Report and Recommendation of the President to the Board of Directors

Project Number: 43407-017 Loan Numbers: 2662 and 3669 April 2020

Proposed Emergency Assistance Loan for Second Additional Financing Republic of the Philippines: Social Protection Support Project Distribution of this document is restricted until it has been approved by the Board of Directors. Following such approval, ADB will disclose the document to the public in accordance with ADB's Access to Information Policy.

CURRENCY EQUIVALENTS (as of 15 April 2020)

Currency unit = peso/s (₱)

₱1.00 = $0.01975 $1.00 = ₱50.6100

ABBREVIATIONS

4Ps – Pantawid Pamilyang Pilipino Program ADB – Asian Development Bank CCT – conditional cash transfer COVID-19 – coronavirus disease DSWD – Department of Social Welfare and Development EAL – emergency assistance loan ECA - emergency cash assistance ESAP – Expanded Social Assistance Project GDP – gross domestic product IPP – indigenous people’s plan LBP – Land Bank of the Philippines NCR – National Capital Region SPSP – Social Protection Support Project SPSP-AF – Social Protection Support Project – Additional Financing SPSP-AF II – Social Protection Support Project – Second Additional Financing

NOTES

(i) The fiscal year of the Government of the Philippines and its agencies ends on 31 December.

(ii) In this report, “$” refers to United States dollars unless otherwise stated.

Vice-President Ahmed M. Saeed, Operations 2 Director General Ramesh Subramaniam, Southeast Asia Department (SERD) Directors Ayako Inagaki, Human and Social Development Division (SEHS),

SERD Kelly Bird, Philippines Country Office, SERD

Team leaders Shamit Chakravarti, Principal Social Sector Specialist, SEHS,

SERD Yukiko Ito, Senior Social Development Specialist, Social Development Thematic Group, Sustainable Development and Climate Change Department (SDCC) Joel Mangahas, Principal Planning and Policy Economist; Strategy, Policy and Business Process Division; Strategy, Policy and Partnerships Department

Team members Meenakshi Ajmera, Principal Safeguards Specialist, Office of the Director General (SEOD), SERD Elizabeth Burges-Sims, Senior Social Development Specialist (Gender and Development), SEHS, SERD Oliver Domagas, Senior Financial Control Specialist, Loan and Grant Disbursement Section, Controller’s Department Madhumita Gupta, Principal Social Development Specialist Safeguards Division, SDCC Shinsuke Kawazu, Principal Counsel, Office of the General Counsel Anne Michelle Mendoza, Senior Financial Management Officer, Public Management, Financial Sector and Trade Division, SERD Luvette Anne Miclat, Senior Project Assistant, SEHS, SERD Antoine Morel, Principal Environment Specialist, SEOD, SERD

David Raitzer, Economist, Economic Analysis and Operational Support Division, Economic Research and Regional Cooperation Department Ma. Karen Revilla-Guzman, Senior Project Officer, SEHS, SERD Ruchel Marie Grace Roque-Villaroman, Project Analyst, SEHS, SERD

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS Page

PROJECT AT A GLANCE

I. THE PROPOSAL 1

II. THE PROJECT 2

A. Rationale 2 B. Project Description 4 C. Value Added by ADB 4 D. Summary Cost Estimates and Financing Plans 5 E. Implementation Arrangements 6

III. DUE DILIGENCE 7

A. Technical 7 B. Economic and Financial Viability 7 C. Sustainability 7 D. Governance 8 E. Poverty, Social, and Gender 8 F. Safeguards 8 G. Summary of Risks and Risks Management Plan 9

IV. ASSURANCES 9

V. RECOMMENDATION 10

APPENDIXES

1. Revised Design and Monitoring Framework 11 2. List of Linked Documents 16

Project Classification Information Status: Complete

PROJECT AT A GLANCE

Source: Asian Development BankThis document must only be generated in eOps. 09042020203250519334 Generated Date: 18-Apr-2020 21:56:24 PM

1. Basic Data Project Number: 43407-017Project Name Social Protection Support Project (Second

Additional Financing) Department/Division SERD/SEHS

Country Philippines Executing Agency Department of Social Welfare and Development

Borrower Republic of the Philippines

Country Economic Indicators

https://www.adb.org/Documents/LinkedDocs/?id=43407-017-CEI

Portfolio at a Glance https://www.adb.org/Documents/LinkedDocs/?id=43407-017-PortAtaGlance

2. Sector Subsector(s) ADB Financing ($ million)Public sector management Social protection initiatives 150.00

Health Disease control of communicable disease 50.00

Total 200.00

3. Operational Priorities Climate Change InformationAddressing remaining poverty and reducing inequalities

Accelerating progress in gender equality

Strengthening governance and institutional capacity

Climate Change impact on the Project

Low

Sustainable Development Goals Gender Equity and MainstreamingSDG 1.3SDG 2.1SDG 3.8SDG 5.1SDG 10.2

Gender Equity (GEN)

Poverty TargetingHousehold Targeting

4. Risk Categorization: Low.

5. Safeguard Categorization Environment: C Involuntary Resettlement: C Indigenous Peoples: B

.

6. Financing

Modality and Sources Amount ($ million)

ADB 200.00

Sovereign Project (Regular Loan): Ordinary capital resources 200.00

Cofinancing 0.00

None 0.00

Counterpart 0.00

None 0.00

Total 200.00

Currency of ADB Financing: US Dollar

I. THE PROPOSAL 1. I submit for your approval the following report and recommendation on a proposed emergency assistance loan (EAL) to the Republic of the Philippines for the second additional financing of the Social Protection Support Project (SPSP-AF II).1 2. The proposed SPSP-AF II will support the government’s efforts to provide unconditional emergency cash assistance (ECA) to the poor and vulnerable households which have been adversely affected by the coronavirus disease (COVID-19) pandemic, and the associated declaration of community quarantine announced in several parts of the Philippines since 15 March 2020. The Bayanihan to Heal as One Act, or Republic Act No. 11469 (Bayanihan Law),2 which was signed into law on 24 March 2020, empowers the government to provide an ECA of ₱5,000–₱8,000 per month for 2 months to around 18 million low-income households / families nationwide.3 The Department of Social Welfare and Development (DSWD) and the local government units have been designated as the key agencies through which the ECA will be delivered. The SPSP-AF II will build on the decade-long support of the Asian Development Bank (ADB) for the government’s Pantawid Pamilyang Pilipino Program (4Ps), which provides conditional cash transfers (CCTs) to improve the health and education of nearly 4.28 million households nationwide. This proposed EAL will fund part of the ECA to these 4Ps households so that they can cope with the unfolding economic, health, and social costs of the COVID-19 pandemic. 3. 4Ps: Design and conditionalities. The 4Ps was launched by the government in 2008 to target poor households and help them improve the education and health of their children, as a pathway out of poverty.4 The CCTs are as follows: (i) for the education grant, for 10 months each year, the 4Ps households receive ₱300 per month for children in elementary or secondary school, ₱500 per month for children in grades 7–10, and ₱700 per month for children in grades 11–12, provided the children attend at least 85% of classes each month;5 and (ii) for the health grant, the 4Ps households receive a fixed amount of ₱750 per month for 12 months (irrespective of the number of children), provided they fulfill the following conditions: (a) pregnant women avail themselves of pre- and post-natal care, and are attended during childbirth by trained health professionals; (b) parents attend regular family development sessions; (c) children aged 5 years and under receive regular preventive health check-ups and vaccination; and (d) children aged 6–14 years receive deworming pills biannually. Households exit from the 4Ps either when all the children enrolled for education grants reach 18 years of age and/or graduate out of senior high school,6 or if they fail to comply with the conditions despite repeated reminders. 4. ADB’s past engagement. On 2 September 2010, ADB approved the Social Protection Support Project (footnote 1) for $400 million to support the government’s social protection program through CCTs under the 4Ps. On 9 February 2016, ADB approved the first additional

1 ADB. 2010. Philippines: Social Protection Project. Manila. The original loan became effective on 12 January 2011

and closed financially after full disbursement on 5 June 2017; ADB. 2016. Philippines: Social Protection Support Project (Additional Financing). Manila.

2 Accessible at https://www.officialgazette.gov.ph/downloads/2020/03mar/20200324-RA-11469-RRD.pdf 3 The Bayanihan Law will remain in effect only for 3 months unless extended by the Congress of the Philippines. 4 Initially, only those households below the poverty line with children younger than 14 years old and/or pregnant

women, as identified by the National Household Targeting System for Poverty Reduction in 2009 (Listahanan 1), were included under the 4Ps. With the launch of the kindergarten to grade 12 Program (which extended school from grade 10 to grade 12) by the Department of Education in 2015, the 4Ps raised the age cap of children from 14 to 18 years to enable them to complete senior high school.

5 Each 4Ps household can register up to three eligible children for the education grant. 6 Based on the operations manual of the 4Ps, if the child beneficiary turns 19 during the school year, he or she shall

continue to receive education grants until the end of that school year.

2

financing of SPSP (SPSP-AF or the ongoing project) (footnote 1) for $400 million to support expansion of the 4Ps. The DSWD served as the executing agency for the SPSP, the SPSP-AF, and the associated technical assistance grants. 5. Good performance of SPSP-AF. The SPSP-AF’s outcome is increased household consumption and increased utilization of education and health services by 4Ps families, especially mothers and children. The outputs are (i) national targeting system to select poor families implemented efficiently, (ii) conditional health and education cash grants provided to poor families, (iii) capacity for CCT program operations strengthened, and (iv) systems for monitoring and evaluating social protection programs improved. The SPSP-AF is performing well, with project performance rated on track annually since loan effectiveness in 2016. By 8 January 2020, the entire additional financing of $400 million had been disbursed. The project has no technical issues and has satisfactorily achieved most of its expected results. School attendance of 4Ps children (aged 3–18 years) was 95.8% as compared to the target of 90.0%. About 83.7% of pregnant women delivered their babies in health facilities, exceeding the target of 70.0%. Nearly 85.21% of births were delivered by skilled health personnel.7 The project has consistently complied with safeguards and financial covenants. The SPSP-AF was scheduled to close on 30 June 2020. However, the government, in its letter dated 28 March 2020 to the ADB President, requested for a second additional financing to be processed on a fast-track basis to support the DSWD in providing the ECA to 4Ps households nationwide. The SPSP-AF II meets all of the eligibility criteria for additional financing including (i) satisfactory implementation progress, (ii) satisfactory compliance with safeguard policy requirements, (iii) successful management of risks, and (iv) a rating of highly satisfactory or satisfactory in the project performance ratings. 6. The COVID-19 pandemic is an unprecedented global emergency. While there has not been any destruction of physical infrastructure as is normally experienced during natural hazards or non-natural disasters, the economic, health, and social disruption caused by the pandemic is unparalleled (paras. 7–8). By providing immediate, short-term transitional assistance in the form of an ECA, the EAL will support the DSWD in addressing the urgent basic needs of the poor 4Ps households whose livelihoods have been disrupted. ADB is coordinating with other development partners including the Department of Foreign Affairs and Trade of the Government of Australia, the International Labour Organization, the United Nations Children’s Fund, the World Bank, and the World Food Programme.8

II. THE PROJECT A. Rationale 7. Adverse impact of COVID-19 outbreak. As in many other countries around the world, the Philippines—and particularly its poor and vulnerable people—has been hit hard by the COVID-19 pandemic.9 It poses a very high health risk for the elderly and for those with underlying health problems. As of 18 April 2020, the Philippines had recorded 6,087 COVID-19 cases, with 397 deaths. The government declared community quarantine covering the National Capital Region (NCR) on 15 March 2020. This was extended to the entire island of Luzon on 17 March

7 Summary of Project Performance (accessible from the list of linked documents in Appendix 2). 8 For details refer to Emergency Assistance Coordination (accessible from the list of linked documents in Appendix 2). 9 The World Health Organization (WHO) declared the COVID-2019 outbreak a public health emergency of international

concern in 30 January 2020. On 12 March 2020, the WHO declared it to be a global pandemic.

3

2020. This quarantine has subsequently been extended until 30 April 2020.10 The Office of the President of the Philippines has declared a state of calamity for the country until 17 September 2020. As a result of the community quarantine, factories have shut down, malls and restaurants closed, supply chains cut, and public transportation halted. While the Philippine economy grew at a steady average annual rate of 6.5% during 2012–2019, growth is expected to be adversely affected by the COVID-19 pandemic. Projections made by the National Economic and Development Authority of the Philippines show that the quarantine could reduce gross domestic product (GDP) growth to potentially negative levels in 2020.11 8. Potential increase in poverty, hunger, and other vulnerabilities. While the poverty rate in the Philippines declined from 25.2% in 2012 to 23.3% in 2015 and to 16.6% in 2018,12 absolute poverty and inequality remain high. Nearly 17.6 million people continue to live under the poverty line. Approximately 14.2 million live just above the line and are vulnerable to sliding back into poverty.13 Due to to the sudden loss of livelihoods due to the quarantine, the poor, indigent elderly and informal sector workers and daily wage laborers have lost their livelihoods. They have limited cash and are unable to purchase adequate food and other basic necessities. With the loss of income and growing food insecurity, compounded by the health risk and cost of COVID-19, the prospects for these poor households are very grim. Unless addressed on an emergency basis, this could roll back the progress made by the Philippines in its fight against poverty. Since the COVID-19 pandemic has unfolded, the DSWD has identified approximately 6.5 million poor and vulnerable households and 2.9 million indigent senior citizens as beneficiaries of the proposed ECA based on different targeting protocols.14 In addition, it is estimated that there are around 7.7 million informal sector workers and daily wage earners nationwide.15 The DSWD has issued guidelines to implement the Social Amelioration Program mandated by the Bayanihan Law. 9. Vulnerable segments – 4Ps households. The 4Ps program targets 4.4 million beneficiaries covering eligible poor households with children 0–18 or with pregnant women, homeless street families, families in need of special protection, and indigenous peoples. As of 29 February 2020, there were 4.28 million active households nationwide under the 4Ps. Around 85.3% of these households are headed by female grantees. There are 643,414 indigenous people households (i.e. 15.0% of total active 4Ps households). Approximately, 202,000 (4.7%) households have a person with disability. In all, 7.8 million children aged 3-18 years old children (51.7% females) are registered under the 4Ps. Given the reach of the 4Ps, providing ECA to these households is a top priority of the government, and will be supported under the proposed loan. There is a distinct risk that some of the gains achieved under the 4Ps CCT interventions over the years may get rolled back if these households are not given ECA to meet their food, medicine,

and other basic needs during this crisis. 10. Choice of modality. Building on ADB’s ongoing 4Ps support through additional financing will be faster and more effective in reinforcing the government’s emergency COVID-19 response

10 Local governments in Visayas and Mindanao have followed suit and imposed “enhanced community quarantine”

measures, including in regional economic hubs and tourism sites (e.g., Cebu, Iloilo, Bohol, Boracay, Leyte, Davao, Cagayan de Oro, and Bukidnon), which will further impact poor and vulnerable people in these island groups.

11 National Economic Development Authority. 2020. Addressing the Social and Economic Impact of the COVID-19 Pandemic. Manila.

12 Philippine Statistics Authority (PSA). Multiple years. National Income Accounts, Labor Force Survey, and Poverty Statistics. Manila.

13 PSA. 2018. Poverty Statistics. Manila. 14 For details on the targeting protocols and operational guidelines, refer to the Social Amelioration Program

Guidelines (as of 13 April 2020) (accessible from the list of linked documents in Appendix 2). 15 The estimate is approximately 60% of total informal workers and daily wage earners who are most likely not

receiving any benefits from social assistance programs.

4

as compared to designing a new loan. The proposed SPSP-AF II meets all eligibility criteria for an EAL (para. 11).16 It will be limited only to the transition phase of the government’s COVID-19 response, and will support the DSWD in providing immediate and short-term transitional assistance to the poor 4Ps households whose livelihoods have been disrupted by the COVID-19 pandemic and quarantine measures. The loan will have a one year implementation period (i.e., from April 2020 to April 2021). The SPSP-AF II will use DSWD’s targeting mechanisms and time-tested cash delivery systems to provide the ECA to approximately 3.67 million 4Ps households (out of the total 4.28 million 4Ps households) that have cash cards issued by the Land Bank of the Philippines (LBP). The DSWD continues to have strong ownership of the ongoing SPSP-AF. 11. Emergency assistance loan eligibility. The proposed SPSP-AF II meets all eligibility requirements for an EAL as laid down under the Disaster and Emergency Assistance Policy (footnote 18):

(i) the government’s request for assistance has been received (para. 5), (ii) the potential impact on social needs and priorities has been identified in a damage

and needs assessment,17 (iii) the COVID-19 pandemic involves significant economic dislocation and the

proposed EAL is intended to address immediate needs, (iv) no security risks to ADB staff are anticipated, and (v) the level of burden and risk sharing among the stakeholders is appropriate.

B. Project Description 12. The proposed SPSP-AF II is aligned with the following impact: income poverty and non-income poverty reduced.18 The outcome of the overall project will remain the same: household consumption and the use of education and health services by 4Ps households (especially mothers and children) are increased. The project will support this outcome through the output described in para. 13. 13. Unconditional ECA for 4Ps households having cash cards delivered on time. The SPSP-AF II will fund ECA of between ₱5,000 and ₱8,000 ($98.30 - $157.30) per month for 2 months to 3.67 million 4Ps households who have cash cards.19 The specific amount of the ECA per household will depend on the region and the prevailing minimum wage there. The DSWD will require nearly $726.1 million to provide ECA to all 4Ps households nationwide for a period of 2 months. Of this, $637.1 million will be required for the 86% of 4Ps households (i.e., 3.67 million) which have cash cards. ADB will fund $200 million of this amount. C. Value Added by ADB 14. ADB is supporting the government in responding to the unprecedented social and economic disruptions of the COVID-19 pandemic through several channels. First, ADB approved a $3 million grant on 14 March 2020 to help procure critical medical supplies and equipment to

16 ADB. 2004. Disaster and Emergency Assistance Policy. Manila (para. 92). 17 Summary Assessment of Damages and Needs (accessible from the list of linked documents in Appendix 2). 18 National Economic and Development Authority. 2017. Philippine Development Plan 2017–2022. The impact

statement is unchanged. 19 The LBP and its conduits, along with the DSWD, organize over-the-counter CCT payments for the 4Ps households

who don’t have cash cards. However, because of the quarantine, this arrangement cannot be used. The DSWD is delivering ECA via local government units to these households. Since it will not be possible for ADB to undertake fiduciary assessment of the local government units, the second additional financing project will be restricted to the 86% of 4Ps households (around 3.67 million) with cash cards.

5

help with COVID-19 treatment.20 Second, ADB approved a $5 million technical assistance project on 31 March 2020 to support the government by leveraging private sector participation in providing essential food supplies to about 55,000 poor households in the NCR and neighboring areas.21 This grant has been provided as “bridge support” until the provision of the ECA through SPSP-AF II and other assistance from the government. Third, the proposed Expanded Social Assistance Project (ESAP) in the amount of $500 million will continue ADB’s decade-long support for the 4Ps CCT program till 2023.22 15. Fourth, ADB is designing an EAL to address the immediate needs of improving COVID-19 surveillance, infection prevention, control measures, and diagnostic and treatment capacity. It will also support medium- and long-term investments for future pandemic preparedness. Fifth, the proposed COVID-19 Active Response and Expenditure Support Program ($1.5 billion) will support critical public spending, help finance the government’s COVID-19 response and relief packages, and support counter-cyclical fiscal stimulus.23 16. ADB has been supporting the DSWD’s social protection programs, which include the 4Ps and community-driven development. In collaboration with the DSWD and other development partners, ADB has helped to strengthen the national household targeting system, enhancing institutional capacity, developing credible monitoring and evaluation systems, and generating and disseminating knowledge. Having demonstrated positive results over the years, these programs are well-placed to support collective efforts to mitigate the adverse impact of COVID-19 on poor and vulnerable households. D. Summary Cost Estimates and Financing Plans 17. The overall project is estimated to cost $637.1 million (Table 1). ADB will partly finance expenditures related to providing the ECA to approximately 3.67 million 4Ps households which have cash cards.

Table 1: Summary Cost Estimates

($ million)

Item Current Amounta

Additional Financingb Total

A. Base Costc

1. National targeting system implemented efficiently 13.7 13.7 2.1. Conditional health and education grants provided 6,353.3 6,353.3

2.2 Unconditional emergency cash assistance for COVID- 19-affected 4Ps delivered on time

635.2 635.2

3. Capacity for CCT operations strengthened 59.9 59.9 4. Systems for monitoring and evaluation 46.9 46.9 5. Advocacy 5.9 5.9 6. Administration and personnel services 468.9 468.9

Subtotal (A) 6,948.6 635.2 7,583.8 B. Contingencies 7.7 7.7 C. Financing Charges During Implementationd 87.3 1.9 89.2 Total (A+B+C) 7,043.6 637.1 7,680.7

4Ps = Pantawid Pamilyang Pilipino Program, CCT = conditional cash transfer, COVID-19 = coronavirus disease.

20 ADB. 2020. Philippines: COVID-19 Emergency Response. Manila. 21 ADB. 2020. Implementing a Rapid Emergency Supplies Provision (RESP) Assistance to Design a Sustainable

Solution for COVID-19 Impact Areas in the National Capital Region, Through Public Private Collaboration. Manila. 22 ADB. Forthcoming. Report and Recommendation of the President: Proposed Loan to the Republic of the Philippines

for Expanded Social Assistance Project. Manila. 23 ADB. Forthcoming. Report and Recommendation of the President: Proposed Loan to the Republic of the Philippines

for COVID-19 Active Response and Expenditure Support Program. Manila.

6

a Refer to original loan amount and first additional financing. Includes taxes and duties of $1.84 million to be financed from government resources.

b Additional financing for the emergency cash assistance. Any taxes and duties will be financed by the government. c In March 2020 prices. d Includes interest and commitment charges financed by the government. Commitment charges for the Asian

Development Bank loan are 0.15% per year on the undisbursed loan amount Source: Asian Development Bank.

18. The government has requested additional financing of $200 million from ADB’s Ordinary Capital Resource to support part of the government program in response to the COVID-19 epidemic. The government will finance $437.1 million. The loan will have a term of 29 years including a grace period of 8 years, use the straight line method with an annual interest rate determined in accordance with ADB’s London interbank offered rate (LIBOR)-based lending facility, have a maturity premium of 0.20% and a commitment charge of 0.15% per year, and such other terms and conditions set forth in the loan agreement. 19. Detailed cost estimates by expenditure category and by financier are included in the project administration manual.24 The summary financing plan is in Table 2.

Table 2: Summary Financing Plan

Source

Currenta Additional Financing Total

Amount ($ million)

Share of Total

(%) Amount ($ million)

Share of Total

(%) Amount ($ million)

Share of Total

(%)

Asian Development Bank OCR (regular loan) 800.0 11.4 200.0 31.4 1,000.0 13.0

World Bank (loan) 450.0 6.4 450.0 5.9

Government 5,793.6 82.3 437.1 68.6 6,230.7 81.1

Total 7,043.6 100.0 637.1 100.0 7,680.7 100.0

OCR = ordinary capital resources. a Refer to the original loan and first additional financing. Source: ADB and Philippines Department of Social Welfare and Development

E. Implementation Arrangements 20. The DSWD will continue to serve as the executing agency. It will supervise and coordinate implementation, and ensure the appropriate use of the loan proceeds. The 4Ps National Program Management Office will continue to remain as the implementation unit. A financial management assessment has been undertaken as part of the due diligence process. Since the loan will provide urgent cash support to alleviate the immediate economic and financial hardships faced by poor and vulnerable households, it will have a 1-year implementation period with full disbursement expected. The implementation arrangements are summarized in Table 3 and described in detail in the project administration manual.

Table 3: Implementation Arrangements

Aspects Arrangements

Implementation period April 2020–April 2021

Estimated completion date 30 April 2021

Estimated loan closing date 31 October 2021

Management

(i) Oversight body Secretary, DSWD (chair) Relevant undersecretaries and assistant secretaries (members)

24 Project Administration Manual (accessible from the list of linked documents in Appendix 2).

7

Aspects Arrangements

(ii) Executing agency DSWD

(iii) Key implementing agencies Pantawid Pamilyang Pilipino Program NPMO and RPMO

(iv) Implementation unit NPMO (15 managerial staff) and RPMO (17 managerial staff), supported by contractual staff

Procurement Not applicable

Consulting services Not applicable

Retroactive financing Withdrawals from the loan account may be made to finance eligible expenditures incurred in connection with the ECA to about 3.67 million 4Ps households that are paid via cash card under the project before the loan effectiveness, provided that the expenditures for the ECA have been incurred after the emergeny occurred but not earlier than 12 months before the date of the loan agreement and up to 30% of the loan proceeds.

Disbursement The loan proceeds will be disbursed following ADB's Loan Disbursement Handbook (2017, as amended from time to time) and detailed arrangements agreed between the government and ADB.

4Ps = Pantawid Pamilyang Pilipino Program, ADB = Asian Development Bank, DSWD = Department of Social Welfare and Development, ECA = emergency cash assistance, NPMO = National Program Management Office, RPMO = Regional Program Project Management Office.

III. DUE DILIGENCE

A. Technical 21. A detailed technical review of the DSWD’s targeting protocol, payroll preparation, and payments mechanism for making the ECA to 4Ps households with cash cards has been made. The funds will be released through the LBP, using the same cash cards which are used for paying CCTs to 4Ps households. This arrangement is quite robust and time tested.

B. Economic and Financial Viability 22. A standard economic rate of return analysis does not have to be done for this additional financing.25 Since the proposed SPSP-AF II will utilize the DSWD’s existing targeting protocol and cash-card-based delivery system for the 4Ps, the marginal cost for distributing the ECA is negligible. The ECA will help the 4Ps households with cash cards smooth out their consumption of food and other basic needs and help to cope with this unprecedented crisis. Since poor households have a higher marginal utility of consumption than the general population, this redistribution will be enhance overall welfare. The economic benefits are substantial while the costs are negligible, thus, indicating a high economic rate of return. 23. Short-term GDP growth is likely to contract substantially because of the quarantine measures. The project’s contribution is approximately 4.7% of the total cost of emergency assistance for 4Ps and non-4Ps beneficiaries (estimated at $4.2 billion) and 31.4% of the assistance provided to active 4Ps beneficiaries with cash cards. The national government’s debt had been declining since 2010. While it will be impacted by the crisis, there are adequate fiscal resources to absorb increases in government spending for the ECA.

C. Sustainability 24. The Bayanihan Law is a temporary emergency measure (footnote 3) under which the ECA will be urgently provided to 4Ps households to help them meet their food and other basic needs.

25 Economic and Financial Analysis (accessible from the list of link documents in Appendix 2).

8

The government’s 4Ps program has been institutionalized through Republic Act No. 11310 in April 2019.26 ADB’s proposed ESAP for $500 million will extend support for the CCTs until 2023. D. Governance 25. The government continues to strengthen its public financial management. Significant improvements in transparency, policy-based budgeting, and asset–liability management have been made since the public expenditure and financial accountability assessment of 2007.27 However, budget reliability, accounting and reporting, and external audit remained weak and are currently being addressed by the government. At the 4Ps level, the premitigation financial management risk is rated substantial. The Commission on Audit conducts annual audit of the 4Ps. Most observations are resolved within the fiscal year.28 The DSWD has a good financial management system with internal controls for its programs. It has extensive experience of undertaking large-scale programs and working with multiple development partners. Technical assistance support is being provided by ADB to further strengthen the DSWD’s financial management system.29 With this support, the risk is moderate. E. Poverty, Social, and Gender 26. The key causes of poverty and vulnerability include high inequality of income, underinvestment in human capital, catastrophic health expenditure, and frequent natural hazards. The poverty rate in the Philippines declined from 25.2% in 2012 to 16.6% in 2018. Despite this decline, absolute poverty and the risk of vulnerability remain high, especially with the rapid spread of the COVID-19 across the Philippines. The expanded quarantine from mid-March 2020 has deprived not only the poor but also informal sector workers, including daily wage workers of their livelihoods. They are now finding it difficult to pay for food, medicines, and other basic necessities. The project is categorized as having a gender equity theme as the COVID-19 crisis may potentially aggravate inequality and disproportionately impact poor people, especially poor women. Of the 4.28 million 4Ps households, 85.3% are headed by female grantees. Key gender issues include (i) income loss since many poor women work in informal sectors as daily wage earners; (ii) increased negative social behavior including heightened gender-based violence as a result of anxiety and stress around loss of employment, disease transmission, and forced confinement; and (iii) disproportionate impact of COVID-19 on women because of their roles as primary household and family caregivers. F. Safeguards 27. In compliance with ADB’s Safeguard Policy Statement (2009), the project’s safeguard categories are as follows.30 28. Environment (category C). The project will not support any civil works or other similar activity with potential adverse environmental impacts.

26 Accessible at https://www.officialgazette.gov.ph/2019/04/17/republic-act-no-11310/. 27 World Bank. 2016. Republic of the Philippines: PFM Strategy Implementation Support—Public Financial

Management and Accountability Assessment. Washington, DC. (Report No: 105753-PH, June). 28 The observations of the Commission on Audit for fiscal years 2015–2017 have been fully complied with. 29 The TA, Strengthening Social Protection Reforms, in the amount of $1 million was attached to the SPSP-AF which

was approved in 2016. This was converted into a transaction TA facility (with the same name) in November 2018, with additional funding of $1 million to support the design and implementation of the ESAP.

30 ADB. Safeguard Categories.

9

29. Involuntary resettlement (category C). The project will not support any civil works or other similar activity that involves land acquisition. 30. Indigenous peoples (category B). The project is categorized B as it will have positive impact on indigenous households by providing them with the ECA to help cope with this crisis. Of the total active 4Ps households, 643,414 (15%) households are those of indigenous people. An indigenous people’s plan (IPP) has been prepared following the ADB Safeguard Policy Statement on indigenous peoples safeguards.31 The plan specifies safeguard provisions to be monitored during project implementation to ensure that indigenous peoples can access and receive benefits from project activities. The SPSP-AF II will ensure that indigenous peoples are aware of the additional support provided by the government during the COVID-19 pandemic. The IPP specifies safeguard provisions to be monitored during project implementation to ensure that indigenous people are not excluded from the list of grantees for additional cash grants and other health services. It provides guidance to ensure that indigenous people are consulted and aware of the support provided by the government during the COVID-19 pandemic. The IPP specifies that indigenous communities will be provided with relevant and adequate information on how to protect their families from infection. It will ensure culturally appropriate and gender-sensitive consultation processes are used when engaging tribal leaders, indigenous communities, and indigenous peoples representatives.

G. Summary of Risks and Risks Management Plan 31. Significant risks and mitigating measures are summarized in Table 4 and described in detail in the risk assessment and risk management plan.32 There are no high risks to this project.

Table 4: Summary of Risks and Risk Mitigating Measures

Risks Mitigating Measures

Widespread COVID-19 infection and associated enhanced community quarantine affect the 4Ps payment delivery mechanisms, e.g., processing of payroll, LBP documentation, and release of funds.

Payroll and grant allocations will be prepared while awaiting the fund releases from the DBM. The DSWD will coordinate with LBP regarding electronic transfer procedures in case of prolonged quarantine. The DSWD’s business processes will be streamlined further to deliver cash grants in a timely manner.

Household grantees have limited access to ATMs because of community quarantine measures.

More mobile ATMs will be used and collaboration with local banks increased to support the timely delivery of cash grants.

NPMO and other DSWD field staff overstretched because of the high workload and work-from-home arrangements.

The DSWD has issued new work and social distancing guidelines to ensure that critical staff are given adequate support for carrying out their tasks. ADB will provide support to DSWD as required through the ongoing technical assistance facility (footnote 32).

4Ps = Pantawid Pamilyang Pilipino Program, ADB = Asian Development Bank, COVID-19 = coronavirus disease, DBM = Department of Budget and Management, DSWD = Department of Social Welfare and Development, LBP = Land Bank of the Philippines, NPMO = National Program Management Office. Source: Asian Development Bank.

IV. ASSURANCES

32. The government and the DSWD have assured ADB that implementation of the project shall conform to all applicable ADB requirements including those concerning anticorruption measures, safeguards, gender, procurement, consulting services, financial management, and disbursement as described in detail in the project administration manual and loan documents.

31 Indigenous Peoples Plan (accessible from the list of linked documents in Appendix 2). 32 Risk Assessment and Risk Management Plan (accessible from the list of linked documents in Appendix 2).

10

33. The government and the DSWD have agreed with ADB on certain covenants for the project, which are set forth in the loan agreement.

V. RECOMMENDATION

34. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Asian Development Bank (ADB) and recommend that the Board approve the emergency assistance loan of $200,000,000 to the Republic of the Philippines for the second additional financing of the Social Protection Support Project, from ADB’s ordinary capital resources, in regular terms, with interest to be determined in accordance with ADB’s London interbank offered rate (LIBOR)-based lending facility; for a term of 29 years, including a grace period of 8 years; and such other terms and conditions as are substantially in accordance with those set forth in the draft loan agreement presented to the Board.

Masatsugu Asakawa President

20 April 2020

Appendix 1 11

REVISED DESIGN AND MONITORING FRAMEWORK

Impact the Project is Aligned with

Current project: Income poverty and non-income poverty reduced

Overall project: Unchanged (Philippines Development Plan 2017–2022) a

Results Chain Performance Indicators with

Targets and Baselines

Data Sources and Reporting Mechanisms Risks

Outcome

Current project: Household consumption and the use of education and health services by 4Ps householdsb (especially mothers and children) are increased

a. At least 10% increase in average per capita consumption of beneficiaries in target communities (2008 baseline: $211 per capita per year) (RFI 1.1)c b. At least 90% each of boys and girls aged 6–18 years in poor beneficiary householdsb attend school (2008–2009 baseline: 62%) (RFI 1.1)c c. At least 70.0% of pregnant women deliver in a health facility (2008 baseline: 44.5%) (RFI 1.1)c d. At least 80.0% of births are delivered by skilled health personnel (2008 baseline: 62.2%) (RFI 1.1)c

a–f. Regular impact evaluation surveys (DSWD and PIDS) b–e. Quarterly program MIS reports (DSWD) a, f. Annual poverty indicators survey (PSA)

Benefit levels are not adjusted for inflation. Social services may be unavailable or of low quality. Political and financial support for the program may not be maintained.

Overall project: Unchanged

e. At least 85% of children are fully immunized before 1 year old (2008 baseline: 70%) (RFI 1.1)c f. Decrease in the share of children 6–14 years old who are working in project areas (2008 baseline: 4.6%) (RFI 1.1)c Overall project: Unchanged

Outputs Output 1 Current project: National targeting system to selected poor householdsb implemented efficiently Overall project: Unchanged

1a. Current project: By 2019, 85% of poor householdsb nationwide registered in the Listahanan database (2008 baseline: 0) (RFI 1.1)c Overall project: Unchanged 1b. Current project: By 2019, the Listahanan exclusion error is less than 20% for the NCR and 7% for non-NCR areas and inclusion error is less than 11% for the NCR and 14% for non-NCR areas (2008 baseline: Not applicable) (RFI 1.1)c Overall project: Unchanged

1a. Listahanan database (DSWD) and annual poverty indicators survey (PSA) 1b–d. Listahanan database (DSWD)

Transitory movements in and out of poverty may not be fully captured by the targeting system. The targeting system may result in inclusion and exclusion errors.

12 Appendix 1

Results Chain Performance Indicators with

Targets and Baselines

Data Sources and Reporting Mechanisms Risks

1c. Current project: By 2019, at least 25 national programs use the Listahanan targeting mechanism (2008 baseline: Not applicable) (RFI 1.1)c Overall project: Unchanged 1d. Current project: By 2019, at least 60% of poor householdsb registered in the Listahanan database receive benefits of social protection programs (2008 baseline: Not applicable) (RFI 1.1)c Overall project: Unchanged

Output 2 Current project: Conditional health and education cash grants provided to poor householdsb Overall project: Unchanged

2a. Current project: By 2019, at least 4 million poor householdsb receive cash grants and at least 90% of grant recipients are women (2008 baselines: Not applicable) (RFI 1.1)c Overall project: Unchanged 2b. Current project: By 2019, at least 80% of mothers in beneficiary householdsa receive 4Ps cash grants in at least five of the six reporting periods per year (2008 baseline: Not applicable) (RFI 1.1)c Overall project: Unchanged 2c. Current project: By 2019, at least 80% of householdsb meet education conditions regularly (2008 baseline: Not applicable) (RFI 1.1)c Overall project: Unchanged 2d. Current project: By 2019, at least 80% of householdsb meet health conditions regularly (2008 baseline: Not applicable) (RFI 1.1)c Overall project: Unchanged 2e. Current project: By 2019, at least 80% of householdsb meet the family development session conditions (2008 baseline: Not applicable; males: Not applicable) (RFI 1.1)c Overall project: Unchanged 2f. Current project: By 2015, local area maps are produced, with data down to at least the barangay level, showing distributions of (i) target households; (ii) health facilities; (iii) preschools and day-care centers;

2a–e. Pantawid 4Ps MIS (DSWD) 2f. DSWD Information Management Bureau mapping service

Payment windows may be far from beneficiaries’ homes and therefore either inaccessible or expensive to access. Errors may result in ineligible households receiving CCT grants. Weaknesses in internal control may increase fiduciary risk.

Appendix 1 13

Results Chain Performance Indicators with

Targets and Baselines

Data Sources and Reporting Mechanisms Risks

(iv) schools; and (v) payment windows (RFI 1.1)c Overall project: Unchanged

Output 3 Current project Capacity for CCT program operations strengthened Overall project Unchanged

3a. Current project: By 2011, central and local project management structures established (2008 baseline: Not applicable) (RFI 1.1)c Overall project: Unchanged 3b. Current project: At least 1,400 central and local staff acquire knowledge on gender analysis, indigenous peoples sensitivity, and prevention of gender-based violence by 2017 (2008 baseline: Not applicable) (RFI 1.1)c Overall project: Unchanged 3c. Current project: Gender action plan implemented to 2019 (2008 baseline: Not applicable) (RFI 1.1)c Overall project: Unchanged 3d. Current project: By end of 2014, participatory gender audits and community-driven municipality gender action plans piloted in 10 municipalities (2008 baseline: Not applicable) (RFI 1.1)c Overall project: Unchanged

3a. Pantawid4Ps Operations Manual (DSWD) 3b. Training and workshop records (DSWD) 3c–d. Gender action plan updates by the gender and development unit (DSWD)

Output 4 Current project Systems for monitoring and evaluating social protection programs improved Overall project Unchanged

4a. Current project: By 2011, MIS is established and functioning to support payments, verification, updates, and grievance system (2008 baseline: established) (RFI 1.1)c Overall project: Unchanged 4b. Current project: By 2019, 90% of grievances received are resolved within established time protocol (2008 baseline: Not applicable,) (RFI 1.1)c Overall project: Unchanged 4c. Current project: At least seven rounds of independent spot checks of 4Ps conducted by 2016 (2008 baseline: Not applicable) (RFI 1.1)c Overall project: Unchanged 4d. Current project: By 2016, final impact evaluation report based on third wave impact evaluation survey in late 2015 (2008 baseline: Not applicable) (RFI 1.1)c

4a. Spot-check reports (Social Weather Stations) 4b. 4Ps MIS (grievance redress system) (DSWD) 4c. Spot-check reports (Social Weather Stations) 4d. Impact evaluation reports (DSWD)

Program integrity and success could suffer from political capture or interference.

14 Appendix 1

Results Chain Performance Indicators with

Targets and Baselines

Data Sources and Reporting Mechanisms Risks

Overall project: Unchanged

Output 5 (added) Unconditional emergency cash assistance for 4Ps households having cash cards delivered on time

5a. Within the duration of the implementation of the Bayanihan Law, 100% of beneficiaries having cash cards received the ECA (2020 baseline: 0) (RFI 1.1)c 5b. At least 85.3% of ECA recipients of 4Ps households with cash cards are women (2020 baseline: 0) (RFI 1.1)c

5a.–b. DSWD reports

Delayed release of funds

Key Activities with Milestones 1. National targeting system to select poor families implemented efficiently 1.1 Assess households in set three areas, and register poor households in the Listahanan database (Q3 2010;

updates through Q2 2015) (completed) 1.2 Complete the list of potential Pantawid beneficiaries, using the Listahanan PMT, for all sets (Q3 2010)

(completed) 1.3 Apply the Listahanan PMT targeting mechanism in 15 other national programs (by Q2 2019) (completed) 1.4 Process special validation requests on an annual basis (by Q2 2019) (completed) 2. Conditional health and education cash grants provided to poor families 2.1 Undertake sets 2 and 3 of beneficiary household validation, LBP enrollment, and identification card distribution

(by Q3 2010) (completed) 2.2 Distribute cash cards to new beneficiaries (initiated in Q3 2010) (completed) 2.3 Ensure computerized compliance verification system operating by Q1 2011 and used as basis for all subsequent

grant payments (completed) 2.4 Prepare and transmit to LBP the beneficiary payrolls for every pay period (completed) 2.5 Make bimonthly payments of CCT to beneficiaries until 2019 (completed) 3. Capacity for conditional cash transfer program operations strengthened 3.1 Mobilize additional staff per staffing plan under approved reorganization, including hiring contractual staff for the

National Program Management Office and Regional Program Management Offices (by Q2 2019) (completed) 3.2 Complete supply-side assessment and analysis (by Q2 2011) (completed) 3.3 Implement training and capacity building (periodic to 2019) (completed) 3.4 Disseminate information in public forums (periodic to 2019) (completed) 3.5 Ensure that more efficient institutional mechanisms for providing grants to remote beneficiaries are in place by

Q4 2012 3.6 Pilot participatory gender audits and community-driven gender action plans (Q3 2010–Q4 2014) (completed) 3.7 Train Pantawid parent leaders in regional clusters (Q1 2017–Q2 2019) (completed) 4. Systems for monitoring and evaluating social protection programs improved 4.1 By Q4 2010, launch core modules of computerized MIS: (i) household information, (ii) registration, (iii)

verification, (iv) payments, (v) updates, and (vi) grievance redress system (completed) 4.2 Ensure that a fully integrated computer-based MIS is operating by Q2 2011 (completed) 4.3 Develop and test spot-checking methodology (Q3 2010) (completed) 4.4 Undertake ADB-financed independent spot checks and reporting at least seven times through 2016 and

counterpart-financed independent thereafter at least annually (completed) 4.5 Undertake monitoring and evaluation studies (2014–2016) (completed) 5. Unconditional emergency cash assistance for Pantawid Pamilyang Pilipino Program households having

cash cards delivered on time 5.1 Prepare and transmit to LBP the beneficiary payrolls (Q2 2020) 5.2 Provide the ECA to 4Ps households with cash cards

Appendix 1 15

Inputs

ADB

Loan TA

$800.0 (current) $2.0 (current)

$200.0 (additional)

$1,000.0 (overall) $2.0 (overall)

World Bank

$450.0 (current)

$ 0.0 (additional)

$450.0 (overall)

Government

$5,793.6 (current)

$437.1 (additional)

$6,230.7 (overall)

Assumptions for Partner Financing Not applicable

4Ps = Pantawid Pamilyang Pilipino Program, ADB = Asian Development Bank, CCT = conditional cash transfer, DSWD = Department of Social Welfare and Development, ECA = emergency cash assistance, LBP = Land Bank of the Philippines, MIS = management information service, NCR = National Capital Region, PIDS = Philippines Institute for Development Studies, PMT = proxy means test, PSA = Philippine Statistics Authority, Q = quarter, RFI = results framework indicator. a National Economic and Development Authority. 2017. Philippine Development Plan 2017-2022. b The planned change in the primary beneficiary of 4P from “households” to “families” did not materialize in 2015, and therefore the primary beneficiary unit has been changed back from “families" to “households”. Reference to the program as “Pantawid” has also been changed to “4Ps”.

Contribution results framework: c RFI 1.1: 3.67 million households benefiting from improved health services and social protection. Source: ADB.

16 Appendix 2

LIST OF LINKED DOCUMENTS http://www.adb.org/Documents/RRPs/?id=43407-017-3

1. Loan Agreement

2. Summary Assessment of Damages and Needs

3. Project Administration Manual

4. Summary of Project Performance

5. Emergency Assistance Coordination

6. Economic and Financial Analysis

7. Summary Poverty Reduction and Social Strategy

8. Risk Assessment and Risk Management Plan

9. Indigenous Peoples Plan

10. Approved Report and Recommendation of the President to the Board of Directors: Social Protection Support Project

11. Approved Report and Recommendation of the President to the Board of Directors: Social Protection Support Project (Additional Financing)

Supplementary Documents

12. Philippines: Targeting Different Vulnerable Segments for Emergency Cash Assistancein Response to COVID-19

13. Social Amelioration Program Guidelines

14. Draft Sector Assessment: Expanded Social Assistance Project