October 31, 2006
THE PHILIPPINES
OWNERSHIP
1. Partners have operational national development strategies
a. Coherent long-term vision with medium-term strategy derived from vision
1. The Philippines’ medium-term strategy is the Medium-Term Philippine
Development Plan (MTPDP) for 2004-10. This is the main tool used by the Government
for expenditure planning. The President’s Ten-point Agenda, revealed at the start of
President Gloria Macapagal-Arroyo’s 2004-10 term, reflects the key objectives of the
MTPDP. Regional Development Plans take account of the national MTPDP but also
reflect local priorities; regional plans are not funded in national budgets. Local
government poverty reduction plans are being formulated through the coordination of the
Government-stakeholder National Anti-Poverty Commission.
2. The Government’s long-term development policy directions are contained in the
Long-term Philippine Development Plan 2000-25 (LTPDP), which has served as a
general framework for the detailed plans of sector agencies.1 There is also a long-term
sustainable development framework prepared by the Philippine Council for Sustainable
Development, which was established in 1996 to follow up on the commitments of the
Earth Summit in Rio de Janeiro. This framework, the Philippine Agenda 21 (PA21),
reached beyond sustainable development to include broader objectives including poverty
reduction. The PA21 was first updated in 2000, and an Enhanced Philippine Agenda 21
was prepared in 2005 following a thorough consultative process, producing rather
ambitious targets. However, the Enhanced PA21 was not endorsed by the cabinet-level
board of the central planning agency, the National Economic and Development Authority
(NEDA), and it is not used as a primary basis for the MTPDP.
b. Country specific development targets with holistic, balanced, and well
sequenced strategy
3. The MTPDP for 2004-10 outlines a strategy that aims to link growth and job
creation with poverty reduction, while emphasizing fiscal stability and governance. Its
areas of focus are: (i) economic growth and job creation, (ii) energy, (iii) social justice
and basic needs, (iv) education and youth, and (v) anti-corruption and good governance.
In addition, it includes plans for constitutional reform as well as a National Defence
Program focused particularly in the southern island of Mindanao.
4. The MTPDP includes Strategy Planning Matrices that establish broad goals for all
areas of the plan and provide preliminary output targets for each of these. The Matrices
also identify the government agencies responsible for implementation. In the area of
poverty reduction, the MTPDP sets the ambitious target of reducing the incidence of
poverty from 34 percent to 17 percent through a series of measures including land use
reform, reforms aimed at increased access to essential services (water, health services,
etc.), and programs providing preferential access to social services for vulnerable groups.
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The LTPDP was completed in 2000 and the current MTPDP in 2004. The PA21 was adopted in 1996 and
updated in 2000 and 2005.
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The MTPDP is also geared toward the achievement of the MDGs, with targets for 2010
that are consistent with the MDG targets for 2015.
5. The MTPDP refers to a number of cross-cutting issues. It addresses the concerns
of both prevention and treatment of HIV/AIDS. In addition, the Government has
launched the Fourth Medium-Term Plan for AIDS covering 2005-10, with a national
HIV/AIDS monitoring system under development. The Government is also attempting to
address gender issues. It aims to develop gender-responsive micro-finance services and
products including training, product development, market access and new technologies,
and it also includes plans to support a Youth Entrepreneurship Financing Program. The
MTPDP sets out a series of initiatives to respond to the needs of the most vulnerable,
including children in need of special protection, women and youth in difficult
circumstances, disabled persons, the elderly and indigenous peoples. It also aims to build
a performance-oriented, service based public sector to enforce anti-corruption measures
and improve overall competitiveness and private sector development. On governance, the
MTPDP sets out a number of initiatives, although the Ten-Point Agenda focuses mainly
on economic reforms. Environmental concerns, however, receive limited attention.
c. Capacity and resources for implementation
6. The MTPDP provides a broad framework for government policy-making and all
major programs of the Government. The MTPDP does not include detailed prioritization
of activities or a costing framework. The MTPDP is, as a consequence, loosely linked to
the annual budget process, and integration becomes increasingly difficult as the elapsed
time since the preparation of the MTPDP increases.
7. The MTPDP for 2004-10 is accompanied by a Medium-term Public Investment
Plan (MTPIP) for 2005-10. The MTPIP contains a three-year rolling set of priority
programs and projects to be implemented by Government agencies and other entities with
the corresponding cost estimates. Generally, all government agencies, corporations and
institutions are asked to align their budgets with the activities identified in the MTPIP.
The MTPIP is updated continuously as priority projects are identified by sector agencies
and submitted to NEDA.
8. Regional Development Plans and Investment Programs are required to include the
growth strategies of the regions as well as the programs, projects and activities that
support the national MTPDP. However, in practice, not all Regions have prepared
detailed development plans and accompanying investment plans. Regional Plans do not
provide for resources for implementation, and they are not linked to the national budget.
Links between Regional Plans and local government poverty reduction plans are also in
need of strengthening.
9. The Government has undertaken efforts to strengthen the budget process, for
example through the recent introduction of the Paper on Budget Strategy. The two key
features of this Paper are that (i) it deals not only with fiscal targets but also with
expenditure priorities, and (ii) it engages and commits key political leadership to an
agreed budget strategy path early on in the budget process. Government attempts to
introduce a medium-term perspective to budgeting began in earnest in 2000 but have met
with limited success. For the 2008 budget, the Government once again will try to
introduce a Medium-Term Expenditure Framework. Attempts to introduce an MTEF for
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October 31, 2006
2007 failed mainly due to limited time available to agencies to prepare rolling budgets.
The re-enactment of the budget (given the failure to enact the new budget) continues to
undermine these efforts.
d. Participation of national stakeholders in strategy formulation and
implementation
10. The locus of initiative for the MTPDP lies with the President and NEDA.
Mandated by the Philippine Constitution as the country’s central planning agency, NEDA
is responsible for providing direction for and approving MTPDPs. The President is the
Chairman of the NEDA Board, and the Secretary of Socio-Economic Planning,
concurrently NEDA Director-General, is its vice-chairman. The NEDA Board, which
generally meets on a monthly basis with flexible timing, is composed of several Cabinet
members, the Central Bank Governor, and local government representatives. Six cabinet-
level interagency committees assist the Board of NEDA: (i) the Development Budget
Coordination Committee, (ii) the Infrastructure Committee, (iii) the Investment
Coordination Committee, (iv) the Social Development Committee, (v) the Committee on
Tariff and Related Matters, (vi) and the Regional Development Committee. Each
Department and government agency’s role in implementation is indicated in the Strategy
Planning Matrices that assign the responsible entity for each output target and outcome
goal of the MTPDP.
11. Stakeholders were involved in the formulation of the MTPDP mainly through
their participation in meetings of the Inter-Agency Committees responsible for the
formulation of different chapters of the plan. These meetings were open to non-
government stakeholders and representatives from a wide range of NGOs, civil society
and the private sector attended, although the short timeframe of the formulation period
limited the depth of these consultations. The private sector also provides input to the
Socio-Economic Report (SER), which is the main reporting mechanism on MTPDP
implementation and progress toward plan targets. There is no mechanism for systematic
government-stakeholder dialogue in monitoring and evaluation of the MTPDP.
12. Local governments participate in permanent structures for Government-
stakeholder dialogue on development policy issues. For example, the National Anti-
Poverty Commission is charged with coordinating national policies and actions to
alleviate poverty, including the formulation of local poverty reduction plans, the design
of anti-poverty interventions, poverty monitoring and analysis and regular dialogue with
stakeholders. The Commission is chaired by the President and includes among its
members a wide range of stakeholder representatives as well as the heads of various
government agencies and the Presidents of the League of Provinces, the League of
Municipalities, the League of Cities and the League of Barangays (villages).
13. Congress is involved in MTPDP implementation through the budget process. The
economic committees of both the House and the Senate are responsible for monitoring all
matters regarding development planning. There is no constitutional requirement for
formal legislative approval of the MTPDP, nor is there a requirement for agencies of the
executive branch to report on the status of the implementation of the MTPDP to
Congress. However, a report on the sectoral accomplishments in MTPDP implementation
is usually a part of these agencies’ presentations during the budget hearings.
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October 31, 2006
14. In addition, a Legislative-Executive Advisory Council (LEDAC) was created in
1992 to serve as an advisory body to the President on development policies. Its purpose is
to help harmonize Regional Development Plans and the legislative agenda, in particular
the budget, with the MTPDP. Its members include the President and Vice President,
members from the Cabinet, the Senate and the House of Representatives, a representative
from the Local Government Units, a representative from a Youth organization and a
representative from the private sector. The LEDAC is required to meet once every
quarter.
ALIGNMENT
2. Reliable country systems
15. There has been progress in the area of transparency in procurement since the
passing of the Government Procurement Reform Act in 2003. Implementing Rules and
Regulations were passed later that year, with accompanying capacity-building and
training measures. The Government Procurement Policy Board rolled out a national
training program to disseminate the new standards and provide training on the use of
standardized bidding documents for national competitive bidding. NGOs and external
partners are providing capacity-building support for more effective monitoring, and a
Presidential Anti-Graft Commission is strengthening the internal audit units of
Government agencies to ensure compliance with new procurement regulations. The
Office of the Ombudsman is planning to train procurement process observers. An August
2005 Second Update to the 2002 Country Procurement Assessment Report (CPAR) was
prepared in close cooperation with the Government and with considerable involvement of
stakeholders. Of the sixty-six items that it identified as needing action in November 2002,
64 percent were completed by November 2004 while only 7 percent were not yet started.
A CPAR Mission applied the Baseline Indicator System which gave the Philippines
reform achievement an overall score of 68 percent. Its report also highlighted five areas
where 50 percent or less of the baseline elements are met: (i) existence of institutional
development capacity; (ii) efficient procurement operations and practice; (iii)
functionality of the public procurement market; (iv) effective control and audit system;
and (v) degree of access to information.
16. Reforms in the area of public financial management are part of the Government’s
agenda. A new Government Accounting System, which has been progressively adopted
across levels of government since 2002, has had positive impact on the transparency of
the financial management system. Delays in budget approval, however, undermine
effective use of budget resources; as of end March 2006, the 2006 budget had not yet
been passed. A proposed Fiscal Responsibility Bill being submitted to the Parliament in
2006 could address these delays. A proposed National Program for Public Expenditure
Rationalization would promote performance of the public sector through civil service
reform. Work on agency rationalization is ongoing; as of June 2006, only a couple of
agencies had presented plans to the Department of Budget and Management. The
Commission on Audit is the Philippines' Supreme Audit Institution. The Constitution
declares its independence, grants it powers to audit all uses of government resources and
to prescribe accounting and auditing rules.
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17. The Philippines’ Transparency International Corruption Perceptions Index score
was 2.5 in 2006, ranking 121st out of a list of 163. Governance indicators show that
despite an open society, there is the perception that rule of law, political stability, and
control of corruption are lower in the Philippines than in other East Asian countries. The
MTPDP calls for a wide variety of anti-corruption and governance measures and some
progress has been achieved. In 2005, a National Anti-Corruption Plan of Action was
formed to consolidate the numerous efforts in this area being undertaken at different
levels and branches of Government and by civil society, private sector and external
partners.
3. Aid flows are aligned on national priorities
a. Government leadership of coordination
18. The Government takes an overall role of leadership of development assistance,
with the Bank playing a close coordinating role among external partners, organizing and
co-chairing meetings of the Philippines Development Forum (PDF) with the
Government. In March 2005 in Davao City, for the first time, the PDF involved a broad
range of stakeholders including representatives from civil society, Congress, the business
community, and academia as well as external partners. The latest PDF meeting was held
in March 2006 in Tagaytay City.
19. The PDFs place a new emphasis on facilitating substantive dialogue with
stakeholders on the development policy agenda. Government agencies act as lead
conveners and external partners as co-lead conveners of the working group meetings, in
which other stakeholders also participate. At the March 2006 PDF, seven thematic
working groups were convened and have continued the dialogue beyond the formal
annual meetings: (i) MDGs and Social Progress; (ii) Growth and Investment Climate; (iii)
Economic and Fiscal Reform; (iv) Governance and Anti-Corruption; (v) Decentralization
and Local Government; (vi) Mindanao; and (vii) Sustainable Rural Development. Other
working groups that existed before the PDF process feed into the ongoing policy dialogue
as sub-groups of the relevant working groups, such as the anti-money laundering group or
the judicial reform working group which is a sub-group of the working group on
Governance and Anti-corruption. These groups serve as a mechanism to identify and
coordinate actionable tasks among development partners.
20. The Government has also been accorded a leadership role in strategy development
within the UN system. The UN Development Assistance Framework for 2005-09, from
which different UN agencies develop their respective country programmes, was
developed under the leadership of the Government and with the full participation of other
stakeholders. In addition, National Steering Committees or Executive Committees,
chaired by the Government, have been formed to guide the UN agency country
programmes. For example, the Government-UNICEF Country Program for Children is
chaired by NEDA and includes UNICEF and various implementing agencies as members.
The UNDP uses what it refers to as the National Execution modality (NEX) for the
UNDP Country Programme Action Plan, whereby an Executive Committee, composed of
NEDA, UNDP and a team of experts, provides overall leadership and direction to ensure
country ownership and progress towards results.
b. Partners’ assistance strategy alignment
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October 31, 2006
21. Most of the Philippines’ major development partners support the MTPDP, which
is broad and all-encompassing, and as such easily accommodates externally financed
projects and programs. The five major external bilateral partners providing ODA are
Japan, the USA, Germany, Australia, and Spain accounting for approximately 90 percent
of gross ODA in 2003-04.2 Net ODA accounted for 0.5 percent of GNI in 2004. The
World Bank and the ADB are also key partners, and the assistance strategies of both
institutions explicitly support the MTPDP. The areas of assistance of the EC, another key
partner, are also broadly consistent with the goals of the MTPDP. AusAID’s Philippines
Australia Development Cooperation Strategy 2004-08 lays out its support for MTPDP
implementation. USAID’s FY2005-09 Strategy for Philippines also supports MTPDP
implementation aligning its focal areas with the Government priorities. The areas of
assistance that Germany supports are broadly consistent with the goals of the MTPDP.
The UNDAF is also consistent with and supports the MTPDP.
c. Partnership organization
22. A number of external partners have taken steps to increase their presence in the
country to better participate in daily decision making. For example, the World Bank
Country Director for the Philippines is based in Manila, and the team leaders of 7 of the
19 World Bank-financed projects are based in Manila. The ADB Headquarters is in
Manila. The EC delegation has undergone a large deconcentration exercise in 2002-04,
more than doubling its staff in the field. Approximately 90 percent of EC projects are
managed from the field. Most of the large development partners (UN agencies, USAID,
CIDA, AusAID, Japan, etc.) have sufficient local technical staff either as regular staff or
consultants, or a combination. The United Nations System has a large presence in
Mindanao to support the joint programme for peace and development with the
Government, entitled ACT (Areas for Conflict Transformation) for Peace. Other UN
programmes for Mindanao such as the WFP or FAO programmes are coordinated
through common services arrangements.
4. Strengthen capacity by coordinated support
Coherent and coordinated capacity support
23. A coherent capacity building strategy is not in place and capacity-building
activities are largely fragmented. The MTPDP identifies many capacity constraints and
bottlenecks and plans for capacity-building are spelled out for discrete areas, such as the
plans to support anti-corruption efforts. But these plans are not integrated with other
capacity building programs. At the March 2006 PDF, external partners identified many
opportunities for coordinated capacity-building efforts in their support to local
governments, to the strengthening of the investment climate and governance, among
others. Many partners, including the World Bank, have pledged support to the
Government in areas such as capacity-building for the investigation and prosecution of
tax and graft cases, support to address the backlog of cases and support of procurement
reform.
5. Use of country systems
Donor financing relying on country systems
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24. Recently, significant progress has been made in the area of procurement
harmonization. Since July 2005, Philippine Bidding Documents for works and goods
have been harmonized with the requirements of the ADB, JBIC, and the World Bank.
Philippine Bidding Documents for Consulting Services have been harmonized with the
World Bank requirements.
25. There is a shift toward the use of country systems in the health and education
sectors. Progress is being made toward preparing a common sector approach while
relying on country systems in the health sector. Several participating external partners,
including the World Bank, Germany and the EC, plan to support the implementation of
the health sector reform agenda while supporting the Department of Health’s own
financial management and procurement reforms, performance-based budgeting and
decentralization of the health system. The World Bank and AusAID are coordinating
their efforts in the education sector through the financing of a National Program Support
for Basic Education. Coordination will focus on supporting the government’s coherent
education reform program. Their assistance will also follow the already-harmonized
procedures for procurement and will also support strengthening the Department of
Education’s capacity to implement the new accounting system.
6. Strengthen capacity by avoiding parallel implementation structures
PIUs progressively phased out
26. Project implementation is still managed by PIUs in many cases, although there are
signs of a trend beginning to move away from parallel PIUs. For example, in the case of
the World Bank, several projects are managed by coordination units within departments
which at their inception had been created under agreements to follow World Bank
procurement and reporting rules. There are cases where multiple PIUs in one sector are
being consolidated into a single PIU. For example, the Foreign-Assisted Projects Office
in the Department of Agriculture oversees all donor-funded projects in the sector. In
another case, an entity that had been established for a previous project was maintained to
coordinate implementation of a Social Fund Project in Mindanao. The World Bank plans
to continue efforts with the Government to mainstream project activities within
implementing agencies. In the case of the EC, the management of its projects is
increasingly being placed in the hands of national agencies.
7. Aid is more predictable
Disbursements aligned with annual budgetary framework
27. External assistance alignment with the annual budgetary framework depends in
large part on the Government producing the yearly budget on a timely basis. Reaching
legislative approval of the annual budget has been a challenge in the Philippines. For
example, as of March 2006, the 2006 budget had not yet been approved. All development
loans are reflected in the relevant sector department’s budget. However, not all grant
financing is systematically recorded in the budget; only recipient-executed grants are
reflected in the budget.
8. Aid is untied
28. Some bilateral partners are making efforts to provide untied aid. The EC has
untied its aid to some extent and increased the percentage of recipient-executed aid.
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HARMONIZATION
9. Use of common arrangements or procedures
29. There are signs of a trend toward common arrangements among external partners.
The World Bank and EC have agreed to use common appraisal, reporting, auditing and
review procedures, and will undertake some pooling of funds. A wider group of partners,
including ADB, and Germany through GTZ and KfW, has agreed to participate in joint
planning and review arrangements for their support for the health reform program. The
UN system is pursuing a harmonized and joint programming process in the Philippines to
achieve better development results and reduce transaction costs. In addition to the
ongoing programme in Mindanao, joint UN programmes are being developed for
HIV/AIDS and Migration, Gender Responsive Local Governance and for a Disaster Risk
Reduction framework. Common services such as travel, courier and procurement services
are provided across the UN system. The Harmonized Approach to Cash Transfers, a
common fund disbursement and reporting scheme will be rolled out next year by UNDP,
UNFPA and UINICEF.
10. Encouraging shared analysis
Joint missions
30. There are signs of a trend toward joint missions. Joint evaluation missions have
been conducted in Mindanao by the UN system with AusAID to assess the impact of the
third phase of the post-conflict joint programme. In the health sector, external partners
are conducting joint appraisal and joint review missions, and the Government has a
mechanism to track these joint missions. The decentralization of development assistance
agencies has not always led to a reduction in the need for missions; in the case of the EC,
the number of missions has decreased only slightly as a result of its decentralization
efforts. In the case of the GTZ, sector specialists are based in headquarters and in most
cases take part in joint missions along with the experts based in the Philippines.
Analytical partnership
31. A number of strong partnerships exist. For example, the ADB, JBIC, and World
Bank engage in joint ODA portfolio reviews. In 2002, a Public Expenditure, Procurement
and Financial Management Review (PEPFMR) -- an integrated PER/CFAA/CPAR -- was
produced as a joint analytical product of the Government, ADB, and the World Bank. In
2003, a CPAR was published as a companion volume of the PEPFMR, with CPAR
updates published in 2004 and 2005. The ADB and the World Bank also produced a joint
Public Expenditure Review in April 2003 and jointly conducted an investment climate
survey in 2004. Within the EU, joint evaluation and analysis are becoming more frequent.
As of October 2006, external partners have posted 40 documents on the Country Analytic
Work website.3
MANAGING FOR RESULTS
11. Results oriented frameworks
a. Quality of development information
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http://www.countryanalyticwork.net
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32. The quality and availability of poverty-related data is improving. The National
poverty monitoring system is based on data collected from various censuses, surveys and
administrative records of Government agencies. But disaggregation of data by gender or
by region is often missing in the development information collected by the National
Statistics Office (NSO) and other Government sources. Poverty information other than
income-based data is also missing. However, the poverty analyses of the Second Progress
Report on the MDGs (2005), which is based on data disaggregated by gender and by
region, are proof of progress in this area. Data collection with community-level
involvement has been on the rise since the mid-1990s, helping to address these data gaps.
The UNDP has been supporting NEDA and the NSO in establishing a Community-Based
Poverty Indicators Monitoring System which involves communities and local
governments in the provision of data and monitoring of minimum basic needs for
attaining a decent quality of life. In addition, the Micro Impacts of Macroeconomic
Adjustment Policies-Community-Based Monitoring System (MIMAP-CBMS) has been
pilot-tested in 17 provinces as of January 2006, with the objective of addressing statistical
gaps in the existing national and community monitoring system by shifting the
responsibility for data collection and monitoring more squarely on local governments.
b. Stakeholder access to development information
33. Information on Government policies is easily accessible and disseminated
regularly. The Central Support Office of the NEDA Secretariat is responsible for the
communication and dissemination of development information related to the MTPDP.
The MTPDP was distributed to all national government agencies, selected local
governments, Congress and selected private sector organizations. All documents,
including a wealth of analytical documents related to the MTPDP and the MTPIP as well
as the Socio-Economic Reports on MTPDP implementation progress, are available online
in English on NEDA’s website.
c. Coordinated country-level monitoring and evaluation
34. The NEDA Secretariat is responsible for the monitoring and evaluation of plan
implementation through its three offices: (i) The National Development Office is in
charge of coordinating the formulation of national and sectoral policies and monitoring
macroeconomic and sectoral performance; (ii) the Regional Development Office provides
support for implementing agencies in the regions and monitors regional and interregional
development policies; (iii) and the Central Support Office is in charge, among other
things, of disseminating information about plan implementation. The Socio-Economic
Report is prepared annually by the NEDA Secretariat, detailing the status of MTPDP
implementation, an analysis of shortcomings and recommendation for improved
performance in implementation. The centralization of monitoring functions as well as
MTPDP formulation functions within NEDA facilitates informed Cabinet-level decision-
making, in particular given Cabinet-level representation on the NEDA Board
Committees. The Government is receiving support from external partners including
UNICEF to install and roll out the use of the DevInfo development statistics software at
national, regional and local government levels to bolster monitoring capacity. In addition,
the Government is developing a web-based ODA knowledge information system, linked
to an electronic Project Proposal Monitoring System, to monitor ODA financing and
ODA-funded projects.
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MUTUAL ACCOUNTABILITY
Development effectiveness assessment frameworks
35. The Philippines has signed the Paris Declaration on Aid Effectiveness. A
framework to monitor Government and external partner implementation of the Paris
Declaration in the Philippines is not yet in place, though elements of such a commitment
exist in certain sectors and in certain Government-donor partnerships. The terms of
reference of the planned 2008 mid-term review of the Government-UNICEF assisted
country programs for children includes a review of aid effectiveness and results for
children as part of the terms of reference. Regular reviews of the Government-led
UNDAF will take into consideration UN support to commitments to the Paris
Declaration.
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October 31, 2006
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