rural Poverty * Reduce absolute * Poverty * Poverty incidence of 1) Decreased poverty incidence,(All KRAs) poverty incidence of 25-28% depth and severity (% of rural

* Develop and 32% in 1997 population below absoluteimplement population line); national andappropriate and regional levels, by key povertyholistic indicator groups)system of ruralwelfare outcomes totrack changes inabsolute poverty * Stagnant * N.A. (Assumes rapid 2) Increased primary & secondaryover time and space increases) school enrollment rates (in rural

areas)3. Food Security * Access to food * Rice * Rice prod'n growth:

(all KRAs) supplies (esp. rice) production 8.3 to 9.2% p.a. 1) Rice balances (production/at stable prices on growth: 1% in imports, consumption) andyear-round basis 1990s at 0.1% price trends (farmgate,

* Develop and yield growth wholesale, tariff levels; nat'al/implement an * Generally * N.A. reg'al levels)integrated program stable rice (Implies stable prices and

(trade protection prices (except large decrease in tariffsplusstrtegi pulic 1995) by 2004 in line withplus strategic public 19)WTO guides)

expenditures) * Rice tariff level* Implement essential (50% average)

NFA reforms(separate regulatoryand commercialroles, and phasedapproach toprivatization)

STRATEGIC UPDATED PRIORITY RECOMMENDED PRIMARY

PERFORMANCE STRATEGIC TRENDS MTPDP PERFORMANCE INDICATORSINDICATOR AREA OBJECTIVES TARGET (OUTCOMES)

2) Decreased prevalence of* Stagnant * N.A. (implies malnutrition (nutrition status,

significant % children under 5)improvements)

4. Agrarian * Expedite * Ave. land * CARP completion by 1) Number of (land) hectaresReform implementation of redistribution 2004 (Assumes redistributed (private and public(KRA 3) CARP based on of 165,000 has redistribution of lands, and by modality)

reformed annually 320,000 has p.a.)modalities andexpandedfinancingIntensify strategicsupportinfrastructure and * Erratic * N.A. (implies rapid 2) Increases in ARB householdservices to ARCs/ increases) income (No/% of ARB HHARBs to enhance Income over nat'al./reg'alincomes absolute poverty level)

* Enhance functionof land rentalmarkets and useland reform asmeans to facilitateland access


PERFORMANCE STRATEGIC TRENDS MTPDP PERFORMANCE INDICATORS


5. Rural Sector * Increase ANRE * DA: 43-54% * N.A. 1. Aggregate trends and patterns,Investments public expenditures budget (Assumes increase with focus on:

to increase allocation by PhP 20 Billion to - government expenditures on

a) Public Sector productivity and * DENR 16-22% support AFMA) ANRE as a percentage of totalInvestments reduce poverty budget government expenditures(all KRAs) * Reform ANRE allocation - expenditure reforms by

agencies to: * ANRE is about priority policy instrumentsincrease 10% of total (specially irrigation, R & D/efficiencies; public extension, land distribution,strengthen expenditures natural resources management

decentralization and (NRM) community-basedcost sharing with activities, regulatory functionsLGUs; restore and diversification)

balance in: _.

a) project vs. * Negligible * N.A. 2) Degree of (increased) fundprogram funding; reforms and (Reforms are utilization (ratio of used/b) staff vs 0 & improvements, implied, but not obligated funds vs. total budgetM funding; stable and slow fund operationalized) allocations) and stability ofbudget releases; utilization fund releases by DBM/Introduce (especially by National Government Agenciesperformance-based DA) (NGAs) (% of approved budget

approach to released per quarter)budgetaryallocations andreleases


INDICATOR AREA OBJECTIVES TARGET (OUTCOMFS)

* Improve policy and * Agri growth of * GVA agriculturalb) Private Sector legal environment 1 .9% p.a. growth of 3.9%- 1) Growth rate in agricultural

Investments * Expand rural (since 1980s; - 4.8% p.a. (to be (includes livestock) and fishery(KRAs 1, 2 & 3) infrastructure 6% in 1998; private-sector production

* Minimize +6.6% in 1999) driven)bureaucratic "red- * Fishery growthtape" of 1.3% p.a.

* Expand access to N.A. (negligible) * N.A. 2) Aggregate value and privatec) Rural Finance financing (assumes rapid rate) investments in breeding stocks

(KRAs 1, 2, 3) (especially long- and tree cropsterm)

* Mobilize additional * 65 to 85% * N.A. 1) % of rural population withfinancing for and borrow from (Assumes rapid increasing access to formal -.

savings for rural informal increases) financial system as depositorsector sources; and/or borrower

* Expand sustainable * Only aboutaccess to rural 11% borrowfinance (especially from formalby smallholders and financialmedium scale agro- institutionsbased enterprises) * 38% of the * N.A.

* Implement Agro- farm (Implies rapidIndustry Modem households increases in savings,Credit and Facility borrow money; access to formalProgram (AMCFP), finance, and highwith focus on * Declining credit recovery ratesphasing out directed credit recovery based on market-credit programs levels determined rates)



6. Natural * Enhance sustainable * Rate of * Protection of 6

Resource asset values of key degradation is million has forest 1) Increased aggregate forest

Management natural resources decreasing; lands cover (from plantation,

(KRA 4) * Promote improved inconsistent * Development/ reforestation, rehabilitation,

water pollution policy signals management of and protection of natural

control, and actions 1,017 CBFM forests and mangrove areas)

rehabilitation of agreement

degraded rivers * Rehabilitation of

* Expedite gazetting 200,000 has of

of Priority Protected degraded forest

Areas, Strengthen

PAMB & formulate * Deteriorating * N.A. (Implies rapid 2) Reduced pollution in key

and implement PA improvements) coastal and industrial areas and

management plans improved water quality levels

of key rural areas

* Fishery prod. * Rehabilitation of

Growth of five major rivers

1.3% p.a. * Rehabilitation of

* Slow progress 2,000 mangrove

in areas and 25,000 has

implementing of coral reefs

actions to meet * Establish water

targets pricing policy and

NRM user fee

system


PERFORMANCE STRATEGIC TRENDS MTPDP PERFORMANCE INDICATORSIND)ICATOR AREiA OBJECTIVES TARGET (OUTCOMES)

7. Institutional * Complete review * N.A. (although * N.A. (implies rapid I) Number/value of cost-sharingArrangements and reform appears to be trends) arrangements by and between

devolution LGC/ increasing National Government Agenciesa) Devolution processes trend (NGAs) and LGUs to support

(KRA 5) * LGUs to update (especially by strategic activitiespriority investment DA)and developmentfinancing * N.A. (appears * N.A. (implies rapid 2) Expanded membership patternsrequirements and to be trend) and number of local bodies to

* plans increasing ensure meaningful* LGUs to promote trend) participation of civil society

meaningfulparticipation of civilsociety in re-activated localcouncils

* Strengthen national/local partnershipsthrough sound * N.A. (poor) * N.A. (implies high 3) Improved Service DeliveryMOAs/MOUs level) Effectiveness of LGUs (proxy

* Broaden capacity of measures to be used)LGUs to deliverbasic services andresponsibilities


PERFORMANCE STRATEGIC TRENDS MTPDP PERFORMANCE INDICATORS


b) Convergence * Re-activate role and * N.A. * N.A. (implies 1) Budgetary allocations and

(KRA 5) give clear directions (negligible) significant issuance/ implementation of

and signals to increases) relevant supporting

corresponding departmental orders to reflect

departments to priority convergence activities

operationalizeconvergence

strategies and NGA/LGU interface

* Work out priorityjoint activities andreflect in annualbudgets

* Ensure fullownership by and/orpartnerships withLGUs in commonstrategies andprograms

* Strengthencoordinationcapacities & effect.

CHAPTER 1: INTRODUCTION

A) Study Context

1.1 The Philippine agricultural sector has been growing erratically since the early 1980s, itsgrowth well below potential and required rates. Its growth has averaged below 2% per annum(p.a.), in contrast to a required sustained growth of at least 3.5% p.a. This reflects the lack ofdynamism in the rural sector as will discussed in this report. Rural poverty continues to be pervasivewith about 50% of the rural population living below the poverty line, and the income gap betweenrural and urban areas appearing to be growing.

1.2 Over the past two years, the Government of the Philippines (GOP), the World Bank (WB)rural sector team for the Philippines, and other groups have carried out several studies which haveassessed rural development (RD) and natural resource management (NRM) issues and strategies.'The WB-supported studies also provided the main basis for the Rural Development (RD) sectionof the recently completed WB Country Assistance Strategy (CAS, May 1999) for the Philippines,which was widely consulted with various stakeholders. These studies became the impetus for theforging of a general consensus among the Bank, other donors, and the GOP on the diagnosis of themain sector issues and the main strategy elements needed to achieve the Medium-Term PhilippineDevelopment Plan (MTPDP) goals of achieving broad-based rural growth and poverty alleviation.

1.3 While the MTPDP outlines basically a sound strategy for addressing the challenges of ruraldevelopment and poverty alleviation, the greater challenge now lies in prioritizing, operationalizing,and effectively implementing focused strategies and supporting programs, based on availableresources. This requires, among others, an appropriate performance monitoring system. There is,however, general consensus that the GOP needs to develop and improve a credible mechanism tomonitor, on a sustained and regular basis, the implementation of rural strategies, as well as theexplicit link between policies and programs and outcomes. 2 To more effectively fulfill its role ofmonitoring the implementation of the MTPDP, the NEDA requested the WB's assistance indeveloping a strategic framework for monitoring the implementation of the rural sector strategies.

Recent rural sector work reports include: (a) by the WB: Philippines: Promoting Equitable Rural Growth (May,1998); and Philippines: Tree Crops for Rural Development: Issues and Strategy Options (June, 1999); by the ADB:An abridged and updated version of the Rural Sector Report (July, 1999) and various supporting reports; (c) by theUSAID: various reports, including NFA Restructuring and Strategy Options (January, 2000); and rural credit studies,(d) by the AusAID: "Rural Incomes Strategy and Program Identification", draft report, February, 2000; and (e)various reports by Filipino researchers, including many of the study team members.

2 Performance indicators can be broadly classified into 3 major categories: (a) inputs: consist of resources used toproduce goods and services; (b) outputs re the goods and services delivered or performed, ranging from policy adviceto the enforcement of regulations and delivery of basic services; (c) outcomes refer to the impacts or results that theGovernment want to achieve, such as reduction in poverty incidence. Some of the pioneering work in developingpublic performance monitoring systems relevant to the Philippines were initiated in New Zealand ("Putting it Together:An Exploratory Guide to New Zealand Public Sector Financial Management System", 1996, New Zealand Treasury).

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B) Objectives of Study

1.4 In the light of the above mentioned context, the main objectives of this consultative andstrategy-oriented "surveillancc" study are: I

i to assess the trends in rural development and natural resource management strategies as reflectedby selected performance indicators, especially those linked to the implementation of priorityelements of the Philippines' RD/NRM strategies;

: to suggest to the GOP agencies relevant adjustments and improvements involving RD/NRMstrategies and implementation performance which would enhance the prospects for betterachieving the stated RD/NRM objectives and results/outcomes; and

> to formulate a strategic and prioritized RD/NRM performance indicator svstem focusing onkey outcomes and emerging from the strategy assessments, which could be used as a managementmonitoring tool to catalyze appropriate and timely actions toward achieving the priority MTPDP/CAS objectives. Such a system would provide cost-effective, timely, and reliable informationto enhance decision-making and implementation effectiveness.

1.5 An important related objective of the study is to formulate and suggest a phased action planfor institutionalizing an RD/NRM performance indicator system by the relevant GOP agencies.Currently, there are five related initiatives which are at the conceptual stage and which providepotential supplementation for this initiative. First, the NEDA is carrying out "sector effectivenessreviews" (SERs) of the performance of government agencies. Second, the DBM is at the earlystages of developing mechanisms for improving implementation and monitoring for all sectorsunder the Public Sector Expenditure Management Improvement Project which is supported by anInstitutional Development Fund (IDF) grant. Third, the Congressional Planning and Budget Office(CPBO) is in the early stages of developing a conceptual framework for a performance-basedbudgetary allocation system, as part of strengthening the oversight role of Congress.4 Fourth, severalNGOs (e.g., PHILRAA) are carrying out partial, and somewhat ad-hoc, monitoring activities of theimplementation of the MTPDP. Fifth, the Department of Agriculture's Planning Service is currentlyin the process of developing a sector monitoring system to enable the DA to better link its agriculturalprograms and projects to overall sector performance. This provides a good model and frameworkwithin which to further refine and implement the performance indicator system developed throughthis study and outlined below.

None of these efforts, however, are aimed at developing an operational performance indicator systemfor the entire RD/NRM sector, underpinned by analysis of the relevant trends and by corresponding

While this study is NOT a RD strategy study, it is understood that assessing the implementation of the RD strategiesand the implied performance of the relevant agencies will provide an improved and objectivc basis for refining operationalstrategies and implementation modalities to achieve the desired outcomes and impacts of broad-based rural developmentand reduced poverty. Accordingly, an indirect result of the present study is to contribute to the updating of operationalRD/NRM strategies and enhanced implementation modalities and performance indicator system.

The CPBO recently wrote an excellent Policy Brief outlining the general rationale and approach: "LegislativeOversight: A Proposed Conceptual Framework and Methodology", by Dr. R. Miral,and V. Canicosa. CPBO,Policy Brief (No. 9905. May 1999).

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performnance indicators, and linking priority strategies with implementation performance outcomes/

results and the implied activities. The availability of this performanice system is also expected to

enhance the capacity and efforts of the World Bank and other interested donors to better monitor

the effectiveness and outcomes of their respective strategies and assistance programs for RD/NRM.5

The study team is aware of the complexity and pathbreaking nature of this study, and has therefore

focused its efforts on developing a phased program, beginning with the conceptual and operational

framework. The Chairman of the GOP's Inter-Agency Rural Sector Planning Committee (PC) for

the MTPDP has directed the PC to further develop the operational plan as part of a phased

performance indicators system. The PC is charged with the monitoring of the implementation of

the agriculture/agrarian reform/NRM component of the MTPDP.

C) Participatory A roach

1.6 Setting up an effective and relevant rural strategy monitoring system requires the participation

of key members of civil society as active partners in improving plan implementation and refining

strategic interventions. Accordingly, from the outset, the study design and implementation process

has included the active participation by key stakeholders in RD/NRM. The underlying analyses for

each of these performance indicator areas were prepared by a study team comprised primarily of

Filipino RD/NRM specialists/researchers who are familiar with these issues and who also are

providing policy/strategy advice to key decision makers and implementors. These analyses and

the consequent recommendations have been reviewed by the GOP The main counterpart of the

study is the National Economic Development Authority (NEDA) Agriculture staff. The GOP's

inter-agency Rural Sector Planning Committee for the MTPDP, which has been charged with the

monitoring of the implementation of the agriculture/agrarian reform/NRM component of the MTPDP,

is providing overall guidance in the study design and process. Another innovative feature of the

study to promote meaningful participation was the convening of three Regional RD/NRM stakeholder

workshops6 from the outset. The outputs of the initial stakeholder consultations workshops, referred

hereafter as "Phase I", provided valuable inputs to study team members in the conduct of their

analyses and in identifying strategic performance indicators. Follow-up regional stakeholder

I The World Bank developed an initial developing country rural development strategy in 1996 ("Rural

Development: From Vision to Action"). To assess the progress in implementing this strategy, as well as its role in

such implementation, the Bank is carrying out six country-level case studies (including that for the Philippines). It

also developed a concept paper outlining a "rural scorecard" which aims to develop a core set of performance indicators,

and measured by a composite index of "rural well-being", based on five key outcome indicators ("Monitoring Rural

Well-Being: A Rural Score Card", N. Okidegbe, Rural Development Dept.. World Bank, February, 2000). The present

study is one of the initial attempts to apply the principles outlined in this concept paper to a specific country, within its

own strategy framework. This complements the traditional approach of having M&E system for investments projects,

whereas there has been negligible attention to monitoring the implementation of RD strategies, even as part of many

agricultural sector adjustment programs in the 1980s and 1990s, and agricultural sector investment programs since the

mid-1990s.

6 The study team was able to mobilize additional funding from the Bank's Participation Fund to support these regional

workshops, spread over two phases (covering Davao. Cebu and Manila, with Phase I held in October, 1999, and Phase

2 was carried out in March. 2000 involving primarily the same participants). These participants were carefully

selected to represent various rural sector stakeholder perspectives and included the following major stakeholder groups:

representatives from primary stakeholder groups (e.g., fisherfolk, farmer groups. indigenous peoples, women), national

and regional-based representatives from national and LGU agencies, and the private sector. Cross-country experience

suggests that securing meaningful participation, especially primary stakeholders. in the study design and implementation

stages will enhance the quality and relevance of studies and implementation of recommendations.

4

workshops were recently completed as part of Phase 2. These workshops elicited valuable feedbackon the draft report's findings and recommendations from the RD/NRM stakeholders, most of whowere the same participants as in Phase 1. Already, it is evident that these workshops have prove avaluable source of feedback and consensus on assessing trends, and prioritizing and sharpeningstrategies and performance indicators. Their participants, together with the Planning Committeemembers, directly contributed to the content of this report. They also committed themselves toparticipate in the operationalization and implementation of the proposed monitoring system. Annex1 provides a summary of the methodology and outcomes of the Phases I & 2 stakeholder workshops.In the formulation of the study's recommended performance indicator system, the study teamestablished collaborative arrangements with the relevant initiatives outlined in para. 1.5, to broadenthe participatory and sustainable approaches used in their phased institutionalization.

1.7 In addition, the study team had endeavored to consult key policy makers/implementers duringthe course of preparing the draft report. Among other activities, it conducted informal focusedgroup discussions of selected initial draft working papers. The feedback from such activities hadprovided valuable inputs in enhancing the relevance and focus of the recommendations, andreportedly, had helped to trigger key actions involving a number of lagging strategies.

D) Report Structure

1.8 Chapter 2 summarizes the main features and a preliminary assessment of the MTPDP for therural sector. Chapter 3 contains a discussion of the RD/NRM trends, classified under each of theseven performance indicator areas. It also details a proposed RD/NRM strategic performancemonitoring framework, focusing on the formulation of priority performance indicators for the ruralsector within the framework of a consolidated RD/NRM strategy and seven RD/NRM performanceindicator areas. The final section of Chapter 3 outlines a suggested phased action plan forinstitutionalizing the monitoring system by relevant agencies. Table I of the Executive Summaryoutlines the conceptual framework of the recommended "primary" performance indicators, includingthe priority strategies, trends, and targets. Table 4.1 provides an operational framework for theperformance indicator system which includes the primary outcomes and corresponding resultindicators which could be attributed to short-term actions by implementing agencies. The frameworkalso includes the required the frequency of data collection, and the roles of the institutions involved.The longer list of performance indicators is shown in Annex 3, Table 1. Annex 2. Tables 1-10provide summary matrices/tables for each of the study's seven performance indicator areas andtheir components: key issues, prioritized strategies, performance indicators, and institutionalarrangements. To the extent feasible, the report's recommendations are presented according towhether they address RD/NRM policy/strategy issues or GOP management/performance issues,although in some cases these are closely inter-related and difficult to completely separate fromeach other.

CHAPTER 2: THE PHILIPPINES RURAL SECTOR: BACKGROUND &OVERVIEW OF THE MTPDP

A) Background

2.1 Importance and Performance of RD/NRM. Although data on the contribution of the ruralsector to the national economy are not available, the contribution of the agricultural sector is a goodproxy. In 1998, the sector, excluding agricultural-based industry, accounted for about 17% of thecountry's Gross Domestic Product (GDP) and employed about 40% of the work force. When alleconomic activities related to agro-processing and the supply of non-farm agricultural inputs areincluded, the agricultural sector, as broadly defined, accounts for about two-thirds of the laborforce and 40% of the GDP (Annexes 5-15 includes additional background information on most ofthe major subsectors). The sector, therefore, has a strategic role in the country's overall economicdevelopment through its strong growth linkage effects as a source of food and raw material supplyto the rest of the economy, and as a source of demand for non-agricultural inputs and consumergoods and services.

2.2 The crops subsector accounted for 58% of the agricultural gross value added (GVA) for theperiod 1990-1998, followed by the livestock (20%), fisheries (20%), and forestry (2%) subsectors.Excluding forestry, the rate of growth of agriculture slowed from 5.8% a year in the 1970-80 periodto 1.7 % and 1.9% per annum in 1980-89 and 1990-98 periods. This decline has mainly been theresult of the erratic and low growth rates of the traditional crops rice, corn, and coconut, all ofwhich account for the more substantial portion of the agricultural GVA. Crops accounted for only7% of the total agricultural sector growth in the 1990s. In contrast, livestock, poultry, and fisheriesaccounted for 35%, 36.5%, and 21.5% of the growth of the sector in the same decade, respectively.

2.3 The agricultural sector growth rates are well below the high population growth rate ofabout 2.7%, resulting in declining per capita growth rates. While the growth rate in 1999 was about6.6%, this followed a negative growth of about 6 % in 1998, and was primarily due to favorableweather conditions.

2.4 Rural Poverty. Poverty in the Philippines is predominantly a rural problem. The rural poormade up about 44 % of the rural population and accounted for nearly two-thirds of the poornationwide in 1997. Rural poverty is greatest among landless workers and small farmers. Of therural households employed in agriculture, about 63% have incomes below the poverty line. Incomparison, households employed in rural industry and service have a poverty incidence of nearly40%. There are also large regional differences in rural poverty incidence. Poverty is particularlywidespread in the Cordillera Administrative region, as well as in Mindanao which alone accountsfor nearly a third of the country's poor. The low and erratic agricultural growth rates have resultedin a meager decline in the incidence in rural poverty during the 1990s, and an increase in theabsolute number of poor rural households.

B) MTPDP: Goals, Strategies, Key Result Areas

2.5 Overview. In July 1999, the GOP approved its latest MTPDP with the avowed objectiveof eradicating poverty, especially in the rural areas, through sustainable rural development. Themain RD objectives to be addressed in the next six years are rural poverty reduction, food security,

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and agricultural modernization. Central to achieving these objectives are the agriculture, agrarianreform, and natural resources sectors whose growth rates have lagged behind over the last sixyears, despite the implementation of some policy reforms and many rural development programsand projects during the 1980s and 1990s.

2.6 The overarching goal set forth in the new MTPDP is the attainment of sustainable ruraldevelopment over the next six years (1999- 2004). This goal is to be achieved through the followingdevelopment strategies: (a) modernization of the Philippine agriculture and fisheries sector; (b)diversification of the rural economy; (c) sound practices of resource use efficiency and sustainability;and (d) adoption of the 'Convergence Framework" as the innovative institutional framework forsustainable rural development.

2.7 To pursue these strategies, the new MTPDP has identified five (5) key result areas (KRAs),namely:

> productivity and competitiveness enhancement;> diversification of production and resource use;

access to land and other productive resources;, promoting environmental sustainability; and> rationalizing institutional structures and empowerment of stakeholders.

2.8 Some of the main rural sector targets presented in the new MTPDP include:

an average growth rate of 3.9 to 4.7% for the agriculture sector over the plan period;> increase in the total area of irrigated lands from 43 to 54% of the total irrigable area;> completion by 2004 of the distribution of the remaining 3.3 million hectares of lands under the

Comprehensive Agrarian Reform Program (CARP);;0 expansion of the Agrarian Reform Communities (ARCs) and increased access of Agrarian

Reform Beneficiaries (ARBs) to support services to 60%;> increase in the allocation for agricultural R & D to I% of the agricultural GVA in 2001;> protection and management of 6 million hectares of forestlands;> implementation of integrated coastal management (ICM) by 250 LGUs along 6,000 kms of

coast line;

THE MODERNIZATION OF THE PHILIPPINE AGRICULTURAL AND FISHERIES SECTOR

2.9 The MTPDP envision (a) the transformation of subsistence farmers to entrepreneurs; (b) arural sector characterized by increased productivity; and (c) broader and more intensifiedmanagement of natural resources through community-based approaches and more appropriateresource pricing for natural resource users. The modernization of the agriculture and fisheriessector shall have three principal features: (a) dynamism, innovation and adaptability to change; (b)high productivity and competitiveness; and (c) emphasis on enterprising tillers with informed choiceson the type of technology to use, crops to raise, and markets to tap for their products.

2.10 To realize this vision for the rural sector, the MTPDP aims to diversify the rural economythrough alternative employment opportunities in farm and non-farm activities and to increase thesector's productivity and production through modern technologies and sustainable farm practices.

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It also aims to promote and expand opportunities for equitable access to productive assets (i.e.land); and empower sector stakeholders and provide stronger institutional structures throughimproved capacity building and extension services. Finally, it aims to remove policy biases againstsector competitiveness; mobilize financial resources; enhance private sector participation; andpromote environmentally-sound practices.

THE "CONVERGENCE FRAMEWORK" FOR SUSTAINABLE RURAL DEVELOPMENT

2.11 The effective implementation of the new MTPDP's RD strategy largely depends on theeffectiveness and efficiency of the institutions and agencies responsible for the sector. Under theMTPDP, two key areas for institutional reform and change are highlighted: (a) the overall relationshipof the key sector stakeholders and agencies, i.e. national agencies, LGUs, private sector, communitiesand civil society, under a devolved set-up; and (b) integrated and coordinated roles and responsibilitiesof the primary agencies managing the development of the sector - the Departments of Agriculture(DA) , Agrarian Reform (DAR), and Environment and Natural Resources (DENR).

2.12 Under the MTPDP, the national government is expected to assume an indirect, non-interventionist role in designing and implementing development initiatives in the rural areas. Itwill intervene only in cases of market failures and distortions, when demand for service in areas notcovered by the private sector, and equity issues, need advocacy and attention. More specifically, itwill set national policies and over-all regulatory frameworks; design programs of national concernwith potential for LGU replications; set relevant technical standards; provide technical assistanceto LGUs; and, together with the LGUs, jointly monitor and evaluate the implementation and impactof national programs.

2.13 The LGUs are the focal points for the prioritization and provision of localized services anddevelopment assistance; design and implementation of specific development programs; andmobilization of resources and investments for local projects. The civil society, for its part, wouldplay the crucial role of facilitating partnerships in local governance among NGAs, LGUs,communities, and the private sector as well as in strengthening capacities of local communities toenhance their participation in the overall development of the rural sector.

2.14 The MTPDP identifies a "convergence framework" for integrating and joining thecomplimentary initiatives among the principal government institutions in the rural sector. Thisframework is the 'principal modality' to attain sustainable rural development over the next sixyears. Under the convergence framework, the DENR will carry out a holistic management of the"life forces" of water, soil, air, flora and fauna through the integrated management of watersheds,forests and soils. The DA will put into productive use the regenerative life forces nurtured by theDENR. Finally, the DAR will ensure the equitable sharing/distribution of access to, and benefitsof, development.

THE FIVE (5) KEY RESULT AREAS (KRAS) FOR THE RURAL SECTOR

2.15 The MTPDP's five KRAs, which will guide the implementation of the RD strategy, aresummarized below. Further details on the assessment of these KRAs are provided in Annex 4,including relevant feedback from the Phase 1 stakeholder workshops.

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2.16 KRA 1: Productivity and competitiveness enhancement: This includes two general policythrusts: (a) ensuring an environment conducive for improving sector competitiveness; and (b)enhancing and improving the delivery of support services.

2.17 KRA 2: Diversification of production and resource use: The main elements of this KRAinclude (a) broadening the research agenda by focusing on integrated farming, resource management,and market-oriented systems; (b) strengthening agriculture and industry linkages; and (c) expandingplanning approaches from terrestrial to marine and coastal areas.

2.18 KRA 3: Access to land and other productive resources. This KRA involves two mainstrategies: expediting the completion of the CARP and broadening options to enhance land accessfor non-CARP beneficiaries.

2.19 KRA 4: Promoting environmental sustainability. The MTPDP proposed eleven (11) majorpolicy initiatives to promote environmental sustainability in the sector. A separate set of policyinitiatives under KRA 4 covers the six (6) sectoral resource areas of forestry, land, freshwater,coastal and marine, biodiversity and protected areas, and minerals.

2.20 KRA 5: Rationalizing institutional structures and empowerment of stakeholders. Thisincludes two major policy initiatives - to rationalize institutional structures in the sector and tostrengthen the institutional capabilities of sector stakeholders.

2.21 Finally, the MTPDP outlined other policies and strategies to support the five KRAs for therural sector. These are the adoption of a spatially oriented approach to sector planning anddevelopment, and the integration of gender equity and sensitivities in the formulation of sectorpolicies, strategies, and programs and projects in the MTDPD.

C) MTPDP: Preliminary Assessment & Emerging Priorities

2.22 While assessing the linkages among the MTPDP strategic objectives, supporting strategies,KRAs, and priority inputs/activities, the study team identified five key themes which reflect relevantfeedback from the Phase I stakeholder consultations and which merit further attention during theimplementation phase (Further details are contained in Annex 4). These themes are

(a) Need to correlate MTPDP objectives and strategies with priority inputs;(b) Need to prioritize inputs with MTPDP objectives and strategic outcomes;(c) Need for a stronger sense of integration and complementation;(d) Need for more program, sustainable, system-based approaches, rather than short-term.

high impact, project-based strategies; and(e) Need to shift (or better balance) rural support programs from infrastructure-based to

social (human) capital formation inputs.

2.23 The key issues in the country's rural development have been clearly painted in the MTPDP.The solutions or approaches identified pursue a longer view towards the resolution of these issues.Towards these ends, it is expected that the strategies and inputs aimed at addressing these issuesshould go beyond rhetoric and contain concrete, appropriate and rationale methodologies andmechanisms for action.

9

2.24 However, a good part of the strategic policies listed in the KRAs of the MTPDP are broaddeclarations and repetitions of previously stated programs and strategies contained in previousplans. Indeed, the KRAs under the Angat Pinoy 2004 Plan are reformulations, if not repetitions, ofprevious KRAs and strategies of past plans. A clear example is the productivity and competitivenessobjectives in the KRA and the subsequent program of upgrading and improving post-harvest facilitiesand infrastructure in the sector. While these are indeed important, if not fundamental, requirementsof any rural development strategy, these items have been the staple menu of previous plans.

2.25 Indeed, rural infrastructure and public works as key elements of RD strategies in previousMTPDPs have become a sort of a 'panacea' to the problems in the rural sector. In the consultations,while sector stakeholders did prioritize the need for post-harvest facilities and rural infrastructure,they similarly raised the need for evaluating and assessing the performance of previous rural sectorplans that included the same set of proposed strategies and programs contained in the new plan.

2.26 Likewise, the recognition of the need to prioritize other types of services and inputs,particularly on social capital formation such as health, education, capability building,entrepreneurship, human resource development and gender, has been growing and creating a demandfor integrating 'non-infrastructure' based programs in the rural sector strategy. In the MTPDP,these social capital formation programs have yet to achieve equal prominence with traditionaltypes of infrastructure and technology-based services and continue to receive inadequate attentionin investment programs.

CHAPTER 3: RD/NRM STRATEGIES: UPDATED FRAMEWORK ANDASSESSMENT OF TRENDS AND PRIORITIES

A) RD Strategy Framework: A Holistic Approach

3.1 What is RD? 7 The migration of unprepared rural household members to urban areas hasnot solved, and will not solve, rural poverty. Rural poverty needs to be addressed by appropriateprograms that improve rural living standards, increase employment opportunities for residents ofrural areas, and prepare the rural youth for future integration into the urban labor force. A WBRural Development Strategy paper on E. Asia & Pacific states that:

"Rural development thus includes, inter alia, the provision of social and physical infrastructure,the provision of financial services in non urban areas, non-farm and small-medium enterprisesactivities in rural communities and market towns that are more closely linked to the ruraleconomy than they are to the economies of larger urban cities, as well as the development oftraditional rural sectors, such as agriculture and natural resource management ......... Theconclusion is that programs to reduce rural poverty must be comprehensive and must includethe views of the poor and the actions of local communities, civil society organizations, centraland local government, bilateral and multilateral donors acting in partnership. When ruraldevelopment interventions are taken holistically and extend beyond the traditional sectors,there appears to be a synergistic outcome" (WB, Bale, p. 8).

3.2 Overview of a Philippines RD Strategy Framework. Taking into account a holistic approachto RD, the five KRAs of the MTPDP, the WB's CAS, and relevant inputs from the stakeholderconsultations, below is a synthesized RD strategy framework comprised of four broad elements.These emerging elements also provide a framework for the proposed rural sector performanceindicators developed by the study team (ref. paras. 3.3 - 3.5). The four strategic elements, whichare closely correlated with the KRAs, can be summarized as follows:

(a) Deepen and implement key structural reforms to help ensure a sustained, higher, and broad-based growth of agriculture, by removing policy and institutional distortions and making thesector more efficient and internationally more competitive (refers to KRAs 1, 2, and 3), withpriority actions including:

' For rice: replacing quantitative restrictions/QRs with appropriate and adjustable tariff levelswhich will be reduced over time, as the rice sector is supported with productivity enhancingmeasures; restructuring the National Food Authority (NFA) and separating its proprietary andregulatory roles; and devising and implementing more effective rice targeting approaches todirectly benefit low income consumers;

> For corn/livestock: reducing tariff protection and adopting uniform tariffs; and designing supportprograms for marginal corn farmers;

7This section draws on and adapts to the Philippine case relevant points from a recent RD Strategy Paper prepared bythe World Bank ("The Rural Poor: A Thematic Approach", M. Bale, E. Asia and Pacific Region, December, 1999).

11

For sugar: reducing trade protection in support of the food processing industry and providingappropriate investment incentives for modernizing the industry's production and millingoperations;

In forest management: developing, stabilizing, and operationalizing forestry policies andcommunity-based resource management approaches, including tenurial instruments for uplandand coastal populations;

In land use: developing and implementing a comprehensive land use policy; and developing,approving, and implementing improved land tax policies and land administration andmanagement (especially improved land security); and

For the CARP: expediting funding and implementation based on reformed modalities of landreform; and achieving enhanced productivity increases among the agrarian reform beneficiariesand reasonable progress in attaining social justice.

(b) Facilitate increased and prioritized strategic public and private investments (refers to KRAs1, 2, and 3), with priority actions including:

Providing priority support for smallholder productivity enhancement programs, includinginstitutional and funding reforms involving research and extension systems, and support forrural infrastructure, especially rural roads and communal irrigation systems;

Providing essential social rural infrastructure, particularly rural primary, secondary, and technicaleducational institutions, water supply systems, and health clinics/services;

Promoting agro-based diversification toward higher value crops and value-added processing;

) Increasing funding to support the CARP's land acquisition, complemented by reforms in CARPmodalities, land taxes, and community-driven and decentralized approaches

Developing and implementing effective targeting programs for disadvantaged rural groups andprovinces/municipalities, including a rice price targeting program for the urban poor and thelandless; and

Expanding access to rural finance, with focus on the strengthening of rural financialintermediation, the consolidation of rural programs, the promotion of market-based interestrates, the implementation of a savings-led approach to microfinance, and enhanced cost-effectiveness of rural financial intermediation;

(c) Improve natural resource management (refers to KRA 4), with priority actions including:

Supporting community-based natural resource management programs that would increase andsustain household incomes, increase and stabilize the supply of goods and services from naturalresources, promote sustainable forest management, and enhance the decentralization of themanagement of protected areas; and

Supporting a decentralized and integrated approach to the protection, management, andrehabilitation of coastal resources.

(d) Strengthen institutional framework, capacity and performance (refers to KRA 5), with priorityactions including:

12

> Refining and implementing the RD Convergence Strategy with clearer definitions of the rolesand responsibilities of the DENR, DA, and DAR, and with a greater role for LGUs, and NGOs/POs; and

> Strengthening strategic programs/activities for a more effective devolution and decentralizationof rural development, such activities to include capacity building programs for LGUs; andrationalizing (and expanding, as relevant) cost sharing arrangements between NGAs/LGUs/communities, in accordance with the intent of the Local Government Code.

B) Strategic RD/NRM Performance Indicator Areas: Trends, Issues, Strategies, andPriority Performance Indicators

3.3 Within the above mentioned RD/NRM strategy framework, and in consultation with thekey stakeholders, the study team's core work involved assessing the RD/NRM trends andimplementation performance of priority strategies, and developing strategic performance indicatorsfor the Philippines' RD/NRM.' The indicators have been grouped according to seven strategicperformance indicator areas which generally correspond to the thrusts of the KRAs of the MTPDPand the synthesized RD strategy framework outlined in para. 3.2. It was not possible to achieve a1: 1 correspondence between the KRAs and the broader strategic performance indicator areas, andthere is some inevitable overlap of these frameworks due to varying perspectives on cross-cuttingissues (e.g., food security and rural poverty). Figure I illustrates these overlap and close inter-relationships. These indicator groupings and their component indicators (prioritized by "primary"and "secondary") have been chosen to assess progress in achieving the Philippines RD goals andstrategies, with an emphasis on showing outcomes rather than processes, and the direction of changeover time rather than statistical comparisons per se. The outcome indicators would complementthe traditional, but inadequate, sectoral indicators (e.g.. agricultural production, education levels,etc.) for assessing the progress of rural development. It is also recognized that there are a variety ofperformance indicators systems which should be used in a complementary manner- for budgctmonitoring, sector monitoring and project monitoring. Accordingly, the seven categories of theperformance indicators should be viewed as a means to focus and organize the suggested priorityindicators, which can easily be correlated with the KRAs and the above updated RD strategyframework:

(2) Synthesized (-K ATs

RDINRM Strategy Elements~ == ---- =KRAs

(Performance Indicator Areas: l+2)=====

Figure 3.1: Illustrative Overlay of MTPDP/KRAs and Synthesized RD/NRM Strategies

8 Nearly all of the study team members are recognized Filipino experts/analysts involving a particular strategic indicatorarea, and therefore each analyst developed the initial indicators based on cumulative past and on-going analytical workand implementation experiences of the relevant subject.

13

3.4 Some of the most relevant questions to ask regarding these indicators over time are whetherthe value has increased/decreased; and whether there is a pattern of improvement/deterioration.Clear and timely answers to these key questions could help determine needed policy/implementationinterventions.9 The suggested performance indicators are designed to be further operationalizedand used by the relevant agencies as a management tool to facilitate the monitoring andimplementation of priority MTPDP strategies. These performance indicators could also be used bythe civil society and donor agencies. The process of determining the priority indicators highlightedseveral underlying weaknesses in data systems and institutional roles and arrangements for thecollection, analysis, and monitoring of, and follow up on, the indicators. These data systemweaknesses and recommended improvements are summarized in para. 4.17 (c) and Annex 3, Tables2 and 3. Two of the study's main conclusions are that: (a) improving information feedback to keydecision-makers and implementors will enhance the effectiveness of the rural policies and strategiesand of the GOP's performance in implementing its RD strategies; and (b) there is a need to addressthe underlying policy and institutional constraints and rigidities to establishing and using this typeof strategy performance monitoring.

3.5 The section below summarizes the study team's papers (Annexes 5-15) according to eachof these seven strategic performance indicator areas. Each section discusses main trends, emergingissues, improved priority strategies, and the suggested priority performance indicators. The trendanalysis provided an improved foundation for the selection of appropriate yardsticks, and theindicators were used to facilitate discussions of recent developments. Accordingly, an importantpremise of this study is that defining sound performance indicators means that there is a need tolink prioritized RD/NRM policies and strategies, programs, and expected results/outcomes. Givingclear definition to some of the policies means recommending ways that general policy initiativesand thrusts can be translated into "doable" programs. To the extent feasible, the study team hasattempted to show a distinction between recommendations involving RD/NRM strategies on theone hand, and action-oriented recommendations involving public sector management performanceand performance indicators.

3.6 The last section also proposes a phased approach to institutionalizing an operationalframework for a RD/NRM performance indicator system. The linkages with the KRAs are shownin parenthesis, and further details are provided in the study team's discussion papers contained inAnnexes 5-15. To facilitate the process of reaching a reasonable consensus on the prioity strategic

9 The WB (headquarters) has developed a "rural scorecard" for all developing countries in terms of a conceptualframework and an initial quantified composite index of "rural well being", based on 11 indicators involving the following5 outcomes: proportion of rural population with below poverty lcvels reduced; social and physical well-being improvcd;enhanced human development; increased gender equity; enhanced food security. The composite index assumes equalweights for the various indicators, and uses available data. Figure 3.2 shows the comparison for the Philippines vis-a-vis other E. Asia and Pacific region developing countries, showing that the level and trends of the Philippines index arewell below other countries. While having this index as a reference point, the study team decided that in the Philippinescase it would be more appropriate for GOP and other stakeholders to develop its own performance indicator systemwhich is linked cxplicitly to the Philippines RD/NRM strategies as outlined in the MTPDP, supported by other prioritystrategies. It is suggested that the implementation phase of the performance indicator monitoring system attempt toformulate an appropriate methodology and basis for a quantifiable Philippines rural scorecard. This would provide anadditional refinement to its sector management tools in order to facilitate focused discussions and improvedimplementation performance and outcomes, in addition to developing short-term result performance indicators.

14

performance indicators, during the course of finalizing this report, the study team subjected thereport's findings and recommendations to further consultations with the MTPDP Planning Committeeand strategically selected RD/NRM stakeholders convened in a Phase 2 regional stakeholderworkshops. These consultations provided valuable inputs to prioritizing and refining the RD/NRMstrategies and performance indicators. Annex 1 includes the summary table which consolidates theoutcome of the Phase 2 stakeholder workshops (showing primary and secondary indicators). Theseseven performance indicator areas are as follows (and links with the MTPDP KRAs):

> Agricultural Growth and Performance (KRA 1. 2);

> Rural Poverty (all KRAs)

> Food Security (focus on rice) (KRAs 1, 5)

> Agrarian Reform (KRA 3)

; Rural Sector Investments (all KRAs)

* Public Sector (includes rural roads and a preliminary assessment of the medium terminvestment plan)

- Private Sector

e Rural Finance

t Natural Resource Management (KRA 4)

> Institutional Arrangements, Roles and Performance (KRA 5)

Figure 3.2: Rural WVell-Being - Score Card Results forPhilippines

118

116

114

112

110

-n 1018- 106

104

102

100

981990 1991 1992 1993 1994 1995 1996 1997 1998

Years

00 Philipinesift t0S0A E0ast Asia Aand PaScific:;;

(1) Agricultural Growth and Performance: (Annex 5)

3.7 Main Trends and Emerging Issues. The agricultural sector is pivotal in the structure of thePhilippine national economy. Rapid agricultural growth is key to achieving the country's

15

developmental and social goals. The performance of the agricultural sector is also strategicallyimportant in the country's food security and poverty alleviation efforts since a large majority of thepoor are located in the rural sector and depend directly on agriculture-related economic activitiesfor their major source of livelihood.

3.8 Unfortunately, the performance of the agriculture sector has been quite erratic and poorsince the 1980s. While it performed well relative to other Asian countries in the 1970s, it has hadone of the Region's lowest average growth rates in agricultural gross value added (GVA) andexports over the past two decades. The sharp increase in the agricultural GVA in 1999 was duemostly to better weather conditions, after a particularly long and severe drought brought on by theEl Nifio phenomenon in 1997 and 1998. Except for livestock, poultry and a few crops such asmangoes and other non-traditional crops, the production of most crops and fisheries grew at ratesbelow that of population growth. (See Table 3.1).

Table 3.1 -Philippines: Growth Rates of Real Gross Value Added in Agriculture, Fisheryand Forestry, 1980-1999 (in percent per annum)

ITEM 1980-90 1990-98 1998 1999

Crops 0.5 1.1 -12.9 10.6Palay 2.6 1.1 -24.1 37.8Corn 3.5 (2.2) -11.8 19.9Coconut (5.2) (0.3) -13.1 -7.4Sugarcane (5.9) 0.6 -13.8 22.7Banana (3.4) 1.9 -5.8 6.7Other Crops 1.2 2.1 -5.8 -4.5Livestock 5.0 4.3 4.1 4.7Poultry 4.1 6.0 -0.3 0Agri. Act. and Services 3.7 (0.1) -5.9 1.6Fishery 2.4 1.4 1.2 2.5

Agriculture and Fishery 1.7 1.9 -6.6 6.7(excluding Forestry)

Forestry Na Na -19.3 -16.7Agriculture, Fishery 1.0** 1.5** -6.6 6.6

And Forestry

Source of basic data: NSCB** World Bank data

3.9 The fact that the growth rates of the agricultural gross value added and exports have laggedbehind those of other developing countries suggests that the country has been losing its competitiveadvantage in the sector. Indeed, measures of revealed comparative advantage have declined sharplyfor agriculture as a whole, and for all major agricultural exports. By the early 1990's, the agriculturalsector has ceased to be a net earner of foreign exchange.

16

3.10 Agricultural imports (including manufactured agricultural imports) rose from just 30% ofagricultural exports in 1980, to more than 150% by the late 1990s. The composition of agriculturalexports changed as fishery products and fruits and vegetables grew rapidly up to the mid- 1990'sand together now constitute 40-45% of total exports. Despite the growth in the exports of theseitems, total export growth in the 1990s declined relative to the 1980s. The share of coconut productsstayed at about 35-40%; but exports of sugar, which was second only to coconut as a leadingagricultural export in the 1980s, dropped dramatically in the 1 990s. The share of processed products(mainly coconut oil, prepared/preserved fishery, fruits and vegetables) relative to primary agriculturalexports expanded.

3.11 Declining competitive advantage of the sector is also evident from the increasing trend inprotection among the major import-competing agricultural commodities, mostly staples. This policyhighly distorts price incentives (especially protected rice prices) which, in turn, misallocate resources,thereby lowering agricultural and overall economic growth. High food prices raise the clamor forhigher wages, thus reducing the country's competitive advantages. Moreover, high food prices(especially of rice) hurt the real incomes and food security of the majority of the poor, includingfisherfolks, non-rice and corn farmers, landless rural households, and the urban poor. The poor arenet buyers of food, and the cost of food constitutes a high proportion of their total expenditures.

3.12 Increasing price protection over import-competing commodities is likewise consistent withthe apparent decrease in the measure of agriculture's trade openness (i.e., imports plus exports asratio of the GVA), mainly due to the slow growth of exports. It lowers incentives for the productionof exportable commodities relative to all non-tradeables and relative to the highly protectedagricultural commodities competing with scarce land and capital resources. Agricultural imports,as a consequence, grew steadily over the past two decades led by wheat, dairy products, andagricultural inputs such as animal feedstuffs and fertilizers. Ironically, imports of sugar, rice, andcorn have grown significantly in recent years despite increasing trade protection.

3.13 Whether and to what extent the declining trend in the competitive advantage of agriculturewill be reversed and such reversal sustained depend critically on the rate of productivity growth.Table 3.2 shows the decline in crop productivity growth rates during the 1990s, which is a majorfactor explaining low agricultural sector growth rates. Over the past two decades, labor productivityhas virtually stagnated while land productivity per hectare incrcased at a much lower pace than inthe 1960s and 1970s. The set of policies and cxpenditure programs identified in the MTPDPaddresses this concern. These policies include the key elements for increasing productivity andoverall efficiency in the sector, i.e., an incentive structure that promotes efficient allocation ofresources; an expenditure program that provides adequate public goods and support services, propertyrights, and other institutional structure that allow the efficient operation of output, land, and othermarkets; and a bureaucracy and governance that is transparent, predictable, accountable, andparticipatory.

17

Table 3.2: Yield Performance* of Selected Crops, 1980-98 (in percent per annum)

Commodity 1980-90 1990-98 1998

Palay 2.1 -0.1 -8.0Corn 2.9 3.0 2.2

Copra 0.9 -0.4 -2.2Tobacco 0.4 0.9 17.0Sugarcane 2.4 -5.4 -11.6

Pineapple 5.5 3.8 -8.3

Mango 0.6 6.1 -8.1Banana -1.4 1.4 -5.3Coffee 0.9 -2.1 -5.7Rubber 4.2 1.8 2.6

Onion 3.8 -3.9 -4.4Abaca 0.7 0.9 12.4

* computed using ordinary least squares mnethod exceptfor 1998

Note: 1999 data not yet available; Source of basic data: BAS, UCAP (for copra)

3.14 The more complete measure of productivity is total factor productivity which relates the

growth of output to the growth of total inputs, including not only labor and land, but also other

capital (machine, animal, trees, etc.) and current inputs (fertilizer, agricultural chemicals, feeds,

etc.). Because of limited data availability, however, total factor productivity cannot as yet be

computed with a reasonable degree of accuracy, especially for the recent years.

3.15 Annex 2. Table 1 outlines the key indicators proposed to monitor the impact of the MTPDP

on the economic performance of agriculture. These include: growth rates at aggregate levels by

major commodities, which factor in yields and total factor productivity; relevant measures of revealed

competitive advantage, trade openness. and price protection; the ratio of non-traditional commoditiesto total gross value added as a measure of diversification; and measures of dispersion of agriculturalprotection across commodities.

(2) Rural Poverty (Annex 6)10

3.16 Poverty estimates based on official measurement practice suggest that rural poverty is not

only alarmingly high - with one-half of the rural population deemed poor - but also seeminglyunresponsive to overall economic growth. The relatively high GDP growth during 1994-97 hardly

trickled to the rural poor. Indeed the estimates suggest that their number in fact increased from18.0 million in 1994 to 19.5 million in 1997 (see Table 3.3).

3.17 The Estrada Administration recognizes the imperative of bringing about broad-based rural

development to win the war against poverty. But whether or not it succeeds in winning this war

10 For further details on a recently completed Poverty Study, see: Philippines Poverth Assessment, April 28, 2000,

World Bank. Washington D.C.)

18

depends largely on its political commitment to mobilize resources and to reform institutions andpolicies for equitable growth and rural development.

3.18 At present, a credible monitoring system linking policies and programs with rural welfareoutcomes is not in place. Such a system requires a clear understanding of (i) economic andinstitutional constraints to broad-based rural development, (ii) policies and programs needed toeffectively address these constraints, and (iii) household responses, especially by the poor, to thesepolicies and programs. By implication, it also involves access to good analysis and reliable, current,and transparent data.

3.19 The current practice of generating "rural performance" indicators is technically flawed asto be useful in informing actual achievements (or failures) in the war against poverty. The firstproblem has to do with the shifting of the definition of "rural areas" over time, thereby systematicallycreating a downward bias on rural performance indicators. The second pertains to spatial (andintertemporal) inconsistency in published poverty profiles.

3.20 The physical area of the "rural sector" is, almost by definition, shifting over time. Aspopulation grows and/or economic activity expands, an initially rural area will sooner or later beclassified as urban. While this may not pose a problem in measuring, say, urbanization trends, ittends to create a systematic downward bias on rural performance indicators, including rural poverty,employment, and household income.

3.21 Assuming that the main yardstick against which outcomes of national government policyare judged is the reduction of absolute poverty, it is imperative that the poverty measurement andmonitoring system can track well the changes in absolute poverty over time and across administrativeareas of the country. The present system falls short of this requirement. It is dependent on povertynorms that are quite sensitive to spatial differences - and to changes over time - in overall livingstandards, as well as on current household income as a broad proxy for household welfare. It isthus unsuitable for either national poverty monitoring or assessing comparative performance acrossregions or areas of the country. The poverty lines need to be anchored on the consistency featureof a poverty norm. For a broad measure of household welfare, consumption expenditure is preferableto income from both conceptual and empirical grounds. The current (official) practice may, however,still be appropriate for local poverty monitoring, especially in a decentralized governance regime.In this regime, LGUs define their own poverty standards, given their development priorities andgeneral living conditions.

3.22 Conventional money-based indicators of rural welfare outcomes need to be complementedby non-money indicators, since there is usually no guarantee that an improvement in the former,including the preferred expenditure-based poverty measures suggested in this paper, will alwaysmean an improvement in the latter. The choice of indicators has to be guided by a clear understandingof the objective of monitoring, as well as fiscal constraint. In this regard, rural welfare indicatorsshould not be equated with indicators of government agency performance. The former areindependent of the structure of government organization and authority and their evolution does notdepend exclusively on government action (or inaction).

3.23 High on the list of indicators of rural welfare outcomes should be: (I) expenditure-basedpoverty incidence; (2) education indicators, namely, functional literacy, and primary and high-

19

school enrolment rates; (3) health and nutrition indicators, namely infant mortality rate, childmalnutrition rate, proportion of households with access to safe water, and proportion of householdswith access to health care; (4) rural non-farm income as measured by the share of rural non-farm

income in total household income; and (5) food expenditure as measured by the share of food in

total household expenditure. The current statistical system supports the generation of these indicators

for each province of the country. In addition, it would also be useful to complement this performancesystem with the work involving the updating of the UNDP-sponsored "Human DevelopmentIndex".`" (Annex 3 includes some of the summary tables for the Philippines HDI). It is important

to ensure that the design of the performance indicator system strengthens the linkages betweenpoverty indicators and cost-effective interventions.

3.24 An effective monitoring and evaluation system focused on rural welfare outcomes haslikewise to be incentive-compatible, i.e., the agents (government agencies) acting in behalf of the

principal (society) find that it is in their interest to advance the interest of the principal. This

requires, among other things, that agents responsible for program implementation should not be atthe same time the monitors of rural welfare indicators.

3.25 The functions of the National Anti-Poverty Commission (NAPC), which is mandated tocoordinate and monitor poverty alleviation programs, should therefore be sharpened to enable it to

take an increasing role in devising an appropriate national poverty monitoring system, coordinatingthe monitoring and evaluation systems of the various agencies vis-a-vis welfare outcome indicators,and overseeing the generation and reporting of information on poverty concerns. Unfortunately,the NAPC's current capacity to perform the above tasks is rather weak. Capacity building for theCommission must be a high priority. In the meantime, the NEDA would play a key role in

coordinating this effort, and work out collaborative arrangements with the NAPC as the latter'scapacity is strengthened.

UNDP publishes annual Human Development Reports (worldwide coverage) and periodic country-level updates

(Philippines Human Development Report 2000, 2000).

20

Table 3.3: Priority List of Rural Poverty Indicators

Poverty Concern/ Information Frequency Content/Description & Source Level of sub-Priority Component System Purpose national

_____________________ aggregation

"Ends" Measures

Poverty incidence, Family Triennial, Family income and NSO Provincialdepth, & severity Income and since 1985 expenditures, sources of (since 1994),

Expenditures incomes, spending sectoralSurvey patterns: benchmark(FIES) information for CPIAnnual Annual Family income and NSO ProvincialPoverty (except expenditures; access (since 1998)Indicator FIES indicators to basic needsSurvey years), and social services;(APIS) since 1998 employment status of

household membersEducation

(i) Functional FLEMMS Data on functional literacy, NSO Regionalliteracy education, and mass media

exposure(ii) Primary & HSenrolment rate

Infant mortality Health Info Annual Data on mortality/ DOH SectoralSystem morbidity from notifiable

diseases, nutrition status &deficiencies, healthservices & sanitation

Malnutrition National Once every Nutrition status, food FNRI Regionalprevalence Nutrition 5 years adequacy, nutrition

Survey deficiencies, and relatedsocio-economic info

"Meso" Measures

Rural employment ISH-Labor Quarterly Data on the employed/ NSO RegionalForce Suvey unemployed, & other(LFS) relevant HH characteristics

Rural nonfarm FIES Triennial, See FIES above NSO Provincialincome (as % of since 1985 (since 1994)total HH income)

Food expenditure FIES Triennial, See FIES above NSO Provincial(as % of total HH since 1985 (since 1994)expenditure)

Access to safe water FIES, APIS Annual, See FIES/APIS above NSO Provincial& health care since 1997

21

(3) Food Security (Annex 7)

3.26 This Section aims to assess food security trends and consolidate a framework for an improvedfood security strategy and performance monitoring system, and suggest arrangements for theimplementation of such a system. It outlines key concerns related to food security, and then laysdown a strategy for enhancing food security. A concluding section lays down the institutionalaspects for implementing such a strategy.

3.27 Food security may be defined as access of the population to food supplies at stable marketprices on a year-round basis. In a broad context, enhancing food security involves improving theavailability and distribution of food supplies at the national level and enhancing purchasing power

capacity at the household level.

3.28 In discussing food security, three issues are raised: the scope of any food security program,the meaning of price stability, and the extent of local sourcing of food items identified as critical inany food security program. At least three considerations would seem to define the coverage of foodsecurity policy: the calorie-intensiveness of the food item, the lack of substitutes due to existingpreferences of the population, and the high proportion of expenditure on the food item to totalhousehold budget. It is thus recommended that the government focus primarily on rice in its foodsecurity program, while also supporting an integrated and sequenced program of supporting yieldincreases by smallholders, cost-effective rice targeting for the poor as a safety net, and key tradereforms to enable the Philippines farm sector to become more globally competitive. This reinforcesthe GOP's intention of maintaining a uniform tariff level for all agricultural commodities which isexpected to be much lower than the level of protection presently being accorded to rice.

3.29 Price stability is attained if market rice prices fluctuate within a given range expected by thepopulation, such fluctuations measured in terms of both intra-period and inter-period variation ofprices. Intra-period variability is measured in terms of the deviation of the market prices of ricefrom their moving average. In periods of stable prices, intra-period fluctuations are within plus andminus five percent of average. Inter-period variability refers to the rate of change of annual averagemarket price. Data suggest (see Figure 3.3) that the population tolerates increases of annual averagerice prices up to ten percent. These features are then used as inputs in designing a program forstabilizing rice prices.

22

Figure 3.3: Quarterly Rice Wholesale Prices (1990-1999)

20.00

17.00

1 14.00o , y = 0.0862x + 7.1722

R 2= 0.85410~

8.00

b.OO Il Il II I II 1 l l l ; IIII 1f 1 l 1 Fi I 1I I I I II I i ,I I II II I II I(0 (D <D CD (C CD CD CD CD C D AD CD CD CD (D CO tD <D EDo o W -\ M~ M3 Cw c; *> -> 0 m O~ 0) -. m4 X CD C

O o o o o o o o o o o o o o0 o o o o o o_4 -4 -\ - - -.4 4- - --4 - -4 -4 - -4

Month/Year

Source of Basic Data: Bureau of Agrcultural Statistics

3.30 Officially, food self-sufficiency, i.e. "the availability of enough food sourced from domesticproduction" is a necessary condition for attaining food security in the Philippines. During theNational Food Summit in August 1998, the national government has urged provincial localgovernments to lead the effort for individual provinces to be "self sufficient" in rice production.Accordingly, some of the GOP statements appear to be confusing rice self-sufficiency with foodsecurity. Statistics show that the country's rice imports had been increasing particularly in thesecond half of the 1990s. The trend is explained by the facts that rice output has grown since 1980at the annual rate of 2.4%, while rice use has increased about a percent higher each year. While thePhilippines has the potential to close the supply-demand gap, numerous cross-country studies showthat sector performance and household welfare are enhanced by enabling farmers to produce thecrop mix which best fits their resource endowments, while ensuring an efficient system for procuringand distributing food, including cost-effective safety nets for the poor. This approach is alsoconsistent with the current strategy being followed by the DA to promote the zoning of farm landsaccording to "food baskets" to enhance net farm incomes. This implies that trade should be used toclose any emerging rice gap which may arise over time, especially as the world rice market isbecoming increasingly competitive and using vast land areas for rice may not be the most efficientway of using scare land resources by Filipino smallholders.

3.3 t Any improvement in the current policy regime for food security has to involve changes inthe charter of the National Food Authority (NFA). The country's food security policy as embodiedin Presidential Decree No. 4, as amended, also known as the NFA Charter, merged the regulatoryand proprietary functions required to carry out these mandates in the NFA. The NFA is a governmentcorporation, receiving significant annual budgetary support, as well as being allowed to issue

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commercial papers with full financial guarantees from the national government. Besides thesepowers, the NFA is likewise granted an import monopoly for rice. This arrangement has contributedto what appears to be costly and excessive rice imports.

3.32 The current food security program has avoidable large budgetary costs. Since 1986, theNFA's net operating loss had fluctuated from nearly PHP 387 million in 1990 to over PHP 2.3billion in 1992. It was only in 1996, when it imported rice, that the NFA posted a net operatingprofit of PHP1.2 billion.

3.33 Not only are financial losses incurred, the current regime can be made more effective inattaining the goals of stabilizing rice prices, providing rice consumption subsidies to the poor, andensuring competitive returns to palay farmers. In order to improve the design of the country's foodsecurity program, the following reforms are proposed:

> stabilize rice prices within a band, adjusting the level of imports for this purpose;> replace the current general rice price subsidy with a targeted rice price subsidy for the poor,

based on a carefully designed and implemented beneficiary eligibility criteria and monitoringsystem to track program effectiveness and impacts; and

. focus government assistance to rice farmers from recurrent price supports to a package ofappropriate trade protection and public expenditures intended to increase productivity, enhanceinternational competitiveness, reduce market transaction costs, and promote more competitivegrain markets and trade facilitation.

3.34 Public expenditures for improving agriculture infrastructures and basic technologydevelopment remain to be an important gap in this area. One important problem preventing asustained increase in productive public spending for agricultural development is the absorptivecapacity of the DA. To alleviate this problem, a partnership with the local government units isessential.

3.35 There is still scope for further improving rice productivity through appropriate riceproductivity programs, especially if there are rice biotechnology breakthroughs. Nevertheless, atsome point in time, with continuing growth in both population and per capita income, the countryis likely to reach the limits imposed by technology and especially land -its most constrainingfactor. When land scarcity becomes the constraining factor in increasing rice productivity, thegovernment appears to be relying on trade protection or regulations on the use of farmlands toattain self-sufficiency. These interventions, in turn, embody more expensive strategies for Philippinesociety than alternative and more sustainable strategies as outlined in Section 7.

3.36 The key result areas and tasks required for attaining these food security objectives includethe following performance indicators: rice prices; fiscal subsidies to the NFA; the cost-effectivenessof a rice program targeted on the poor; rice balance indicators (e.g., opening stocks, domesticavailabilities, stocks, and required imports); and key public expenditures for and progress inincreasing rice productivity. Among the key government agencies identified as having the singleor joint responsibility for attaining these results is DA's Planning Service, and the proposed NationalRice Board which is to absorb the regulatory functions of the NFA. It will be important to givespecial attention to the transitional phases of these reforms and institutional arrangements to minimizeany possible disruptions in the rice market and in the availability of rice to the poor.

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(4) Agrarian Reform: Access to Land and its Productivity'2 (Annex 8)

3.37 Trends and Emerging Issues: Land reform has had a significant impact on improving farmers'well being (Deininger, et.al.). The 1998 per capita consumption of beneficiaries from the 1972land reform was significantly higher at (about 45%) than that of non-beneficiaries. Econometricestimates using a number of different indicators confirm that children of land reform beneficiarieshad accumulated human capital faster than those from non-beneficiaries. The rates of physicalasset accumulation by land reform beneficiaries were also significantly higher than those of non-beneficiaries. Finally, land reform had longer-term effects through which land reform beneficiarieswere able to improve their productivity and income more than non-beneficiaries in the 1985-98period.

3.38 The MTPDP highlights three major thrusts involving agrarian reform: (a) expediting theimplementation of the CARP so that all remaining public and private lands are redistributed by2004; (b) intensifying the provision of support services and infrastructure to about 1000 ARCs; and(c) broadening options for enhancing land access for non-CARP beneficiaries.

3.39 Notwithstanding the large tracts of land that had been redistributed in the ten years ofimplementing the CARP, progress is lagging well behind the original target of completing theprogram by 1998. Moreover, the current Government's stated target of completing the CARP by2004 will require a doubling of its historical rate of about 160,000 has per year to about 322,000has per year. Table 3.4 shows the status of agrarian reform between 1972-1999. During the past 27years, the DAR redistributed only about 4.9 million has of public and private land, or about 61 % ofthe original CARP target of 8 million has. It redistributed 2.99 million has of private lands or onlyabout 68 % of the original target of 4.3 million has and 1.9 million has of public lands, which isonly 50% of the original target of about 3.7 million has.

3.40 The DAR has distributed almost all government-owned and public lands and is left with abalance of 1.4 million hectares of accessible private lands for distribution. The distribution ofthese lands is, however, jeopardized by the removal from the 1999 CARP budget of funds forlandowners' compensation. Under PD 27, EO 228 and RA 6657, landowner's compensation reachedP24 billion as of mid 1999 covering 1.1 million hectares or only about 72% of the total privatelands distributed (Table 3.5). Accordingly, redistributing the balance of about 1.4 million has ofprivate lands by 2004 implies that about 322,000 has of private lands will need to be redistributedeach year, requiring as much as PHP 20 B per year, assuming an average compensation price ofPHP 60,000 per ha. Based on the historical rate of land redistribution, it could take up to 17additional years to complete the CARP.

12 This section draws and synthesizes from several recent papers and empirical studies, particularly: (a) "The PhilippineComprehensive Agrarian Reform Program: Perspectives and Issues", paper presented by Undersecretary C. Navarro,DAR, at an International Conference W/CARRD 20/20: Emerging Trends and Perspectives of Agrarian Reform inAsia, October 6 and 7, 1999; and (b) "Redistribution, Investment, and Human Capital Accumulation: The Case ofAgrarian Reform in the Philippines" by K. Deininger, F. Lara Jr., P. Olinto, and M. Maertens, draft Discussion Paper,World Bank, Washington, D.C., February, 2000; and (c) various background notes/papers involving the CARP ImpactAssessment Study, currently being carried as an independent study, under the overall supervision of DAR, and fundedby several donors.

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Table 3.4 LAND DISTRIBUTION STATUS, 1972-1999By Land Type/Mode of Coverage

In Hectares

LAND TYPE SCOPE ACCOMP PERCENT BALANCE

DAR 4,290,453 2,991,934 69.73 1,298,519

* PAL 2,996,105 1,572,074 52.47 1,424,031

* Non-PAL 1,294,348 1,419,860 109.70 -

DENR 3,771,411 1,918,735 50.88 1,852,676

* Public A & D Lands 2,502,000 1,140,002 45.56 1,361,998

* ISF Areas 1,269,411 778,733 61.35 490,678

TOTAL CARP 8,061,864 4,910,669 60.91 3,151,195

Source: PARC

Table 3.5 ACCOMPLISHMENT IN LANDOWNER'S COMPENSATIONApproved for Payment (1972 to June 1999)

PARTICULARS A RA 6657 TOTAL

PD 27/E0 228

No. of Cfs approved 33,310 55,847 89,157

Area Covered (Ha) 392,926 695,325 1,088,251

Total Land Value (Ph M) 2,823 21,183 24,006

No. of LO's 25,547 35,657 61,204

No. of FBs 235,814 399,522 635,336

Source: PARC

3.41 While few disagree with the importance of agrarian reform, there is growing and intense

debate on the extent and modalities for implementing the CARP, due to underlying constraints.

These constraints include inadequate funding from a sustainable source of financing; landownerresistance; and the complex and time-consuming litigation process in settling disputes over the

coverage of lands. They also include deficient modalities, with current modalities being overlycentralized, thereby lacking adequate accountability and the lack of support services needed to

realize the full productive potential and ineffective and variable management.

3.42 The ARC Program: Aside from land redistribution, the CARP likewise involves the provisionof support services to the ARCs. There about 10 donor-funded projects which provide economic

and social infrastructure, such as rural roads, irrigation, and water supply systems, and supportservices such as community organizing and skills development and facilitation in promoting viable

livelihood/agricultural enterprises, to ARCs. Many of these programs are having substantial positive

impacts on increasing household incomes. However, their implementation is hampered by various

constraints, including limited budgetary allocations, variability in management effectiveness, and

weak coordination with various agencies, especially in the light of the devolution of a substantialnumber of government responsibilities and functions to the LGUs.

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3.43 Emerging Priority Strategies. Notwithstanding the need for further empirical research, theslow rate of CARP implementation and the underlying constraints outlined above suggest the needfor the GOP to proactively intensify the implementation of the following strategies:

) Increase significantly public sector funding for the purchase and redistribution of private lands,and improve land compensation formulas, and alternative methods of payment and modalities forimplementing CARP, including complementing the current administrative approach with a demand-driven and community-based approach to land distribution.; Develop alternatives to increasing funding for CARP implementation, one of which is theimplementation of a more effective collection of existing land taxes, possibly introducing a reformedand progressive land tax structure and at the same time providing strong incentive to increase theefficiency of land use. Another alternative is to structure the land tax receipts such that the LGUscould use these revenues to assist in financing land acquisition by poor communities on a mutuallyagreeable basis;> Promote an integrated approach in land acquisition and distribution activities, right from thebeginning;> Promote the newly launched program MAGKASAKA to generate or access the financial,technical and/or managerial resources needed to derive maximum benefit from the new lands;; Reduce land rental restrictions through a rental arrangement while also ensuring that the CARP

guidelines are not compromised; and> Promote greater progress toward agricultural trade liberalization.

3.44 The above strategies need to be approached as an integrated package with variants to beapplied to different situations. This package would also address the MTPDP strategy of promotingoptions for enhancing land access for non-CARP beneficiaries.

3.45 Proposed Indicators. To help focus greater attention on implementing one of the mostimportant structural reforms in Philippine society, the following primary performance indicatorsare suggested for use mainly by the DAR in operationalizing and implementing its recent innovativestrategies (Annex 2 provides further details according to strategic objectives and secondaryindicators):

> No. of hectares redistributed (private and public lands, and by modality);> No. of landless and poor being able to access land (ref. rental markets)> ARCs supported/funded (and level of social organization)> No. of CARP beneficiaries/households income over the national (regional) poverty threshold

(5) Rural Sector Investments

(5) (a) Public Investments (Annex 9)

3.46 Public Expenditure Patterns: Public expenditures for agriculture, natural resources and theenvironment (ANRE) reached a total of about PHP 35 billion in 1998. As ratios to total publicexpenditures (8%) and gross value added (8%) in the sector, these expenditures are comparablewith other developing countries. The DA accounted for about 50% to total public expenditureswhile the DENR and combined DAR and LBP had similar shares of about 15% each. The LGUsshare steadily grew to 11% since the devolution in 1992. Almost three-fourths of LGU expenditures

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were for agricultural services, mainly for extension; while veterinary services accounted for 20%,and natural resource services, 6%.

3.47 Strategic Directions and Priorities. Strategic directions and priorities for ANRE may beinferred from the distribution of public expenditures by policy instruments and by commodity.Less than 40% of the budgetary appropriations was allocated for productivity-enhancing expendituressuch as irrigation, research and development, extension, and other support services. Managementof natural resources and the environment accounted for about 20% of expenditures, mostly onforest management and rehabilitation. Close to 20% was allocated for land acquisition anddistribution; but at least half of that was used for operational expenses. The remainder (at least20%) was spent for price stabilization, and production support such as seed and planting materials,postharvest facilities, farm equipment, and credit subsidies. Since most of these are private and notpublic goods and services, their purpose is more redistributive, rather than growth-enhancing.

3.48 In fact, many of these production support activities did not prove to be as useful to recipientsand cost-effective in redistributing income as expected, while providing opportunities for graft andcorruption. For example, the NFA's monopoly on grain imports together with its domestic marketingoperations, was found to exacerbate seasonal price instability. The use of variable import levieswill be more effective in achieving the agency's objectives without incurring huge marketing losses.In the case of production support, the grain dryers/farm equipment distributed, and the agro-processing centers/farm level grain centers constructed by the government, had been hardly utilized.

3.49 Among growth-enhancing investments, irrigation received the highest allocation. Yet,because of low world rice prices and high cost of irrigation per hectare, gravity irrigation projectshave shown low social rates of return since the 1980s. Continuing investments in rehabilitationbegged the question of how to improve the operation and maintenance (O&M) of irrigation systems.Too little effort has been devoted to strengthen irrigators' associations that can take over O&M, norto raising collection rates of irrigation fees to cover O&M costs. As water becomes increasinglyscarce and groundwater use expands, the role of the public sector may have to shift away fromdirect provision of water service towards ensuring the appropriate, regulatory policy, and institutionalframework for allocating and managing water resources.

3.50 The budgetary allocations for extension were relatively large at PHP 4 billion, about twiceas much as that for R&D. However, questions may be raised about the balance in funding betweentechnology generation and extension, the effectiveness of the linkage between research and extension,the methodologies adopted in technology transfer activities given dramatic changes in informationtechnology, and the increasing role of the private sector in R&D and therefore in extension. R&Dis clearly underfunded; public expenditures should increase by two or three-fold to be comparablewith research intensity ratios in other countries.

3.51 Bias toward Rice: Public expenditures for agriculture, about half of the total, continue tobe disproportionately in favor of the rice sector, which presently contributes about 15% of theagricultural GVA. Aside from the budgetary allocation for irrigation and price stabilization, ricedominated expenditures for extension, land redistribution, credit programs, subsidies for farmmachineries and postharvest facilities. By contrast, the budgetary allocation for the exportableagricultural and fisheiy subsector was been quite meager. R&D expenditures for corn, coconut,fruits, and fishery, for example, were very low relative to these commodities gross valued added

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contribution. The strong and persistent bias of public expenditure towards rice is often justified interms of the food security goal, defined as rice self-sufficiency. Such a bias, however, is counter tothe MTPDPs objective of promoting diversification, and ultimately to the goal of food security. Itis imperative that (a) public resources are allocated in activities where social rates of return arehighest, (b) food prices reflect their social opportunity cost and not determined by policy intervention,and (c) any food subsidies be targeted specifically for the poor.

3.52 Decentralization Patterns. Despite decentralization and devolution efforts, central officesof national government departments continue to have dominant control over budgetary resources(about 80%), particularly at the DA. Thus, the ability of the LGUs and regional offices to influencethe strategic directions and program designs developed by the central offices has been extremelylimited. Indeed, studies have shown that IRA transfers were much less than commensurate to theresponsibilities devolved to the LGU. Moreover, poorer regions which have a greater proportionof population in agriculture, have also been allocated lower budgetary resources and fewer devolvedpersonnel.

3.53 Program vs. Project Funding. The mechanism for funding affects allocation of expenditures,predictability of funding, accountability, efficiency, and effectiveness of governance. The increasingdominance of project vs. program funding has led to more unstable and unpredictable funding,promoted short-term vs. long-term projects, and favored redistributive rather than public goodtype, productivity-enhancing investments, and other essential regulatory and other support activities.It has also perpetuated the centralized nature of ANRE governance as the central offices generallycontrol local and foreign-funded projects.

3.54 The DENR had the highest rate of regular program funding (60%); and most of its projectswas foreign-funded, reflecting the high priority accorded to environmental issues by externalagencies. These ratios were much lower for the DAR (30%) and DA (20%). Project funds of theDAR are primarily from the Agrarian Reform Fund specifically appropriated by Congress to financethe CARP within the 10-year implementation period.

3.55 In the case of the DA, the ratio of project funding rose dramatically from 30% in the late1980s to 80% of available appropriations by 1998. The level of regular program funding in realterms generally stagnated, and even declined in a number of agencies; whereas appropriations forprojects increased more than ten-fold. Two-thirds of DA projects was locally funded, and only athird was funded by foreign loans and grant proceeds.

3.56 Fund Utilization Patterns. The relatively low rate of fund utilization is another source ofinefficiency in public expenditure programs that may be caused both by bureaucratic and allocationproblems at the user end and by cash flow constraints on the supply side. The ratio of unused/unauthorized funds to total available appropriations averaged 20%, with the DAR having the bestrecord of 10%, followed by the DENR and DOST (15%). The DA had the lowest absorptivecapacity with rates of unused or unobligated funds ranging from 20-30%. This is mainly becauseof the larger size of project vs. program funding, substantial allocations for irrigation that requiresa complicated bidding process, and the higher degree of centralization that causes delays in theliquidation of central office funds disbursed to the regions and LGUs.

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3.57 Preliminary Observations on the draft Medium Term Public Investment Plan (MTPIP).The draft MTPIP (December, 1999) does portray MTPIP activities in accordance with the fiveidentified key result areas for strategic elements of the MTPDP's chapter on Agriculture, AgrarianReform, and Environment. Also, the timeframe for the draft MTPIP is only for four years (from1999 to 2002). This further contributes to the impression that the activity listing in the MTPIP isjust a continuation of the previous years' activities and hence, are not adjusted and refined at thestart of each medium term in order to correspond to the agreed strategies and key result areas.

3.58 The MTPIP is supposed to operationalize the MTPDP by providing/allocating the appropriatefinancial resources required for achieving the latter's objectives. The long list of the MTPIP becomesthen a sort of wish list, instead of as an investment framework by which MTPDP objectives andkey result areas can be realistically achieved. An examination of the MTPIP entries shows thatthese are sometimes too specific to the point that their relevance to the MTPDP objectives and keyresult areas seem to be too far off (e.g., improvement and supervision of the racehorse breedingindustry, etc.). Some other entries are too general to the point that almost everything can berationalized under the said activities (e.g., Research, Extension, Public Information Services, etc.).Clearly, there are some gaps between the proposed investments listed in the draft MTPIP and theprioritized recommendations from the stakeholder consultations.

3.59 Strategic Directions for ANRE Expenditure Reforms: Faulty allocation of publicexpenditures, coupled with weaknesses in the budgetary process, suggest major potential gains forimproving the efficiency and effectiveness of the public expenditure program in ANRE. Theseareas of reform relates to whether or not: (a) public expenditures are being used to perform/providepublic roles/goods vs. private ones; (b) the choice of policy instruments (i.e., expenditure programvs. other market-based instruments to achieve goals) is most cost-effective; and (c) publicexpenditures for ANRE are optimally allocated across policy instruments, agencies of government,levels of government, regions, and types of expenditures. The areas also relate to whether or notmechanisms for funding and other related budgetary procedures (e.g., project vs. program funding,local vs. foreign-funded, user charges such as irrigation services fees, etc.) promote efficient andeffective allocation of public expenditures. Finally, there is a need to determine whether or notcost-effective mechanisms for timely monitoring, evaluation, and impact analysis of publicexpenditures are adopted.

Key Public Expenditure Indicators and the MTPDP

3.60 The level and allocation across several dimensions of the public expenditure program willbe a critical factor in attaining the targets set for the five MTPDP key result areas. To assess theefficiency and impact of public expenditures in the main subsectors, there is a need for independentin-depth assessments to be carried out, based on sound terms of reference (TOR) (e.g., irrigation,research and extension). To monitor whether and to what extent the ANRE public expenditureprogram is consistent with the attainment of the RD/NRM strategies, the following primaryperformance indicators are recommended (Annex 2 provides further details and secondaryperformance indicators; the full paper is provided in Annex 9):

> Aggregate expenditure trends and patterns, with focus on:- government expenditures on ANRE as a percentage of total government expenditures;- expenditures by priority policy instruments (specially irrigation, R & D/extension, land

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distribution, natural resources management (NRM) community-based activities, regulatoryfunctions and diversification),

> Degree of fund utilization (ratio of used/obligated funds vs. total budget allocations) and stabilityof fund releases by the DBM/National Government Agencies (NGAs) (% of approved budgetreleased per quarter);

> Project vs. priority program funding (% of each vs. total agency expenditures, with focus on thestrategic programs involving the DA, DAR, and DENR);

3 Allocations of type of expenditure (% of MOOE allocations vs. total allocations and % of PSvs. total allocations, again for each of the main programs implemented by the DA, DAR, andDENR)

Rural Roads (Annex 10)

3.61 The substantial and sustained investment in rural roads has been a very important componentof the successful rural/ agricultural/ and economy-wide development experience of the high-performing Asian economies (HPAEs). In the HPAEs, road infrastructure investments have alsobeen effectively deployed as instruments for targeted poverty alleviation, productivity improvementand the enhancement of market efficiency. Hence, this study has given special attention to reviewingthese strategic public investments. This Section establishes the current status of the rural andagricultural road network in the country and describes the goals of the government in theimprovement of the road network as part of the implementation of the 1999-2004 MTPDP, andassesses the prospects of the attainment of these goals, based on current trends and historicalperformance.

3.62 The 1999-2004 MTPDP targets the pavement and improvement of a total of 14,091kilometers of national roads over the plan period. Of the total, 8,123 kilometers are national arterialroads, implying that by 2004, 100% of such roads will be paved. The remaining 5,968 kilometersare national secondary roads; thus by the end of the plan period 67% of national secondary roadswill be paved. However, the record shows that between 1992 and 1998 the government was able toraise the percentage of paved national roads by only 10 %, 12% for arterial roads and 7% forsecondary roads. The MTPDP calls for an overall improvement of 24% - more than twice therecord of the previous plan period - consisting of 29% in arterial roads and 20% in secondary roads.

It is highly unlikely that the government can meet this target in pavements. The period of greatestgrowth in road length was a decade average exceeding 9% per year, and ranging from a low of3.37% to as much as 23.22% during the decade of the seventies.

3.63 It is also highly unlikely that the government can meet the overall requirements for themaintenance of the existing road network. The estimated annual cost of maintenance exceeds P 11Billion, which is a multiple of current levels allocated in the national government budget.

3.64 A system of prioritizing and targeting of investments and O&M requirements is in order.The selection of those roads and transport links most crucial to growth, and the targeting of availableresources to these, would allow the government to stretch its constrained resources for maximumpossible gain. Key performance indicators include: kilometers (kms.) built vs. kms. targeted; kms.maintained vs. kms. substandard vs. kms targeted; total funds required vs. total allocated; total

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funds allocated vs. total obligated; and total funds obligated vs. total expended. The Department of

Public Works and Highways (DPWH) could carry out the institutionalization of these indicators,with the NEDA Infrastructure staff playing a coordinating role.

(5) (b) Private Investments (Annex 11)

3.65 There is general consensus that the sustainable engine of rural sector growth will arise fromexpanded private sector investments at all levels of the rural economy, triggered by increases insmallholder productivity, rural population consumption, and non-farm enterprises and relatedservices. Private investment is one of the key factors in reversing the slow growth of agriculture.Investments must flow into the sector not only to increase the productivity of existing stock ofcapital, but more so to reverse the depletion of aging stocks, such as tree crops. But the MTPDPwas rather silent on the explicit strategies to tap this private sector role. This Annex outlinedvarious trends, identified constraints to expanded private role and updated the priority strategiesand supporting performance indicators to monitor.

3.66 The MTPDP investment-to-GNP ratio is projected to increase from 20.9% in 1999 to 24.6%in 2004. On the other hand, the domestic savings rate will fall from 23% of the GNP in 1999 to22.6% in 2004. The 2004 figures indicate a gap that must be financed from foreign sources.Meanwhile, the aggregate incremental capital-output ratio will fall from 7.7 in 1999 to 4.7 in 2004,and averaging 4.7 for the whole period. This indicates an improving efficiency in investment.

3.67 Total investments in real terms are projected to grow by 5% to 5.2% p.a. from 1999 to 2004,assuming El Nino occurs in 2001 and 2004. Without El Nifno, investments can expand by 5.2% to5.3% p.a. Agricultural investments are projected to reach some PHP 93.5 to PHP 198.2 billion p.a.at current prices, assuming 10-20% share of agriculture to total investment.

3.68 The monitoring of private investments leaves room for improvement. While there are goodsources of data, they fail to capture the overall investment picture. The national income accountsmeasures total investments, but it is a partial measure and is not segregated.

3.69 Nevertheless, even from partial measures, the share of private investments to total investmentsfrom various sources appear small compared to the sectoral share to the GDP, and growth appearsto be declining. This may not be reflective of the actual picture as the sector accounts for about20% of the GDP. Still, the trends do not augur well for a sustained sectoral growth.

3.70 Within the framework of available recent studies, which have assessed the constraints toinvestment, this study carried out a supplemented survey to probe the constraints further. TheNovember/December 1999 survey revealed interesting results. Most of the respondents indicatedthey have invested in the past five years. The bulk of the investments went to Mindanao. However,on the aggregate, the only factor identified favorable to investments in the past five years was thegrowing domestic market, with Inter-regional comparisons indicating that access to land was foundimportant in Mindanao and Luzon and a growing export market was being cited by Mindanaorespondents. It was distantly followed by better information. Trade liberalization rated third but ithad a borderline rating. The rest, (a) access to land, (b) access to good human resource, (c)growing export market, (d) access to financing, (e) government incentives, (f) peace and order, (g)

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supportive LGUs, and (h) better infrastructure, in that order were considered not helpful. Theirlow ratings indicated that the investors are not satisfied with progress in these factors.

3.71 The respondents felt that the key result areas that must be addressed to promote investmentsare: (a) clear and consistent government policies, (b) infrastructure, (c) government bureaucracy,(d) access to credit, and (e) peace and order, in that order. Also considered important are incentives,agrarian reform, access to information, extension services, and local governance, also in that order.What is perhaps not obvious is that the distortions in the land markets have discouraged investments,not only for existing owners who could not access credit, but also for potential investors who couldnot buy land. The survey revealed that investment-friendly environment is essential to the growthof agricultural investment. Moreover, public investments, say infrastructure, fulfill a complementaryrole with private investments. In many respects, they have also a leading effect.

3.72 There is a need to focus on priority strategies to promote expanded private sector investments.These strategies include: (a) improving policy and legal environment; (b) developing infrastructure;(c) removing distortions in land markets; and (d) minimizing bureaucratic red tape. They alsoinclude enhancing access to financing; providing support to R & D; enhancing access to marketinformation; and promoting peace and order.

3.73 As part of the MTPDP monitoring system, key indicators must be identified for privateinvestments in agriculture. The current indicators are all partial and do not capture the total picture.The primary indicators that should be monitored include: (a) agricultural and fishery productionlevels/trends; and (b) breeding stocks and investments in tree crops. Secondary performanceindicators could include: (a) number of business registrations in rural-based activities; (b) actualbank loans to agriculture/NRM activities; and (c) access to bank loans to agriculture (especiallylong term). Data is available for most of these indicators, although some proxy data need to beused until improved data collection systems are developed as a collaborative effort of governmentand relevant private sector organizations. In addition, it would be useful to monitor some of theconstraints identified in the survey which affect the "enabling environment" for private sectorinvestors, including: infrastructure adequacy, law and order, governance standards, and policyconsistency. The survey results suggests that private sector investors are influenced by theirperception of these intermediate variables.

(5) (c) Rural Finance: (Annex 12)

3.74 Mobilization of greater financial resources for sector development is identified as one ofthe key concerns in achieving sustainable rural development. This will be achieved by establishinga viable and sustainable rural financial system that caters to the financing needs of the rural household.It is believed that mobilizing greater financial resources for sector development would lead to thesmall farmers' increased access to credit.

3.75 The MTPDP identifies the following specific policies and strategies for rural finance:

3 Increase in the access of small farmers, fisherfolk, upland dwellers and indigenous peoples(IPs) to credit, including long-term financing;

> Promotion of a savings-led approach to encourage capital formation among farmer, fisherfolk,upland dwellers and IPs, household micro-enterprises, and rural banks; and

33

> Prioritization of the implementation of the Agro-Industry Modernization Credit and FinancingProgram (AMCFP), as provided under RA 8435 through the phase-out and consolidation of alldirected credit programs by no later than December, 2001.

3.76 These strategies are aimed at increasing the flow of financial resources to the rural areasand improving the access of the rural population to these resources. While this has been the objectiveof rural finance since the 70s there seem to be a continuing search for the sustainable interventionsthat would bring about the expanded access of the rural population to financial services.

3.77 Trends in the rural sector's access to credit. Data on lending to the sector show that on theaverage, only 38% of farm households borrow. Of the borrowing farm households, only about one-third (29%) borrow from formal sources of credit, implying that only about 11% of the farmhouseholds borrow from formal financial institutions. Thus, over the years, informal sources ofcredit have continued to play an important role in the rural financial market. Meanwhile, totalloans granted by formal financial institutions have dramatically declined during the period from1980 to 1998. The declining proportion of loan granted by formal financial institutions to theagricultural sector, however, does not provide very conclusive evidence on the extent of financingin the rural areas. The proportion of formal finance going to non-farn enterprises in the rural areasis equally important in determining the extent of financial resource mobilization in the rural areas.Unfortunately this classification of loan portfolio is not available from existing data.

3.78 In an attempt to expand the rural sector's access to credit, government provided credit inthe form of directed credit programs (DCPs). These programs direct the flow of credit resources totargeted sectors of the population for specific purposes. These programs, however, impose hugefiscal costs in terms of both default and interest subsidies on the part of the government. Data fromthe studies conducted by the Credit Policy Improvement Program of the National Credit Council in1998 show that there were 12 DCPs implemented by the DA and 21 by the Land Bank of thePhilippines. Total interest and default subsidies for 20 of these credit programs were estimated tototaled P1.89 billion in 1996. Interest subsidies total P1.39 billion while principal and interestsubsidies amounted to PHP 0.51 billion.

Table 3.6: Incidence of Borrowing and Distribution ofBorrowers among Farm Households: Survey Results

(In percent)

Period ~~Incidence ofFomlIfraPeriod ~BorrowingFomlIoma

1985-85 32 32 651986-87 37 28 661988-89 44 20 821991-92 35 26 851992-93 36 32 681994-95 33 31 691996-97 40 33 671997-98 47 24 76

Average 38 29 72

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3.79 In view of the huge costs of government credit programs, the need to mobilize financialresources for the development of the rural sector and the continuing problem of credit access in therural sector, the government through the Agriculture and Fisheries Modernization Act (AFMA)seeks to establish a viable and sustainable financial market and encourage increased private sectorparticipation in the rural financial market. Along this line, the government seeks to phase-out theimplementation of DCPs in the agriculture sector by year 2002. Under the AFMA, the funds fromthe phased-out DCPs will be transferred to the Agricultural Modernization Credit and FinancingProgram (AMCFP) which will be made available to both government and private financial institutionsat market rates of interest.

3.80 Emerging Issues. Policy reforms that changed the nature of government intervention froma highly supply -led approach in the 70s to one that deregulated the rural credit markets in the mid80s did not seem to have significant changes in the agriculture credit market. The following issuesare raised:

> Declining proportion of agricultural loans. The proportion of agricultural loans to total loansgranted by formal financial institutions has been declining over time.

> Constant proportion of borrowers borrowing from formal sources. Likewise, the proportion ofborrowers borrowing from the informal sector compared to the proportion of borrowersborrowing from the formal sources has remained within the range of 65% to around 85% overthe years.

t Inconsistency in interest rate policy. While both the Central Bank and the other economicagencies of the government have announced the adoption of market-based interest rates, suchpolicy does not seem to be implemented at the operations level. Interest rate subsidies continuedto be provided (Lim and Adams, 1998), especially in the credit programs implemented by thegovernment.

> Policy Reversals. While the government has been well meaning in the pursuit of reforms thatwould deregulate and liberalize the financial market, political considerations motivate the designand implementation of programs and projects that are highly visible and popular. Politiciansusually perceive the implementation of government DCPs as the most expedient and visibleway of disbursing funds.

3.81 Performance Indicators. To monitor the objectives indicated in the 1999-2004 MTPDP,several primary performance indicators are suggested below. They help determine the extent offinancial resources mobilized for the rural sector, whether access to rural finance has been expanded,and loan repayment rates. Additional operational details on these indicators and suggested secondaryperformance indicators (outcome and output) are included in Annexes 2 and 12.

> Proportion of rural savings vs. total savings> Proportion of agricultural loans vs. total loans> Proportion of borrowers from formal and informal sources> Incidence of borrowing> Loan repayment rates (formal borrowings)

3.82 Institutionalizing the indicators. With the current institutional set-up, monitoring the proposedpriority indicators in rural finance would not be difficult. The Agricultural Credit Policy Council(ACPC) is currently mandated to oversee agricultural credit policies and programs. In the AFMA

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and in the draft implementing rules of EO 138, it in coordination with the National Credit Council(NCC), is tasked to monitor the phase-out of the DCPs in the agriculture sector.

3.83 The NEDA can tap the existing system in the ACPC in generating the proposed indicators.Most of the basic data needed to generate the indicators are already being monitored by the ACPC,and the Council may be requested by the NEDA to include the generation of these indicators intheir monitoring system.

6) Natural Resource Management (Annex 13)

Emerging Trends and Issues

3.84 As a result of declining stocks, much of the Philippine natural resources experienceddecreasing economic values. High deforestation rates during the 1970s depreciated the value ofPhilippine dipterocarp forest by PHP 823 million in 1988, although this depreciation slowed downto PHP 162 million1 3 and by PHP 416 million in 1996/7 because of investments in reforestationand the management of residual forests by communities.

3.85 The continuing depreciation of upland soils, however, has negated the appreciation of theforest resources and is an increasing concern because a large area of 9 million hectares of forestlands remained open access and this accelerated degradation of forest lands. The depreciation ofupland soils directly affects on- and off-site productivity of upland agriculture, irrigated lands, andcoastal/mangrove areas. Erosion in areas with at least 8% slope averaged 30 Mt/ha/yr. in the 80s,resulting in a depreciation in the value of this resource by PHP 334 million in 1988 and a muchhigher PHP 906 million in 1996. Thirty per cent of erosion occurs in agricultural lands under thejurisdiction of the DA while a higher 70% is in forests and other areas under the jurisdiction of theDENR.

3.86 The worsening forest degradation and the increasing open access condition of forest landsare also threatening existing biodiversity and critical habitats in protected areas. This is furthercomplicated by the inadequacy of government budgets, and unstable and unpredictable governmentpolicies on the participation of communities, private sector and LGUs in the management of forestsand forest lands in non-PA areas and buffer zones.

3.87 Apart from the opportunity costs associated with the foregone earning from well-managedland, soil erosion imposes high costs on the downstream sector - infrastructures, roads, bridges,agricultural production areas, settlements, water districts, etc. - because forests provide watershedprotection. The environmental damage of soil erosion drastically increased from PHP 11 millionin 1988 to PHP 1.2 billion in 1997.

3.88 Fishery resources depreciated by PHP 737 million in 1988, PHP 5,786 million in 1992 andPHP 299 million in 1997. The erratic depreciation of pelagic (surface-dwelling) fisheries may bedue to a series of alternating entry to and exit from the open access waters, as fishers note cycles ofnegative and positive fishing rents. Fish habitats were also destroyed because of various destructivefishing techniques and pollution from silts. The economic costs in the form of foregone earnings

Unless otherwise noted, all values in this report are in real terms at 1985 prices.

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from low coral reef productivity was estimated to be PHP 610 million in 1988, increasing fast toPHP 1,653 million by 1996.

3.89 For mineral resources, the depreciation of major metallic minerals is estimated at P HP 658million in 1988 and a lower PHP 194 million in 1996. This decline in depreciation is caused by lowextraction rates associated with the softening of metallic mineral prices in the long term. Theenvironmental damages associated with pollution and mining accidents and competition with otherland uses, such as areas protected for biodiversity purposes and the preservation of indigenouspeoples, warrant serious attention towards improving the mining industry.

3.90 The depreciation of the forests and top soils contributes to the increasing poverty of at least20 million upland people, considered to be the poorest among the poor. Their only hope forsocioeconomic developments are improved rural development interventions that will help themincrease production while helping improve the environment.

3.91 The management of the environment and natural resources has only been partially devolvedto the LGUs. This institutional issue has constrained many LGUs from participating in the optimalallocation of forest lands, in reviewing applications for resource use rights, facilitating the landtitling process, and in helping enforce the conditions of the environmental compliance certificates(ECCs).

3.92 Strategic Objectives:

> Enhance the sustainable asset values of key natural resources, especially forestry, water, fisheries,biodiversity, minerals, and soil fertility following sound incentive pricing strategies, broad-based participation of forest lands management and development, community-based tenurialinstruments, and deregulated policies/regulation/enforcement;

E Promote and encourage a more direct and broader participation of LGUs, civil society,communities, other concerned NGAs, and the private sector in the protection, management,and development of forest lands which are now considered to be open access;

> Promote and enforce ECCs, environmental management plans, and pollution control policiesand regulations;

> Protect, manage, and rehabilitate degraded rivers, coastal and mangrove areas, fish sanctuaries.habitats, degraded forest lands, and polluted lakes; and

> Expedite the gazetting of priority protected areas, strengthen protected areas management(PAMBs), and formulate and implement PA management plans.

Strategies

3.93 The environment and natural resources sector should adopt prioritized strategies within thebroad framework of the MTPDP. The proposed strategies are highly interrelated with each otherbecause of the interconnectedness of the uplands and the lowlands, the forests with the agriculturalproduction areas, irrigation systems, and coastal/fishery resources. After all, poverty in the uplandsmight have been the result of an iniquitous system of allocating prime agricultural lands, the lack ofproductive employment and economic opportunities in the urban areas, or declining productivityof the prime agricultural lands.

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(a) Promote stability by passing the proposed Sustainable Forest Management Act, LandUse Code, Clean Water Act, and various bills on the gazetting of critical protectedareas

3.94 In addition to the passages of the Clean Air Act, the Mining Law, and the AFMA, Congresshas yet to legislate the proposed Sustainable Forest Management Act, Land Use Code, and CleanWater Act, and pass various bills for the gazetting of Critical Protected Areas. These laws willstabilize and strengthen ENR policies and; clarify the roles and responsibilities of the LGUs, privatesector, and other concerned agencies for a more holistic and stakeholder-focused management ofthe environment and natural resources. They will also mandate the DENR to delineate forest landsand A & D; ban commercial logging in protected areas and critical watersheds; and provide annualbudgets and support systems for the protection and management of highly diverse habitats, coastalareas, and protected areas.

(b) Delineate forest lands and allocate these to various stakeholders for appropriatemanagement

3.95 To protect and manage forest lands, there will be an urgent need to clearly delineate forestlands at the municipal and provincial levels. Each municipality or province with the assistance ofthe DENR and information available from the NAMRIA, LMB, and concerned LGUs will have todetermine and delineate the boundaries of forest lands within their respective political jurisdictions.After delineation and through a process of joint forest land use planning, efforts should be exertedby the DENR and the LGUs to place all forest lands that are covered with tenure or agreementsunder protection, development, and management. All forest lands that are considered "open access"should be allocated to the concerned and most suitable stakeholders.

(c) Improve capacity for arbitrating and resolving use conflicts

3.96 The process of delineation and allocation of forest lands will inevitably ignite conflicts thatwill need urgent resolutions. Some conflicts could delay the overall intent of reducing open accessand uncertainty. The DENR has to strengthen its capacity for arbitration, especially in the fieldoffices. Other agencies such as the DA, DAR, NEDA and LGUs can help in the arbitration andconflict resolution process. In the long term, a transparent system of gathering, analyzing, andusing environmental information in this process will reduce conflicts.

(d) Adopt ecosystem-based planning and implementation by political units

3.97 The DENR and LGUs should jointly develop ecosystem-based plans for implementation.These plans should allow interrelationships among various sub-systems to simultaneously addresseconomic, social, political, and biophysical concerns. These plans should also consider theinterconnectedness of uplands, agricultural production areas, and coastal areas.

3.98 There will be a need to support the NEDA and DBM operationalize the economic-environmental interactions. Funds should be allocated for watershed management planning, themonitoring of key indicators of environmental accounts, and the determination of the net benefitsto society of resource allocation and use. After all, natural resources are an integral part of anecosystem; their unintended effects of primary resource use may inevitably impact on other sectorsof the society.

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(e) Adopt and institutionalize economic instruments to enhance ENR management

3.99 The traditional "command and control" mode of implementing regulatory policies tends tobe complex, expensive, and ineffective. In addition, detailed rule making allows little room forflexibility among those being regulated to choose the appropriate technology. The use of economicinstruments to complement rule making should therefore be pushed further. These instrumentsinclude property rights that provide the basis for market-based transactions and various fee systemsaimed at getting the resource user to internalize the full cost of his actions. The resource prices aimto regulate the use rates and encourage conservation and in the process generate revenues formonitoring, rehabilitation, and payment of damages in the event of accidents caused by environmentalrisk.

(f) Set up an environmental trust fund

3.100 The revenues generated from the market-based instruments should be placed in a newlyestablished environmental trust fund. This trust fund should follow transparent and accountabilityprinciples. Funds deposited in the trust fund can then be accessed to fund environmental monitoring,provide incentives, or pay environmental damages.

(g) Establish a DENR-assisted but LGU-based support and extension delivery system forthe upland farmers and municipal fishermen

3.101 This strategy will shift the DENR's main focus in assisting upland farmers and artisanalfishermen. The DENR through the LGUs will now provide needed support and extension servicesto the upland farmers and fishermen in the protection, management, and development of the uplandsand coastal areas. Assistance in making planting materials available, technology transfer, communityorganizing, cooperative development, construction and rehabilitation of farm-to-market roads, andproviding access to credit are only a few of critical services that both the LGUs and DENR andother NGAs can provide. This can be done initially in the identified "convergence areas" of theDENR, DA, and DAR.

(h) Institutionalize a simple, participatory, and performance indicator-oriented ENRmonitoring system

> Adopt and transform various indicators of resource scarcity (or sufficiency) to measureperformance towards attaining sustainable development.

> Regularly support the process of developing and operationalizing basic resource informationsystems at the DENR and DA.

> Transform resources information into timely and digestible pieces of knowledge for policyformulation, review, and implementation.

3.102 Recommended Priority Performance Indicators: The following primary performanceindicators are suggested (further operational details and secondary performance indicators areoutlined in Annex 2):

> Improvement of forest cover (plantation, natural forests, mangrove rehabilitation andprotection);

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> Pollution levels and water quality;> Fishery production levels;> Number and area of tenurial instruments issued as a percentage of total open access; and> Protected Areas gazetted and protected areas plans finalized/approved

(7) Institutional Arrangements, Roles and Performance Indicators

3.103 The Philippines faces two major institutional challenges in rural development: the need toaddress vertical devolution - the transfer of power, authority, and functions from the national tolocal governments; and the need to improve horizontal coordination across departments, especiallyamong national agencies which are involved in the "convergence" strategy, particularly the DA,DENR, and DAR.

A) Devolution (Annex 14)

3.104 The devolution's strategic objectives are to rationalize the institutional framework andstructures of the LGUs and NGAs and to strengthen and capacitate key stakeholders, especially theLGUs, as they take more responsibilities in program/project implementation and become activeplayers in the convergence program.

Emerging Issues

3.105 The devolution process must be viewed at two levels of implementation - national andlocal. At the national level, the four major issues/concerns that impinge on the devolution processinclude lapses in the implementation of the Local Government Code (LGC) that may need periodicreview and the amendment of the same Code. They also include limited financing base andinadequate funds for the LGUs to implement devolution. Finally, these concerns likewise consistof inactive development councils and weak participation of civil society in these bodies, and the adhoc nature of national and local relations and the case to case arrangements on collaborations.

3.106 Learnings, experiences, and lapses in devolution should provide the chance to improve andrefine the process over time. Nonetheless, there is a need to continue providing a balance to thecentralist tendency of the national government.

3.107 Local finance captures the heart of the devolution process. Presently, most LGUs are largelydependent on their internal revenue allotments (IRAs) for financing most of the devolved functions.Many LGUs need to broaden their base of funding sources by expanding the IRA formula to includenational tariffs and custom duties and by putting more weight on population rather than physicalarea. Their funding base can also be expanded by tapping the private sector through build-operate-and-transfer (BOT) and joint venture projects, lobbying for congressional insertions or initiativeson behalf of their municipalities or provinces, accessing ODA funds, and entering into cost sharingarrangements with national line agencies.

3.108 The civil society's inadequate participation has further weakened the effectiveness of localbodies to carry out devolution and partly hampered efforts to improve transparency, democratization,and empowerment at the local level. Multisectoral and interagency initiatives with the LGUsprovide a check and balance in the devolution process. A broader level of participation in local

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governance can improve the LGUs' credibility and help the NGAs, NGOs, and the private sectorbecome more comfortable with devolution.

3.109 The devolution process has continued to highlight the need to gradually define the mostappropriate and relevant roles for the LGUs and the national line agencies at the local level. Asexperiences have shown in the last eight years, these relations have highlighted the need for theNGAs to work with the LGUs in policy making, setting technical standards for the qualityperformance of devolved functions, providing technical assistance and support services, anddesigning and carrying out capacity building programs to empower the LGUs.

3.110 At the local level, the key devolution issues are:

> Many LGUs are inefficient and ineffective in performing their devolved responsibilities asmandated in the LGC, not being able to institutionalize, internalize, and operationalize theirdevolved powers and responsibilities.

> Many LGUs admit that they have limited capability and capacity for carrying out the mandatesof the devolution. This weakness, however, could partly be minimized if the newly-electedLGU leaders and NGA field officers are committed to providing continuity in policies andprograms of the past administration after objective assessment of past efforts. The frequentchanges in operational policies and re-shuffling of staff among NGAs are further complicatingthe task of strengthening and capacitating the LGUs to carry out various devolved functions.Capacity-building interventions that would accelerate the institutionalization of basic servicesand systems in local planning, budgeting, investment planning, resource mobilization andinformation management are critical components for strengthening the LGUs.

> With local finance being the centerpiece of devolution, the dependency of the LGUs on thenational government has limited their flexibility to respond to local needs. Thus, devolutionmust also be seen in the context of how the LGUs are becoming accountable and how they arebroadening their sources of funds over time.

> Conflicts and confusion besetting the relationship between the provincial LGUs and lowerlevel LGUs. Specifically, there is a need to clearly delineate and clarify the roles andresponsibilities including the territorial and operational jurisdictions of provinces andmunicipalities with respect to the delivery of agricultural extension services, technical assistanceon watershed and coastal resource management, and law enforcement.

Strategies

3.111 Review of the devolution processes at both national and local levels. The leagues/ULAP incooperation with Congress, civil society, and academic/research institutions should work togetherto consolidate and review proposed amendments to the present LGC.

3.112 Local Finance. The LGUs have to formulate and update their development and investmentplans. These can be the only basis of many LGUs to lobby for higher IRAs, get more of the nationaltariff and custom duties, attract private investments, identify strategic areas for cost sharingarrangements (especially rural infrastructure, community-based resource management interventions,

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and technology transfer), and encourage the civil society to support more grassroot-orienteddevelopment projects.

3.113 Participation. The LGUs and the leagues have to proactively seek the participation of civilsociety in the local development councils. The LGUs will have to take actions to re-activate theirlocal bodies and improve their credibility in local governance. Possible areas where the civilsociety can participate may include policy-making, budgeting and planning, implementation, funding,and monitoring and evaluation of LGU plans and programs.

3.114 National-Local Rclations. Based on ad hoc experiences, mother memoranda of agreementand understanding (MOAs and MOUs) with generic provisions may be developed, validated, andexecuted between and among the leagues, DILG, and LGUs. These MOAs or MOUs can cover abroad range of areas for collaboration - capacity-building, provision of technical assistance, andjoint project implementation, among others.

The recommended primary performance indicators of the devolution process whose furtheroperational details and secondary performance indicators are outlined in Annex 2, Table 10 are:

> Reviews/amendments to the Local Government Code,R Revenues collected by LGUs and share of total expenditure,

' Continuity of policies and programs of the LGUs and the NGA over time,> No./value of cost-sharing arrangements by and between NGAs and LGUs to support strategic

activities,> No. of development and investment plans finalized by LGUs,> Amount of investments generated by LGUs,> Membership patterns & no. of local bodies to ensure meaningful participation of civil society,

and> Service delivery effectiveness of LGUs (focus on main rural sector services, such as extension,

health, education, water supply).

B) Rural Sector Convergetce (Annex 15)

3.115 The Philippine government's convergence strategy under the MTPDP attempts to achieveeffective institutional coordination in the planning, implementation, and monitoring ofcomplimentary initiatives in selected "convergence" areas. Specifically, it focuses on attainingconvergence in strategies and operations of each of the concerned departments - the DA, DENR,and DAR- to ensure ... "adequate and affordable supplies of food and water...."

Emerging Issues:

3.116 Several key issues confront the convergence strategy. First, the government convergenceprogram appears to be "stuck" at the conceptual level. It has to move from concepts intoimplementable and doable strategies. The three departments are still at the exploratory and "talking"level. They are still formulating the operational details of the strategy. They have not allocatedbudgets in support of convergence.

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3.117 Second, the LGUs have not been identified and involved as the 'integrating and converging"force at the local level. They are not in the "driver's seat", despite the devolution law and the localand international experiences providing evidences that LGUs are much more effective than nationalline agencies as integrators in convergence areas.

3.118 Third, the convergence as an institutional framework demands major changes in theinstitutional mindsets and in the way things are done in the three departments. Despite the analysisthat the " institutional coordination of the three departments was perceived to be the solution tooverlapping and fragmentation of functions and responsibilities in rural areas," none of the threedepartments is driving the process to refine the concept and implementation strategy.

3.119 Lastly, the absence of an effective facilitator and integrator for implementing the convergencestrategy at the national and regional levels has kept the strategy in hibernation.

Strategies

3.120 Refining and Operationalizing the Strategy. The NEDA, DILG, and probably the Officeof the President should organize a tripartite meeting among the LGUs, concerned departments, andDILG to refine the concept and implementation strategy. An action plan to move from the conceptto operation should be the main focus of the meeting. The action plan may be generated whereeach LGU, the concerned departments, NEDA, and DILG allocate portions of their GAA in supportof the refinement and mobilization phase of the convergence strategy.

3.121 Giving LGUs Ownership of the Strategy. Being the most logical integrators of theconvergence strategy, the LGUs should pass resolutions and ordinances owning the convergencestrategy to make it work at the local level. The DENR, DA, and DAR should support the LGUsinitiatives for integrating various sectoral concerns in their political jurisdiction. The LGUs need torealize and accept their lead role and the supportive role of the NGAs in each convergence area.With the refined and doable concept, a defined implementation strategy, acceptable decentralizedand devolved arrangements, and budgetary support, the strategy could harness the power of bothvertical devolution and horizontal coordination in achieving the MTPDP KRAs and RD objectives.

3.122 Commitments in terms of support, personnel, and funds from each of the key playershave to be translated into signed MOAs and MOUs with attached site development plans for theconvergence areas.

3.123 The recommended primary performance indicators for the convergence strategy furtherdetails on the operational aspects and secondary performnance indicators are provided in Annex 2,Table 10) are:

> Number of operational convergence areas that are covered with MOUs or MOAs (withoperational plans and funding), and effectiveness of the coordination efforts; and

> Budgetary allocations and issuance/implementation of relevant supporting department ordersto reflect priority convergence activities.

CHAPTER 4: RD/NRM PERFORMANCE: EMERGING CONCLUSIONS ANDOPERATIONAL FRAMEWORK OF A PERFORMANCE INDICATOR SYSTEM

(A) RD/NRM Trends and Strategy Implementation: Emerging Conclusions andRecommendations

4.1 Based on a comprehensive assessment of the RD/NRM trends and the GOP's implementationof priority strategies, the study team generated 5 major conclusions:

> There is mixed/poor RD/NRM performance due to a combination of factors involving deficientdesign aspects (including absence of operational strategies) and weak implementationperformance and capacities by the relevant departments;

> There is a need for the GOP, under the overall guidance of the Planning Committee, to sharpen,and in some cases, redirect and/or readjust, RD/NRM priorities and the sequencing of a numberof strategies and programs (some of the more important ones are recommended below);

) There are a number of encouraging RD/NRM initiatives, but a MINDSET change by the relevantdepartments is required in order to enhance the prospects for significantly improving progresstoward the ambitious MTPDP objectives/KRAs/targets. These behavioral and operationalchanges could be facilitated by the phased implementation of two management toolsrecommended by the study team: an explicit RD/NRM performance indicator system and aperformance-based budgetary allocation system (to be worked out in close collaboration withNEDA and DBM). The operational framework for combining these 2 tools in terms of a RD/NRM performance indicator system is outlined below;

- There are major benefits to establishing and implementing a phased improved performanceindicator monitoring system for RD/NRM;

) There are generic data and capacity constraints to institutionalizing a RD/NRM performanceindicator system which need to be addressed. A framework operational plan is outlined below.

(1) Mixed/Poor Performance

4.2 The trends and implementation performance in priority RD/NRM strategies show thatprogress toward achieving the ambitious MTPDP targets and outcomes are lagging significantlybehind. This is also consistent with the "rural well being composite index" developed for thePhilippines, in comparison with other East Asian countries (see Figure 3.2). While it is not possibleat this time to come up with an overall "rural scorecard" based on the performance indicatorsdeveloped by the study team, a tentative conclusioncan be achieved. Based on a qualitativejudgement of the study's comprehensive analysis involving the seven performance indicator areas,the overall progress can be summarized as unsatisfactory, although there are some promisingdevelopments (see below). The analytical dimensions and underlying causes of this performanceare provided in Annexes 5-15. The main underlying reason for this performance level is acombination of deficient policies, absence of prioritized operational strategies, and poor institutionalcoordination and performance by the relevant agencies. The absence of prioritized operationalstrategies and poor institutional coordination and performance, in turn, are due to capacity

44

weaknesses, and a lack of suitable accountability mechanisms, incentives and, a "mindset" to promotebetter performance. These deeper issues are also observed in other sectors, and therefore sustainedimprovements need to be addressed as part of a broader public sector management reform program(currently under preparation by the GOP, as part of its proposal to "Re-Engineer Government).Some of the more strategically important shortfalls include the following areas:

> Large gap between historical agricultural sector growth rates and targeted agricultural growthrates (1.9% p.a., vs. 3.8-4.6% p.a., respectively), notwithstanding various reforms in the 1990s;

> Sluggish and erratic rural sector growth rates and lagging rural sector diversification anddynamism, which put in question the feasibility of meeting the GOP's poverty targets by 2004;

> The "de-facto" policy'4 of equating rice self-sufficiency with food security, compounded by adistorted rice trading regime brought about by the NFA's monopoly of rice imports, highprotection of rice trade resulting in excessive rice prices hurting the poor, and protracted approvaland implementation of urgently required reforms of the NFA;

> The large shortfall in the CARP public sector funding and cumbersome and costly CARPmodalities, raises serious questions on the feasibility of completing the CARP in less than fiveyears;

> The faulty allocation of rural sector budgetary resources, weaknesses in the budgetary system,and inefficient utilization of public resources to achieve strategic RD/NRM objectives;

> Meager private sector investments going to the countryside compounded by a rural financialsystem which severely limits access to finance, the lack of clear and sustainable rural financepolicies, and the proliferation of directed and subsidized credit programs;

E Deteriorating natural resources are further complicated by a combination of factors, including:a lack of firm commitment to promote the appropriate mixture of incentives and enforcementmeasures; inadequate public funding to fulfill essential regulatory and conservation functions;mixed policy statements which may undermine decades of successful experiences involvingcommunity-managed resource management initiatives; and a regulated and centralized policyenvironment that discourages on-site and private investments for the protection and managementof improved natural resources; and

> A devolution process which has resulted in a breakdown of some essential services tosmallholders, and a convergence strategy which is still "stuck" at the conceptual level.

(2) Need for Sharper Priorities and Sequencing. and Suggested Mid-Course Adjustments

4.3 While the MTPDP KRAs for the rural sector are generally sound, the study team's assessmentof strategy implementation highlights an urgent need for GOP RD/NRM agencies (especially theDA, DENR, DAR, NEDA, spurred by the Planning Committee) to prioritize, operationalize, properlysequence and monitor the strategies and actions. These efforts need to be supported by a moreefficient and strategic allocation and utilization of public sector expenditures. Even prior to theMTPDP's mid-term review, the study team recommends that the GOP consider updating some ofthe RD/NRM strategies and targets to more realistic levels. It also recommends that the governmentprioritize and operationalize strategic interventions and its medium term and annual public investment

" The MTPDP document (and intent) aims to promote a food security agenda that is consistent with the provisionsoutlined in the AFMA. The AFMA, in turn, stipulates promotion of food security, including sufficiency in staple foods(not necessarily implying self-sufficiency in rice). Senior GOP officials have made frequent public statements equatingfood security with rice self-sufficiency by the year 2003.

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plans to support timely and effective implementation of priority strategies. The study team hasrecommended priority RD/NRM strategies, and in some cases, suggested some directional andmid-course adjustments to the MTPDP. in order to enhance the prospects of achieving the MTPDPKRAs and attain sustainable tangible impacts in reducing rural poverty. Some of the strategieswhere directional improvements need to be considered by the GOP involve food security andapproaches to CARP modalities and land markets. This prioritization is summarized in Table 1 ofthe executive summary, with further summary details of the suggested mid-course adjustmentsoutlined in paras. 3.7-3.122 of the text and the summary tables outlined in Annex 2 (Tables 1-10).The full analysis according to performance indicator areas are presented in Annexes 5-15.

4.4 Recommended Adjustments: Based on the detailed analysis of the study team, the followingeight (8) priority mid-course policy and strategy adjustments are recommended for considerationto the Planning Committee in order to close the gap between the MTPDP and actual RD/NRMstrategies/performance, and thereby enhance their sustainable impacts:

(a) Growth Targets: DA, in consultation with the NEDA, DENR, and DAR, could work outupdated and realistic agricultural growth targets, and recommend to the Planning Committee theupdated targets and policy and resource requirements."5 This proposal should be driven by renewedPC commitment to formulate and implement strategic and prioritized action plans to achieve theupdated targets, hopefully exceeding significantly the historical growth rate of about 2% per year;

(b) Competitive and Diversified Rural Economy: The DA needs to translate general policies,strategies, and plans into specific policy decisions and operational action plans, and remove policyand institutional rigidities and constraints to promote a more competitive and diversified agriculturalsector. These reforms are needed to enhance the modernization, dynamism and profitability of therural sector (including rural non-farm enterprises). It is suggested that the GOP give special attentionto enhancing farmer choices and profitability by: promoting more competitive input and outputmarkets for agricultural commodities and transport services, including inter-island transportation;reforming a demand-driven research and extension support services; and providing essential ruralinfrastructure;

(c) Food Security: The GOP, with DA and NEDA support, should adopt a more sustainablepolicy and implement operational approaches to achieve national and household food security.The current de-facto approach of focusing on rice self-sufficiency and the GOP's postponing thefinal approval of reforms on the (NFA) is resulting in continued significant resource allocationdistortions, while failing to provide a sustainable rice support system for poor consumers andproducers. There is an urgent need to shift the GOP's food security focus on rice "self-sufficiency"to strategies which will enhance household incomes and the purchasing power of the poor, and helpensure the availability of rice throughout the year at stable prices. This does not preclude attainingrice self-sufficiency, provided the farmers' commodity choices are expanded. It is suggested thatthe food security stratcgy include the following integrated, well-sequenced, and operationalcomponents: (a) implementation of a vigorous and phased reforms on the NFA, especially the

IS Any adjustments to the agricultural growth rate targets would have implications on other macro- and sectoral economictargets. especially on sectors which are closely linked to the agricultural sector. During the course of preparing theMNTPDP there was extensive debate on the growth targets and underlying assumptions. These assumptions, especiallyinvolving rice yields and pace of commodity diversification, should be revisited.

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separation of the agency's regulatory and commercial functions, enhancing of transparency in riceimports, and import liberalization; (b) promotion of smallholder food productivity programsinvolving rice, livestock, poultry and fisheries; (c) actions to promote a more competitive tradingsector and a more diversified rural economy, spurred by expanded private sector investmentswhich would also stimulate non-farm enterprises and agro-processing activities; (d) actions forreducing trade barriers, especially for rice and sugar, in line with the WTO agreements, and (e)design and implementation of more effective rice targeting programs for the poor consumers;

(d) CARP: The DAR, in consultation with the relevant stakeholders, should intensify its on-going efforts to improve the CARP modalities and approaches that will enhance the prospects forexpediting the completion of the CARP. There is a need for it to move more vigorously fromstrategizing to operationalizing and implementing its emerging initiatives. The CARP modalitiesshould be less costly, demand/community-driven, faster, better-targeted to the poor and landless,and integrated so that ARB productivity and incomes of the poor are enhanced. These improvementsshould also build on the findings of the on-going impact assessment study of the CARP and otherrelevant studies. These concrete actions and improved results would enhance the prospects formobilizing Congressional support to expand public sector funding for land redistribution. Giventhe availability of a large amount of open access lands, estimated to amount to up to 5.0 M hectares,it is also suggested that the DAR promote stronger collaboration with the DENR to identify suitablepublic alienable and disposable lands to expedite CARP implementation. This may include an"uplands version" of the CARP for eligible ARBs, taking into account the DENR's strategies ofimplementing its forest management policies and forest demarcation. While the currentadministration aims to complete the CARP by the 2004, the DAR, in consultation with the PlanningCommittee, may wish to update the CARP targets to more realistic levels, or introduce twoaccomplishment scenarios based on updated and more realistic assumptions, especially involvingpublic funding. Congress should also be more accountable to supporting CARP reforms and funding;

(e) Budgetary Reforms: The DA, DENR, and DAR, in close collaboration with the NEDA andDBM, need to formulate operational action plans which would help reform their departmentalbudgetary allocation systems and ensure that their allocations are more consistent with prioritystrategies. In parallel, there is a need to establish a rational allocation and prioritization mechanismin Congress, with perhaps the CBPO spearheading the advocacy effort to promote such reforms. Itis recommended that each of the agencies approach the preparation of the FY01 budget and theirthree-year medium term expenditure program currently under preparation in a manner whichstrengthens explicitly the linkages between the MTPDP KRAs and the budgetary allocations forstrategic programs. These agencies should also link explicitly these priorities expenditure programswith performance indicators (both outcomes and results); and encourage the CPBO to promotebudgetary review reforms within the relevant Congressional Committees/subcommittees, as thiswill help complement needed budgetary reforms in the Executive Branch. Based on the studyteam's assessment, eight strategic programs are suggested on a priority basis: irrigation, especiallysmall-scale systems rural roads, CARP land distribution, support services for ARCs, reforestation,watershed management, research and extension programs, and market information. These indicatorscould be used as management tools to monitor the performance of the implementing unit(s);

(f) Sustainable Rural Finance: The ACPC, with the support of the NCC and enhancedcommitment by the DA, should focus on promoting and monitoring the implementation of theAgro-Industry Modernization Credit and Financing Program. Special attention should be placed

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on expanding sustainable and expanded access to rural finance for financially and economicallyviable investments, and strengthening financial intermediation, supporting sustainable approachesto viable livelihood enterprises, and the systematic phasing out of DCPS. In practice, DCPsundermine the achievement of sustainable expanded access to finance by smallholders and smallentrepreneurs. Currently, there are mixed "signals" and micro-finance programs/activities thatappear to be undermining the GOP's stated rural finance policies;

(g) Sustainable NRM: The DENR should sharpen its NRM strategies and operational programs,with emphasis on the following priority areas in the light of relevant implementation experiencesand strategic objectives: improving community-based resource management strategies; strengtheningvarious tenurial instruments for closing open access land areas; adopting a sound operationalframework for guiding a program on delineation of forest boundaries; implementing a clear andconsistent logging policy; supporting priority conservation and protection efforts; implementingoperational strategies for sound watershed management and development; finalizing andimplementing sound pricing/cost recovery policies, including the imposition of service fees topromote sustainable resource use; and further decentralizing and devolving key natural resourcemanagement responsibilities to achieve effective and sustainable management, supported byenhanced capacity-building at the LGU level. These interventions should adopt a holistic andsustainable perspective.

(h) Institutional Performance: Devolution and Convergence: The DA, DAR, and DENR needsto fastrack priority institutional reforms to strengthen the devolution to LGUs/rural communities ofpriority RD/NRM programs, and to operationalize the convergence strategy and interface betweenthe NGAs and LGUs. These improvements should focus on strengthened capacities, coordination,and monitoring mechanisms in order to improve the performance and accountabilities of theparticipating agencies and departments in implementing priority RD/NRM strategies of the MTPDP/KRAs.

(3) Potential for Improved Performance. Need for "Mindset" Changes. and Role of TwoManagement Tools

4.5 The study findings also shows that the Philippines has the potential for significantlyimproving its progress toward many of the MTPDP targets and KRAs. The GOP, however, willneed to mobilize a more pro-active, systematic, and coordinated effort to establish, operationalize,and implement sharper and "do-able" strategic priorities and programs. Although the DA, DAR,and DENR are making some progress in addressing each of the above mentioned issues, the currentefforts are not likely to be adequate to achieve the MTPDP targets, unless the actions are prioritizedand significantly intensified. This will require more proactive approaches, greater results-orientedpolicies and budgetary allocations, and a performance-based "mindset" among key GOP decision-makers and implementors. While these changes are part of broader on-going reforms, achievingmacro and sector-level reforms is a complex process and will require some time. Given that povertyin the Philippines is concentrated in rural areas, there is a need to "jumpstart" this mindset changein RD/NRM. This could build on the leadership being shown by the Chairman and Secretariat ofthe Planning Committee who are actively promoting these reforms. These results and momentumwould also facilitate the implementation of reforms in other sectors, as part of GOP's on-goinginstitutional reforms.

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4.6 To "jumpstart" this complex process and mindset change, the study team recommends theuse of two management tools: (a) a performance indicator system which aims to assess progresstowards achieving priority outcomes and results of improved rural well being and performance byGovernment agencies in implementing the MTPDP; and (b) a performance-based budgetaryallocation system which aims to encourage improved department management performance andeffectiveness in formulating and implementing public sector policies and investment programs.Clearly, these two systems are closely inter-related, although they have different areas of emphasisand approaches. The section below outlines the frameworks of these two management tools andhow they can be combined to meet the multiple objectives of improving both strategy implementationto get better outcomes/impacts in reducing rural poverty; and public sector management performancein the budgetary system.

4.7 Performance Indicator (PI) System: The DA, DAR, and DENR, with the support of theNEDA and guidance of the Planning Committee, should carefully select and operationalize strategicperformance indicators for RD/NRM and use them as an effective management tool. This toolshould aim to facilitate the process of redefining strategic priorities, re-aligning resources, andsystematically monitoring key performance indicators of the MTPDP goals. and getting improvedresults and impacts. Annex 3, Table 1 contains an operational framework of the proposed indicatorsystem emerging from the study. It shows, for each performance indicator area, both outcome andresult indicators, frequency of data collection and analysis, and institutional roles. The outcomeand result indicators have been discussed with the Planning Committee members, and furthervalidated and refined during a series of regional workshops participated in by multi-sectoralstakeholders. Prior to the initial implementationi of the proposed PI system, the outcome and resultindicators should be further validated, reduced to a manageable number, and refined through aparticipatory working group process involving the concerned line agencies (the DA, DAR, DENR,and facilitated by the NEDA and DBM). Based on this longer list of performance indicators, Table4.1 shows a suggested prioritized and reduced set of outcome and results performance indicators.This list could provide the basis for further refinements during the course of operationalizing the PIsystem. The development of the system's operational plan should also take into account relevantinitiatives being carried out by several departments to meet their operational objectives (e.g., theDBM as part of its efforts to encourage a performance-based budgetary allocation system/see below:the DENR as part of its efforts to promote watershed development; the DAR as part of its efforts toexpedite implementation of the CARP and providing support to ARCs; the DA as part of its effortsto develop and implement regional and national Agriculture and Fisheries Modernization Plans(AFMPs); and Congress.

4.8 The major constraints to operationalizing the PI system include fragmented institutionalarrangements and weak capacities. varying degrees of operational commitment to fully implementingthe PI system, and the partial availability of data in the required format and level of detail/regionaldisaggregation. Annex 3. Tables 2 and 3 highlight these constraints and outline short and mediumterm actions to address them. In summary, there are three main operational strategies to addressthese constraints. First is the establishment of a sub-committee of the Planning Committee toimplement and oversee the operationalization and implementation of the PI system. Second is theformulation and implementation of a capacity-building action plan to enable subcommittee membersand personnel in the agencies concerned to adapt and extend "best practices" of M&E methodologiesto suit the required P1 system, together with the performance-based budgetary allocation systembeing proposed in subsequent sections. Third is the promotion of confidence-building in the PI

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system through (i) validation of the operational issues with each agency (ref. Annex 3. Tables 1 and2); and (ii) immediate pilot testing of the PI system in one agency (e.g., the DA).

4.9 Performance-Based Budgetary Allocation System: In 1999, the DBM announced its plansto introduce a performance-based approach to budgetary allocations. This forms a part of thereforms the GOP is pursuing which are under discussion in Congress (ref. "Re-EngineeringGovernment). It is recognized that embarking on this approach is a complex process, and willrequire mindset changes and a phased approach. To support this effort, the DBM is using an on-going Expenditure Management Improvement Project that is funded by the Institutional DevelopmentFund (IDF). This project seeks to support performance-based approaches to strengthening publicsector agencies and programs, and budget allocations. More specifically, it aims to developoperational approaches by line departments in preparing their forward expenditure programs andoutput and organizational level indicators while formulating their annual budget estimates. In2000, the DBM plans to work closely with one department, with the DA being proposed, andagency to prepare the FY02 budget estimates, and use this experience to replicate the approach inother departments. The DBM's budget call for FY2001 is also requesting all line departments topresent their budgetary requirements in a manner that links the activities and expenditures to prioritystrategies and performance indicators. It is recognized that full implementation of this approachwill require more time, building on the above mentioned on-going initiative. Congress, throughthe CPBO, is also promoting a performance-based budgetary allocation approach as part ofstrengthening its oversight role.'6 These proposals are still at their early stages of operationaldevelopment. The phased implementation of the proposed PI system for RD/NRM sector providesa timely opportunity to support and link with the above initiatives. Preliminary discussions withofficials from the DBM and CBPO also confirm their interest in collaborating closely with theproposed RD/NRM PI system subcommittee.

4.10 The effectiveness of using and linking these two complementary management tools as partof a single system will hinge on the commitment and participation of the implementing departments.A proposed operational approach is for the agencies to develop with the DBM and NEDA the mostrelevant performance indicators, as part of the budgetary preparation and discussion process forFY02 and possibly for finalizing the FY01 budgetary process, in response to the DBM's budgetcall guidelines. The CPBO could also work in parallel to meet its own requirements, and participatein this process with the subcommittee, especially after the initial agreement between the linedepartments and the NEDA and DBM. Further refinements could be made and agreed by all of theparties concerned. This process would also facilitate budget discussions with Congress, with theaim of focusing on the FY02 budget cycle.

6 The CPBO is promoting the adoption of a performance-based management system, as outlined in the Policy Brief("Legislative Oversight: A Proposed Conceptual Framework and Methodology", dated May, 1999). This articlestates: "For legislative oversight to be an effective tool in brining about greater accountability and efficiency in the useof public resources. it should be linked to a system of reward and punishment. Congress can issue a quarterly orsemestral report card of agencies' performance to promote transparency. accountability and competition amonggovernment agencies. On the basis of such performance rating, good performers can be rewarded and bad performerscan be punished" (p. 5)s ....Government agencies which have shown good performance can be given greater flexibilityin their budget." i....Agencies that are wanting in performance should face the threat of budget cuts."

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(4) Benefits of an Improved Performance Indicator Monitoring System

4.11 There are major potential benefits in investing in the detailed design and implementation ofan operational strategy and action plan to monitor strategic RD/NRM performance indicators on aregular basis, especially if they are linked to implementing a performance-based public expendituresystem. First, the outcome-oriented performance indicators will provide the GOP with improvedmanagement tools to enhance the role and effectiveness of its current programs in achieving theKRAs of the MTPDP. Second, operationalizing the analysis and feedback systems for the RD/NRM performance indicators, and linking the results to a performance-based public expendituresystem, will be essential in developing and updating responsive and strategic interventions, It willalso be vital in budgeting and re-aligning scarce public resources and in crafting responsive, market-oriented, and deregulated government policies which will instill greater dynamism in the ruralsector. Third, promoting a transparent PI system is made more urgent by a budgetary system whichaims to reward departments which are committed to implementing a performance-based budgetaryallocation system. The politicians and policy makers would justify this demand on the basis andclamor for increased budgetary allocation for RD-related programs and interventions. This demandfor better monitoring is also reflected in the initiative taken by the CPBO. But devising such animproved information system that is linked to expenditure allocations is a complex process, and isnot costless. Careful attention should be taken to develop a well-focused system that will yieldoperational benefits and results on the ground.

(5) Constraints to and Proposed Mechanisms for Operationalizing the Performance IndicatorSystem

4.12 Currently, there are limited explicit mechanisms in place to systematically monitor theimplementation of the MTPDP, either at the global or the sectoral levels. At the level of theimplementing departments, there are limited mechanisms to translate the strategies into operationalprograms, and to systematically monitor their implementation and explicit links with prioritizedinvestment plans and the budgetary allocation process. There appears to be a limited demand forthis type of information and strategy monitoring system from the main decision-makers, except onan ad-hoc basis, usually related to the annual performance evaluations of each Secretary/Departmentas required by the President. Below are a brief assessment of why past efforts appear to have failedin many developing countries, including the Philippines, and a suggested strategy under thePhilippines context. Recently, there was an IDF grant-supported project that attempted to assist theNEDA establish a sector performance monitoring system, focusing on project implementation.During most of its implementation period, this project performed unsatisfactorily due to a numberof reasons. This poor performance pattern in both the supply of, and demand for, strategy monitoringinformation and system is similar to most developing countries. There are various complexunderlying reasons that need to be well grasped, if this pattern is going to change. These reasonsinclude the following:

> Policy makers at various levels of the agencies (e.g., central, regional, provincial, field) may beunconvinced that the existing information is accurate or useful, and in some cases, distrustofficial statistics;

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i Policy-makers might be well aware of the state of RD and the status of RD efforts in qualitativeterms and/or have better information, but are constrained by budget and political considerationsin forging progress;

> Some policy-makers might have proclaimed some grand RD strategies in order to win votes,and might not be terribly keen to monitor their own electioneering promises;

) Policy-makers might not want any part of a monitoring system that they or their staff did nothave a primary role in designing;

) Emphasis had been placed on the achievement of physical targets as a measure of an agency'ssuccess, rather than the contribution of the agency to clear impacts or changes in the quality ofthe sector;

> A systematic and clear monitoring system may reveal implementing agency and managementinefficiencies and program weaknesses. Accordingly, there is no real incentive(s) for officials,even at the planning level, to take a proactive role in monitoring, even to rectify problems; and

) The management styles and strategic orientations of the relevant Secretaries vary.

4.13 The full commitment of the senior management of the DA, DAR, DENR, NEDA and DBMwill be vital in establishing and implementing a strategic performance indicator system. If theywish to be assured of achieving the desired targets, they should ensure that the proposed monitoringsystem is designed, effectively implemented, and institutionalized. They likewise need to ensurethat the analyses and recommendations emanating from the use of the PI system are utilized toimprove the prioritization of public sector interventions that would help achieve broad-based ruralsector development and poverty reduction within the next four years. This will be further enhancedwhen the PI system will be clearly linked with the budget preparation, allocation, and approvalsystem. As stated above, achieving this challenge in practice may also require a "retooling" ofmindsets towards greater performance and accountability.

4.14 Mechanisms to Ensure Functional and Credible PI System: A strong demand fromcommunities, local government units, and the civil society, especially the NGOs, for a moretransparent and performance-based governance will further strengthen the process and commitmentto setting up and institutionalizing an outcome and results-oriented perforrnance indicator monitoringsystem at various levels of government's operations. Building on the constructive and effectiverole played by rural stakeholders in formulating the study's recommended RD/NRM strategies andperformance indicators, other country experiences'' show that strategically selected ruralstakeholders and oversight agencies should also play an important role in the implementation phaseof the PI system. The stakeholder and agency oversight role can be carried out in several ways,adapted to the specific circumstances and institutional structure of the Philippines, to help minimizethe constraints observed worldwide in performance monitoring systems (ref. para. 4.12). These

17 For example. in various parts of India "Citizen Report Cards" have evolved as an effective mechanism of holdingpublic service providers to account on minimum performance standards by gathering client feedback on key performanceindicators, and gathering primary stakeholder proposals for continuous improvements. In the case of the Philippines,the Social Weather Station plays an important role in eliciting public perceptions on public sector issues and performance.

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options, which are not mutually exclusive, and are further developed in para. 4.17 (d), would includethe following:

(a) One or two consortia of RD/NRM-based NGOs15 could be included as a member (orobserver) in the proposed PI sub-committee, and participate in the periodic meetings where theperiodic (say, six-monthly) PI assessment reports (or "rural scorecards") would be presented anddiscussed;

(b) A suitably-qualified independent group (say, contracted by a consortium of rural NGOs)could carry out an independent periodic (say, annual) RD/NRM "audit" of both the process andresults of the PI monitoring system."9 This approach would help address the constraints to attainingeffective and transparent performance monitoring systems outlined in para. 4.12. Recently, theCODE NGO is carrying out citizen monitoring of Government pro-poor programs and policies inthe Philippines;

(c) The CPBO could carry-out their own perfonnance indicator system to enhance their oversightrole and effectiveness, and these efforts could be further enhanced through collaborating with theRD/NRM PI subcommittee;

(d) The Presidential Management Staff (PMS) could also draw on the results of the RD/NRMP1 indicator system as inputs to their internal monitoring and the annual performance reportssubmitted by each Department to the President. The PMS has regional offices and technical staffwho are in a position to validate key results and outputs on the ground

18 Some of the national-level NGOs which are giving special attention to monitoring rural sector performance andwhich could participate include: Philippines Participation for Development of Human Resources in Rural Areas;Philippines Community Organizers Society; and CODE-NGO Co-Multiversity. During the course of the Phase 2stakeholder consultations. PHILRA representative expressed keen interest in contributing to this PI system, given thatits current work program includes periodic monitorinlg of the implementation of the MTPDP for the rural sector.

These independent "social audits" have been effectively carried out in other countries as a model for "auditing"performance monitoring of public ageticies in order to enhlanice credibility of the self-assessmenits by Governmenitagencies, as well as to encourage improved quality of performance monitoring over time.

Table 4.1: RD/NRM Performance Indicator System: Recommended Framework for Operational Plan1 '

STRATEGIC PRIMARY RESULT PERFORMANCE INDICATORS 3 FREQUENCY & INSTITUTION

PERFORMANCE OUTCOME PERFORMANCE (Sub-indicators defining the "character" of AVAILABILITY (Analysis/

INDICATOR AREA INDICATORS2 ' major indicators to be determined during (of Data on Result Collection)(Primary & Secondary) Phase 1) Indicators)

1. Agricultural 1) % Aggregate growth rate of: (a) agric. 1) % of and trend in DA budget expended * Annual (data NEDA/DAGrowth and value-added per rural worker; (b) for: on labor andPerformance yield per ha. by major commodity (a) Increasing production by major capital(KRA 1 & 2) commodity productivity

(b) Enhancing of productivity of land, labor not available)& capital by major commodityc) Supporting non-traditional commodities/diversification

2) Measures of revealed comparative 2) Relevant DA policies, admin orders (ref. * Annual (data/ DAadvantage, trade openness, and price QRs, MAVs, tariff levels), programs, DA- info areprotcction (e.g. nominal and effective initiated bills filed in Congress available) _protection rates; QRs, tariff levels forrice, sugar)

2. Rural Poverty 1) Decreased poverty incidence, depth I) % of NGAs' (DA, DENR, DAR) budget * Annual (data NEDA/DA/(All KRAs) and severity (% of rural population approved and expended for projects not readily DAR/DENR

below absolute population line); targeting poverty groups available;national and regional levels, by key regional data topoverty groups) be generated)

2) Increased primary & secondary school 2) % of DOE budget for rtiral areas * Annual (data to DOE/DII-Genrollment rates (in rural areas) be generated)

3. Food Security 1) Rice balances (production/imports, I) Regularly updated action plans for ensuring * Quarterly DA/NSO &(all KRAs) consumption) and price trends adequate rice balances and rice price (most data is BAS

(farmgate, wholesale, tariff levels; analysis and action plans for price available)nat'al/reg'al levels) stabilization (by private sector/NFA)

2) Decreased prevalence of malnutrition 1) Proportion of relevant NGAs' budget for * Annual (data NEDA/FNRI(nutrition status, % children under 5) improved malnutrition to total budget available)

STRATEGIC PRIMARY RESULT PERFORMANCE INDICATORS 31 FREQUENCY & INSTITUTIONPERFORMANCE OUTCOME PERFORMANCE (Sub-indicators defining the "character" of AVAILABILITY (Analysis/

INDICATOR AREA MNDICATORS2' major indicators to be determined during (of Data on Result Collection)(Primary & Secondary) Phase 1) Indicators)

4. Agrarian 1) Number of (land) hectares 1) Budgetary allocations for land acquisition * Annual (data NEDA/DARReform redistributed (private and public lands, and % of approved budget utilized for land available)(KRA 3) and by modality) acquisition;

* Annual (data NEDA/DAR2) Increases in ARB household income 2) % of DAR budget and expenditures for available)

(No/% of ARB HH Income over programs and projects to increase HHnat'al./reg'al absolute poverty level) income of ARBs

5. Rural Sector 1) Aggregate trends and patterns, with I) * Annual (data NEDA &Investments focus on: * % of NGAs' budget proposed versus available) CPBO/DA,

- Government expenditures on approved versus released DAR, DENRa) Public Sector ANRE as a percentage of total * % of NGAs' expenditures versus total

Investments government expenditures government expenditures 4n

(all KRAs) - expenditures by priority policy * Budget expenditure trends * Annualinstruments (specially irrigation, R & * Modernization versus maintenance budget (modernizationD/extension, land distribution, natural and expenditures ("modernization" defined data not readilyresources management (NRM) to mean a systematic shift of resources available)community-based activities, towards promising sub-sectors andregulatory functions and geographical areas)diversification)

2) Degree of (increased) fund utilization 2) * Annual (data DBM &(ratio of used/obligated funds vs. total * NGAs' absorptive capacity (% budgetary not readily NEDA/DA,budget allocations) and stability of allocation utilized) available) DAR, DENRfund releases by DBM/National * Profile of budget approvals versusGovernment Agencies (NGAs) (% of releases (proportion & timing of releases)approved budget released per quarter)

STRATEGIC PRIMARY RESULT PERFORMANCE INDICATORS 3 FREQUENCY & INSTITUTION

PERFORMANCE OUTCOME PERFORMANCE (Sub-indicators defining the "character" of AVAILABILITY (Analysis/

INDICATOR AREA INDICATORS2 ' major indicators to be determined during (of Data on Result Collection)(Primary & Secondary) Phase 1) Indicators)

b) Private Sector 1) Growth rate in agricultural (includes 1)Investments livestock) and fishery production * Actual private sector investments in * Annual - NEDA/DA &(KRAs 1, 2 & 3) production quarterly (data BAS

* Modernization versus maintenance not readilyinvestments ("modernization" defined to available)mean shifting of investments towards morepromising business activities)

* Number and value of NGAs' programsupport to private investments

2) Aggregate value and private 2)investments in breeding stocks and * Actual private sector investments in * Annual - NEDA/DA &tree crops breeding stocks and tree crops projects quarterly (data BAS

* Number and value of NGAs' program not readilysupport to private sector investments available)

c) Rural Finance 1) % of rural population with increasing 1) Trends in and profile of rural pop. * Annual (most ACPC/banks(KRAs 1, 2, 3) access to formal financial system as Borrowing and savings in formal fin'al data available) & financial

depositor and/or borrower system institutions

1)6. Natural 1) Increased aggregate forest cover (from * % of DENR budget expended for * Annual (data NEDAIDENR,

Resource plantation, reforestation, improvement of forest cover, protected available) FMBManagement rehabilitation, and protection of areas(KRA 4) natural forests and mangrove areas) * No.of DENR projects & beneficiaries

2) Reduced pollution in key coastal and 2) % of DENR approved budget for programs * Annual (proxy NEDA/DENR,industrial areas and improved water and projects directed towards reduced data available) EMBquality levels of key rural areas pollution and improved water quality

management; available indicators from keyareas

STRATEGIC PRIMARY RESULT PERFORMANCE INDICATORS3/ FREQUENCY & INSTITUTION

PERFORMANCE OUTCOME PERFORMANCE (Sub-indicators derining the "character" of AVAILABILITY (Analysis/INDICATOR AREA INDICATORS2' major indicators to be determined during (or Data on Result Collection)(Primary & Secondary) Phase 1) Indicators)

7. Institutional 1) Numberlvalue of cost-sharing I) Amount and % of NGAs' budget actually * Annual (data DILG/DA,Arrangements arrangements by and between "surrendered" to LGUs in thc form of available) DENR, DAR,

a) Devolution National Government Agencics counterpart fund to support mutually LGUs(KRA 5) (NGAs) and LGUs to support agreed-upon programs and projects

strategic activities

2) Expanded membership patterns and 2) Breadth of stakeholder membership base * Annual (data DILG/1.GUsnumber of local bodies to ensure of local bodies such as LDCs; Number and not readily & NGOmeaningful participation of civil geographical distribution of active versus available) federationssociety inactive local bodies

3) Improved serviccielivery 3) Selected result indicators on service * Annual (data DlLG/LGUseffectiveness of LGUs cffectiveness not available)

b) Convergence I) Budgetary allocations and issuance/ 1) % of DA, DENR, & DAR budget & * Aniual (data NEDA/DA,(KRA 5) implementation of relevant supporting actual expenditurcs for convergence not readily DAR, DENR

departmental orders to reflect priority activities versus non-convergence activities available)convergence activities

Based on the Conceptual Sumimiary Framework outlined in Table I (See Executivc Summary)2' Refers to "outcome" indicators (or impacts)

"Result" perforimiance indicators aims to reflect the actions which arc withiin reasonable control of the relevant department/agency, for which it can be heldaccountable. These should be linkecd to the relevant outcome indicators.

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(B) Recommended Framework and Main Elements of an Integrated RD/NRMPerformance Indicator System

4.15 It is preferable to integrate the two above mentioned and complementary management toolswithin an operational framework which could be based on some key guiding principles and sixelements. These are outlined below.

(1) Guiding Principles

4.16 To help ensure a constructive and credible approach to the PI system, it is desirable that theprocess of operationalizing the PI system considers the following guiding principles:

> Secure active ownership by the DA, DAR, and DENR, supported and facilitated by the NEDA,DBM, CBPO, and selected RD/NRM stakeholders. In some cases, the data collection agencywill be specialized (e.g., National Statistical Office), and close coordination with the relevantdepartment will be essential. These institutions will help ensure accountability in the effectiveimplementation of the systems. A related principle is that the relevant government agencyprimarily responsible for the particular performance indicator should take the primary role forgathering, analyzing, and acting upon the relevant information. It would be desirable for thePlanning Committee, on the recommendation of the PI subcommittee, to designate clearly therelevant performance indicators to the relevant departments/agency, under the overallresponsibility of its Policy and Planning Unit, so that this exercise becomes integrated in thedepartment's core activities;

L Focus on priority RD/NRM strategies and policies, especially those which will generate a,,multiplier" effect and help trigger improved strategic results in rural well-being;

> Use simple and measurable performance indicators, with explicit linkages between the KRAs/strategic areas and programs. A clear distinction between the outcome and result indicators,must also be established, such that the latter ones can be attributed directly to the performanceof the implementing agency. Agreement on the final set of performance indicators will involvea process of discussion (and "negotiation") between the implementing departments and theNEDA and DBM. The key is to ensure a common set of PIs that both the implementing agenciesand respective stakeholders will buy-in and serve as a benchmark for the periodic assessments.Accordingly, it is suggested that the selection of the specific indicators should aim to ensureacceptable, fair, and appropriate coverage of common parameters, from the perspectives ofboth implementing agencies and stakeholders;

> Promote the PI system as a mechanism for promoting incentives and motivation to get betterresults, rather than fault-finding or evoking punitive reactions.

> Institutionalize the systems in a phased manner, this process to include capacity building interms of improved data systems and technical capacity to analyze and monitor implementationperformance. Periodic management reviews by the Planning Committee should be built intothe implementation plans in order to make improvements an integral part of the implementationprocess.

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(2) Recommended Framework of the PI System

4.17 The section below includes a recommended action plan to implement in a phased mannerthe above outlined RD/NRM PI system, which provides an effective management tool to gettingimproved results and rural well-being as envisioned under the MTPDP.

(a) Priority Performance Indicators: The formulation of an appropriate set of RD/NRMperformance indicators (PIs) should include both outcome and result/management-related indicators.Table 4.1 provides an initial set of priority performance indicators which can be further refinedalong the lines discussed in para. 4.7.

(b) In-depth Strategic Studies: There is a need to identify and conduct in-depth studies onstrategic aspects of the priority PIs. These studies could address relevant issues involving thepriority strategic public sector investment programs. Some of these in-depth studies are already on-going (e.g., Impact Assessment Study for Agrarian Reformi/CARP). Other topics would requirespecial study (e.g., operational plans for reforming the RD/NRM budgetary system; irrigationsubsector; agricultural research and extension; forest management policies and experiences andapproaches to building on successful community-based approaches). Given the analytical natureof these studies, it is envisioned that the PI subcommittee should encourage the relevant Departmentto contract out the studies to suitably qualified research institutions (e.g., PIDS, several universities,consulting firms). These analytical activities and results should also endeavor to provide strongerunderpinning to the DA, DENR and DAR in developing and adapting department-based modalitiesand mechanisms for integrating MTPDP performance indicators in their internal planning andbudgeting processes. In this regard, the PI subcommittee would coordinate closely with the DA'sPlanning Service which currently is developing performance-oriented agricultural plans (see item(d) below). This experience will provide relevant inputs to the other departments.

(c) Data Systems and Weaknesses and Action Plan: There is an urgent need to address underlyingdata system weaknesses in order to ensure that reliable data underpin the performance indicatorsystem. Annex 3, Tables 1 and 2 highlight some of the more important data constraints and outlinesshort and medium term actions to address them. The design and implementation of the PI systemshould aim to focus on those PIs where these data constraints are not severe, and where necessary,use "proxy" indicators. The identified generic data constraints include the following factors:

(i) data gathering is of generally low priority across the bureaucracy, especially in the light ofusual budget constraints;

(ii) data processing is of even lower priority, so that raw data becomes obsolete;(iii) data supply does not always match data demand;(iv) Government-generated data is perceived by the private sector to be not highly reliable;(v) there is inconsistency of overlapping data across different agencies;(vi) there is difficulty in getting reliable income data due to their sensitive and non-cash

subsistence nature;(vii) development planning, annual budgeting, and monitoring and evaluation are not closely

linked;(viii) there is a lack of linkage between sector level monitoring and evaluation, and program!

project level monitoring and evaluation.

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Annex 3, Tables 1 and 2 provide further detailed assessment of these constraints according to theseven strategy performance indicator areas as well as recommended actions in the short to mediumterms.

(d) Implementation Arrangements and Roles: Working out implementation roles andarrangements of the PI system, including the complementary roles of the Planning Committee'ssubcommittee for the PI indicator system, Congress' CPBO, the NGOs, and local-level bodies.The Planning Committee has endorsed the proposal to establish a subcommittee which will takethe main responsibility to formulate and recommend to the Planning Committee relevant mid-course corrections to the MTPDP, and to formulate and implement a RD/NRM performance indicatorsystem. This initiative should build on relevant initiatives being taken by other departments. Forexample, under the "Pilot-Testing of a Participatory Agricultural Planning System (PPAPS) Project"(January to December 2000), the DA is applying a development planning activity and methodologytowards the formulation of the agriculture and fishery modernization plans (AFMPs). These areserving as "context" for the annual DA budget beginning in Year 2001. The AFMPs containperformance indicators (physical and financial targets) for programs and projects which whenaggregated at the macro level, contribute towards the achievement of sector level performanceindicators based on the MTPDP. The PI system should build on DA initiatives on sector andprogram/project level monitoring and evaluation, by interfacing the relevant organizational anddata systems. Building on the DA's initiative will also enable the subcommittee to regionalize thePI system, perhaps using the Regional Development Councils (RDCs) which are chaired by theNEDA and also mandated to monitor the implementation of sectoral programs.

In parallel, it is proposed that the CPBO proceed with its plans to operationalize its performance-based framework for assessing the budgetary allocation process, working with and building on theinitiative being spearheaded by the PI subcommittee, and that it is also made a member of the PIsubcommittee. It is further suggested that efforts should also be made to include relevant "umbrella"or sectoral-based NGOs to participate in the national and regional-based PI system andimplementation. These NGOs could also promote broader rural stakeholder consensus and supportto the implementation of priority strategies and the proposed performance indicator system, perhapsin the form of a "Citizen Report Card" for the rural sector. This would enable the participatingNGO(s) to provide independent and ground-level inputs to the Planning Committee, perhaps workingfrom a similar set of performance indicators. The precise nature and form of this collaborationbetween the subcommittee and the relevant NGO(s) should be worked out as soon as possible.

(e) Institutional Capacities: There is a need to identify the institutional weaknesses of theabove mentioned participants and to develop a supporting action plan for strengthening their capacityto steer and implement the proposed PI system. It is envisioned that the focus of the capacity-building should be in-service training, with some limited support for degree training in sectoral andprogrammatic M&E systems.

(f) Phased Implementation: Working out an operational plan to implement the proposed PIsystem, and beginning implementation in a phased manner, under the day-to-day guidance of thePI subcommittee. It is recommended that the phasing be closely synchronized with the GOP'sbudgetary cycle, with an initial focus on linking with finalizing the on-going FY01 budget, andapplying the system fully to the FY02 cycle. This link with the budgetary cycle will provide astrong incentive and "glue" for the agencies to participate. The PI system also needs to be

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"sectoralized" by department to focus monitoring and assessment of each agency's performance.A multiple-track and phased approach is suggested. This approach involves beginning the processwith an initial set of PJs to be carried out by the DA, DENR, and DAR, as spearheaded by the PIsubcommittee. It then calls for the gradual regionalization of the PI system to ensure disaggregatedanalysis and monitoring of key PIs and target groups of the poor; with the approach perhapsbeginning with the identified "convergence areas" as initial focal areas for testing the regionaldimensions of the PI system. The DBM and CPBO will then need to initiate the institutionalizationof the performance-based budgetary allocation system, somewhat in parallel the implementation ofperformance-based systems, and coordinate closely with the subcommittee. Finally, relevant NGOswill need to begin the phased implementation of their system, perhaps using a "Citizen ReportCard" for the RD/NRM sector. Over time, the PC's PI subcommittee should take the initiative topromote collaboration amongst these parallel efforts, with each meeting their own operationalobjectives, although aiming to address some common questions and Pis. During the periodicpresentations to the Planning Committee by the PI subcommittee, the CPBO and NGO representativescould be invited to contribute to the discussions and decision-miiaking process. Using the budgetarycycle, which would act as the "glue" of these initiatives, could influence the timing and degree ofconvergence of these efforts.

C) Recommended Action Plan for Institutionalizing the RD/NRM Performance IndicatorSystem

4.1 8 Notwithstanding the difficulties in establishing and implementing an effective RD/NRMstrategy performance indicator monitoring system, the recently completed consultation meetingswith the MTPDP Planning Committee and the regional stakeholders on the draft report generatedstrong support for the GOP/stakeholders to institutionalize a well-designed performance indicatormonitoring system for RD/NRM. These consultations emphasized that the framework for thissystem needs to be underpinned by prioritized RD/NRM strategies, operational guiding principles,and a strong and explicit link with a performance-based budgetary allocation system for RD/NRM.This mechanism will encourage good performance by the relevant GOP agencies in the achievementof strategic objectives and KRAs, as measured by performance indicators mutually agreed betweenthe DBM/NEDA and the relevant departments/agencies.

4.19 Based on the strong consensus to proceed with the operationalization of the suggested RD/NRM performance monitoring system emerging from this study, and building on the PI systemframework outlined above, the following six (5) point action plan is recommended:

(1) Establish and Activate the P1 Sub-Committee/Working Group: Based on the endorsementexpressed by the Chairman and members of the Planning Committee, there is a need to establish assoon as possible a PT system sub-committee to operationalize the proposed RD/NRM performanceindicator system. It is suggested that the NEDA coordinate the formal establishment of this body,perhaps through an appropriate administrative circular signed by the PC Chairman, and activatethis PI subcommittee. In the meantime, the NEDA-Agricultural staff is already taking the initiativeto convene on an informal basis the likely core members of the proposed subcommittee. Themembers of this subcommittee should be senior officials, perhaps with the rank of at least anAssistant Secretary, and Director as alternate member, supported by the relevant technical staff.These officials should come from the DA, DAR, DENR, DBM, CPBO, selected NGOs (e.g., CODENGO, PHILRA), and NEDA. The NEDA-Agricultural staff would act as the Secretariat, and the

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subcommittee members could select the Chairman/Co-Chairman. The main framework TOR forthis subcommittee could include three key elements to be further developed and agreed during itsfirst meeting. The first of these elements is the working out of the principles and arrangements fordeveloping, perhaps by mid-2000, specific recommendations for mid-course corrections/improvements of the relevant RD/NRM strategies involving the MTPDP. Relevant recommendationswould then need to be made to the Planning Committee as decision points, perhaps building on therecommendations outlined in para. 4.4). The subcommittee could also recommend to the PC of theMTPDP improved approaches and mechanisms that would improve the implementation and resultsof the priority RD/NRM strategies. The second element is the establishment and implementationof an RD/NRM PI system that could be used as a tool to monitor implementation of the MTPDPpriority strategies, building on the framework outlined in para. 4.17. The third element is theconduct of relevant sectoral and multi-sectoral consultations and feedback activities with keystakeholders on the implementation of the MTPDP, and to use this feedback as part of the first andsecond elements.

It is also suggested that each Department Secretary formally designate, perhaps by issuing an internaladministrative order, the relevant unit and working staff within its department to implement therelevant PIs. As discussed in para. 4.14, it is also recommended that this subcommitte becomplemented by additional PI monitoring mechanisms to help ensure timely and credibleimplementation of the PI system. Accordingly, the NEDA's active support for the implementationof this performance indicator and performance-based budgetary allocation systems would helpreinforce the perception that the NEDA is taking a proactive role in promoting the effectiveimplementation of the MTPDP. It is understood that carrying out the above functions will requirehighly motivated and professional staff. Accordingly, the Management in each Department concernedis encouraged to appoint dedicated staff and to give due recognition of their contributions withinthe Government's existing system of financial and non-financial incentives. The participation ofNGOs is based on their specific mandates and resource availabilities to enable their participation.

(2) Prepare Detailed Operational Plan for Phase 1: The Performance Indicator Systemsubcommittee, supported by the relevant department technical staff and possible short termconsultancy assistance, would work out a detailed operational plan for the initial phase of theproposed performance monitoring system. This work could build on and further sharpen thesuggested Pls developed by the study team. These "primary" and "secondary" performance indicatorsare outlined in Annex 3, Table 1, with a reduced number of primary PIs (outcome and results)illustrated in Table 4.1. The operational plan should include the spatial and timeframe dimensionsof the PIs. Also, over the next few months, the study team members and members of the PIsubcommittee plan to continue focus group discussions with the relevant departments on selectedstudy report annexes. The results of these discussions could also contribute to this consensus-building process, and to the formulation and implementation of priority performance indicators.The PI subcommittee/working group should also aim for the detailed operational plan to includedisaggregated performance indicators according to regions and key poverty groups, subject to theavailability of data. The study team has identified the main data and institutional issues andrecommended actions to help operationalize the proposed performance indicator system in a phased,disaggregated and bottom-up manner. Finally, the operational plan would include identifying therequired data systems and, capacity-building, and technical assistance needs of the participatingagencies, along the lines outlined in para. 4.17 (c), with further details outlined in Annex 3, Tables2 and 3.

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The analytical aspects of the foregoing activities in terms of impact assessments may becomplemented and supported by the participation of a suitably qualified independent researchinstitution(s) (ref. para. 4.17 (b)). The PI subcommittee should aim to include in the operationalplan the priority areas for in-depth assessment, prepare focused TOR, and help arrange their fundingand implementation.

(3) Initiate First Phase: It is suggested that the result of the detailed operational planning phasefocus on reaching consensus on a small and manageable number of "primary" performance indicatorsas the basis of an initial implementation phase. The initial phase would aim to test and work out theimplementation modalities, and address both "supply" and "demand" issues involving the PI system.It could be completed by end-2000, and give special attention to developing indicators as part offinalizing the FY01 and FY02 budgets for the rural sector agencies. The focus on the FY01 andFY02 budgets will enhance the operational focus of this PI system framework. Based on the initialresults of the first phase, it is anticipated that the performance monitoring system could be fullyapplied during the FY02 budget cycle. The first phase could be coordinated and facilitated by thePIs subcommittee; the day-to-day implementation of the Phase 1 would be the main responsibilityof the NEDA Agriculture Staff, supported by short-term consultant(s), and working closely withthe relevant participating institutions. The PC would provide overall guidance, based on periodicmanagement reviews, conducted, perhaps every six months. This first phase could also include theapplication of the PI system in a number of "convergence" sites agreed by the subcommittee, andthe use of the system to test the "convergence" of the local and national performance monitoringsystems. The PI subcommittee should also endeavor to coordinate closely with the parallelperformance indicator systems which are also in the process of being launched by other stakeholders(para. 4.14).

(4) Implement Phase 2: Based on the implementation experiences of Phase 1, the PIsubcommittee would endeavor to formulate and implement Phase 2, with a focus on supporting theimplementation of the full FY02 budget cycle. It may also expand the participation of the NEDARegional Staff, Regional Development Councils, DILG Regional Development Councils and theLeague of LGUs, in the institutionalization of steps to further decentralize the performancemonitoring system to the regional/local levels. It is also envisioned that NGOs would take a moreactive role during this phase, as already discussed in para. 4.14 (b). This approach is also likely tobroaden the effective demand for, and credibility of, sustaining the performance indicator system.As this system shows positive results, it could be used by the relevant agencies to support theirrequests to Congress for increasing funding, and would provide a more objective basis for budgetallocations and decisions, compared to the current ad-hoc system of budget negotiations.

(5) Mobilize Funding: The NEDA, in collaboration with interested donor agencies, shouldnow mobilize funding support in order to operationalize the RD/NRM performance monitoringsystem. There are several options, including the following choices which are not mutually exclusive:

3> Mobilize support from the on-going Expenditure Management Improvement Project that isfunded by the Institutional Development Fund (IDF) and being managed by the DBM. TheNEDA is already discussing with DBM staff the specific arrangements of the collaborationarrangements. Apparently, funds are currently available to support this initiative, and the IDFProject's priority of focusing on addressing these needs as part of the FY02 budget cycle coincides

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with the thrust of the proposed PI system. The experiences gained from the rural sector couldalso be applied by the DBM and NEDA to other sectors;

) Mobilize grant funding from interested donors, especially for efforts to enhance capacities andstrengthening data systems, although accessing this fund source may take some time; and

- Utilize existing NEDA funds and staff to initiate implementation of the recommended PIframework and supporting operational plan for the initial phase, although these funds andmanpower are not likely to meet the full requirements.

ANNEX 1

MTPDPD Rural Development /Natural Resources ManagementTrends and Strategies Implementation

Stakeholders Feedback Workshops(Draft Report)

ByElmer S. Mercado2 "

World BankManila, Philippines

March 2000

20 Natural Resource Management Policy Advocacy Advisor, Natural Resources Management Programme-CoastalResources Management Project (NRMP-CRMP), a DENR project funded by the United States Agency for InternationalDevelopment and former Undersecretary for Environment and Field Operations. DENR.

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1. Background

Phase 2 of the RD/NRM is part of the continuing effort between the Government of thePhilippines (GOP) and the World Bank (WB) in seeking an approach to operationalise rural sectorwork in the context of the implementation of the new Philippine Medium-term Development Plan(1999-2004). This effort is focused on the development of strategic performance monitoringindicators that shall serve as decision-making inputs to the MTPDP Planning Committee onAgriculture and Natural Resources Management in the identification of relevant institutional, policy,operational and planning directions to key rural sector area agencies.

The stakeholders' feedback workshop is the second stage of a two-step consultation processthat started last October 1999 involving key rural sector stakeholders, including basic sector andcivil society participants, representing Luzon, Visayas and Mindanao. The results of the firststakeholders consultation workshops was a prioritisation of strategic objectives, inputs andperformance indicators from the long list of objectives, targets and inputs identified in the 5 KeyResult Areas (KRAs) of the MTPDP. The workshop results served as inputs in the rural sectorstudy commissioned by the Bank as key component element of the Bank's assistance to the GOP.

The second stage of the stakeholders' workshop is a feedback workshop of the results of theoutputs of the rural sector study team on the trends and analysis of the country's rural developmentstrategies as it relates to the priorities, objectives and targets of the MTPDP. The feedback workshopswas composed of the same core of representatives from the first stakeholders consultation lastOctober 1999 as a follow-through and link up of the stakeholders' output with the study team's.This process of engaging the participation of local stakeholders in the rural sector in formulation,identification, planning and monitoring of the implementation of the MTPDP is expected to serveas initial steps towards the institutionalisation of a system of participatory and consultation processin the performance monitoring activities of the GOP.

2. Workshop Process and Methodology

The phase 2 stakeholders' workshop is basically a feedback consultation of the findings ofthe rural study team on the trends and analysis of the country's rural development strategies, prioritystrategies and objectives as related to the new MTPDP, and suggested performance monitoringindicators (i.e. outcomes and outputs) on the implementation of the MTPDP. A consolidatedmatrix of recommended summary framework of strategic RD/NRM performance monitoringindicators is one of the outputs of the study.

The matrix is divided into seven (7) strategic performance indicator areas:* agricultural growth and performance* rural poverty* food security* rural sector investments(public sector, private sector and rural finance)* agrarian reform* natural resource management* institutional arrangements ( devolution/convergence)

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The matrix consolidates and integrates the 5 KRAs in the MTPDP and the strategic areaobjectives (i.e. rural poverty and food security) of the Plan. Other components of the matrix listsdown a set of strategic objectives and priority performance indicators for each of the 7 strategicareas.

The feedback workshop used the consolidate matrix as the main document for discussion.A critical focus of the participants is the appreciation of a holistic view of the interrelationship andlinkages of strategic objectives with the key issues and trends for each strategic area. The reducedlist of priority indicators was also seen as integrated elements for performance monitoring of thestrategic area.

The seven strategic areas were further divided into two main discussion areas of the workshop.One focuses on core objectives - agricultural growth and performance, rural poverty, food securityand rural sector investments, and the other focused on sectoral objectives - agrarian reform, naturalresource management and institutional arrangements. Discussion on these areas centered on furtherrefinements and focus for both strategic objectives and performance indicators.

A further prioritisation of performance monitoring indicators of the proposed 64 indicatorsfor the 7 strategic areas was also done. A third level of discussion focused on suggestions andrecommendations for operationalisation and institutionalisation of the MTPDP performanceindicators system.

3. Overview of Workshop Results

a. General Observations

1) Most of the strategic objectives and priority indicators in the study team matrixmostly validated the observations and prioritisation laid down by the stakeholdersduring the first consultation workshop. This indicated that the results of the 'expert'study on the trends and analysis of the country's rural development strategies overthe years were clearly manifested and appreciated by the sector's stakeholders;

2) There was a general agreement on the 7 strategic areas of the matrix as a furtherexpansion of the 5 KRAs identified in the MTPDP;

3) In most cases, the stakeholders agreed to the strategic objectives identified in thematrix. Only in the area of devolution were the stakeholders actually proposed theinclusion of another strategic objective on LGU capacity building. At most, furtherrefinements and clarification in formulation were proposed reflecting specificstakeholders interest areas (i.e. fishery) and assurances over coverage of the objectives(i.e. market infrastructure includes transportation, market information, etc.). Thereis a further need to emphasize the interrelationship and holistic viewing of theidentified strategic objectives;

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4) In the area of priority indicators, stakeholders had a more active and more dynamicparticipation and interest in redefining, refining and further specifying the parametersof the proposed indicators. Of the 64 proposed performance indicators, a total of 41were prioritised as primary indicators. At least 5 new performance indicators weresuggested outside of those in the recommended list;

5) A good number of the proposed indicators were further subjected to more focusedand more relevant (i.e. practical) presentations. Among those that generated morefocused formulations were the priority indicators on agrarian reform, devolutionand private sector investments;

6) The stakeholders tended to mix both output (results) and outcome indicators. Agood number of the stakeholders were focusing on issues of implementation andoperationalisation of the indicators in the course of the prioritisation of performanceindicators.

7) Most of the stakeholders recommendation on institutionalisation andoperationalisation of the performance indicator monitoring system focused onexpanding and assuring the participation of regional and local stakeholders andagencies in planning, budgeting and monitoring of performance.

8) Mindanao and Visayas workshop participants expressed apprehension on thereliability, availability, capacity and support on the generation and integration ofperformance data and benchmarks of each agency in the rural sector. There is ageneral sentiment that the process of generating the proposed indicators will resultto a major over-all of existing and more familiar data gathering and reporting systemsof government agencies and units.

9) A majority of the participants acknowledge the need for the NEDA to play a moreactive role in the performance monitoring of the key rural sector agencies. InMindanao, it was recommended that NEDA be given a mandate by the key ruralsector agencies (i.e. DAR, DA and DENR) to play an active and direct role inproviding guidance and recommendations in the planning and implementation ofagency performance commitments to the MTPDP.

b. Process observations

1) The content of the workshop was generally more focused and less tedious than thefirst phase workshop. The fact that the feedback workshop focused on a more holisticviewing of the activity provided the participants with a clearer idea of the discussion.This afforded the participants more time in discussion of issues while being able tocomplete the expected outputs of the workshop;

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2) Participants had more opportunities for discussion and interaction because of thefocused matrix. These resulted into further refinements and contextualisation of theparameters by which the strategic objectives and proposed performance indicatorsshall be based. In the case of the Luzon workshop, participants had a very activediscussion on the core objectives of agricultural growth, rural poverty, food securityand rural sector investments;

3) The Luzon arid Visayas workshop had a more balance representation in terms ofbasic sector representatives as well as participants in the first phase workshops.The Mindanao workshop was limited to core agency (i.e. NEDA NROs); basic andcivil society representatives due to a regionwide transport strike during the workshopday.

4) The expanded participation of NEDA NROs provided extended views of the regionalconditions of the current status of the MTPDP's implementation at the regionallevel.

5) For Visayas and Mindanao, the workshop was conducted in plenary discussion whilethe Luzon workshop participants were divided into two workshop groups along thetwo discussion areas from the proposed 7 strategic performance areas.

4. Summary Workshop Results and Remarks

a. Strategic Objectives

1) Agricultural growth and perfornance

* Stakeholders have a general consensus on the objectives of this strategic area.Emphasis, however, were expressed on the composition and type of public(govermment) support to rural infrastructure, markets, R&D and extension activities.A strong focus on improvement of transportation, i.e. shipping, was expressed byMindanao stakeholders.

* Government structural reforms must be rationalized so that when other sectors whichare non agri-based industries are being benefited by government policies, this willnot be counterproductive to the agricultural sector.

* The economic share of the agricultural sector is not reflected in terms of actualcapital infusion (either from public and private sources) to the agricultural sector.There should be a balance of budgetary allocation as a reflection of plowing backthe contribution of the agricultural sector instead of the funds being unfairly divertedto development activities in the urban areas.

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* Government policy intervention should address both ends of the production system.Any appropriate intervention should address inputs (both domestically sourced andimported raw materials such as fertilizers). These policies should encouragepositioning and dispersion of agri-industries to the rural areas.

* Public support should not only focus on basic agricultural production but moreimportantly on on-site value-added agri-based processing to increase returns to thelocal communities (as supported by R and D and extension services). In areas wherethere is dearth in private investments, the government should provide the neededinfrastructure under BOT-type arrangements.

2) Rural poverty

* All the workshops supported the basic objectives in this strategic area with furtherrefinements on the context of relating rural welfare outcomes with respect to absolutepoverty.

- There has to be a definitive, consistent and complementary anti-poverty frameworkand action agenda among the different agencies of government. Only then can anacceptable poverty monitoring indicator system be instituted holistically and mademeasurable over time.

- Government must enlist the participation of the basic sectors in developing a soundpoverty monitoring system to ensure transparency, accountability and ownership.

3) Food security

* General consensus was achieved by the 3 workshops on the stated objectives in thisarea. This component was largely related and tied to the strategic area on agriculturalgrowth and performance as interrelated to assure that both objectives of growth andfood security compliment each other.

* It was also suggested that trade protection and public expenditure must be focusedon enhancing small holder productivity, competitiveness and facilitation of privatesector trade.

* "Access" in the context of the study include people's capacity to avail of "mixedcommodities" at stable prices on year-round basis.

4) Rural sector investments

* No major refinements in the strategic objective were suggested by the stakeholdersexcept emphasis and clarification on areas of rural savings generation and theallocation of private sector investment to infrastructure on rural development projects.

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* In the case of public sector investments, closer integration between planning andbudgeting among ANRE agencies is being pursued in order to strengthendecentralisation and cost sharing with LGUs.

* Other comments centered on the issue that budget restructuring should be taken inthe perspective of institutional restructuring.

5) Agrarian reform

* Outside of a basic consensus on the objectives, other stakeholder comments focusedhighlighting the development of ARB's capabilities and expanding ARBs to includeCARP beneficiaries in the upland areas.

6) Natural resource management

* Some of the refinements in the NRM strategic objectives called for emphasis onindigenous peoples rights in the context of issuance of tenurial instruments, i.e.ancestral domains, and appropriate representation in NRM management bodies suchas the protected area management boards (PAMBs).

* Other comments highlighted implementation of national coastal and marinemanagement policy and practice.

7) Institutional arrangements

* A major addition to the strategic objectives on devolution was on the capacity buildingof LGUs to perform basic social services and mandated tasks under the LocalGovernment Code.

* Some participants also expressed indifference on the prioritisation of the reviewand amendment to the Local Government Code which was largely due to thelegislative requirement on its review after 5 years of implementation.

* On convergence, a major refinement by Luzon and Mindanao stakeholders washighlighting the objectives on operationalisation of the convergence strategy at thenational level.

b. Priority Performance Indicators

I) Agricultural growth and productivity

* There was a consensus on the priority indicators identified by the study team andthe stakeholders, specially on the indicator for growth rates by major commoditiesand measures of revealed competitive advantage where all workshops identifiedthem as priority indicator.

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* However, in the case of growth rates Luzon stakeholdersthat emphasized that thereare distortions in the pricing of major commodities from the inputs to the outputsand that an indicator should be developed to capture these distortions.

* For secondary indicators, a new indicator was suggested to include funding for R&D.

2) Rural poverty

* From the four (4) priority indicators identified in the study team matrix, thestakeholders supported two (2) indicators as primary - food expenditures vs totalhousehold (HH) expenditures and poverty incidence, depth and severity. Stakeholdersfrom Visayas and Mindanao prioritised measures for rural employment based oncriteria set by Labor Force Survey as primary indicator.

* Similarly, Mindanao and Luzon stakeholders felt that there was no single socialservice sector indicator that could be prioritised and therefore suggested a general"access to basic services (education, health care, water and other utilities, masshousing and electrification) as a primary indicator, if not break them into sub-indicators. In the case of Luzon stakeholders, rural electrification was also cited asa priority indicator.

* For secondary indicators, measures for safe water, malnutrition, infant mortality,and rural non-farm income were commonly identified by all 3 workshops.

3) Food security

* A general consensus was reached between the study team recommended three (3)priority indicators and the stakeholders for food security - rice prices, fiscal subsidyand effectiveness of rice targeting, and public expenditures for rice productivity(i.e. irrigation and technology). Public expenditures for rice productivity was thecommon primary indicator for all 3 workshops.

* For secondary indicators, stakeholders proposed an indicator for NFA reforms andrelated financial indicators on grains trading and management. This is primarilydue to the common appreciation of the stakeholders that rice supply and ricetransactions remains a major national food security policy element. In the Luzonworkshop, "rice" was viewed as proxy performance indicator to mark trends onfood security.

4) Rural sector investments

Public sector investments

* The stakeholders identified as primary indicators all the four (4) performanceindicators proposed by the study team (only two were prioritised in the matrix).

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This came from the general sentiments of the stakeholders that public sectorinvestments in the sector has to be accelerated to propel growth and productivity.Luzon stakeholders related budgetary allocations must be tied to efficiency andeffectiveness of use of public funds.

* A fifth (5) indicator was proposed by Mindanao stakeholders on strengthening therole of Regional Development Councils (RDCs) in the budgetary process.

Private sector investments

* Stakeholders prioritised only one (1), breeding stocks and tree crops investments,of the three (3) indicators proposed as primary by the study team. The other primaryindicator relates to agricultural and fishery production.

* Many of the stakeholders expressed that private sector investments are necessarilytied to incentives and relaxation of bureaucratic procedures for private sectorinvestments to come into the sector. This involves among other things simplificationof regulatory and permitting functions of both national and local governmentagencies.

* For secondary indicators, bank loans to agriculture was the most common but withqualifiers that include actual loans and long-term loans to agriculture.

Rural finance

* The stakeholders prioritised three (3) indicators as primary but felt that others couldbe merged. These include proportion of borrowings( formal/informal sources) withincidence of borrowings and loan repayment for AMCFP with collection efficiencyof AMCFP.

* It should be stressed that in the case of rural finance, stakeholders were stronglyrecommending measures for increasing access to loan by small and mediumfarmholders and actual loans/savings generated for the rural sector.

5) Agrarian reform

* Of the three (3) priority indicators in the matrix, two indicators were identified bystakeholders as primary but with more focused and specific refinements. In thecase of the indicator for number of hectares of land redistributed, Luzon stakeholdersbroke down the indicator to include number of hectares redistributed actuallyoccupied and redistributed lanzds reverted. This qualifier stems from the premisethat existing data merely captures paper or documented releases of land but notnecessarily lead to actual occupation by target beneficiaries. Luzon stakeholdersmentioned that this indicator should also be related to land conversion rates.

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* The other primary indicator that was redefined was the trend in household income.All stakeholders held the view that increases in household income must be focusedto CARP beneficiaries and with the national or regional poverty incidence as abenchmark.

* For secondary indicators, the stakeholders have a consensus on extent of land rentaltransactions, length of time to litigate land disputes and number of landless andpoor being able to access land. Further refinements were added to indicators onjoint ventures by CARP beneficiaries in 'terms of arrangements and schemes' whileVisayas stakeholders suggested indicators for landlord reinvestment (CARPpayments) to rural sector.

6) Natural resource management

Five (5) priority indicators were suggested by the stakeholders from the eight (8) listedin the matrix. The improvement of forest cover, pollution levels (and water quality),number of tenurial instruments and fishery production levels were common priorities toat least two workshops. In the case of forest cover, it was clarified that the indicatorrelates to actual tree stands in reforested areas not just replanted trees or reforestationactivities.

For secondary indicators, fees systems and user fees collected and land conversion rateswere supported by a majority of the stakeholders. Land conversion rates is consideredas both a positive or negative indicator (e.g. forestland to kaingin/agricultural use orabandoned fishpond areas to recovered mangrove areas).

7) Institutional arrangements

Devolution

* Stakeholders had a varied prioritisation of primary indicators on devolution thanthe study team's. Stakeholders viewed LGU generation of revenues and civil societyparticipation in LGU special bodies as critical indicators of devolution. This comesfrom the understanding that the main arena for devolution to work is at the locallevel and therefore prioritisation must be focused on making actual local governancework.

* Similarly, Luzon stakeholders suggested new indicators (priority) on investmentgeneration by LGUs and local service delivery effectiveness as well as actual plansprepared and implemented by LGUs (secondary).

Convergence

* Indicators related to actual implementation and operationalisation of the convergencestrategy at the field level were the focused of the suggested primary indicators ofthe stakeholders. These include budgetary allocations and issuance/implementation

Annex 1/11 of 12

orders by agencies on convergence activities and MOUs/MOAs entered into by theagencies to implement specific aspects of convergence activities in priority areas.

* As a result of the reformulation of the strategic objective on national leveloperationalisation of convergence, the reactivation and regular functioning of theconvergence steering committee was seen as a primary indicator by Luzon andVisayas stakeholders.

5. Recommended Institutionalisation and Operationalisation of Performance Indicators

Many of the discussions during the feedback workshops inevitably veered towards questionsof institutionalisation and operationalisation of the performance indicators not only within thenational agencies but also in regional and local agencies.

Stakeholders felt that coming out with a mechanism to integrate both local and regionalstakeholders and agencies, i.e. NEDA regional offices and Regional Development Councils, willprovide a better appreciation and groundlevel validation of the prioritisation and accomplishmentsbeing reported by the agencies.

Others expressed apprehension that operationalisation of performance indicators will leadto drastic changes in the existing reporting and monitoring system already being utilised by keyagencies, i.e. NEDA, Bureau of Agricultural Statistics. Such changes will eventually delay thefunctionality of the indicators not only as measures of performance by agencies but also as tools fordecision-making and allocation.

Other recommendations from the stakeholders include:

a) Expanding the role of private sector and civil society as equal partner at both nationaland local level of the performance monitoring system;

b) Assure continuing commitment of NGAs to monitoring targets and indicators thatshould be reflected in actual budget or resources allocated to implement monitoringprocess and the responsiveness of the Planning Committee to act on outputs andresults of monitoring process, i.e. shifts in direction and changes in allocation;

c) Development of a rural development governance index patterned after the HumanDevelopment Index of the UNDP. The RD governance index shall be a compositeof the prioritised performance monitoring indicators that shall serve as basis forevaluation qualitative changes in rural sector;

d) Installation and recasting of appropriate database and information generation andstrengthening of relevant database systems in key agencies;

Annex I / 12 of 12

e) Use of performance indicators as a measure of effective management andaccountability for key rural sector agency management and officials;

f) Strengthening of regional participation and involvement, i.e. RDCs, in the budgetingand planning process for the sector; and,

g) Strengthening of NEDA's mandate (national and regional) as main monitoring bodyfor performance indicator along with Regional Development Councils as counterpartof the Planning Committee at the regional level.

Several inputs from the NEDA regional offices and central units suggested that the indicatorsbe related to either the Sector Effectiveness and Efficiency Review (SEER) or the National Testingo Indicators for Sustainable Development (NTISD) project of the Philippine Council for SustainableDevelopment (PCSD). At the regional level, this could be made a specific section on the annualregional development report being prepared by the NEDA regional offices in coordination with therespective regional offices of the various national agencies.

Other areas for integrating the performance indicator system in the Executive Departmentwill be through the Presidential Management System (PMS) which prepares the annual performancereport of the Executive, i.e. Ulat sa Bayan, and yearly State of the Nation Address (SONA) deliveredby the President at the start of the new year in January and opening of Congress in July, respectively.

A further step is to relate the performance indicators in the legislative process of the GeneralAppropriations Act (GAA). The House of Representatives and Senate have their respectivecommittee on appropriation/finance who are mandated to provide oversight functions on governmentagency performance and use of budgets appropriated by Congress.

There are also technical offices in both chambers who actually conduct reviews and analysisof government agency performance and budgets. These are the Congressional Planning andBudgeting Office (CPBO) in the House and the Legislative Budget Review and Monitoring Office(LBRMO) in the Senate. Both of these offices provide technical and analytical support to bothchambers' committees on appropriation and finance, respectively.

These along with efforts to achieve a common framework and consensus between theplanning and budgeting agencies of thc GOP on the targets, objectives and monitoring indicatorsfor the rural sector are areas for the subsequent institutionalisation and operationalisation ofperformance indicator monitoring in the GOP.

ANNEX 2

RD/NRM Performance Indicator System:Summary Matrices According to Performance Indicator Area

Summary Matrices According to Performance Indicator Area

(1) Agricultural Growth and Performance (Annex 5)

(2) Rural Poverty Reduction (Annex 6)

(3) Food Security (Annex 7)

(4) Agrarian Reform (Annex 8)

(5) Rural Sector Public Expenditures (Annex 9)

(6) Public expenditures: Rural Roads (Annex 10)

(7) Private Investments in Agriculture (Annex 11)

(8) Rural Financial Sector (Annex 12)

(9) Natural Resources Management (Annex 13)

(10) Decentralization and Devolution (Annex 14 and 15)

Table 1: Agricultural Growth Performance (Annex 5)

Key Issues Strategic Intervention Suggested Indicators Institution Remarks

Declining competitive Public investments in Growth rates at aggregate level NEDA Due to wide annualadvantage/stagnating growth-enhancing and by major commodities fluctuation of agriculturalproductivity public goods and a) gross value production, average growth

services, particularly added/production rates must be estimated usingR&D and extension, b) total factor regression analysis orirrigation, etc. productivity computed on a 5-year moving

c) land productivity or average.yield

Measures of revealed competitive NEDA Requires improvement in dataadvantage trade openness, and availability and quality,price production. particularly for total factor

productivity measurement andfor proper attribution to theMTPDP.

Limited Reducing dispersion of Ratio of non-traditional NEDA Computed based on nominaldiversification agricultural protection commodities (and fisheries and real terms

across commodities. livestock and poultry) to totalGVA.

Greater public support Measure of dispersion (e.g., CV) NEDAfor market of agricultural protection acrossinfrastructure, market commodities.development, R&D andextension activities fornon-traditionalcommodities.

Annex 2/3 of 28

Table 2: Rural Poverty (Annex 6)

Priority List of Rural Poverty Indicators

Poverty Concern/ Information Frequency Content/Description & Source Level of sub-nationalPriority Component System Purpose aggregation

"Ends" Measures Family Triennial, Family income and NSO Provincial (since 1994),Income and since 1985 expenditures, sources of sectoral

Poverty Expenditures incomes, spendingincidence, depth, & Survey patterns; benchmarkseverity (FIES) information for CPI

Annual Annual Family income and NSO Provincial (since 1998)Poverty (except expenditures; accessIndicator FIES indicators to basic needsSurvey years), and social services;(APIS) since 1998 employment status of

Education household members

(i) Functional FLEMMS Data on functional NSO Regionalliteracy literacy, education, and

mass media exposure(ii) Primary & HSenrolment rate

Infant mortality Health Info Annual Data on mortality/ DOH SectoralSystem morbidity from notifiable

diseases, nutrition status& deficiencies, healthservices & sanitation

Malnutrition National Once Nutrition status, food FNRI Regionalprevalence Nutrition every 5 adequacy, nutrition

Survey years deficiencies, and relatedsocio-economic

"Meso" Measures information

Rural employment ISH-Labor Quarterly Data on the employed/ NSO RegionalForce Suvey unemployed, and on other(LFS) relevant characteristics of

household

Rural nonfarm FIES Triennial, See FIES above NSO Provincial (since 1994)income (as % of since 1985total HH income)

Food expenditure FIES Triennial, See FIES above NSO Provincial (since 1994)(as % of total HH since 1985expenditure)

Access to safe water FIES, APIS Annual, See FIES/APIS above NSO Provincialsince 1997

Access to health care FIES, APIS Annual, See FIES/APIS above NSO Provincialsince 1997

Table 3: Food Security (Annex 7)Enhancing Food Security in the Philippines: Interim Key Result Areas, Indicators and Agencies Responsible for Result Areas

Key Issue Priority Strategy/Key Result Area Suggested Indicator Responsibility Remarks

The government maintains a buffer stock equal to 30- Level of buffer stocks held by National Food Authoritydays of national consumption at the onset of the lean government by July 1;season each year. The stocks are either sourced from budgetary outlay ofdomestic procurement or from importation. government for maintaining

the buffer stocksWholesale and retail rice Department of Agriculture-prices Bureau of Agricultural Statistics

In January of each year, the rice import quota is Wholesale and retail rice Department of Agriculture-determined (based on the gap between local supply and prices Bureau of Agricultural Statistics

Rice Price demand, net of the NFA's requirements for bufferStabilization stocking) and auctioned off to private sector importers. Utilization of auctioned rice National Food Authority Aside from addressing possible

import permits Department of Agriculture-MAV shortages, allocating the quotaSecretariat mainly to the more efficient

private importers will result inlower prices for consumers.

The NFA's procurement and release prices are made Farmgate palay prices; Department of Agriculture- If permits are not utilized, theremore responsive to market prices. Local production wholesale and retail rice Bureau of Agricultural Statistics could be a shortage.costs, world prices and movements in the exchange rate pricesare factored into the computation of these NFA prices.

Intemationally Marketing costs for primary agricultural products Farm-to-market road density Department of Agriculture; The stress on roads is for aCompetitive reduced through improved road system Local government units sector-neutral marketAgriculture infrastructure.(also a long- Improved, and better access of farmers to, irrigation Private sector investments in Department of Agriculture; Local irrigation facilities/servicesterm issue) services irrigation facilities, including National Irrigation can be supplied by private

maintenance thereof Administration; Local sector providers, particularly forgovernment units communal projects. Farmers

may enter into a contract withsuch providers where they payirrigation service fees in thesame way that road users payfor toll roads. Government can >encourage such contracts tooccur through regulations orlaws (if needed) or technicalassistance in project develop- 4~ment particularly from the NIA. o



Access of farmers to more and improved agricultural Amount appropriated for Congress; Department of The AFMA already providestechnologies broadened subsidizing basic agricultural Agriculture that amounts be set aside for

technology development this purpose.Plant variety protection and Congress; Department of This is a commitment to theregistration bill enacted Agriculture WTO under the TRIPs

Agreement.Regulations issued for the Department of Agriculture; With availability of suchcommercialization of Department of Science and technologies in othertransgenic agricultural Technology countries, the prospect ofproducts accelerating agricultural

modernization is higher iffarmers are provided betteraccess to such improvedtechnologies. To addressconcerns for bio-safetyparticularly fromenvironmental groups, thereview of existing field testingregulations for transgenicmaterials needs to be done.

Regulations reviewed and Department of Agriculture;improvements adopted for the Department of Science andfield testing of transgenic Technologyagricultural products

Reduced tariff rates on products used as inputs in Statutory tariff rates Department of Agriculture- The Philippines hasagriculture, including packaging materials and Policy Analysis Service; NEDA unilaterally committed totransportation equipment Tariff and Related Matters APEC a tariff policy regime

Committee between 0-5% in 2003 exceptfor sensitive agriculturalproducts. An Executive Orderhas yet to be issued to enable ;>this.

0<

I'



Agricultural products better safeguarded against Legislation enacted and Congress; Department of The proposed legislationdumping, subsidized agricultural exports, and import regulations issued for WTO- Agriculture; Tariff Commission include: General Safeguardssurges consistent anti-dumping, Law and Agriculture Special

Targeted countervailing, and Safeguards Law.Rice safeguards measures Implementing rules andSubsidies to regulations are yet to bethe Poor issued on these and the anti-(also a long- dumping and countervailingterm issue) laws.

Enhanced capacity to export agri-based products International sanitary and Department of Agriculture - This will also protect locallyphytosanitary standards Bureau of Agriculture and grown crops and livestockadopted Fishery Product Standards, from pests and diseases that

Bureau of Plant Industry, agricultural imports mayBureau of Animal Industry, introduce into the country.National Meat InspectionCommission, Bureau ofFisheries and AquaticResourcesDepartment of Health - Bureauof Food and Drugs

A cost-effective scheme designed, adopted, and Delivery scheme of targeted Department of Agriculture- The NFA has piloted a smallimplemented to target rice subsidies for lower income marketing assistance for Policy Analysis Service, program since 1997. Thegroups. missionary local rice markets proposed Grains Sector

Amount appropriated each Department of Agriculture; Development Program of theyear for targeted rice NEDA Development Budget ADB lists this reform in thesubsidies benefiting lower Coordinating Committee; program's policy reformincome groups. Congress matrix.Institution(s) set up to Department of Agriculture;implement the targeted rice Department of Budget andsubsidies program. Management

.



Fiscal Given the above results, fiscal subsidies to the NFA, and Amount of operational Department of Agriculture;assistance ceilings for DOF-guaranteed commercial notes of the subsidies to the NFA Department of Finance;to the NFA NFA reduced indicated in the General National Food Authority

reduced to Appropriations Act; ceiling inlower the the financial guaranteesbudgetary granted by the Department of

deficit while Financeensuring Given the above results, non-core and special assets of Proceeds from NFA asset Department of Finance;

food security the NFA sold to partially retire its debts. sale; amount of NFA debt National Food Authority(also a long- retiredterm issue)

00

Table 3: Food Security (Annex 7)Table 4.2 Enhancing Food Security in the Philippines: Long-Term Key Result Areas, Indicators and Agencies Responsible for Result Areas


In January of each year, rice import quota is determined Target and market wholesale Department of Agriculture- Requires amendments to NFAand auctioned to private sector importers to support the and retail rice prices National Rice Board; Bureau Charter to decouple the NFAcurrent annual national rice consumption at the target of Agricultural Statisticswholesale price set initially at 50% above first warehouse Local rice production; target Department of Agriculture- Requires amendments to NFAprice of imported rice. Target price changes kept within national use of rice; target rice National Rice Board; Bureau Charter to decouple the NFAplus or minus ten percent from immediately preceding imports of Agricultural Statisticslevel by appropriate adjustments in statutory in-quota Utilization of auctioned rice Department of Agriculture- If permits are not utilized,tariff for rice. Market wholesale rice prices fluctuate import permits National Rice Board; Bureau there could be a shortage.within plus and minus five percentage points around the of Agricultural Statistics The assumption is that thetarget price. WTO tariff binding

commitment in rice allowsDepartment of Finance- flexibility for varying applied in-Bureau of Customs quota tariff rates.

Regional wholesale rice prices deviate from the national Regional wholesale and retail Department of Agriculture- Regional rice markets areRice Price target price to the extent of competitive rice marketing rice prices; marketing costs National Rice Board; Bureau reasonably integrated.Stabilization costs. Regions with extraordinarily high marketing cost of Agricultural Statistics

are identified and provided with marketing assistance to Delivery scheme of targeted Department of Agriculture- The scope of work for this cankeep rice prices in these markets at comparable levels marketing assistance for Policy Analysis Service be incorporated in that forwith the rest of the country. Mechanism for delivering missionary local rice markets poverty-group targeted riceassistance to be designed. subsidy.

Fiscal subsidy for targeted Department of Agriculture- The National Rice Board shallmarketing assistance National Rice Board have access to a contingency

fund.Average palay price at the farm level is no less than fitty Regional farmgate prices of Department of Agriculture- Market farmgate palay pricespercent of target rice price. Regional palay farmgate palay National Rice Board; Bureau on average are half theirprices may deviate from this average to the extent of of Agricultural Statistics corresponding rice wholesalecompetitive marketing cost. prices.Extraordinary situations, including but not limited to Local rice production; world Department of Agriculture- NDCC intervenes only afterbumper harvests, sharp changes in world rice prices prices; exchange rate; National Rice Board; Bureau the President makes an officialand/or currency value, area-specific natural calamities or regional rice prices; regional of Agricultural Statistics declaration that there is atemporary disruptions in domestic trade in rice for any farmgate prices; utilization of calamity. >reason other than natural calamities are appropriately rice contingency fund; NDCC National Disasterdealt with using the contingency fund of the National expenditures related to rice Coordinating CouncilRice Board. Natural calamities are addressed followingexisting procedures of the National Disaster Coordinating Local government unitsCouncil for responding to natural calamities.

._ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 0 0

Table 3: Food Security (Annex 7)Table 4.2 Enhancing Food Security in the Philippines: Long-Term Key Result Areas, Indicators and Agencies Responsible for Result Areas


Internationally Marketing costs for primary agricultural products reduced Farm-to-market road density Department of Agriculture The stress on roads is for aCompetitive through improved road system sector-neutral marketAgriculture Local government units infrastructure.(also an Improved, and better access of farmers to, irrigation Private sector investments in Department of Agriculture- Local irrigation facilities/servicesinterim services irrigation facilities including National Irrigation can be supplied by privateissue) maintenance thereof Administration sector providers, particularly for

communal projects. FarmersLocal government units may enter into a contract with

such providers where they payirrigation service fees in thesame way that road users payfor toll roads. Government canencourage such contracts tooccur through regulations orlaws (if needed) or technicalassistance in projectdevelopment particularly fromthe NIA.

Access of farmers to more and improved agricultural Amount appropriated for Congress The AFMA already provides thattechnologies broadened subsidizing basic agricultural amounts be set aside for this

technology development Department of Agriculture purpose.Plant variety protection and Congress This is a commitment to theregistration bill enacted WTO under the TRIPs

Department of Agriculture Agreement.Regulations issued for the Department of Agriculture With availability of suchcommercialization of technologies in other countries,transgenic agricultural Department of Science and the prospect of acceleratingproducts Technology agricultural modernization is

higher if farmers are providedbetter access to such improvedtechnologies. To addressconcerns for bio-safetyparticularly from environmentalgroups, the review of existingfield testing regulations fortransgenic materials needs tobe done.

Table 3: Food Security (Annex 7)Table 4.2 Enhancing Food Security in the Philippines: LonS-Term Key Result Areas, Indicators and Agencies Responsible for Result Areas


Regulations reviewed and Department of Agricultureimprovements adopted for thefield testing of transgenic Department of Science andagricultural products Technology

Reduced tariff rates on products used as inputs in Statutory tariff rates Department of Agriculture- The Philippines hasagriculture, including packaging materials and Policy Analysis Service unilaterally committed totransportation equipment APEC a tariff policy regime

NEDA Tariff and Related between 0-5% in 2003 exceptMatters Committee for sensitive agricultural

products. An Executive Orderhas yet to be issued to enablethis.

Agricultural products better safeguarded against Legislation enacted and Congress The proposed legislationdumping, subsidized agricultural exports, and import regulations issued for WTO- include the Generalsurges consistent anti-dumping, Department of Agriculture Safeguards Law and

countervailing, and safeguards Agriculture Specialmeasures National Economic and Safeguards Law.

Development Authority -Tariff Implementing rules andCommission regulations are yet to issued

on these and the anti-dumping and countervailinglaws.

Enhanced capacity to export agri-based products International sanitary and Department of Agriculture - This will also protect locallyphytosanitary standards Bureau of Agriculture and grown crops and livestockadopted Fishery Product Standards, from pests and diseases that

Bureau of Plant Industry, agricultural imports mayBureau of Animal Industry, introduce into the country.National Meat Inspection The NFA has piloted a smallCommission, Bureau of program since 1997. TheFisheries and Aquatic proposed Grains SectorResources Development Program of the >Department of Health - ADB lists this reform in the C

Bureau of Food and Drugs program's policy reformmatrix.

00

Table 3: Food Security (Annex 7)


Targeted Rice A cost-effective scheme designed, adopted, and Delivery scheme of targeted Department of Agriculture-Subsidies to implemented to target rice subsidies for lower income marketing assistance for Policy Analysis Servicethe Poor groups. missionary local rice markets(also an Amount appropriated each Department of Agricultureinterim issue) year for targeted rice subsidies

benefiting lower income NEDA Development Budgetgroups. Coordinating Committee;

CongressInstitution(s) set up to Department of Agricultureimplement the targeted ricesubsidies program. Department of Budget and

ManagementFiscal Given above results, remaining assets of the NFA sold Assets sold; NFA debt retired Department of Agricultureassistance to to finance the NFA restructuring and retire all of itsthe NFA debts Department of Financereduced tolower National Food Authoritybudgetarydeficit whileensuring foodsecurity(also aninterim issue)

0C

Annex 2/ 12 of 28

Table 4: Agrarian Reform (Annex 8)

STRATEGIC PERFORMANCE PRIMARYOBJECTIVES INDICATORS RESPONSIBILITY

1) Expedite implementation of * No. of Has. Redistributed * DAR (with support fromCARP based on reformed/ and their prices (private regional offices)innovative modalities. and public lands);

* Budgetary funds approvedand released by GOP forland acquisition;

* Land taxes collected andused for land acquisition;

* % of has. Redistributed &no. of beneficiaries (basedon the main modalities,with emphasis onvoluntary transfer);

* No.of length of time tolitigate land disputes.

2) Provide strategic support * No. of ARCs supported * DAR (with support frominfrastructure and services tc (and reaching higher level independent surveys andenhance household incomes of social organization); analysts)and agricultural productivity * No. of joint ventures,

volume of investments;* Household income

increases (compared tocontrol groups) (P);

* Issuance of individualCLOAs (no.)

3) Improve the functioning of * Number of landless and * DAR (with support fromland rental markets and use poor being able to access independent syrveys andland reform as a means to land (P) analysts)facilitate increased land * Extent of rentalaccess by the poor (and non- transactions.CARP beneficiaries).

Annex 2/ 13 of 28

Table 5: Rural Sector Public Expenditures (Annex 9)Summary of key indicators for public expenditures for ANRE

Key Issues Strategic Interventions Suggested Indicators Priority InstitutionalResponsibility

1. Stagnating productivity/declining Increase productivity - enhancing public Expenditure by policy instruments (P) DAcompetitiveness expenditutre. i.e. ;public goods and services Irrigation

such as imgation, R&D . extension, market R & Dinfrastructure. Extension

CreditIncrease public expenditure for market Production Supportdevelopment, policy analysis, statistical Market developmentservice. Policy analysis. statistical service, etc.

Provide greater financial support for Regulationstrengthening regulatory functions to addressextemalities, asymmetric information, e.g.,quarantine services, seed and planting materialquality regulation, fertilizer qualtty andpesticide regulation, etc.

2. Concentration of production on a few Redistribution of public expenditure away from Expenditure by commodity (P) DAcommodities. any commodity bias towards more neutrality Rice

across all policy or program instruments and if Non-rice cropsapplicable within each policy instrument. Livestock and poultry

Fisheiy

R & D by commodity (P) DA-BAR

3. Unequal distribution of land ownership Facilitate redistrbution of land ownership. Trends and distribution of DAR and ARF badget by land fP) DARand access tn other productive acquisition and distribution vs. beneficiariesresources. development

4. Rapid degradation of forest, land, Appropriate levels of budgetary allocation to Trends and distribution of DENR cxpenditurcs for forcst (P) DENRwater and fishery resources. effectively carry out the sustainable management, land management, mines and geo-science,

management of natural resources through environmental management, protected areas and wildliferegulatorv interventions, rehabilitation resources development.programs, R&D. policy analysis and advocacy,etc.

5. Weak quality of govemance of thesector arising from:

over-centralization of the budget of Reallocate budget in favor of regional offices Degree of Decentralization (P) DA. DAR. DENR, LGUsDA and LGUs. Ga by level of govemance - national (central,

regionalt, localDA, DAR, DENR, LGUs

Regional allocation of DA, DAR, DENR & (S)LGUs as ratios of GVA, rural pop'n., no. of farmhousehold,l farm areas.

Regional DA & SCUs R & D as ramos of GVA IS) DA

* liisited moultotrig. evaluation, anid Institutionalize iimechaniismiis. Expenditures on monitoring, evaluation and impact (P) NEDA, DA, DAR,impact analysis of program and Allocate necessarv budgets. analysis of program and projects. DENR. LGUsprojects.

Bureaucratic constraints to timely Streamline bidding procedures for CO. Degree of fund utilization as measured by the ratio of (P) DA, DAR, DENRrelease and spending of budgetary Further decentralizanon at DA. unused funds or unobligated funds to total availableallocation. appropriations.

* Dominance of project vs. program Reallocate budget in favor of program funding. Available appropriations according to program and (P) DA, DAR. DENRfunding project by agency

Ratio of regular program of total expenditures by agency. (P) DA, DAR, DENR

Overly high share of budgetary allocation Reallocate budget, address overstaffing in Allocation by type of expenditure as measured by the (P) DA, DAR, DENRfor PS relative to MOOE and PS in the certain agencies. ratios of PS. MOOR, and CO to total expenditures byregular program budget. agency.

Allocation by type of R&D expenditure as measured by (S) DA-BARthe ratios of PS, MOOE, and CO to total expenditures byagency

Degree of utilization of public funds for undertaking (P) NEDAprivate sector roles.

Underfunding of ANRE-related public Maintain a ratio of public expenditure for Real Ga. Ga as a ratio of G, G. and GVA (P) NEDA, (DA. DAR.sector investments/chronic fiscal deficits ANRE to GVA that is comparable to other DENR)

progressive developing countries. Ga as a ratio of rural pop'n. no, of farm households, farm (P) NEDA, (DA, DAR,area. DENR)

Highly unstable and unpredictablebudgetary and releases. Maintain more stable budgetary allocation. Available appropriations according to program and (P) DA, DAR, DENR

_________ ________ ________ ________ ___________________ project by agency

Annex 2 /14 of 28

Table 6: Key Issues and Monitoring Indicators for Roads (Annex 10)

Road 1 Targeting of0 Contracting and |ConsultationsCosrction 2 e iks. engineering: DPWH required with|

I I I 2 ~~~~~(maximize contracting and IDA, LGUs I

l i | | ~~~~~devolution to LGUs, |and4 | | g ~~~~~minimize administration). agriblusines

Road |Targeting of Monitoring: DPWH, DILG |of crucialMaintenance |key links. reporting system, NSO for links.

periodic census of

infrastructure.

Fianin Inesfe Stregthe

advocacy, adocc by tente * GAA |proj-ect II DM and LGUs. enabling LGU

development activism.

and resourceI

* Obligations |Obligate up DBM and LGUs. Focussed|to maximum I programming|allocated I required.|under GAA.

* Expenditures |To expend l EDBM and LGUs |FacilitateImaximum I contracting gobligated. and payment|

Annex 2 /15 of 28

Table 7: Private Investments in Agriculture (Annex 11)

Key Issues Priority Suggested Primary RemarksStrategies Indicators Institution

Lack of Increasing Good indicator but NSCB has toinvestments due productivity; PRIMARY strengthen databaseto: NEDA/

Improving sector NSCB Strength (S): Availability of time* Perceived risks competitiveness; Breeding stocks series data on investments in

due to natural and and orchard (with private livestock and poultry.calamities and development sector and Weakness (W): Data notnatural events; Diversification of component of the LGU inputs) disaggregated by component;

* Poor production and gross domestic measures onlyinfrastructure; resource use capital formation breeding stocks

* Peace and in the National and afforestation;order situation; By: promoting Income Accounts does not capture

* Lack of access private investments investments into financing in agriculture orchard(short and development, farmlong-term); Specifics construction, and

* Weak domestic purchases ofdemand; and * Improve policy equipment.

* High incidence and legalof rural environmentpoverty. * Develop

infrastructure;* Remove

distortions inland markets:

* Minimizebureaucratic redtape;

* Enhance accessto financing;

* Provide supportto R& D;

* Enhance accessto marketinformation; and

* Promote peaceand order.

Annex 2 / 16 of 28

Table 8: Rural Financial Sector (Annex 12)

To monitor and be able to take actions so that the achievement of the objectives indicated in the1999-2004 MTPDP are ensured, the following priority indicators are proposed:

Key Issues Priority Proposed Definition of the PrimaryStrategies Indicators (C - Indicator, Frequency of Institutional

core indicator; S- Collection Responsibilitysecondaryindicator

Declining Greater financial * Proportion of * This is the proportion of * CPC (lead),proportion of resources loans going to loans going to non-farm BSP, NSO,agricultural loans mobilized for the non-farm enterprises. Main data DA-BASto total loans sector enterprises source is the.

* This is the volume ofloans granted by formalfinancial institutions to the * ACPC (lead),

* Proportion of agri sector as percentage BSPagricultural of total loans granted.loans to total Main data source is theloans granted BSP. Data may be(C) collected quarterly.

* This is the volume ofsavings from the ruralareas as percentage of totalsavings.

* Proportion of * ACPC (lead),rural savings to BSPtotal savingsdeposits (S)

Constant Access to rural * Proportion of * This the no. of borrowers * ACPC (lead),proportion of finance expanded borrowers from formal/informal SWSborrowers from borrowing sources as percentage ofthe formal from formal total borrowerssources and informal

sources (C) This is the no. ofborrowing farmers aspercentage of total no. offarmers. Main data source

* Incidence of is the annual survey being * ACPC (lead),borrowing (S) conducted by SWS. SWS

Huge fiscal costs Agriculture * Proportion of * This is the no. of DCPs * ACPC (lead),arising from the directed credit rural credit phased-out as percentage NCCimplementation programs phased- programs of total DCPs. Main dataof govemment out and phased-out to source is the ACPC anddirected credit consolidated into total DCPs (C) the NCC.programs the AMCFP

Annex 2/17 of 28



* This is the amount ofbudget earmarked andreleased to creditprograms as percentage of

* Proportion of total budget to the sector.budget going to Main data source is therural credit DBM. This may be * NCC (lead),programs (C) collected annually. ACPC, DBM

* This is the amount of agricredit funds phased-outand consolidated into theAMCFP as percentage oftotal DCP funds inAgriculture. Main datasource is the ACPC. Thismay be collected annually.

* This is the amount of* Proportion of donor funds allocated to

DCP funds in credit programs asagriculture percentage of total ODAphased-out and to the sector. Main dataconsolidated source is the NEDA-PIS * ACPC (lead),into the AMCFP and the DOF-IFG but NCC(C) NCC monitors all these

data.

* This is the no. of DCPstransferred to GFIs aspercentage of total DCPs.Main data source is theACPC and the NCC.

* Proportion ofdonor fundsgoing to ruralcredit programs(S)

* CC (lead)NEDA,

Annex 2/ 18 of 28



* Proportion ofrural creditprogramstransferred toGFIs (5)

* CPC (lead).NCC, GFIs

Huge fiscal costs AMCFP * Proportion of * '[his is the amount of the * ACPC (lead),arising from the implemented agricultural agricultural budget going DIBM DA,implementation budget going to to the AMCFP. Main data NCCof government AMCFP source is the DBM. Thisdirected credit may be collected annually.programs

* This is the volume ofloans released to agriborrowers as percentage oftotal funds in the AMCFP.Main data source are the

* Agricultural GFIs. The data may be * ACPC (lead),loans granted as collected quarterly. NCC, GFIs% of the totalfunds in the * This is the no. of programAMCFP (C) borrowers as percentagc of

total small-farmerborrower. Main datasource are the GFIs andthe PFIs. The data may becollected quarterly.

* This will determine thecollection efficiency andsustainability of theprogram. Main data

* No. of program source is the GFls. Data * ACPC (lead),borrowers as % may be collected quarterly. NCC, GFIsof small farmer-borrowers (C) * This is the average interest

rates charged for loansgranted under the AMCFP

Annex 21 19 of 28



* This will determine thelevel of governmentsubsidy for the program.Since funds from thebudget will still beappropriated for theAMCFP, this indicatorshould be considered todetermine actual fiscal

* Repayment rate cost of the program. Thefor AMCFP data may be reported

annually. Main data source * ACPC (lead).are the GFIs and the GFIsDBM.

* Average interestrate ofagricultural loansgranted (S) * ACPC (lead),

GFls

* SubsidyDependencyIndex (SDI) forAMCFP (5)

* ACPC (lead),GEls, DBM

Annex 2/20 of 28

Table 9: Natural Resources Management (Annex 13)SUMMARY OF ISSUES, KEY STRATEGIES AND PRIORITY INDICATORS

KEY ISSUE PRIORITY PRIORITY PRIMARY(INDEX); / SUB-STRATEGY PERFORMANCE / RESPONSIBILITYindicators INDICATORS

Deforestation & Degradation

Build on community-oriented Income of stakeholders P DENR/FMBforest management andproduction systems Effective area conserved R

Open access area P

(Change in the S Continue rehabilitation and Tenurial instruments (holders P DENRINFDO/Asset Value of conservation efforts of & area) FMBForest Resource) prioritized watershed areas

Reforestation R Secure user rights & Conservation practices R DENR; Congress(area, volume) responsibilities (URR) for

various stakeholders

Strengthen multi-sectoral Incidence of destructive R DENR, DILG,protection practices Civil Society

Encourage private sector Investments in plantation R DENR, DTIinvestments

Correct pricing of resources Instruments operationalized R

Environmental Fund Rcreated

Overfishing and Degradation of Coastal Resources

(Change in the S Define access to fisheries Territories & users R DA, PCG, DENRAsset Value of (TURF)Fishery (Secure URR) Delineated & definedResource)

Build on community-oriented Common property rules R DA, DTLG, DENRcoastal resources formulatedmanagement

Income of fisherfolk P

Catch/effort P Effective fishing R DENR, DAcommunities

S Mangroves rehabilitation Area effectively managed R DENR, DA

Foreshore area managed Inventory & user fees R DENR, LGU

Annex 2/21 of 28

KEY ISSUE PRIORITY PRIORITY PRIMARY(INDEX); / SUB-STRATEGY PERFORMANCE I RESPONSIBILITYindicators INDICATORS

Degraded Freshwater Resources

Environmental S Strengthen monitoring & Ambient monitoring R DENR; LGUsDamage enforcement Pollution load reduced R

Ambient water S Apply wastewater discharge Fee collected R DENR; LGUsfees

Quality Groundwater extraction Fee collected R DENR. LGUs,descriptors NWRB, LWDs

Rehabilitate prioritized Investments in Rdegraded rivers Rehabilitation (from fees DENR. LGUs, DBM

collected)

Endgangered Biodiversity Reserves & Indigenous Peoples

Value of Direct S Complete the designation of Area delineated R DENR, PAMBsNature Services PAs

Implement NIPAS provisions Buffer zones established R DENR, PAMBsIPAF established

Biodiversity S Appropriate fee system in Fees collected & in IPAF R DENR, PAMBsplace

Descriptors R DENR, PAMBs

User groups' P Harmonize conflicting Survey and registration Rpractices legislations Resolved conflicts R

Safeguard indigenous peoples Livelihood enhanced R NCIP:DENR,and ancestral domains PAMBs

Sustaining use of Mineral Resources

Environmental S Mitigate risk: Pollution load P DENR/MGBRisk & Damagefrom Mining Develop env'l regulations: Safety measures installed R DENR/MGB

EIA System

Monitor compliance to IRR Incidence of P DENRIMGB; LGUsof Mining Act failure/accidents

Econ. Impacts on host R LGUs, NEDAcommunities

Develop compacts among Joint decisions & R DENR/MGB; LGUsvarious stakeholders enforcement

MPSA issued P

Annex 2/22 of 28

KEY ISSUE PRIORITY PRIORITY PRIMARY(INDEX); / SUB-STRATEGY PERFORMANCE / RESPONSIBILITYindicators INDICATORS

Convergence Area Operational

Adopt watershed & Coordinating mechanism R NEDA, DENR, DAecosystem set up

Approach to planning/mgmt. Joint personnel training R

Delineate forest lines Boundaries established R DENR, DA

Conduct eco-profilin, and Plans developed R NEDA, DENR,physical framework planning LGUs

Market Failure & Institutional Failure

Full cost internalization: Instruments formulated R DENR, DOF.valuation Congress

Property rights reforms Enforced rules R DENR. DOD.Congress

Government budget Environmental trust fund R DENR, DBM.,allocation created Congress

Streamline bureaucracy

N.B.: Primary responsibility for index formulation and monitoring: DENR

P = Pressure Indicator S = State of resource index R = Response indicator

Table 10: Decentralization and Devolution (Annexes 14 and 15)

Institutional Arrangements: Roles and Performance

MTDP/CAS Key Issues Priority Rationale Priority Primary Action PlanStrategic Strategies Indicators Responsibility For Institutional

Objectives (Outcome) PeformanceIndicators

A. Devolution

A.) Rationalize the Continuing Review ofinstitutional the Devolution Process:framework andstructures; The mandatory review Amend the LGC to The LGC provides for a Interagency and Congress a. Consolidate and

of the LGC has not address partial mandatory review in multisectoral reviews Leagues/ULAP review all proposedA.2 Strengthen and occupied a high priority devolution, increased every five years. Over of the LGC with DILG amendments to the

capacitate key in the Congress. shares of LGUs from the last eight years, there recommended LGCstakeholders national taxes, have been adequate amendments(especially at Various issuances and inadequate provision on experiences and lessons b. Provide key analysesthe LGU level) circulars from national the mandatory to improve the present Amendments to the and summary tofor rural lines agencies are consultation of the Code version of the LGC. LGC by the Congress justify the proposeddevelopment undermining the spirit for national Devolution must be seen based on lessons LGC amendmentsprograms of autonomy and governments, and as dynamic and a learned and emperical

devolution unclear relations between continuing process. evidence. c. File the bill amendingthe LCE and the local the LGC

Partial devolution of the law making body with Over the years, theenvironmental sector respect to personnel various leagues d. Advocate the passage(in contrast to health, appointment. (governors, mayors, vice- of the LGCagriculture, and social mayors, barangay amendments.services) -DENR has Encourage the various captains) have emergedmaintained its power to leagues, the Union of as a strong advocate forcontrol, supervision and Local Authorities LGUs. These groupsreview of community (ULAP) and NGOs to together with the otherforestry projects. advocate for the local stakeholders can

amendment of the LGC. provide a balance for theCongress deliberation 'centralizing" tendenciesof bills seeking to of the nationalrecentralize and government.renationalize powersdevolved to LGUs. O0


Objectives (Outcome) Peformance

Indicators

Local Finance:

The IRA share of LGU LGUs to seek ways to Local finance is at the Number and value of Congress a. LGUs to formulateis based on a sharing gradually become less heart of the devolution cost sharing DOF development andscheme/formnula that is dependent on IRA for process: devolution arrangements of LGUs DILG investment plansbiased for LGUs with local financing and without financial with NGAs DA/DENR/DARlarger land areas but not explore financing devolution is DTI b. Determine andheavily populated; arrangement with the meaningless. Extent ol transfer of Leagues identify sources of

private sector, ODA, financing to the LGUs funds for the plansMost LGUs are heavily joint ventures, bond through the IRAdependent on IRA for flotation, etc. c. Proactively seekfinancing Percentage decrease in funding support from

LGUs to step up efforts the dependency of the IRA, jointLGUs have still no to get their right share LGUs from IRA ventures, cost sharingshare in national tariffs from national wealth financing arrangements, privateand customs duties. located within their sector, ODAs, NGOs,

jurisdiction. Increased Congress and CongressLimited borrowing insertions andcapacity of most LGUs, LGUs to sclectively enter initiatives for LGUs d. Sponsor investmentespecially those who into cost sharing and for a for LGUs whobelong to the lower matching funds Increased private sector have developmentclass LGUs. arrangement with the financing for local level and investment plans

national line agencies for developmentsDespite devolution, the undertakings that arebudgets of devolved supportive to theirnational agencies overall developmentcontinued to increase plansover the past five years.

Strategize and advocateCongressional for the Congress >initiatives and initiatives and insertionsinsertions are through the LGU >predominantly through budgets.the NGA budgets.



Participation:

Some localdevelopment councils Elect qualified sectoral Increase participation in Extent of involvement Leagues/ULAP a. Develop and validate

are inactive and representatives to the the process of of civil society in local NGOs a multisectoral and

concerns were raised special bodies - governance is a governance DILG interagencyabout the quality and Sanggunians and fundamental principle of monitoring system

nature of NGOs in the development councils the devolution process. Tactical alliance and for the participation

councils. This is part of the sectoral representations of the civil society in

NGOs/POs to strategize broader concern of in support of the LGU LGU special bodiesSome NGO/PO on how to enter into democratization and plans and local governancenetworks are frustrated tactical alliances with developing andin their participation in other sectors (e.g. implementing programs Extent of funding b. Conduct periodic

the local governance leagues) to advocate that are responsive to the support for the LGU monitoring of

process. common causes at the stakeholders. plans sourced by the participation in local

local level. civil society governance

NGOs/POs with access c. Discuss results ofto external funds should the M &E withimplement projects in leagues/ULAP and

support of the LGU other interesteddevelopment plans. parties.

National LocalRelations:

Ad hoc and case to case Authorize and direct the It is imperative to MOUs/MOAs signed Leagues/ULAP a. Develop and validate

arrangements through consolidated leagues continue clarifying the by the ULAP/leagues NGAs a generic MOU and

MOAs and MOUs under the ULAP to nature of the relationship with NGAs covering Training MOA for each of the

between local-national represent the LGUs and between the national various concerns and Institutions key NGAs to cover >

agencies regarding execute mother MOUs government agencies and collaborative efforts policies, standards, Z

provision of technical and MOAs to cover joint the loca government training, technical

assistance and on other undertakings at the local especially in the areas of Institutionalized assistance, and

collaborative level. overall policy setting, training programs to collaboration

undertakings. access and provision of capacitate localN)



Strengthen institutions technical assistance, stakeholders especially b. Execute MOAs orthat are capacitating the capacity building and the LGUs and field MOUsLGUs, especially the training. staff of NGAsCenters for Local c. Monitor theGovernance, or Institutes The change of roles of Continuity of policies implementation ofof Local Government the LGUs and the and programs at the MOAs and MOUs.Administration, to enable national line agencies LGU and NGA levelsthe LGUs to meet the depends on the with change incapacity demands under effectiveness of capacity administration.the devolution. building and engineering/ Standards and local

refocusing the national policies forIdentify and pursue areas line agencies as service implementing devolvedwhere collaborative and providers to the LGUs. functions.cost sharing arrangementfor implementation maytake place.

National line agencies inclose consultation withLGUs should jointly setthe technical standardsfor devolved functionsfor monitoring qualityperformance.

Advocate and worktowards changing therole of national lineagcncies into becomingproviders of technical >services to LGUs insupport of autonomy.

C)



B. Convergence

To achieve effective Conceptual Stage of theinstitutional Convergence Programcoordination in theplanning, The convergence Jointly refine and The convergence Reactivated and NEDA, DILG a. NEDA , to organize

implementation, program that will validate the concept and framework has been functional Convergence DA, DAR, DENR a tripartite meeting

and monitoring of facilitate the implementation strategy perceived to solve or Steering Committee among the LGUs,complimentary institutional of the convergence minimize problems of concerned NGAs,initiatives in the coordination of the program fragmentation, overlap, Refined and doable and DILG to refinerural areas under three agencies remains waste, diffused concept and the concept,

the "convergence" to be largely Develop a consensus and effectiveness and implementation implementationstrategy conceptual. It is slow increase ownership for confusion in strategy for the strategy, and

in moving out from the short and medium implementing rural convergence program. institutional

To accomplish concepts and get term sub-strategies of the development. With the Budgets to the three arrangements for theconvergence in translated into ground program clear delineation of roles departments from GAA convergence

strategies and realities. It is still open Mobilize resources to of DA, DENR, and DAR, in support of the program.

operations for each to re-examination and implement the it is expected that rural convergence programof the three specification toward convergence strategy in development could take a with supporting b. Conduct field

departments successful rural selected sites. much faster and effective departmental orders to validation of the

(DENR, DA, and development. pace. reflect priority refined concept andDAR) and lay the convergence activities. implementation

foundation for strategy on selectedsustainable rural Number of convergence sites.

development. convergence areacovered with MOAs or c. Seek funding for theMOUs with operational planning of programsplans and identified and projects for eachlead and support of the convergcnccagencies per site. sites.

Plans, programs, M& E C

system, andimplementationarrangement per site are oin place e


Objectives (Outcome) PcformanceIndicators

LGUs Role in theConvergency Strategy

LGUs ownership of the Identify and clarify the Both local and Roles and NEDA a. NEDA, the NGAs,

convergence strategy is roles and responsibilities international experiences responsibilities of DILG and LGUs to reviewweak because they have of LGUs as the lead have shown that the LGUs as the lead and Leagucs/ULAP the concept andnot been identified as organizations in LGUs are much more the NGAs as support implementationthe major or primay implementing the effective as the clarified strategy of the

player/actor in the convergenice prograimi sustainable integrating convergence program

conceptualization and and 'convergeing" force Training programs in with the purpose ofplanned implementationi Build the LGUs capacity in rural and local support of the LGUs identifying the roles

of the strategy. as the lead organizations development with and the NGAs field and responsibiliticsand those of the NGAs national departments as staff. of LGUs as the lead(DENR, DAR, DA) as playing supportive role agencics.the support organizations or service provides.

b. Conduct orientationInstitutionalize the and training for theconvergence strategy at LGUs and NGAthe LGU level support staff.

c. Conduct

implementationplanning perconvergence site withthe concerned NGAsprovidin, technicalassistance andsupport.

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 00~~~~~~~~~~~~~~~~~~~~~o

ANNEX 3

RD/NRM Performance Indicator System:Framework and Key Elements

Table 1: Recommended Framework for Operational Plan: Outcome and ResultPerformance Indicators

Table 2: Operational/Data Issues and Recommended Actions

Table 3: Data System Weaknesses and Recommended Actions

Table 1: RD/NRM Performance Indicator System: Recommended Framework for Operational Plan"

STRATEGIC RESULT PERFORMANCE FREQUENCY &PERFORMANCE OUTCOME PERFORMANCE INDICATORS 3' AVAILABILITY INSTITUTION

INDICATOR INDICATORS2' (Sub-indicators defining the "character" (of Data on (Analysis/AREA (Primary & Secondary) of major indicators to be determined Result Indicators) Collection)

during Phase 1)

PRIMARY INDICATORS:1. Agricultural 1) % Aggregate growth rate of: 1) % of and trend in DA budget expended for: * Annual (data on NEDA/DA

Growth and (a) agric. value-added per rural (a) Increasing production by major labor and capitalPerformance worker; (b) yield per ha. by major commodity productivity not(KRA 1 & 2) commodity (b) Enhancing of productivity of available)

land, labor & capital by majorcommodity

c) Supporting non-traditionalcommodities/diversification * Annual (data/info DA

2) Measures of revealed comparative 2) Relevant DA policies, admin orders (ref. are available)advantage, trade openness, and price QRs, MAVs, tariff levels), programs, DA-protection (e.g. nominal and initiated bills filed in Congresseffective protection rates; QRs, tarifflevels for rice, sugar)

SECONDARY INDICATORS:

1) Ratio of non-traditional commodities I) % of DA budget actually expended in * Annual (data NEDA/DAto total GVA (in PhP) support of non-traditional commodities available)

2) % of modernization versus maintenance * Annual (data not1) Farmer adoption rates of improved budget & expenditures of DA available)

technologies (e.g., improved seed ("modernization" defined to mean less ofvarieties of rice) low value/income traditional commodities)

3) LGUs with annual operational action plans * Annual (data to be DA/LGUsof improved technological packages; generated)

0C

STRATEGIC RESULT PERFORMANCE FREQUENCY &PERFORMANCE OUTCOME PERFORMANCE INDICATORS 3 (Sub-indicators AVAILABILITY INSTITUTION

INDICATOR INDICATORS2' defining the "character" of major (of Data on (Analysis/

AREA (Primary & Secondary) indicators to be determined during Result Indicators) Collection)Phase 1)

4) Proportion of modernization versus Annual NEDA & CPBO/maintenance DA R&D budget, strategies, DAprograms, and projects (C'modernization" inR&D defined to mean greater focus onnon-traditional but high value/incomecommodities)

2. Rural Poverty PRIMARY INDICATORS:(All KRAs) 1) Decreased poverty incidence, depth 1) % of NGAs' (DA, DENR, DAR) budget * Annual (data not NEDA/DA/DAR/

and severity (% of rural population approved and expended for projects readily available; DENRbelow absolute population line); targeting poverty groups regional data to benational and regional levels, by key generated)poverty groups)

2) Increased primary & secondary 2) % of DOE budget for rural areasschool enrollment rates (in rural . Annual (data to be DOE/DILGareas) generated)

SECONDARY INDICATORS:]) Increased rural employment (based 1) % of NGAs' total budget of NGAs for . Annual (data not NEDA & DOLE/

on criteria set by Labor Force employment and income-generating readily available) NGAsSurvey) programs and projects

2) Decreased food expenditure as 2) * Annual (data not NEDA/NGAspercentage of total household readily available)expenditure (rural and urban) >

3) Increased % of Households with 3) Budget as % of total and results of * Annual (data not NEDAINGAsaccess to safe water household water supply programs and readily available)

projects of NGAs

STRATEGIC RESULT PERFORMANCE FREQUENCY &PERFORMANCE OUTCOME PERFORMANCE INDICATORS 3' (Sub-indicators AVAILABILITY INSTITUTION

INDICATOR INDICATORS2 / derining the "character" of major (of Data on (Analysis/AREA (Primary & Secondary) indicators to be determined during Result Indicators) Collection)

Phase 1)

4) Infant mortality (mortality/morbidity 4) Actual expenditures and trends on * Annual (data NEDA/DOHfrom notifiable diseases, nutrition relevant programs and projects available)status & deficiencies, health services 5) Preventive versus curative strategies, * Annual (dataand sanitation) programs and projects available)

5) Improved access to health care 6) Geographical distribution of health care * Annual (data NEDA/DOH &facilities and services (supply) available) NSO

7) Number of and trends in population * Annual (dataserved (demand) available)

6) Improved education (functional 8) % of and trends in NGA budget expended * Annual (data NEDA/DOEliteracy inclusive of mass media for training of marginalized groups available)exposure; primary and high school 9) % of trainees from NGAs versus those * Annual (dataenrollment rates) from farm & fisheries sector available)

IO)Proportion of budget, programs, and * Annual (dataprojects for functional literacy, primary, available)and high school programs versus total

7) Rural non-farm income as percentage 12)% of NGAs' budget and expenditures for * Annual (data NEDA/NGAs &of total household income non-farm income-generating projects available) NSO

3. Food Security PRIMARY INDICATORS:(all KRAs)

I) Rice balances (production/imports, I) Regularly updated action plans for ensuring * Quarterly (most DA/NSO & BASconsumption) and price trends adequate rice balances and rice price data is available)(farmgate, wholesale, tariff levels) analysis and action plans for price >(national and regional levels) stabilization (by private sector/NFA) x

2) Decreased prevalence of malnutrition 2) Proportion of relevant NGAs' budget for * Annual (data NEDA/FNRI(nutrition status, % children under 5) improved malnutrition to total budget available)

_____________ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~cc

STRATEGIC RESULT PERFORMANCE FREQUENCY &PERFORMANCE OUTCOME PERFORMANCE INDICATORS 3/ (Sub-indicators AVAILABILITY INSTITUTION

INDICATOR INDICATORS 2' defining the "character" of major (of Data on (Analysis/AREA (Primary & Secondary) indicators to be determined during Result Indicators) Collection)

Phase 1)

SECONDARY INDICATORS:1) NFA reforms and related finanicial 1) NFA Reform Indicators: * Annual (data NEDA/DA, BAS,

indicators (profits, losses, fiscal * Magnitude of NFA market intervenition available) and NFAsubsidies, progress toward * Trends in NFA budget NEDA &privatization and establishment of * NFA budget, income, and expenditures DBM/NFA &regulatory body) * DA and NFA Council policies, NEDA &

administrative orders DBM/DA & NFA* DA-initiated bills filed in Congress;

advocacy2) Improved rice productivity 2) % of DA budget expended for projects to * Annual (partial data NEDA/DA & NIA

increase rice productivity available)Number of and benefit trends in DAprojects

3) Reduced fiscal subsidy and improved 3) % of NFA budget used for subsidy * Annual (data NEDA & DBMIeffectiveness of rice targeting available) DA & NFAprogram for the poor * Subsidy per direct beneficiary served * Annual (data not

readily available)

4. Agrarian PRIMARY INDICATORS:Reform Number of (land) hectares redistributed 1) Budgetary allocations for land acquisition * Annual (data NEDA/DAR(KRA 3) (private and public lands, and by and % of approved budget utilized for land available)

modality) acquisition;I) Increases in ARB household income * % of DAR budget and expenditures for * Annual (data NEDA/DAR

(No/% of ARB HH Income over programs and projects to increase HH available)nat'al./reg'al absolute poverty level) income of ARBs


INDICATOR INDICATORS2 1 defining the "character" of major (of Data on (Analysis/AREA (Primary & Secondary) indicators to be determined during Result Indicators) Collection)

Phase 1)

SECONDARY INDICATORS:1) ARCs supported/ funded (and level I) % of DAR budget actually released and * Annual (all data NEDA/DAR

of social organization) absorbed by DAR for ARC support; % available)budgetary allocations for ARCs absorbed;

2) Number of landless and poor being Result trends in ARCs projectsable to access land 2) DAR action plans for expanding access to * Annual (to be NEDA/DAR

landless and profile of direct beneficiaries generated)

3) Numberlvolume of joint ventures 3) * Annual (all data NEDA/DARwith ARCs * % of NGA budget expended in support available)

of joint ventures* Trends in number and direct

beneficiaries of joint ventures with4) Length of time to litigate land ARCs

disputes 4) * Annual (data NEDA/DAR* % of DAR budget to litigate land available)

disputes5) Extent of land rental transactions * Profile of litigation cases

5) . Annual (data NEDA/DAR* DAR's relevant program and projects available). Profile of land rental transactions

6) Landlord Reinvestment to Rural 6) Geographic (rural vs. urban) distribution * Biennial (data NEDA & BOI/Sector of investments available) DAR & DA

5. Rural Sector PRIMARY INDICATORS: 1) * Annual (data NEDA & CPBO/Investments 1. Aggregate trends and patterns, with . % of NGAs' budget proposed versus available) DA, DAR, DENR >

focus on: approved versus released C

a) Public Sector - Government expenditures on * % of NGAs' expenditures versus totalInvestments ANRE as a percentage of total government expenditures(all KRAs) government expenditures * Budget expenditure trends


INDICATOR INDICATORS2' derining the "character" of major (of Data on (Analysis/AREA (Primary & Secondary) indicators to be determined during Result Indicators) Collection)

Phase 1)

- expenditures by priority policy * Modermization versus maintenance * Annualinstruments (specially irrigation, R & budget and expenditures (modernization dataD/extension, land distribution, natural ("modernization" defined to mean a not readilyresources inanagenient (NRM) systematic shift of resources towards available)community-based activities, promising sub-sectors and geographicalregulatory functions and areas)diversification)

2. Degree of (increased) fund utilization 2)(ratio of used/obligated funds vs. total * NGAs' absorptive capacity (% * Annual (data not DBM & NEDA/budget allocations) and stability of budgetary allocation utilized) readily available) DA, DAR, DENRfund releases by DBM/National * Profile of budget approvals versusGovernment Agencies (NGAs) (% of releases (proportion & timing ofapproved budget released per quarter) releases)

SECONDARY INDICATORS: 1) . Annual (data not DBM & NEDA/1) Project vs. Priority program funding * NGAs' prioritized budget proposals readily available) DA, DAR, DENR

(% of each vs. total agency * Profile of proposed versus approvedexpenditures) budgets

2) Allocations of type of expenditure 2) Profile of expenditures * Annual (data not DA, DAR, DENR(% of MOOE allocations vs. total readily available)allocations and % of PS vs. totalallocations)

b) Private Sector PRIORITY INDICATORS:Investments 1. Growth rate in agricultural (includes 1) * Annual - quarterly NEDA/DA &(KRAs 1, 2 & 3) livestock) and fishery production * Actual private sector investments in (data not readily BAS

production available)

STRATEGIC RESULT PERFORMANCE FREQUENCY &PERFORMANCE OUTCOME PERFORMANCE INDICATORS I (Sub-indicators AVAILABILITY INSTITUTION

INDICATOR INDICATORS2' defining the "character" of major (of Data on (Analysis/AREA (Primary & Secondary) indicators to be determined during Result Indicators) Collection)

Phase I)

2. Aggregate value and private * Modernization versus maintenanceinvestments in breeding stocks and investments ("modernization" definedtree crops to mean shifting of investments towards

more promising business activities)* Number and value of NGAs' program

support to private investments2)

* Actual private sector investments in * Annual - quarterly NEDA/DA &breeding stocks and tree crops projects (data not readily BAS

* Number and value of NGAs' program available)support to private sector investments

SECONDARY INDICATORS: 1) BOI/SECI) Number of business registrations in * Number and size of new rural-based * Annual - quarterly

rural-based activities enterprises (data not readily* NGAs' assistance in business available)

development2) Actual bank loans to agriculture 2) Loan profile . Annual (data BSP/LBP & DBP

3) available)3) Agricultural AND FISHERY exports * Volume and value of exports . Annual - quarterly NEDA/DA & DTI

* NGAs' export promotion programs (not all data readilyavailable)

c) Rural Finance PRIORITY INDICATORS: I) Trends in and profile of rural pop. a Annual (most data ACPC/banks &(KRAs 1, 2, 3) 1) % of rural population with increasing borrowing and savings in formal fin'al available) financial

access to formal financial system as system institutions >depositor and/or borrower

00

0c

STRATEGIC RESULT PERFORMANCE FREQUENCY &PERFORMANCE OUTCOME PERFORMANCE INDICATORS 3 (Sub-indicators AVAILABILITY INSTITUTION

INDICATOR INDICATORS2" defining the "character" of major (of Data on (Analysis/AREA (Primary & Secondary) indicators to be determined during Result Indicators) Collection)

Phase 1)

SECONDARY INDICATORS: 1) Volume of savings from rural areas as * Annual (data ACPC/banks and1) Proportion of rural savings vs. total percentage of total savings available) financial

savings institutions

2) Proportion of borrowers from formal 2) No. of borrowers from formal versus . Annual (data notand informal sources informal sources as % of total borrowers readily available)

4) Loan repayment rates for AMCFP 4) Trends in % of repayments * Annual (data ACPC/AMCFPavailable) implementers

5) Proportion of agricultural loans vs. 5) Loan distribution profile * Annual (data ACPC/associationtotal loans available) of banks and

financialinstitutions

6) Proportion of Directed Credit 6) DCPs actually phased out versus planned * Annual (data ACPC/agenciesPrograms (DCPs) phased out to total phasing out versus total DCPs available) involved in DCPsDCPs (in numbers and denomination)

7) Proportions of loans to non-farm 7) Loan distribution profile * Annual (data ACPC/associationenterprises available) of banks and

financialinstitutions

8) Proportion of agricultural loans 8) Profile of loans granted * Annual - quarterly ACPC/AMCFPapproved as percentage of total loans (data available) implementorsin AMCFP

9) Collection efficiency of AMCFP 9) Loans versus collections * Annual (data ACPC/AMFCPavailable) implementors

Subsidy Dependency Index for AMCFP I O)Level of government subsidy * Annual (data ACPC/GFIsavailable)

__________________________ _____________________________ _______________ _____________ 00


INDICATOR INDICATORS2 ' derining the "character" of major (of Data on (Analysis/AREA (Primary & Secondary) indicators to be determined during Result Indicators) Collection)

Phase 1)

PRIMARY INDICATORS: I)6. Natural 1. Increased aggregate forest cover . % of DENR budget expended for . Annual (data NEDA/DENR,

Resource (from plantation, reforestation, improvement of forest cover, protected available) FMBManagement rehabilitation, and protection of areas(KRA 4) natural forests and mangrove areas) * No.of DENR projects & beneficiaries

2) Reduced pollution in key coastal and 2) % of DENR approved budget for programs * Annual (proxy data NEDA/DENR,industrial areas and improved water and projects directed towards reduced available) EMBquality levels of key rural areas pollution and improved water quality

management; available indicators from keyareas

SECONDARY INDICATORS:1) Improved productivity of major 1) BFAR and DENR budget and * Annual (proxy data NEDA/DENR,

fishery grounds (% increases/year) expenditures on programs and projects on available) DA, LGUsfishery production

2) Number and area of tenurial 2) Profile of tenurial instrunments issued . Annual (data NEDA/DENR &instruments issued as a percentage of available) LGUstotal open access

3) Protected areas gazetted and 3) DENR programs and projects on * Annual (data NEDA/DENR,protected areas plans finalized/ protected areas available) PAWB, PAMBsapproved

4) Land conversion rates (focus in key 4) Area covered by approved conversion * Annual (data not NEDA/DENR,urban/peri-urban areas) versus applications versus total convertible/ readily available) DA, LGUs

agricultural area >rD

5) Establish improved NRM fee system 5) . Annual (data NEDA/PAMBsand fees collected * Installation of improved fee system available)

. Trends in fees collected_0

STRATEGIC RESULT PERFORMANCE FREQUENCY &PERFORMANCE OUTCOME PERFORMANCE INDICATORS 3/ (Sub-indicators AVAILABILITY INSTITUTION

INDICATOR INDICATORS2 defining the "character" of major (of Data on (Analysis/AREA (Primary & Secondary) indicators to be determined during Result Indicators) Collection)

Phase 1)

PRIMARY INDICATORS:1. Number/value of cost-sharing 1) Amount and % of NGAs' budget actually * Annual (data DILG/DA, DENR,

7. Institutional arrangements by and between "surrendered" to LGUs in the form of available) DAR, LGUs

Arrangements National Government Agencies counterpart fund to support mutually(NGAs) and LGUs to support agreed-upon programs and projects

a) Devolution strategic activities(KRA 5)

2. Expanded membership patterns and 2) Breadth of stakeholder membership base * Annual (data not DILG/LGUs &

number of local bodies to ensure of local bodies such as LDCs; Number and readily available) NGO federationsmeaningful participation of civil geographical distribution of active versussociety inactive local bodies

3. Improved service delivery 3) Selected result indicators on service * Annual (data not DILG/LGUs

effectiveness of LGUs effectiveness available)

SECONDARY INDICATORS: 1)I) Reviews/amendments to LGC . NGAs' proposals to Congress to amend . Based on the CPBO & DILG/

LGC legislature's DA, DENR, DAR,* LGUs/Leagues' proposals to Congress calendar (data Leagues

that have been endorsed by NGAs available)* NGAs' advocacy activities in Congress

2) Increased revenues collected by 2) Trends in revenues collected versus total * Annual (data DILG & DOFN

LGUs and revenues as % of total expenditure versus IRA available) LGUs

expenditure

3) Number of development and 3) Number of plans approved by the local * Annual (data not DILG/LGUs &

investment plans finalized by LGUs legislature readily available) Leagues

00


INDICATOR INDICATORS 2' defining the "character" of major (of Data on (Analysis/AREA (Primary & Secondary) indicators to be determined during Result Indicators) Collection)

Phase 1)

4) Number and scope of MOAs/MOUs * Trends in nature, coverage, and funding * Annual (data not DILG/DA, DENR,finalized and implemented at local for relevant MOAs/MOUs readily available) DAR,, LGUslevel

5) Amount of Internal Revenue * LGU absorptive capacity * Annual (data not DILG & DOF/Allotment (IRA) transfers to and fund * LGUs financial requirements versus readily available) LGUs, Leaguesutilization rate by LGUs available IRA plus local revenues

PRIMARY INDICATORS: 1)b) Convergence I) Budgetary allocations and issuance/ * % of DA, DENR, & DAR budget & * Annual (data not NEDA/DA, DAR,

(KRA 5) implementation of relevant actual expenditures for convergence readily available) DENRsupporting departmental orders to activities versus non-conivergencereflect priority convergence activities activities

SECONDARY INDICATORS:1) Reactivation and Functional 1) Office of the

Convergence Steering Committee * Action Plan and Achievements * Annual (data not President &* Agenda folders, minutes of meetings readily available) NEDA/DA,* Resolutions and reports DENR. DAR

2) Number of convergence areas 2)covered with MOUs/MOAs (with * Profile of relevant MOAs/ MOUs * Annual (data not NEDA/TWG, DA,operational plans and funding), * Trends in convergence programs and readily available) DENR, DARachievements, and the effectiveness activities that havc been completed andof the coordination efforts are on-going

Based on the Coniceptual Summary Framework outlined in Table I (See Executive Summlary) m

2/ Refers to "outcome" indicators (or impacts)" "Result" peiforimance indicators aims to reflect the actions which are within reasonable control of the relevant departmenit/agency, for which it can be held

accountable. These should be linked to the relevant outcome indicators.

Table 2: Operational Issues and Recommended Actions

Performance Indicator Areas Overall Key Issues 21 Recommended Action

OVERALL * Organizational structure to operationalize the * A sub-committee within the Planning Committee shouldsystem of performance indicators be officially tasked to oversee the performance indicator

system* NEDA should be designated as lead agency* Sub-committee should as soon as possible formulate a

work plan that could include some/all of the actionsrecommended below

* Capability-building program for the above- * Resources from the GOP and/or WB should be providedmentioned organizational structure for technical assistance to adapt and extend state-of-the-

art Monitoring and Evaluation technology to suit themacro performance indicator system

* Complementary capability-building support should beprovided to each of the agencies concerned

* Defining the major results indicators * To avoid varying interpretations as to what is to bemonitored, the major "results indicators" in the"Operational Plan" should be clearly and preciselydefined by way of sub-indicators; this would be part ofthe above-mentioned capability-building support

1. Agricultural Growth and * Data presentation and presentation formats * An immediate review of data available at DA should bePerformance made vis-a-vis the requirements of the macro

perfornance indicator system* Required re-formatting should be drawn up in

collaboration with concerned DA offices* Lack o f data or inadequate level of detail * Same as above; measures to efficiently collect lacking

data and/or to provide required level of detail should beidentified and implemented

2. Rural Poverty X Data not disaggregated by target socio- * Study should be carried out to determine how existingeconomic and/or income group/s data could be efficiently disaggregated

?' Specific details on key issues are provided in the tables on "Data System Weaknesses".

Performance Indicator Areas Overall Key Issues 20 Recommended Action

a Inter-regional differences in the "character" * After establishing a performance indicator system on ruralof poverty poverty at the national level, ways to disaggregate the

system by region should be considered3. Food Security * Definition of "food security" * DA should establish a firm definition in terms of

commodities covered4. Agrarian Reform * Lack of effective sectoral impact assessment * Study should be commissioned to review recent initiatives

model/s to assess overall agrarian reform performance and to pickout the more promising methodological aspects

5a. Public Sector Investments * Political intervention in resource allocation * Performance indicator system should be refined todistinguish non-market factors that affect investmentprioritization, allocation, and expenditures

5b. Private Sector Investments * Level of detail of existing data * Existing data should be reviewed to determine need tocollect/extract required detailed data

5c. Rural Finance * Data not disaggregated by target socio- * Study should be carried out to determine how existing dataeconomic and/or income group/s could be efficiently disaggregated

6. Natural Resource * Data gathering and analysis could he * Overlaps should be reviewed in terms of how these couldManagement constrained by overlaps across DA, DENR, affect the performance indicator system

and DAR7a. Devolution * Questions regarding land conversion process * Process for land conversion should be reviewed in terms of

how it could affect the performance indicator system* Generally weak data base across LGUs * As part of the above-mentioned capability-building

support, review the relevant portions of the data base ofsample LGUs, and recommend responsive capability-building measures

* Work with Leagues (of Provinces, Cities, Municipalities)7b. Convergence * Weak operationalization a Allow some time for the convergence strategy to be

implemented before attempting to monitor performance |

Annex 3/ 15 of 18

Table 3: Data System Weaknesses and Recommended Actions

GENERAL WEAKNESSES

Generic Issues Priority Recommended Actions

1. Data gathering of low priority across the * NEDA should strengthen advocacy forbureaucracy, particularly in light of the Executive and Legislative Branches tousual budget constraints allocate more resources for purposive data

gathering2. Data processing even of lower priority, so * Same as above; immediate processing of

that raw data become obsolete priority data as determined by NEDA forpurposes of assessing macro socio-economic performance based on theMTPDP

3. Data supply does not always match data * NEDA should lead a demand-drivendemand review of existing data systems in support

of development planning includingassessment of macro growth targets

4. Government-generated data perceived by * Review "independence" of dataprivate sector to be not highly reliable generators such as BAS vis-a-vis DA

. Increase collaboration between privatedata banks (UAP/CRC; FRLD;universities; think tanks) and relevantgovernment agencies (BAS; NSO)

5. Inconsistency of overlapping data across * Inter-related agencies should set updifferent agencies stronger coordinative mechanisms

* Inter-related agencies should enhancetriangulation and validation of data, aswell as analysis of discrepancies

6. Difficulty in gathering reliable income * Income data should be cross checked withdata because of (a) sensitive nature other variables, e.g., assets(personal and tax concerns); and (b) partly * Proxy indicators should be reviewednon-cash subsistence economies

7. Development planning, annual budgeting, * Individual agencies should reviewand monitoring and evaluation not closely linkages across planning, budgeting, andlinked monitoring and evaluation systems

8. Lack of linkage between sector level * NEDA NRM sector staffs should integratemonitoring and evaluation, and program/ sector review with project level review byproject level monitoring and evaluation NEDA Project Monitoring Staff that

coordinates with individual agencies

Annex 3/16 of 18

SPECIFIC WEAKNESSES

Performance Key Issues Priority SuggestionsIndicator Area Immediate Longer-Term

1. Agricultural Not all expenditures DA should study DA should pilotGrowth and across DA bureaus, report refinements test and possiblyPerformance agencies, and based on institutionalize

regional offices are performance promisingconsolidated indicators refinementsNot all expenditures * Same as above * Same as aboveacross DA bureausand agencies areorganized bycommodityDA budget and * Same as above * Same as aboveexpenditures are notorganized in terms offactor (esp. capitaland labor)productivityExcept for special * DBM and NEDA * DBM shouldprojects, NGAs not should study adjust budgetsystematically inclusion of formsmonitoring number of number of accordinglybeneficiaries beneficiaries as

performanceindicator

DA does not yet * DA should provide Planning,clearly distinguish appropriate budgeting, adbetween planning and monitoring and"modernization" and budgeting evaluation should"maintenance" guidelines consistentlyprograms, project, differentiateand activities between

modernizationand maintenance

2. Rural Poverty Budget and * DBM and NEDA * DBM shouldexpenditures of should review make theNGAs not presented budget forms appropriatein terms of targeting adjustments inspecific socio- formseconomic groups

Annex 3/17 of 18


Data on income- * Individual Agencies shouldgenerating projects agencies should institutionalizeremain to be begin to separate reporting onextracted data on income- income-

generating projects generatingversus other types programs andof data projects

3. Food Security Reliable data on rice * NFA should NFA shouldtargeting difficult to review its data continuallyobtain base analyze reports

on rice targeting4. Agrarian DAR data base still * DAR should * DAR should

Reform needs to be formulate a TOR channel morestrengthened for strengthening support for data

its data base generation andmanagement

5a. Public NGA project * DBM should * DBM shouldInvestments proposals normally consider requiring provide

presented as shopping agencies to appropriatelist rather than in prioritize project guidelinesorder of priority proposals

5b. Private Sector Private sector * Concerned GOP * Concerned GOPInvestments investments not agencies should agencies should

clearly presented as collaborate in the institute"modernization" review of the appropriateversus "maintenance" presentation of changes in

investment data/ investment data/reports reports

Private sector * Same as above * Same as aboveinvestments notpresented in terms ofdesired level ofspecificity, e.g.,"breeding stocks"

6. Natural Data on land * Inter-agency * Inter-agencyResource conversion not (NGAs-LGUs) committeeManagement available in committee should should review

consolidated format; review reporting land conversionprocess itself for land on land conversion processconversion remainsan issue

Annex 3 / 18 of 18


7a. Devolution Composition of local * DILG should * DILG shouldbodies such as LDCs consider issue appropriatenot being monitored monitoring of directives to

status of local LGUsbodies mandatedby law

Number of active * Same as above * Same as abovelocal bodies notavailable

Number of approved * Same as above * Same as abovelocal planscontinually changing;quality of plansvaries widelyNGA-LGU * DBM and NEDA * DBM and NEDAcooperation not being should review should adoptcontinually monitoring system appropriatemonitored for NGA-LGU measures

cooperation7b. Convergence Possible non- or * Inter-agency * Inter-agency

duplicative reporting committee should committeeon convergence by discuss and should instituteagencies concerned coordinate coordinated

reporting on reporting onincipient convergence toconvergence the Office of theactivities President

ANNEX 4

MTPDP: OVERVIEW OF GOALS, STRATEGIES, KEY RESULT AREAS ANDPRELIMINARY ASSESSMENT

1. Overview. In July 1999, the Philippine Government approved its latest MTPDP withthe avowed objective of eradicating poverty, especially in the rural areas, with special emphasis onsustainable rural development. The main RD objectives to be addressed in the next six years arereduction of rural poverty, food security and agricultural modernization. Central to achieving theobjectives of the MTPDP are the agriculture, agrarian reform and natural resources sectors of theeconomy which have lagged behind over the last six years, despite some policy reforms in the ruralsector and implementation of many rural development programs and projects during the 1980s and1990s.

2. The overarching goal set forth in the new MTPDP is the attainment of sustainable ruraldevelopment over the next six years (1999-2004), based on the following development strategies:(a) modernization of the Philippine agriculture and fisheries sector (i.e. AFMA); (b) diversificationof the rural economy; (c) sound practices of resource use efficiency and sustainability; and (d)adoption of the 'Convergence Framework' as innovative institutional framework for sustainablerural development.

3. To pursue these strategies, the new MTPDP has identified five (5) key result areas (KRAs),namely (further summarized in para. 2.16-2.26):

> Productivity and competitiveness enhancement;L Diversification of production and resource use;t Access to land and other productive resources;> Promoting environmental sustainability; and> Rationalizing institutional structures and empowerment of stakeholders.

4. Some of the main rural sector targets presented in the new MTPDP include:

> Average growth rate of 3.9 to 4.7% for the agriculture sector over the plan period;> Increase in the total of irrigated lands from 43 to 54 percent;k Completion by 2004 of the distribution of the remaining 3.3 million hectares CARPable lands;> Expansion of ARCs and increase to 60 percent ARBs access to support services;* Increase to 1% of agriculture GVA in 2001 for agricultural R&D;> Protection and management of 6 million hectares of forestlands;> Implementation of integrated coastal management (ICM) by 250 LGUs on 6,000 kms of coast

lines;

Annex 4/2 of 6

Modernization of the Philippine agricultural and fisheries sector

5. The MTPDP envisions a transformation of subsistence farmers to entrepreneurs, a ruralsector which would be characterized by increased productivity, broader and more intensifiedmanagement of natural resources through community-based approaches and more appropriateresource pricing for natural resource users. The modernization of the agriculture and fisheriessector shall have three principal features: (a) dynamism, innovation and adaptability to change; (b)high productivity and competitiveness; and (c) emphasis on enterprising tillers with informed choiceson the type of technology to use, crop to raise, and market for their products.

6. To realize this vision for the rural sector, the MTPDP aims to: (a) diversify the rural economythrough alternative employment opportunities in farm and non-farm activities; (b) increase sectorproductivity and production through modem technologies and sustainable farm practices; (c) promoteand expand opportunities for equitable access to productive assets (i.e. land); (d) empower sectorstakeholders and provide stronger institutional structures through improved capacity building andextension services; (e) remove policy biases against sector competitiveness; (f) mobilize financialresources; (g) enhance private sector participation; and (h) adopt environmentally-sound practices.

"Convergence Framiework" for sustainable rural development

7. The effective implementation of the new MTPDP's sustainable rural development strategylargely depends on the effectiveness and efficiency of the institutions and agencies responsible forthe sector. Under the MTPDP, two key areas for institutional reform and change are highlighted: (a)the overall relationship of the key sector stakeholders and agencies, i.e., national agencies, LGUs,private sector, communities and civil society, under a devolved set-up; and (b) an integrated andcoordinated roles and responsibilities of the primary agencies managing the development of hesector - Department of Agriculture (DA), Department of Agrarian Reform (DAR) and the Departmentof Environment and Natural Resources (DENR).

8. Under the MTPDP, the national government, is expected to assume and indirect, non-interventionist role in designing and implementing development initiatives in the rural areas andwill intervene only in cases of market failures and distortions, when demand for service in areas notcovered by the private sector, and when equity issues need advocacy and attention. In its relationwith LGUs, the new MTPDP highlights the national government's responsibilities under a devolvedset-up, namely: (a) setting of national policies and over-all regulatory frameworks; (b) designingprograms of national concern with potential for LGU replications; (c) setting of relevant technicalstandards; (d) providing technical assistance service to LGUs; and (e) joint monitoring and evaluation,of the implementation and impact of national programs.

9. The LGUs are the focal points of priority setting and provision of localized services anddevelopment assistance; design and implementation of specific development programs; and resourceand investment mobilization for locally based development and poverty alleviation projects. Thecivil society would play the crucial role of facilitating partnerships in local governance amongNGAs, LGUs, communities and the private sector as well as strengthening capacities of localcommunities to enhance their participation in the overall rural development.

Annex 4 / 3 of 6

10. The MTPDP identifies a "convergence framework" for integrating and joining thecomplimentary initiatives among the principal government institutions in the rural sector (i.e. DA,DENR and DAR) as the 'principal modality' to attain sustainable rural development over the nextsix (6) years. Under the convergence framework, the roles of the three departments would be asfollows: (a) DENR will carry out a holistic management of the "life forces" of water, soil, air, floraand fauna through the integrated management of watersheds, forests and soils; (b) DA will put intoproductive use the regenerative life forces nurtured by the DENR through assistance in the provisionof communal irrigation systems, seeds, feedstuffs and fertilizers, among others; and (c) DAR willensure the equitable sharing/distribution of access to and benefits of development (i.e. landdistribution and shifts to social capital formation and local empowerment).

Five (5) Key Result Areas for the Rural Sector

11. The MTPDP's 5 key result areas (KRAs) will guide the implementation of its rural sectordevelopment strategy and are summarized below. Further details on the content of these KRAs areprovided in Annex 4, including relevant feedback from the Phase 1 stakeholder workshops.

12. KRA 1: Productivity and competitiveness enhancement: This includes two general policythrusts: (a) ensure a conducive environment for improving sector competitiveness; and (b) enhanceand improve in the delivery of support services. Eight (8) major policy and program initiatives areproposed to improve sector competitiveness.

13. KRA 2: Diversification of production and resource use: The main elements include (a)broadening the research agenda by focusing on integrated farming, resource management and market-oriented system; (b) strengthening agriculture and industry linkages; and (c) expanding planningapproaches from terrestrial to marine and coastal services.

14. KRA 3: Access to land and other productive resources. This KRA promotes two mainstrategic areas: expediting the completion of CARP and broadening options to enhance land accessfor non-CARP beneficiaries. Eight (8) policy initiatives were submitted to achieve the objectivesof this KRA.

15. KRA 4: Promoting environmental sustainability. The MTPDP proposed eleven (11) majorpolicy initiatives to promote environmental sustainability in the sector. A separate set of policyinitiatives under KRA 4 cover the six (6) sectoral resource areas of forestry, land, freshwater, coastaland marine, biodiversity and protected areas, and minerals.

16. KRA 5: Rationalizing institutional structures and empowerment of stakeholders. Thisincludes two major policy initiatives - to rationalize institutional structures in the sector and tostrengthen institutional capabilities of sector stakeholders.

17. Finally, the MTPDP outline other policies and strategies to support the five (5) main KRAsfor the rural sector. These are the adoption of a spatially oriented approach to sectoral planning anddevelopment, and the integration of gender equity and sensitivities in the formulation of sectoralpolicies, strategies and programs and projects in the MTPDP.

Annex 4 /4 of 6

MTPDP: Preliminary Assessment & Emerging Priorities (by themes)

18. While NEDA organized stakeholder consultations prior to finalizing the MTPDP, it is notclear which of the specific feedback was reflected in the final version. The emphasis should be itsimplementation. Nonetheless, it is still relevant to assess various aspects of Chapter 3 as it willaffect the expected outcomes. While assessing the linkages between the MTPDP strategic objectives,supporting strategies, KRAs and priority inputs/activities, the study team identified 5 key themeswhich reflect relevant feedback from the Phase 1 stakeholder consultations and which merit furtherattention during the implementation phase, and these are summarized:

(a) Need to Correlate MTPDP objectives and strategies with priority inputs

19. A preliminary view of the MTPDP's strategic objectives and the identified strategies, KRAsand priority inputs/activities show that there is a strong need to correlate the contribution of theidentified priority sectoral activities with priority inputs (or activities) in achieving the strategicobjectives and KRAs in the MTPDP. For example, in the case of inducing sector competitivenessthrough corrections in the current tariff reform regime in the sector, no clear inputs or proposals ontariff reform outside of proposed amendments to the Agricultural Tariffication Act (RA8 178)) wereindicated as the priority support activities (PSAs) for the productivity and competitivenessenhancement KRA. In the case of the KRA for diversification of production and resource use,PSAs identified in the MTPDP covered only a limited section of the general and specific policiesidentified in the KRA. In fact, the total number of areas, around fifteen (15), to be covered in thegeneral and specific policies in the KRA far outnumber the total of seven (7) proposed PSAs for theKRA.

(b) Need to prioritize inputs with MTPDP objectives and strategic outcomes

20. While there is a general consensus and acceptance (as shown from the stakeholders workshop)of the strategic issues, objectives and outcomes, including the identified six (6) KRAs of the MTPDP,the long list of priority sectoral activities (PSAs) or inputs listed in the MTPDP is seen more of a'wish list' rather than real, implementable and realizable activities. In the list of PSAs for the six(6) KRAs, seventy-four (74) PSAs were identified. Seventy percent (70%), or a total of 53 PSAswere concentrated for the KRAs for productivity and competitiveness enhancement (21 PSAs) andpromoting environmental sustainability (32 PSAs), while the rest of the PSAs are distributed unevenlyto the rest of the 4 remaining KRAs. Out of the long list of PSAs, no ranking or sense of prioritywas laid down in relation to the KRAs' strategic outcomes and targets.

21. The same is true for the list of key policies and strategies listed under most of the KRAs. Asreflected during the stakeholders workshops and meetings of the Planning Committee, there is afelt need to trim down or prioritize the key inputs for each KRA in order to achieve efficiencies andeffectiveness to achieve the goals of the MTPDP and a more prudent use of scarce public resources.

(c) Need for stronger sense of integration and complementation

22. The current plan strongly pointed out the need for integration and complementation amongthe agencies involved in the rural sector. The adoption of the 'convergence framework' as institutional

Annex 41 5 of 6

framework for sustainable rural development clearly shows this stated commitment to achieve greaterintegration and complementation among agencies in the sector, specially in 3 key agencies of theDA, DAR and DENR. However, the current plan appears to be precisely more of a list of outputswith little sense of prioritization and sequencing of programs and activities, if not integration andcomplementation, with other activities of other national agencies. The list of PSAs identified byeach agencies as their inputs to the achievement of the KRAs has no clear unifying element thatwould show how each activity will lead or support the other activities listed under the PSAs for theKRAs, much more, contribute to achieving the KRA itself.

23. An example is directly linking the specific areas covered by the watershed areas beingmanaged by the DENR with SAFDZs and ARCs of both DA and DAR, respectively, to inducegreater productivity and increase incomes of agrarian reform beneficiaries in these areas. Anotherexample is the matching of proposed establishment of rural infrastructure and investments withpotential areas planted to high-yielding crops. In the stakeholder workshops, participants similarlynoted the need for linkages not only among activities and inputs within the rural sector programsbut also with other sectoral programs, i.e. industrial and technology.

(d) Needfor more program, long-gestating, system-based approachtes than short-term,high-impact, project-based strategies

24. Because of the growing need for integration and complementation in the sector, ruraldevelopment strategies and approaches are shifting into a more integrative, evolving, broad-basedand area-based program approach rather than short-term, high-impact projects. These can be seenin the institutionalization of more system-based and integrative planning frameworks into the MTPDP.

25. A very clear example is the adoption of the 'convergence strategy' of integrated rural supportservices among the key rural sector agencies. Similar types of strategies, approaches and inputssuch as eco-system based resource management, integrated watershed management, integrated coastalmanagement, integrated farming practices, agricultural information system among others, aregenerously scattered in the strategic policies listed under the KRAs as well as the PSAs or inputsidentified by the lead agencies. In this aspect, stakeholders expressed strong support to such broad-based program planning approaches. However, as earlier expressed in this report, rural stakeholdersare seeking simplified yet clear lines of responsibilities and roles to be played in the MTPDCP bythe key players in the sector.

(e) Need to shifting rural supportprogramrls fi-om infr-astructure-based to 'social (human)capital formation' inputs

26. The key issues in the country's rural development strategy are deeply rooted problems thathave affected the sector for the last five decades. This has been clearly painted in the MTPDP.Likewise, the solutions or approaches identified in the MTPDP pursues a longer view towards theresolution of these issues and thereby achieving the goal of poverty alleviation and rural growth.Towards these ends it is expected that the strategies and inputs aimed at addressing these issuesshould go beyond rhetoric and contain concrete, appropriate and rationale methodologies andmechanisms for action that would implement the strategies in the MTPDP.

Anniex 4 / 6 of 6

27. A good part of the strategic policies listed in the KRAs of the MTPDP are broad declarationsand repetition of previously stated programs and strategies contained in previous plans. Indeed, thesame KRAs under the Angat Pinoy 2004 Plan are reformulation, if not repetition, of previous KRAsand strategies of past plans. A clear example is the identification of productivity and competitivenessobjective sin the KRA and the subsequent program of upgrading the improving post-harvest facilitiesand infrastructure in the sector. While these are indeed important, if not fundamental, requirementsof any rural development strategy, these items have been the staple menu of previous plans.

28. Indeed, the propensity for rural infrastructure and public works as key elements ofdevelopment strategies in rural sector in previous MTPDP's has become a sort of 'panacea' to theproblems in the rural sector. In the consultations, while sectoral stakeholders did prioritize post-harvest facilities and rural infrastructure in achieving enhanced productivity in the sector, theysimilarly raised the need for evaluating and assessing the performance of previous rural sectorplans that included the same set of proposed strategies and programs contained in the new plan.

29. Likewise, prioritization of other types of services and inputs particularly on social capitalformation such as health, education, capability building, entrepreneurship, human resourcedevelopment and gender have been growing and creating a demand for integrating 'non-infrastructure'based programs in the rural sector strategy. In the MTPDP, these social capital formation programshave yet to achieve equal prominence to traditional types of infrastructure and technology-basedservices and continue to receive inadequate attention in investment programs.

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