world bank documentdocuments.worldbank.org/curated/en/...may 12, 2017 · dot department of tourism...
TRANSCRIPT
Document of
The World Bank
Report No. ICR00003450
IMPLEMENTATION COMPLETION AND RESULTS REPORT
(IBRD-80500, IBRD-82380, IBRD-83280, IBRD-84350)
ON A
LOAN
IN THE AMOUNT OF
US$ 250.00 MILLION, US$ 800.00 MILLION, AND US$ 300.00 MILLION
TO THE
REPUBLIC OF THE PHILIPPINES
FOR THE
PHILIPPINES DEVELOPMENT POLICY LOAN TO FOSTER MORE
INCLUSIVE GROWTH (PROGRAMMATIC SERIES I TO III)
May 12, 2017
Macroeconomics and Fiscal Management
East Asia and Pacific Region
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
CURRENCY EQUIVALENTS
(Exchange Rate Effective May 12, 2017)
Currency Unit = PhP
PhP 1.00 = US$ 0.02
US$ 1.00 = PhP 49.81
FISCAL YEAR January to December
ACRONYMS AND ABBREVIATIONS
CAS Country Assistance Strategy MILF Moro Islamic Liberation Front
COA Commission on Audit MTEF Medium-Term Expenditure
Framework
DA Department of Agriculture NDRRF National Disaster Risk Reduction
Framework
DAP Disbursement Acceleration Program NEDA National Economic and
Development Authority
DBCC Development Budget and Coordination
Committee
NHIP National Health Insurance
Program
DepEd Department of Education NHTS-PR National Household Targeting
System for Poverty Reduction
DOF Department of Finance PAG-IBIG Home Development Mutual Fund
DOH Department of Health PBR Philippine Business Registry
DOJ Department of Justice PCB Primary Care Benefit
DOT Department of Tourism PCN Project Concept Note
DPL Development Policy Loan PD Project Document
DPWH Department of Public Works and
Highways
PDAF Priority Development Assistance
Fund
DTI Department of Trade and Industry PDO Program Development Objectives
ESC Education Service Contracting PDP Philippine Development Plan
FIES Family Income and Expenditure
Survey
PEFA Public Expenditure and Financial
Accountability
FMR Farm to Market Roads PFM Public Financial Management
FRS Fiscal Risk Statement Phil
Health
Philippine Health Insurance
Corporation
GAA General Appropriations Act PHP Philippine Peso
GASTPE Government Assistance to Students
and Teachers in Private Education
PPP Public-Private Partnership
GCG Governance Commission for GOCCs SAOB Statements of Allotments,
Obligations, and Balances
GIFMIS Government Integrated Financial
Information Management System
SC Supreme Court
GOCC Government-Owned and Controlled
Corporations
SEC Securities and Exchange
Commission
IAC Inter-Agency Committee SSS Social Security System
ICR Implementation Completion and
Results Report
SY School Year
IFC International Finance Corporation TES Tax Expenditure Statement
ISR Implementation Status and Results
Report
TRIP Tourism Road Infrastructure
Program
LEDAC Legislative-Executive Development
Advisory Council
TTL Task Team Leader
LGU Local Government Unit UACS Unified Account Code Structure
LTS Large Taxpayer Service UHC Universal Health Care
Regional Vice President: Victoria Kwakwa (EAPVP)
Country Director: Mara Warwick (EACPF)
Senior Global Practice Director: Carlos Felipe Jaramillo (GMFDR)
Practice Managers: Ndiame Diop (GMFDR)
Project Team Leader: Kai Kaiser (GGODR)
ICR Team Leader: Saeeda Sabah Rashid (GGODR)
ICR Main Author: David Stephen Knight (GMFDR)
Acknowledgements
This Implementation Completion and Results (ICR) Report was prepared by a team led by Saeeda Sabah
Rashid (Senior Public Sector Specialist, GGODR) and the following:
GMFDR: David Knight (Senior Economist and ICR Main Author), Karl Kendrick Chua (former Senior
Economist), Kevin C. Chua (Economist)
GGODR: Kai Kaiser (Senior Economist), Bonnie Ann Sirois (Senior Financial Management Specialist),
Tomas Sta. Maria (Financial Management Specialist), Noel Sta. Ines (Senior Procurement Specialist)
GFADR: Carolina Figueroa-Geron (Lead Rural Development Specialist)
GTIDR: Victor Dato (Senior Infrastructure Specialist)
GTCDR: Hans Shrader (Senior Operations Officer), Roberto Galang (Operations Officer)
GHNDR: Caryn Bredenkamp (Senior Health Specialist), Roberto Rosadia (former Health Specialist)
GEDDR: Lynnette Perez (former Senior Education Specialist)
EACPF: Aleksandra Posarac (Program Leader - HD), Hanif Anilmohamed Rahemtulla (Senior Operations
Officer), Maria Consuelo Sy and Reinaluz Ona (Program Assistants)
The team worked under the guidance of Rogier van den Brink and Birgit Hansl (Program Leaders - EFI),
Mathew Verghis and Ndiame Diop (Practice Managers – MFM GP), Robert R. Taliercio (Practice Manager
– GOV GP), and Mara K. Warwick (Country Director).
5
PHILIPPINES
Philippines Development Policy Loan to Foster More
Inclusive Growth (Programmatic Series I to III)
CONTENTS
A. Basic Information ................................................................................................................................... 6 B. Key Dates ............................................................................................................................................ 7
C. Ratings Summary ............................................................................................................................... 7
D. Sector and Theme Codes ................................................................................................................... 8
E. Bank Staff .......................................................................................................................................... 10
F. Results Framework Analysis ........................................................................................................... 11
G. Ratings of Program Performance in ISRs ..................................................................................... 18
H. Restructuring (if any) ...................................................................................................................... 18
1. Program context, program development objectives (PDO), and design .......................................... 19 1.1 Context at appraisal ........................................................................................................................... 19
1.2 Original PDO and key indicators ...................................................................................................... 24
1.3 Revised PDO and key indicators, and reasons/justifications ............................................................ 26
1.4 Original policy areas supported by the program ............................................................................... 32
1.5 Revised policy areas .......................................................................................................................... 35
1.6 Other significant changes .................................................................................................................. 36
2. Key factors affecting implementation and outcomes ......................................................................... 36 2.1 Program performance ........................................................................................................................ 36
2.2 Major factors affecting implementation ............................................................................................ 45
2.3 Monitoring and evaluation design, implementation, and utilization ................................................. 48
2.4 Expected next phase/follow-up operation ......................................................................................... 49
3. Assessment of outcomes ........................................................................................................................ 50 3.1 Relevance of objectives, design, and implementation ...................................................................... 50
3.2 Achievement of PDOs ...................................................................................................................... 51
3.3 Justification of overall outcome rating .............................................................................................. 60
3.4 Overarching themes, other outcomes and impacts ............................................................................ 60
4. Assessment of risk to development outcomes ..................................................................................... 62 5. Assessment of Bank and Borrower performance ............................................................................... 64
5.1 Bank performance ............................................................................................................................. 64
5.2 Borrower performance ...................................................................................................................... 65
6. Lessons learned ..................................................................................................................................... 66 Annex 1: Comments from the Government ........................................................................................... 69 Map ............................................................................................................................................................ 70
6
A. Basic Information
Program 1
Country Philippines Program Name
Philippines Development
Policy Loan to Foster
More Inclusive Growth
Program ID P118931 L/C/TF Number(s) IBRD-80500
ICR Date 12/19/2016 ICR Type Core ICR
Lending Instrument DPL Borrower REPUBLIC OF THE
PHILIPPINES
Original Total
Commitment USD 250.00M Disbursed Amount USD 250.00M
Implementing Agencies
Department of Finance
Cofinanciers and Other External Partners
Program 2
Country Philippines Program Name PH - PH Development
Policy Loan 2
Program ID P126580 L/C/TF Number(s) IBRD-80500,IBRD-
82380,IBRD-83280
ICR Date 12/19/2016 ICR Type Core ICR
Lending Instrument DPL Borrower REPUBLIC OF THE
PHILIPPINES
Original Total
Commitment USD 300.00M Disbursed Amount USD 800.00M
Implementing Agencies
Department of Finance
Cofinanciers and Other External Partners
Program 3
Country Philippines Program Name
Third Philippines
Development Policy
Loan
Program ID P147803 L/C/TF Number(s) IBRD-82380,IBRD-
83280,IBRD-84350
ICR Date 12/19/2016 ICR Type Core ICR
Lending Instrument DPL Borrower GOVERNMENT OF
THE PHILIPPINES
7
Original Total
Commitment USD 300.00M Disbursed Amount USD 300.00M
Implementing Agencies
Department of Finance
Cofinanciers and Other External Partners
B. Key Dates
Philippines Development Policy Loan to Foster More Inclusive Growth - P118931
Process Date Process Original Date Revised / Actual
Date(s)
Concept Review: 01/05/2011 Effectiveness: 08/08/2011
Appraisal: 03/07/2011 Restructuring(s):
Approval: 05/19/2011 Mid-term Review: 11/01/2011
Closing: 03/31/2012 03/31/2012
PH - PH Development Policy Loan 2 - P126580
Process Date Process Original Date Revised / Actual
Date(s)
Concept Review: 12/05/2011 Effectiveness:
Appraisal: 08/29/2012 Restructuring(s):
Approval: 03/19/2013 Mid-term Review: 03/24/2014 03/24/2014
Closing: 02/28/2014 06/30/2015
Third Philippines Development Policy Loan - P147803
Process Date Process Original Date Revised / Actual
Date(s)
Concept Review: 04/08/2014 Effectiveness: 01/12/2015
Appraisal: 06/26/2014 Restructuring(s):
Approval: 09/26/2014 Mid-term Review:
Closing: 12/31/2015 12/31/2015
C. Ratings Summary
C.1 Performance Rating by ICR
Overall Program Rating
Outcomes Satisfactory
Risk to Development Outcome Low or Negligible
Bank Performance Satisfactory
Borrower Performance Satisfactory
8
C.2 Detailed Ratings of Bank and Borrower Performance (by ICR)
Overall Program Rating
Bank Ratings Borrower Ratings
Quality at Entry Satisfactory Government: Satisfactory
Quality of Supervision: Moderately Satisfactory Implementing
Agency/Agencies: Satisfactory
Overall Bank
Performance Satisfactory
Overall Borrower
Performance Satisfactory
C.3 Quality at Entry and Implementation Performance Indicators
Philippines Development Policy Loan to Foster More Inclusive Growth - P118931
Implementation
Performance Indicators
QAG Assessments (if
any) Rating:
Potential Problem Program
at any time (Yes/No): No Quality at Entry (QEA) None
Problem Program at any
time (Yes/No): No
Quality of Supervision
(QSA) None
DO rating before
Closing/Inactive status Satisfactory
PH - PH Development Policy Loan 2 - P126580
Implementation
Performance Indicators
QAG Assessments (if
any) Rating:
Potential Problem Program
at any time (Yes/No): No Quality at Entry (QEA) None
Problem Program at any
time (Yes/No): No
Quality of Supervision
(QSA) None
DO rating before
Closing/Inactive status Satisfactory
Third Philippines Development Policy Loan - P147803
Implementation
Performance Indicators
QAG Assessments (if
any) Rating:
Potential Problem Program
at any time (Yes/No): No Quality at Entry (QEA) None
Problem Program at any
time (Yes/No): No
Quality of Supervision
(QSA) None
DO rating before
Closing/Inactive status
D. Sector and Theme Codes
Philippines Development Policy Loan to Foster More Inclusive Growth - P118931
Original Actual
Sector Code (as % of total Bank financing)
Central Government (Central Agencies) 56 56
Other Education 22 22
Health 11 11
Other Industry, Trade and Services 11 11
9
Theme Code (as % of total Bank financing)
Debt management and fiscal sustainability 13 13
Education for all 37 37
Public expenditure, financial management and procurement 12 12
Regulation and competition policy 13 13
Tax policy and administration 25 25
PH - PH Development Policy Loan 2 - P126580
Original Actual
Sector Code (as % of total Bank financing)
Central Government (Central Agencies) 43 43
Other Education 14 14
Health 14 14
Other Transportation 7 7
Other Industry, Trade and Services 22 22
Theme Code (as % of total Bank financing)
Education for all 14 14
Health system performance 14 14
Infrastructure services for private sector development 14 14
Public expenditure, financial management and procurement 43 43
Regulation and competition policy 15 15
Third Philippines Development Policy Loan - P147803
Original Actual
Sector Code (as % of total Bank financing)
Other Agriculture, Fishing and Forestry 9 9
Other Public Administration 46 46
Secondary Education 9 9
Health 18 18
Other Industry, Trade and Services 18 18
Theme Code (as % of total Bank financing)
Education for all 9 9
Health system performance 18 18
Infrastructure services for private sector development 27 27
Public expenditure, financial management and procurement 37 37
Regulation and competition policy 9 9
10
E. Bank Staff
Philippines Development Policy Loan to Foster More Inclusive Growth - P118931
Positions At ICR At Approval
Vice President: Victoria Kwakwa James W. Adams
Country Director: Mara K. Warwick Bert Hofman
Practice Manager/Manager: Ndiame Diop Vikram Nehru
Task Team Leader: Kai-Alexander Kaiser Ulrich Lachler
ICR Team Leader: Saeeda Sabah Rashid
ICR Primary Author: David Stephen Knight
Karl Kendrick Tiu Chua
Saeeda Sabah Rashid
Joseph Louie C. Limkin
PH - PH Development Policy Loan 2 - P126580
Positions At ICR At Approval
Vice President: Victoria Kwakwa Axel van Trotsenburg
Country Director: Mara K. Warwick Motoo Konishi
Practice Manager/Manager: Ndiame Diop Sudhir Shetty
Task Team Leader: Kai-Alexander Kaiser Kai-Alexander Kaiser
ICR Team Leader: Saeeda Sabah Rashid
ICR Primary Author: David Stephen Knight
Karl Kendrick Tiu Chua
Saeeda Sabah Rashid
Joseph Louie C. Limkin
Third Philippines Development Policy Loan - P147803
Positions At ICR At Approval
Vice President: Victoria Kwakwa Axel van Trotsenburg
Country Director: Mara K. Warwick Motoo Konishi
Practice Manager/Manager: Ndiame Diop Mathew A. Verghis
Task Team Leader: Kai-Alexander Kaiser Kai-Alexander Kaiser
ICR Team Leader: Saeeda Sabah Rashid
ICR Primary Author: David Stephen Knight
Karl Kendrick Tiu Chua
Saeeda Sabah Rashid
Joseph Louie C. Limkin
11
F. Results Framework Analysis
Program Development Objectives (from Program Document) The overall goal of this series of DPLs is to help the Philippines achieve sustained inclusive
growth through (i) better fiscal management, and improved investment climate and better
governance for faster growth, and (ii) investments in human capital to enable the poor to take
better advantage of emerging growth opportunities.
Revised Program Development Objectives (as approved by original approving authority)
The PDO is defined as fostering inclusive growth by: (Pillar 1) Strengthening Priority Public
Investment Implementation; (Pillar 2) Reducing the Cost of Doing Business for Jobs Creation
and Poverty Reduction; (Pillar 3) Developing the Human Capital of the Poor by Strengthening
the Basic Education and Health Sector; (Pillar 4) Fiscal Transparency and Good Governance;
and (Pillar 5) Consolidating Fiscal Sustainability, Revenue Mobilization, and Risk Management.
Indicator(s)
Philippines Development Policy Loan to Foster More Inclusive Growth - P118931
Indicator Baseline Value
Original Target
Values (from
approval
documents)
Formally
Revised
Target Values
Actual Value
Achieved at
Completion or
Target Years
PH - PH Development Policy Loan 2 - P126580
Indicator Baseline Value
Original Target
Values (from
approval
documents)
Formally
Revised
Target Values
Actual Value
Achieved at
Completion or
Target Years
Third Philippines Development Policy Loan - P147803
Indicator Baseline Value
Original Target
Values (from
approval
documents)
Formally
Revised
Target Values
Actual Value
Achieved at
Completion or
Target Years
Indicator 1: Public infrastructure investment (from the budget)
Value
(quantitative or
Qualitative)
1.8 percent of
GDP
>3.5 percent of
GDP
2.7 percent of GDP
Date achieved 12/31/2010 12/31/2014 12/31/2014
Comments
(incl. %
achievement)
Indicator under Pillar 1 (Public Investment). Indicator is met at project
completion. In 2015, public infrastructure investment from the budget
was 4.3 percent of GDP.
12
Indicator 2: DPWH public infrastructure investment
Value
(quantitative or
Qualitative)
1.5 percent of
GDP
>1.5 percent of
GDP
1.4 percent of GDP
Date achieved 12/31/2010 12/31/2014 12/31/2014
Comments
(incl. %
achievement)
Indicator under Pillar 1 (Public Investment). Indicator is met at project
completion. In 2015, DPWH public infrastructure investment was 2.1
percent.
Indicator 3:
DPWH public investment project portfolio prioritization improved, as
measured by percent value of budgeted contracts bid in first half
Value
(quantitative or
Qualitative)
31 percent of
GAA
>50 percent of
GAA
51 percent of GAA
Date achieved 12/31/2010 12/31/2014 12/31/2014
Comments
(incl. %
achievement)
Indicator under Pillar 1 (Public Investment). Indicator is met before
target. Latest available data is 2013. Budget for DPWH was scaled up
and effort for early contracting made. Declaration of DAP as
unconstitutional in late 2014 slowed down execution.
Indicator 4:
Spatial targeting clarified and project selection transparency enhanced
as evidenced by operational network plans and implementation by
DPWH for two major priority road programs
Value
(quantitative or
Qualitative)
0
2/4
4/4
Date achieved 12/31/2010 12/31/2014 12/31/2014
Comments
(incl. %
achievement)
Indicator under Pillar 1 (Public Investment). Indicator is met and
exceeded in target year. Examples of operational network plans include
the tourism road infrastructure program [TRIP], farm to market roads
[FMR], school building program [SBP], and health facilities
enhancement program [HFEP].
13
Indicator 5:
The average number of days required to register a sole proprietorship
business has been reduced to under 10 days for selected cities
Value
(quantitative or
Qualitative)
>10 days
<10 days
<10 days (98% of
480 target LGUs);
1,221 LGUs have
finished
streamlining the
Business Permit
and Licensing
System
Date achieved 12/31/2010 12/31/2014 12/31/2014
Comments
(incl. %
achievement)
Indicator under Pillar 2 (Doing Business). Indicator was met in target
year. In 2015, the average number of days to register a sole
proprietorship is 3 days in Quezon City, and 1-3 days in Manila,
Mandaluyong, Pasig, Puerto Princesa, and Tuguegarao cities.
Indicator 6:
Reduction in the student-teacher ratio at the top 25th percentile of its
distribution, primary
Value
(quantitative or
Qualitative)
40.4
<40.4
29.8
Date achieved 12/31/2010 12/31/2014 12/31/2014
Comments
(incl. %
achievement)
Indicator under Pillar 3 (Human Capital of the Poor). Indicator was met
in School year 2013-14. Education sector has been one of the biggest
recipients of the budget in 2013 and 2014.Resources were allocated for
the hiring of teachers, construction, repairs and maintenance of
classrooms and school facilities.
Indicator 7:
Reduction in the student-teacher ratio at the top 25th percentile of its
distribution, secondary
Value
(quantitative or
Qualitative)
42.0
<42.0
25.4
Date achieved 12/31/2010 12/31/2014 12/31/2014
Comments
(incl. %
achievement)
Indicator under Pillar 3 (Human Capital of the Poor). Indicator was met
in School year 2013-14. Education sector has been one of the biggest
recipients of the budget in 2013 and 2014.Resources were allocated for
the hiring of teachers, construction, repairs and maintenance of
classrooms and school facilities.
14
Indicator 8:
Reduction in the student-classroom ratio at the top 25th percentile of its
distribution, primary
Value
(quantitative or
Qualitative)
43.8
<43.8
26.9
Date achieved 12/31/2014 12/31/2014 12/31/2014
Comments
(incl. %
achievement)
Indicator under Pillar 3 (Human Capital of the Poor). Indicator was met
in School year 2013-14. Education sector has been one of the biggest
recipients of the budget in 2013 and 2014.Resources were allocated for
the hiring of teachers, construction, repairs and maintenance of
classrooms and school facilities.
Indicator 9:
Reduction in the student-classroom ratio at the top 25th percentile of its
distribution, secondary
Value
(quantitative or
Qualitative)
60.0
<60.0
31.6
Date achieved 12/31/2010 12/31/2014 12/31/2014
Comments
(incl. %
achievement)
Indicator under Pillar 3 (Human Capital of the Poor). Indicator was met
in School year 2013-14. Education sector has been one of the biggest
recipients of the budget in 2013 and 2014.Resources were allocated for
the hiring of teachers, construction, repairs and maintenance of
classrooms and school facilities.
Indicator 10: Net enrollment ratio, primary
Value
(quantitative or
Qualitative)
88.1
>94.0
95.2
Date achieved 12/31/2010 12/31/2014 12/31/2014
Comments
(incl. %
achievement)
Indicator under Pillar 3 (Human Capital of the Poor). Indicator met and
exceeded in School year 2013-14. Aided by expanded CCT program,
progress in improving enrollment and learning environment for school
children is likely to be strongly supportive of inclusive growth over the
medium term.
Indicator 11: Net enrollment ratio, secondary
Value
(quantitative or
Qualitative)
59.6
>76.0
64.6
Date achieved 12/31/2010 12/31/2014 12/31/2014
Comments
(incl. %
achievement)
Indicator under Pillar 3 (Human Capital of the Poor). Indicator unmet.
Target set very high representing a 16.4% increase in NER within 4
years. In comparison, target for primary NER is raised by only 6% from
15
baseline. Enrollment data available for 2015 but data on school age
population still unavailable.
Indicator 12: Number of NHTS-PR individuals covered by PhilHealth (millions)
Value
(quantitative or
Qualitative)
22.1
47.8
92.6
Date achieved 12/31/2010 12/31/2014 12/31/2015
Comments
(incl. %
achievement)
Indicator under Pillar 3 (Human Capital of the Poor). Indicator was met
and exceeded as at project completion. The 2015 figure represents all
individuals with PhilHealth coverage, including the CCT recipients who
are automatically enrolled.
Indicator 13:
Number of NHTS-PR individuals enlisted with a primary care benefit
provider (millions)
Value
(quantitative or
Qualitative)
0
9.5
28.2
Date achieved 12/31/2010 12/31/2014 12/31/2015
Comments
(incl. %
achievement)
Indicator under Pillar 3 (Human Capital of the Poor). Indicator was met
and exceeded by project completion date. The 2015 figure represents the
total number of individuals i.e. both members and their dependents.
Indicator 14:
Number of claims by NHTS-PR families at PhilHealth-accredited
providers in the previous year (share of total)
Value
(quantitative or
Qualitative)
20 percent
>27 percent
32 percent
Date achieved 12/31/2010 12/31/2014 12/31/2015
Comments
(incl. %
achievement)
Indicator under Pillar 3 (Human Capital of the Poor). Indicator was met
and exceeded by project completion date. The 2015 figure is based on
paid claims by admission dates from January 1, 2015 to December 31,
2015; and total claims amount paid under Unified Claims Processing
System budget table.
Indicator 15: Improvement in the PEFA indicator score: PI 5 - classification of budget
Value
(quantitative or
Qualitative)
D
Score improves
C
Date achieved 12/31/2010 12/31/2014 12/31/2015
Comments
(incl. %
achievement)
16
Indicator 16:
Improvement in the PEFA indicator score: PI 10 - public access to key
fiscal information
Value
(quantitative or
Qualitative)
C
Score improves
A
Date achieved 12/31/2010 12/31/2014 12/31/2015
Comments
(incl. %
achievement)
Indicator under Pillar 4 (Fiscal Transparency). Indicator was met at
project completion. PEFA assessment conducted in 2016 using data for
the completed fiscal years till 2015.
Indicator 17:
Improvement in the PEFA indicator score: PI 24 - quality and timeliness
of in-year budget reports
Value
(quantitative or
Qualitative)
D
Score improves
D+
Date achieved 12/31/2010 12/31/2014 12/31/2015
Comments
(incl. %
achievement)
Indicator under Pillar 4 (Fiscal Transparency). Indicator was met at
project completion. PEFA assessment conducted in early 2016 using
data for the completed fiscal years till 2015.
Indicator 18:
Enhanced budget transparency through the existence of a unified
account code structure, and the timely publication of budget execution
data
Value
(quantitative or
Qualitative)
Does not exist/not
timely
Yes
Yes
Date achieved 12/31/2010 12/31/2014 12/31/2014
Comments
(incl. %
achievement)
Indicator under Pillar 4 (Fiscal Transparency). Indicator was met in
target year. UACS is being used for the budget formulation and
financial reporting. Acceptable budget execution reports are being
regularly uploaded on DBM website. Completeness is still a challenge.
Indicator 19: Tax administration gains by BIR (percent of GDP)
Value
(quantitative or
Qualitative)
9.1 percent of
GDP
1 percentage point
(PPT) of GDP
increase
10.6 percent of
GDP (1.5 PPT
increase)
Date achieved 12/31/2010 12/31/2014 12/31/2014
Comments
(incl. %
achievement)
Indicator under Pillar 5 (Fiscal Sustainability). Indicator was met in
target year. In 2015, tax collection reached 10.8 percent of GDP,
representing a 1.7 ppt increase from the baseline value.
17
Indicator 20: Excises from alcohol and tobacco (percent of GDP)
Value
(quantitative or
Qualitative)
0.63 percent of
GDP
0.4 PPT of GDP
increase
0.95 percent of
GDP (0.32 PPT
increase)
Date achieved 12/31/2010 12/31/2014 12/31/2014
Comments
(incl. %
achievement)
Indicator under Pillar 5 (Fiscal Sustainability). Indicator was met.
Indicator is met as at project completion. In 2015, excises from alcohol
and tobacco reached 1.2 percent of GDP, representing a 0.57 ppt
increase from the baseline value.
Indicator 21:
Enhanced evidence based stakeholder awareness of key tax
expenditures and fiscal risks
Value
(quantitative or
Qualitative)
Low (Awareness
is rated low for
the baseline given
that no fiscal risk
statement is
prepared prior to
20
Basic (Basic
refers to a basic
understanding of
the key tax
expenditures and
fiscal risks in
the country based
on awareness of
the existence of a
published Fiscal
Risk Statement
which includes
this information)
Basic
Date achieved 12/31/2010 12/31/2014 12/31/2014
Comments
(incl. %
achievement)
Indicator under Pillar 5 (Fiscal Sustainability). Indicator was met in
target year and sustained. Online survey conducted in 2016 among
members of the Fiscal Risk Statement (FRS) Technical Working Group
reveals awareness among its core members.
Indicator 22: GOCC contribution to consolidated public sector deficit
Value
(quantitative or
Qualitative)
-0.7 percent of
GDP
0 percent of GDP
0 percent of GDP
Date achieved 12/31/2010 12/31/2014 12/31/2014
Comments
(incl. %
achievement)
Indicator under Pillar 5 (Fiscal Sustainability). Indicator was met in
target year. GOCCs contributed a surplus of 0.2 percent of GDP in
2014.
18
Indicator 23:
Majority of top 20 GOCCs as measured by government transfers
between 2010-2013 are subject to completed GCG performance
evaluation contracts for 2013/14
Value
(quantitative or
Qualitative)
0
15/20 or 75
percent
16/20 or 80 percent
Date achieved 12/31/2010 12/31/2014 12/31/2014
Comments
(incl. %
achievement)
Indicator under Pillar 5 (Fiscal Sustainability). Indicator was met in
target year. Starting 2014, a majority of top 20 GOCCs in terms of
subsidies received from the national government are governed by
performance evaluation contracts under the Governance Commission
for GOCCs. All are covered in 2016.
G. Ratings of Program Performance in ISRs
Philippines Development Policy Loan to Foster More Inclusive Growth - P118931
No. Date ISR
Archived DO IP
Actual Disbursements
(USD millions)
1 06/15/2011 Satisfactory Satisfactory 250.00
PH - PH Development Policy Loan 2 - P126580
No. Date ISR
Archived DO IP
Actual Disbursements
(USD millions)
1 07/23/2014 Satisfactory Satisfactory 800.00
PH - PH Development Policy Loan 3 - P147803
No. Date ISR
Archived DO IP
Actual Disbursements
(USD millions)
1 01/15/2015 Moderately Satisfactory Moderately Satisfactory 300.00
H. Restructuring (if any)
19
1. Program context, program development objectives (PDO), and design
1.1 Context at appraisal
1. This programmatic development policy loan (DPL) series consisted of three
operations, and was the second DPL program in the Philippines. The first program was a
standalone DPL in 2007 which primarily supported reforms aimed at restoring macroeconomic
stability under the previous (Arroyo) administration. The second program supported the Aquino
Administration's inclusive growth agenda, which was articulated in the Philippine Development
Plan (PDP) 2011-1016 as “high growth that is sustained…that massively creates jobs, and reduces
poverty.”
2. The Philippines managed to emerge from the global financial crisis only moderately
affected, given earlier fiscal consolidation. In 2009, expansionary fiscal policy resulted in higher
deficit of 3.7 percent of GDP but the fiscal position remained broadly sustainable. Debt levels had
declined from 96 to 54 percent of GDP between 2003 and 2010. In 2010, GDP growth, which had
fallen to around 1 percent in 2009, quickly recovered (Table 1). By the end of the Arroyo
Administration, macroeconomic instability was no longer a major concern and investors’ concerns
had shifted to corruption and infrastructure gaps, the next two biggest constraints.
3. However, despite progress in the macroeconomic environment, it was clear that
growth was far from being inclusive. For instance, between 2003 and 2009, higher average
growth of around five percent compared to four percent in the previous decade did not result in
poverty reduction. In fact poverty incidence1 increased from 30 to 32.6 percent and the number of
people living in poverty increased by 4.7 million. The government’s strategy of keeping
expenditure levels low, given its inability to raise revenues, managed to lower deficit and debt
levels significantly but had negative on poverty reduction and job creation.
4. In 2010, the Aquino Administration commenced office with a strong focus on
improving governance (Figure 1). Its campaign promise was “kung walang corrupt, walang
mahirap,” or “if there is no corruption, there is no poverty.” Immediately, it embarked on a number
of “housekeeping” reforms. Persons of generally accepted competence and integrity were
appointed by the president to head key governance agencies such as the Supreme Court (SC),
Commission on Audit (COA), Department of Budget and Management (DBM), Department of
Justice (DOJ), the Office of the Ombudsman (OOB), and the Bureau of Internal Revenue (BIR).
He also ordered sweeping reforms in the budget process. For the first time in many years, budgets
were passed on time. Lump sum funds were reduced and converted into clear budget line items.
The list of eligible spending under the congressional “pork barrel” fund and special purpose funds
were tightened and published online. Quarterly reports on budget execution (i.e., statements of
allotments, obligations, and balances) were regularly posted. Finally, the budget preparation
process was opened to civil society organizations. At the same time, the government improved its
poverty programs by reducing expensive subsidies which were poorly targeted and replacing them
with a scaled-up conditional cash transfer program which relied on an objective means of
1 This is based on the previous national poverty estimation methodology. Based on the latest methodology, the poverty
headcount ratio in 2009 was 26.3 percent but the incidence for 2003 is not available.
20
identifying the poor through the national household targeting system for poverty reduction (NHTS-
PR).2
Box 1. The Macroeconomic Context of the first and second DPL
The first standalone DPL supported the government’s program to restore macroeconomic
stability. In 2004, the Philippines was on the verge of a fiscal collapse, the consequence of fiscal
indiscipline after the 1997 Asian financial crisis, which included the enactment of significant
tax eroding measures equivalent to three percent of GDP.3 At its height in the early 2000s, non-
financial public sector debt reached 95 percent of GDP,4 the consolidated public sector deficit
breached five percent, debt servicing was equivalent to over 85 percent of revenues, and
borrowing spreads surpassed 600 basis points (bps). In 2004, fresh from the elections, the
Arroyo Administration embarked on a fiscal consolidation program aimed at raising tax
revenues, controlling government spending, and addressing fiscal risks from government-owned
and controlled corporations (GOCCs), notably in the power sector. These reforms gradually
improved macroeconomic stability and created the conditions for a development policy loan in
2007.
In 2008, a second DPL under a programmatic series was considered but did not materialize
given the weak policy environment, notably in the area of revenue mobilization. Between
2005 and 2010, the governance environment deteriorated, reducing traction for reforms, notably
in tax enhancing measures. Instead, a number of tax eroding measures were enacted. Private
investment stagnated at around 17 percent of GDP as the private sector took a wait-and-see
stance. In 2008 and 2009, economic prospects deteriorated following international oil and rice
price spikes, the global financial crisis, and the global slowdown.
5. With a government which showed a strong focus on governance and a commitment
to reforms, the Bank reengaged with a new DPL series. The first operation in 2011 (DPL I)
supported the government’s governance agenda and reforms to strengthen macroeconomic
stability. Following the 2009 country assistance strategy (CAS) priorities, DPL I focused on
deepening fiscal reforms by strengthening revenue mobilization and fiscal risk management. In
tandem with fiscal stability, the CAS and the DPL series supported the government’s reforms in
public financial management. At the same time, the CAS and the DPL series began to put more
focus on structural reforms such as improving the investment climate by reducing the cost of doing
business, addressing infrastructure bottlenecks,5 and ramping up education and health spending.
Inheriting a treasury with limited revenues, the Aquino Administration immediately pursued
2 Also known as Listahanan. 3 See the program document and the ICR of the 2007 DPL for more discussion. 4 Before the revision to the GDP series in 2011, non-financial public sector debt was equivalent to over 100 percent of GDP during its height. 5 As DPL I was about to be discussed in the Board in April 2011, revisions to the national accounts revealed that
investments had been underestimated by around three percent of GDP, pushing up the average investment to GDP
ratio from 15.6 to 20.5 percent. However, most of this gain was contributed by private investment. This may have
reduced the urgency to ramp up investment spending in the succeeding years.
21
public-private partnership (PPP) projects to address infrastructure bottlenecks by crowding in
private capital.
Table 1. Selected macroeconomic indicators
6. These reforms restored confidence and positively affected growth momentum. Under
a process called zero-based budgeting, governance reforms were making the budget more
transparent, and efficient, resulting in significant fiscal savings. However, by 2011, it became
evident that these reforms were slowing down project implementation significantly, resulting in
slower economic growth despite the uptick in private investment. Associated reforms in public
financial management (PFM) were slow materialize, particularly the long awaited automation
through a financial management information system (FMIS) which remained stalled at the
procurement stage. The government responded by introducing the Disbursement Acceleration
Program (DAP) to move funds from slow moving projects to fast moving projects.6 This added
flexibility contributed to higher growth in 2012 and 2013.
7. A second DPL supported sustained reform progress through 2013. DPL II focused on
deepening governance reforms and improving social service delivery, primarily through larger
budget allocation and better targeting. A historic sin tax reform, better tax administration, and more
6 In reality, the budget practices formalized in the DAP were widely used in the past. This formalization likely caught
the attention of the opposition, which filed a case before the Supreme Court questioning its legality.
22
prudent spending resulted in higher revenues and rapidly falling deficit and debt levels. By end
2013, the consolidated public sector balance turned to a surplus (0.2 percent of GDP)7 while debt-
to-GDP fell to 51 percent of GDP. To further reduce fiscal risk from GOCCs, the government
created the Governance Commission for GOCCs (GCG).
8. With the national government’s fiscal stance improving, international credit rating
agencies upgraded the country to two notches above investment grade—the first for the
Philippines. The macroeconomic stability and better governance boosted growth, confidence, and
ratings, but their impact on poverty was not apparent. Poverty incidence hardly declined between
2009 and 2012 even as the macroeconomy and the governance environment improved
significantly.8
9. On November 8, 2013, Typhoon Yolanda, a category five typhoon, hit central
Philippines, and caused immense damages and casualties. On December 4, 2013, supplemental
financing under DPL II assisted in addressing the unanticipated financing gap caused by the
unprecedented magnitude of the typhoon which risked jeopardizing the government’s reform
program. The disaster also led to a major rethinking in a number of government programs and
policies. This included: i) factoring in disaster risk as a central element of macroeconomic risk, ii)
improving expenditure tracking, especially to account for aid provided for relief and
reconstruction, iii) improving social safety nets for disaster-affected and vulnerable people, and
iv) accelerating delivery of reconstruction projects.
10. In 2014, as the Philippines recovered from the devastation caused by Typhoon
Yolanda, DPL III was prepared to help the government strengthen implementation of
reforms to support inclusive growth. To accelerate poverty reduction, the government sought to
improve the targeting of infrastructure and anti-poverty programs to ensure that significant
increases in the budget were reaching the intended beneficiaries. In this regard, DPL III supported
ramping up infrastructure spending, and targeted investments in tourism and farm-to-market
(FMR) roads, scaling up the conditional cash transfer (CCT) program to cover high school
students, and using the national household targeting system for poverty reduction (NHTS-PR) to
target health insurance beneficiaries. As in previous operations, DPL III also supported reforms to
strengthen fiscal transparency and sustainability.
11. By 2015, the reform efforts started paying off. Economic growth is more inclusive and
is translating into stronger job creation and faster poverty reduction. Between January 2014
and 2015, more than a million jobs were created as the unemployment rate fell to 6.6 percent,
significantly lower than the seven to eight percent recorded in the previous decade. Official poverty
incidence among Filipinos dropped to 21.6 percent in 2015 from 25.2 percent in 2012, representing
a feat of 1.8 million Filipinos lifted out of poverty in three years. The decline in the number of
poor can be attributed to improved incomes, higher employment rate and the generally stable
inflation environment. Another significant contributor has been the government’s conditional cash
transfer program, the Pantawid Pamilyang Pilipino Program, whose budget increased by almost
200 percent to Php 62.3 billion, and whose household coverage almost doubled to 4.4 million
7 The consolidated public sector position turned into a surplus in 2013, while the general government deficit decreased
to 1.4 percent in the same year. 8 Philippines ranking in the Corruption Perception Index improved from 134 (2010 report) to 94 (2013 report).
23
households between 2011 and 2015. Meanwhile, the 2015 Family Income and Expenditure Survey
(FIES) revealed that average family incomes increased for all income deciles from 2012 to 2015.
The first four deciles experienced the largest increase, averaging 13.4 percent increase in real
terms, compared to an average of 4.5 percent for the fifth to tenth decile. Moreover, the real income
of the bottom 20 percent grew much faster than the rest of the population through substantial
growth of domestic cash transfers to this quintile, confirming that the government’s CCT program
is well targeted.
12. Sustaining recent gains through focused reforms, especially in the economic sector,
can help the government achieve eradication of extreme poverty within one generation. The
country is increasingly characterized with robust economic growth, stable inflation, healthy current
account surpluses, more-than-adequate international reserves, and a sustainable fiscal position.
With a solid macro economy that has proven resilient against shocks, the country can focus on
crucial structural reforms that address extreme poverty. Recent poverty reduction translates into a
growth elasticity of poverty of -0.9, meaning for every one percent increase in per capita growth,
poverty incidence declines by 0.9 percent. Sustaining this level of elasticity and achieving growth
of at least seven percent can keep the country on track to eradicate extreme poverty in one
generation (i.e., by 2045).
24
Figure 1. Philippine Development Policy Engagement Since 2007
1.2 Original PDO and key indicators
13. The program development objectives (PDO) for the overall program, as set out in
DPL I, is to help the Philippines achieve sustained inclusive growth through i) better fiscal
management, ii) an improved investment climate, iii) better governance, and iv) increased
investments in human capital. Key outcomes and indicators were specified for each of these pillars
(Table 2).
25
Table 2. Original PDO Key Outcomes and Indicators
Outcome Indicator
Strengthened public revenue mobilization Total tax revenues increase from 12.8% of
GDP in 2010 in line with the Government’s
Philippine Development Program target
(14.4% in 2013).
The amount of revenues generated by the LTS
increases from 54% of total BIR collection in
2010 to at least 70% in 2013.
Strengthened fiscal risk management Total NFPS debt as a % of GDP has declined
below 60.7% (2009 baseline).
Fiscal risk is reduced, as reflected by
improvement in the ratings of sovereign credit
by any of S&P, Moody’s or Fitch.
Improve the business climate by reducing the
cost of doing business
The average number of days required to start
a business has been reduced to 10 days, based
on the Doing Business methodology for
business entry.
Addressed infrastructure bottlenecks Total fixed investment increases above 15.7%
of GDP (2010 baseline).
Improved public financial management,
budget transparency, and accountability
Enhanced transparency through the existence
of a unified Chart of Accounts and the regular
publication of budget execution data.
Strengthened the basic education sector Reductions of the (i) Students-to-Teacher
ratio and the (ii) Students-to-Classroom ratio
at the top 25th percentile point of their
respective distributions. (Baseline
2010/2011: 40.37 and 43.8 for public
elementary schools, and 42.03 and 59.98 for
public secondary schools.)
Net enrolment ratios increase. (Baselines
2009/10: 88.1% for elementary and 59.6%
secondary. Targets 2013/14: 94% for
elementary and 76% for secondary.)
Strengthened the health sector Increased utilization of health services among
poor and near-poor households from 1.0
outpatient visits per capita to at least 1.5 visits
per capita.
Improved financial protection for the poor, as
measured by reduced out-of-pocket payments
for health care among insured poor
households.
26
1.3 Revised PDO and key indicators, and reasons/justifications
14. The PDO remained consistent throughout the DPL series but underwent some
refinement to increase its relevance to the policy framework as it developed over the course
of the program. Slight tweaks to the high level PDO were made, such as explicitly defining
inclusive growth to mean job creation, and linking the formulation of the pillars to the policy
framework, for instance replacing “better fiscal management” with the more specific objectives of
“raising revenues and reducing fiscal risk” (Table 3). Pillar I was divided into two pillars to
explicitly capture the focus on public investment and private investment, each with its own results
indicators.
Table 3. Summary of the DPL PDO and Pillars under the Series
DPL I DPL II DPL III
Help achieve sustained
inclusive growth
Help achieve sustained
inclusive growth
Support sustained inclusive
growth and job creation
Pillar 1: Improved
investment climate
Pillar 1: Increase private and
public investment, notably to
help job creation
Pillar 1: Strengthening priority
public investments
implementation
Pillar 2: Reducing the Cost of
Doing Business for Jobs
Creation and Poverty Reduction
Pillar 2: Investments in
human capital to enable the
poor to better take
advantage of emerging
growth opportunities
Pillar 2: Strengthen public
resource allocation for
education and health
outcomes
Pillar 3: Develop the human
capital of the poor by
strengthening the Basic
Education and Health Sector
Pillar 3: Better governance
for faster growth
Pillar 3: Improve public
financial management (PFM)
to enhance the accountability
and effectiveness of public
spending more broadly
Pillar 4: Fiscal transparency
and good governance
Pillar 4: Better fiscal
management
Pillar 4: Enhance public
revenue mobilization and
strengthen fiscal risk/debt
management
Pillar 5: Consolidating fiscal
sustainability, revenue
mobilization and risk
management
15. Further details of the changes in the pillars, including their impact and justifications
are provided below.
Fiscal – The formulation of the PDO was made more explicit by attributing better fiscal
management to two key reforms: increasing revenues and strengthening fiscal risk
27
management. This change meant that the PDO was more clearly related to results indicators
in each of these two areas of reform.
Investment climate – The PDO was expanded in the second operation to more explicitly
cover public investment bottlenecks. In the third operation, this distinction was further
developed by splitting the area to create two distinct sub-pillars that sought to address
constraints to private and public investment, respectively. On public investment, the
development of the operation-specific PDOs is consistent with the evolution of the
government’s program, which began with a focus on PPP projects and then evolved to
raising public investment execution and finally better targeting of public investment. On
the private sector side, the focus on reducing the cost of doing business was sustained.
Governance – The formulation of the PDO was refined in the second and third operation
based on their respective policy content. The changes more clearly linked the objective to
measurable policy areas. A general focus on good governance in DPL I was made more
explicit in DPL II by highlighting the role of public financial management (PFM) reforms.
The increased clarity is also reflected in the description of the outcomes of this pillar which
went from generally supporting “faster growth” to “effectiveness of public spending more
broadly” in DPL II and DPL III.
Human capital – The formulation of the PDO changed slightly in the second operation,
before returning to the original formulation in the third year, so overall there were no
substantial revisions in the final formulation.
16. The results framework underwent significant changes over the course of the program,
particularly in the final operation. Of the 17 results indicators in the original results framework
for the program, nine remained in the final results framework, of which six are education
indicators. Thirteen new indicators were added in DPL II and DPL III, giving rise to 23 indicators
in the final results framework.
17. Changes to the result indicators were geared towards improving measurement and
attribution of results to supported policies. (Table 4). Many of the new indicators were more
explicit and focused, such as tax collection from sin tax, DPWH contracts signed, and coverage of
primary care providers, whereas removed indicators were more high-level, such as overall revenue
mobilization, investment levels, and household healthcare costs. These changes improved
measurement and attribution. However, in reducing the focus on higher level outcomes and in
some cases reducing the ambition of targets, the program became somewhat less ambitious and
less strongly linked to the high level objective of inclusive growth. In some cases, the specificity
is consistent with the refinement in the PDO components (e.g., supporting public investment led
to a focusing down of results on public infrastructure execution). However, in other cases, the final
results framework leaves some relevant policy objectives uncaptured, such as overall revenue
mobilization, aggregate investment, and healthcare costs for the poor. To ensure that these changes
are captured, this ICR also assessed the indicators from previous operations in the program where
they do not appear in the final results framework.
28
Table 4. Impact of Changes in Results Indicators
Pillar Original indicators Revised indicators Impact of changes
1 Total fixed investment
increases above 15.7% of
GDP (2010 baseline)
Public infrastructure
investment
DPWH Public infrastructure
investment (% GDP)
DPWH Program Contract
Signed in H1 (by value)
Number of major DPWH
convergence infrastructure
programs with poverty and
jobs targeting
Narrowing of one part of
the results can potentially
reduce confidence that the
PDO has been achieved
but is consistent with the
completion policy
framework.
2 The average number of
days required to start a
business has been
reduced by 10 days,
based on the Doing
Business methodology
for business entry
The average number of days
required to register a sole
proprietorship business
3 Reductions of the (i)
Students-to-Teacher ratio
and the (ii) Students-to-
Classroom ratio at the top
25th percentile point of
their respective
distributions. (Baseline
2010/2011: 40.37 and
43.8 for public
elementary schools, and
42.03 and 59.98 for
public secondary
schools)
Net enrolment ratios
increase. (Baselines
2009/10: 88.1% for
elementary and 59.6%
secondary. Targets
2013/14: 94% for
Student Teacher Ratio, Top
25th pct, primary
Student Teacher Ratio, top
25th pct, secondary
Students-to-Classroom ratio,
Top 25th pct, elementary
Students-to-Classroom ratio,
Top 25th pct, secondary
Net Enrollment (Primary)
Net Enrollment (Secondary)
Number of NHTS-PR
individuals/families covered
by Philhealth (millions)
Education unchanged.
Health results framework
changed focus and no
longer directly measures
impact on poor and near-
poor and can potentially
reduce confidence that the
PDO has been achieved.
29
Pillar Original indicators Revised indicators Impact of changes
elementary and 76% for
secondary)
Increased utilization of
health services among
poor and near-poor
households from 1.0
outpatient visits per
capita to at least 1.5 visits
per capita
Improved financial
protection for the poor,
as measured by reduced
out-of-pocket payments
for health care among
insured poor households
Number of NHTS-PR
members/families enlisted
with a primary care benefit
(PCB) provider (millions)
Number of claims by NHTS-
PR families at Philhealth-
accredited providers in the
previous year (share of total)
4 Enhanced transparency
through the existence of a
unified Chart of
Accounts and the timely
publication of budget
execution data
PEFA indicators score for:
PI5 – classification of budget
PI10 – Public access to key
fiscal information
PI24 – Quality and
timeliness of in-year budget
reports
Enhanced budget
transparency through the
existence of a unified
account code structure, and
the timely publication of
budget execution data.
Additional results
indicators improve
confidence that the PDO
has been met, but may be
a challenge to measure.
5 Total tax revenues
increased from 12.8% of
GDP in 2010 in line with
the Government’s
Philippine Development
Program target (14.4% in
2013)
The amount of revenues
generated by the LTS
increases from 54% of
total BIR collection in
Tax administration gains by
BIR yield 1 percentage point
net gain in revenues (from
9.1 percent of GDP 2010
baseline)
Policy impacts: Excises from
alcohol and tobacco (% GDP
gain)
Enhanced evidence based
stakeholder awareness of key
The result indicators were
made more explicit and
narrow. However, this
may have excluded the
impact of some policy
actions and can potentially
reduce the confidence that
the PDO has been
achieved.
30
Pillar Original indicators Revised indicators Impact of changes
2010 to at least 70% in
2013
Total NFPS debt as a %
of GDP has declined
below 60.7% (2009
baseline)
Fiscal risk is reduced, as
reflected by improvement
in the ratings of
sovereign credit by any
of S&P, Moody’s or
Fitch
tax expenditures and fiscal
risks (PPP, natural disasters,
GOCCs)
GOCC contribution to
consolidated public sector
deficit (% GDP)
Majority of top 20 GOCCs
as measured by government
transfers between 2010-2013
are subject to completed
GCG Performance
Evaluation Contracts for
2013/14 (0 to >75 %)
18. The indicators dropped from the final results framework are described, along with
explanations, in Table 5.
Table 5. Removed Results Indicators
Indicator Explanation
The amount of revenues generated by the
Large Taxpayer Service (LTS) increases from
54 percent of total Bureau of Internal
Revenue (BIR) collection in 2010 to at least
70 percent in 2013.
The reasons given in DPL II for removing this
indicator are that it is subsumed in the broader
revenue collection indicator (but was
subsequently also dropped), and it was only
an imperfect proxy of LTS tax administration
capability.
Fiscal risk is reduced, as reflected by
improvements in the ratings of sovereign
credit by any of S&P, Moody’s, or Fitch.
The peer reviewers noted that sovereign debt
ratings were driven by many things, and
hence could not be attributed to the
operation. Also, given the recent financial
crisis history, there was some concerns about
their accuracy.
Total tax revenues increase by two percentage
points of GDP from the 2010 baseline of 12.1
percent of GDP in line with the government’s
Philippine Development Plan (PDP) target.
This indicator was dropped in DPL III on the
basis that it was too aggregate and replaced
with a more specific indicator on BIR tax
administration gains. Moreover, the Bank had
no engagement with BOC, thus narrowing the
indicator was prudent.
The non-financial public sector debt, as a
percentage of GDP, has declined below 54.8
percent (2009 baseline).
This indicator was dropped because it was
deemed too aggregate a measure. It was also
deemed an inadequate measure of the PDO. It
was replaced with a more specific indicator
on GOCC contribution to the fiscal deficit.
31
Indicator Explanation
Total fixed investment increases above 20.2
percent of GDP (2010 baseline).
This indicator was dropped because it was
deemed too aggregate a measure. In its place,
a more specific indicator on public investment
was used, which was well within the control
of the government.
Increased utilization of health services among
poor and near-poor households from less than
1 outpatient visit per capita to at least 1.5 per
capita.
This indicator was dropped on the basis that it
was not measurable. Since the
commencement of the program, no baseline
had been defined. It was replaced by a more
measurable indicator (discussed below).
Reduced out-of-pocket payments for health
care among insured poor households.
This indicator was dropped on the basis that it
was not measurable. Since the
commencement of the program, no baseline
had been defined. It was replaced by a more
measurable indicator (discussed below).
19. The indicators that were added to the program, all in DPL III, and the justification
for their inclusion, are shown in Table 6.
Table 6. Added Results Indicators
Indicator Explanation
Public infrastructure investment increased to
over 3.5 percent of GDP per annum (from
<2.5 percent).
In lieu of the removed indicator for total
investment, a number of indicators that more
specifically targeted the execution of public
investment were included. This indicator was
added to measure results against the
government’s targeted scale up of public
investment.
Project portfolio prioritization improved, as
measured by percent value of budgeted
contracts bid in first half (to over >50
percent).
Similarly, to the previous indicator, this
indicator was added since its achievement
was under the control of the government. The
indicator focuses on the timely contracting of
projects in the first half of the fiscal year,
given that late contracting has been a key
constraint in delivering public works in the
past.
Spatial targeting clarified and project
selection transparency enhanced as evidenced
by operational network plans and
implementation by the Department of Public
Works and Highway (DPWH) for two major
priority road programs.
This is the third of the indicators added to
capture the results of public investment
reforms. This indicator specifically measures
a key aspect of project planning, the
introduction of network plans for priority road
projects.
32
Indicator Explanation
Number of major DPWH convergence
infrastructure programs with poverty and jobs
targeting.
This is the fourth and last indicator on public
investment that was added to capture another
aspect of planning, major programs that have
poverty and jobs targeting integrated into
their design.
Number of NHTS-PR individuals/families
covered by Philhealth (100 percent of those
defined eligible in millions).
This is the first of three indicators in lieu of
the two indicators that were removed due to
their immeasurability. This indicator
measures the number of families that are
covered by Philhealth by automatic and free
enrollment based on their poverty status.
Number of NHTS-PR families enlisted with a
primary care benefit (PCB) provider (9.54
million or 65 percent of total from 0).
This indicator captures the number of lower
income households enrolled in Philhealth that
have taken steps to actively use the program
by enrolling with a primary care benefit
provider. This is considered to be a better
indicator of whether the household are able to
draw on Philhealth services.
Number of claims by NHTS-PR families at
Philhealth-accredited providers in the
previous year (>27 percent share).
This final indicator on health measures the
actual utilization of Philhealth benefits by
lower income families, as measured by the
number of claims they make as part of the
scheme.
Improvement in the following public
expenditure and financial accountability
(PEFA) indicators score (2010 base year):
PI 5 – classification of budget (D in 2010).
PI 10 – Public access to key fiscal information
(C in 2010).
PI 24 – Quality and timeliness of in-year
budget reports (D in 2010)
This set of indicators was added to improve
the coverage and measurability of the results
indicators in the areas of government
financial transparency and quality of budget
information.
1.4 Original policy areas supported by the program
20. This DPL series supported key government reform programs identified in the
Philippine Development Plan (PDP) 2011–2016. The PDP envisions a Philippines with “high
growth that is sustained…that massively creates jobs…and reduces poverty.” To achieve this goal,
the government intends to i) invest heavily in physical infrastructure, ii) improve governance, iii)
enhance human development, and iv) accelerate employment generation. These PDP pillars form
the basis for organizing the PDO pillars, which are i) maintaining a stable macroeconomic
environment, ii) improving competitiveness and increasing infrastructure investment, iii)
improving governance, and iv) developing the human capital of the poor.
33
A. Maintaining a stable macroeconomic environment
21. At the outset of the DPL program, maintaining fiscal sustainability was a clear
priority as the country was just recovering from the impact of the global downturn and
needed to wind down stimulus and set a sustainable path to support medium-term growth. The path to fiscal sustainability was to be achieved by: i) strengthening revenue mobilization, and
ii) strengthening fiscal risk management.
22. Strengthening revenue – The program document of DPL I notes that revenue mobilization
had declined from 17 percent of GDP in 1997 to less than 13 percent in 2003 which, coupled with
unsustainable spending, led to a rapid escalation of non-financial public sector debt to 95 percent
of GDP. The risk of an impending fiscal crisis led to a series of tax policy and administration
measures intended to consolidate public finances. While the crisis was averted and the decline in
revenues arrested, tax revenue collections remained weak due to a number of policy reversals and
weak tax administration and by 2010, revenues were still below 13 percent of GDP. Under this
policy area, the program supported efforts of the government to raise tax revenues, primarily
through tax administration reforms, with tax policy measures only to be considered after the
potential for tax administration gains was exhausted.
23. Strengthening fiscal risk management – To strengthen fiscal stability in the medium
term, the DPL series highlighted the need to increase proactive analysis and management of fiscal
risks, and incorporate elements of risk management into fiscal planning. An overarching element
of this approach was the publication of an annual fiscal risk statement, which is a forward-looking
document that identifies risk and mitigating measures to inform fiscal planning. There was also a
set of institutional reforms to strengthen risk management, which included the establishment of a
Debt and Risk Management Office, the publication of a medium-term debt management strategy,
public disclosure of PPP risk assessment, and new GOCC management systems. For GOCCs, the
program envisioned a new web-based financial performance management system for GOCCs and
legislation to promote financial viability and fiscal discipline in GOCCs. Taken together, the
ultimate objective was a further lowering of deficit and debt levels to more sustainable levels.
B. Improving competitiveness and increasing infrastructure investment
24. The PDP identified lack of investment as a key constraint towards achieving long-
term growth potential in the Philippines. At the beginning of the program, total investment was
slightly below 15 percent of GDP, compared to an average of 25 percent of GDP in the East Asia
and Pacific region. Improving competitiveness was to be achieved by reducing the cost of doing
business and addressing infrastructure bottlenecks.
25. Reducing the costs involved in starting small businesses – Difficulties associated with
doing business were identified as a major impediment to higher private investment. In 2011, the
Philippines was ranked in the bottom quartile of countries in the World Bank Group’s Ease of
Doing Business Report. The tedious process of starting a business and getting construction permits,
for instance, was a considerable deterrent to businesses. With the aim of reducing these barriers,
the program supported reforms to simplify the procedures for starting a business through system
34
modernization, consolidation of steps, and a reduction in the time and cost involved. The program
also outlined planned steps the government intended to take to review the National Building Code,
the Fire Code, and procedures to obtain construction permits. Further steps, including the review
of local government ordinances to bring them in line with national law, and trade facilitation
reform to improve efficiency of customs operations were also set out.
26. Addressing infrastructure bottlenecks – Lack of infrastructure is cited by businesses as
one of the key factors which reduces the Philippines’ attractiveness to investors. Following the
Asian financial crisis, public infrastructure investment declined from 2.9 percent of GDP in 1997
to as low as 1.1 percent of GDP in 2005, and remained low, constrained by limited government
revenues and weak public investment management. The program set out in DPL I focused on PPP
projects as a temporary means to jumpstart investment while revenues were limited. Steps taken
included the establishment of a dedicated PPP unit in the government, strengthening the National
Economic and Development Authority’s (NEDA) oversight and planning capacity, and the
identification of 10 PPP projects to be supported under DPL II.
C. Improving governance
27. Policy reforms under this pillar were aimed at supporting the government’s drive for
increased transparency to enhance accountability and effectiveness in public expenditures.
Good governance was the mainstay of the administration’s agenda. Several steps were taken to
improve quality of spending by improving both budget formulation and execution practices. While
successes were achieved in the first aspect, a large unfinished agenda remained on the second till
the end of the Aquino administration.
28. The policy area under this pillar was to promote better public financial management,
budget transparency, and accountability. Reforms under this area were intended to improve the
governance of public expenditure as set out in the public financial management (PFM) roadmap,
particularly with a view to strengthen the budget preparation process, disclose budget execution
data, and improve management of the budget. Key reforms envisioned for addressing
shortcomings in these areas were the development and implementation of a government-wide
integrated financial management information system (FMIS), the preparation and adoption of a
unified chart of accounts for budget preparation and execution, and the public dissemination of
expenditure information on major projects, including the priority development assistant fund
(PDAF), popularly known as “pork barrel,” and the special purpose fund.
D. Developing the human capital of the poor
29. Policy reforms under this pillar aimed to increase human capital of the poor by i)
expanding coverage of social services, and ii) moving to a targeted system of identifying
beneficiaries, including through a scale-up resources allocated to the social sectors.
30. Expanding the coverage and quality of basic education services – The program sought
to arrest the stagnation in educational outcomes, such as declining enrollment rates and low
completion rates, by scaling up resources and reforming the educational curriculum and facilities.
First, the program targeted real increases in education resources over the course of the program,
35
particularly in the second operation. Second, it sought to improve implementation efficiency by
launching a new sector medium-term expenditure framework (MTEF) and an improved and more
integrated information system. A key program supported was the education service contracting
program, which sought to decongest public schools by providing subsidies to public school
students to enroll in private schools, which have excess capacity. The scale-up of the budget helped
accelerate construction of the much-needed classrooms and launch the K to 12 program, which
increased the mandatory curriculum by two years.
31. Expanding the coverage and quality of health services – The program highlighted that
while the Philippines has made progress in health outcomes, there remained significant disparities
across income groups and overall the Philippines still lagged other countries at similar levels of
development. As a result, the program supported the government’s policy of ensuring universal
access to healthcare. The primary policy reform envisioned to achieve this was extending
subsidized health insurance to the poor using the NHTS-PR. To complement this, the program
included planned measures to ensure the effective utilization of health benefits by the poor and
near-poor, including a strengthened outpatient program with identified primary healthcare
providers and streamlined administrative and contracting systems in the healthcare sector.
1.5 Revised policy areas
32. Policy areas remained broadly consistent throughout the program, with policy
triggers appropriately evolving as the program progressed. The majority of policy areas
envisaged at the commencement of the program were continued throughout and new policy areas
were introduced based on their relevance to and impact on the PDOs. The more notable changes
were in the formulation of the policy actions, which were mostly revised to adjust to the emerging
priorities of the government.
A. Maintaining a stable macroeconomic environment
33. Strengthening public revenue mobilization – The policy areas were broadly unchanged.
The main adjustment was the reformulation of the general tax policy trigger in the third operation
to cover more specifically the implementation of the sin tax. This is a notable development because
the rationale for this measure is primarily longer-term improvements in health, although it would
also be expected to have, at least in the short-term, a positive impact on revenues.
34. Strengthening fiscal risk management – This policy area proceeded as originally
designed.
B. Improving competitiveness and increasing infrastructure investment
35. Improving the investment climate – This policy area proceeded broadly as originally
designed, although the extent to which the Philippine Business Registry is linked with LGUs was
not evident. In its place, a reform to introduce integrated online payment was introduced, which
had not been explicitly recognized as a policy reform at the outset of the program.
36
36. Addressing infrastructure bottlenecks – There was a significant change to this policy
area. At the outset, it focused on progressive steps to support PPP projects with an indicative trigger
for the second operation. However, progress on the PPP agenda was slow given the realization that
good PPP projects take time to design and implement, and contingent liabilities from PPPs needed
to be better managed. By the second year, in lieu of PPP projects, the policy area was reoriented
to focus on public investment implementation, particularly reforms to improve the execution of
the DPWH infrastructure program.
C. Improving governance
37. Promoting better public financial management, budget transparency, and
accountability – The reform program set out under this policy area was broadly completed as
envisaged, with an additional policy area, the Philippines open data portal, added to the program.
D. Developing the human capital of the poor
38. Expanding coverage and quality of basic education services – There were no substantial
changes to the policy program in this area, except for the inclusion of a policy action in the final
operation that related to the update of the NHTS-PR that was not originally envisaged in the
program. This prior action is consistent with the overall goal of expanding coverage of the poor.
39. Expanding coverage and quality of health services – In this policy area, the trigger for
DPL II was amended from the implementation of a partial subsidy scheme in 20 provinces to full
national health insurance program (NHIP) enrollment for all CCT beneficiaries. This changed
reflected the availability of the NHTS-PR with nationwide coverage. Moreover, DPL III
introduced a prior action not envisaged at the outset, the use of the NHTS-PR to target at least
three major government programs for the bottom 40 percent.
1.6 Other significant changes
40. There were no other significant changes.
2. Key factors affecting implementation and outcomes
2.1 Program performance
41. The DPL program consisted of three operations comprising a total of 29 prior actions
that were all achieved – nine in the first operation, nine in the second operation, and 11 in
the third operation. Tables 7 to 11 summarize the implementation status of these prior actions by
PDO pillar.
42. Under the fiscal sustainability pillar, eight prior actions were achieved. There were
five different policy areas supported by the prior actions: i) tax administration reforms, ii) tax
incentives management, iii) tax policy reforms, iv) general fiscal risk management, and v) GOCC
fiscal risk management. Tax administration reforms were supported in the first two operations as
37
envisaged and are being actively followed-through by the BIR. Fiscal risk management through
the preparation of a fiscal risk statement was supported in DPL I and further developed in DPL III.
Tax incentives reform was a struggle over the period, with the initially supported preparation of
the fiscal incentives bill still stalled in congress at end of the program. Tax expenditure publication
was supported in the final operation. Finally, GOCC fiscal risk management reform was sustained
over the course of the program with policy actions in the first two operations that supported the
development of a new monitoring and reporting framework which is now operational.
Table 7. Consolidating Fiscal Sustainability through Revenue Mobilization and Risk
Management
Operation Prior action Implementation status
I The government has commenced
restructuring the Large Taxpayer
Service (LTS) under the approved LTS
rationalization plan, has approved its
Revenue Regulation No 17-2010,
which broadens the selection criteria
for large taxpayers, and had added
about 747 taxpayers to the LTS as of
Jan 1, 2011.
Efforts to strengthen the LTS were
sustained and the LTS was successful
in adding additional large taxpayers.
The number of large taxpayers rose
from 1,943 in 2011 to 2,287 in 2015,
reflecting annual growth of 4.2 percent.
BIR tax revenues from these taxpayers
rose from Php569.9 billion in 2011 to
Php881.5 billion in 2015, an annual
increase of 11.5 percent.
I The government has submitted a
revised fiscal incentives rationalization
bill to congress and has identified it as
a priority bill.
The bill was submitted as a priority bill
in 2011 but was not passed into law
before the closing of the 15th Congress
in June 2013, thereby rendering it
obsolete. Under the 16th Congress, the
Department of Finance (DOF) and the
Department of Trade and Industry
(DTI) each submitted separate versions
of the bill and reconciliation of the
differences remained pending.
I The Development Budget and
Coordination Committee (DBCC) has
published a fiscal risk statement as a
reference for the 2011 budget.
The fiscal risks statement was
published each year from 2012 to 2014
and continues to inform budget
formulation. The government is now
issuing this bi-annual starting with the
2015-16 statement issued already.
There has also been expansion in
coverage to include disaster risk and
remaining risks from the public sector.
I Senate Bill No. 2640, whose objectives
are, among other things, to promote
financial viability and fiscal discipline
in government owned and controlled
corporations, in part through temporary
The bill was enacted into law in 2011
as the GOCC Governance Act (RA
10149). The Governance Commission
for GOCCs was subsequently created
38
Operation Prior action Implementation status
delegation of reform power from
congress to the executive, has been
filed in congress.
and is effectively monitoring GOCC
performance.
II BIR has adopted a strategic plan for
2011-2016 and an agency-level set of
key performance indicators (KPIs) that
conform to good international
standards of tax administration, and has
collected baseline data for the year
2011.
BIR continues to actively monitor and
report KPIs, which include collection
efficiency, taxpayer compliance and
service quality, process efficiency,
resource utilization, and integrity.
These are available in the BIR website
(www.bir.gov.ph).
II DOF has implemented the web-based
financial monitoring framework for
GOCCs.
The gcg.gov.ph website is operational
and reports performance evaluation
agreements and results for GOCCs.
III The borrower has implemented a series
of revenue related reforms: i) the
implementation of a tobacco and
alcohol excise tax reform, and ii) the
completion and on-line publication of a
tax expenditure statement (TES)
concerning fiscal incentives for
investment.
The annual increase in tobacco and
alcohol excise tax rates proceeded in
accordance with the law, with tobacco
tax rates increasing more than fourfold.
The 2014 tax expenditure statement
reporting data on 2011 supported
greater fiscal transparency but has not
yet led to substantive action to address
fiscal leakages. The challenge going
forward is sustaining the TES and
expanding it to cover more incentive
areas.
III Fiscal risk management strengthened
through disclosure of broad risks
(annual fiscal risk statement) and
explicit/increased contingency
allocations in 2014 budget (risk
management program + national
disaster risk reduction framework
[NDRRF]).
The government was more explicit
about contingent allocations and risk
management, especially in the wake of
Typhoon Yolanda. The fiscal risk
statement is of good quality and covers
all major risks. Challenges remain in
further institutionalizing the fiscal risk
management function in government
and putting in place various
mechanisms to better insulate against
fiscal risk.
43. Under the cost of doing business pillar, three prior actions were achieved over the
program. These actions involved successive measures to support improvements in business
registration, which saw marked improvement in both cost and time for businesses that avail of this
procedure. However, the new online system is still only one of multiple business registration
routes, with a separately managed system for limited liability companies and paper-based option
39
still available. Given multiple systems, the full benefit of the reforms supported by the program
has yet to be realized.
Table 8. Reducing the Cost of Doing Business
Operation Prior action Implementation status
I The new web-based enhanced business
name registration system adopted by
DTI has reduced the average time
required for a business name
registration by 15 minutes.
The new online system
(business.gov.ph) is operational. While
the system is functional, a follow-up
technical evaluation in January 2015
suggested that a large number of the
initial name registrations are going
through a parallel paper-based process.
II The Philippine Business Registry
(PBR) has been uploaded online and is
functioning; PBR is linked with the
online Business Permit and Licensing
systems of two local government units
(LGUs).
The PBR and LGU systems were
linked in two LGUs with large amount
of business activity with new
businesses in those areas benefitting
from streamlined procedures. However,
in the rest of the country, linkages
between the PBR and LGU systems
remains poor and the challenge is now
to extend this functionality to more
LGUs.
III DTI has improved online functionality
of the PBR for national registration,
including ePayments.
The ePayments system is operational.
The ability to pay registration fees
online has further integrated previously
separate steps in registering a business
and thereby helped reduce red tape.
However, a significant agenda remains
to enhance information sharing across
LGUs and national government offices.
44. The public investment reforms under the program began in DPL II with one action
and was expanded to three actions in DPL III. Reforms were focused on improving the project
execution framework, including informed project selection and timely delivery of projects. The
performance of the program in this area was affected by the freezing of DAP-funded projects,
which adversely affected project execution. Nevertheless, reforms have supported a strengthened
framework, and if this can be maintained and built upon over time, public investment execution is
expected to improve.
Table 9. Strengthening Priority Public Investment Implementation
Operation Prior action Implementation status
II The Department of Public Works and
Highway (DPWH) has strengthened
project preparation and implementation
This action was built upon by
subsequent action in the following
operation (see next item).
40
Operation Prior action Implementation status
methodologies, and has quantified
performance targets, including
completing over 90 percent of project
bids for the 2012 general appropriations
act (GAA) allotments in the first
semester.
III The implementation of DPWH public
infrastructure program has advanced: i)
by January 1, 2014, over 80 percent of
the combined 2012 and 2013 capital
expenditure budget has been contracted,
and over 60 percent of these projects
have been completed, and ii) over 50
percent of the 2014 capital expenditure
budget has been contracted by June 30,
2014.
DPWH saw major scaling up of its
budget and worked to ensure early
contracting. A supreme court ruling
that declared aspects of the
Disbursement Acceleration Program
(DAP) unconstitutional led to stalled
execution in the second half of 2014,
causing public investment spending to
collapse, and thereby pulling down
economic growth. The government is
taking proactive steps to accelerate
execution by addressing key
absorptive capacity issues, such as
right of way, procurement, and
technical design.
III DPWH has delivered contract of works
under the tourism road infrastructure
program (TRIP) network preparation
process and resulting plan.
TRIP was expanded in the 2015
budget covering 149 new projects and
the completion rate of the existing
portfolio up to 2014 is above 50
percent.
III The 2014 GAA requires that DPWH
implements the regular farm-to-market
road (FMRs) program with the
Department of Agriculture (DA)
providing and disclosing the network
plan for these projects.
The reforms revealed significant
shortcomings in the extent of network
planning for the FMR program. All
projects have now been geo-tagged
but completing this pre-requisite
enforced by DBM led to a delay in
implementation in 2014.
45. Improved governance through public accountability and transparency was an
ongoing policy program, with five policy actions supported over the course of the DPL
program. The program supported two budget transparency measures in the first two years on clear
reporting and accountability of major government programs and public investments. These
measures helped inform public debates which led to the identification of policy priorities. The two
measures supporting PFM reform were completed but the broader reform of an integrated
information system stalled. The final policy area which featured in DPL III was the implementation
of an online data portal. A number of good practices were introduced in the budget formulation
and the budget calendar was pushed earlier to include additional rigor in review of the budget
proposals from line agencies. Additional conditions for some aspects like zero-based budgeting
and the need to provide geo spatial information for road projects in fact led to a slowdown in the
41
spending. Institutional fragmentation of the central finance functions required extensive
coordination efforts around the PFM Reform Roadmap. Each DPL’s preparation process itself
served to repeatedly convene the key oversight agencies, and key line agencies. The Bank kept
emphasizing the need to strengthen institutional mechanisms, including around FMIS to improve
the working coordination among DOF, CoA and DBM. The PFM Steering Committee was the
main counterpart mechanism for this. A Public Finance Law or act was one mechanism considered
at the end of the series, but the enabling environment for enactment was not present.
46. A major setback to the PFM reforms was the failure to proceed with implementation
of FMIS as planned. Several benefits hinged on the FMIS did not materialize since this could not
be procured after three attempts. The first round yielded a few bids but these were all declared
invalid due to various technical reasons regarding fulfillment of procedural requirements. In the
second round, one bid was successful and after necessary clearances, the final contract was sent to
the President’s office for approval and signature. At this point, political economy issues came into
play and it was realized that sufficient effort had not been made to secure the support and
ownership of stakeholders beyond DBM. The contract was scrutinized and eventually not
approved largely, it is perceived, due to lack of support from other oversight agencies. The
underlying bid expired. The scope of the contract was then reduced drastically to limit
implementation to BTr and DBM only. Again technical formalities were not properly completed
in the first procurement process and success was achieved in the second attempt. This scaled down
version comprising only core treasury functions was contracted at the tail end of the administration
and remains in development stage at the end of 2016. In the absence of timely, complete and
reliable information on the budget execution, reforms in budget formulation and transparency
demonstrated little impact.
Table 10. Fiscal Transparency and Good Governance
Operation Prior action Implementation status
I To strengthen transparency and
accountability, the 2011 general
appropriations act adopted by congress
has mandated that the implementation
status and fund utilization of major
programs and projects be posted by
departments and agencies on their
official websites and that the
Department of Budget and Management
(DBM) post on its website all releases
and realignments under priority
development assistance fund (PDAF).
Government agencies were selectively
reporting on major programs. Prior to
the supreme court decision that
declared the priority development
assistance fund (PDAF)
unconstitutional, DBM published
details of the PDAF program, which
received significant public scrutiny.
Therefore, this transparency measure
can be considered to have had
substantial impact. Beginning with the
2014 GAA, PDAF is no longer a
government program.
42
Operation Prior action Implementation status
II The interagency committee (IAC) has
approved an action plan to implement
the public financial management (PFM)
reform roadmap, including the adoption
of a unified account code structure
(UACS) for accounting, treasury,
transactions, and auditing.
Under the PFM roadmap, significant
progress was made in rolling out the
treasury single account for revenue
and adopting the UACS. The major
setback was the failure of the
completion of procurement for an
FMIS which was a major component
in the PFM roadmap. UACS has been
fully adopted and is being used for
budget formulation and financial
reporting. In the absence of a FMIS,
its full benefits in the ability to drill
down and analyze budget execution is
very limited.
II DBM has published not later than two
months after the end of each quarter the
obligated expenditure data for the
2011/2012 budget required from line
agencies of the borrower, as well as
gaps from those that have not submitted
such data.
DBM continues to publish the
obligated data in the statement of
allotment, obligation, and balances
(SAOB) on a quarterly basis. At the
time of assessment, the series was up-
to-date with a lag of only slightly over
two months. Blank rows with
departmental headings identify
missing data submissions.
Nonetheless, this reform has led to
notable contribution towards
transparency.
III The borrower has adopted a unified
account code structure (UACS) for
accounting, budgetary, and treasury
transaction and implemented this as part
of the 2014 budget preparation and
implementation.
The UACS was used as the primary
coding structure for budget
formulation and execution. Starting
with 2014, budget is prepared using
this classification. Capturing the full
54-digit code at the transaction level is
challenging in a manual record
keeping system, but aggregate
reporting is compliant with UACS.
Complementary reforms on
automation have been delayed thereby
affecting timely release of execution
data by DBM.
III The Philippines open data portal
(data.gov.ph) is fully operational with
full electronic access to over 600
datasets.
The portal is operational and contains
more than 600 datasets. The next
challenge is analyzing usage statistics
and closing the feedback loop (i.e.,
facilitating mechanisms for the data to
43
Operation Prior action Implementation status
be utilized by citizens for analysis and
verification resulting in feedback to
the government).
47. The DPL series supported nine prior actions on health and education reforms. These
reforms consistently built on previous operations and marked key milestones in the development
of landmark government policies on universal healthcare, poverty-targeting, and education service
delivery. In both education and health, the program reflected an evolution of the policy programs
to reach the stated objectives, which realistically reflected continued government focus on the
overall objectives. In health, an initial program to subsidize health insurance was broadened to
automatic and free enrollment for all poor households. In education, the constraint of limited public
school space was initially address by subsiding private school spaces, but then complemented by
a school building program. The roll-out of a new poverty targeting and social protection system
was supported and was further developed into a convergence program where pro-poor benefits
across the social sector were unified using a single targeting system. Overall, the policy areas under
this pillar indicated strong government ownership and rapid progress on major reforms.
Table 11. Developing the Human Capital of the Poor
Operation Prior action Implementation status
I The Government Assistance to Students
and Teachers in Private Education
(GASTPE) budget allocation that funds
the education service contracting (ESC)
program of the Department of Education
(DepEd) has been increased by 48
percent in 2011 compared to 2010.
The ESC program was effective in
relieving pressure on the public
education system by providing
subsidies to public school students to
attend private schools where space in
public schools was not available. As
demand increases due to the K to 12
program, ESC will continue to be an
important program in ensuring access
for lower-income children.
I The medium term expenditure
framework (MTEF) of DepEd has been
updated to reflect the resources required
to implement its policies, programs and
strategies, including the K to 12
program.
The MTEF supported the rolling out
of major programs such as K to 12,
which has taken effect beginning
school year 2016-2017.
I PhilHealth has adopted Board
Resolution No. 1479 for the
implementation of the partial insurance
premium subsidy program for the near-
poor.
The board resolution was adopted and
further progress was made in reaching
both poor and near-poor. All
households in the lowest four income
deciles are now eligible for full
premium subsidies.
II The per-student subsidy provided to
participants in the ESC program has
been increased to enable greater
The per-student subsidy increase was
implemented and supports the
effective access of students to private
44
Operation Prior action Implementation status
participation in the program by students
from low income households, based on a
program review conducted by DBM and
DepEd.
schools where space is not available in
public schools.
II The actual spending (adjusted for
inflation) of DepEd in 2011 has been
equal to or greater than its spending in
2010.
Additional DepEd expenditure (by 32
percent in real terms) led to more
teacher recruitment and classroom
construction that helped relax
constraints to better educational
outcomes.
II Households receiving conditional cash
transfers under the 4P program have
been enrolled in the national health
insurance program (NHIP) for receiving
an enhanced package of PhilHealth
benefits.
This action follows from DPL I.
PhilHealth benefits were extended to
more low-income households.
Although there is limited evidence at
present about these households’
utilization of benefits, a large number
are registered with local healthcare
providers.
III Expand the CCT coverage to children
up to 18 years of age.
In 2014, CCT coverage was expanded
to children aged between 14 and 18,
which supports reforms to extend
compulsory schooling to age 18 from
2016.
III The preparation for NHTS-PR II is
advanced: i) operational manual is
revised to reflect lessons learned from
the previous assessment, ii) field
workers are being hired and trained
using standard training tools, iii) IT-
enabled data collection and encoding is
developed and tested, and iv)
arrangements for spot checks to monitor
reassessment processes are in place.
While preparations for the NHTS-PR
update were well advanced, funding
was delayed in 2014 due to the
cancellation of the DAP, which meant
the project did not commence in 2014
as planned but began in early 2015
after supplemental budget was
provided. The update has now been
completed.
III NHTS-PR used to target at least three
major government programs to the
lowest 40 percent of the population,
including evidence that PhilHealth has
achieved effective enrollment of poor
and near poor in the bottom 40 percent
of the population.
A large number of government
programs are already utilizing the
NHTS-PR, including the major
government programs such as CCT,
Philhealth indigent program, and
social pension program.9 The next
challenge is ensuring availment of
services by the poor and measuring
impact on their health.
9 Under this program, a monthly stipend of PHP 500 is provided to indigent senior citizens 77 years old and above.
The age requirement was recently lowered to 65 years old.
45
2.2 Major factors affecting implementation
48. The DPL program reflected well the priorities of the Aquino Administration and as
a result most policy areas supported by the DPL series received sustained and high levels of
political commitment that help drive results. In particular, governance reforms in public
investment and social service delivery were the highest priority and got the most support in terms
of budget allocation, oversight, and technical assistance. This strong alignment between
government priority and the design of the DPL series was the single most important factor of
success.
49. Moreover, a strong analytical basis and good coordination with active sector
programs led to well-designed policy areas that supported implementation. The Bank has
invested significantly in analytical and advisory activities to support the program. On fiscal policy,
a comprehensive tax policy report was prepared in 2011 and substantially updated in 2014.
Technical assistance was provided to institutionalize program evaluation, manage the sin tax
reform, and prepare fiscal risk and tax expenditure statements. On business regulations, the
International Finance Corporation (IFC) continues to work with the National Competitiveness
Council in streamlining business procedures, though admittedly, they faced resistance from a
number of national government agencies and local government units who preferred the status quo.
On public investment, the Bank and IFC supported the PPP Center during its start-up and the Bank
engaged with DBM and DPWH to accelerate public infrastructure projects. The Bank also
continued earlier engagement with DBM, Bureau of Treasury (BTR), and Commission on Audit
(COA) to address PFM issues. A PEFA assessment was done in early 2016 and published prior to
the change in administration in June 2016. On the social sectors, significant technical assistance
was provided to launching and managing the CCT program, including expansion to health and
education sectors. In sum, analytical and advisory activities appear to be fully adequate to support
the program and any remaining gaps are largely attributed to implementation capacity.
50. On the other hand, some factors contributed to reducing the planned impact or
increased risks to the sustainability of outcomes. These are explained below.
51. Even with a reformist government, coordination challenges across government
agencies remain substantial. A major factor slowing down implementation was the difficulty of
coordinating among executive agencies, between the national government and the local
government, between the executive and congress, and between the executive and constitutional
offices. For instance, weak progress in passing the fiscal incentives bill stemmed from a lack of
consensus between the Department of Finance that is mandated to raise revenues, and the
Department of Trade and Industry that is mandated to raise investment. Several attempts to
reconcile their differences were either unsuccessful or led to significant watering down of the
DOF’s preferred bill. Weak progress in starting a business exemplifies both lack of coordination
among national government agencies involved in business start-up (e.g., Securities and Exchange
Commission [SEC], BIR, PhilHealth, Social Security System [SSS], Home Development Mutual
Fund [Pag-IBIG], etc.) and between the national and local government units (LGUs), the latter’s
autonomy from the national government was increased in 1991 with the passage of the Local
46
Government Code. Less frequent interaction between the executive and legislative branches,
notably through sub-optimal use of the Legislative-Executive Development Advisory Council
(LEDAC), has led to a slowdown in the passage of important bills, notably tax policy reforms.
Finally, a number of policies requires coordination with constitutional office, which have the
highest degree of autonomy. In particular, the mandate for various parts of PFM is fragmented
across DBM, DOF, NEDA, and COA, and any issue which leads to actual or perceived overlap in
authority gets stalled.
52. Strong resistance by vested interests against some reforms meant that progress stalled
to avoid expending limited political capital. Lack of progress in some areas is linked to the
challenges of building consensus among different interest groups. DPL II and III highlighted risks
arising from vested interests resisting change. The sin tax reform is a notable example, which
passed by only one vote at the bicameral committee despite very strong economic and health
rationale. While some positive steps were taken, there was little long-lasting change to sustainably
shore up tax revenues, measures which would see some losers at least in the short term, and
especially in the area of tax incentives, where a tightening of rules would have hit a number of
clearly defined groups and would have been politically unpopular.
53. Lack of donor coordination has added to implementation challenges. Major donors
have carried out budget support programs largely independently of one another, which has added
to the compliance and coordination burden for government. While lessons learnt from the previous
DPL on sufficient analytical underpinnings and appropriate sequencing have been well factored
into the program design, other areas such as ensuring development partner coordination have
remained unaddressed. Following a divergence in budget support operations in 2008, the major
development partners, World Bank, Asian Development Bank, and Japan International
Cooperation Agency, have provided separate budget support operations often with conflicting
policy priorities. Not only does this increase transaction costs, but focusing on different policy
areas reduces attention and potentially splinters reform effort, increasing the risk that reforms are
not institutionalized.
54. An ambitious program and at times vaguely-defined results framework reduced
clarity and focus on results during implementation. While the majority of the program was
appropriate and well designed, there is evidence of a high level of ambition in some areas,
especially in the outer years. DPL I was clear that some of the indicative triggers set, for instance
around the PPP projects, were “stretch targets” which both the government and the Bank thought
would be difficult to achieve, and these actions were subsequently removed from the program. The
fiscal incentives bill sought to address a major reform area but was also known to be controversial.
The attainment of program targets in some areas was challenging given a high level of ambition
in some areas, high risks in a number of areas, and some unrealistic result indicators. For instance,
the original results indicator in the area of tax reform targeted a large increase in tax of two
percentage points of GDP over the original program term of three years. However this was
contingent on further tax policy reforms, which did not materialize. If such areas were known to
be unlikely to succeed at the outset, it may be that other forms of support would have been more
appropriate or if retained, their timeframe could be made more realistic. Moreover, the results
framework exhibited some deficiencies, including poorly defined indicators which were not easily
measured (e.g., no baseline), results that were hard to attribute to supported reforms, and an overly
47
high level of ambition in the target values. This is a notable finding given one of the lessons learned
from the previous Philippines DPL ICR was to ensure an appropriate level of ambition.
55. Risks around macroeconomic and political instability did not materialize, which
might have otherwise put the program off-track. At the commencement of the program, the
Philippines was recovering from the global downturn that saw negative per capita growth and a
sharp decline in government revenues, raising the risk of fiscal instability. But due to good fiscal
management and favorable economic conditions, including an uptick in investment, the
government was able to maintain a steady economic and fiscal position over the course of the
program and as a result the risk of a fiscal crisis fell rapidly. A risk raised in DPL II was around
mid-term elections and the possible impact that they may have on the ability of the administration
to deliver on their reform program. But following the elections, the Aquino Administration
continued to receive the support of both houses on the majority of issues and remained popular in
the public’s view. A final source of risk is risk coming from natural disasters, as Typhoon Yolanda
highlighted. While the Philippines recovered well from the devastating typhoon, the disaster did
expose the weaknesses of the fiscal house with regard to disaster risk management.
56. Inefficient, unclear, and sometimes contradictory budget processes slow down
reform. The Aquino Administration’s ambitious governance and budget reforms aimed at
accelerating impact of government spending on growth and poverty ran into serious headwinds by
mid-term. The current government organization and budgeting law, known as the “Administrative
Code,” was enacted in 1987 and was hardly amended to take into account innovations in
technology and processes. The lack of budget flexibility, among other reasons, which contributed
to slower spending in 2011, was partially addressed by the Disbursement Acceleration Program
(DAP), which moved funds from slow moving projects to fast moving projects. At first, this
scheme was successful in accelerating spending in 2012 and 2013, but public scrutiny led to the
filing of a case before the Supreme Court, questioning its constitutionality. The Supreme Court,
while acknowledging its positive impact on economic growth, ruled some aspects of the DAP
unconstitutional. This led to a slowdown in spending. Both the Supreme Court ruling and its impact
on spending could not be foreseen during the preparation of DPL III which was approved shortly
after the 2014 Supreme Court decision. Moreover, Typhoon Yolanda further exposed the system’s
rigidity, which was hard pressed to support emergency spending for relief and reconstruction. The
government learned that stop gap measures do not address the root cause of the problem brought
about by the 28-year old obsolete system, which is already operating at capacity and is hard pressed
to support higher spending. There is strong realization of these constraints. The Aquino
administration starting review of processes to address spending, design, right of way, and
procurement bottlenecks, while also drafting a new organic budget law, which would clarify,
streamline, and harmonize the various pieces of legislation and executive orders on the budget
process to improve delivery of services. The new administration has continued this emphasis and
a Budget Reform Bill is under preparation.
48
2.3 Monitoring and evaluation design, implementation, and utilization
2.3.1 Monitoring and evaluation design
57. The results framework of the DPL series has undergone major changes. During the
preparation of DPL I, a set of 17 outcome indicators were identified. This was increased to 18 in
DPL II and finally expanded to 23 in DPL III (with 13 added indicators and seven removed relative
to DPL I). Indicators were selected in agreement with the government for the five pillars of the
DPL program.
58. The increase in the number of indicators reflects both improvements in the design of
the results framework, refinements in the prior actions, and alignment with the country
partnership strategy (CPS). The original design of the results framework was based on the 2009
CAS framework, which focused on achieving a stable macro economy, strengthening the
investment climate, improving public service delivery, reducing vulnerabilities, and supporting
good governance. It also took into consideration lessons learned from the first DPL operation in
2007. In particular, efforts were made to ensure that indicators were more measurable and that data
would be available for assessment at project completion. The design of the results framework went
through significant changes by DPL III, reflecting the new CPS framework (FY15-18), which in
turn reflects the shift in priorities from macroeconomic stability and governance to
implementation, pro-poor targeting, and other structural issues.
59. The original monitoring and evaluation framework exhibited some limitations due to
an overly ambitious design, which was partly addressed in later operations. In some cases,
the design of the monitoring framework was based on the expectation of new monitoring indicators
being prepared but which never materialized. Moreover, some were contingent on further reforms,
such as tax policy reforms, which also did not fully materialize. At the time of the ICR mission,
two10 of the original results indicators were still missing baseline and actual values and a third11
was missing any actual values. In each case, the inability to assess results indicators was due to
overreach at the design phase, rather than a lack of monitoring efforts, because the indicators were
not part of any standard information release. Two of these three indicators were removed in
subsequent operations, while the third (relating to starting a sole proprietorship) remains in the
results framework but could only be measured through specific efforts and not through routinely
available information which is available for corporates but not sole proprietorships.
2.3.2 Monitoring and evaluation implementation and utilization
60. The monitoring and evaluation framework design also struggled to balance the high
level PDO with attributable results against the prior actions. The overall PDO was to achieve
inclusive growth, but this was not defined as a measurable outcome in the results framework.
Instead, the original monitoring and evaluation framework included a number of relatively high
level outcomes as results indicators, such as total tax revenue as a proportion of GDP and total
10 Out-of-pocket healthcare payments amongst poor (indicator now removed) and average number of days required to
start a business. 11 Increased utilization of health services (indicator now removed).
49
investment as a proportion of GDP which are highly relevant to the overall PDO but somewhat
outside the direct influence of policies supported under the program. In subsequent operations,
many of the high level result indicators were removed and substituted with indicators that more
directly measure the effectiveness of various government programs supported under the policy
framework.
61. Monitoring and evaluation has been a regular activity throughout the course of the
DPL series. Results monitoring primarily took place through the implementation status report
(ISR) preparation for each DPL operation, during the preparation of DPL II and DPL III, and the
ICR preparation for the entire DPL series. Assessment of indicators occurred over the course of
the program. For some indicators, data collection has been a recurring issue. Specifically, for the
indicators related to improving the ease of doing business where a central data base of
improvements made by local governments is not available. Nonetheless, any revisions to baselines
and targets necessitated by this limitation remained aligned to the original purpose of the measures;
thereby, ensuring continuity.
62. The monitoring and evaluation framework provided valuable input into the design of
successive operation, and supported broader government and World Bank policy and
programming. The continued monitoring and reporting on results on many of the government’s
flagship policy areas has supported a continued critical discussion around policy implementation
and resource prioritization. The design of the results framework in DPL III took into consideration
a possible new DPL series and the preparation of any proposed program will be heavily informed
by the results of the previous operation and this ICR.
2.4 Expected next phase/follow-up operation
63. Engagement through a DPL series with the new administration is under discussion. Currently at a very preliminary stage, this would aim to support the government in the pursuit of
its 10-point socio-economic and reform agenda which continues the directions of the
macroeconomic policies of the previous administration. While the content is still under
formulation, the government has expressed interest to include therein the areas of tax policy and
administration reforms, customs and collection improvement, and reforms to support the newly-
formed Philippine Competition Commission. The government has recently steered the Philippine
Development Forum in Davao that will give substance to its reform agenda with the Philippines
Development Plan and Philippines Investment Plan under preparation for finalization in early
2017. Prior to the change in administration, the Bank started working on a draft DPL IV for
delivery in FY16 to support last mile reforms of the previous administration. This planned DPL,
however, could not materialize largely due to delays in the completion of approval processes
within the government.
50
3. Assessment of outcomes
3.1 Relevance of objectives, design, and implementation
64. Coming from a decade of fiscal instability, weak governance, and stubbornly
persistent poverty despite higher growth, the Aquino Administration appropriately focused
on achieving rapid, sustained, and inclusive growth as its development objective. In 2011, the
Aquino Administration’s campaign slogan “kung walang corrupt, walang mahirap” was translated
into the 2011-2016 Philippine development plan (PDP). The PDP envisions a Philippines with
“high growth that is sustained…that massively creates jobs…and reduces poverty.” To achieve
this goal, the government intends to i) invest heavily in physical infrastructure, ii) improve
governance, iii) enhance human development, and iv) accelerate employment generation. These
PDP pillars have been supported by the 2009 CAS and the 2014 CPS, which form the basis for the
DPL pillars.
65. The objectives pursued by the DPL series are fully consistent with the Bank’s 2009
CAS and the 2014 CPS. The 2009 CAS prioritizes achieving a stable macro-economy, while also
focusing on a strengthened investment climate, improved public service delivery, reduced
vulnerabilities, and better governance. The FY15-18 CPS builds on the 2009 CAS by emphasizing
the following pillars: i) supporting public sector reforms to improve transparency, accountability,
and governance, ii) empowering the poor and vulnerable, iii) achieving rapid, inclusive, and
sustained economic growth for more and better job creation, iv) addressing vulnerability from
climate change, environment, and disasters, and v) building peace and development.
66. These same objectives appear in the DPL series and even with the shift from the CAS
to the CPS, the DPL series’ PDO was not substantially altered. Even though fiscal policy
adjustments achieved in 2005 averted a fiscal crisis and represented a major step forward in
achieving these objectives, fiscal sustainability remained a concern through the early years of the
Aquino Administration. With this in mind, the DPL series continued to support reforms to deepen
macroeconomic stability such as raising tax revenues and further reducing fiscal risk. The DPL
series also continued to support governance reforms. On the other hand, the total investment ratio
in the Philippines continues to be relatively low and has constrained the ability of the Philippines
to sustain high and inclusive growth. Moreover, social services spending has significant room for
improvement. These have resulted in slower job creation and poverty reduction, albeit improving
in recent years. All these suggest that the policy focus adopted in the DPL series was justified in
terms of the country’s development needs.
67. To support the PDO, the government and the Bank agreed on a set of prior actions
for the DPL series which were believed to be attainable given the prevailing political
environment. Given past issues with reforms that require congressional approval, the prior actions
were limited to those that only require executive decision and fall under priority programs.
68. The results framework, while supportive of the PDO, was initially too high level and
quite ambitious. This reflected initial optimism of the government that reforms could be quickly
implemented given strong public support for the new government. However, the results framework
51
was eventually adjusted to cover more specific outcomes that are less ambitious, reflecting the
changing political dynamics especially after the mid-term election.
3.2 Achievement of PDOs
69. Sustained inclusive growth. The overall PDO was to “help the Philippines achieve
sustained inclusive growth”. Inclusive growth meant growth that creates more and better jobs and
reduces poverty at a faster rate. Reform efforts have been paying off. Between January 2014 and
2015, more than a million jobs were created as the unemployment rate fell to 6.6 percent,
significantly lower than the seven to eight percent recorded in the previous decade. Moreover,
poverty incidence among Filipinos dropped to 21.6 percent in 2015 from 25.2 percent in 2012,
representing a feat of 1.8 million Filipinos lifted out of poverty in three years. The decline in the
number of poor can be attributed to improved incomes, higher employment rate and the generally
stable inflation environment. Another significant contributor has been the government’s
conditional cash transfer program, the Pantawid Pamilyang Pilipino Program, whose budget
increased by almost 200 percent to Php 62.3 billion, and whose household coverage almost
doubled to 4.4 million households between 2011 and 2015. To further gauge the achievements of
the PDO, it will be assessed based on the more specific sub PDOs, and consideration about their
likely impact on inclusive growth.
70. Fiscal sustainability was supported through solid revenue gains, and improvements
in risk management and reporting. Almost all of the indicators under this pillar are rated
satisfactory or highly satisfactory, reflecting the fact that substantial progress was achieved in all
areas over the course of the program. Higher tax revenues reflected i) the effectiveness of the
government’s efforts to improve tax administration, ii) higher economic growth, iii) some tax
policy reforms, notably the sin tax reform, and iv) improvement in GOCC accountability.
Revenues from the Bureau of Internal Revenue (BIR), which account for 80 percent of tax
revenues, increased from 9.1 percent of GDP in 2010 to 10.6 percent of GDP in 2014. The 1.5
percentage points (ppt) increase in BIR revenues is roughly attributed to the following: 0.3 ppt
from excise taxes from alcohol and cigarette, -0.4 ppt from erosion in the tax base due to existing
fiscal incentives and unindexed petroleum excises, and 1.6 ppt from a combination of higher
economic growth and better tax administration. Excise tax revenues from alcohol and tobacco
nearly reached its target. Despite these gains, there is a significant risk that revenue gains achieved
so far could be reversed given a number of enacted and proposed tax breaks (e.g., higher exemption
threshold for bonuses, increase in the marginal threshold to PHP 1 million, and more fiscal
incentives). Moreover, an erosion in tax governance could weaken revenue mobilization. These
setbacks make achieving the government’s PDP target of 16 percent of GDP by 2016 unlikely.
71. Overall fiscal management was achieved through increased awareness of fiscal risks,
tax expenditure, and fiscal leakages reduced through better GOCC performance
measurement. The fiscal risk statement (FRS) was produced for three straight years, is available
online on the DBM website, and is being used to inform budget preparation. In 2014, the first tax
expenditure statement (TES) was published covering the period 2012 and made available in the
DOF website. It showed that fiscal incentives amounted to at least 1.5 percent of GDP annually. It
is now being used to inform the budget process. However, stakeholder awareness is estimated to
52
be basic as dissemination of the FRS and TES has been limited. Impact stemming from public
awareness of fiscal risks has yet to be observed, given the lack of further progress on reform on
tax exemptions, and the long time lags in publishing tax expenditure data. Finally, GOCC fiscal
performance has improved and is contributing less to the public sector deficit. From a contribution
of 0.7 percent of GDP to the deficit in 2010, the fiscal position of GOCCs have turned around to
post a surplus of 0.2 percent of GDP in 2014. In addition, the majority of the top 20 GOCCs in
terms of subsidies received from the national government are now governed by performance
evaluation contracts under the Governance Commission for GOCCs.
72. Fiscal sustainability results indicators removed from the final results framework
under this pillar also showed progress but were deemed not suitable because they either
exhibited design weaknesses or were overly ambitious. The removed indicator on overall tax
collections as a ratio to GDP showed a substantial increase from 12.1 percent in 2010 to 13.6
percent in 2014, albeit less than the initial target of two percentage points of GDP. The removed
indicator on public sector debt as a ratio to GDP showed a substantial improvement, falling from
58 percent to 49.8 percent, exceeding the target. The removed indicator on proportion of total
revenue from LTS improved from 54 percent to 64 percent, but fell somewhat short of the target
of 70 percent. Finally, the indicator of sovereign credit risk ratings was met as all three credit rating
agencies improved Philippines risk rating by one notch.
73. Impact of the program on reducing the cost of doing business for sole proprietorships
is assessed through a proxy variable – the nationwide LGU’s streamlining of the Business
Permits and Licensing System (BPLS). Spearheaded by the Department of Trade and Industry
(DTI) and the Department of Interior and Local Government (DILG), the BPLS mainstreaming
started in 2010 and required local government units to (i) adopt the unified form prescribed by the
joint memorandum circular no. 1 and do away with old forms, (ii) ensure processing time for
business application not to exceed 10 days for new applications and five days for renewals, (iii)
retain a maximum of five steps in the application process, and (iv) reduce the required signatories
to five or lower. These guidelines were applied nationwide. As of 2nd quarter of 2014, a total of
1,376 LGUs (137 cities and 1,239 municipalities) have been given training on how to streamline
their BPLS. Of these number, 1,221 have completed the streamlining process while 155 LGUs are
still undergoing reforms. There have been significant reforms at the local level, which have
contributed to reducing the number of days needed to register a sole proprietor business. In some
cities such as Manila, Mandaluyong, Quezon City, Pasig, Puerto Princesa, and Tuguegarao, the
number of days needed to register a sole proprietor business has now reduced to only one to three
days, down from 35 to 45 days previously.
74. Priority public investment implementation, both in terms of quantity and quality, has
continued to face challenges, but reforms have borne results. All of the four results indicators
in this area are rated as moderately satisfactory and above. Achieving these targets faced difficulty
in 2014, when increasing spending in line with the budget allocation was partially hampered by
the impact of a natural disaster over the period, and an inability to address constraints to
implementation of public investment projects. With stronger government focus, however, the
public investment reforms that have been set in motion have started to bear results. For instance,
a commitment to increase public investment from 1.8 percent of GDP to greater than 3.5 percent
of GDP resulted in public investment of 4.3 percent of GDP in 2015. Similarly, DPWH
53
infrastructure spending has risen from its baseline of 1.5 percent of GDP in 2013 to 2.1 percent of
GDP in 2015, 0.6 percent higher than the target. In terms of quality of spending, spatial targeting
has been introduced into four selected infrastructure programs, which marks good progress, and
there are indications that spending quality continues to improve given savings in procurement and
better targeting of projects especially in national roads, some local roads, and some facilities.
75. Fiscal transparency and good governance – The indicators under this pillar are rated
satisfactory. A public expenditure and financial accountability (PEFA) assessment conducted in
2016 evaluated the three PEFA indicators and found that the ratings for these improved. The score
for performance indicator (PI) 10, public access to key fiscal information, improved from C to A
as a result of publication of audit reports by COA and contract awards by DPWH. The score for
PI 24, quality and timeliness of in-year budget reports, marginally improved from D to D+. The
sub-indicators within this indicator however showed improvements in the scope and quality of the
reports. While the reports are being regularly disclosed, timeliness of submission by several
departments remains a challenge. For PI 5, classification of the budget, the adoption of UACS led
to improvement of the score. Since 2014 this is used for budget formulation and has progressively
been rolled out to financial reporting. Pending the anticipated automation of accounting and
financial reporting processes, applying the 54-digit code at the transaction level in a manual
recording environment is difficult. While the aggregate financial reporting is compliant with
UACS, the benefits regarding analysis and drill down of budget execution data are not yet
achieved. Improvements in the public availability of public finance information are significant and
if sustained are likely to support improved public debate over fiscal policy making and thus support
budgets which address constraints to growth in an inclusive manner.
76. Together with better management of schools, higher spending in education resulted
in notable gains in the education indicators. Five out of six indicators are rated as highly
satisfactory, with one rated as moderately unsatisfactory. Student-teacher ratios for both primary
and secondary schools fell from greater than 40 in 2010 to less than 30 in school year (SY) 2013-
14, while student-classroom ratios also fell substantially from 44 percent in 2010 to 27 percent in
SY 2013-14 in primary schools, and from 60 percent to 32 percent in secondary schools.
Meanwhile, net enrollment ratios in both primary and secondary schools increased from 88 and 60
percent in 2010 to 95 and 65 percent in 2014, respectively. Only net enrollment in secondary
schools, which registered a modest increase, did not reach the target of 76 percent by 2014. The
clear progress in improving the enrollment and learning environment for school children is likely
to be strongly supportive of inclusive growth over the medium term, as education is one of the
most important determinants of increased productivity and income in the future. As more children
attend and complete secondary school, aided by the expanded CCT program, these effects are
likely to strengthen.
77. In health, rapid progress has been achieved in rolling out of the NHTS-PR program,
which has helped extend access to millions more low-income households. Latest data indicates
that 92.6 million individuals targeted under NHTS-PR are now covered by PhilHealth, compared
to 21 million in 2010. While the target for this indicator was not clearly defined,12 the scale of the
12 The target was defined as “100 percent of eligible households”, however the eligibility criteria have been continually
adjusted to increase the scope of the program and include more low-income households with eligible households
54
increase has exceeded expectations and can be considered to be highly satisfactory. As of 2015,
28.2 million individuals were registered with a primary care benefit provider, compared to a target
of 9.5 million. Finally, the proportion of healthcare claims due to NHTS-PR families rose from 20
percent in 2010 to 32 percent in 2015, meeting the target of “greater than 27 percent.”
reportedly automatically enrolled. Therefore, while the target is automatically met, it is assumed that the intent of the
target was a scale up in the coverage of households of a level somewhat less than has actually been achieved.
Table 12. Achievement of Outcome Indicators
Indicator
Relates to actions
in: Baseline Target (2014) Outcome Rating
DPL
I
DPL
II
DPL
III
Pillar 1: Strengthening Priority Public Investment Implementation
Public infrastructure
investment (from the
budget) X X
1.8 percent of
GDP in 201013 >3.5 percent of GDP 4.3 percent of GDP in 2015 S
DPWH public
infrastructure
investment X X
1.5 percent of
GDP in 201014 >1.5 percent of GDP 2.1 percent of GDP in 2015 S
DPWH public
investment project
portfolio
prioritization
improved, as
measured by percent
value of budgeted
contracts bid in first
half
X 31 percent of GAA in 2010 >50 percent of GAA 51 percent of GAA in 2013 MS
Spatial targeting
clarified and project
selection
transparency
enhanced as
evidenced by
operational network
plans and
implementation by
DPWH for two
major priority road
programs
X 0 in 2010 2/4
4/4 in 2014
(e.g., Tourism road
infrastructure program
[TRIP], Farm to market
roads [FMR], School
building program [SBP],
and Health facilities
enhancement program
[HFEP])
HS
13 Baseline revised from “<2.5 percent of GDP” for greater precision to enable assessment of progress against the indicator. 14 Baseline revised from 1.1 percent of GDP due to data revisions during the program.
56
Indicator
Relates to actions
in: Baseline Target (2014) Outcome Rating
DPL
I
DPL
II
DPL
III
Pillar 2 : Reducing the Cost of Doing Business for Jobs Creation and Poverty Reduction
The average number
of days required to
register a sole
proprietorship
business has been
reduced to under 10
days for selected
cities
X X X >10 days (national + local) <10 days (national + local)
3 days (Quezon City)
1-3 days (Manila,
Mandaluyong, Pasig, Puerto
Princesa, and Tuguegarao)
<10 days (98% of 480 target
LGUs); 1,221 LGUs have
finished streamlining the
Business Permit and
Licensing System
S
Pillar 3: Developing the Human Capital of the Poor by Strengthening the Basic Education and Health Sector
Reduction in the
student-teacher ratio
at the top 25th
percentile of its
distribution, primary
X X X 40.4 in 2010 <40.4 29.8 in SY 2013-14 HS
Reduction in the
student-teacher ratio
at the top 25th
percentile of its
distribution,
secondary
X X X 42.0 in 2010 <42.0 25.4 in SY 2013-14 HS
Reduction in the
student-classroom
ratio at the top 25th
percentile of its
distribution, primary
X X X 43.8 in 2010 <43.8 26.9 in SY 2013-14 HS
Reduction in the
student-classroom
ratio at the top 25th
percentile of its
X X X 60.0 in 2010 <60.0 31.6 in SY 2013-14 HS
57
Indicator
Relates to actions
in: Baseline Target (2014) Outcome Rating
DPL
I
DPL
II
DPL
III
distribution,
secondary
Net enrollment ratio,
primary X X X 88.1 in 2010 >94.0 95.2 in SY 2013-14 HS
Net enrollment ratio,
secondary X X X 59.6 in 2010 >76.0 64.6 in SY 2013-14 U
Number of NHTS-
PR individuals
covered by
PhilHealth (millions)
X X X 22.1 million in 2010 47.8 million 92.6 million in 2015 HS
Number of NHTS-
PR individuals
enlisted with a
primary care benefit
provider (millions)
X X X 0 in 2010 9.5 million 28.2 million by 2015 HS
Number of claims by
NHTS-PR families
at PhilHealth-
accredited providers
in the previous year
(share of total)
X X X 20 percent in 2010 >27 percent 32 percent in 2015 HS
Pillar 4: Fiscal Transparency and Good Governance
Improvement in the
following PEFA
indicator scores:
PI 5 - classification
of budget
X X X
PI 5 - D in 2010
PI 10 - C in 2010
PI 24 - D in 2010
Two scores improve
PI 5 - C in 201515
PI 10 - A in 2015
PI 24 - D+ in 2015
(all preliminary ratings)
S
15 Based on PEFA assessment conducted early 2016.
58
Indicator
Relates to actions
in: Baseline Target (2014) Outcome Rating
DPL
I
DPL
II
DPL
III
PI 10 - public access
to key fiscal
information
PI 24 - quality and
timeliness of in-year
budget reports
Enhanced budget
transparency through
the existence of a
unified account code
structure, and the
timely publication of
budget execution
data
X X X Does not exist/not timely Yes Yes16 S
Pillar 5: Consolidating Fiscal Sustainability, Revenue Mobilization, and Risk Management
Tax administration
gains by BIR
(percent of GDP) X
9.1 percent of
GDP in 2010
1 percentage point (PPT) of
GDP increase
10.6 percent of GDP (1.5
PPT increase) in 2014 S
Excises from alcohol
and tobacco (percent
of GDP) X
0.63 percent of
GDP in 201017
0.4 PPT of GDP
increase
1.2 percent of GDP (0.57
PPT increase) in 2015 HS
Enhanced evidence
based stakeholder
awareness of key tax
expenditures and
fiscal risks
X X Low18 Basic19 Basic S
16 UACS is being used for the budget formulation and financial reporting. Acceptable budget execution reports are being regularly uploaded on DBM website.
Completeness is still a challenge. 17 Baseline revised from 0.5 percent of GDP due to data revisions during the program. 18 Awareness is rated low for the baseline given that no fiscal risk statement is prepared prior to 2011. 19 Basic refers to a basic understanding of the key tax expenditures and fiscal risks in the country based on awareness of the existence of a published Fiscal Risk
Statement which includes this information.
59
Indicator
Relates to actions
in: Baseline Target (2014) Outcome Rating
DPL
I
DPL
II
DPL
III
GOCC contribution
to consolidated
public sector deficit X X
-0.7 percent of
GDP in 201020
0 percent of
GDP by 201421
+0.2 percent of GDP
(surplus) in 2014 HS
Majority of top 20
GOCCs as measured
by government
transfers between
2010-2013 are
subject to completed
GCG performance
evaluation contracts
for 2013/14
X X 0 in 2010 15/20 or 75
percent
16/20 or
80 percent in 2014 S
20 Baseline revised from four percent of GDP due to data revisions during the program. 21 Target revised from -1.5 percent of GDP in light of a significantly improved baseline due to data revisions.
60
3.3 Justification of overall outcome rating
78. The overall outcome rating for this development policy program is Satisfactory.
79. The rating for relevance is substantial. The program was designed to closely follow the
Aquino Administration’s reform agenda. This was guided by the overarching goal of achieving
rapid, sustained, and inclusive growth. The development policy program’s achievements are
highly relevant to the administration’s strategy for inclusive growth – the type that creates more
and better jobs and reduces poverty at a faster rate – by: i) strengthening macroeconomic stability
through revenue mobilization and better management of fiscal risks as prerequisites of inclusive
growth, ii) strengthening governance by increasing transparency and accountability, iii)
accelerating reforms in business start-up and infrastructure delivery to strengthen the investment
climate, and iv) expanding access to education and health through better targeting of the poor.
The program was able to remain relevant as the government’s program evolved over time to cope
with implementation challenges by emphasizing new areas of reform.
80. The rating for achievement of PDOs is satisfactory. Across the five pillars of the PDO,
there were marked differences in performance against targets. The PDO for fiscal sustainability
was satisfactorily achieved, although a revision of results indicators meant that this was against
slightly less ambitious targets than originally envisaged. The fiscal transparency PDO was also
satisfactorily achieved. The PDO for human development of the poor was the most successful.
Under this pillar, education reforms were generally highly satisfactory, with results for all except
one indicator exceeding targets. Under health, most indicators were satisfactorily achieved, the
reforms are proceeding well and are having an impact on the ground. Overall the human
development pillar is rated as satisfactory. The investment pillar, split into public investment and
business environment, was the most problematic in the program. While reforms aimed at making
sole proprietorship start-up easier seem to have proceeded well, this can be assessed only through
proxy indicator and data from some selected cities. All of these however are positive. Finally, the
public investment pillar is rated satisfactory. Based on latest information two of the result
indicators were satisfactorily achieved and one was exceeded. Budget allocation for public
investment steadily increased but expenditures decreased. This was due to implementation
challenges, most particularly expenditure slowdown after Supreme Court ruling on DAP and lack
of progress in implementation of the FMIS reform supported by DFAT.
3.4 Overarching themes, other outcomes and impacts
(a) Poverty impacts, gender aspects, and social development
81. The operations’ prior actions were selected to enhance long-term welfare of the poor
and bottom 40 percent of the population through better job opportunities and enhanced
income protection. Three of the prior actions have direct poverty and social impact and are
highlighted in this section: farm-to-market roads, social protection, and the sin tax reform.
82. Better transparency and targeting of farm-to-market roads is expected to provide
better economic opportunities to the bottom 40 percent and the extreme poor as three out of
61
four poor people in the Philippines live in rural areas. Majority are subsistence farmers or farm
laborers. Better access to markets will increase their income earning opportunities. Analysis shows
that the poor are particularly vulnerable to weather-related shocks, including those brought about
by climate change, as well as those from natural disasters such as earthquakes. Improving
resilience of public infrastructure and enhancing disaster related risk management by the national
government in collaboration with local governments stands to lead to large positive poverty and
social impact.
83. The prior action related to the NHTS-PR aims to ensure that the database of poor
and vulnerable Filipino households is accurate and are used for all targeting all social
programs. The ultimate goal is to ensure that government programs that identify beneficiaries
using this database, such as the conditional cash transfer program, sponsored health insurance
program through PhilHealth, and other national and subnational anti-poverty programs, reach
those who need them the most. Enhanced targeting for health and improved service provision will
improve efficiency and effectiveness of public spending.
84. The sin tax reform prior action benefitted from a poverty and social impact
assessment (PSIA) analysis both in the design and implementation phase. The PSIA suggests
that while the tax incidence on tobacco excises is slightly regressive, the commensurate health
impacts and revenues used for health programs are progressive given the impact particularly to the
bottom 40 percent of the population. The design of the sin tax earmarked funds to promote
universal health care, notably health insurance for the bottom 40 percent of the population. The
Bank has supported the design of the sin tax implementing rules and regulations, including
cessation programs that are particularly likely to benefit the poor. A sin tax monitoring and
evaluation report has recently been completed and is showing marked reduction in consumption
of cigarettes by the poor.
85. The operation also builds on the analysis of the recent findings of the World Bank
country gender assessment. The assessment finds that gender gap in education in the Philippines
tends to be the reverse of what is found in many other countries. In this regard, the prior actions
on education and health seeks to improve gender equality.
(b) Institutional change/strengthening
86. Several institutions were involved in the implementation of prior actions across the
DPL series and achievements in institutional strengthening were encouraging. While
implementation hurdles and other factors have been discussed in other sections, it is important to
note the contribution of complimentary technical assistance resources. Progress through the health
and education sector related prior actions was particularly successful. The institutions involved
have all greatly benefited from continuing support available through Bank-funded projects like
Learning, Equity and Accountability Program Support (LEAPS) and the programmatic AAA for
social protection and labor as well as for health. In the latter, momentous strides were made
towards universal health coverage and the capacity for managing and running the insurance
program was built as the coverage numbers expanded. The experience gained during the proposal
and passage of the sin tax law has helped improve capacity at BIR to formulate and defend
contentious policy proposals. The initiative to develop the Philippine Business Registry, which
62
allows linkage between the name registry at DTI and registration at required social agencies for
sole proprietors, has created a standing team in DTI that is responsible for the management,
maintenance, and advancement of the PBR. This team is seeking to establish itself as a formal
unit in DTI so that these roles will be formally recognized and PBR specific management will be
sustained. Enactment of the GOCC Governance Act resulted in establishment of the GCG which
is operational and fulfilling its mandate for monitoring the GOCC performance.
87. Fiscal risk statements have been produced and improved regularly since the prior
action in DPL I and capacity has been built in DBM in the area of fiscal risk management. Additionally, the significant ramping up of public disclosure of information has resulted in a
dedicated team preparing materials surrounding the budget proposal and approval as well as in-
year execution reports. The Bank is also supporting the institutional strengthening in the area of
‘open data’ through various platforms.
88. An area where institutional capacity improved but results are still lagging is in public
investment implementation. Technical assistance was provided to DPWH even prior to the DPL
series and continued in parallel. Capacity for planning and execution has been augmented through
training and equipment but much remains to be done to translate this into higher expenditures
which were also impacted by the DAP in 2014. While substantial efforts were made in the
formulation of UACS, the failure to move ahead on the development of a financial management
information system substantially limits its usefulness in ramping up budget execution through
identification of specific areas for intervention as well as an input to better budget preparation.
(c) Other unintended outcomes and impacts (positive or negative, if any)
None.
4. Assessment of risk to development outcomes
89. Overall rating: Low or Negligible – The risks are rated moderate for the outcomes on
public investment, starting a business and tax revenue mobilization. The risks are rated low for the
fiscal transparency, fiscal risk, education and health outcomes.
90. The main source of risk is sustainability of reforms with the change in administration. However, since this milestone has now passed, the risk is not considered significant since the new
administration has declared commitment to continuity of the macroeconomic policies. In addition,
revenue mobilization, improving business environment and investing in infrastructure remain
priorities. The new administration has also demonstrated commitment to transparency by issuance
of Executive Order for Freedom of Information while it still awaits enactment. The CCT program
and its targeting mechanism also remain in place for now and the risk of reversal of the reforms
supported by this DPL series is considered moderate.
91. Particular risks by pillar are as follows:
92. Infrastructure – Higher budget for DPWH’s infrastructure program (from 1 percent to 2.2
percent of GDP between 2010 and 2015) has not translated into commensurate increases in
63
spending given a number of implementation issues discussed above. In recent years, there has been
significant push from the top to improve implementation performance and quality of infrastructure.
The risk that these indicators are reversed are moderate. While the new administration is fully
committed to deliver infrastructure, unresolved implementation constraints, particularly at the
local government level, reduce the ability to deliver on this ambition. Politicization of
infrastructure projects also remain a risk.
93. Starting a business – Reducing start-up business cost remains a significant challenge,
given the complexity of the process (up to 18 agencies are involved and interconnection is still
lacking). Unless these are addressed on a holistic manner rather than piece-meal, time spent in
registering a business is unlikely to improve significantly, thus making the risk significant.
94. Fiscal transparency – Significant strides have been made in fiscal transparency. The
program supported the launch of the open data portal which has since then spawned a series of
more focused open data platforms, such as reconstruction, the tourism road infrastructure program,
and the bottom-up budgeting initiative. These and the commitments of the government under the
Open Government Partnership significantly mitigate the risk of reversal of these reforms. While
detailed information on the enacted budget is available on the DBM website, posting it in an inter-
operable format has been a challenge and poses risk for sustainability. The new administration,
however, is committed to transparency. PFM reforms have had limited impact on performance in
terms of timely information to decision makers and efficiency in budget execution. Policies
supported through the DPL series have been slow in implementation. Sustained effort is required
to achieve progress without which these outcomes are at risk.
95. Education – Significant increases in the budget for education and better management of
resources, such as through the school-based management system, has significantly improved a
number of education outcomes. The risk of reversal is now moderate. Institutionalizing reforms
are now needed to lock-in the significant gains made.
96. Health – While full coverage of the poor in the health insurance program is expected, there
are concerns that beneficiaries are not getting adequate service given slow progress through 2013.
97. Revenues – Significant revenue gains have been achieved through better tax administration
and the enactment of the sin tax reform. These enabled the government to raise 1.5 ppt of GDP in
tax revenues. However, there is significant risk that this gain is reversed given a number of enacted
and proposed tax breaks (e.g., higher exemption threshold for bonuses, increase in the marginal
threshold to PHP 1 million, and more fiscal incentives). Moreover, an erosion in tax governance
could weaken revenue mobilization. These setbacks make achieving the government’s PDP target
of 16 percent of GDP by 2016 unlikely.
98. Fiscal risk – One of the biggest gains in the last decade is sustaining macroeconomic
stability through better management of fiscal resources, both at the national government level and
at the public sector at large. Institutionalization of reforms, for instance through the recently
created GCG, has reduced the risk of reversal. Deepening reforms to increase transparency of
GOCC operations and regular publication of the fiscal risk statement would help mitigate risks
further.
64
5. Assessment of Bank and Borrower performance
5.1 Bank performance
Bank performance in ensuring quality at entry
Rating: Satisfactory.
99. The Bank made an overall positive contribution to the reform efforts of the Philippine
government. The program was well focused on a government-owned reform program, which was
relevant to the PDO and in the most part reflected a strategic and well-considered reform process.
The Bank’s contribution came through a range of analytical work and on-going technical
assistance across the operation’s pillars. An important contribution of the Bank was to help
promote converge of programs and objectives, in particular those that required actions by more
than one agency. Notable were efforts to leverage programmatic sectoral work, including through
Bank budget and trust fund support, for advancing the policy reform agenda both at the outset of
the program and over the course of the operation.
Quality of supervision (including M&E arrangements)
Rating: Moderately Satisfactory
100. The programmatic DPL gave the Bank the opportunity to take stock of progress made
between appraisal and effectiveness of the succeeding DPLs. The Bank was responsive to the
government’s evolving policy implementation priorities, for example in a shift in the latter part of
the program to delivering on public infrastructure investment execution (beyond the initial focus
on PPPs). Changes were made in successive programs to the prior actions and in some cases policy
areas supported to ensure the program remained relevant to the development objectives.
Supervisory inputs were well-targeted to areas of focus for government-led reform.
101. Despite adequacy of supervision, the monitoring and evaluation framework exhibited
a number of weaknesses, some of which were addressed during the course of the program. Some results indicators were difficult to assess, and these issues could have been better addressed
during the course of the program. Regular supervision was supported by cross-sectoral teams
engaged in a close dialogue with counterparts to assess progress on the indicators, as well as
validate strategies. Good transition arrangements were afforded between operations within the
program, with consistency of task leadership for the most part of the program and good knowledge-
sharing when there was a change in task team leader (TTL) between the first and second operation.
Moreover, the TTL for DPL II and III was based in Manila, which helped improve the quality of
supervision.
Justification of rating for overall Bank performance
Rating: Satisfactory.
102. Overall Bank performance is rated as satisfactory. In line with the harmonized
evaluation criteria, performance at entry is rated as satisfactory while quality of supervision is
rated as moderately satisfactory, giving an overall rating of satisfactory.
65
5.2 Borrower performance
Government performance
Rating: Satisfactory.
103. The government showed strong commitment to increasing transparency and
improving investments for social protection and public infrastructure for inclusive growth. The passage of the sin tax reform with earmarking for universal health care (UHC) was emblematic
of a determination to tackle vested interests for the benefit of the bottom 40 percent. In addition,
public consultation increased significantly under this government, which helped improve support
for these reforms. Finally, implementation issues, while not always fully addressed, were identified
early on, allowing the government to address them early.
104. However, a number of reform areas, such as fiscal incentives rationalization, proved
to be more challenging in terms of reaching both political and technical agreement. The roll-
out of some systems reforms, for example the Philippines Business Registry (PBR) and the
adoption of the UACS suffered some delays during implementation. However, in all cases an
overall commitment to the reform trajectory was sustained.
105. The passage of a large number of PPP’s in the early part of the program was always
considered a stretch target, nonetheless this was realized by the end of the program.22
Integrating LGUs with national systems in the registration of sole proprietors has continued to
prove challenging. Overall government showed a strong commitment to realizing convergence
agendas across agencies and levels of government.
Implementing agency or agencies’ performance
Rating: Satisfactory
106. The Department of Finance provided satisfactory overall coordination and follow-up
on all dimensions of the program. The two other oversight agencies, DBM and NEDA, provided
strategic guidance for the program, as well as close engagement on specific parts of the program.
The main challenges were in areas that required legislative passages (e.g., fiscal incentives
rationalization), although some successes were achieved, such as GOCC oversight and the sin tax
reforms.
107. Line agency counterparts across all parts of the program (i.e., DPWH, Department
of Tourism [DOT], DA, GCG, DTI, Department of Health [DOH], BIR, and Department of
Education [DepEd]) continuously engaged and committed to delivering on their respective
components. The main challenges occurred when inter-agency/convergence collaboration was
required, notably in the absence of clear political and priority agreements (e.g., DTI-DOF on fiscal
incentives, DBM-DA-DPWH on FMRs).
22 Notwithstanding many delays, several PPP projects have been awarded, and a number have already started
construction. These projects are projected to raise investments by 0.6 and 0.8 percentage points of GDP in 2015 and
2016, respectively.
66
Justification of rating for overall Borrower performance
Rating: Satisfactory.
108. Overall Borrower performance is rated as satisfactory. In line with the harmonized
evaluation criteria, both government performance and implementation agencies’ performance is
rated as satisfactory, giving an overall rating of satisfactory.
6. Lessons learned
109. Key lessons to inform any future engagement through DPO lending include the use of
programmatic, multi-year programs, complementing prior actions with implementation support
through other instruments and maintaining pragmatism in designing the monitoring and evaluation
framework.
110. A programmatic multi-year DPL can serve as an effective platform for promoting
reform opportunities and institutional development for inclusive growth. The DPL program
was launched at the outset of a new government with leadership committed to advancing major
reforms, particularly in the broader governance domain. In a context such as the Philippines, single
tranche “stroke of the pen” would not have supported the type of progressive medium term reform
trajectories the program was able to support. A medium term perspective however also required
calibration of actions to what was possible in terms of actions to support inclusive growth. The
challenge for the program was always striking a balance between the effort required to complete
an action rather than be distracted by starting pursuit of a new idea.
Within the context of a multi-year engagement, while a regular annual cycle would have been
ideal, financing needs and shocks entailed flexibility and more extended timelines in the program.
Despite the DPL program was an integral part of the government’s annual financing plan, timing
of uptake was quite variable. Particularly in the latter parts of the program, foreign financing was
no longer a major part of the financing constraint of the government. But shocks such as Typhoon
Yolanda required rapid access to new budget financing. A challenge for the DPL reform program
was therefore to effectively reconcile the timing around financing with the reform program.
111. Complementary technical assistance, economic and sector work, and close
coordination from sector teams and other development partners was vital for both a well-
informed program and in maintaining relevance over the course of the program. Given the
DPL’s strong emphasis on institutional and inter-agency convergence reforms, on-going policy
dialogue and technical assistance was needed to underpin the different reform tracks. For the team
it was therefore vital to leverage both project engagements and also Trust Funded policy
engagements. The Australian Umbrella TF proved vital in this regard especially its support to the
PFM agenda. Strong collaboration with the IMF, notably in the fiscal transparency and
sustainability pillars, also proved to be instrumental in advancing the policy reforms. Going
forward, supporting a package of policy and administrative reforms through a combination of DPO
and IPF or Program for Results would greatly increase the likelihood of achieving the intended
impact and institutionalize the reforms. Collaboration with other development partners can help
enhance this impact.
67
112. Monitoring and evaluation frameworks need to be realistic in view of the data-
gathering constraints. The Philippines does not yet enjoy strong integrated systems to monitor
financial and physical progress of major government programs. Government and service-level
devolution also means that reporting indicators require collaboration across national and local
levels of governments (e.g., business registration, health). Such difficulties need to be factored into
the results framework at the design stage to ensure that monitoring is feasible and verifiable.
Throughout the duration of the DPL series, teams had to invest significant effort in securing and
validating monitoring indicators across the life of the program. Information should also be from
verifiable sources – either information releases subject to standard quality assurance or if drawn
from MIS sources, supported by dedicated technical resources to assist with the preparation of
appropriate data. Continued monitoring and reporting is important for the continuous dialogue
with the government and for the success of the programmatic approach. This also helps maintain
the relevance of this approach for a medium term inclusive growth agenda.
Other factors for consideration
113. Legislative reforms in the Philippines will remain as highly unpredictable yet critical
reform milestones. The DPL series encompassed a number of successful legislative reforms
(GCG and sin tax laws), but also some that have yet to come into effect (fiscal incentives
rationalization). In the Philippines, passing legislation will remain a drawn-out and politically-
difficult process as recognized in the previous DPL ICR, but may be nevertheless a critical step to
assure sustainable reform in some areas. Teams should weigh carefully the risk and criticality of
such actions. Given the overriding importance of consensus building for successful legislative
reform, teams should not only carry out detailed technical analysis of proposed reforms but also
political economy analysis of the likelihood of success of different options. The primary lesson is
that when DPLs support a step in legislative reform, subsequent progress through the legislature
is a very uncertain and risky action and should only be supported where teams are fully informed
and willing to take that risk.
114. The DPL series was a useful instrument for advancing convergence agendas both
across government but also within the Bank. The DPL series was one of the few instruments
the Bank had to focus cross-sectoral collaboration across agenda that involved more than one
agency. The DPL proved especially useful in advancing often contentious dialogues (e.g., FMR
oversight and prioritization). However, at times, this came with huge transaction cost. An
important lesson of the DPL series was that it was important to get progressive higher level
agreement on reform objectives, and then move to specific definitions of prior actions. Having a
multi-year program, versus single tranche operation, helped significantly in this regard.
115. Balanced emphasis on both revenue and expenditure improves likelihood of success. While increasing revenue collection through both policy and administrative measures is essential,
the argument is better made, especially in the political context, if it is accompanied with measures
to improve the quality of spending. Over the course of the DPL series, the administration faced the
issue of under-execution of the budget largely due to implementation constraints. This undermined
the significance of revenue enhancing measures since the government was unable to demonstrate
a shortage of funds for spending. As credibility of the budget i.e. ability to execute the budget as
approved, remained weak, the need to increase revenues became less urgent.
68
116. Pressing actions on reform implementation versus intent remain vital to the success
of the program. Both the complex political economy and bureaucratic implementation challenges
in the Philippines tend to promote predilection of plans over execution measures. To show actual
outcomes, the DPL series needed to maintain a bias towards implementation, particularly as the
program matured. Support by CMU leadership was vital to aligning task teams to this line of
emphasis. At the same time, care needed to be taken that the DPL would not be used to force
through implementation that regular project or AAA dialogues had not succeeded in advancing
since this may circumvent ownership thereby reducing sustainability. In the end, policy, planning
and execution go together in delivering a successful DPL program.
69
Annex 1: Comments from the Government
1. The Implementation Completion and Results Report was transmitted to the Department
of Finance for government comments on February 7, 2017. Comments were received on
April 1, 2017. They were primarily of editorial nature and requested the correction of a
few data points. The team incorporated these comments into the final draft.
70
Map