world bank document · philippines kapitbisig laban sa kahirapan-comprehensive and integrated...
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Document ofThe World Bank
Report No: 24642-PH
PROJECT APPRAISAL DOCUMENT
ONA
PROPOSED LOAN
IN THE AMOUNT OF US$100 MILLION
TO THE
REPUBLIC OF THE PHILIPPINES
FOR
KAPITBISIG LABAN SA KAHIRAPAN-COMPREHENSIVE AND INTEGRATED DELIVERY OFSOCIAL SERVICES (KALAE-CIDSS) PROJECT
August 23, 2002
Environment and Social Development UnitEast Asia and Paciflc Region
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CURRENCY EQUIVALENTS
(Exchange Rate Effective August 1, 2002)
Currency Unit = PesoPhP51.15 = US$1
US$1 = PhP51.15
FISCAL YEARJanuary 1 - December 31
ABBREVIATIONS AND ACRONYMSADB Asian Development BankAPL Adaptable Program LoanARMM Autonomous Region of Muslim MindanaoBAP Barangay Action PlanCAS Country Assistance StrategyCAU Contract Administration UnitCIDSS Comprehensive Integrated Delivery of Social ServicesCOA Commnission on AuditCODE Caucus of Development NGO NetworksDBM Department of Budget ManagementDBP Development Bank of the PhilippinesDENR Department of Environment and Natural ResourcesDILG Department of Interior and Local GovernmentDOF Department of FinanceDPWH Department of Public Works and HighwaysDSWD Department of Social Welfare and DevelopmentEA Environmental AssessmentGOP Govemment of PhilippinesIA Implementation AgencyIP Indigenous PeopleIRA Internal Revenue AllotmentKALAHI Kapit Bisig Laban sa Kahirapan (Linking hands in the fight against poverty)KDP Kecamatan Development Program, IndonesiaLBP Land Bank of the PhilippinesLGU Local Govemment UnitMOU Memorandum of UnderstandingNAPC National Anti Poverty CommissionNEDA National Economic Development AuthorityNGO Nongovenmmental OrganizationsOM Operations ManualO&M Operation and MaintenancePANAMIN Presidential Assistance for National MinoritiesPMO Project Management OfficePO People's OrganizationRPMO Regional Project Management OfficeSOE Statement of ExpendituresTWC Technical Working Committee
WBOM World Bank Office in Manila
Vice President: Jemal-ud-din KassumCountry Manager/Director: Robert Van Pulley
Sector Manager/Director: Zafer EcevitTask Team Leader/Task Manager: Cyprian F. Fisiy
PHILIPPINESKAPITBISIG LABAN SA KAHIRAPAN-COMPREHENSIVE AND INTEGRATED DELIVERY
OF SOCIAL SERVICES (KALAHI-CIDSS) PROJECT
CONTENTS
A. Project Development Objective Page
1. Project development objective 22. Key performance indicators 2
B. Strategic Context
1. Sector-related Country Assistance Strategy (CAS) goal supported by the project 22. Main sector issues and Government strategy 33. Sector issues to be addressed by the project and strategic choices 4
C. Project Description Summary
1. Project components 62. Key policy and institutional reforms supported by the project 93. Benefits and target population 104. Institutional and implementation arrangements 12
D. Project Rationale
1. Project alternatives considered and reasons for rejection 132. Major related projects financed by the Bank and other development agencies 143. Lessons learned and reflected in the project design- 164. Indications of borrower commitment and ownership 165. Value added of Bank support in this project 17
E. Summary Project Analysis
1. Economic 182. Financial 183. Technical 204. Institutional 205. Environmental 226. Social 237. Safeguard Policies 26
F. Sustainability and Risks
1. Sustainability 272. Critical risks 283. Possible controversial aspects 30
G. Main Conditions
1. Effectiveness Condition 312. Other 31
H. Readiness for Implementation 31
I. Compliance with Bank Policies 32
Annexes
Annex 1: Project Design Summary 33Annex 2: Detailed Project Description 36Annex 3: Estimated Project Costs 41Annex 4: Cost Benefit Analysis Summary, or Cost-Effectiveness Analysis Summary 42Annex 5: Financial Summary for Revenue-Earning Project Entities, or Financial Summary 48Annex 6: (A) Procurement Arrangements 49
(B) Financial Management and Disbursement Arrangements 57Annex 7: Project Processing Schedule 65Annex 8: Documents in the Project File 66Annex 9: Statement of Loans and Credits 67Annex 10: Country at a Glance 69Annex 11: Environmental and Social Safeguards 71
MAP(S)Philippines: KALAHI-CIDSS Project Provinces
PHILIPPINESKapitbisig Laban sa Kahirapan-Comprehensive and Integrated Delivery of Social Services
(KALAHI-CIDSS) Project
Project Appraisal Document
East Asia and Pacific RegionEASES
Date: June 11, 2002 Team Leader: Cyprian F. FisiySector Manager/Director: Zafer Ecevit Sector(s): Other social services (100%)Country Manager/Director: Robert V. Pulley Theme(s): Other social development (P),Project ID: P077012 Decentralization (S), Other accountability/anti-corruptionLending Instrument: Specific Investment Loan (SIL) (S)
Project Financing Data[X] Loan [ Credit [ ] Grant [] Guarantee [ Other:
For Loans/Credits/Others:Loan Currency: United States DollarAmount (US$m): 100
Borrower Rationale for Choice of Loan Terms Available on File: Z Yes
Proposed Terms (IBRD): Fixed-Spread Loan (FSL)Grace period (years): 8 Years to maturity: 20Commitment fee: 0.85 Front end fee (FEF) on Bank loan: 1.00%
Payment for FEF: Capitalize from Loan Proceeds
Initial choice of Interest-rate basis: Auto. Rate Fixing by period 6 months
Type of repayment schedule:[X] Fixed at Commitment, with the following repayment method (choose one): level[ ]. Linked to Disbursement
Conversion options: [X]Currency [X]Interest Rate [X]Caps/Collars: Capitalize from Loan Proceeds
Financing Plan (US$rm): Source Local Foreign TotalBORROWER 82.00 0.00 82.00
IBRD 0.00 100.00 100.00Total: 82.00 100.00 182.00
Borrower: REPUBLIC OF THE PHILIPPINESResponsible agency: DEPARTMENT OF SOCIAL WELFARE AND DEVELOPMENTAddress: Department of Social Welfare and Development, Quezon City, PhilippinesContact Person: Corazon Juliano-Soliman, SecretaryTel: 63-2-931-7916 Fax: 63-2-931 8191 Email: [email protected]
Estimated Disbursements (_Bank FY/US$m):FY 2002 2003 20Q4 2005 2006 2007, .2098
Annual 1.40 2.30 21.00 33.00 30.00 12.00 0.30
Cumulative 1.40 3.70 24.70 57.70 87.70 99.70 100.00
Project implementation period: 6.5 yearsExpected effectiveness date: 12/02/2002 Expected closing date: 06/30/2009
CCS PAD F- R. ZMOO
A. Project Development Objective
1. Project development objective: (see Annex 1)
The objective of the Project is to assist the Borrower in strengthening local communities' participation inbarangay govemance, and developing their capacity to design, implement and manage developmentactivities that reduce poverty.
This objective establishes a strong link between improved local govemance and poverty reduction. Thisgoal is pursued through three interlinked activities:
i. Empowerment of communities: this involves participatory planning, implementation, andmanagement of local development activities. It fosters an engagement with govemment at alllevels to access, influence, and manage resources to meet community priorities.
ii. Improvement of local governance: this is pursued by strengthening formal and informalinstitutions to become more inclusive, accountable, and effective.
iii. Provision of grants for community investment programs: by matching needs with limitedresources in a competitive manner, communities and Local Government Units (LGUs) will beengaged in a demand-driven process of problem solving. The limited project grant resources willfarther trigger better local resource mobilization, effective community ownership of investments,and induce the type of behavioral change required for long-term sustainability of suchinvestments.
2. Key performance indicators: (see Annex 1)
* Proportion of LGUs (municipalities) that have institutionalized the participatory strategies andtechnical assistance introduced by the project to assist community organizations/barangaysreduce poverty.
* Proportion of community organizations/barangays with well-defined and functioning operationaland financial procedures that promote people's participation.
* Proportion of LGUs that assist participatory planning and management of subprojects bybarangays.
* Improved poverty indicators in project barangays compared to without-project barangays.
* Improved human development indicators in the target barangays.
Ultimately, these indicators will contribute to meeting the Millennium Development Goals (MDGs) forthe Philippines.
B. Strategic Context
1. Sector-related Country Assistance Strategy (CAS) goal supported by the project: (see Annex 1)Document number: R2002-0083(IFC/R2002-0076) Date of latest CAS discussion: June 4, 2002
The objective of the Bank's proposed Country Assistance Strategy is to assist the Government of thePhilippines (GOP) in pursuing its overarching objective of "winning the war against poverty." Thisstrategy calls for rapid growth and the empowerment of the poor to participate fully in development. The
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KALAHI-CIDSS Project will contribute to this broad strategy by enhancing the planning andimplementation capabilities of communities, in particular in procurement, financial management, andproject implementation. It will complement other Bank assistance that focuses on improving investmentsin human resources (education and health), ensuring the poor have access to productive resources, andsupporting efficient provision of other basic services. The project will also contribute to strengtheningthe organizational and financial capacity of local actors, such as barangays, and the poor in particular.
Core design features of the project will reinforce the proposed Country Assistance Strategy by promotinggood and effective govemance with a focus on: (i) keeping a tight "firewall" against graft and corruptionin projects; (ii) improving citizen access to information; (iii) promoting civil society participation inbudget formulation and monitoring, and institutionalizing citizen feedback on quality and access togovernment services; and (iv) strengthening public sector rules and capacity.
The KALAHI, which stands for Kapit-Bisig Laban sa Kahirapan or 'linking arms m the struggle againstpoverty,' is both a program and the primary poverty fighting framework of the Arroyo administration. It isconstructed on the follo,wing five pillars: (i) asset reform (redistributing physical and resource assets tothe poor, especially land and credit); (ii) human development services (access to basic education, healthand nutrition, shelter, potable water, sanitation and electricity); (iii) employment and livelihood activities(boosting agriculture and fisheries activities and providing seed capital to micro and small businesses ofthe poor); (iv) participation in the governance of basic sectors (strengthening political participation andcultural expression); and (v) social protection and security against violence by reducing the risk andvulnerability of the poor to the immediate effects of economic shocks and disasters.
2. Main sector issues and Government strategy:
Poverty situation: Widespread poverty continues to be a challenge in the Philippines. Initial estimates ofthe national poverty incidence show that the proportion of poor households increased from 31.8% in1997 to 34.2% in 2000. The aggregate number of households below the poverty line in 2000 reached ahigh of 5.2 million and absolute poverty is over 40% in 8,of the 16 regions in the country.
Poverty is a predominantly rural phenomenon in the Philippines. The rural poor constitute about 44% ofthe rural population and account for almost three-fourths of the poor in the country. Most of the ruralpoor are engaged in agriculture (about 63%), with rice, corn, coconut farmers, and fisher folk comprisingthe majority. The severity of rural poverty is the greatest among the landless workers and small farmerswho make up a large part of the rural population.
The 1997 East Asian financial crisis and the subsequent El Nifno phenomenon further exacerbated theeconomic situation by causing a reduction in the average living standards of Filipinos and an increase inthe country's poverty incidence. These structural and exogenous factors have contributed in delaying aquick economic recovery.
Average GDP growth in the last three years has been less than 3%. With a population growth rate of2.32 per annum and the prospect of a robust economic recovery appearing uncertain in the very nearfuture, the incidence of poverty is rising again. Official sources cite unemployment at 11% andunderemployment at 21 % in the last quarter of 2001.
Worsening poverty has had serious consequences on the economic, political and social fabric of thePhilippines. The present administration perceives a strong linkage between high levels of absolutepoverty and the persistence of civil unrest and armed conflict in certain parts of the country. It hasdeclared the fight against poverty to be the long-term solution to its fight against armed conflict.
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The structural fundamentals of the Philippines economy have impeded previous attempts to fight poverty.Changes in the Philippine economy have not always led to improvements in the distribution of wealthdue to historically embedded patterns of asset distribution. At the institutional level, the governmentcontinues to invest in strengthening its institutional foundations with the aim of achieving sustainablepoverty reduction outcomes. The structural and bureaucratic requirements for a strong developmentalstate, based on good govemance and driven by economic policies that would bring about broad-basedgrowth and poverty reduction, are not yet fully in place.
Previous poverty reduction programs: Past administrations were not short on measures or programsthat sought to address the problem of poverty. These measures culminated with the RamosAdministration's 1997 enactment of the Social Reform and Poverty Alleviation Act (RA 8425), aimed atcomplementing the Economic Recovery Agenda and addressing broader structural patterns of poverty inthe country. Among these programs was the 1998 Comprehensive Integrated Delivery of Social Services(CIDSS), which has emerged as a viable technology in assessing the minimum basic needs ofcommunities, but has been less successful in meeting those needs. CIDSS coverage has been quitelimited and poorly funded, and its concentration on social services has made it largely a top-downwelfare program.
As both an upgrade on CIDSS and an improvement on KALAIi, KALAHI-CIDSS will provide"investment" type assistance that is situated within the KALAHI framework and builds on the CIDSStechnology by deepening and broadening its outreach. It will differ from the CIDSS by introducing: (i) anopen menu for selection of project activities; (ii) the selection of sub-projects through an inter-barangaycompetitive forum; (iii) community management of development resources including communitycontracting; (iv) arrangements to ensure full transparency; and (v) an enhancement of the facilitationprocess. It will also shift the unit of reference for basic planning and implementation of activities fromthe household to the barangay.
3. Sector issues to be addressed by the project and strategic choices:
(a) Conceptualframework
The conceptual underpinnings of this community approach to development and poverty reduction arethreefold. The first establishes the context in which communities can be empowered to manage theirassets, lives and livelihoods in ways that restore their sense of responsibility and human dignity (i.e. theemancipatory dimension of development as opposed to social engineering). The second focuses on howcornimunities and social networks link into the policy and administrative structures of the state,particularly by strengthening the linkages between communities and their local government units. Thethird establishes a development model that uses investment programs as a platform to promoterepresentation and accountability, and to reduce poverty. The demand-driven, open menu, approach toinvestment is at the center of this project, it empowers communities to decide and act, while curbing thetop-down planning approach inherent in social engineering models.
The ,KALAHI-CIDSS will adopt people-centered approaches to problem solving. It will foster themovement of actors from being mere "subjects" who are passive beneficiaries of state assistance, tobecoming active citizens with rights and responsibilities who take control of their destinies. At aninstitutional level, the project design will take into account the ways in which unequal access to politicaland economic decision-making processes affect access to and control over resources by the poor. Thisfocus on the flow of power in decision-making processes is expected to identify the current obstacles andsuggest new ways of dealing with winners and losers in the development process.
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(b) Project Principles
In order for the goals of the investment to be achieved, the core project principles must be adhered to byall participating municipalities and barangays. The mnemonic construct of "LETS-CIDSS" facilitates theeasy internalization of these principles and stands for:
* Localized Decision-Making. All deliberations and decisions on subprojects are taken at thebarangay level and at the inter-barangay forum.
* Empowering and participatory. KALAHI-CIDSS will coordinate processes to ensure thatcommunities, with the assistance of technical experts, prioritize development needs, and makedecisions on how resources are used.
* Transparent. Every aspect of project decision-maling will be known to the community andmunicipal players. Every amount spent and all decisions taken will be publicly announced andmade availablel on information boards, and through the independent monitoring of NGOs andmedia groups.
* Socially inclusive. The whole community, not just a few families, has the opportunity to beinvolved in the, planning and decision-making process. Special efforts will be taken to ensure agender-balanced and active participation of the poorest segments and minorities in the barangay.
* Competitive. Participating barangays will submit proposals to the inter-barangay forum forselection. All barangays have equal chances to access project funds based on the feasibility ofproposed activities.
* Institutional capacity-building for good governance. Institutions working in the barangay andmunicipality LGUs, NGOs, media, and POs will be encouraged to join in project planning,implementation, and maintenance.
* Demand-driven poverty reduction. Options for community-driven projects are based on an openmenu. Communities will prioritize their development needs, design activities, seek technicalexpertise and make inforned choices on how resources are used for sustainable povertyreduction.
* Simple. All decision-making, financial procedures and components of the project will be keptsimple for all players to easily understand and become fully involved in the project.
* Sustainable. Viable long-term operations and maintenance plans must be set up prior to projectimplementation. At the municipal level, local governments will be encouraged to adoptparticipatory community-driven planning approaches.
(c) Operational Mechanisms
The core mechanisms of the project are: (i) a very fast system of direct cash transfers from a nationalSpecial Account to the barangay, where village representatives hold a collective bank accounts; (ii) atiered system of technical and social facilitators to support existing CIDSS staff, NGOs, and the villagesthemselves; (iii) open project menus; (iv) a process for technical review of sub-project proposals thatentails no veto or decision-making powers; (v) support for barangay management of procurement,financial management, and project implementation; and (vi) full transparency through a program ofdisclosure and independent civil society monitoring. These processes are designed to support thefollowing core project components.
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C. Project Description Summary
1. Project components (see Annex 2 for a detailed description and Annex 3 for a detailed costbreakdown):
The twin goals of empowerment and good governance, which lie at the center of this investment, are thecritical building blocks for poverty reduction sustainable development. These goals will be achievedthrough community preparation of sub-project components based on the following five pillars:
a. A robust facilitation framework where the primary goal is to ensure the inclusion and participationof poor and marginal groups and minimize gender bias during implementation. The demand-driven,multi-stakeholder competition envisaged should push communities to become more cohesive and torebuild their solidarity, the basis for mobilizing social capital. There 'is always the risk of elitecapture, especially as it pertains to the mobilization of social capital for private gain. A riskmanagement framework included in the design will expressly address this concem. Also, in theproject implementation manual will set out the procedures to guard against official coercion onsub-component selection and/or the selection of contractors and procurement.
b. Direct fund flows to beneficiary communities should revamp local decision making, build theinstitutional capabilities of barangays to acquire and manage assets, and establish accountability andtransparency in the management of the common good. This departure from standard practice buildson the CIDSS experience.
c. A conflict resolution framework that provides institutional mechanisms for dealing with conflict isnecessary, as it is recognized that the project will be implemented in regions of the country that are inpre-conflict, conflict, or post-conflict situations, especially the non-ARMM areas of Mindanao. Inaddition, competition for limited resources between and within culturally-diverse communities hasthe potential to increase, social tensions. To this end, appropriate contextual adaptations will beintroduced during project implementation, while maintaining the integrity of project principlesdiscussed above.
d. An Anti-corruption strategy that will include ex ante measures based on information flows,disclosure rules, and other aspects of social control as well as ex post mechanisms (such as audits,suspensions, legal action, etc.) deemed commensurate with the violation. In addition, the projectmanual will include a detailed mitigation plan for detecting and acting upon cases of corruption. Theanticipated outcome is to contribute to ending a culture of impunity.
e. Consistent with the national policy requiring cost sharing for devolved activities, cost sharing withlocal communities and LGUs will be required for participation in the project. Contributions fromcommunities may be in cash or kind, and LGU engagement will include contributions in staff time,fixed assets and other forms.
Project components
The KALAHI-CIDSS project components include:
A. Barangay Grants
1. Carrying out community development sub-projects, including investment in economic and socialinfrastructure, environmental conservation measures and capacity building, through the provision ofgrants to Barangays.
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2. Carrying out audits of the records, accounts and financial statements of expenditures relating to theimplementation of community development sub-projects.
B. Implementation Support
1. Mobilizing local communities to participate in the Project through provision of technical assistanceby facilitators and community organizations.
2. Strengthening the capacity of local communities and local government units to initiate, plan andimplement, manage and supervise Barangay Sub-projects, through the provision of technicalassistance, training :and workshops.
C. Monitoring and Evaluation
Strengthening the capacity of the National Project Management Office and local communities tomonitor and evaluate implementation of the Project and Barangay Sub-projects respectively through thedevelopment of baseline data and a computerized management information system.
Indicative! Bank- % ofComponrfent %losts "o6i, of financing Bank-
(US$M) Total (US$M) financingCommunity Block Grants 132.20 72.6 90.60 90.6Implementation Support 46.20 25.4 7.00 7.0Monitoring and Evaluation 2.60 1.4 1.40 1.4
Total Project Costs 181.00 99.5 99.00 99.0Front-end fee 1.00 0.5 1.00 1.0
Total Financing Required 182.00 100.0 100.00 100.0
Component 1: Community Grants
The project will assist communities (barangays in the selected municipalities) through a facilitatedparticipatory planning process to develop sub-project proposals, that will be selected at a competitiveinter-barangay forum comprising of all participating barangays. This process is expected to take four tosix months.
Proposals for sub-projects will be based on an open menu supplemented by a negative list of activitieswith adverse environmental and social impacts not allowed under the project (see Section E.7.2). Apartfrom micro-finance or other activities involving on-lending-of project funds, the community will be ableto choose any activity it agrees is important for its development, be it economic infrastructure such asroads, bridges or irrigation facilities, social service infrastructure such as a school or clinic, water supplyand sanitation facilities, environmental conservation measures such as watershed management, orcapacity building. The chosen activity must qualify as an investment item and not a consumption item.Communities will be also be able to coordinate among themselves on activities that would benefit fromjoint planning (e.g. provision of water supply, road, bridge). The development of sub-project proposalswill involve an assessment of needs in relation to existing assets, resources, and capacities (see SectionE.5 on the sub-project cycle).With the assistance of municipal facilitators a joint proposal by adjoiningbarangays may be submitted to the inter-barangay forum.
Within each municipality, there will be three cycles of project preparation and selection, open to allbarangays. The number of barangays per municipality varies considerably (with an average of 24), andin larger municipalities, there may be two or more inter-barangay forums during each cycle to selectsub-project proposals from different clusters of barangays. Since the funding allocation per municipality
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may not allow for sub-project implementation in all barangays, the selection will be competitive, and theinter-barangay forum will decide on the sub-project proposals that will receive funding. . While theinter-barangay forum consists of both community representatives and technical advisors, only thecommunity representatives can approve a subproject proposal.
Community cost contribution towards both the investment and O&M costs will be one of the selectioncriteria at the inter-barangay forum. The Philippines CIDSS and the Indonesian Kecamatan DevelopmentProgram (KDP) have found that the overall community contribution is higher when not fixed in advance,but when it is considered as one of the criteria in the competitive selection process. Since this may favorthe more well-off barangays, the size of community contribution would need to be supplemented andweighed against other sub-project criteria such as poverty focus, operation and maintenance plan, and arationale in terns of the benefits a sub-project provides to the community at large (as opposed to aselected few).
Community contracting: Selected subprojects will be implemented through community contracting.The barangay project implementation team selected by the community will manage the implementationof a particular sub-project, and will, if required, employ outside contractors selected through competitivebidding.
Grievance redress: As elite capture, both at the barangay and municipal level, is a key risk in theproposed project, a grievance redress mechanism will be developed to provide segments of a communityor entire communities with an avenue for complaints if bypassed or marginalized in the sub-projectplanning and selection process. This grievance redress mechanism will be independent of the projectimplementation set-up and the LGU structure. Its composition and mode of functioning will bedetermined during loan appraisal. Civil society monitoring together with the rules of full transparencyrequired under the project, will provide a supplementary check on elite capture.
Component 2: Implementation Support
The very essence of the project lies it its ability to mobilize communities and other institutionalstakeholders to initiate, plan, implement and manage subproject components chosen by them. To achievethis goal of the project, this component includes aspects of (i) social mobilization and communityorganizing, and (ii) capacity building and technical support.
(i) Social Mobilization and Community Organizing
This involves a multi-level and multi-stakeholder organizing, socialization, and facilitation process toensure that consistency with project principles is achieved. Social mobilization and communityorganizing are cross-cutting activities of the project happening at all stages of the project cycle-from itsinception and area targeting, social marketing, information dissemination and sharing, communityorganizing, participatory community planning, sub-project preparation, municipal competition, projectimplementation, project monitoring and the preparation and completion of project reports.
The project will recruit and train community facilitators in each region to undertake informationdissemination at the community level, mobilize and support community volunteers regardingparticipation in sub-project planning and implementation, and facilitate the involvement of thecommunity in identifying, planning, and implementing subprojects. In addition, community facilitatorswill liaise with municipalities regarding technical and other inputs to the community, consultantsproviding training to the communities, and help facilitate the inter-barangay forums. Facilitators will be
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employed on time-bound contracts, and will not automatically be absorbed into the LGUs at the closingof the project. Instead, the project will have created a pool of skilled personnel and future leaders of thecommunity who could be employed in other development projects, whether implemented by GOP or byNGOs. To this end, facilitators will be provided training in development planning and management,conflict resolution, intra- and inter-barangay mediation, quality reviews, poverty assessments, etc. Thedetailed training program and training infrastructure for facilitators is under preparation.
(ii) Capacity Building for Local communities and LGUs
Technical Assistance will be provided to create capacity through training at the community levelregarding such tasks as project planning, contracting, construction supervision, O&M, bookkeeping andfinancial management to members of the Barangay development councils and volunteers. Thecommunities will also receive technical assistance from the municipalities regarding assessment of thetechnical feasibility of subprojects, project design and budgeting. Training will therefore also beprovided at the municipal level to technical staff (e.g. Planning & Development Officer, Social WelfareOfficer, Engineer, etc.) to strengthen their capacity to support the barangay level activities and undertakemonitoring. A training needs assessment together with a training plan, training manual, and curriculumfor different types of training and target audiences will soon be finalized.
Given the number of guiding principles and project manuals being prepared during preparation, theparties (i.e. GOP and the Bank) have agreed to field test these new processes and procedures in onemunicipality before final rollout. The field test will start in July 2002.
Component 3: Monitoring and Evaluation
Monitoring will be designed to provide for a continuous learning and adjustment of the project approachand will involve: (i) participatory monitoring by communities based on self-defined indicators; (ii)internal monitoring of inputs, process, and outputs by the Project Management Office (PMO); (iii)independent external monitoring and evaluation by consultants; and (iv) civil society monitoring byNGOs and the press. A computerized management infornation system (MIS) will be developed toenable internal input, process, and output monitoring, and an analysis of project impacts. Baseline datafor impact monitoring will be established early during project implementation when beneficiarybarangays have been selected through the process of inter-barangay forums, and mid-term and terminalsurveys will be undertaken subsequently. The poverty mapping study is ongoing and will generate usefulbaseline indicators.
2. Key policy and institutional reforms supported by the project:
The Investment Coordinating Council (ICC) of the Philippines requires that local governments provideabout 50% of the cost of devolved activities for ODA financing local govermnent unit projects. This1996 policy on "Cost Sharing Scheme for the Financing of Local Government Projects" is part of abroader issue on the devolution of power to LGUs. Although the project endorses the concept ofcost-sharing as a fundamental requirement for local ownership, it should be pointed out that this is notstrictly an LGU support project; it is community driven. Cost sharing, should be at variable rates toreflect the ability of each community to contribute. The percentage of community contribution will alsoprovide a good measure of commitment during the inter-barangay competitive forum. This would allowboth rich and poor communities within the selected municipalities to maximize their contributions toleverage project funds.
The wider policy implication involves thinking through the role of the central government in the overallpoverty reduction strategy of the administration. To prescribe a 50% local contribution for the
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KALAHI-CIDSS would unduly punish the less affluent, and by definition, poorer communities, therebyperpetuating existing inequalities. The CIDSS approach has always applied the principle of institutingcost sharing arrangements with beneficiary communities without specifying the limits. TheKALAHI-CIDSS will adopt the CIDSS approach. LGU contributions will be welcome and expected (interms of staff time, land contributions, and other forms of cost sharing) but the Community DrivenDevelopment (CDD) nature of the project should remain as the guiding principle.
3. Benefits and target population:
In fulfilling its main objectives, the project is expected to have a number of direct and indirect benefitsdepending on the type of subprojects chosen by beneficiary communities. The immediate and direct.benefits are likely to include: (i) new and rehabilitated infrastructure, built at a lesser cost to governmentdue to higher local contributions; and (ii) improvement in the delivery of basic services. In addition tothese immediate benefits, the investments are also expected to have a longer term impact as a result ofthe facilitated participatory planning exercise, which is expected to lead to improved govemance throughthe empowerment of local communities to become active participants in the planning of localdevelopment activities. While the immediate investments are expected to contribute towards a reductionof poverty, it is the empowerment of local communities and their ability to influence local governmentstructures that will set the scene for sustainable poverty reduction. Key to this longer-term outcome isthe basic project approach of working within the existing LGU structures, but to do so with modified andmore inclusive procedures supported by facilitation.
Target population
While national in scope (with the exclusion of the areas covered by the ARMM Peace and DevelopmentSocial Fund), the KALAHI-CIDSS project will cover one-fourth of all municipalities in provinceswhere the incidence of poverty is above national average of 33.7%. This represents an initialestimate of 5,378 barangays in 193 municipalities in the 40 provinces in the country, constructedfrom most recent poverty data (Table 2).
Further poverty mapping exercises at the municipal level in the 40 provinces are being conducted toestablish a master poverty list. The final selection of participating municipalities will be determinedthrough a stakeholder consultation process, involving the Project Management Office, representatives ofthe provincial government and municipalities, and civil society. The ranking and selection of thepotentially eligible municipalities will further take into account self-selection of municipalities throughtheir expressed commitment to comply with specific project principles and requirements. Allocations tothe selected municipalities will be proportional to the population size.
The project will also cover approximately 20 poor urban barangays/communities. The participatingurban poor communities will be selected from the urban centers of each region (14 regions) and MetroManila. The decision to identify the barangay instead of the city as a unit of intervention in urban areas isa result of the sheer size of the urban population. In most cases, the population of an urban barangay isequivalent to that of a rural municipality. All sitios (neighborhoods) of selected urban barangays will beeligible to participate in the KALAHI-CIDSS project.
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Table 2: KALAHI-CIDSS Proposed Target Areasegion Poverty Trotal Numbe Total Number Number of INumber of Total [ve. Bgy / Target Targetrovince Incidence lof Househldr of Poor Municipalties arangays ClDSSJMun Mun Bgys
'.Families) Households juic _ iAreasAR
Il fgao 43.3 | 31,346] 13,573 1 11 1 175 | 33 | 16 | 442 t.Province 41.3 1 27,721] 11,4491 10 | 1I 1 301 1l 28
egion IV
3 tomblon 44.0 53,720 23,637 17 219 45 13 554 2uezon 43.1 339,923 146,507 40 1209 63 30 1 3025 Driental Mindoro 38.9 134,322 52,251 14 426 18 301 1076 arinduque 30.9 43,921 13,572 6 218 12 361 55
Region V7 Masbate 55.5 138,945 77,114 20 550 54 28 | 1388 Albay 47.9 208,640 99,939 15 650 21 431 163
9 amarinesNorte 43.2 89,574 38,696 12 282 24 | 24 _= 3 7110 Catanduanes 38.8 41,019 15,915 11 315 30 29 _ _ 7911 amarinesSur 33.9 288,172 97,690 35 1000 75 29 _ _ 25012 Sorsogon 32.7 125,191 40,937 14 541 36 39 4 135
egion VI13 ncilo 44.0 298,5931 131,3811 42 1 1721 1 751 41 1 I 43014 ~apiz j 39.61 128,5541 50,907 1 16 426 1 42 1 27 | 4 10715 egros Occidental 34.8 416,2221 144,8451 19 506 | 36 | 27 | 12716 Guimaras 33.5 27,4651 9,201 1 5 | 96 r 15 | 19 | 24
Region VII 17 Bohol 48.8 209,588| 102,279 47 1094 120 23 1 27418 Siquijor 3691 17,351 6,403 1 6 134 18 22 3419 Cebu 3261 473,5591 154,380 47 986 90 211 11 24720 NegrosOriental 31.01 226,3371 70,164_| 20 _480 51 24 120
egion vm _
21 astemSamar 52.1 73,032 38,050 23 597 60 26 _ d 14922 ortbem Sarnar 47.0 94,410 44,373| 24 569 66 24 _ d 14223 Samar 38.1 124,255 47,341 25 j 794 69 32 _ _ 19924 Leyte | 35.3 322,527 113,852 41 | 1393 88 34 1 34825 iliran 30.4 27,907 8,4841 8 132 24 17 3326 outhem Leyte 30.3 72,894 22,0871 18 500 51 28 125
Region IX27 boangadelNorte | 49.5 161,5121 79,948 25 | 620 | 601 25 15528 boangadelSur 1 41.1 1 255,5181 105,0181 26 | 1015 [ 102 1 39 | A_ 254
egion X29 naodel Norte 55.7 90,092 50,181 22 462 63 21 1 11630 isamis Occidental 38.71 99,901 38,662 14 337 A42 24 8431 ukidnon 33.5J 201,753 67,587 20 464 45 J 231 11632 isamisOriental 30.8 132,042 40,669 24 343 51 141 86
egion XI
33 D 46.51 150,8441 70,142| 7 | 457 | 18| 65 | 21 11434 Oriental | 31.5 | 86,5691 27,2691 11 1 183 1 30_1 17 1 46
I Sarangani 52.9 82,896 43,852 7 140 6 20 2 352 SouthCotabato 47.8 141,418 67,598 10 198 24 20 3 50
35 NorthCotabato 44.0 188,5811 82,976 17 543 33 1 32 4 13636 ultanKudarat 31.0 114,461 35,483 1 1 248 24 231 3 62
Region XmI Caraga39 Agusandel Sur 1 49.01 103,637 50,782 14 312 [ 27 22 | 7 7840 del Norte 32.6 103,0521 33,595 1 1 1 163 | 24 | 15 ] 41
I-I11-| . | l l | 1911 5152
Current financial projections indicate that municipal allocations will range from a low of US$ 69,000(PhP3.5-million) to a high of US$ 225,000 (PhP13-million) per year. Selected municipalities will berequired to confirm by a due date that they will enter into a Memorandum of Agreement (MOA) with theimplementing agency, the Department of Social Welfare and Development (DSWD) to:
* Pass a resolution amending existing procedures to accommodate project principles andapproaches. These include, inter alia, participatory planning of community development,selection of subprojects through inter-barangay forums, direct transfer of funds to communities,community management of project activities, transparency in planning and financialmanagement, and civil society involvement in monitoring;
* Deploy and train existing staff to enable them to provide technical assistance to barangays(information dissemination, organize meetings of all barangays to review, rank and selectsub-project proposals, hold monthly problem-solving meetings with beneficiary communities,provide technical assistance when requested and conduct required monitoring);
* Contribute towards project costs (this would include staff time, land contributions, compensationfor land acquisition, etc.).
4. Institutional and implementation arrangements:
The implementing agency (IA) is the Department of Social Welfare and Development. The projectimplementation stucture agreed between the GOP and the Bank mission will comprise:
1. A technical working committee drawn from agencies represented on the steering committee. Thetechnical working committee will be responsible for development of technical. manuals andcoordination between technical support services at the field level.
2. A mainstreamed PMO with the core organic staff from the DSWD and contractual staff hired tofill strategic gaps.
3. The participatory planning, implementation and monitoring at the provincial, municipal andbarangay levels will be facilitated by contracted community facilitators at each of these levels.Facilitators at the barangay level will be assisted by local volunteers. Participating communitieswill also procure technical assistance on a competitive basis from LGUs, other governmentagencies, or the private sector. Procurement of goods and services will be undertaken inaccordance with Bank guidelines and independent audits will be conducted in accordance withGOP and Bank policies.
Project Coordination. The project implementation structure will consist of an inter-agency steeringcommittee for policy and coordination functions comprising NEDA, NAPC, DSWD, DILG, MOF, DBM,and four NGO representatives. The NGO representatives should be select among NGOs represented onthe NAPC. The Committee should provide policy guidelines on poverty targeting, set goals for theimplementing agency, and assure institutional convergence on poverty reduction outcomes. The NationalSteering Commnittee (NSC) should also ensure a continuous review of the project's contributions to theachievement of the Social Reform Agenda (SRA) goals, and its linkages to the economic recoveryagenda.
Regional Management. At regional level there will be a core group of 15 staff working largely on theproject as part of RPMO. The regional management will be responsible for prioritizing the poorestprovinces in the region based on poverty indicators, providing assistance to provincial level consultants,training trainers, and launching the KALAHI-CIDSS project in the region.
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Role of Provinces. The provinces will play an important role through (i) provision of data for theranking of municipalities; and (ii) their provincial development plans, which will provide the funding forhigher order infrastructure investments to support those at the community and municipal levels.
Role of Municipalities. Similarly, the municipalities will play an important role in this project through(i) monitoring; (ii) problem solving at regular inter-barangay assembly meetings with beneficiarycommunities; (iii) provision of technical services on request; (iv) support for community investmentsthrough complementary municipal development planning; and (v) auditing and accounting reports. Theseprovisions will be contained in a Momerandum of Agreement (MOA) signed by all participatingmunicipalities with the project. The MOA will require that all activities submitted by the barangays tothe inter-barangay forum be automatically included in the municipal development plan (MDP). Themunicipality may fund some of the unfunded sub-projects and it will take up strategic planning at themunicipal level to complement the bottom-up planning initiated at the barangay level. Inclusion ofbarangay sub-projects in the MDP is the appropriate way to safeguard the sustainability of theseinvestments, by including them in the annual budgets of the LGU. However, it is the exclusive role of theinter-barangay forum to choose which barangays and projects will receive grants. To enable themunicipalities to fulfill the above-mentioned roles, capacity building in terms of project planning,implementation, operations and maintenance, financial management, etc. will be provided under theproposed project.
D. Project Rationale
1. Project alternatives considered and reasons for rejection:
Altematives considered were: (i) project scope defined as one municipality per Congressional District;(ii) use of NAPC as the lead implementation agency; (iii) use of the CIDSS approach for projectimplementation; (iv) use of project funds for micro-credit activities; (v) focusing exclusively on thepoorest households; (vi) compulsory community contribution as a fixed share of investment costs; and(vii) using an Adaptable Program Loan (APL) as the project instrument. These were rejected for thefollowing reasons:
A: Project scope
(i) Defining the project scope as one municipalty per Congressional District was rejected, as itwould: (i) introduce political considerations and emphasis in the design; (ii) base the coverage on anentity that is neither a unit of administration nor a unit for national poverty data, and (iii) increaseimplementation and supervision costs as it does not have an administrative structure that could supportthe project. Instead, targeting will be based on an objective poverty ranking of provinces, and aproportionally higher coverage of municipalities in the poorest provinces.
B: Institutional set-up
(ii) Use of NAPC as the lead implementing agency was rejected, as NAPC is primarily a policyformulation agency and the designated institution for poverty monitoring, rather than an entity forimplementing projects and programs. DSWD was chosen as the implementing agency as it has for anumber of years been implementing national programs under the Social Reform Agenda (SRA) includingthe CIDSS. The choice of DSWD as the implementing agency has the full support of NAPC, and NAPChas agreed to co-chair the Steering Committee with DSWD.
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C: Project approach and components
(iii) Use of CIDSS approach, based on the MBN, for project implementation was rejected, as itfocuses on vulnerable households and sub-groups rather than on the community (barangay) itself as aunit of intervention. Bank funding for the CIDSS will be reallocated to the KALAHI-CIDSS once theproject becomes effective and the ongoing three-year CIDSS cycle in participating barangays has beencompleted. In selecting project sites during the first year of implementation, the project will choose areaswith CIDSS infrastructure and technologies to ensure some early wins, while social preparation is beingundertaken in non-CIDSS areas.
(iv) Use of project funds for micro-credit activities was rejected because: (i) the coverage ofexisting micro-finance institutions is too thin to enable national coverage; (ii) the eligibility criteria foraccreditation of the Land Bank of the Philippines (LBP), which is the main financial institution servingrural areas, are too rigid to be satisfied by newly established micro-credit and self-help groups; (iii) theviable unit of analysis for micro-finance activities, the business unit, is not the intended unit of referencefor the project; and (iv) direct implementation of this component would require a level of facilitation andmonitoring which would over-extend the implementation set-up of the proposed project. In addition,DSWD wanted to keep the project design of the KALAHI simple, and wanted to pursue micro-creditactivities through other funding windows available to the Department.
(v) Focusing exclusively on the poorest households as is done in both CIDSS and KALAHI wasrejected, because the focus of the proposed project is to empower local communities at the level of thebarangay and municipality through a modified and more inclusive planning processes of localdevelopment activities that benefit the community at large. However, selection of specific sub-projectproposals for funding will factor in equity and inclusiveness criteria.
(vi) Compulsory community contribution as a fixed share of investment costs was rejected because, (i) itwould favor the more well-off barangays in the competitive inter-barangay selection process, and (ii) experiencefrom the CIDSS and the Indonesian KDP has demonstrated that the resulting overall community contribution ishighcr when not determined in advance, but considered a criteria for sub-project selection. However, to avoidfavoring the more well-off barangays, the size of community contribution would need to be supplemented by othercriteria such as the conmmunity's need for a particular investment, number of poor people to be benefited by theproposed subproject, etc. A final set of criteria for sub-project selection will be determnined during appraisal.
D: Choice of Bank instrument
An Adaptable Program Loan (APL) was rcjected as the choice of Bank instrument for this operation, because theproject will not include a pilot phase. The experience gained by CIDSS and lessons leamcd from other comparableprojects are considered a sufficient basis for initiation of large-scale implementation from thc time of projectcffectiveness. In addition, there are no major policy changes envisaged in the project.
2. Major related projects financed by the Bank and/or other development agencies (completed,ongoing and planned).
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Table 3: Project Ratings
Latest 8uWrvlmlonSector Issue Project (PSR) Ratings
(Bank-financed projects only
Implementation DevelopmentBank-financed Progress (IP) Objective (DO)Beneficiary participation in irrigation Second Communal Irrigation S S
management ProjectOperation and maintenance Second Rural Roads Project S S
(closed; ICR done)Improvement of education quality Third Elementary Education S S
ProjectPoverty reduction Mindanao Rural Development
ProjectLocal institutional capacity; Operation Second Rural Roads Project S Sand Maintenance (closed; ICR completed)Realigning role of DENR, LGU Environment and Natural S Scapacity building, community Resources Sector Adjustmentinvolvement in natural resource LoanmanagementWater resources planning and Water Resources Development S Smanagement; watershed management ProjectTargeted poverty reduction Agrarian Reform Communities S SEmergency Post-Conflict Recovery; SZOPAD Social Fund Project S Spoverty alleviationTackling the nexus butween poverty Community-Based Resource U Sand natural resource management ManagementAgricultural and rural finance Agricultural Credit Project S S
(completed) and Rural FinanceProject
Agricultural and rural finance Second Rural Finance Project S SAgricultural and rural finance Third Rural Finance Project S SIncreasing access to potable water First Water Supply and S S
Sanitation Project (closed; ICRdone)
Other developmentagenciesEmergency recovery USAID-Emergency Livelihood
Recovery ProgramEmergency recovery UNDP-Emergency Assistance
for Development of BasicServices, Livelihood and JobCreation Program for MNLFSoldiers and their Families
Targeted Area Development; poverty European Union: Southernfocus, micro-project financing Mindanao Agricultural
ProgramLGU Institutional Capacity CIDA: Local Govenmment
SupportLGU Capacity Building USAID: Governance and Local
Democracy (GOLD) ProjectFarmer Linkage with Agri-business; USAID: Growth with Equity inenterprise developmrent Mindanao (GEM) Project,
IP/Do Ratings: HS (Highly Satisfactory), S (Satisfactory), U (Unsatisfactory), HU (Highly Unsatisfactory)
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3. Lessons learned and reflected in the project design:
Project design should be simple and flexible, and goals must be realistic and precise. In order tocope with the Philippines' economic, ethnic, and religious variability project design should be simple andflexible and avoid a large number of unrelated components. Project formats and procedures will bedesigned to meet World Bank procurement, financial management, and project quality standards.Involving the Commission on Audit (COA) during the design phase of an innovative investment programreduces the risk of not auditing unanticipated documents during implementation phase.
Community participation in project planning and during implementation is essential. Communityparticipation lowers costs and improves quality. There are high returns to increasing women's andindigenous peoples' participation because of the improved effectiveness and sustainability of projectbenefits. Efforts must therefore be made to ensure their active participation in the formulation andimplementation of programs.
Working with NGOs and Civil society. Successful community-driven projects require clear guidelineson the roles, and responsibilities of government, implementing agency, NGOs, and the community. Localpolitical commitment is essential to ensure sustainability, however, ensuring the autonomy of theinter-barangay forums created to decide on specific projects is essential to avoid unsolicited politicalinterference.
Arrangements for infrastructure maintenance must be set up from the beginning. Whilesupervision of site designs and the quality of construction materials improves project quality noticeably,but maintenance of physical infrastructure often remains unsatisfactory due to cost and lack of technicalskills. The need to implement a self-sustaining system for operation and maintenance is necessary toavoid dependency on government funds. Therefore, the requirement of technically viable 0 & M plan forall funded subprojects and the establishment of earmarked O&M funds, financed from the userassociations' service fee collection, and trust funds, financed from amortization payments by communalschemes are vital for sustainability.
Dole-out Mentality: One constraint to investment activities is the large variety of grant-based schemesset up by the government to disburse funds into poor remote communities. This may influence repaymentrates negatively due to lack of familiarity with repayment. When interest rates either fall significantlybelow or move well above prevailing market rates, serious implementation problems have emerged -above market-rates resulted in slow disbursement, while below-market rates led to concentration of creditto relatively wealthier and larger clients.
Supervision and monitoring are important. They need to include a combination of internal monitoringby project and government staff, regular supervision by Bank staff, independent external monitoring byconsultants and by NGOs and media, and community self-assessments. The monitoring system should bedesigned as a learning system, which makes use of insights derived from monitoring to address problemsin project design and implementation.
4. Indications of borrower commitment and ownership:
Throughout project preparation, the borrower has demonstrated strong ownership of the projectobjectives and design, as indicated by the following actions:
* High level members of the administration, including the Secretaries and Under Secretaries ofDSWD, NAPC and key congressman visited the Kecamatan Development Project (KDP) in
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Indonesia to learn lessons for the design of this project;
* The Team Leader of the KDP was invited to Manila to present the project to the Cabinet,Congress and civil society actors. At each occasion, reactions were positive regarding theapplicability of key features from the KDP to a comparable project in the Philippines;
* Extensive consultations on project principles and design are ongoing. During the identificationand preparation missions, the Bank interacted with high level staff from DSWD, DELG, NEDA,DOF, DBM, COA and NAPC, who have requested that project preparation be fast tracked. TheBank team also met with LGUs at the regional, provincial, municipal, and barangay levels, andthe various stakeholders have expressed commitment to the objectives and key design features ofthe project;
* Civil society organizations representing both of the national NGO coalitions have expressed adesire to become actively involved in project preparation and implementation, throughinformation sharing and regular consultations;
* DELG has endorsed the project approach to achieve improved local governance by workingwithin existing structures, employing modified, more inclusive, and facilitated processes, and theidea that the communities themselves will manage funds for local development;
* DOF and the DBM have accepted the principle of direct transfer of funds for sub-projects fromthe project special account (SA) to community project accounts;
* In the November 2001 meeting, the President of the Philippines requested World Bank PresidentJames D. Wolfensohn to fast track preparation of the project, as it will be the main instrument toimplement the anti-poverty strategy of her administration;
* Last, but not least, the implementing agency, DSWD has mobilized a strong project preparationteam headed by an Undersecretary. This team has independently prepared it project documentpaper, which forms the main input for this PAD and has mobilized high quality TA to fill indesign gaps. This project has been endorsed by GoP's ICC Technical and Cabinet Committees.
5. Value added of Bank support in this project:
After the seven years of, the CIDSS experience, the GOP has deemed it appropriate to introduce a broadercommunity-driven program, with national coverage, that fills the gaps left by the CIDSS. To implement aprogram that does not only target vulnerable households within the community but the entire barangayitself, the GOP has sought to avail itself of the type of support, global knowledge, and outreach that theBank can provide. This has been demonstrated by the extensive learning trips undertaken by variousstakeholders in the Philippines, including Cabinet Secretaries and Undersecretaries, oversight agenciesand representatives of civil society, to Indonesia to learn some of the innovations in investment designintroduced by the KDP.
The Bank is therefore fulfilling its dual mandate of serving as a knowledge Bank and providing criticalresources for poverty alleviation. The Bank's innovative design contribution is the introduction of newways of working with local institutions, including the LGUs. The project is also introducing a new funddelivery mechanism that will allow resources to flow directly to the barangay, whose sub-project wasselected at the inter-barangay forum. This approach will empower communities to plan, implement, andmanage Investments at the barangay level. The anticipated outcome of this approach is to have a strongdemonstration effect that could rapidly produce spillovers to other non-participating municipalities. Thiswill assist in institutionalizing new ways of thinking about accountability and governance at the locallevel.
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E. Summary Project Analysis (Detailed assessments are in the project file, see Annex 8)
1. Economic (see Annex 4):* Cost benefit NPV=US$ million; ERR = 30.11 % (see Annex 4)O Cost effectiveness0 Other (specify)In lieu of providing a discussion Strengths, Weaknesses, Opportunities, Threats (SWOT) or a CostEffective Analysis, the economic and social returns study performed has attempted to provide a morerigorous economic analysis through the calculation of conservative estimates of the benefits, costs, andthe Economic Internal Rate of Return (EIRR) for the Project based on realistic assumptions and plausiblescenarios.
The difficulty involved in undertaking an analysis of this type was primarily due to the key strength ofthe Project design, i.e., the Project will be effective through implementation of a decentralized demanddriven "open menu" approach to subproject selection. That is, while the total overall Project costs havebeen estimated based on the financing sources and budgeted allocations, the benefits that can bequantified are difficult to estimate given that the types of infrastructure investment subprojects will notbe known with certainty until after the Project is underway as these specific decisions will be made at thelocal level by empowered communities.
The methodology employed to work around this inherent uncertainty was as follows. Generic types ofsubprojects were analyzed based on conservative assumptions governing its base unit benefits and costs,beneficiaries, and life cycle. Furthermore, three different benefit realization scenarios were employed toreflect differences in the institutional development and governance abilities of the beneficiariesconcerning subproject planning, construction, and implementation. From the quantifiable expected netbenefits, each type of subproject was analyzed as being economically feasible with an EIRR above theminimum 15% threshold across the three different benefit realization scenarios.
To understand the types of subprojects that the local communities would seek to implement, similarprojects in the Philippines were researched. The differences and relevant points in terms of comparisonto the KALAHI-CIDSS Project were discussed. After careful consideration, the distributions of types ofsubprojects in the existing Comprehensive Integrated Delivery of Social Services (CIDSS), Special Zoneof Peace and Development (SZOPAD) Social Fund, and Agrarian Reform Development CommunitiesProject (ARDCP) were used as the basis for the distributions used in the analysis. Additionally, a fourthdistribution was generated based on the relative estimated Net Present Value of each of the genericsubprojects, i.e., informed communities with a number of infrastructure needs may be inclined tomaximize their investment and choose the type of subprojects higher NPVs.
The analysis thus consisted of three benefit realization scenarios against four subproject distributionscreating a matrix of twelve possible ELRRs for the overall Project. The range in the EIRRs was from28.65% to 32.42%. Clearly, regardless of the differences in subproject distributions, the overall Projectwill be economically feasible. Furthermore, given the conservative nature of the estimation of thegeneric subprojects and the fact that some stated project goals or benefits cannot be readily quantified,the likely overall return to the Philippines will be higher than that the estimated EIRRs.
2. Financial (see Annex 4 and Annex 5):NPV=US$ million; FRR = % (see Annex 4)Financial control measures of the Project (See Annex 5: Financial Control Measures for details):
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Community and LGU participation - The preparation and selection of projects at the inter-barangayforum is based on a competitive allocation of available funds. The competitive element is designed as asocial control measure as it involves the participation of the barangay and LGU representatives in theapproval process.
Allocation of Grant Funds - The process of allocating funds to each municipality should ensure anoptimization of funds allocated to a sub-project. Control on sub-optimum usage of funds would triggerthe reallocation of funds to better performing municipalities where funds are needed. A report monitoringthe use of resources will be generated by the regional office and further consolidated at the NationalProject Office.
Public posting of project finances - Posting in public places of the amounts available, as well as theprogress of the project in terms of its financial and physical accomplishments, should bring greatercommunity awareness of the project. This ensures transparency and discourages corruption.
Training and guidance - To ensure that community and project staff have adequate capability toimplement the project, trained facilitators will be provided, as well as hands on training, including theFinancial Management requirements of the Project.
Written guidelines - A Financial Management Manual will delineate guidelines on policies andprocedures as well as reporting formats. This will improve consistency and shared standards. For furtherdetails, see annex 4.
Fiscal Impact:
Two questions conceming social transfers programs are:
* What is the overall fiscal impact?* Are there any methods for cost recovery?
While these appear to be two separate questions, they are in fact related as the discussion in this sectionattempts to frame a single answer for both.
For all infrastructure projects, beneficiaries should contribute, either in cash or in-kind. This isespecially true for this form of community level participatory approach. In-kind forms of contributionstypically take the form of land or the cost of unskilled labor used for rehabilitation, new construction, orO&M. However, since proper O&M is increasingly viewed as vital to long-term sustainability,beneficiaries should be responsible for covering the O&M costs of infrastructure projects by putting inplace cost recovery mechanisms. Such cost recovery mechanisms could take the form of user fees forbarangay irrigation and potable water supply projects and tolls for barangay roads.
Given the grant nature of the project there is no provision for direct cost recovery to the agency at thenational level. Any fees to be collected from small scale infrastructure investments are made at the locallevel and should be earmarked for proper O&M activities. Additionally, the structure of such user feesshould be priced to ensure that the necessary funds for O&M are raised and that the infrastructure is notused to degree beyond its designed capacity. Such "overuse" as in the classic "tragedy of the commons"will undermine the envisioned long term benefits of the investment.
Even when there is no direct cost recovery, there is indirect cost recovery. The theoretical argument forthis is that sound infrastructure investment increases the productivity of existing capital and labor in the
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economy, similar to technological improvements. While productivity gains are difficult to quantify, theyare viewed as the real factor necessary for economic growth and development. Economic growth anddevelopment imply an increase in the magnitude of activities and transactions, and structural changes thatallow informal economic activities to become formal. These provide the government with greateropportunities for taxation. To this end, the overall beneficial fiscal impact of the Project will likely befar greater than the initial fiscal cost, although this also depends on the effectiveness and efficiency of thegovernment's tax collection regime. Nonetheless, in principle this is the "multiplier" argument forinfrastructure investment by the government at the national level.
3. Technical:Given the small scale nature of the infrastructure anticipated, there are no substantial design challenges.The technical manuals for small scale infrastructure have been prepared to facilitate communityinvolvement in the assessment, delivery, and management of such infrastructure. The objectives are (a) toprovide the community with guidelines and tools for reporting, control and monitoring ongoingsub-projects for quality control and timeliness in implementation; (b) to provide project managementwith the tools for technical reviews and quality control; (c) to provide guidelines for operations andmaintenance of infrastructure projects; and (d) to provide guidelines on environmental screening.
4. Institutional:By focusing on and strengthening the link between the barangay and the municipality, the project will bebroadening the base for participation, especially for weak and marginal members of the community whotended to be left out of earlier generation of social engineering endeavors.
Communities, LGUs (barangay, municipal and provincial), DSWD Regional offices and other lineagencies, civil society organizations and media are groups critical to the success of the project. Theirspecific roles are defined in the operations manual (vol. 1) of the project. The ongoing institutionalmapping exercise will further clarify the institutional setup and decision points in the system.Specifically, the mapping will: (i) identify key local level institutions (in different local culturalcontexts) that can play a positive role in the program; (ii) assess the capacity of these institutions andrecommend critical capacity building interventions to support community demands for assistance; (iii)ascertain the cluster of stakeholders who could exercise potential veto powers on the implementation ofsub-project components and articulate a strategy for dealing with such actors; and (iv) recommend rolesand coordination arrangements among the different groups of stakeholders.
4.1 Executing agencies:
The main operational focus of DSWD, the implementing agency, has been on social welfare activities.This project will provide a unique opportunity for DSWD to shift its focus to hard core developmentalactivities and become fully the department of social welfare and development, as the name implies. Toaccomplish this goal, DSWD is being restructured to include more task-oriented managers with projectimplementation skills. What follows in the next section are the core skills required to implement theproject.
4.2 Project management:
A mainstreamed National Project Management Office (NPMO) will be established to assumeresponsibility for the overall management of the KALAHI-CIDSS Project.
The NPMO will be staffed by current DSWD staff and consultants contracted to fill strategic gaps. TheNPMO will be headed by a National Project Director who will be supported by the following:
* Project Manager
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* Administrative Officer* National Finance and Procurement Specialist(s)* Community Organizing Specialist* Community Infrastructure Team* National Livelihdod Specialist* Human Resources Team* Training Team* Research and Development Team* Monitoring and Evaluation Team* Complaints Action Officer
The major functions of the National PMO include: (i) acting as the secretariat to the National SteeringCommittee; (ii) planning and coordinating project implementation for all the regions; (iii) monitoring andtracking project performance; (iv) resolving administrative and management issues; etc. The full list ofattributes are presented in the Project Operations Manual.
Regional PMOThe Regional Project Management Office (RPMO) will provide oversight on project implementation inthe regions. The RPMO, which will be headed by the DSWD Regional Director, will be comprised ofthe following:
* Regional Finance Specialist* Regional Procurement Specialist* Regional Community Organizing Specialist.* Regional Community Infrastructure Specialist* Regional Livelihood Specialist* Regional Training Team* Regional Monitoring and Evaluation Team
The Area Coordinators, Community Facilitators, Roving Bookkeepers and Municipal DocumentationOfficers - who are all municipal employees- and barangay-based - shall be under the supervision andcontrol of the RPMO. The primary functions of the RPMO are centered around project coordination,supervision and reporting functions, and grievance resolution. The detailed attributes of the RPMO arecontained in Projects Operations Manual.
4.3 Procurement issues:
The procurement for civil works and small infrastructure by the project management team,complemented by the community participation, will utilize enhanced local shopping procedures.Simplified formats, which are consistent with the Bank's fiduciary responsibilities, are being preparedand will be reviewed and cleared by the assigned procurement specialist. These formats will beconsistent with the following procurement principles:
a. for sustainability of projects with future maintenance and operation, enable beneficiarycommunities to be contracted to implement their sub-projects by community force account;
b. meet social objectives of the project by awarding small contracts to individuals and/orenterprises from beneficiary communities and grass-root NGOs, to enable the community tobenefit from contracts for providing services, works and goods;
c. allow use of local know-how, technology and materials by employing local technicians,specifying materials and adopting technologies often used by communities; for examples schools
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could use thatched roofs constructed by local artisans; and
d. adopt labor-intensive and other appropriate technologies in order to use community labor.
The detailed procurement plan is included in annex 6a below.
4.4 Financial management issues:
Although lacking in sophistication, the financial control system in the community projects for the mostpart is effective in limiting leakages or in detecting leakages when they occur. The system is based onchecks and balances in funds withdrawals, detailed bookkeeping and records of expenses, and periodicinspections in the field. The formal system is complemented by the communities' social controlmechanisms designed to ensure transparency. Of course, the capacity of the different barangays tomanage these systems will vary, but for the most part the differences can be remedied through hands-ontraining and follow-up. In areas where the CIDSS has already laid the foundation, the foundations forsuch accountability will already be in place and the project will build on it. This is not to say thatmalfeasance will not occur, when it occurs, it is relatively easy to detect, and sanctions should be swiftand effective to prevent any widespread contagion effects.See annex 6b for details on Financial Control Measures.
5. Environmental: Environrmental Category: B (Partial Assessment)5.1 Summarize the steps undertaken for environmental assessment and EMP preparation (includingconsultation and disclosure) and the significant issues and their treatrnent emerging from this analysis.
Environmental issues in the project would relate primarily to impacts caused by small scale infrastructureconstruction. The environmental impacts caused by such activities are not expected to be significant. Theproject has designed a negative list of prohibited investments that includes activities with adverseenvironmental impacts. The project will use an environmental screening procedure that identifiesprohibited projects (e.g. community roads into protected areas). Mitigation of negative impacts fromsub-projects that are not on the negative list will be addressed through standard operating procedures,which are built into project manuals and training programs.
5.2 What are the main features of the EM? and are they adequate?
The impacts caused by any particular sub-project will be limited, and will be covered by the standardoperating procedures in project manuals. The negative list of prohibited projects will ensure that seriousnegative environmental impacts will be avoided. A framework for assessing cumulative impacts will beestablished to support the guidelines. See annex 10a for environmental guidelines.
5.3 For Category A and B projects, timeline and status of EA:Date of receipt of final draft:
Proposed actions: The main action proposed is to conduct an Environmental Analysis, which willreview lessons from the Indonesian KDP and the CIDSS to assess what environmental issues have arisenduring implementation, and reflect these findings in the project manuals and training modules.
5.4 How have stakeholders been consulted at the stage of (a) environmental screening and (b) draft EAreport on the environmental impacts and proposed environment management plan? Describemechanisms of consultation that were used and which groups were consulted?
During project preparation a total of three consultations have been held with the national level NGOcoordination forums of CODE (two meetings) and the Convergence Coordination (one meeting). Noissues regarding negative environmental impacts caused by the proposed project were raised at thesemeetings. These consultations are ongoing and will be intensified during project implementation.
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5.5 What mechanisms have been established to monitor and evaluate the impact of the project on theenvironment? Do the indicators reflect the objectives and results of the EMP?
N/A
6. Social:6.1 Summarize key social issues relevant to the project objectives, and specify the project's socialdevelopment outcomes.
Social issues related to the project objectives include: (i) avoiding elite capture, gender-basedmarginalization, and exclusion of the poor and vulnerable groups in the identification and prioritizationof barangay issues and project planning and management; (ii) working with formal institutions such asthe Barangay Development Council and the Municipal Development Council, while broadening the spacefor citizens to participate in planning and allocation of local government development resources; and (iii)optimizing the amount of investment per cycle in order to generate interest of barangays to compete forsub-project resources.
6.2 Participatory Approach: How are key stakeholders participating in the project?
Stakeholder participation is the central element in the project design. This participation will take place ata number of different levels. First, various central government, LGU, and civil society actors will beinvolved in a stakeholder consultation for the selection of target municipalities. Second, during theintra-barangay project identification and preparation process, different stakeholders from the communitywill be involved in the negotiation and preparation of a sub-project proposal for presentation at theinter-barangay forum. Third, the selection of sub-projects for funding at the inter-barangay forum willinvolve representatives of the various barangays, civil society, and technical staff from the municipality.Fourth, he implementation process will involve monitoring both by the beneficiaries themselves, RPMO,and by civil society entities (NGOs and the press). Finally, conflict management will involve anindependent grievance redress mechanism.
6.3 How does the project involve consultations or collaboration with NGOs or other civil societyorganizations?
Consultations on the proposed project have been held with the country'sn two major NGO coalitions, andwill continue throughout the project design phase. During implementation, NGOs will be contracted toprovide training to community facilitators and volunteers, and where NGOs are present in the targetareas, they may also be recruited as facilitators at the barangay and municipal level. Finally, NGOs notdirectly involved in the project will be invited to undertake (voluntary and unpaid) monitoring of projectactivities to provide an extemal check on elite capture and corruption.
6.4 What institutional arrangements have been provided to ensure the project achieves its socialdevelopment outcomes?
Central to the success of the project is empowering communities to define their needs and priorities,design activities to address them, negotiate for resources, implement the project, and manage theresources effectively. The main elements of the sub-project cycle, which constitutes the framework forthese activities, are as follows (see Exhibit 1.2.):
* In selected municipalities, the process will be initiated by a meeting with representation from allbarangays to provide information about the project approach, ground rules for participation,criteria for sub-project preparation and selection, and sanctions for non-compliance with theground rules.
* The project facilitators will undertake an information dissemination and mobilization campaign
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in each of the barangays to ensure that all households are aware of the project and the barangaylaunch meeting, where the preparation of a sub-project proposal will be initiated. At thiscommunity wide meeting, representatives will be chosen for the inter-barangay forum and for ateam which will lead the preparation of the sub-project proposal.
* To provide the basis for a discussion of needs and priorities, a barangay situation assessment willbe conducted by the preparation team assisted by the facilitator. The assessment will involve amapping of households/hamlets served by existing facilities and social services, the presence ofindigenous minority groups etc. This information will be presented at a barangay wide meetingas an input to the identification of priority needs and a decision on a sub-project proposal toaddress one of these needs. Following this decision, a preliminary project proposal with atentative cost estimate and commitment regarding the level and forms of community costcontribution will be developed (with technical assistance from the LGU as required). Theproposal and its commitments regarding community contributions will be endorsed through acommunity wide meeting.
* Sub-project proposals will be selected for funding through an inter-barangay meeting. Theoutcome of this meeting will be communicated to the community at another barangay levelmeeting,. If the barangay sub-project proposal has been selected for funding, a team will beselected to manage the implementation of the sub-project (the composition of this team may beidentical to or different from that of the team that prepared the sub-project proposal). The teamwill receive training regarding project planning, contracting, construction supervision etc.
* The next step is the technical preparation of the sub-project which may involve engineeringdesigns and a detailed budget. This may require technical assistance either from the LGU orfrom the private sector. The community will open a bank account, and any community cashcontribution that has been committed, will have to be deposited before project funds are released.
* At the completion of implementation of a sub-project involving civil works, an evaluation of theconstruction quality and the process will be undertaken by the villagers before the completedworks are commissioned.
* The municipality will conduct monitoring on the operation and maintenance as required, andprovide back-up support to barangays having difficulties.
Gender Dimensions: To enhance gender balance during sub-project preparation and implementation, thesocial mobilization effort will place particular importance to the inclusion and participation of womenand other disadvantaged groups within the community. The active participation of women shall beencouraged in a variety of ways:
* Gender balance will be a consideration in the recruitment and deployment of area coordinatorsand community organizers;
* Core leaders and members of the various barangay teams must include a significant number ofwomen;
* The community profile shall include gender-differentiated data;
* Training of area coordinators and community facilitators shall include gender training andfacilitating the active participation of women and marginalized groups in social mobilization,project planning, implementation and evaluation;
* Monitoring shall include the investigation of gender issues and require gender dis-aggregation aswell as a breakdown by poverty group; and
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* Attendance lists -f barangay and inter-barangay meetings shall provide gender and povertybreakdown.
6.5 How will the project monitor performance in terms of social development outcomes?
Built into the design is a strong monitoring and evaluation component involving both internal monitoringof implementation progress, beneficiary monitoring, independent external monitoring and evaluation by aconsultant, and external monitoring by volunteers from civil society and the media. The monitoringsystem will be designed to promote learning and adjustment of the project approach and activities. Tothis end, a management information system will be designed to track implementation progress, identifyissues and bottlenecks, and provide data for the analysis of impacts, results, and problems. Themanagement information, system will utilize data provided by independently contracted and voluntarycivil society monitors.
6.6 Land acquisition and Involuntary Resettlement
The project will comprise sub-projects that provide small scale infrastructure to beneficiary communities(barangays), and which will only require limited land acquisition. No involuntary resettlement isanticipated. Since the project is demand driven, and subproject proposals are developed through aparticipatory planning process at the community level and finally selected through an inter-barangaymeeting, the land acquisition impacts cannot be assessed in advance. Land acquisition under the projectwill therefore be based on a Resettlement Policy Framework agreed between the client and the Bank.The Framework draws upon experience from comparable Bank funded projects in the Philippines. TheFramework will be translated into local languages, and its provisions integrated into the ProjectImplementation Manuals.
Land for sub-projects will be furnished either as voluntary donations, as govemment land free of claims(e.g. from squatters or encroachers), or acquired after payment of compensation at replacement value. Toensure that sub-project implementation does not deprive individuals of land and other assets in the guiseof voluntary donations and in the name of the "common good", procedures are established to (i) verifythat voluntary donations are indeed voluntary, (ii) provide compensation at replacement value toindividuals, who are not prepared to donate land for a particular sub-project, and (iii) provide an avenuefor grievance redress. The Resettlement Policy Framework is attached in Annex 1 Ic.
6.7 Indigenous People's issues
In 1997, the Philippine Congress passed Republic Act (RA) 8371 entitled Indigenous People's Rights Act, which uses the term 'indigenous peoples' as the collective label for non-Christian and non-Muslimethnic groups in the Philippines. Although RA 8371 provides a good basis for identifying indigenouspeoples, the proposed project will use the definition provided in OD 4.20 to include "social groups with adistinct social and cultural identity that makes them vulnerable to being disadvantaged in thedevelopment process." Because of the varied and changing contexts in which indigenous peoples arefound, no single definition can capture their diversity. In particular geographical areas, indigenouspeoples or indigenous ethnic communities can be identified by the presence in varying degrees of thefollowing characteristics:
* a close attachment to their ancestral territories and the natural resources in these areas;* self-identification and identification by others as members of a distinct cultural group;* an indigenous language, often different from the national language;* presence of customary social and political institutions; and,* primarily subsistence-oriented production.
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This definition of 'indigenous peoples' would not apply to non-indigenous ethnic minorities such asChinese, Indian, and American.
Moreover, the concerns of indigenous peoples are primarily met through the design of the project itself,and the project will ensure compliance with the Philippine Indigenous People's Rights Act of 1997 andthe OD 4.20 on Indigenous Peoples through an Indigenous Peoples Strategy (see Annex 1 lb). Thisstrategy aims at achieving the twin policy objectives of ensuring (a) the informed participation ofindigenous peoples in the activities of the KALAIH-CIDSS, so that they are in a position to receiveculturally compatible social and economic benefits, and (b) that indigenous peoples are not adverselyaffected during the development process .
The project design elements that define the strategy to address indigenous peoples concerns include (i)the presence of indigenous peoples as one of the criteria for area targeting, (ii) the facilitatedparticipatory planning process at the community level, (iii) the open sub-project menu that allowsindigenous groups to develop proposals that address their specific concerns, (iv) sub-project proposalformats which provide baseline data on indigenous groups for subsequent monitoring of inclusion andaccess to project benefits, and (v) grievance redress arrangements that provide an indigenous minoritywithin a particular barangay with an avenue for complaints if bypassed or marginalized in the sub-projectplanning or selection process.
7. Safeguard Policies:7.1 Do any of the following safeguard policies apply to the project?
P,olicy, . '...... A.licbiIitJ 'Environmental Assessment (OP 4.01, BP 4.01, GP 4.01) * Yes U NoNatural Habitats (OP 4.04, BP 4.04, GP 4.04) U Yes * NoForestry (OP 4.36, GP 4.36) U Yes * NoPest Management (OP 4.09) U Yes * No
Cultural Property (OPN 11.03) U Yes * NoIndigenous Peoples (OD 4.20) * Yes (9 No
Involuntary Resettlement (OP/BP 4.12) * Yes U NoSafety of Dams (OP 4.37, BP 4.37) (U Yes * NoProjects in International Waters (OP 7.50, BP 7.50, GP 7.50) (U Yes *No
Projects in Disputed Areas (OP 7.60, BP 7.60, GP 7.60)* (9 Yes 0 No
7.2 Describe provisions made by the project to ensure compliance with applicable safeguard policies.
The project will use an environmental screening procedure to assess negative impacts from proposedsub-projects. Land acquisition for sub-projects will be undertaken in accordance with an agreedResettlement Policy Framework. Both the environmental screening procedure and the provisions of theResettlement Policy Framework will be incorporated into the Project Implementation Manual. Theconcerns of indigenous peoples are addressed through the design of the project itself, which comprisesmechanisms that constitute an Indigenous Peoples Strategy (see Section 6.e above).
Certain types of investments with negative environmental or social impacts cannot be undertaken and arehereby included in a negative list of prohibited investments. A negative list of sub-project investmentsand expenditures is as follows.
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* Weapons, chainsaws, explosives, pesticides, insecticides, herbicides, asbestos, and otherpotentially dangerous materials and equipment
* Fishing boats (beyond the weight limit set by the Philippine Bureau of Fisheries and AquaticResources) and related equipment
* Civil works in or that affect protected areas* Purchase of or compensation for land* Micro-credit and livelihood activities which involve on-lending of Project funds* Maintenance and operation of facilities that have been the subject of civil works financed by
proceeds of the Loan* Activities that have alternative prior sources of committed funding* Recurrent Government expenditures, including salaries* Civil works for govermnent administration or religious purposes* Political and religious activities (including rallies) and facilities and materials related to such
activities* Activities that employ children below the age of 16 years* Activities that exploit an individual or individuals* International travel* Consumption items
Compliance with the safeguard provisions and the negative list will be ensured through internal input,process, and output monitoring, independent external monitoring by consultants and civil society entities,and by Bank supervision missions.
(b) If application is still to be determined, describe current or planned efforts to make a determination.
8. Business Policies8.1 Check applicable items:Financing of recurrent costs (OMS 10.02)Cost sharing above country 3-yr average (OP 6.30. BP 6.30, GP 6.30)Retroactive financing above normal limit (OP 12.10. BP 12.10. GP 12.10)Financial management (OP 10.02. BP 10.02)Involvement of NGOs (GP 14.70)
8.2 For business policies checked above, describe issue(s) involved.
F. Sustainability and Risks
1. Sustainability:
Core sustainability issues are addressed at the following two levels: (a) all sub-project proposalssubmitted at the inter-barangay forum for selection must have a viable operations and maintenance plan;and (b) sub-project proposals submitted at the inter-barangay forum will also be integrated into themunicipal development plan. This two-prong approach provides the basic framework for long termsustainability of investments.
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2. Critical Risks (reflecting the failure of critical assumptions found in the fourth column of Annex 1):
Risk Risk Rating Risk Mitigation MeasureFrom Outputs to ObjectiveWeakening of government commitment M On-going policy dialogue and supervision andto poverty alleviation monitoring of project progress in terms of
impact on the poor.Political instability M Government would be encouraged to stay on
course with new policy initiatives that areinclusive.
Macroeconomic reforms not M Ongoing policy dialogueimplemented seriouslyFinancial sector weakness continues M Ongoing policy dialogueFrom Components to OutputsPoor supply response due to insecurity Sand related uncertainty.Elite capture of benefits which is the S To guard against this risk, a number ofmost serious risk of the entire project measures could be put in place. (i) MechanismsThis can take place at different levels, that are not susceptible to politicalespecially if the project is used as an manipulation for identifying and targeting theinstrument to attract voters through poor at LGU levels, as well as the poorerdisbursement of development largesse sections within identified communities. (ii)rather than a focused poverty alleviation Arrangements to ensure effective and timelyeffort. flow of funds from the Borrower/Client to the
beneficiary communities. (iii) Mechanismsdefining sub-project planning cycles in waysthat promote effective participation of the poorin the identification, planning, implementation(community contracting and/or supervision),monitoring of program activities andmanagement of O&M funds. (iv) Mechanismsfor measuring effective service delivery eitherfrom LGUs, private sector entities or both. (v)Mechanisms for enhancing the empowernentof citizenship through community-builtaccountability procedures and effectiveinformation sharing. (vi) Identification ofchannels for conflict management/grievanceredress. (vii) Monitoring and evaluationprocess which includes the tracking ofresources flows to beneficiaries and theengagement of civil society.
Lack of motivation and weak S Assist the Government in capacity building andimplementation capacity institutional reform. Provide technical
assistance. Keep project design simple andprovide intensive supervision. Assist theGovernment to design a system for monitoringprogress in implementation. Program
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orientation at all levels. Strong mediacampaign. Civil society vigilance.Development of advocacy role for leaders(speakers forum), Strict selection and trainingof program workers at all levels. Report cardon cooperation by public representatives fordue acknowledgement. Invitation to publicrepresentatives to attend communitydeliberations. Strengthen capacity for budgetmanagement and monitoring at all levels.Creating an incentive framework for aligninglocal level policies and priorities with nationalpolicies and directives.
Input costs rise significantly S Monitor the market and keep informationflowing to the community so that it canpurchase inputs from the cheapest source
The application of the open menu S Close supervision and orientationapproach as outlined above fails tomaterializeOverall Risk Rating S
Risk Rating - H (High Risk), S (Substantial Risk), M (Modest Risk), N(Negligible or Low Risk)
Possible Controversial Aspects (Project Alert System):
Risk Type of Risk Risk Rating Risk Minimization MeasureRole of LGUs G S Dialogue and orientationFund Flow G S Policy dialogue and orientationType of Risk - S (Social), E (Ecological), P (Pollution), G (Govemance), M (Management capacity), 0 (Other), Risk Rating - H(High Risk), S (Substantial Risk), M (Modest Risk), N (Negligible or Low Risk)
Project risks include: (i) the creation of a parallel delivery mechanism for basic services; (ii) frequentchanges in the LGU leadership which may affect existing arrangements forged by KALAHI-CIDSS withLGU officials; (iii) perception of the dole-out nature of KALAHI-CIDSS from the national government;(iv) possible social tension and conflict arising from competition for limited funds between and withinculturally-diverse barangays; (v) possible elite "capture" of the benefits of the project; and (vi) projectsustainability and exit strategy.
Parallel delivery mechanism. With the creation of PMOs at various levels and the relatively directmanner by which funds are transferred to the barangay, there are concerns that the system might bypassthe traditional delivery channels. But local government units - provincial municipal, and barangay - areexpected to play important roles in the project, affirming the government's goal of decentralization. Inaddition, they will receive capacity building support and technical support through the project.KALAHI-CIDSS will therefore result in the strengthening of local level institutions, whether formal orinformal, as it will heavily promote the active participation of the LGU units and barangay members inthe project.
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Changes in the local political leadership. Given a tenure of only three years for LGU officials, there isconcern that frequent changes in the leadership of the LGUs might result in the victory of unsympatheticofficials to KALAHI-CIDSS. While these frequent changes do pose some degree of uncertainty, it willnot unduly risk the entire project given that: (i) decisions on what projects to support are made by thebarangay members themselves; (ii) it would be imprudent for any political leader to object to ananti-poverty project without suffering the loss of support from his constituents; and (iii)KALAHI-CIDSS will cover the 40 poorest provinces of the country excluding non-ARMM provinceswhere a targeted intervention is being prepared to address context specific issues.
Perception of "dole-out" In the past, most poverty alleviation projects have been viewed as additionalresources (for dole-outs) by LGU officials from the national government. KALAHI-CIDSS will bedifferent - not a dole out but a hands-up - because the types of activities it will fund will involvecost-sharing from the community. Small infrastructure projects, for example, will require counterpartcontributions from the barangay or group of barangays in cash or kind.
Potential negative impacts of competition. Despite the safeguards mentioned in the Critical Risksmatrix above, there are outstanding concerns that the competition for limited funds may increaseexclusion and tension between culturally-diverse communities. To this end, it has been agreed that theproject will be implemented in phases, starting small, learning from experience, and building the lessonsinto gradual scaling up and expansion. The project will be implemented during the first phase in 11municipalities (one per region), prior to full-scale implementation in 199 municipalities. In-depthmonitoring and supervision of project implementation, especially of the inter-barangay competition, willbe undertaken to assess the success of mechanisms to promote inclusion and participation of culturallydiverse groups. Based on lessons learned, design modification will be undertaken, if appropriate, beforefull roll-out.
Elite "capture" of benefits. Of all the concerns, this is the most difficult to handle as evidenced byprevious poverty reduction projects in the country and elsewhere. The KALAHI-CIDSS design providesa response to this risk in the form of: (i) capability-building activities for the barangay members (i.e.,so-called "social preparation"); (ii) encouraging active participation of the barangay members; (iii)ensuring the transparent nature by which business transactions under the KALAHI-CIDSS areundertaken; (iv) ongoing M&E work at different levels; (v) working arrangement with a network of localjournalists to report on incidences of graft and corruption; and (vi) the creation of Complaints Offices tolook into grievances and irregularities that cannot be resolved internally by the community (includingfiling of legal cases against corrupt officials or members).
Sustainability. At inception, sustainability is already built-in to the KALAHI-CIDSS project because ofits social preparation and capacity-building activities for the community. Every investment activity willhave its own operations and maintenance component and an appropriately constituted sub-committeeresponsible for its management.
3. Possible Controversial Aspects:
The area of controversy was about the imposition of at least 50% cost sharing arrangements with LGUSand local communities. Consistent with project principles, the parties agreed that cost-sharing is essentialto the project as it demonstrates client ownership of the investments. However, it is understood that theproject will not impose a fixed percentage of contribution.
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G. Main Loan Conditions
1. Effectiveness Condition
* The National Steering Committee will have finalized, according to procedures acceptable to theBank, the selection of the first eleven (I 1) municipalities in the Project Provinces that will participatein the Project.
* A special order will have been issued by the Undersecretary, DSWD, setting out the responsibilitiesof the National Project Management Office.
* A special order will have been issued by the Undersecretary, DSWD, setting out the responsibilitiesof the Regional Project Management Office.
* The Project Implementation Manual, acceptable to the Bank, will have been adopted by the NationalSteering Committee.
2. Other [classify according to covenant types used in the Legal Agreements.]
* Borrower will maintain the National Steering Committee: with functions, responsibilities andresources satisfactory to the Bank.
* Borrower will maintain the Technical Working Committee: with functions, responsibilities andresources satisfactory to the Bank.
* Borrower will maintain the National Project Management Office within DSWD and the RegionalProject Management Offices, all with functions, responsibilities and resources satisfactory to theBank.
* Borrower will ensure that all participating municipalities sign a Memorandum of Agreement withthe Project committing to abide by the rules and principles of the project.
* Borrower will ensure that the sub-projects are selected and implemented in accordance with thepolicies and procedures set out in the Project Implementation Manual.
* Borrower will maintain policies and procedures adequate to enable it to monitor and evaluateproject performance on an ongoing basis, in accordance with agreed indicators, and annualimplementation reports will be provided to the Bank not later than six weeks after the end of thefiscal year.
H. Readiness for Implementation
D 1. a) The engineering design documents for the first year's activities are complete and ready for thestart of project implementation.
1 1. b) Not applicable.
1] 2. The procurement documents for the first year's activities are complete and ready for the start ofproject implementation.
z 3. The Project Implementation Plan has been appraised and found to be realistic and of satisfactoryquality.
1] 4. The following items are lacking and are discussed under loan conditions (Section G):
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1. Compliance with Bank Policies
El 1. This project complies with all applicable Bank policies.O 2. The following exceptions to Bank policies are recommended for approval. The project complies
with all other applicable Bank policies.
Cyp tP. Fisiy Zafer Ecevit Robert V. Pulley
Team eader
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Annex 1: Project Design SummaryPHILIPPINES: Kapitbisig Laban sa Kahirapan-Comprehensive and Integrated Delivery of
Social Services (KAL;AHI-CIDSS) ProjectKey Performance Data Collection Strategy
Hierarchy of Objectives Indicators Critical AssumptionsSector-related CAS Goal: Sector Indicators: Sector/ country reports: (from Goal to Bank Mission)Improving local govemance * Improved governance as Analysis based on MIS data & Macroeconomic stability is
evidenced by % of participating baseline; maintained;Reducing poverty LGUs that have implemented Independent impact evaluadon Political situation remains stable;Improve quality of life of the poor the participatory strategies and I m e
technical assistance introduced NGO & media reports; Civil conflict is contained;by the project to assist Project activities are implemented incommunity NAPC reports; conflict areas;organizations/barangays reducepoverty;
* Improved poverty situation inthe beneficiary barangays;
* Improved human developmentindicators in the beneficiarybarangays;
Project Development Outcome / Impact Project reports: (from Objective to Goal)Objective: Indicators:Empowerment of local communities Empowerment indicators Analysis based on MIS data & Peace and order problem isthrough improved participation in baseline; manageablelocal govemance and involvement in * % of barangays that have beine;the design and implementation of adopted KALAH[-CIDSS Periodic socioeconomic surveys No natura calamities
poverty reductionprojectsrtioipaofy barantiays:wt Municipal records No political intervention resulting tnpoverty reduction projects partirto of pramtices Municipaltrecords elite capture or politization of
project planning and barangay records community forumsmanagement teams External evaluation studyestablished through Use of sanctons on bad LGUcommunity meetings NGO & media reports performers(>90% of target), NCIP reports
o % of barangays with rsub-projects proposals Complaints reportsendorsed at community Participatory community reportsmeeting (>90% of target),
o % of barangays withsub-projects for whichcommunity contributionswere provided ascommitted (>80% oftarget),
o % of barangays withsub-projects with adequatefunding arrangements forO&M (>80% of target).
* Barangay Development Plansthat integrate the communityneeds articulated through thebarangay mapping and situationanalysis (> 60% of target).
Governance indicators% of LGUs (Municipalities) thathonor signed MOAs and assistparticipatory management ofsub-projects by barangays:
o Number of barangaysassisted by LGUs withtechnical support forsub-project planning and
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implementing (>80%target)
o % of LGUs that conductmonitoring of sub-projectplanning andimplementation (>80% oftarget),
* Sub-projects are selected forfunding by the Inter-BamangayForum based on negotiatedprioritization instead ofbarangay entitlements (>70% oftarget)
* Project transparencyrequirements complied with insub-project prepamtion,selection, and implementation(>80% of target)
* Sanctions enforced in cases ofnon-compliance with projectrules (90% of cases)
Poverty reduction* Improved poverty indicators in
project barangays compared towithout-project barangays
* Improved quality of lifeindicators in project barmngayscompared to without-projectbarangays
Output from each Output Indicators: Project reports: (from Outputs to Objective)Component:1. Community Grants Community Grants provided: PMO MIS data Targeting not captured by elite
* % of barangays with Annual surveys No undue political interventionssub-projects implemented attechnical standards and within Technical audits Complementary investmentsbudget (>80% of target). NGO & media reports undertaken by LGUs
* % of barangays withsub-projects that meet basic NCIP reportsfinancial reporting standards in Complaints reportsFM&A manual (>80% of target)
Special studies* % of sub-projects where flow of Bank supervision
funds was timely (>80% target)* target population benefitting Project component status reports
from sub-projects (>80% target) Participatory community reports
2. Capacity building and Capacity building andimplementation support Implementation support provided:
* Information on project approachprovided to stakeholders atregional, provincial andmunicipal levels,
* Balanced gender composition ofcommunity and area facilitators,
* Planned number of communityfacilitators and areacoordination teams recruited,
* # and type of trainings tofacilitators (>90% of target),
* 1* and type of trainings provided
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for LGU staff (>90% of target)* # and type of training/technical
support provided for communityvolunteers/ brgy developmentcommittees (>90% of target)
3. Monitoring and Evaluation MonItorIng and evaluationconducted:
* Intemal computerized MISestablished and reportingconducted as scheduled by alllevels,
* Extemal monitoring consultantengaged and functioning,
* Participatory beneficiarymonitoring functioning,
* Civil society involved inmonitoring,
* Financial audits conducted,* Grievance redress arrangements
established and grievancesresolved,
* Monitoring results used forleaming and adjustment ofproject activities and/or approach
Project Components I Inputs: (budget for each Project reports: (from Components toSub-components: component) Outputs)Figues in USS million Bsnk GOP Others Perfornance audit reports WB, GOP an others provide adequate
90.6 41.6 00 funds on time1. Community grants 9.6 4.6 hFnancial reports fud ontmI. u n n ro Quality project staff and facilitation is
2. Capacity building and 38.2 00 Independent audit reports availableimplementation support 1.4 1.2 00 Project MIS data Administrative efficiency is improved
3. Monitoring and EvaluationTechnical audits Exchange mte rmains stable
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Annex 2: Detailed Project DescriptionPHILIPPINES: Kapitbisig Laban sa Kahirapan-Comprehensive and Integrated Delivery of
Social Services (KALAHI-CIDSS) Project
1. The KALAHI-CIDSS adopts a community-driven approach to development and povertyreduction by (a) empowering communities to manage their assets, lives and livelihoods in ways thatrestore their sense of responsibility and human dignity; (b) strengthening their social networks andlinking them up with policy and administrative structures of the state; and (c) promoting representationand accountability, at different levels of the decision making pyramnid. The community nature of thisinvestment identifies the barangay, as the unit of analysis, and not sub-groups or individuals within thebarangay. Given its focus on the community as a functioning entity, the project is design to operatewithin existing institutional structures but to change processes within those structures. Given itscommunity-centric focus, most of the investments will either by public or common goods.
2. To respond to the stated goal of the creation of public value, investment options shall be basedon an "open menu" as constrained by a negative list. Under this "open menu" scheme, barangays canrequest funds from the Project to construct infrastructure, such as roads, bridges, water supplies andsanitation facilities. The project therefore consists of the following three components: (a) CommunityBlock Grants, (b) implementation support, and (c) monitoring and evaluation.
(a) Community Block Grants ($90.6m)
3. The project will assist communities (barangays in the selected municipalities) through a facilitatedparticipatory planning process to develop sub-project proposals, that will be selected at an inter-barangaycompetitive forum comprising all participating barangays. This process is expected to take four to sixmonths.
4. Proposals for sub-projects will be based on an open menu supplemented by a negative list ofprohibited activities with adverse environmental and social impacts (see Section E.7.2). Apart frommicro-finance or other activities involving on-lending of project funds, the community will be able tochoose any activity it agrees is important for its development, be it economic infrastructure such as roads,bridges or irrigation facilities, social service infrastructure such as a school or clinic, water supply andsanitation facilities, environmental conservation measures such as watershed management, or capacitybuilding. The chosen activity must qualify as an investment item and not a consumption item.Communities will be also be able to coordinate among themselves on activities that would benefit fromjoint planning (e.g. provision of water supply, road, bridge). The development of sub-project proposalswill involve an assessment of needs in relation to existing assets, resources, and capacities (see SectionE.5 on the sub-project cycle).
5. With the assistance of municipal facilitators a joint proposal will be submitted to theinter-barangay forum. Sub-project selection will be competitive and will take place through aninter-barangay forum with representation from the participating barangays.
6. Within each municipality, there will be three cycles of project preparation and selection, open toall barangays. The number of barangays per municipality vary considerably (with an average of 24),and in larger municipalities, there may be two or more inter-barangay forums during each cycle to selectsub-project proposals from different clusters of barangays. Since the funding allocation per municipalitymay not allow for sub-project implementation in all barangays, the selection will be competitive, and theinter-barangay forum will decide on the sub-project proposals that will receive funding. . While the
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inter-barangay forum consists of both community representatives and technical advisors, only thecommunity representatives can approve a subproject proposal.
7. Community cost contribution towards both the investment and O&M costs will be a selectioncriteria at the inter-barangay forum. The Philippines CIDSS and the Indonesian Kecamatan DevelopmentProgram (KDP) have found that the overall community contribution is higher when not fLxed in advance,but when it is considered as one of the criteria in the competitive selection of sub-project proposals.Since this may favor the more well-off barangays, the size of community contribution would need to besupplemented by other sub-project criteria such as poverty focus, operation and maintenance plan, and arationale in terms of the benefits a sub-project provides to the community at large (as opposed to aselected few). A finai set of criteria for sub-project selection will be determined during projectpreparation.
8. Community contracting: Selected sub-projects will be implemented through communitycontracting. The barangay project implementation team selected by the community will manage theimplementation of a particular sub-project, and will, if required, employ outside contractors selectedthrough competitive bidding.
9. Grievance redress: Since elite capture, both at the barangay and municipal level, is a key risk inthe proposed project, a grievance redress mechanism will be developed to provide segments of acommunity or an entire community with an avenue for complaints if bypassed or marginalized in thesub-project planning and selection process. This grievance redress mechanism will be independent of theproject implementation set-up and the LGU structure. Its composition and mode of functioning will bedetermined during project preparation. Civil society monitoring together with the rules of fulltransparency required under the project, will provide a supplementary check on elite capture.
(b) Implementation Support (US$ 5.4 million)
10. The very essence of the project lies it its ability to mobilize communities and other institutionalstakeholders to initiate, plan, implement and manage subproject components chosen by them. To achievethis goal of the project, this component includes aspects of (i) social mobilization and communityorganizing, and (ii) capacity building and technical support.
(i) Social Mobilization and Community Organizing
11. This involves a multi-level and multi-stakeholder organizing, socialization, and facilitationprocess to ensure that consistency with project principles is achieved. Social mobilization andcommunity organizing are cross-cutting activities of the project happening at all stages of the projectcycle - from its inception and area targeting, social marketing, information dissemination and sharing,community organizing, participatory community planning, sub-project preparation, municipalcompetition, project implementation, project monitoring and the preparation and completion of projectreports.
12. The project will recruit and train community facilitators from the different regions to undertakeinformation dissemination at the community level, mobilize and support community volunteers regardingparticipation in sub-project planning and implementation, and facilitate the involvement of thecommunity in the identification, planning, and implementation of sub-projects. In addition, thecommunity facilitators will liaise with the municipality regarding technical and other inputs to thecommunity, liaise with consultants providing training to the communities, and help facilitate theinter-barangay foruns. Facilitators will be employed on time-bound contracts, and will not be absorbed
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into the LGUs at the closing of the project. Instead, the project will have created a pool of skilledpersonnel and future leaders of the community who could be employed in other development projects,whether implemented by GOP or by NGOs. To this end, facilitators will be provided training indevelopment planning and management, conflict resolution, intra- and inter- barangay mediation, qualityreviews, poverty assessments, etc. The detailed training program and training infrastructure forfacilitators will be developed as part of project preparation.
perl and Maintenance Data Gathering and Training:Community Profiling
Implementadon / Veriflcatiem .lhtinsttutonal / Project Mapping*Generate Investment Ideas
Inter-Barangpy Forum*Confirtnaian of Projects and Cost Barangay Asembly*Selesson of Vcification Team .Expansion of Project Preparation Tcam
_7C. :*Validation of Profiles, Maps, Plans*Pritrization of Projects
Technical Planning and Traling/Barangay Feedback*Detailed Plans Proposal Preparation and TrainingeDtaioed Cost Estimates amd Counterparts *Proposal Writing*Report on Conduct of Inter-Bamngay Forum *Training on Project Preparation.Selection of Implementation Team *Identificatton of Intemal Resoaurces
lnter-Barngay Forum BarangayAssembly.Presentation of Proposals *Select/Confirm Projects.Rating of Proposals *Confirm Cosuterparts
*Select Representation Team
(ii) Capacity Building for Local communities and LGUs
13. Technical Assistance will be provided to create capacity through training at the community levelregarding such tasks as project planning, contracting, construction supervision, O&M, bookkeeping andfinancial management to members of the Barangay Development Council and volunteers. Thecommunities will also receive technical assistance from the municipalities regarding assessment of thetechnical feasibility of sub-projects, project design and budgeting. Training will therefore also beprovided at the municipal level to technical staff (e.g. Local Chief Executive, Planning & DevelopmentOfficer, Social Welfare Officer, Engineer) to strengthen their capacity to support the barangay levelactivities and undertake monitoring. A training needs assessment together with a training plan, trainingmanual, and curriculum for different types of training and target audiences is being developed as part ofproject preparation.
14. Given the number of guiding principles and project manuals being prepared during preparation,
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the parties (i.e. GOP and the World Bank) have agreed to field test these new processes and proceduresin one municipality before final rollout.
(c) Monitoring and Evaluation (US $3 million)
15. Monitoring will be designed to provide for a continuous learning and adjustment of the projectapproach and will involve: (i) participatory monitoring by communities based on self-defined indicators;(ii) internal monitoring of inputs, process, and outputs by the Project Management Office (PMO); (iii)independent extemal monitoring and evaluation by consultants; and (iv) civil society monitoring byNGOs and the press. A computerized management information system (MIS) will be developed toenable intemal input, process, and output monitoring, as well as an analysis of project impacts. Baselinedata for impact monitoring will be established early during project implementation when beneficiarybarangays have been selected through the process of inter-barangay forums, and mid-term and terminalsurveys will be undertaken subsequently. Other studies relating to govemance and poverty will bedetailed during
Summary of the KELAII-CIDSS Monitoring and Evaluation SystemNo. Instrument Data Sources Implementing Agency
I Management Monitoring and MIS PMO staffReporting of inputs, process &outputs .-
2 Baseline survey and follow Poverty mapping study and Independent survey firm & NAPCpanel data subsequent survey instruments
(longitudinal and cross sectional)3 Participatory monitoring & Qualitative assessment of Participating barangays, POs, and
evaluation beneficiaries based on self-identified other community groupsindicators
4 Impact & effectiveness Impact indicators and other MBN PMO, NAPC, NGOs, and othermonitoring tools independent survey firm
5 Technical Audits Engineering Assessments PMO, Independent consultants,I_______ _____________________________ m unicipal engineers
6 Annual Financial Audits MIS and Financial records COA & Independent auditors7 Periodic case studies & learning PMO records, community feedback, PMO, WB supervision, NGOs,
events and surveys. students and consultants.Independent newspaper accounts * Media & NGOs
8 Supervision Systematic and random selection of WB, independent consultants,roject sites NGOs
9 Complaints and resolution * Complaints processing channels * PMO complaints system andsystem at municipal, regional and independent ombudsman.
national levels. * Independent media & NGOs* Newspaper accounts &
reporting
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Annex 2b: Estimated Project CostsPhilippines: KALAHII-CIDSS Pr oject
Project Cost By Component Local Foreign TotalUS$ US$ US$ million
million million1. Community Block Grants 41.6 90.6 132.22. Implementation Support 39.2 7.0 46.23. Monitoring and Evaluation 1.2 1.4 2.6Total Baseline cost 82 99 181Physical contingency 0 1 1Price contingency 0 0 0Total Project cost' 82 100 182Total Financing required 82 100 182i: Identifiable taxes and duties are 0 (US$ m) and the total project cost, net of taxes, is 182 (USS m). Therefore, the project cost sharing ratio isXX.XX% of total project cost net of taxes.
By Component:
Project Component I - US$132.20 million90.6
Project Component 2 - US$46.20 million7.0
Project Component 3 - US$ 2.60 million1.4
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Annex 3: Estimated Project CostsPHILIPPINES: Kapitbisig Laban sa Kahirapan-Comprehensive and Integrated Delivery of
Social Services (KALAHI-CIDSS) Project
Local Foreiln Total'Project Cost By Componehnt L,U$rniiipn US,$milion ,US.$milion
Community Block Grants 41.60 90.60 132.20Implementationr Support 39.20 7.00 46.20Monitoring and Evaluation 1.20 1.40 2.60Total Baseline Cost , 82.00 99.00 181.00
Physical Contingencies 0.00 0.00 0.00Price Contingencies 0.00 0.00 0.00
Total Project Costs1 82.00 99.00 181.00Front-end fee 1.00 1.00
Total Financing Required 82.00 100.00 182.00
Local, ' Fo'reign TotalProject Cost By'-Oategory . USV$h'piliion US$million US4niui,on
Goods 0.00 1.00 1.00Works 35.70 90.60 126.30Services 8.20 4.00 12.20Training 4.10 0.00 4.10Incremetal Operating Cost 31.00 2.20 33.20Unallocated 3.00 1.20 4.20
Total Project Costs1 82.00 99.00 181.00Front-end fee 1.00 1.00
Total Financing Required 82.00 100.00 182.00
Identifiable taxes and duties are 82 (US$m) and the total project cost, net of taxes, is 100 (USSm). Therefore, the project cost sharing ratio is 100% oftotal project cost net of taxes.
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Annex 4: Cost Benefit Analysis SummaryPHILIPPINES: Kapitbisig Laban sa Kahirapan-Comprehensive and Integrated Delivery of
Social Services (KALAHI-CIDSS) Project
Introduction:Poverty in the Philippines is a predominantly rural phenomenon affecting landless workers andsmall plot farmers. The KALAHI-CIDSS Project represents the primary framework of theGovernment of the Philippines (GOP) to alleviate poverty in rural communities and improvelocal governance. It is envisioned as a USD$ I 82million program over six years commencing inDecember 2002, partially financed through a USD$ 100 million World Bank loan.
Project Objectives:The overall objective of the Project is to empower communities through enhanced participationin barangay govemance and involvement in the design, implementation, and management ofeconomic development activities. The vehicle for these development activities is the provisionof grants for community investment programs in small scale infrastructure sub-projects. Thesesub-projects will produce tangible communal goods with associated quantifiable economicbenefits that reduce poverty. Additionally, these sub-projects will each serve as an individualpilot project to foster institutional strengthening and capacity building of the local implementingbarangay by enhancing their planning and implementation capabilities in procurement, financialmanagement, and project implementation. These characteristics of governance have been provento be strongly linked to improving the long-term social welfare of the local community.
Project Background:While relatively innovative in approach, the KALAHI-CIDSS Project builds upon other projectswhich exhibit a similar operational framework, namely:, the Village Infrastructure Project (VIP)I & 2 in Indonesia, the Kecamatan Development Project (KDP) 1 & 2 in Indonesia, and theComprehensive Integrated Delivery of Social Services (CIDSS) Project in the Philippines. Eachof these projects has sought to increase social welfare through the issuance of block grants tolocal communities for small scale infrastructure development sub-projects. In each of theseprojects, local communities are given the opportunity to decide for themselves among a range oftypes of sub-projects to pursue through a demand driven "open-menu" format. The localcommunities are responsible for developing the sub-project, implementing it, and finallyensuring for its proper Operation and Maintenance (O&M). Collectively, these projects have hadvarying levels of success and can be viewed as providing a basis for what can be expected toresult from the KALAHI-CIDSS Project. Similar to these other projects, KALAHI-CIDSSemphasizes the following principles in its design:
* Community Participation and Empowerment* Transparency* Funding Prioritization (based on sub-project feasibility)* Sustainability through Locally Based O&M
Problem Identification and Approach:Due to the design which employs a demand driven "open menu" approach, it is not easy to
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quantify the benefits and costs of the KALAHI-CIDSS Project ex ante. With an "open menu"project framework, it is impossible to know with precision which investment proposals will bepursued by local cormmunities, and then which ones will actually receive funding. Thus, withsuch a project there are inherent uncertainties in attempting to perform a traditional economicanalysis, namely:
1. The benefits and costs of each individual sub-project stemming from the localized planning,design, construction, implementation, O&M, and utilization; and
2. The actual distribution of the types of sub-projects to be selected by the local communitiesacross the entire Project.
Nonetheless, a sound analytical methodology based upon conservative assumptions was carriedout, making use of available data from ongoing and past projects of a similar physical nature inthe Philippines. Profiles of generic sub-projects were modeled for estimating "expected" benefitsand costs per sub-project. Similar ongoing projects in the Philippines were used as benchmarkdistributions to deternine the percent of the Project budget that would be distributed across thegeneric sub-projects.- These benchmark distributions across representative sub-projects aredisplayed in Table 4.1 below.
Table 4.1Benchmark Distributions for KALAHI-CEDSS
sub-project Type Distribution I Distribution II Distribution m Distribution IV(CIDSS-based) (SZOPAD-based (ARCDP-based) (NPV-based)
Classrooms 15% 30% 5% 2.5%Barangay Health Stations 15% 10% 5% 10%Level II Water Systems 20% 15% 10% 20%Level I Water Systems 7.5% 5% 5% 2.5%Road Rehabilitation 7.5% 5% 30% 15%Road Regravelling 7.5% 5% 25% 7.5%Post Harvest Facilities 10% 20% 5% 15%CIS Rehabilitation 10% 5% 5% 10%CIS Construction 7.5% 5% 10% 17.5%
Main Assumptions of the Analysis:
a. Operations and Maintenance (O&M) costs are constant throughout the sub-project life cycle.b. Full payment of O&M costs is necessary for full benefit realization.c. Benefits cease immediately after expiration of designed sub-project life.d. Representative sub-projects of one type are assumed to be identical to all others of the same
type.e. Three different benefit distribution scenarios (A, B, and C) are presented to reflect varying
degrees of the local communities' ability to implement the sub-project. See Table 4.2 below.f. Distribution of sub-projects proposed by local communities are expected to follow the
experiences of similar projects in the Philippines such as the Comprehensive IntegratedDelivery of Social Services (CIDSS) Project, the Agrarian Reform CommunitiesDevelopment Project (ARCDP), the SZOPAD Social Fund Project.
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Table 4.2Expected Benefit Realization Scenarios
Year I Year 2 Year 3 Yearn nScenario A 100% 100% 100% 100% |Scenario B 85% 100% 100% 100%Scenario C 50% 85% 100% 100%
sub-project Types Considered: The EIRRs for each sub-project given below reflect the valuecalculated under Scenario A, full benefit realization in Year 1. Under the Scenario B andScenario C, the EIRRs for each generic sub-project were lower.
a. Communal Irrigation Systems (CIS) - Rehabilitationb. Communal Irrigation Systems (CIS) - Constructionc. Production and Post-Harvest Facilitiesd. Road Rehabilitatione. Road Regravellingf. Level I Water Supply
g. Level 11 Water Supplyh. Barangay Health Stationsi. Basic Education Facilities
(a) & (b): CIS - Rehabilitation and ConstructionIrrigation improvement under the project is to be geared towards either rehabilitating existingschemes which are no longer fully functional, or in the construction new schemes. The returnsfrom irrigation will vary considerably depending on the types of crops planted; the analysisassumes that the base crop is paddy. The rationale for this is that paddy is the primary tradedcrop in country and is also used by the small scale farmers for subsistence.
The impact of irrigation improvements is assessed through a simple model which only considersthe improvement in yield and cropping intensity. A conservative estimate of sub-project benefitsis produced since the model does not attempt to consider gains from:
* Increases in area of land under cultivation* Improvements in cropping patterns* Crop substitution (high value crops for low value crops)
The following EIRR estimates were:CIS - Rehabilitation 19.3%CIS - New Construction 18.4%
(c) Production and Post-Harvest FacilitiesThe construction of production and post-harvest facilities in the project strives to give the smallscale local community farmer a better farmgate price of their paddy by transferring themonopolistic power of the local private production and post-harvest facility operator to the localcommunity. The model assumes that the establishment of such monopoly power is due to capital
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constraints. A conservative estimate of sub-project benefits is produced since the model does notattempt to consider gains from the increases in the Cropping Intensity Index with the project, i.e.,that the farmers would attempt to grow more when receiving a higher price.
The estimated EIRR was 34.2%
(d) & (e) Road Rehabilitation and RegravellingThe primary road construction in the project is likely to be very minor and short sub-projectbarangay or "farm-to-market" roads which will link the barangay center to the provincial ornational road system. In most cases, investment in these roads will comprise regravelling orrehabilitation in an attempt to improve the surface and/or make "all'weather" roads which wouldmake the roads passable by normal vehicles year round. In the absence of such roads, agriculturemust be pulled by carabao carts or carried by people. The analysis of these roads focuses on thetransport cost savings for agriculture.
The following EIRR estimates were:Road Rehabilitation 33%Road Regravelling 34.9%
(f) & (g) Water Supply Systems I & IISafe potable water is a necessary public good and yet a major concern in the outlying poor ruralareas. Without sustainable safe potable water there is increased social health costs due to lowerproductivity from higher worker mortality and morbidity. Additionally, in rural areas there is acost incurred based on the water fetching time for segments of the populace. Instead ofattempting to calculate the benefits from better productivity or time cost savings, the modelemploys a Willingness-To-Pay approach based on a Philippine case study used in the (draft)NEDA Manual on Project Evaluation.
The following EIRR estimates were:Water Supply Level I 19.06%Water Supply Level II 35.9%
(h) Barangay Health StationsAs in the case with improved water supply systems, better health facilities benefit the communitythrough greater worker productivity. Similar to the water supply model, the model employedhere is based on a Philippine case study used in the NEDA Manual on values ofWillingness-To-Pay for better access to health facilities.
The estimated EIRR was 52.6%
(i) Basic Education FacilitiesWhile basic education is widely perceived by most societies as being key to economicdevelopment and social progress, the economic value of education remains difficult to pinpoint.The model employed assumes that with more education facilities, more children will remain inschool longer. Using regression data based on the Philippine experience, a value to these
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additional years of education was estimated.
The estimated EIRR was 16.4%
Summary of Directly Measurable Benefits and CostsThe model was run using:
* The "generic" sub-projects as representative of the types of sub-projects that will be built;* The three benefit realization scenarios; and* The percentage of total project funding appropriated per sub-project based on the four
benchmnark distributions, i.e., the three historical sub-project distributions of CIDSS,SZOPAD, and ARDCP, and one constructed distribution based on the relative NPVs ofthe generic sub-projects.
Only using directly quantifiable benefits, the estimates of the overall Project EIRR ranged from28.65% to 32.42%, see Table 4.3 below. This result corresponds with the lower bound findingsfrom the Village Infrastructure Project (VIP) and Kecamatan Development Project (KDP), bothof which are ongoing in Indonesia and similar in objectives and implementation.
Table 4.3Summary of Estimated Project EIRRs
Across Benchmark Distributions and Benefit Realization ScenariosDistribution I Distribution II Distribution 111 Distribution Iv
(CIDSS-based) (SZOPAD-based) (ARCDP-based) (NPV-based)Scenaio A 32.22% 29.87% 32.42% 32.40%Scenaio B 32.10% 29.77% 32.29% 32.28%Scenario C 30.85% 28.65% 30.98% 31.03%
Exogenous Factors Which May Affect Project Expected Benefit RealizationGiven the inherent uncertainty with this form of project, it may prove that there are exogenousfactors which could undermine the assumptions and/or affect the expected economic return.These could include:
* Elite capture, where the wealthy control the sub-project process for their own benefit andcommunity wide benefits are not realized.
* Corruption, where local contracts for sub-project related work are issued based onkickbacks and expected lower costs from local labor and material are not realized.
* Embezzlement of funds for O&M or other disruption of O&M funding preventingnecessary annual sub-project O&M work.
* Skewness in terms of sub-project selection, i.e., communities predominately select onlyone or two types of sub-projects distorting the expected distribution of funding acrosssub-projects.
* Delay in sub-project implementation due to lack of understanding of procedures, inabilityof the local communities to become motivated to attain grants for sub-projects, and/orfunds disbursement issues.
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Concluding Remarks
The intent of attempting a cost-benefit of analysis for this demand driven open menu project wasto give the decision makers a more rigorous estimate of the economic return than a cost effectiveor SWOT analysis could provide. Given the inherent uncertainty associated with design of theProject, the methodology employed has sought to be as comprehensive as possible. Conservativeassumptions and actual -data from ongoing similar projects in the Philippines were used as thebasis for Project fund allo'cations across sub-projects and the unit values for deriving the return tothe types of representative sub-projects. These values and assumptions can be reviewed in thefull economic analysis on file with the Project documents.
Indirect benefits or those that could not be readily quantified such as those from communityempowerment, institutional strengthening, and capacity building were not specifically included inthe analysis. For these reasons, as well as the use of conservative estimates of quantifiablefactors, the findings are believed to be on the low side of the economic returns which will berealized when the Project is implemented.
[For projects with benefits that are measured in monetary terms]
.,sent Value ,f Flows Fiscal Im-pactEconomic Financial Analysis`Analysis _____.,_i________ Taxes t Subsidies
Benefits:
Costs:
Net Benefits:
IRR:
If the difference between the present value of financial and economic flows is large and cannot be explained bytaxes and subsidies, a brief explanation of the difference is warranted, e.g. "The value of financial benefits is lessthan that of economnic benefits because of controls on electricity tariffs."
Summary of Benefits and Costs:
Main Assumptions:
Sensitivity analysis I Switching values of critical items:
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Annex 5: Financial Summary
PHILIPPINES: Kapitbisig Laban sa Kahirapan-Comprehensive and Integrated Delivery ofSocial Services (KALAHI-CIDSS) Project
Years Ending
Y Year1 I Year2 | Year3 | Year4 r Year5 | Year6 | Year7Total Financing Required
Project CostsInvestment Costs 0.6 2.1 28.1 43.1 41.0 15.4 0.0
Recurrent Costs 0.8 5.7 11.8 13.3 11.5 5.9 1.8Total Project Costs 1.4 7.8 39.9 56.4 52.5 21.3 1.8
Front-end fee 1.0 0.0 0.0 0.0 0.0 0.0 0.0.Total Financing 2.4 7.8 39.9 56.4 52.5 21.3 1.8
FinancingIBRD/IDA 1.4 2.3 21.0 33.0 30.0 12.0 0.3Govemment 1.0 5.5 18.9 23.4 22.5 9.3 1.5
Central 1.0 4.5 10.9 12.0 11.3 5.3 1.5Provincial 0.0 1.0 8.0 11.4 11.2 4.0 0.0
Co-financiers 0.0 0.0 0.0 0.0 0.0 0.0 0.0User Fees/Beneficiaries 0.0 0.0 0.0 0.0 0.0 0.0 0.0Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0Total Project Financing 2.4 7.8 39.9 56.4 52.5 21.3 1.8
| Year 1 | Year 2 | Year 3 Year 4 | Year 5 | Year 6 | Year 7Total Financing RequiredProject Costs
Investment Costs 0.6 2.1 28.1 43.1 41.0 15.4 0.0Recurrent Costs 0.8 5.7 11.8 13.3 11.5 5.9 1.8
Total Project Costs 1.4 7.8 39.9 56.4 52.5 21.3 1.8Front-end fee 1.0 0.0 0.0 0.0 0.0 0.0 0.0
Total Financing 2.4 7.8 39.9 56.4 52.5 21.3 1.8
FinancingIBRD/IDA 1.4 2.3 21.0 33.0 30.0 12.0 0.3Govemment 1.0 5.5 18.9 23.4 22.5 9.3 1.5
Central 0.0 0.0 0.0 0.0 0.0 0.0 0.0Provincial 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Co-financiers 0.0 0.0 0.0 0.0 0.0 0.0 0.0User Fees/Beneficiaries 0.0 0.0 0.0 0.0 0.0 0.0 0.0Other 0.0 0.0 0.0 0.0 0.0 0.0 0.0Total Project Financing 2.4 7.8 39.9 56.4 52.5 21.3 1.8
Main assumptions:
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Annex 6(A): Procurement Arrangements
PHILIPPINES: Kapitbisig Laban sa Kahirapan-Comprehensive and Integrated Delivery ofSocial Services (KALAHI-CIDSS) Project
Procurement1. Guidelines. Procurement of goods and works, and consultant services funded wholly or partly byBank Loan will be carried out in accordance with Bank procurement guidelines ("Guidelines forProcurement under IBRD Loans and IDA Credits" of January 1995 revised January and August 1996,September 1997 and January 1999, and the "Guidelines for Selection and Employment of Consultantsby World Bank Borrowers" of January 1997 revised September 1997 January 1999 and April 2002).
2. There are areas of conflicts between the procurement procedures of the Republic of thePhilippines and provisions, which are acceptable to the World Bank. These include, but are not limitedto:
* two-envelope system is mandatory for procurement of works and goods;* price negotiation is resorted to in case the winning bid exceed the budget ceiling whereas the
Bank Guidelines will allow only reasonable reduction in scope and quantity;* pre-qualification or eligibility screening of contractors is practiced whereas the Bank considers
pre-qualification only to be necessary for large or complex works and not applicable for smallcontracts envisaged under this project;
* prior registration, licensing and/or other government authorization is required prior to submissionof bid, however this should be a required condition for signing the contract; and
* insufficient documentation of the bidding opening process.
A procurement side letter will be issued by the Govemment, on the same date as signing of the LoanAgreement, detailing procedures to be followed to ensure compliance with the Bank's procurementguidelines.
3. Summary of Procurement Capacity Assessments: Assessments of the procurement capacities ofthe Department of Social Welfare and Development (DSWD), which is the implementing agency of theproject, and a sample of three communities were carried out in accordance with the OfficeMemorandum from the Manager of OCSPR, dated August 11, 1998. The assessment involved a reviewof the procurement policies and procedures adopted and implemented in the department, and how itactually implemented procurement for SEMP I and other Bank and/or locally funded projects. On theother hand, the Bank's Country Procurement Assessment Report (CPAR) for the Philippines wascompleted in June 2002, where the general risk assessment for the country is rated average. Thegeneral findings of the assessment of DSWD conform to those of the CPAR's.
4. In general, the laws, rules and regulations relating to procurement being implemented by DSWDadhere to the principle of competition and are intended to promote economy, efficiency andtransparency. However, certain laws, procedures and regulations may not fully support economy,efficiency and transparency in procurement. Some of them are within the authority of the department toamend, and these have been identified with the technical assistance provided to DSWD and wereimplemented under SEMP I. Waivers have been provided to ensure that procurement underBank-financed projects is consistent with Bank policies and these waivers form part of the LoanAgreement. The procurement capacity of DSWD was assessed to be good and the risk rated average.DSWD, in all areas of the Assessment has been rating satisfactory, including the those realting togovemance issues. In terms of qualified procurement staff, it has qualified procurement staff currently
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working in the Central Office and in various projects. However, for this Project, the Assessmentemphasized the need for DSWD to hire additional qualified procurement staff at the Central andRegional Offices to manage the procurement process. It was discussed and agreed that these staff will behired prior to effectiveness.
5. It is not possible to assess the capacity of each of the community (estimated at 3,600 nationwide)that will be implementing the community sub-projects component. Moreover, these communities willnot be identified prior to project effectiveness. Hence, the assessment was based on a limited sample ofthree communities, in particular those that were part of the field testing activity. The objectives of theassessment, which are to have a general picture on how communities are organized and carry out theirprocurement, have been met. The procurement capacity of each community is expected to be low andthe risk for the Bank was assessed to be high. In particular, the assessment found: (a) lack of capacity toprocure large amount of contracts beyond $2,000; (b) no established procurement policies andprocedures; (c) Barangay Treasurer normally performs procurement function; (d) procurementcomplaint mechanism not in place; and (e) no record keeping system.
6. Project Procurement Responsibilities: The responsibilities for each step in the procurementprocess are described in detail in the Procurement Manual. Briefly, the-roles of each group or unit in theprocess are:
a. DSWD Central Office (CO) will handle procurement of contracts covered by components otherthan Community Grants. These are: (a) capacity building and implementation; and (b)monitoring and evaluation. It is responsible for keeping and revising the Procurement Manual tosuit the needs of the Project. Overall monitoring of procurement progress will be done at COwith inputs from the Regional Office and various communities. All reporting requirements onprocurement will be prepared and submitted by the CO to the Bank It will be responsible forapproving community grant that are valued more than the threshold of the Regional Office asdefined in the Procurement Manual.
b. DSWD Regional Office (RO) will be responsible for: (a)procurement orientation and training ofcommunity members,(b) assist the community in organizing its procurement structure; (c) assistthe community in the preparation of their procurement plan; (d) supervise the procurementprocess at the community level; (e) monitoring and reporting the progress of procurement to COon regular basis. Each RO will hire or designate a dedicated Procurement Officer who willperform these functions.
c. Community members will all be responsible for completing the sub-project funded by thecommunity grant category. Once the subproject proposed by a community has been givenpriority status, the following are organized:
i. Procurement Team, consisting of least three member will be designated through simplevoting process involving all members. The Team will handle the procurement of thesub-project following the procedures established in the Procurement Manual. It isresponsible for preparing the Procurement Plan assisted by the DSWD Regional ProcurementOfficer and ensuring that the plan is implemented on time.
ii. Barangay Sub-Project Management Committee (BSPMC) is likewise designated throughsimple voting by all members of the community. This Committee will approve therecommendation of the Procurement Team and will recommend to the Barangay Captain toimplement the subproject.
7. Action Plan to Improve Procurement Capacity: As agreed with DSWD, the following actions will
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be undertaken on the timneframe specified.a. Prior to Loan Negotiation (scheduled in Mid August, 2002):
* Revise the Procurement and Infrastructure Manuals, incorporating the following changes (tobe done by August 15,2002):
a. Procurement regulations updated to EO 40 Standards (done as of July 31, 2002);b. Indicate procurement training for communities, DSWD central and field offices staff,
auditors and interest civil societies(done on August 15);c. Clear procedures for addressing contractual disputes (done as specified in the
Procurement and Infra Manuals);d. Clear process for addressing complaints from various groups (done as specified in
the Procurement and Infra Manuals);e. Forms of contracts per method of procurement should be appended, with appropriate
guidance for completing the forms (done);f. Only those procurement and consultancy selection methods identified herein should
be incorporated in the Manuals (done);g. Appropriate thresholds for review and approval should be indicated (done);h. Fixing of responsibility and accountability of staff and unit or groups in each step of
the Procurement process and contract implementation (done);i. Provide for a record keeping system in the barangay/community level (done as
indicated in the Manuals).* The Procurement Plan for packages to be handled by DSWD during the first year of
implementation (received by the Bank on August 2, 2002).* Agree on the provisions of the Procurement Side Letter (agreed during negotiation).
b. After the fleld testing (scheduled in December, 2002):
* A structured training/familiarization program on procurement for all stakeholders;* Training of procurement staff for the first batch of communities;* To simplify, and avoid inconsistency, merge the Procurement and Infrastructure Manuals
into one Procurement Manual, after project field-testing;* Summarize and shorten the Procurement Manual into few pages and translate into local
dialects, after project field-testing.
* A international procurement specialist should be on board for three months every year ofimplementation to provide training workshops on CDD procurement; also, a localprocurement specialist will be hired to provide advise and guidance to the PMO;
* Incorporate all procurement plans and documents for packages which will be procuredduring the first year of implementation.
c. During the Project Implementation:
* Regular monthly reporting of procurement activities submitted to the Bank;* Establishment of standard cost monitoring guide for community sub-projects (January,
2003);* Independent procurement reviews every six months; and* Annual audit by COA should include procurement performance audit.* A qualified procurement officer must be hired or designated in the Regional Offices who
should have at least two years experience in community driven procurement (prior to social
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preparation involving the concerned Regional Office).
Procurement methods (Summarized in Table A)
Community Grants: $90.6 million dollars are allocated for community subprojects under component A.The subprojects will consist of small scale investment. Proposals for subprojects are prepared by allbarangays within the participating municipality and submitted at the inter-barangay forum, held withirithe municipal development council, where the best proposals are selected for fimding. This selection isbased on the respective votes of barangays representatives at the forum. No targets are set by the DSWDfor minimum or maximum amounts of the grant a barangay or groups of barangays could win for theimplementation of sub-project components. The project will finance any item included on the negativelist of the project presented in Section 7.2 of the PAD.
8. Community Procurement: The procedures to be followed are those under Section 3.15 of theProcurement Guidelines. This will govern the procurement of community grants under component A.The detailed procedures are described in the Procurement Manual. Essentially, the procedures aresimplified selective tender procedures for works, shopping for goods and direct contracts. A briefdescription of the procedures follows:
a. Shopping for Goods and Services - Contracts for goods and services available locally valued atless than $7,500, or equivalent, will be awarded by getting quotations solicited from at least threequalified suppliers on the basis of simplified documents following the fonns required in theProcurement Sub-Manual. To enhance efficiency and remove the inherent risk of compromise,request for and submission of quotations will be in writing. Quotations should be opened at thesame time and to the extent possible in the presence of community members. The supplier whooffered the lowest price will be awarded the contract. Contracts of goods and servicesamounting to more than $7,500, or equivalent, or where the aggregate amount provided by aspecific supplier to an individual sub-project will exceed $7,500, the Regional PMO will assistthe communities with procurement.
b. Shopping for Work or Small works Contracts. Contracts for small works amounting to notmore than $25,000, or equivalent, shall be procured by obtaining written quotations from at leastthree qualified local contractors (including NGOs) who would be invited to submit quotations onthe basis of simplified quotation forms as specified in the Procurement Sub-Manual. Theinvitation to submit quotations should be in writing. The invitation shall include a detaileddescription of the works, including basic specifications, start and completion dates, a basicagreement format acceptable to the Bank, and relevant drawings. Quotations should be opened atthe same time and to the extent possible in the presence of community members. As a generalrule, the award shall be made to the contractor who offers the lowest price quotation and isevaluated to have the technical capacity for the required work. The Municipal Facilitator(technical) will review the specifications, quotations, and the contract.
c. Local Biddingfor goods and works contracts. Contracts for goods amounting to more $7,500,or equivalent, and works, amounting to more than $25,000 will be procured following asimplified open tendering procedure. The process involves limited local advertising by postingnotices at strategic places, use of local media such as radio or local newspaper, circulating thenotice or reading them out in community meetings or other public gatherings. Simplifiedstandard bidding documents will be included in the Procurement Sub-Manual. The request forbids spells out the work or goods needed, the criteria for selection and the deadline forsubmission of bids. Bids shall be opened at a public ceremony and evaluated by a committeeappointed by the community. Bids are examined to determine whether they meet the minimum
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specifications mentioned in the bidding documents. Bids that meet the minimum requirementspecified in the bid invitation are retained for further evaluation. The bidder who mneets thelowest bid is selected. The award and the amount-of the contract should be announced to allbidders. Contracting will follow the form specified in the Procurement Manual, and will besigned within five days of the announcement.
d. Direct contracting/Off the shelf purchases. Goods and works that are available only from onesource and do not exceed $2,500, or $5,000, or their equivalents, respectively, may be. procuredby directly choosing the particular supplier or contractor. To the extent possible the contractprice agreed upon should be within local market rates or established estimates using Unit CostDatabase. This mrethod requires approval of the community committee to remove the inherentrisk of compromnise.
e. Community Force Account: Works that are determined to be implemented by the communityusing its own resources such as skilled and unskilled labor, materials, equipment may be allowedprovided it is shown that the community has the resources and capacity to perform the works.Under this method, the community may apply: (a) hiring of laborers following the pakyawprocedure; and/or: (b) direct provision of raw materials or finished product. Detailed proceduresand standard forms will be incorporated in the Procurement Manual.
9. Project Procurement at DSWD Central Office: The following procedures will be implemented atthe DSWD central office
a. Goods estimated to cost $1million consisting of vehicles, computers, spare parts and otherequipment, will be procured as follows:
i. National Competitive Bidding for contracts estimated to cost more than $50,000 equivalent,up to an aggregate of $0.5million;
ii. National Shopping for contracts estimated to cost less than $50,000 equivalent, up to anaggregate of $0.4million;
iii. Direct contracting for goods that should be procured from only source, up to an aggregate of$0.1 million.
b. Consultants Services: $13.4million dollars, or equivalent, of consultancy services will befinanced by the Bank. The amount will be spent to provide capability building and implementationsupport and as part of monitoring and evaluation component. The methods that will be used are:
i. Consultant Qualifications: Training contract amounting to not more than $100,000 orequivalent, up to an aggregate amount not exceeding $5.Omillion, or equivalent, will followSelection Based on Consultant's Qualification Procedures. This will be resorted to whereexperience has shown that there are others more qualified to provide specific training thanthe project team themselves.
ii. Individual Consultants: Individual consultancy contract up to an aggregate amount of $4million, or equivament, shall be selected following Individual Selection procedures inaccordance with clauses 5.1 to 5.3 of the Guidelines. Additional specialist skills - forexample in public works and water supply engineering - may be needed to provide smallinputs during the project implementation.
iii. Least cost: Auditing firms and other services pertaining to safeguards and fiduciaryactivities will be contracted to perform annual audits on a least cost basis. Each contractshall not exceed $200,000, or equivalent, up to an aggregate value of not more than
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$500,000.Procurement methods (Table A)
Table A: Project Costs by Procurement Arrangements(US$ million equivalen )
Expenditure Category ICB NCB Community OTHER TOTALParticipation COST
Community Grants 0 0 132.3 132.3.__ _ _ _ _ _ _ _ (0) (0) (90.6) (90.6)
Consultancy Services and 0 0 12.0 12.0Training (0) (0) (4.0) (4.0)Goods 0.5 0.5 1.0
(0.5) (0.5) (1.0)Operating Cost 33.4 33.4
._________ __________ (2.2) (2.2)Unallocated 3.3 3.3
(1.2) (1.2)Front-end fee (1.0) (1.0)
0.5 132.3 49.2 182.0(0.5) (90.6) (8.9) (100)
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Table Al: Consultant Selection Arrangements (optional)(US$ million equivalent)
Se iljtion Metho-dConsultait.Servlces ft
Expendlture4atjgory , QCBS QL SF5 LCS . , CQs S hOter N.BF. TotalCost.
A. Firms 0.00 0.00 0.00 4.00 5.40 0.00 0.00 9.40(0.00) (0.00) (0.00) (0.50) (2.00) (0.00) (0.00) (2.50)
B. Individuals 0.00 0.00 0.00 0.00 0.00 4.00 0.00 4.00(0.00) (0.00) (0.00) (0.00) (0.00) (1.90) (0.00) (1.90)
Total 0.00 0.00 0.00 4.00 5.40 4.00 0.00 13.40I (0.00) (0.00) (0.00) (0.50) (2.00) (1.90) (0.00) (4.40)
1\ Including contingencies
Note: QCBS = Quality- and Cost-Based SelectionQBS Quality-based SelectionSFB = Selection under a Fixed BudgetLCS = Least-Cost SelectionCQ = Selection Based on Consultants' QualificationsOther = Selection of individual consultants (per Section V of Consultants Guidelines), CommercialPractices, etc.N.B.F. = Not Bank-financedFigures in parenthesis are the amounts to be financed by the Bank Loan.
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Prior review thresholds (Table B)
Table B: Thresholds for Procurement Methods and Prior Review'
Contract Value '. Contracts'Subject tov . -Tlireshiold , LP rocuremerif-_ Prior eview
Expenditure Category . (US$ thousanftds) . Method- (WS$ millions 1. Works
2. Goods more than $50,000 NCB $200,000 or more ($0.2)less than $50,000 Shopping
Direct Contracting3. ServicesConsultant Less than $100,000 CQ Firm-$I 00,000 or
Less than $200,000 Least Cost more($1.0)Individual
Individual-$50,000 ormore($1.0)
4. Community Grants Less than $7,500 Shopping for Goods $50,000 or more ($17.5)Less than 25,000 Shopping for Works$7,500 or more Local bidding for Goods$25,000 or more Local bidding for WorksLess than 2,500 Direct Purchase for GoodsLess than 5,000 Direct Purchase for Works
Total value of contracts subject to prior review: $20 million
Overall Procurement Risk Assessment
High
Frequency of procurement supervision missions proposed: One every 6 months (includes specialprocurement supervision for post-review/audits)
Post Review. With respect to each contract for Community Grants, the procedures set forth in Paragraph4 of Appendix 1 to the Guidelines shall apply in the ratio of 1:5. For Goods and Consultancy servcies tobe procured by DSWD, the ratio of 1:10 will apply.
'Thresholds generally differ by country and project. Consult OD 11.04 "Review of ProcurementDocumentation" and contact the Regional Procurement Adviser for guidance.
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Annex 6(B) Financial Management and Disbursement ArrangementsPHILIPPINES: Kapitbisig Laban sa Kahirapan-Comprehensive and Integrated Delivery of
Social Services (KALAHI-CIDSS) Project
Financial Mana2ement
1. Summary of the Finaicial Management AssessmentThe Financial Management (FM) arrangements for the KALAHI - CIDSS Project meet the Bank'sminimum requirements. The Project's financial management shall be mainstreamed into the FinanceService Division of the Department of Social Welfare & Development (DSWD). Additional FM staffshall be hired at the Central and Regional Offices as there are no excess staff to handle the additionalvolume of transactions of the project. The Finance Director shall have overall FM responsibility for theProject while the Management Service Head of each Region will be responsible for the regional FM ofthe Project. At the Project level, the community Treasurer shall handle the FM of the Project supervisedby a Roving Bookkeeper, from the Regional Office who is yet to be hired. At the Central and regionallevels, the Project will be using the manual version of the New Government Accounting System (NGAS).At the community level, the project will be maintaining simple cash books and counterpart fund registerswith simple report on fund expenditures, project progress and bank balance. The audit of the Project willbe done by the State auditor and will cover a sample of the community sub projects. The project will besubmitting Financial Monitoring Reports (FMRs) consisting of the financial reports, progress reports andprocurement reports. Funds flow directly to the community bank account for its sub project grants fromthe Central Office Special Account and Counterpart Fund bank account in 3 tranches.
The risk that the funds will not be efficiently and effectively used for the attainment of project objectivesis Substantial. The inherent risks of the project consists of: the risk of insufficient funding broughtabout by the tight budget situation of the country and the delayed release of funds to implementingagencies under the present budgetary funds flow system; the risk of improper accounting and reportingdue to delays caused by the transition to NGAS; and the risk of inadequate audit due to the transitionbrought about by the new COA restructured function. The control risks on the project FM are: the risk ofinadequate FM staffmg at the Central, Regional and community project levels; the risk of misuse offunds at the community level where funds flow directly to community bank accounts; the risk ofinadequate funding due to the lack of budget cover especially for the years with significant increases infunding requirements especially 2004 to 2006 and the high percentage of counterpart funds required; therisk of delayed FMR reporting due to delayed consolidation of fmancials for the large number of subprojects; and the risk of inadequate audit of the Project due to the large numbers of sub projects situatedin far poverty stricken areas and inclusion of counterpart fund contribution in the audit.
To address these risks, following is the summary of action plans:
1. Insufficient funding - Prepare a budget strategy showing how the funding requirement of theProject will be met. Counterpart funds should be required to be committed prior to projectapproval. Releases of funds should be tied in with the adequacy of counterpart funds actuallycontributed.to the Project.
2. Inadequate staffing - Ensure that the additional FM staff required for the project are covered inthe budget and are bn board and trained before a sub project is implemented. Initially, TheFinancial Analyst and Sr. Bookkeeper at the Central Office and the Financial Analyst for theRegions to implement within the first 6months shall be on board prior to effectiveness. The restof the staffing should be on board within 3 months after effectiveness for the Central Office andat least 6 months prior to project implementation at the Regional level.
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3. Misuse of funds at community level - Ensure effective involvement of comnunity, municipality,and DSWD representatives during project screening, approval, fund releases and financialreporting. Finalize arrangements with the commercial bank on direct funds flow to communityprojects using its branch network. Adequate FM staffing on all levels. The community treasurershould be properly screened and supervised by the Roving Bookkeeper and the CormmunityFacilitator. Financial Reporting must be timely.
4. Improper Accounting and Reporting - Proper orientation of FM Staff on NGAS and Bank.policies and procedures. Prepare FM Manual for the project. Work towards the computerizationof the fmancials of the Project at an early stage of implementation. Adequate guidance andsupervision of Regional and community FM staff.
5. Inadequate Audit - Ensure adequate audit TOR including sampling agreement and counterpartfund audit. Include audit cost in the project budget. Implement a Value for Money audit to bedone by an auditor independent of the annual financial audit.
The project will be submnitting Financial Management Reports to the bank on a quarterly basis. These arethe Sources and Uses of Funds, the Physical Progress Report and the Procurement Report. The formatswill be prepared by the Project to be agreed with the Bank.
The Department of Finance's (DOF's) initial choice of EBRD Financial Products' tenns for the Project isfor a Fixed Spread Loan (PSL) for US$100million 20 years with an 8 year grace and a commitmentlinked repayment using a level repayment amortization.
The Project shall disburse using the traditional SOE based method and will shift to FMR disbursementwhen it feels confident to do so. A Special Account shall be maintained to as advance funds for theproject to be replenished periodically.
Annual Audited accounts and the corresponding Management Letter shall be submitted. The AuditedAccounts shall consist of the Sources and Uses of Funds, Summary of SOEs and Statement of SpecialAccount.
2. Audit ArrangementsInternal Audit
The Department does not have an Internal Audit function.
External Audit
The State Auditor, the Commission on Audit (COA), shall handle the Audit of the Project. COA is theaudit institution mandated by the Philippine constitution to audit the books of accounts of the govermmentand its instrumentalities. The Audit of COA shall be based on a TOR to be agreed between the COA andthe Project. Such TOR shall be agreed with the Bank on or before negotiation. The Audit shall cover thetotal Project Financials which is composed of both the loan proceeds and the counterpart funds of thenational and local government as well as those of the beneficiary communities both in cash and in kind.The audit of COA shall be in accordance with international auditing standards. The Audit Report shallprovide separate opinions on the consolidated project financial statements, the operation of the specialaccount and the withdrawals from the loan account made under statement of expenditures.
Presently, there are 12 COA Auditors resident in DSWD constituting the team that audits the DSWDCentral Office. 10 of these are accounting graduates with 5 of them being CPAs including their Head.
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The 2 others are graduate of business courses. The Regional Offices have their own auditorws in additionto the Central office auditors. COA auditors of LGUs cover Barangays in their audit on a rotational basis.That is, not all Barangays are audited in a year but by rotation from one group of Barangay to another.COA's audit is mainly transaction based and they have yet to shift to risk based auditing. A peer reviewis being scheduled for COA as part of audit quality review with possible capacity building measures.
Starting July 1, 2002, a restructured COA has been implemented. This organizes the audit function ofCOA into Clusters which are grouped basically into sectors. Projects are better audited in this way sincethe Head Auditor for a project of a certain sector will just be handled by one Sector throughout thePhilippines. This is different from the previous arrangements where the regional and LGU audits reportto a Regional Director who is independent of the Agency auditor maldng coordination of audit effortsboth in planning and execution very difficult. However, this restructuring would have its transitionaldifficulties which could cause delay in the submission of audit reports. The present DSWD COA set upof 12 resident auditors is still being changed to adapt to such set up. A strong FM arrangement for theProject will at least ensure timely fmancials and good audit liaison and follow up.
A Value For Money (VFM) audit shall be conducted twice during the duration of the Project. One at midterm and a year before project completion. The VFM should be conducted by another auditor, separate ofthe regular annual audit, to provide further check and balances in the audit of the Project.
The 2001 DSWD Audit Report of COA expressed a qualified opinion on the Agency's financialstatements with the following exceptions and findings:
* Unrecorded property of the Department, which understated the value of Fixed Assets byabout Php 300 million.
* Differences in the physical inventory and the book balances of the Buildings and Structuresaccount by about Php 59 million
* Inclusion in the books of unserviceable Equipment totaling about Php 18 million.* Unliquidated Cash Advances of Php 79 million.* Php 1 .3million worth of condemned and demolished building has not yet been dropped from
the accounts of the Agency.* Need for a more efficient system of property management* Accumulated audit suspensions (supporting documents not yet provided to the Auditor) of
about Php 66 million and disallowances (not complying laws, rules & regulations) of aboutPhp 9 million with settlements (satisfactory clearance of previous suspensions anddisallowances) of about Php 40 million.
The DSWD management is in the process of instituting measures to rectify the above findings.
3. Disbursement ArrangementsDisbursements Arrangements - The Project shall be disbursed over a period of 8 years and will use thetraditional SOE-based method. The Withdrawal Applications will be supported by SOEs for:
* Barangay Grants;* Goods below $200,000 equivalent per contract;* Consulting firms' contracts below $100,000 equivalent per contract except those awarded on
a single source basis; and* Contracts for individual consultants below $50,000 per contract.
All other Withdrawal Applications shall be supported by full documentation and signed contracts.The disbursements of the loan shall be for the following categories including the counterpart funds to beprovided by the government as follows: (final figures not yet available)
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(Amounts in Total Loan IBRD loan GOP Localmillions) Project eligibility Counterpart Counterpart
Categories %Grants 132.3 100% 90.6 8.9 32.8Incremental 31.3 50% 2.2 26.1 3Operating Cost _Consultancy 12.2 82% Indiv. 4 8.2 -
Services 87% Firm _Goods 1 100% for 1 -
foreign & localex factory;90% for localgoods.
Unallocated 4.2 80% 1.2 3 -
Front end Fee 1 1Total 182 100 46.2 35.8
A Special Account (SA) shall be maintained at the Central PMO. The maximum SA allocation shall beequivalent to an average of 3 months' estimated disbursements plus the 2 months allowance for a delayedfunds flow under the Philippines government procedures. Initial allocation shall be equivalent to 1/3 ofthe maximum allocation until the aggregate disbursements in the SA reaches 20% of the total loanallocation for this component. A request for an increase in the SA will be entertained should theallocation become insufficient for the operations of the Project.
Allocation of loan proceeds (Table C)
Table C: Allocation of Loan Proceeds
.Expenditure Category : Anount-inU,S$milli n Financing PercentageCommunity Subprojects 90.60 72.7%Implementation Support 7.00 25.4%Monitoring & Evaluation 1.40 1.4%
Total Project Costs 99.00Front-end fee 1.00 0.5%
Total 100.00
Use of statements of expenditures (SOEs):
The FMRs required by the Bank as well as those on audit requirements will need to be generated as partof the reports of the Project to be included in the FM Manual. The Financial Plan for the project, Cashforecast and the Daily Cash Position report need to be introduced too. The following FMR shall besubmitted:
a. Statement of Sources and Uses of Funds - Prepared by each of the Implementing Agencies andsubmitted to DBM for consolidation. Shows the Receipts and Expenditures by Project Componentwith columns for the Quarter and for the Cumulative figures. A summary sheet describing the
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accomplishments by component shall be included in the report. This shall be submitted quarterly.
b. Statement of Uses of Funds by Project Activity - Prepared by each of the Implementing Agenciesand submitted to DBM for consolidation. Shows the Quarterly and Cumulative comparison of thePlan, the Actual and the Variance for different project components / activities. The total Actualexpenditures in this Statement under the Quarter and Cumulative column should agree with the totalexpenditures under the Quarter and Cumulative column of the preceding Statement of Sources andUses of Funds. This shall also be submitted quarterly.
c. Physical Progress Report - Prepared by each of the Implementing Agencies and submitted to DBMfor consolidation. Use the SEMP 1 Physical and Financial Status Report with details by component.This shall also be submitted quarterly.
d. Procurement Report - Use the SEMP 1 Annual Procurement Plan with additional column for theforecast and status. This will be submitted on a semi-annual basis.
The FMRs shall be submitted quarterly.
Special account:The KALAHI-CIDSS is a community-driven development initiative of the GOP intended to
reduce poverty in the Philippines. Community projects pose several challenges for responsiblefiduciary management as they are highly dispersed, the groups managing them usually lackaccounting skills and experience, and they involve thousands of very small contracts, etc.Furthermore, many of the forms and procedures developed for large development operations aresimply not appropriate for community programs. How to strike the right balance between thedemonstrated advantages of community projects for poverty reduction and the Bank andgovernment's need to ensure that borrowed money is well spent and accounted for is a majorchallenge.
The KALAFH-CIDSS builds on the formats and procedures developed for the KDP and theVillage Infrastructure Projects of Indonesia, which have been reviewed by OED. The Project wasadapted to the Philippine situation using the Government of the Philippines'(GOP's) CIDSS Projectwhich is similar to KDP. In these projects, forms and procedures were designed to ensure thatwithdrawals and expenditures could be controlled by a variety of persons, thus providing built-inchecks and balances. Because of these measures, financial leaks in the project are limited andrelatively easy to detect by a trained inspector. Supporting evidence for the effectiveness of the fundsprovided is shown by the fact that these projects have produced 20-30% more output than traditionalprojects in the same sectors.
The underlying philosophy of these CCD-type projects is to provide the means by whichpoor villages can plan and manage their own development activities. In the context of theKALAHI-CIDSS, all activities in the project will a partnership among the villages, the LGUs and acore group of community organizers-cum facilitators, either drawn from the DSWD or hiredconsultants. The latter will only be hired to fill strategic gaps in the skill mix of DSWD. As large ashare of the work as possible is done by the villagers. The existing corps of village volunteers willbe reinforced, trained and supported by the project staff as well as by LGU workers and consultants.Where the process interfaces with other government agencies, a project manager from the LGUexercises control; where the activity is carried out by the village, the project technical staff (e.g.engineer) exercise control. Most importantly, the villagers themselves exercise social control of theirown barangay implementation team, based on their knowledge of the project, and supported by strict
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transparency requirements and procedures.
The Financial Process
KALAHI-CIDSS begins with a fixed total amount that is assigned to a participatingmunicipality. This amount is standard (depending on the size of the municipality), but is set so thatamounts are not too big or too small for projects, and is widely publicized so that all stakeholdersknow how much total money is available. Within the municipality, the money supports proposalsinitiated by the barangay assemblies. The allocation of funds to a particular barangay is based oncompleted designs and budgets drawn up together by the barangay management team, assisted byproject TA and approved by the project manager at the municipal level. The project preparation costestimates also specify the amount of cost sharing expected from barangay, either in kind or in cash,as well as the support from the municipality. This support could be in staff time, land donation and/oracquisition, cash, or all of the above. Once determined, the grant amount of funds provided by theproject is never changed, shortfalls should be borne by the barangay and/or the municipality.Communities may actively lobby their Congress People or other stakeholders to augment their potionof cost sharing arrangements. [Footnote: The project will encourage participating barangays to activelyseek the involvement of their Congress men and women as a possible fund source to strengthen their costsharing portions.] How the agreed budget is spent on the physical works may be arnended by all theparties.
Upon ratification of the plans by the project manager and responsible party from thebarangay, the barangay management team requests an initial advance from the Special Accountthrough the regional project management office, which must be utilized within 90 days. They use astandard administrative format that simply withdraws a standard percentage of the allocated funds. Itis signed by the specified barangay representatives and by the project manager at the municipal level.The size of the withdrawal is a standard percentage of the budgeted total. The accompanyingdocumentation for this initial withdrawal submitted to the Bank and to where the barangay has itsbank account should include: proof that the project manager and barangay representative are indeedthe authorized parties, a copy of the grant agreement with the barangay, and signature samples. Thefunds are transferred directly into the account of the village implementation team in a local branch ofa government or commercial bank.
Even though the funds are in their own bank account, the village team cannot withdraw fundswithout countersigning by the project manager at the municipal level. Both the project manager andthe responsible persons from the barangay would have previously submitted their signature samplesto the bank, along with proof that they were the authorized persons. In order to obtain the approvalof the field engineer, the barangay management team has to produce an acceptable Funds UtilizationPlan - a detailed list of anticipated expenditures for the immediate future. The frequency ofwithdrawals depends in part on physical proximity to the bank from the village, but in principle theamount of cash kept in the barangay is as small as practical. Even when access to the banks is easy,remote branches of banks may require some advance notice to provision for a large withdrawal.Every expenditure made by the barangay has to be accounted for in an Expense Report, which isbasically a photocopy of the Cash Book. An adequate receipt is one that has the signature of theperson receiving the funds, a clear description of what the expenditure was for, a clear amnount anddate. All receipts of materials and services in the Expense Report require the attachment of deliveryorders, wherein a designated person notes the items and quantity received, countersigned by theperson delivering them.
Withdrawals from the bank continue to be made until the first tranche's funds are nearlyexhausted. At this point the barangay requests additional funds from the SA, using the same form asabove and countersigned by the project manager. This shows both the funds requested and
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cumulative status. In addition to this request, the project manager requires two other items prior tosubmitting the request to the national PMO through the regional PMO. The first should be asummary of expenses found in the Expense Report, and the second is a status report signed by thelocal bank saying how much funds remain deposited from the previous tranche.
The full expense report includes a summary of expenses and receipts, including the amountof cash on hand in the barangay. This sheet is backed up with the proof of every expenditure andtheir associated delivery notes, all of which are glued to blank sheets of paper and bound. Oneexpense report book is prepared for each withdrawal from the SA, but these books stay in thebarangay. They can be examined by the facilitator, the project manager or his/her designate, anyinspectors, and any person in the barangay who had an interest.
Payment of incentive wages is accomplished through the use of Disbursement Vouchers.These are used for any payment to a villager, whether working for at a daily rate or working on apiece rate based on accomplishment. The form for pay based on attendance lists the workers in aparticular group (usually around 20 workers, men and women), their attendance, their accrued wagesthis period, and their signature (or thumb print if they were illiterate) confirming that they hadreceived the given amount of money. Most payment is on a weekly or bi-weekly basis. Paymentbased on accomplishment also shows the list of workers, the basis for calculating the volumeaccomplished, the division of payments to each individual (decided amongst themselves), and theirindividual signatures. All of these payments and rates are posted on publicly displayed signboards.
The Cash Book
A key to financial control is the requirement that the implementation team maintain anaccurate cash book in a standard format, updated daily. The key features of the cash book are that:
* the informatibn is maintained in a ledger so that corrections and additions were apparent;* it contains a detailed list of all financial transactions, both receipts and expenses;* expenses are described at the same level of detail as the official receipts, with each
expenditure entered into a column corresponding to the sub;* component of the project it corresponded to (including the barangay team's administrative
expenses);* all expenses are coded with a simple expense category and listed with the number written on
the proof of expense;* two kinds of incoming funds are recorded: from the treasury into the bank, and from the bank
into the village treasurer's hands. Balances are calculated using the latter;* merasures, white-out, and obliterating marks are forbidden, so that corrections are visible;* books are closed near the end of each month and books are then signed by four persons: the
barangay treasurer, the responsible party, the field engineer, the barangay captain in his/hercapacity as controller, and two villagers as witnesses;
* a running balance is maintained, with the proviso that the balance cannot be negative. In thisway, the books always show the actual status of expenses and cash, without hidden expensesand loans to complicate the understanding of an inspector.
Barangay-level meetings are held during implementation to review procurement andexpenditures, and all information is posted on public signboards. An accountability meeting is held atproject completion for the barangay management team and the facilitators to account for funds and tohand over the project to the village, represented by the barangay development council and the
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barangay captain.
Inspecting - Ex Post Measures
The municipal and provincial inspection offices should typically inspect a sample ofinvestments during implementation. They should review the physical works. The Commission onAudit should also audit the accounts at the end of the fiscal year. The modalities for such audits willbe worked out during project preparation.
Regular inspections should be carried out by other project consultants. Senior engineers atthe municipal and provincial levels, should be encouraged to check the quality of the physical worksas well as the work practices of the field engineers and consultants. In cases where deficiencies arefound with the works or administration, recommendations and instructions should be communicatedto the municipal project manager with copies to the regional PMO. An independent inspector shouldvisit project sites at random without any accompanying project officials to crosscheck on all of theabove.
Conclusions
Although lacking in sophistication, the financial control system in the community projectsfor the most part is effective in limiting leakages or in detecting leakages when they occur. Thesystem is based on checks and balances in funds withdrawals, detailed bookkeeping and records ofexpenses, and periodic inspections in the field. The formal system is complemented by thecommunities' social control mechanisms designed to ensure transparency. Of course, the capacity ofthe different barangays to manage these systems will vary, but for the most part the differences canbe remedied through hands-on training and follow-up. In areas where the CIDSS has already laid thefoundation, the foundations for such accountability will already be in place and the project will buildon it. This is not to say that malfeasance will not occur, when it occurs, it is relatively easy to detect,and sanctions should be swift and effective to prevent any widespread contagion effects.
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Annex 7: Project Processing SchedulePHILIPPINES: Kapitbisig Laban sa Kahirapan-Comprehensive and Integrated Delivery of
Social Services (KALAHI-CIDSS) Project
Project Schedule Planned ActualTime taken to prepare the project (months) 14 12First Bank mission (identification) 10/10/2001 10/22/2001Appraisal mission departure 06/18/2002 06/25/2002Negotiations 08/05/2002 08/13/2002Planned Date of Effectiveness 12/02/2002 10/31/2002
Prepared by:
Preparation assistance:
Name Bank Unit Borrower Agency Role/ResponsibilityCyprian Fisiy EASES Team LeaderBhuvan Bhatnagar EASES Social ScientistAsger Christensen EASES Safeguards/InstitutionalJoseph Reyes EACPF Financial ManagementAngelina Ibus EACPF . Civil Society & GenderJohn Victor Bottini EACIF OperationsScott Guggenheim EASES Senior AdvisorCecilia Vales EACPF ProcurementYogana Prasta EACIF DisbursementMargaret Png LEGEA Legal CounselFrida Johansen Consultant Poverty Targeting/AnalysisDavid Hill Consultant Economic AnalysisSteven Burgess Consultant Operational ManualsSusan Wong Consultant Monitoring and EvaluationJulie Slok Consultant Document Preparation & GenderAnju Sachdeva EASES Document PreparationSoeroso Consultant Infrastructure Design -
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Annex 8: Documents in the Project File*PHILIPPINES: Kapitbisig Laban sa Kahirapan-Comprehensive and Integrated Delivery of
Social Services (KALAHI-CIDSS) Project
A. Project Implementation Plan
Completed
B. Bank Staff Assessments
C. Other
General Project Implementation ManualSub-Manuals and Supporting Plans:
Sub-Manual 1 : Community OrganizingSub-Manual 2 : Community InfrastructureSub-Manual 3 : Community LivelihoodSub-Manual 4A : KALAHI-CIDSS Project Financial SystemSub-Manual 4B : Community-Based Financial SystemSub-Manual 5 : Monitoring and EvaluationSub-Manual 6 : Training and Capacity-BuildingSub-Manual 7 : Human Resources and Staffing.Sub-Manual 8 : Community Procurement Manual
(All manuals available in electronic version).*Including electronic files
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Annex 9: Statement of Loans and CreditsPHILIPPINES: Kapitbisig Laban sa Kahirapan-Comprehensive and Integrated Delivery of Social
Services (KALAHI-CIDSS) Project30-Jul-2002
Difference between expectedand actual
Onginal Amount in US$ Millions disbursementsProjed ID FY Purpose IBRD IDA GEF Cancel. Undisb. Orig Frm Revd
P069916 2002 PH-2nd Social Eopenditure Management 100.00 0.00 0.00 0.00 100.00 0.00 0.00P069491 2002 PH-LGU URBAN WATER & SAN APL2 30.00 0.00 0.00 0.00 30.73 1.21 0.00P057731 2001 Metro Manila Urban Transport 80.00 0.00 0.00 0.00 57.60 -0.70 0.00P066069 2001 LAND ADMIN & MANAGEMENT 4.79 0.00 0.00 0.00 3.74 0 95 0 00P066509 2001 MMURTRIP-Sicyde Nwk 0.00 0.00 1.30 0.00 1.34 0.12 0 00P058842 2000 MINDANAO RURAL DEV 27 s0 0.00 0.00 0.00 22.49 11.49 0.00P059933 2000 COASTALMARINE 0.00 0.00 1.25 0.00 1.20 1.60 0.00
P039019 2000 PH-Firat Natl Rds IruVrove.. 150.00 0.00 0.00 0.00 123.04 45.04 0.00P065113 2000 PH-SOCIAL EXPENDITURE MGMT 100.00 0.00 0.00 0.00 51.08 51.03 000P039022 1999 PHIL-LGU URBAN WATER & SANITATION PRO 23.30 0.00 0.00 0.00 17.68 17.86 0.00P057598 1999 RURAL FINANCE III 150.00 0.00 0.00 000° 104.98 84.98 0.00
P048588 1999 PHIL-LGU FINANCE AND DEVELOPMENT PROJ 100.00 0.00 0.00 40 00 55.77 24.47 0.00P004595 1998 COMMUNITY BASED RESO 50.00 0.00 0.00 12.00 29.10 28.20 8.76P004576 1998 PH-WATER DISTRICTS DEVELOPMENT PROJE 56.80 0.00 0.00 0.00 32.13 48.43 20.93P004566 1998 PH-EARLY CHILD DEV. 19.00 000 0.00 0.00 12.97 7.97 0.00P051386 1998 SZOPAD SOCtAL FUND 1000 0.00 0.00 0 00 0.22 0.22 0 00P004602 1997 PH-THIRD ELEMENTARY EDUCATION 113.40 0.00 0.00 20.10 65.46 73.00 28.00P037079 1997 AGRARtAN REFORM COMM 50 00 0.00 0.00 0.00 5.08 -3.62 0.00P004613 1997 WATERRESOURCESDEVE 58.00 000 0.00 16.27 16.89 31.16 3.01P040981 1997 PH-SECOND SUBIC BAY 60.00 0.00 0.00 23 85 17.38 41.22 17.38P004611 1995 PHIL-MANILA SEWERAGE II 57.00 0.00 0.00 9.00 41.25 50.25 27.86P004571 1996 TRANS GRID REINFORCE 250,00 0.00 0.00 45.52 76.67 106.51 64.23
Total: 1469.79 0.00 2.55 166.73 866.97 621.46 170.16
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PHILIPPINESSTATEMENT OF IFC's
Held and Disbursed PortfolioApril 30 - 2002
In Millions US Dollars
Committed DisbursedIFC IFC
FY Approval Company Loan Equity Quasi Partic Loan Equity Quasi Partic2001 APWTrade 0.00 1.00 0.00 0.00 0.00 1.00 0.00 0.001996 All Asia Growth 0.00 4.00 0.00 0.00 0.00 4.00 0.00 0.001996 All Asia Manager 0.00 0.04 0.00 0.00 0.00 0.04 0.00 0.001996 AllAsiaVen Mgmt 0.00 0.01 0.00 0.00 0.00 0.01 0.00 0.002000 Asian Hospital 7.00 0.00 0.00 0.00 5.00 0.00 0.00 0.001997 Bataan P/E 29.82 0.00 10.00 116.55 29.82 0.00 10.00 116.551998 Drysdale Food 13.46 0.00 0.00 10.00 11.66 0.00 0.00 8.802001 Filinvest 22.00 0.00 0.00 0.00 16.00 0.00 0.00 0.001979/90 General Milling 0.00 0.65 0.00 0.00 0.00 0.65 0.00 0.001998 H&Q PV III 0.00 5.76 0.00 0.00 0.00 5.76 0.00 0.001989 H&QPV-I 0.00 0.61 0.00 0.00 0.00 0.61 0.00 0.001993 H&QPV-I[ 0.00 1.16 0.00 0.00 0.00 1.16 0.00 0.002000 MFI MEP 0.0o 0.12 0.00 0.00 0.00 0.12 0.00 0.002001 MNTC 46.00 0.00 0.00 0.00 0.00 0.00 0.00 0.001970/72/00 Mariwasa 9.79 0.00 3.00 0.00 9.79 0.00 3.00 0.001993/94 Mindanao Power 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.002001 PIATCO 50.00 0.00 0.00 50.00 0.00 0.00 0.00 0.001993 Pagbilao 30.00 10.00 0.00 3.00 30.00 10.00 0.00 3.001992 Pilipinas Shell 0.00 1.56 0.00 0.00 0.00 1.56 0.00 0.002000 PlantersBank 15.00 0.00 8.71 0.00 15.00 0.00 8.71 0.001998 Prycc Gases 13.00 0.00 0.00 5.00 13.00 0.00 0.00 5.002000 SME.com 0.00 0.21 0.00 0.00 0.00 0.12 0.00 0.002000 STRADCOM 12.00 0.00 8.00 0.00 0.10 0.00 8.00 0.001995 Sual Power 27.19 17.50 0.00 140.05 27.19 17.50 0.00 140.051999 UPPC 20.00 0.00 10.00 0.00 20.00 0.00 10.00 0.001992 Union Cement 0.00 5.63 0.00 0.00 0.00 5.63 0.00 0.001994 Walden Mgmt 0.00 0.05 0.00 0.00 0.00 0.05 0.00 0.001994 Walden Ventures 0.00 1.59 0.00 0.00 0.00 1.59 0.00 0.00
Total Portfolio: 295.26 49.89 39.71 324.60 177.56 49.80 39.71 273.40
Approvals Pending Commitment
FY Approval Company Loan Equity Quasi Partic2001 AEI 1.00 0.00 0.00 0.002002 Eastwood 25.00 0.00 3.00 0.002002 S&R Price 12.50 0.00 0.00 0.002002 APW RI 0.00 0.63 0.00 0.002000 Asian Hospital 0.00 0.00 0.00 5.002000 LTO Project 0.00 0.00 0.00 20.002001 PEDF 1.50 0.00 0.00 0.00
Total Pending Commitment: 40.00 0.63 3.00 25.00
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Annex 10: Country at a GlancePHILIPPINES: Kapitbisig Laban sa Kahirapan-Comprehensive and Integrated Delivery of
Social Services (KALAHI-CIDSS) ProjectEast Lowor-
POVERTY and SOCIAL Asia a middle-Philippines Pacific Income Dovelopmeni diamond
2000Population, mid-year (millions) 75.6 1.853 2,046 Life expectancyGNI per capita (Atlas method, USS) 1.040 1,060 1.140GNI (Atfas method, USS billions) 78.8 1,964 2.327
Average annual growth, 1994.00
Population (I%) 2.1 1.1 1.0Labor fwce (X1 2.6 1.4 1.3 GNI Gross
per primaryMost recent estImate (latest year svailable, 1994-00) capita enroilment
Poverty (% of population below national poverty line) 37Urban populatUon (9 oflt alpopulationj 59 35 42Life expectancy at birth (years) 69 69 69Infant mortality (per 1,000 live births) 31 35 32Child mainutrifon (X of children under 5) 13 11 Access to improved water sourceAccess to an Improved water source ( oafpopulation) 87 75 80Illiteracy (X ofpopulafion age fS+) 5 14 ISGross primaryenrollment (% of school-age population) 117 119 114 - PhIlppines
Male 121 118 Lower-middle-lncome groupFemale 121 114
KEY ECONOMIC RATIOS and LONG-TERM TRENDS
1980 1990 1999 2000EconomIc ratios
GOP (USS billions) 32.5 44.3 76.2 74.7Gross domestic investrnentUGDP 29.1 24.2 1 8. 17. 8Exports of goods and servicesGD1P 23.8 27.5 515 583 TradeGross domestic savlngslGDP 24.2 18.4 19.2 24.0Gross national savingslGDP 19.5 24.7 30.3
Current account belance/GDP -5.9 -5.8 9.0 12.3 Domesc Interest payments/GDP 1.8 3.5 2.7 3.3 savings InvestmentTotal debUGOP 53.6 69.0 68.3 69.4 savingsTotal debt servicelexports 2686 27.0 14.4 13.7Present value of debtVGDP 68.1Present value of debtlexports 111.0
Indebtedness1980.90 199040 1999 2000 200044
(average annual growth)GDP 1.0 3.3 3.4 40 - PhilippinesGDP per capita -1.2 1.0 1.5 2.2 Lower-middle-income grmupExPorts of goods and services 3.5 7.3 3.6 86.
STRUCTURE of the ECONOMY1980 1990 1999 2000 GrowthofinvestrnentandGDP(%)
(16 of GOP)Agriculture 25.1 21.9 17.1 15.9Industry 38.8 34.5 30.6 31.1 lo
Manufacturing 25.7 24.8 21.8 22.8 aServices 36.1 43.6 52.2 52.9 10s
Private consumpton 66.7 71 5 68.0 63.2 .2sGeneralgovemmentconsumpUion 9.1 10.1 13.1 12.8 GOO *GOPIm ports of goods and services 28.5 33.3 51.3 50.2 -2- -
1980-90 1990400 1999 2000 Growth of exports and Imports I%)(averege annual growth)Agriculture 1.0 1.6 6.5 3.3 30Industry -0.9 3.2 0.9 3.9 1S
Manufacturing 0.2 3.0 1.6 5.6Services 2.8 4.0 4.0 4.4 o os os 0? aa
Private consumption 2.2 3.9 0.4 1.4 I: General govemmentOonsumption 0.6 3.4 8.7 -1.1 q3Gross domestic investrnent -2.1 3.1 -2.0 2.3 Exports SbnpartsImports of goods and services 3.4 7.7 -2.8 0.2
Note: 2000 data are preliminary estimates.
The diamonds show four key Indicators In the country (in bold) compared with its income-group average. If data are missing. the diamond willbe incomplete.
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Philippines
PRICES and GOVERNMENT FINANCE
Domestic dces 1980 1990 1999 2000 Inflation (%)
(% change) 1T
Consumer prices .. 142 6.7 4.3 10Implicit GDP deflator 14.3 13.0 8 0 6.7
Govemment finance(% of GOP, includes current grants) oCurrent revenue .. 16.8 25.7 23.4 s5 S6 97 Be 99 50
Current budget balance .. 0 3 2.8 1.9 - GOP deflator -0CPIOverall surplus/deficit .. -3.5 -2.7 -3.6
TRADE
(US$ millions) 1980 1990 1999 2000 Export and Import levels (USS mill.)
Total exports (fob) .. 8,186 34,210 37,295 *ooon.a. ..
n.a. .. .. .. .. 30.Manufactures .. 5,706 31,097 33,394
Total imports (cif) .. 12,206 36.276 36.102 2004.i i d lii iFood .. 656 1.982 1,256 100*Fuel and energy .. 1,842 3.395 4.524Capital goods .. 3.122 14,555 15.011 o
9s as 96 97 Bs 99 00Export price index (1995=100) .. 86Import price index (1995=100) 94.. .. * Eports 8 ImporsTerms of trade (1995=100) .. 92
BALANCE of PAYMENTS
(US$ millions) 1980 1990 1999 2000 Current account balance to GOP (%)
Exports of goods and services 7,236 11,430 39,012 41,473 15 .Imports of goods and services 9,147 13,967 36,767 36,464 i Resource balance -1,911 -2,537 2,245 5.009 10
Net income -439 -744 4,104 3.786 sNet current transfers 447 714 481 430 o -
Current account balance -1.903 -2,567 6,830 9,225 97 Oa as oo
Financing items (net) 2,794 2,474 -2.889 -9.645Changes in net reserves -891 93 -3.941 420 -10
Memo:Reserves including gold (USS mnilions) .. 2,048 14,987 14.910Conversion rate (DEC, localIUS$) 7.5 24.3 39.1 44.2
EXTERNAL DEBT and RESOURCE FLOWS1980 1990 1999 2000
(USS millions) Composition of 2000 debt (USS mill.)Total debt outstanding and disbursed 17,417 30,580 52,022 51,872
IBRD 926 3,943 4,040 3,627 3.627IDA 34 101 206 207 G: 5.948 s 207-
Total debt service 2,183 3.590 6,732 6,832 , 3.281IBRD 106 597 641 572IDA 0 2 4 5
Compositon of net resource flowsOflicial grants 59 362 170 .Z302Official creditors 367 935 -130 -215Private creditors 946 109 3,920 2,138 \ _Foreign direct invesrtment -106 530 573 F. 24.4t5
Portfolio equity 0 0 422 .
World Bank programCommitments 695 1.008 208 255 A - IBRD E -BlateralDisbursements 230 507 164 162 B -IDA 0- Other multlatera F -Private
Principal repayments 33 302 387 352 C -IMF G -Short-tern,
Net flows 197 206 -223 -190Interest payrnents 73 297 2568 225Net transfers 124 -91 481 -415
Development Economics 10N3/01
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Additional Annex 11: Environmental Impact Assessment Guidelines dated July 30, 2002PHILIPPINES: Kapitbisig Laban sa Kahirapan-Comprehensive and Integrated Delivery of
Social Services (KALAHI-CIDSS) Project
1. Presidential Decree No. 1151 (otherwise known as the "Philippine Environmental Policy") is thefirst policy on Environmental Impact Statement (EIS) System in the Philippines. Effective since 1977,section 4 thereof explicitly requires "all agencies and instrumentalities of the national government,including government-owned and controlled corporations, as well as private corporations, firms andentities to prepare an EISfor every action, project or undertaking which significantly affects the qualil)'of the environment.'
2. The Philippine EIS System was formally established in 1978 by virtue of PD No. 1586.Reiterating the policy statement under PD 1151, it declared environmentally critical projects (ECPs) andprojects within environmentally critical areas (ECAs) as projects which require the submission of anEIS. Section 4 thereof provides that "no person, partnership or corporation shall undertake or operateany in part such declared ECP or project within an ECA without first securing an EnvironmentalCompliance Certifcate (ECC). "
3. The major categories of ECPs and ECAs were identified through Presidential Proclamation No.2146, series of 1981 The categories were given technical definitions by EMB's predecessor agency, theNational Environmental Protection Council (NEPC), through NEPC Office Circular No. 3, series of1983.
4. Since then, the EIS system has undergone several refinements to make it a more effectiveplanning, management, and regulatory tool in addressing environmental problems in the country. TheDENR has consistently endeavored to strengthen and tighten the system, by continuously introducingnew features and requirements in response to changing economic realities and the growing environmenialconsciousness of the Philippine populace.
5. The latest of this effort is DENR Administrative Order (DAO) No. 37 series of 1996 or DAO96-37, which expressly supersedes DAO 21 series of 1992. DAO 96-37 is an attempt to furtherstreamline the EIS system and to strengthen the processes for its implementation.
6. DAO 96-37 is elaborated further in the Procedural Manualfor DAO 96-3 7, which is intended toprovide a comprehensive guide for proponents and regulators alike. The Revised Second Edition is thelatest version of the manual.
Scope and Coverage under KALAHI-CIDSS
7. Environmental issues refer primarily to impacts caused by small scale infrastructure construction.The environmental impacts caused by such activities are not expected to be significant. The project hasdesigned a negative list of prohibited investments that includes activities with adverse environmentalimpacts. The project will use an environmental screening procedure that identifies prohibited projects(e.g. community roads into protected areas). Mitigation of negative impacts from sub-projects that arenot on the negative list will be addressed through standard operating procedures, which are built intoproject manuals and training programs. The following matrix provides a reference point for screeningenvironmental impacts in accordance with the environmental clearance issued by DENR-EMB.
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ACTIVITIES CRITERIA REQUIREMENTTraining and institutional none Not covered under the Philippine EIS SystemassistanceLivelihood Activities * Backyard animal farms not exceeding 5,000 heads -Not covered under the Philippine EIS System
of birds or 2 sows with 20 pigs -CNC may be issued upon request of proponent(not applicable under * Sari-sari (or coop) storeKALAHI-CIDSS) * Organic compost/fertilizer production not exceeding
10,000 (50 kg) bags per annum capacity* Cottage industries
Livelihood activities with capacities in excess of the Submission of duly accomplished lEE Checkist/s asthreshold application for ECC
Rehabilitation of roads & with effective expansion of less than 500% Not covered under the Philippine EIS Systembridges - CNC may be issued upon request of proponentRehabilitation of irrigation service area expansion does not exceed thresholdsystemRehab of other supportsystemsConstruction of roads Roads with length in excess of 5 km that will traverse Submission of EIS as application for ECC
an area with critical slope (>50%)Roads with length in excess of 20 km if not traversingan area with cridical slopeRoads with length in excess of 3 km but less than or Submission of IEE as applicationfor ECCequal to 5 km that will traverse an area with criticalslope (>50%10)Roads with length in excess of 15 km but less than orequal to 20 km if not traversing an area with criticalslope
Construction of roads Roads with length less than or equal to 3 km that will Submission of duly accomplished IEE Checklist as(continuation) traverse an.area with critical slope (>50%) application for ECC
Roads with length in excess of 10 km but less than orequal to 15 km if not traversing an area with criticalslope
Roads with length less than or equal to 10 km if not Not covered under the Philippine EIS Systemtraversing an area with critical slope CNC may be issued upon request of proponent
Construction of bridges 2 lanes with length in excess of 200 meters Submission of EIS as applicationfor ECC(Not applicable under 2 lanes with more than 10 spansKALAHI-CIDSS)
2 lanes with length in excess of 100 meters but less Submission of lEE as application for ECCthan or equal to 200 meters2 lanes with more than 6 but less than or equal to 10spans
2 lanes with length in excess of 50 meters but less than Submission of duly accomplished IEE Checklist asor equal to 100 meters applicationfor ECC2 lanes with more than 4 but less than or equal to 6spans2 lanes with length of less than or equal to 50 meters Not covered under the Philippine EIS System
CNC may be issued upon request of proponentConstruction of Irrigation With service area in excess of 1,000 hectares Submission of EIS as application for ECCSystem Reservoir storage capacity in excess of 25 million cubic
metersReservoir area (flooded area) in excess of 100 hectaresWith service area in excess of 700 hectares but less Submission of lEE as applicationfor ECCthan or equal to 1,000Reservoir area (flooded area) in excess of 50 hectaresbut less than or equal to 100 hectaresWith service area in excess of 350 hectares but less Submission of duly accomplished lEE Checklist asthan or equal to 700 applicationfor ECCReservoir area (flooded area) in excess of 25 hectaresbut less than or equal to 50 hectaresWith service area of less than or equal to 300 Not covered under the Philippine EIS System
I CNC may be issued upon request of proponentThese criteria are indicative and will be complemented by an environmental screening procedure, which will take into accountinvestrnents in water supply, buildings, and other structures not included on this list.
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Annex 1lbPhilippines: KALAHI-CIDSS Project
Indigenous Peoples Strategy dated July 30, 2002
1. This strategy on indigenous peoples (IPs) aims to ensure compliance with the PhilippineIndigenous People's Rights Act and the World Bank's 0D4.20 on Indigenous Peoples.
The project
2. The Govemment of the Philippines (GoP) is undertaking a country-wide anti-poverty programbased on its overarching KALAHI framework. The central component of this program is theKALAHI-CIDSS project, a community-driven initiative, which aims to empower communities throughenhanced participation in barangay governance and involvement in the design, implementation, andmanagement of development activities that reduce poverty.
3. Based on a facilitated participatory planning process, communities will submit sub-projectproposals which will be reviewed for funding by an Inter-Barangay Forum with representation from allparticipating Barangays. Proposals for sub-projects will be based on an open menu supplemented by anegative list of prohibited activities with adverse environmental and social impacts. A community willbe able to choose any activity it agrees is important for its development, be it economic infrastructuresuch as roads, bridges or irrigation facilities, social service infrastructure such as a school or clinic, watersupply and sanitation facilities, environmental conservation measures such as watershed management, orcapacity building. Communities will be also be able to coordinate among themselves on activities thatwould benefit from joint planning.
Indigenous Peoples in the Philippines
4. The indigenous population of the Philippines comprises a wide range of different groups thatvary in terms of settlement patterns, economic subsistence, social structure, stratification andsociopolitical organization, as well as articulation with the wider society. These groups are found withinthree major geographical areas, namely Luzon, the Visayas, and Mindanao. No exact figures existregarding the aggregate number of the indigenous population or even the number of distinct indigenousgroups in the country. Jocano (1998, p.15-16) lists 54 different named groups that are described in theanthropological literature and comprise populations ranging from a few hundred to several thousand. The1974 ethnic map of the Philippines, entitled The Filipino People, identified 106 groups includingsubgroups within the same culture areas. In 1979, the PANAMIN (Presidential Assistance for NationalMinorities) listed 76 different groups, with an estimated total population of around 4.5 mnillion. Othersources provide numbers ranging from 1.5 million to 6.3 million (Jocano, 1998, p.22).
Policy Context
5. The World Bank's 0D4.20 on Indigenous Peoples provides policy guidance to ensure thatindigenous groups (a) benefit from development projects, and (b) that adverse impacts are either avoided,or if unavoidable, are mitigated. The policy further requires special action in situations where Bankinvestments affect indigenous peoples, whose social and economic status restrict their capacity to asserttheir interests and rights in land and other productive resources.
6. Because of the varied and changing contexts in which indigenous peoples are found, no singledefinition can capture their diversity. In particular geographical areas, indigenous peoples or indigenousethnic communities can be identified by the presence in varying degrees of the following characteristics:
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* a close attachment to their ancestral territories and the natural resources in these areas;* self-identification and identification by others as members of a distinct cultural group;* an indigenous language, often different from the national language;* presence of customary social and political institutions; and,* primarily subsistence-oriented production.
7. In 1997, the Philippine Congress passed Republic Act (RA) 8371 entitled Indigenous People'sRights Act, which uses the term 'indigenous peoples' as the collective label for non-Christian andnon-Muslim ethnic groups in the Philippines. Although RA 8371 provides a good basis for identifyingindigenous peoples, the proposed project will use the definition provided in OD 4.20 to include "socialgroups with a distinct social and cultural identity that makes them vulnerable to being disadvantaged inthe development process" and as identified by the characteristics described in the preceding paragraph.This definition would not apply to non-indigenous ethnic minorities such as Chinese, Indian, andAmerican.
The strategy
8. This strategy aims at achieving the twin policy objectives of (a) ensuring the informedparticipation of indigenous peoples in the activities of the KALAHI-CIDSS so that they are in a positionto receive culturally compatible social and economic benefits, and (b) ensuring that indigenous peoplesare not adversely affected during the development process.
9. The concerns of indigenous peoples are primarily met through the design of the project itself.The project design elements that define the strategy to address indigenous peoples concerns are:
1. The criteria used for targeting of municipalities for project interventions within the 40 poorestprovinces does in addition to poverty criteria include the presence of marginal and vulnerablegroups such as indigenous communities.
2. The key element of the project approach is facilitated participatory planning and management ofdevelopment activities at the commnunity (barangay) level, through which different stakeholdersincluding indigenous groups will be enabled to influence the choice of sub-project proposals.
3. The open menu for sub-project identification provides scope for indigenous groups to developproposals that address their specific concerns (e.g. titling of ancestral domain rights under theIndigenous People's Rights Act).
4. The Manual on Community Organizing includes a format for sub-project proposals, whichrequire that the community profile and needs assessment will provide baseline data onindigenous groups in a particular barangay.
5. The training of community facilitators will include orientation on the project's strategy toaddress indigenous peoples issues.
6. The project monitoring arrangements will track whether indigenous groups are included inconsultations on sub-project planning, and whether they perceive that selected sub-projectsaddress their concerns and needs.
7. The project design includes a grievance redress mechanism that provides an indigenous minoritywithin a particular barangay or municipality with an avenue for complaints if bypassed ormarginalized in the sub-project planning and selection process.
8. The independent monitoring by civil society (NGOs and the press) provides another avenue foridentification of cases where indigenous minorities have been bypassed or marginalized in thesub-project planning and selection process.
9. The institutional mapping and the assessment of community based poverty reduction programsfunded under the ASEM Grant will provide inputs regarding the institutional contexts,
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constraints, and lessons learned with regard to the mobilization and involvement of differentindigenous groups in community development activities.
Monitoring
10. Project monitoring includes community self-assessments of sub-project preparation andimplementation, which provides an avenue for indigenous groups to communicate whether they havebeen involved in consultation on the project proposal, and whether the final sub-project addresses theirneeds. In addition, the'National Commission on Indigenous Peoples (NCIP) established under theIndigenous People's Rights Act will be involved in monitoring of project implementation in relation toindigenous peoples, as mandated under Chapter m, Section 44(h) of the Act. Such monitoring will becarried out by the NCIP Commissioners at the regional level, and through NCLP's Provincial offices andCommunity Service Centers where these exist. The NICP will report quarterly to the National SteeringCommittee, the National Project Management Office, and the Regional Project Management Offices.
Grievance redress
11. Complaints from indigenous groups if bypassed or marginalized in the sub-project planning andselection process will be registered by the NICP and included in their quarterly reporting. During theinitial community orientation and mobilization, the community facilitators will inform indigenous groupsabout this avenue for submission of complaints. The NICP will likewise disseminate this infornationthrough its staff to indigenous groups, local NGOs and the press.
12. The project will maintain a grievance register, which will provide infornation on the number andtype of grievances and complaints from indigenous groups at the municipal and provincial levels, and onthe way these complaints have been addressed. This information will be included in the in the quarterlyproject reports to the National Steering Committee.
Notes:1. F. Landa Jocano: Filipino Indigenous Ethnic Communities: Patterns, Variations, and Typologies,Punlad Research House, Metro Manila, 1998.2. R. Fox & E. Flory: The Filipino People, National Museum, Manila, 1974.3. The seven NICP 'Commissioners have been appointed for each of the following ethnographicareas: (i) Region I and the Cordilleras; (ii) Region II; (iii) the rest of Luzon; (iv) island groups includingMindoro, Palawan, Romblon, Panay and the rest of the Visayas; (v) Northern and Western Mindanao,(vi) Southern and Eastern Mindanao; and (vii) Central Mindanao.
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Annex ticPhilippines: KALAHI-CIDSS Project
Resettlement Policy Framework dated July 30, 2002
This resettlement policy framework and implementation guidelines will govern the conduct of landacquisition and involuntary resettlement of Displaced Persons during the design and implementation ofsub-project components under the KALAHI-C[DSS. The framework also provides guidelines onaccepting and recording land donations during the implementation of the project.
To ensure consistency with existing laws and policy frameworks, this Framework is based ona. Executive Order 1035, Procedures and Guidelines for the Expeditious Acquisition by the
Government of Private Real Properties or Rights thereon for Infrastructure and OtherGovernment Development Projects. June 1985;
b. Executive Order 132, Procedures to be followed in the Acquisition of Private Property forPublic Use and Creating Appraisal Committee; and
c. World Bank Operational Policy 4.12, Involuntary Resettlement. October 2001.
In case of inconsistency in the different laws and policies, The World Bank's OP4.12 will provideguidance on the appropriate mitigation for displaced persons.
The Project
The KALAHI-CIDSS Project is the flagship program of the Philippine administration to reduce povertyin the Philippines. The overall objective of this Project is to empower local communities throughenhanced participation in barangay governance and involvement in the design, implementation, andmanagement of development activities that reduce poverty.
The principal development activity under this Project is community/barangay level sub-projects, whichmay comprise small scale infrastructure works. Sub-projects will be financed through block grants tolocal barangays from the Implementing Agency, the Department of Social Welfare and Development(DSWD). These sub-projects will serve two purposes: (a) provide needed physical infrastructure in ruralareas and thereby benefit the local community, and (b) serve as "pilot projects" for the barangaygoverning body in order to develop better planning, implementation, operation, and managementtechniques, which will result in a more self sufficient organization. It is envisioned that this exercise in"learning by doing" will eventually result in promoting better barangay efficiency for other governanceactivities.
Given the nature of this project, which involves community based planning of small-scale infrastructuresub-projects, the magnitude of adverse impacts is expected to be minimal and will only be known oncethe specific sub-projects are identified and designed. Sub-projects with infrastructure components thatmay require land can consist of roads, bridges, or irrigation facilities, of social service infrastructure suchas a school or clinic, water supply and sanitation facilities, or of environmental conservation measuressuch as watershed management involving check-dams. Careful attention will be paid during sub-projectidentification to minimize adverse impacts. No resettlement is anticipated.
The present Resettlement Policy Framework has been prepared to guide the preparation andimplementation of subprojects with components requiring land. It lays down the principles andobjectives, eligibility criteria of entitlements, legal and institutional framework, modes of compensation,people participation features, and grievance procedures that will guide the implementation ofcompensation for persons affected by land acquisition. Land for sub-projects will be furnished either as
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voluntary donations, as government land free of claims (e.g. from squatters or encroachers), or acquiredafter payment of compensation at replacement value. To ensure that sub-project implementation does notdeprive individuals of land and other assets in the guise of voluntary donations and in the name of the"common good", procedures are established to (i) verify that voluntary donations are indeed voluntary,(ii) provide compensation at replacement value to individuals, who are not prepared to donate land for aparticular sub-project, and (iii) provide an avenue for grievance redress.
Definition of Terms
"Displaced Person" means a person who, on account of the execution of the Project, has experienced orwould experience direct economic and social impacts caused by:1. the involuntary taking of land, resulting in (i) relocation or loss of shelter; (ii) lost of assets or access
to assets; or (iii) loss of income sources or means of livelihood, whether or not such person mustmove to another location; or
2. the involuntary restriction of access to legally designated parks and protected areas, resulting inadverse impacts on the livelihood of such person.
"Displaced Persons" means,' collectively, all such displaced persons.
Land Acquisition refers to the process whereby a person or entity is compelled by a public agency toalienate all or part of the land a person/entity owns or possesses, to the ownership and possession of thatagency for public purpose in return for a consideration.
Baseline surveys refer to the census and inventory of losses for each displaced person, which will berecorded in the sub-project proposal submitted by a community to the Inter-Barangay Forum.
Replacement Cost refers to the value determined to be fair compensation for real property based on itsproductive potential, replacement cost of houses and structures (as reckoned on current fair market priceof building materials and labor without depreciation or deductions for salvaged building materials), andthe market value of residential land, crops, trees and other commodities.
Resettlement refers to all measures taken to mitigate any and all adverse impacts of the project ondisplaced person's property and/or livelihood including compensation, relocation and rehabilitation(where applicable).
Relocation refers to the physical relocation of a displaced person from his/her pre-project place ofresidence.
Rehabilitation refers to compensatory measures provided under these guidelines other than payment ofthe replacement costs of acquired or affected assets.
Compensation refers to payment in cash or in kind of the replacement costs of the acquired or affectedassets.
Principles and Objectives
The following principles and objectives will govern preparation and implementation of sub-projects:* Acquisition of land and other assets should be avoided, where feasible, and minimized as much
as possible.* All displaced persons, whose land or business are determined to be affected by land acquisition
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at the time of the baseline survey for a sub-project proposal, will be entitled to be provided withcompensation sufficient to assist them to improve or at least maintain their pre-Project livingstandards, income earning capacity and production levels.
* The baseline-survey recorded in the sub-project proposal will constitute the cut-off date forfuture claims for compensation.
* Lack of legal rights to the assets lost will not bar the displaced person from entitlement to suchcompensation or rehabilitation measures.
* If replacement land is provided for agricultural, residential or business use, it will have securedtenure status and be without any additional cost, taxes, and surcharges to the displaced persons atthe time of transfer.
* Planning and implementation for acquisition of land and provision of compensation will becarried out in consultation with the displaced persons during the sub-project planning by theconinunity (barangay) to ensure minimal disturbance and transparency in transactions betweenthe project implementers and displaced persons.
* Entitlements will be provided to displaced persons no later than one month prior to expectedstart-up of works at a particular sub-project site. Construction work will not be initiated untildisplaced persons are compensated or adequately relocated.
* Commitments regarding financial and physical resources for compensation will be made by themunicipality at the Inter-Barangay Forum when a sub-project involving land acquisition isselected.
* Supervision, monitoring and evaluation of the implementation of land acquisition andcompensation plans will be carried out by the Regional Project Management Offices.
Entitlements
The MOA with participating Local Government Units (municipalities) will obligate these to ensurecompliance with the implementation of the Policy Framework. The communities, with the assistance ofthe facilitators and other technical staff, will assess the land needs of each subproject proposed andensure that appropriate measures are in place to obtain the land, either through donation, makinggovernment land available, or through acquisition with compensation. Where the landowner does notwant to either sell or donate his/her land, only the LGU has the mandate to initiate expropriationmeasures under eminent domain principles. Where such procedures may be required, the communityproposing a particular sub-project may reconsider its viability for funding under this scheme. In practice,project preparation team at the community level and the facilitators will coordinate with the municipalityin determining the appropriate compensation for displaced persons in accordance with the followingcompensation scheme:
A. Productive land and crops
displaced persons losing more than 20% or all of their agricultural land, or in cases when the remainingassets are not economically viable, are entitled to:
* Full compensation at replacement cost of the entire asset either through provision of equivalentland of equal productive capacity (if available and so desired by the displaced person) or throughcash compensation.
* Displaced persons who will lose their income will be provided opportunities for alternativelivelihood, through skills and entrepreneurship training, job matching or business developmentassistance.
* Appropriate transfer and subsistence allowances will be given during the transition phase.
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Displaced persons losing less than 20% of their productive assets, where the remaining assets remainviable for continued use, are entitled to cash compensation at replacement cost for the affected asset.
Replacement of damaged or lost crops will be based on full market value for one year's harvest and willbe paid in cash.
A displaced person whose land is temporarily taken will be compensated at full replacement cost for theirnet loss of income and/or damaged assets.
Verification of land titles and tax payments shall be undertaken before land replacement or cashcompensation.
B. Residential Land and Structures* Full compensation at replacement cost of the entire asset either through provision of equivalent
land of equal productive capacity (if available and so desired by the displaced person) or throughcash compensation, and
* Cash compensation reflecting full replacement cost of the structures, without depreciation;* If the displaced person so wishes and the remaining land is still a viable residential lot, cash
compensation, at full replacement cost (market value), will be provided to the displaced person;* If after acquisition, the residential land and/or structure is insufficient to rebuild the residential
structure lost, then at the request of the displaced person the entire residential land and structurewill be acquired at full replacement cost, without depreciation;
* Tenants, who have leased a house for residential purposes will be provided with a cash grant ofthree months rental fee at the prevailing market rate in the area, and will be assisted inidentifying alternative accommodation.
C. Loss of a business* The provision of alternative business site of equal size and accessibility to customers,
satisfactory to the displaced person;* Cash compensation for the lost business structure reflecting full replacement cost without
depreciation;* Cash compensation for the loss of income and opportunity during the transition period.
Voluntary Land Donations
Land that will be required for small-scale civil works will most likely consist of government lands free ofclaims or encroachments, or of voluntary donations from community members.
Arrangements have to be made to ensure that the donation is indeed voluntary, that the donor is thelegitimate owner of such lands, and that the donor is fully informed of the nature of the sub-project andthe implications of donating the property. Should the donor decide to donate the property on aconditional basis, the terms and conditions for the temporary use (usufruct rights) of the property must beclearly stated in a Conditional Deed of Donation document.
Where land is donated, the following safeguards need to be applied, based on their relevance to the casesbeing encountered by sub-project proponents:
* An assessment that the affected person does not suffer a substantial loss affecting his/hereconomic viability as a result of the donation;
* Certification from the LGUs and the proponents, that the land is free of claims or encroachments
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from any third party;* Deed of Donation to the Community Association or the LGU concemed, as witnessed by the
LGU barangay and municipal govemment officials, notarized by a registered Lawyer, withcopies of donation papers furnished the Office of the Municipal Assessor and the ProvincialRegister of Deeds;
* Declaration of Ownership with Waiver of Claims for Affected Assets;* Joint Affidavits of Two Adjoining Landowners or Barangay Officials (for unregistered lands);* Waiver of Rights/Quit Claim (for plants, trees, houses, structures claimed by tenants, informal
settlers)* Waiver of Rights/Quit Claim (With Sharing of Claim)
Implementation Arrangements
Preparation and implementation of the provisions in the Resettlement Policy Framework will form part ofthe community level sub-project cycle as follows (see Sub-Manuals 1 and 2 on Community Organizingand Community Infrastructure):
1. A community wide Barangay Assembly will nominate a Sub-Project Preparation Team tomanage preparation of the community project proposal based on priorities agreed by theassembly.
2. The initial 'rough' project proposal developed by the Sub-Project Preparation Team forsubmission to the Inter-Barangay Forum will contain information on (i) how the land required foran infrastructure sub-project would be made available (i.e government land, donations,acquisition), (ii) how many land owners would be affected as donors or displaced persons, and(iii) a compensation cost estimate in case land and assets are to be acquired.
3. During preparation of the 'rough' proposal, consultations will be held with community memberson the implications of donating property to the project, and on the alternative of acquisition andcompensation at replacement value.
4. The 'rough' sub-project proposal would be endorsed by the Barangay Assembly comprising theentire community before submission to the Inter-Barangay Forum.
5. Prioritization of 'rough' sub-project proposals for funding by Inter-Barangay Forum will requirecommitments from the municipality regarding funding of compensation for land andrehabilitation measures, if the sub-project involves land acquisition. Without this commitmentfrom the municipality, the sub-project cannot be considered for funding under theKALAHI-CIDSS.
6. The preparation of detailed sub-project proposals that require land for infrastructure works willinclude detailed infornnation on how the land will be made available. If land is donated, theamounts of land from different donors, their names, declaration of willingness to make thedonation, and a map showing the parcels of land to be donated will be part of the sub-projectproposal. If land is acquired, a census and inventory of losses with assessments of compensationcosts will be part of the sub-project proposal.
7. A the meeting of the Inter-Barangay Forum where fund allocations for sub-project proposals arefinalized, the commitment of the municipality regarding funding of compensation for land andrehabilitation measures will be confirmed, and recorded in a MOA.
8. A Land Acquisition & Compensation Plan including the census and inventory of losses, atime-bound implementation plan, a budget, and the MOA will be submitted to the RegionalProject Management Office.
9. Documentation of voluntary land donations as described above must be completed before civilworks under the sub-project are initiated. Likewise, compensation payments for assets acquiredmust be completed before civil works under the sub-project are initiated.
10. The progress of implementation of the Land Acquisition & Compensation Plan will form part of
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the reporting by the barangay and municipality to the Regional and National Project ManagementOffices.
Training on the procedures to be followed regarding implementation of the provisions in theResettlement Policy Framework will be provided to community and area facilitators, municipal staff, andstaff at the Regional and National Project Management Offices.
Inventories of assets donated or acquired
An inventory of land donations and/or assets acquired will constitute the baseline for planning, progressreporting, and monitoring in sub-projects that require land for civil works. The inventory will include thefollowing information for each owner or household who donates land or is affected by land acquisition:
Name of Area & type Area of Quantity & Whether Date of Compensation Date ofowner of house plot type of trees donated or donation or value of compensation
agricultural and crops acquired acquisition acquired paymentland assets
Supervision, Monitoring and Evaluation
Implementation of the 'inventories and resettlement plans will be regularly supervised and monitored bythe respective Area and Community Facilitators in coordination with the respective municipal andBarangay-based Comnittees. The findings will be recorded in the monthly reports to be submitted to theRegional and National Project Management Offices.
Intemal monitoring and supervision by the Area and Community Facilitators will constitute:* In sub-projects where land is provided through donation: verification that the donation does not
affect the economic viability of the person making the donation, the he/she own the assetdonated, and that a deed of donation has been completed.
* In sub-projects where land is acquired: verification that the baseline data with an inventory andvaluation of assets acquired has been completed, that compensation and other entitlements havebeen committed and provided, and that any relocation has been carried out in accordance withthe provisions of the Land Acquisition & Comnpensation Plan for the sub-project in question.
* Verification and follow-up action to ensure that funds for implementing the inventory andresettlement plan are provided by the Municipality and/or Province to the Barangay-basedCommittee in a timely manner and in amounts sufficient for their purposes, and that such fundsare used by the Barangay-based Committee in accordance with the provisions of the respectiveinventory and resettlement plan.
* Record all grievances and their resolution and ensure that complaints are dealt with in a timelymanner.
The PMO will hire an extemal agency or agencies, as and when needed, to periodically carry outindependent monitoring and evaluation of the implementation of the inventories and resettlement actionplans. The external agencies can be from academic or research institutions, non-governmentalorganizations (NGO) or independent consulting firms, all with qualified and experienced staff and termsof reference acceptable to the World Bank.
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In addition to verifying the information submitted in the internal supervision and monitoring reports ofthe Municipal and Community Facilitators, the external monitoring agency will visit a sample of 20% ofdisplaced person households in each Province prior to approval of civil works and/or other occasions asdeemed necessary by the PMO. The external monitor will:
* Determine whether the procedures for displaced persons orientation, consultation meetings,participation, relocation and delivery of compensation and other entitlements have been done inaccordance with this Framework and the respective inventories and resettlement action plans;
* Assess if the objectives of compensation at replacement value, and restoration of living standardsand income levels of displaced persons have been met;
* Suggest modifications to the PMO on the implementation procedures of the inventories andresettlement plans, as the case may be, to achieve the principles and objectives of this document.
Costs and Budget
Each inventory and resettlement plan will include detailed cost of relocation, compensation and otherentitlements, with a breakdown of replacement or rehabilitation costs for agricultural land, residentialland, business land, houses, business and other assets, public facilities and services, and utilities. Thecost estimates will make adequate provisions for continuous consultation and information dissemination,surveys and project supervision under contingencies.
Complaints and Grievances
Complaints and grievances relating to any aspect of the resettlement entitlements and/or activities,including the determined area and price of the lost assets, will be managed in accordance with the overallframework for conflict management. [See manual on conflict management]
Amendments to the Resettlement Policy Framework
Where needed, this policy framework may be amended with prior consent from the World Bank. Suchamendments will not depart from the policy objective avoiding or minimizing adverse impacts, andwhere such impacts exist, of their full and timely mitigation.
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