Validation Report Philippines: Country Partnership ... 21 November 2017 Validation Report Philippines: Country Partnership Strategy Final Review Validation, 2011–2016 The attached

IN.426-17 21 November 2017

Validation Report

Philippines: Country Partnership Strategy

Final Review Validation, 2011–2016

The attached report is circulated at the request of the Director General, Independent Evaluation Department. The report is also being made publicly available. For Inquiries: Marvin Taylor-Dormond, Independent Evaluation Department

(Ext. 5953) Nathan Subramaniam, Independent Evaluation Department

(Ext. 5730) Marco Gatti, Independent Evaluation Department

(Ext. 5094)

CPS Final Review

Validation

Raising development impact through evaluation

EvaluationIndependent

PhilippinesCountry Partnership Strategy Final Review Validation, 2011–2016

Validation Report November 2017

Philippines: Country Partnership Strategy Final Review Validation, 2011–2016

This document is being disclosed to the public in accordance with ADB’s Public Communications Policy 2011.

Reference Number: FRV: PHI 2017-14 Independent Evaluation: VR-27

NOTES

(i) The fiscal year (FY) of the Government of the Philippines ends on 31 December.

(ii) In this report, “$” refers to US dollars.

(iii) For an explanation of rating descriptions used in ADB evaluation reports, see ADB. 2015. 2015 Guidelines for the Preparation of Country Assistance Program Evaluations and Country Partnership Strategy Final Review Validations. Manila.

Director General

Marvin Taylor-Dormond, Independent Evaluation Department (IED)

Director Nathan Subramaniam, IED Team leader Marco Gatti, Principal Evaluation Specialist, IED Team members Enrico Pinali, Senior Evaluation Specialist, IED

Ari Perdana, Evaluation Specialist, IED Lawrence Nelson Guevara, Evaluation Officer, IED Rosel Isidro-Cajilig, Senior Evaluation Assistant, IED

The guidelines formally adopted by the Independent Evaluation Department (IED) on avoiding conflict of interest in its independent evaluations were observed in the preparation of this report. To the knowledge of IED management, there were no conflicts of interest of the persons preparing, reviewing, or approving this report. In preparing any evaluation report, or by making any designation of or reference to a particular territory or geographic area in this document, the IED does not intend to make any judgments as to the legal or other status of any territory or area.

Abbreviations

4Ps – Pantawid Pamilyang Pilipino Program (Conditional Cash

Transfer Program) ADB – Asian Development Bank ADF – Asian Development Fund ARMM – Autonomous Region in Muslim Mindanao ASEAN – Association of Southeast Asian Nations BIMP-EAGA

– Brunei-Indonesia-Malaysia-Philippines East ASEAN Growth Area

CAPE – country assistance program evaluation CDD – community-driven development CCT – conditional cash transfer COBP – country operations business plan CPS – country partnership strategy CPSFR – country partnership strategy final review DOF – Department of Finance EIRR – economic internal rate of return FY – financial year GCR – Global Competitiveness Report (World Economic Forum) GDP – gross domestic product IED – Independent Evaluation Department IREM – integrated natural resources and environmental

management KALAHI-CIDSS

– Kapit-Bisig Laban sa Kahirapan (Comprehensive and Integrated Delivery of Social Service)

KC-NCDDP

– KALAHI-CIDSS (National Community Driven Development Project)

LGFBR – local government finance and budget reform LGU – local government unit M&E – monitoring and evaluation NEDA – National Economic Development Authority NGO – nongovernment organization NRT – net resource transfer NSO – nonsovereign operations PBL – policy-based lending PCR – project completion report PDP – Philippines Development Plan PESO – Public Employment Service Office PPER – project performance evaluation report PPP – public–private partnership PPTA – project preparatory technical assistance PSM – public sector management PVR – project validation report RCI – regional cooperation and integration RRP – report and recommendations of the president SAPE SERD SLA

– – –

sector assistance program evaluation Southeast Asia Regional Department sustainable livelihood approach

TA – technical assistance

TCR – technical assistance completion report TOR – terms of reference TVET – technical and vocational education and training UNDP – United Nations Development Programme XARR – extended annual review report

Currency Equivalents (as of 14 November 2017)

Currency Unit – Philippine pesos (₱) ₱1.00 = $00.1953 $1.00 = ₱51.1970

Contents

Page

Acknowledgments vii

Executive Summary

ix

Chapter 1: Rationale and Context 1

A. Validation Purpose and Rationale 1

B. Country Context 2

C. Government Development Plans in the Context of the CPS 2011–2016 6

D. Country Partnership Strategy and ADB Portfolio 8

Chapter 2: Validation of the Country Partnership Strategy Final Review 13

A. Relevance 13

B. Efficiency 18

C. Effectiveness 23

D. Sustainability 29

E. Development Impacts 31

F. ADB and Borrower Performance 35

G. Overall Assessment 38

Chapter 3: Key Lessons and Recommendations 40

A. Lessons Learned 40

B. Recommendations 42

APPENDIXES 46

1. Ongoing and Completed Program during the Country Partnership Strategy Final Review Period (2011–2016): Loans, Grants, and Nonsovereign Investment Facilities

47 2. Ongoing and Completed Program during the Country Partnership

Strategy Final Review Period (2011–2016): Technical Assistance

52 3. Planned Versus Actual Loans to the Philippines 57

4. Validation Comments on Sector Outcome Achievements 60

5. 2008 Philippines Country Assistance Program Evaluation (CAPE) Recommendations and the Country Partnership Strategy (CPS), 2011–2016 Response

63

Acknowledgments This validation report is a product of the Independent Evaluation Department (IED) of the Asian Development Bank (ADB). The validation was led by Marco Gatti. Team members were Enrico Pinali, Ari Perdana, Lawrence Nelson Guevara and Rosel Isidro-Cajilig. Gabriele Ferrazzi, Magdalena Casuga, Ma. Isabel Corpuz, and Jonathaniel Principe were the consultants. Valuable inputs and comments at various stages were received from Professor David Jay Green (external peer reviewer), Joanne Asquith, and Tomoo Ueda (internal commenters). The report benefited from the overall guidance of Nathan Subramaniam, Veronique Salze-Lozac'h, Walter Kolkma, and Marvin Taylor-Dormond. For their time and opinions, the team would like to thank the officials and representatives interviewed in the Philippines from the Department of Finance, Department of Interior and Local Government, Department of Public Works and Highways, the National Economic and Development Authority; local government units from the provinces of Leyte, Eastern Samar, Bohol, Misamis Oriental, Palawan, Davao, and Cebu; implementation units; and nongovernment organizations. The team is also grateful to ADB staff in Manila who made themselves available for interviews, as well as to staff from ADB’s Philippines country office who provided invaluable inputs and facilitated the field work for this validation. Their inputs strengthened the evidence base for this report. Nevertheless, IED remains fully responsible for the report.

Executive Summary

Asian Development Bank’s country partnership strategy (CPS), 2011–2016 was designed to support the Philippines to achieve high, inclusive, and sustainable growth. The CPS promoted four program objectives: (i) improved investment climate and private sector development; (ii) more efficient, effective, and equitable social services delivery; (iii) reduced environmental degradation and vulnerability to climate change and disasters; and (iv) strengthened governance and reduced corruption. From 2011 to 2016, ADB approved a total portfolio of $4.78 billion which were focused on public sector management, education, infrastructure and finance. Overall, the validation assessed the program successful on the borderline, with the ratings of relevant, less than effective, efficient, likely sustainable, and less than satisfactory development impact. Both ADB and borrower performance was assessed satisfactory. The validation provided five recommendations, three strategic and two operational, for consideration in preparing the next CPS. For strategic recommendations: (i) Scale up ADB work in Mindanao; (ii) Support local government units (LGUs) to enhance their financing capabilities; and (iii) Link nonsovereign lending more tightly to CPS objectives. For the operational recommendations, (iv) ADB should consider establishing a local presence in Mindanao; and (v) Weave education sector work more effectively into social protection support.

The Independent Evaluation Department (IED) of ADB has validated the country partnership strategy final review (CPSFR) prepared by the Southeast Asia Department for the Philippines country partnership strategy (CPS), 2011–2016. The validation assessment relied primarily on information presented in the CPSFR, consultations with ADB staff involved with the CPS preparation and operations, consultations with various stakeholders during independent evaluation missions, critical reviews of relevant project documents, reports (including project evaluation and validation reports) and analysis of available country data. Collection of primary data through the application of a beneficiary survey was also undertaken to support the findings. The validation covers all ADB loans, grants and technical assistance approved for the Philippines during the period 2011 to

2016. In addition, this validation also reviewed projects that were approved before 2011 but that were still active and implemented during the validation period.

Country Context

Solid economic and social development performance in recent years. Over the period 2011–2016, the Philippines’ gross domestic product (GDP) grew on average by 6.1% a year, outpacing those of most of the Philippines’ neighbors during the same period. Macroeconomic fundamentals also improved substantially over the period 2011–2016: unemployment fell from 7.3% in 2010 to 4.7% as of October 2016, exceeding the medium-term target of 6.5% to 6.7% by 2016; inflation fell to 1.8% average for 2016, below the Philippines Central Bank’s target band of 2.0% to 4.0% for 2016; and

x Philippines: CPS Final Review Validation, 2011–2016

the national government fiscal deficit in 2015 was 0.9% of GDP, which was also well below the target of 2%. Low competitiveness and high cost of doing business. The World Economic Forum’s Global Competitiveness Report 2016–2017 ranked the Philippines 57 out of 138 economies in terms of overall competitiveness, setting it back 10 places from the previous year’s ranking. The Philippines ranks particularly low in terms of infrastructure competitiveness when compared with its regional peers in Southeast Asia, with its weakest scores being in the quality of air transport and ports. Poverty and inequality. Overall poverty incidence declined from 25.2% in 2012 to 21.6% in 2015, the fastest poverty incidence decline in the last decade. At the subnational level, poverty incidence remains high in the eastern Visayas and central and western Mindanao regions, reflecting wide income and regional inequalities. As an example, the per capita gross regional GDP in the Autonomous Region in Muslim Mindanao (ARMM) is about 20% of the national average. Mindanao as a whole has a very high incidence of poverty.

In 2014, the Philippines ranked 115 in the human development index of the United Nations Development Programme, placing it in a group of countries with a “medium” level of human development.

Government Development Plans

Philippine Development Plan (PDP), 2011–2016. To achieve integrated and coordinated programs and policies for national development, a Philippines Development Plan (PDP) for the period 2011 to 2016 was formulated in 2011. With good governance and anti-corruption as an overarching theme, the PDP, 2011–2016 adopts a framework of inclusive growth, which if sustained, would generate labor demand and reduce poverty. The PDP, 2011–2016 centers on

five key strategies: (i) boost competitiveness in the productive sectors to generate massive employment; (ii) improve access to financing to address the evolving needs of a diverse public; (iii) invest massively in infrastructure; (iv) promote transparent and responsive governance, and; (v) develop human resources through improved social services and protection. PDP 2011–2016: Midterm Update. Halfway through implementation, the government undertook a midterm review of the PDP in 2014 to make any necessary adjustments in policies, strategies, measures and programs to reflect progress and lessons learned to that point. The update highlights the country’s robust economic performance, but also acknowledges remaining challenges, including the slow pace of vital infrastructure development and the high cost of doing business. The persistence of poverty and poor provinces is highlighted, revealing the need to refocus strategic interventions to better address their needs and development potential.

PDP 2017–2022. A new PDP for the period 2017–2022 was finalized in March 2017 to reflect the progress made in the previous period and to set the priorities of the new administration for the medium term. Key education reforms from the previous administration that have a good chance of being continued include the expansion of education, including increasing the duration of basic education from 10 to 12 years and promoting technical and vocational education and training. In terms of social protection activities, the national form of conditional cash transfer (CCT), the Pantawid Pamilyang Pilipino Program (4Ps), started in 2007, is perceived by program stakeholders to have been effective in directing cash to poor households to spur school attendance and use of preventive health care and nutrition services and is likely to be continued with enhanced beneficiary targeting. The National Community Development Project (KALAHI-CIDSS),

Executive Summary xi

later expanded nationwide under the name KC-NCDDP, provides block grants to communities (barangays) for small-scale infrastructure projects and it is also likely to be continued. The latest PDP also includes an enhanced focus on infrastructure development in the Mindanao Region.

ADB Support

Country Partnership Strategy (CPS), 2011–2016. In 2011, the CPS, 2011–2016 was prepared when the Philippines was just commencing its current period of sustained high-level growth and before the devastating effects of Typhoon Yolanda in November 2013. Reflecting the priorities of the government and those of ADB’s Strategy 2020, the CPS was designed to support the Philippines to achieve high, inclusive, and sustainable growth, focusing on three of the five core operational areas of Strategy 2020: infrastructure, environment, and education. The CPS promoted the following four program objectives:

(i) improved investment climate and private sector development—ADB would support scaling up of transport and energy infrastructure investments and policy reforms to improve the quality of competition and regulation, enhance fiscal policy and expenditure management, and strengthen legal and judiciary reforms;

(ii) more efficient, effective, and equitable social services delivery—ADB would increase support for the efficient, effective, and equitable delivery of social services;

(iii) reduced environmental degradation and vulnerability to climate change and disasters—ADB would provide support in the areas of environment, climate change, and disaster risk management to prioritize strengthening ecosystem functions and the preservation of natural resources; and

(iv) strengthened governance and reduced corruption—ADB would continue and deepen its efforts to strengthen governance and reduce corruption at country, sector, and project levels.

ADB’s originally envisaged that it would provide support in five priority sectors: transport, energy, education, agriculture and natural resources, and water supply and other municipal infrastructure and services. Additional support for public sector management was deemed to be crosscutting. These elements were expected to contribute to the overall CPS key objective “to help the Philippines achieve high, inclusive, and sustainable growth.” The total programmed resource envelope for the period 2011–2016 was $2.4 billion. Responding to the government’s 2014 midterm review of the PDP, ADB updated its country operations business plan (COBP) by focusing it on four areas: (i) sustainable and climate resilient infrastructure; (ii) good governance and inclusive finance; (iii) inclusive employment and education; and (iv) regional cooperation and integration (RCI). The COBP, 2015–2017 also updated the sector objectives for energy, agriculture, natural resources and rural development and public sector management.

ADB approved and active portfolio. From January 2011 to December 2016, ADB approved 16 sovereign loan projects totaling $4.32 billion, four nonsovereign loan projects totaling $342 million, 11 grant projects totaling $47 million; and 37 TA projects totaling $73 million. The total approved portfolio was $4.78 million. Of the sovereign loans, a high proportion (64% by number, 69% by amount) utilized programmatic approaches, such as policy-based lending (PBL), results-based lending, special assistance loans, and sector loans. In terms of the sectoral allocation, 42% of the approved support went to public sector management, 23% to education, and 11% to finance. Infrastructure received $653 million or 14% of the total

xii Philippines: CPS Final Review Validation, 2011–2016

approvals during the period. In addition, ADB managed an active portfolio (approved prior to 2011) that included 11 sovereign loans ($1.673 billion), seven nonsovereign loans ($373 million), six grants ($15 million) and 18 TA projects ($14 million) totaling $2.07 billion.

Project completion reports (PCRs) and PCR validation reports (PVRs) were completed for only for a small proportion of the projects and programs approved during the validation period of 2011-2016. Of the 24 loans approved during this period, only three have had PCRs and PVRs completed for them. This validation incorporates the findings of these evaluations, as well as the findings from ongoing loans approved during the Validation period.

Assessment

Overall, the validation assesses the ADB Program successful on the borderline. The validation assessed the ADB program as relevant (compared with highly relevant in the CPSFR), efficient, less than effective (compared with highly effective in the CPSFR), likely sustainable, and with less than satisfactory development impact (compared with satisfactory in the CPSFR). The validation also reassessed both the ADB’s performance and the Borrower’s performance satisfactory (these were not assessed in the CPSFR). The coordination of sector level work to achieve cross-sectoral objectives is very important for achievement of ADB developing member countries’ long-term development objectives and the validation therefore places importance both on the achievement of outcomes at the sector level and on contributions to thematic objectives. The assessments for relevance and development impact gave equal weights to sector level and cross-sector CPS objectives. The validation assesses the ADB program relevant. This criterion assesses the ADB program’s strategic relevance to country development needs, sector development constraints, and government policies and

plans. The validation finds the support provided under the program to be generally consistent with and responsive to government policies and plans, including the government’s 2014 midterm update of the PDP, 2011–2016, which was considered in the preparation of ADB’s country operations business plan (COBP), 2015–2017. The ADB program exhibits continuity, as is required in areas of reform that are challenging and that demand long-term commitment. This can be seen in the Local Government Finance and Fiscal Decentralization Reform Program, which is now in its second phase. The program also showed adaptability in responding to signals of political support and renewed government priorities. ADB revised its strategy to acknowledge the government’s changes to the PDP in 2014. To ensure alignment, the CPS shared some results targets from the government’s PDP targets. ADB’s flexibility was also evident in its response to the devastating impacts of Typhoon Yolanda in late 2013, which had an important transformative effect on the economies in the typhoon-affected areas. The continued reliance on programmatic approaches (including PBL), highlights the CPS’s intention to mainstream policy lending to provide holistic programmatic assistance in selected sectors. Despite these positive features, this validation found the following weaknesses in the sector program: (i) some projects in the energy sector were approved although they did not reflect the key priorities of the government; (ii) it took time for projects and programs that were consistent with the mid-course strategy revision to be approved; (iii) there was a loose connection between lending and technical assistance, reflecting in part the late preparation of a knowledge plan; and (iv) delays in implementing some emergency response projects meant that their relevance had diminished by the time they delivered benefits.

For the nonsovereign portfolio, ADB focused its efforts on the needs of the

Executive Summary xiii

private sector in line with the priorities of the government. The portfolio including critical national and local infrastructure projects in (i) energy; (ii) water and sanitation; (iii) transport (toll roads, ports, and mass transit systems); (iv) education; (v) infrastructure finance; and (vi) financing for microbusinesses and small and medium-sized enterprises (MSMEs). However, there were too few operations to cover all the priority areas.

With regard to cross-sectoral issues and contribution to thematic objectives, support for inclusive growth is visible in most projects covering all sectors. Following the government’s PDP midterm review in 2014, ADB also updated its focus areas and sector objectives in its COBP. Regional cooperation, for example, has been explicitly addressed through activities linked to the Brunei-Indonesia-Malaysia-Philippines East ASEAN Growth Area (BIMP-EAGA) program, which covers the Mindanao region. The ADB program also addressed social development through improved education access and quality, community development programs, and social protection programs, and via its assistance for post-Typhoon-Yolanda recovery. The CPS’s design framework was aligned with Strategy 2020 and the government’s midterm review. Overall, the crosscutting objectives of the CPS are assessed to be relevant. Combining relevance ratings for the sector program and crosscutting work, the validation assesses ADB’s program relevant, a notch lower than the CPSFR’s highly relevant. The validation assesses the ADB program performance efficient. For the ongoing portfolio, the processing of all loans from approval to effectivity was, on average, 6.9 months, which was in line with the bank average of 7 months. Philippine project loans took longer to process (8.2 months versus the ADB average of 6.7 months) while PBL was processed more efficiently (3 months compared with the ADB average of 8.7 months during the same period, 2011–2016). The overall

disbursement ratio of the Philippine loans has been better than the ADB average for much of the CPS period, although this appears to be more a reflection of the shift of modalities toward PBL and other programmatic lending than of improvements in project implementation. PBL is fast-disbursing and often based on already-achieved policy measures, hence they tend to disburse soon after program effectiveness. Delays in investment project implementation are still an issue and need to be reduced. The three completed program loans were rated highly efficient by both the PCRs and the PVRs. For nonsovereign operations, both coal-fired energy projects carried over from the previous CPS ranked high in terms of economic performance, with the Masinloc Power Plant in Zambales province deemed very efficient. The validation assesses the ADB program performance less than effective. There were shortfalls in achieving project and program outputs and outcomes set out in the design and monitoring frameworks. Capacity development components in certain sectors (e.g., agricultural and natural resources) have seen shortfalls in outputs and outcomes vis-à-vis the envisaged targets. Also, there has been a lack of progress toward achieving some of the sector-level outcomes set out in the CPS. Of the 14 sector-level results framework outcome indicators identified in the CPS, two have been achieved, four are on track to be achieved, four are not on track, three are considered inappropriate, and one was dropped. Overall, only 43% of the envisaged outcomes have been achieved or are on track to be achieved. For example, in the education sector, the sector target of improved access and quality of basic education does not seem to be on track, while in the PSM sector (most prominent in terms of ADB operations) the picture is mixed, with one indicator likely to be achieved, another dropped, and other indicators lacking recent data. On the positive side, most

xiv Philippines: CPS Final Review Validation, 2011–2016

stakeholders, particularly beneficiaries of community-driven development (CDD) initiatives related to disaster relief and recovery, assessed ADB’s overall performance effective or better. For nonsovereign operations, ADB’s role was deemed effective in adding to both conventional and non-conventional generation capacity. The validation concurs with the CPSFR assessment of program performance as likely sustainable. The program complemented existing government efforts and supported implementing structural policy reforms and advancing competition policy, regulatory efficiency, public–private partnerships (PPPs) in infrastructure, and competitive labor markets. The institutional arrangements and additional financing to carry out the Yolanda Rehabilitation and Recovery Plan were adequate and sustainable after ADB’s support. The PCRs and project validations rated two of the three completed loans highly likely sustainable, since many of the reforms under the program were institutionalized and funded by the government. Although the government has shown good commitment to sustain the reforms related to ADB’s programs, this has varied across the different areas supported by ADB. Notable successes include ADB’s support for the public–private partnership initiative. Financing of operations and maintenance has also been advanced through ADB public sector management support that helped the government rethink its approaches to fiscal revenue management, including cost recovery at central and local government. A key initiative is the Local Government Finance and Fiscal Decentralization Reform Program. There are also some initiatives that are not yet completely assured, such as the 4Ps program in the social protection subsector where the change in administration has led to some uncertainty in the government’s commitment. Other initiatives show less promise for sustaining ADB’s support efforts, as in the agriculture and natural

resources sector which has struggled to establish the full commitment of counterpart funding and institutional resources. For nonsovereign operations, all the four projects approved under the CPS, 2011–2016 are likely to be sustainable given their on-time performance. The validation assesses the development impact of the CPS program less than satisfactory. The assessment is because only three of the government’s six overall targets are likely to be achieved or exceeded. The three targets that are likely to be achieved or exceeded are: (i) improvements in the human development index, (ii) a reduction in the fiscal deficit, and (iii) consolidation of the public sector deficit. The achievements that are lagging are: GDP growth, rate of growth of employment, and poverty incidence. Of these three, GDP growth and rate of growth of employment are not far below their respective targets, whereas poverty incidence results are well below the expected target. Given the importance of the unachieved targets, particularly GDP growth and poverty incidence, the validation assesses that the overall progress towards achievement of these targets is less than satisfactory. Also, given the small size of the ADB program when compared with the Philippines economy, the contribution to GDP growth is at best marginal. Of the three completed sovereign loans, the PCR assessed one as having a satisfactory impact and the other two as having a highly satisfactory impact. The validation report for the latter two loans reassessed the rating to satisfactory, noting that the impact indicators were only partly achieved.

Achievements on crosscutting issues have been satisfactory, with progress made in private sector development, good governance and inclusive finance, and inclusive employment and education. Considerably less progress than expected has been made on regional cooperation and integration issues. Combining the development impact results of less than satisfactory for the achievement of overall

Executive Summary xv

targets and satisfactory ratings for achievement of crosscutting work, the validation assesses the development impacts of ADB’s program less than satisfactory.

The validation assesses ADB’s performance satisfactory. The validation recognizes several positive features of ADB support, as mentioned by the CPSFR. ADB worked hard to align its program and to build a trusting relationship with government that gave it access to reform fields of a strategic and sensitive nature. It coordinated well with the government and other stakeholders in responding to the Yolanda disaster, establishing an extended mission for Yolanda-affected areas in Tacloban, the city most affected by the typhoon. ADB’s shift to more programmatic approaches made it easier for it to influence nationwide reforms, while reducing procedural inefficiencies. Increased knowledge sharing in the last half of the CPS period has also underpinned program design. Notwithstanding this generally positive assessment, there were some weaknesses in ADB’s performance, including weak supervision of some projects (e.g., the Agrarian Reform Communities Project II), and insufficient tracking of policy loan indicators and key actions to sustain policy dialogue (e.g., the Local Government Finance and Budget Reform Program). The validation agrees with the CPSFR’s suggestions on the need for more staff resources to maximize its participation in Philippine Development Forum working groups, increased consultation and partnerships with other stakeholders, and increased coordination in the emerging program in Mindanao.

The validation assesses the borrower’s performance satisfactory. There were a number of strong points to the borrower’s performance, the main one being, as the CPSFR points out, the government’s prudent macroeconomic management during the CPS period, which provided it with greater fiscal space to improve the effectiveness of public spending and to address social and equity concerns. The

government also responded quickly to Typhoon Yolanda, including mobilizing development partners and ensuring the timely release of loan proceeds. In terms of facilitating the implementation of ADB operations in PSM, the government has shown considerable ownership, flexibility and responsiveness. One area for improvement would be in improving the government’s coordination of development partners by using the Philippine Development Forum more effectively.

Lessons and Recommendations

Lessons. The validation concurs with and provides its comments on the CPSFR’s five key lessons: lessons from the national development experiences, lessons from recent ADB support, long-term programmatic support in areas where ADB has a comparative advantage, modalities, and the CPS results framework. The five additional lessons were: (i) continuous support (in terms of capacity building and TA support) over an extended period is key for success; (ii) government ownership in design and use of TA yields better results; (iii) policy-based lending has served the government reform well but it is not always effective, (particularly in addressing regional issues and development constraints that are tied to institutional capacity); (iv) conflict, geography, ethnicity, and culture complicate development efforts (e.g., in Mindanao); and (v) local presence is crucial in undertaking complex operations in difficult circumstances (as in the case of the ADB extended mission for Yolanda-affected areas in Tacloban).

Recommendations. The validation offers five recommendations (three strategic and two operational): Strategic Recommendations

(i) Scale up ADB work in Mindanao. There is a strong rationale for ADB to scale up its operations in Mindanao. The government is giving heightened

xvi Philippines: CPS Final Review Validation, 2011–2016

priority to Mindanao in its new PDP. ADB also has a strong relationship with the main agencies in Mindanao gained through its long history and experience of implementing projects in the region. By scaling up operations, ADB would also reinvigorate the activities of the BIMP-EAGA in Mindanao and contribute to ongoing regional integration efforts. Mindanao has great potential for regional cooperation and integration with Brunei Darussalam, Indonesia, and Malaysia, given its geographical proximity as well as links that are rooted in culture and religion. The scaling up would need to pay due consideration to the ongoing conflict and security situation in Mindanao (focused initially mainly in nonconflict areas) and the financial and institutional capacity of Mindanao agencies and the activities of other development partners in the region.

(ii) Support local government units (LGUs) to enhance their financing capabilities. To achieve some breakthroughs in support to LGUs, ADB may need to think beyond providing support to nationally-managed lending and ongranting to LGUs, aiming instead to preparing the groundwork for market-based mechanisms for LGU financing. For instance, ADB could build on the tentative steps taken in the Philippines with municipal bonds—which have thus far been limited to private placements.

(iii) Link nonsovereign lending more tightly to CPS objectives. The relevance assessment found that nonsovereign operations approved in the CPS period were only loosely linked to the initial and revised CPS objectives, particularly with regard to the poverty reduction and inclusive growth. The public–private partnership development undertaken under the public sector management subsector is a good example of how better links can be established. Greater efforts to discern additional opportunities in private sector operations that directly support

CPS objectives would make for a stronger overall program.

Operational Recommendations

(iv) ADB should consider establishing a local presence in Mindanao. Related to the first strategic recommendation to scale up ADB operations in Mindanao, ADB should consider establishing a local presence in Mindanao via a liaison or satellite office reporting to the Philippine country office. Currently, several areas of Mindanao are considered conflict-affected areas, severely impacting ADB’s operations. The experience with the extended mission for Yolanda-affected areas indicates that a local presence could be very useful in such difficult situations. In addition, to complement ADB’s ongoing capacity development activities in Mindanao, consideration should be given to granting the liaison office a knowledge hub role linked to BIMP-EAGA work.

(v) Weave education support more effectively into social protection support. ADB is successfully undertaking important and innovative work to improve the education sector and the social protection subsector, but there is still scope to improve the synergies between these activities. This may call for a greater effort to scale up the public employment service offices and to strengthen JobStart depending on the findings of the impact evaluation. This could provide a bridge between the expanded senior high school enrollment and the job market. Support for the sustainable livelihoods component that is so crucial to the eventual convergence and maturation of social protection and community-driven develop-ment initiatives (e.g., 4Ps and KC-NCDDP), could also be more tightly linked to the JobStart initiative

CHAPTER 1

Rationale and Context

A. Validation Purpose and Rationale 1. The Asian Development Bank (ADB) is preparing a new country partnership strategy (CPS) for the Philippines covering the period 2017 to 2022. It aims to align this strategy with the new Philippine Development Plan (PDP) that has been recently finalized by the government. To support the formulation of the new CPS, an evaluation of the current CPS1 is needed to assess whether the objectives of that strategy were achieved, in terms of actual versus planned project approvals, implementation of the CPS, and portfolio performance. The previous evaluation of the CPS for the Philippines was carried out through a country assistance program evaluation (CAPE) in 2008,2 but the evaluation of the current CPS is being carried out by this validated CPS final review (CPSFR). The CPSFR was prepared in mid-2016 by the Southeast Asia Department.3 2. The validation of the CPS final review by IED is mandated under ADB’s Operations Manual.4 An evaluation approach paper (EAP)5 was prepared in accordance with the March 2015 guidelines,6 to provide an independent evaluation of the performance of ADB’s program, and identify the key issues for evaluation. The EAP set the following objectives of the validation: (i) verify the findings of the self-assessments in the CPSFR, (ii) assess the quality of the final review, and (iii) identify lessons and recommendations to improve the design and implementation of subsequent CPSs. The EAP also provided details on the evaluation approach, methodology and the composition of the evaluation team. 3. This validation has relied primarily on information presented in the CPSFR, consultations with ADB staff involved with CPS preparation and operations, consultations with various stakeholders during independent evaluation missions,7 critical reviews of relevant project documents, reports (including project evaluation and validation reports), and analysis of available country data. Primary data was collected through a beneficiary survey to support the findings.

1 ADB. 2011. Country Partnership Strategy: Philippines, 2011–2016. Manila. 2 IED. 2008. Country Assistance Program Evaluation for the Philippines: Increasing Strategic Focus for Better Results. Manila: ADB.

3 The Independent Evaluation Department (IED) received the self-assessed country partnership strategy final review (CPSFR) on 14 June 2016 via a memo dated 6 June 2016, signed by Director General, Southeast Asia Department (SERD) on 10 June 2016.

4 ADB Operations Manual, Section A2, para. 5 5 IED. 2016. Evaluation Approach Paper: Philippines Country Partnership Strategy Final Review Validation. Manila: ADB.

6 Independent Evaluation Department (IED). 2015. Guidelines for the Preparation of Country Assistance Program Evaluations and Country Partnership Strategy Final Review Validations. Manila: ADB.

7 An independent evaluation mission was undertaken on 26–29 September 2016 in Tacloban, Leyte Province, with a field visit to Western Samar Province; on 3–4 October 2016 in Davao City; and on 6–7 October 2016 in Cebu City. Project and sector assessment missions were also undertaken in Naga, Cebu on 10–13 October 2016 and Cagayan de Oro and Bohol on 16 November 2016. Meetings with executing agencies at the national level were also undertaken by the team on 18–22 September and 10–12 October 2016.

2 Philippines: CPS Final Review Validation, 2011–2016

4. Although the CPS was prepared in 2011, its structure adhered to the 2007 corporate guidelines.8 In late 2015 the revised CPS guidelines reformed the CPS business process to favor outcomes at thematic and cross‐sector levels, and to include a clear statement of the CPS objectives.9 Revised CAPE and CPSFR validation guidelines in the same year placed greater attention on assessing CPS cross-sector objectives. 10 In addressing the effectiveness and efficiency criteria, the CPSFR sought to reflect this shift by gathering the initial sectors of focus in the original CPS under the reworked objectives of the 2014 strategy realignment in the government’s updated national plan (see Section C, para. 15). 5. The validation covers all ADB loans, grants and technical assistance approved for the Philippines during the period 2011 to 2016, the validation period. In addition, this validation also reviewed projects that were approved before 2011 but were still active and implemented during the validation period. Lists of the ongoing and completed loans, grants, nonsovereign operations, and technical assistance are provided in Appendixes 1 and 2. 6. The CPSFR did not treat nonsovereign operations separately, and gave them little attention in the analysis or assessment. The validation assessed these operations separately in view of the considerable effort and investment made by ADB to pursue nonsovereign operations, and its anticipated larger role in the future lending mix.

B. Country Context 7. Economic performance. The Philippines is a large archipelagic country comprising more than 7,000 islands located in Southeast Asia. Over the period 2011–2016, gross domestic product (GDP) grew on average 6.1% a year. The Philippines annual growth outpaced that of its neighbors Indonesia, Malaysia, Singapore, Thailand and Viet Nam (Figure 1). The Philippines’ growth outcomes have steadily improved over the past 30 years, with average annual per capita gross national income accelerating from an average of -1% in the 1980s, to 2% in the 1990s, to 4% in the 2000s, and to 2.8% during 2011–2016.

8 ADB. 2007. Country Partnership Strategy Guidelines. Manila 9 ADB. 2015. Reforming the Country Partnership Strategy Informal Board Seminar. 2 September. Manila. 10 ADB. 2015. Revised Guidelines for the Preparation of Country Assistance Program Evaluations and Country

Partnership Strategy Final Review Validations. Manila.

Rationale and Context 3

8. In terms of sector shares (Figure 2), more than half of the Philippines’ GDP during the validation period has been derived from the services sector, followed by industry and agriculture. The share of the services sector has been increasing since 2011at the expense of both industry and agriculture and is now almost 60%.

Figure 2: Share of Philippine GDP by sector (%), 2011–2016

Source: World Bank. World Development Indicators databank.

55.9 56.9 57.6 57.3 58.8 59.5

31.3 31.2 31.1 31.3 30.9 30.8

12.7 11.8 11.3 11.3 10.3 9.7

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.0

100.0

2011 2012 2013 2014 2015 2016

Services (% of GDP) Industry (% of GDP) Agriculture (% of GDP)

Figure 1: Annual GDP Growth (%) of Southeast Asian Countries, 2011–2016

Source: World Development Indicators Database. Accessed September 2017.

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

2011 2012 2013 2014 2015 2016

Indonesia Malaysia Philippines Thailand Singapore Viet Nam


9. Macroeconomic fundamentals also improved substantially over the period 2011–2016: unemployment fell from 7.3% in 201011 to 4.7% as of October 2016,12 exceeding the medium term target of 6.5% to 6.7% by 2016; inflation fell to 1.8% average for 2016, below the Philippines Central Bank’s target band (2.0%–4.0%) as of end 2016, led by lower fuel and food prices; and the national government fiscal deficit in 2015 was 0.9% of GDP, well below the target of 2%.13 These positive developments gave the government more fiscal space to shape development policies. Heading into the CPS period, ADB regarded low public spending for social services, including on education, health and social protection, as an impediment to inclusive growth and a favorable investment climate.14 Official figures for national accounts indicate that GDP grew by 6.9% in 201615 but ADB has forecasted more modest growth of 6.4% for 2017 and 6.6% for 2018.16 The International Monetary Fund (IMF) has higher growth forecast at 6.8% for 2017 and 6.9% 2018 respectively due to higher public spending.17 10. While international financing institutions have produced optimistic growth forecasts, other observers, such as the World Economic Forum and the IMF, have been more guarded. The investment climate suffers from low competitiveness and the high cost of doing business.18The World Economic Forum’s Global Competitiveness Report 2016–2017 ranked the Philippines 57 out of 138 assessed economies, in terms of overall competitiveness, setting it back 10 places from previous year’s ranking.19 The Global Competitiveness Report noted that the four most problematic areas that the Philippines needed to address were inefficient government, inadequate infrastructure, corruption, and the tax regime. Upgrading public infrastructure is recognized as the Philippines’ major structural challenge. The IMF notes that “At 21.8% of GDP in 2014, the investment rate in the Philippines is well below regional peers. Raising investment, particularly in infrastructure, would allow the country to reap the dividends of its young and growing population.”20 The Philippines ranks very low in terms of infrastructure competitiveness when compared to its regional peers, with its weakest scores being in the quality of air transport and ports (Table 1).

11 Philippine Statistical Authority. 2011. 2010 Annual Labor and Employment Status. Reference Number: 2011-

011. Release Date: Tuesday, February 8, 2011. https://psa.gov.ph/content/2010-annual-labor-and-employment-status#sthash. R7v29Ovt.dpuf

12 Philippine Statistical Authority. 2017. Labor Force Survey. http://psa.gov.ph/statistics/survey/labor-force Accessed March 2017.

13 Bureau of Treasury. 2016. Full-Year 2015 National Government Budget Deficit Widens to P121.7 Billion. Press release.

14 ADB. 2011. Country Partnership Strategy: Philippines, 2011–2016. Manila. para. 6. 15 https://www.rappler.com/business/166361-psa-revised-gdp-growth-2016. 16 ADB. 2017. Asian Development Outlook 2017: Transcending the Middle-Income Challenge. Manila. 17 IMF. 2016. World Economic Outlook. October 2016. Subdued Demand Symptoms and Remedies 18 Global Affairs Canada:

http://www.international.gc.ca/development-developpement/countries-pays/philippines. aspx?lang=eng 19 World Economic Forum. 2016. Global Competitiveness Report 2016–2017. Geneva. 20 T. Komatsuzaki. 2016. Improving Public Infrastructure in the Philippines. IMF Working Paper WP/16/39 Asia

Pacific Department. February.


Table 1: Global Infrastructure Competitiveness Ranking of Selected Southeast Asian Countries, 2016–2017

Indicator Philippines Singapore Malaysia Thailand Indonesia Viet Nam

Quality of Roads 106 2 20 60 75 89

Quality of Railroads 89 5 15 77 39 52

Quality of Ports 113 2 17 65 75 77

Quality of Air Transport 116 1 20 42 62 86

Available Airline Seat Kilometers 27 20 23 15 14 29

Quality of Electricity Supply 94 2 39 61 89 85

Fixed Telephone Connectivity 107 29 72 91 86 99

Mobile Telephone Connectivity 65 24 27 55 38 40

Overall 112 2 19 72 80 85 Source: World Economic Forum. 2016. The Global Competitiveness Report 2016–2017. Geneva.

11. Poverty and inequality. In 2016, the total population was estimated at 103 million and growing at 1.9% per annum.21 Overall poverty incidence declined from 25.2% in 2012 to 21.6% in 2015,22 the fastest poverty incidence decline in the last decade. From 2012 to 2015, per capita incomes in the poorest 30% of the population grew by 24.3%, exceeding the average for all income groups (15.8%) and the richest 20% of the population (12%). Notwithstanding this, the World Bank noted that poverty affects roughly 25% of the population and many Filipinos live just above the poverty line, moving in and out of poverty due to their high vulnerability to climatic, disaster, financial and price shocks.23 At the subnational level, poverty remains high in the eastern Visayas and central and western Mindanao regions, reflecting wide income and regional inequalities. As an example, the per capita gross regional GDP in the Autonomous Region in Muslim Mindanao (ARMM) is about 20% of the national average and Mindanao as a whole, has a very high incidence of poverty.24 12. In 2014, the Philippines ranked 115 in the human development index of the United Nations Development Programme (UNDP), placing it in a group of countries with “medium” level of human development.25 Some progress has been seen in particular sub-sectors, for instance in the rising rates of primary and to a lesser extent secondary school net enrollment.26 Net primary school enrollment increased from 91% in 2009 to 96% in 2013, while secondary school enrollment increased from 61% to 67% during the same period. Among the poor, income distribution has improved slightly as shown by the decline in income gap, poverty gap and poverty severity indexes from 2012 to 2015.27 In its 2014 report on the country’s progress in achieving the Millennium Development Goals (MDGs), the government reported that it had reached its target on access to safe water and was on track to achieve the MDGs on education, empowering women, reducing infant and under-five mortality, reversing incidences of malaria, and increasing the proportion of households with access to sanitary toilet facilities. However, progress on poverty and welfare in general is threatened by economic and social inequality, as well as by regional disparities, especially in the conflict-affected provinces of the island of Mindanao. The UNDP report further notes that ensuring that social services reach the poor remains a major challenge: women in the labor force are confined largely to low-

21 ADB. 2017. Basic 2017 Statistics. Manila. 22 Philippine Statistical Authority. 2016. Poverty Incidence among Filipinos Registered at 21.6% in 2015 – PSA.

Reference Number: PHDSD-1610-04, Release date: Thursday, 27 October 2016. 23 World Bank. 2014. Country Partnership Strategy for the Republic of the Philippines for the Period FY2015–

2018. Washington. 24 Philippine Statistics Authority, https://psa.gov.ph/regional-accounts/grdp/data-and-charts. The information

on the incidence of poverty is from Joel Mangahas. 2010. Making a Difference in Mindanao. Manila: ADB. p. 1.

25 UNDP. 2015. Human Development Report 2015: Work for Human Development. New York. 26 ADB. 2014. Senior High School Support Program. Summary Sector Assessment: Education. Manila. 27 https://psa.gov.ph/poverty-press-releases


wage, low-productivity jobs and have limited access to land ownership, credit, and training. Natural disasters such as hurricanes and floods have resulted in severe losses of life and property and have constrained efforts to reduce poverty. 13. Recent developments in Mindanao areas affected by conflict. In May 2017, an armed conflict between the Philippine military and local militant groups erupted in Marawi, Lanao del Sur which is under the governance of the ARMM. The government

declared martial law over the entire island of Mindanao on the grounds of rebellion.28 The economic impact of the armed conflict has yet to be assessed but, thus far, the armed conflict has resulted in multiple fatalities for both sides and the devastation of the city’s infrastructure. Most Marawi City residents have evacuated the area to neighboring municipalities and cities. In the short term, government efforts are directed to the relief and rehabilitation of Marawi City and its residents but more strategic initiatives for reconstruction and recovery are also necessary in the medium to long term.

C. Government Development Plans in the Context of the CPS 2011–2016

14. PDP 2011–2016. To achieve integrated and coordinated programs and policies for national development, a PDP for the period 2011 to 2016 was formulated in 2011. Preparation of the PDP included exhaustive consultations with government agencies, regional development councils, local government units, the business sector, nongovernment organizations, academe, and groups of well-known experts in economic and social development. With good governance and opposition to corruption as an overarching theme, the PDP, 2011–2016 adopts a framework of inclusive growth, which, if sustained, would generate labor demand and reduce poverty. The PDP, 2011–2016 centers on five key strategies: (i) boost competitiveness in the productive sectors to generate employment; (ii) improve access to financing to address the evolving needs of a diverse public; (iii) invest significantly in infrastructure; (iv) promote transparent and responsive governance; and (v) develop human resources through improved social services and protection. The PDP serves as a guide for programming, budgeting, program implementation, and monitoring. It makes use of a public investment program component that identifies budgetary requirements and sources of finance for these programs and projects. Its performance management is tracked through a results matrix for specific programs and projects that specifies responsible implementing agencies. 15. PDP 2011–2016: Midterm Update. Halfway into its period of implementation in 2014, a midterm review29 of the PDP was undertaken by the government to enable it to make adjustments to policies, strategies, measures and programs if needed to reflect progress and lessons learned to that point. The review highlighted the country’s robust economic performance, but also acknowledged remaining challenges, including the slow pace of vital infrastructure development and the high cost of doing business. The persistence of poverty and poor provinces was highlighted, revealing the need to refocus strategic interventions. The review detailed these interventions and set results-based and time-sensitive targets. These included a reduction in unemployment to 6.5%–6.7% and a reduction in the incidence of income poverty to 18%–20% by 2016; a reduction in underemployment to about 17%; and a reduction of multidimensional poverty to 16%–18% by 2016. Under social protection, the midterm PDP review also targeted increasing

28 PCOO. 2017. Duterte Declares Martial Law in Mindanao, Cuts Short Russia Trip. News Release.

http://pcoo.gov.ph/uncategorized/duterte-declares-martial-law-in-mindanao-cuts-short-russia-trip%E2%80%A8%E2%80%A8-moscow-russia/

29 NEDA. 2014. Philippine Development Plan 2011-2016: Midterm Update. Manila.


the social insurance coverage of poor families under the PhilHealth Sponsorship Program from 88.7% in 2010 to 100% by 2016. Total estimated investment targets under the adjusted PDP amount to P4.19 trillion, consisting of about 1,500 priority programs and projects from 2013 to 2016. More than half of the investment targets are programmed for infrastructure development (P1.84 trillion, 53%), followed by social development (P727.79 billion, 21%), agriculture and fisheries (P522.71 billion, 15%) and sustainable and climate resilient environment and natural resources (P166.23 billion, 5%).30 16. PDP 2017–2022. A new PDP31 for the period 2017–2022 was finalized in March 2017 to reflect the progress made in the previous period and to set the priorities of the new administration for the medium term. The new PDP contains the new administration’s 10-point socioeconomic agenda, which focuses among other things on infrastructure building, fiscal reforms, rural development, health education systems, job creation, and enhanced competitiveness. Key education legacy reforms from the previous administration that have a good chance of being continued in some form include the expansion of education, including increasing the duration of basic education from 10 to 12 years and promoting technical and vocational education and training (TVET). In terms of poverty reduction programs, the national form of conditional cash transfer (CCT), 32 the Pantawid Pamilyang Pilipino Program (4Ps), started in 2007 is perceived by program stakeholders to have been effective in directing cash to poor households to spur school attendance and access to preventive health care and nutrition services and is likely to be continued with enhanced beneficiary targeting. The community-driven development (CDD) approach introduced through KALAHI-CIDSS, and later expanded nationwide under the name KC-NCDDP, which provides block grants to communities (barangays) for small-scale infrastructure projects, is also likely to be continued. As the previous administration came to an end, considerable urgency was given to improving the effectiveness and efficiency of the above social protection programs, with the notion of “convergence” taking center stage, essentially linking the 4Ps, KC-NCDDP and other programs such as the sustainable livelihood approach to gain greater impact and sustainability. 17. The latest PDP includes an enhanced focus on infrastructure development in Mindanao. Among the main priorities are to (i) develop the metropolitan area of Cagayan de Oro so the city can become the main gateway and transshipment hub in northern Mindanao, while remaining the main educational center in the area; (ii) expedite road projects and improve logistics, particularly in western Mindanao; (iii) expand the rail network among main cities and growth areas; (iv) expand water transport between main ports; (v) fast-track implementation of the Visayas–Mindanao power connection; and (vi) complete the 230 kV Mindanao transmission “backbone” from Lanao del Sur in the north to Davao del Sur in the south. The PDP also prioritizes ensuring national security against internal and external threats in recognition of the fact that communities that experience armed conflict are frequently among the poorest in the country. Under the long-term vision of the Philippines in the PDP, pursuing the peace agenda for areas threatened by armed conflict is part of one of the four areas for strategic action.

30 NEDA. 2014. Philippine Development Plan, 2011-2016: Revalidated Public Investment Program. Manila. 31 NEDA. 2017. Philippine Development Plan, 2017-2022. Manila. 32 Department of Health. 2016. 10-Point Socioeconomic Agenda of the Duterte Administration. Manila.


D. Country Partnership Strategy and ADB Portfolio

1. ADB Country Partnership Strategy 18. Combining the priorities of the government with those of ADB’s Strategy 2020,33 the CPS, 2011–2016 for the Philippines34 was designed to support the Philippines to achieve high, inclusive, and sustainable growth focusing on three of the five core operational areas of Strategy 2020: infrastructure, environment, and education. The CPS promoted the following four program objectives:

(i) an improved investment climate and private sector development—ADB would support scaling up of transport and energy infrastructure investments and policy reforms that improve the quality of competition and regulation, enhance fiscal policy and expenditure management, and strengthen legal and judiciary reforms;

(ii) more efficient, effective, and equitable social services delivery—ADB would increase support for the efficient, effective, and equitable delivery of social services;

(iii) reduced environmental degradation and vulnerability to climate change and disasters—ADB would provide support in the areas of environment, climate change, and disaster risk management by prioritizing strengthening ecosystem functions and the preservation of natural resources; and

(iv) strengthened governance and reduced corruption—ADB would continue and deepen its efforts to strengthen governance and reduce corruption at the country, sector, and project levels.

19. ADB originally envisaged that its support would encompass five priority sectors: transport, energy, education, agriculture and natural resources, and water supply and other municipal infrastructure and services. Support for public sector management was deemed to be crosscutting. All of these were to make a contribution to the overall CPS key objective “to help the Philippines achieve high, inclusive, and sustainable growth.” 20. Responding to the 2014 update of the national government development plan, ADB realigned its country operations business plan (COBP) for 2015–2017 by updating the sector objectives for energy, agriculture, natural resources and rural development and public sector management. The resulting ADB program focused on four areas (or what might be described as new CPS objectives): (i) sustainable and climate-resilient infrastructure; (ii) good governance and inclusive finance; (iii) inclusive employment and education; and (iv) regional cooperation and integration (RCI). Unfortunately, there was little explanation or justification in the CPS, COBP, or CPSFR for the specific grouping of operations that fall under each of these objectives. The CPSFR fleshes out these objectives through exclusive lists of sectors of focus, leaving important assumptions implicit. This throws up some unexamined challenges. Nonetheless, the validation recognizes this structure, and works with it in the discussion of efficiency and effectiveness (and to some degree relevance).35

33 ADB. 2008. Strategy 2020: The Long-Term Strategic Framework of the Asian Development Bank, 2008–2010.

Manila. 34 ADB. 2011. Country Partnership Strategy: Philippines, 2011–2016. Manila. 35 The validation team recognizes that the CPS reforms of 2015 stress relevance and development impact as

the criteria for assessing the CPS objectives in CPS final review validations (see ADB. 2015. Reforming the Country Partnership Strategy. December. Manila). However, it accommodates the CPSFR’s emphasis on efficiency and effectiveness, recognizing that it will take some time for the 2015 reforms to be fully reflected in documents.


2. Planned ADB Country Program 21. Based on the CPSFR, the total programmed resource envelope for the period 2011–2016 was $2.4 billion. About half of the envelope was programmed for public sector management (PSM), while 27% was for infrastructure (transport, energy and water and other urban infrastructure services). The breakdown of the programmed allocation by sector is provided in Figure 3.

3. ADB Approved Portfolio 22. From January 2011 to December 2016, ADB approved 16 sovereign loan projects totaling $4.317 billion and 11 grant projects totaling $47 million. TA operations consisted of 37 TA projects totaling $73 million while nonsovereign operations consisted of four projects totaling $342 million. The total approved portfolio amounted to $4.78 billion, almost double the planned investment for the period (Table 2). Sovereign loans make up about 90% of the total portfolio and nonsovereign operations 7%. (Figure 4). Of the total 16 approved sovereign loans, nine are still active and seven have closed, three of which have completion reports.36 For TA projects, of the 47 approved, 31 are still active and 16 have closed, 10 of which have TA completion reports. None of the four nonsovereign projects or 11 grants have extended annual review reports or grant completion reports. (Appendix 1 and 2).

36 ADB. 2013. Completion Report: Emergency Assistance for Relief and Recovery from Typhoon Yolanda. Manila.

ADB. 2012. Completion Report: Increasing Competitiveness for Inclusive Growth Program (Subprogram 1). Manila; and ADB. 2014. Completion Report: Increasing Competitiveness for Inclusive Growth Program (Subprogram 2). Manila.

Figure 3: ADB Indicative Resource Allocation for Sovereign Operations in CPS, 2011–2016

ANR = agriculture and natural resources, ENE = energy, PSM = public sector management, TRA = transport, WSOMIS = water sector and other municipal infrastructure and services. Source: ADB. 2011. Country Partnership Strategy: Philippines, 2011–2016. Manila, Results Framework.

TRA11%

ENE8%

EDUC12%

ANR11%

WSOMIS8%

PSM50%


Table 2: ADB Approved Portfolio in the Philippines, 2011–2016, Sector and Modality ($ million)

Modality Sovereign Loans Nonsovereign loans

Technical Assistance Grants All Modalities

Sector No. of

Loans

Amount Approved

No. of Loans

Amount Approved

No. of TAs

Amount Approved

No. of Grants

Amount Approved

Amount Approved

%

ANR 1 100.00 0 - 2 3.53 3 5.91 109.44 2.3%

Education 3 1,072.10 0 - 4 4.00 2 6.50 1,082.60 22.7%

Energy 1 300.00 1 20.00 2 2.50 1 5.00 327.50 6.9%

Finance 1 300.00 2 246.81 8 5.06 0 - 551.87 11.5%

Health and Social Services

0 - 0 - 0 - 0 - - 0.0%

Industry and Trade 1 350.00 0 - 4 14.00 0 - 364.00 7.6%

Multisector 0 - 0 - 0 - 2 21.50 21.50 0.4%

Public Sector Management

6 1,950.00 0 - 13 40.56 2 6.00 1,996.56 41.8%

Transport 1 62.00 1 75.00 1 1.00 0 - 138.00 2.9%

WUS 2 183.30 0 - 3 1.89 1 2.00 187.19 3.9%

Total 16 4,317.40 4 341.81 37 72.54 11 46.91 4,778.66

ANR = agriculture, natural resources and rural development, No. = number, TA = technical assistance, WUS = water and other urban infrastructure and services. Source: ADB Loan, TA, Grant and Equity Approvals Database

Figure 4: ADB Approved Projects in the Philippines, 2011-2016, by Modality

Source: ADB Loan, TA, Grant and Equity Approvals Database

23. On an annual basis, ADB support averaged $796 million per year, reaching almost $1 billion in 2014 (Figure 5a). The main approvals in 2014 were: the Senior High School Support Program, the second subprogram for Increasing Competitiveness for Inclusive Growth Program, and the first subprogram for the Local Government Finance and Fiscal Decentralization Reform Program. Approvals for nonsovereign operations were higher in 2015 with the approval of the 150-MW Burgos Wind Farm Project and the Tiwi and MAKBAN Geothermal Power Green Bonds. By sector, PSM makes up about 42% of the total portfolio, followed by education (23%) and finance (11%). The infrastructure sectors accounted for a combined 14% of the total portfolio (Figure 5b).

Sovereign Loans90%

Nonsovereign loans7%

Technical Assistance

2%Grants

1%


Figure 5a: ADB Annual Approved Projects in the Philippines, 2011–2016, by Modality

($ million)

Source: ADB Loan, TA, Grant and Equity Approvals Database.

Figure 5b: ADB Approved Projects in the Philippines, 2011–2016, by Sector


24. ADB active portfolio. In addition to these approvals, ADB also managed an active portfolio (approved before 2011) amounting to $2.074 billion. This included 11 active sovereign loans ($1.673 billion), seven nonsovereign loans ($373 million), six grants ($15 million) and 18 TA projects ($14 million). The combined approved and active portfolio during the period amounted to $6.853 billion (Table 3). In terms of sector allocation, the majority of the combined approved and active portfolio ($2.81 billion) was allocated to public sector management, followed by education ($1.484 billion), and finance ($806 million). The infrastructure sector (energy, transport and water and other urban infrastructure and services) received $1.01 billion or about 14.7% of the total support during the period (Figure 6).

0.0

200.0

400.0

600.0

800.0

1000.0

2011 2012 2013 2014 2015 2016Sovereign Loans Nonsovereign loans Technical Assistance Grants

Agriculture, Natural Resources and Rural

Development2%

Education23%

Energy7%Finance

11%

Industry and Trade8%

Multisector0.45%


42%

Transport3%

Water and other urban

infrastructure and services

4%


Table 3: ADB Combined Approved and Active Portfolio in the Philippines, 2011–2016, by Sector and Modality ($ million)

Modality Sovereign Loans Nonsovereign loans

Technical Assistance

Grants All Modalities

Sector No of Loans

Amount Approved

No. of

Loans

Amount Approved

No. of TAs

Amount Approved

No. of Grants

Amount Approved

Amount Approved

%

Agriculture, Natural Resources and Rural Development

4 278.80 0 - 3 4.83 4 13.91 297.54 4.3

Education 4 1,472.10 0 - 7 5.60 2 6.50 1,484.20 21.7

Energy 2 331.10 3 340.00 2 2.50 2 6.50 680.10 9.9

Finance 2 500.00 7 299.31 8 5.06 2 1.90 806.27 11.8


2 63.00 0 - 1 1.00 1 0.40 64.40 0.9

Industry and Trade 1 350.00 0 - 4 14.00 0 - 364.00 5.3

Multisector 0 - 0 - 0 - 2 21.50 21.50 0.3


9 2,750.00 0 - 25 49.51 3 9.00 2,808.51 41.0

Transport 1 62.00 1 75.00 2 2.00 0 - 139.00 2.0

Water and Other Urban Infrastructure and Services

2 183.30 0 - 3 1.89 1 2.00 187.19 2.7

Total 27 5,990.30 11 714.31 55 86.39 17 61.71 6,852.71


Figure 6: Combined ADB Approved and Active Portfolio, 2011–2016, by Sector


Agriculture, Natural Resources

and Rural Development

4%

Education22%

Energy10%

Finance12%


1%

Industry and Trade5%

Multisector0.31%


41%

Transport2%

Water and Other Urban

Infrastructure and Services

3%

CHAPTER 2

Validation of the Country Partnership Strategy Final

Review

A. Relevance 25. The validation assesses the ADB program relevant, downgrading the CPSFR rating of highly relevant. This criterion assesses the ADB program’s strategic relevance to country development needs, sector development constraints, and government policies and plans. The validation finds the support provided under the program was generally consistent with and responsive to government policies and plans, including the 2014 updating of the PDP, 2011–2016, which was considered in the preparation of ADB’s COBP, 2015-2017. The ADB program exhibited continuity, as is required in areas of reform that are challenging and demand long-term commitment. The Local Government Finance and Fiscal Decentralization Reform Program, which is now in its second phase, is a good example. Yet the program also showed adaptability to changing government priorities, with ADB revising its strategy to acknowledge the government’s formal changes to the PDP as made in 2014. To ensure alignment, the CPS shared selected results targets from the government’s PDP targets. ADB’s flexibility was also evident in its response to the devastating impacts of Typhoon Yolanda in late 2013, which had an economic transformational effect in the typhoon-affected areas. The continued reliance on programmatic approaches (including PBL) highlights the relevance of the CPS intention to mainstream policy lending as part of more holistic programmatic assistance in selected sectors. The validation also notes that the three completed loans were rated highly relevant by both the PCRs and the PVRs. Nevertheless, the validation reassessed the program relevant, a downgrading from the CPSFR’s highly relevant rating for the following reasons: (i) a midcourse strategy revision was made so the ADB program remained aligned with the national update in priorities, but approvals consistent with the new strategy were slow to arrive; (ii) some projects in the energy sector were approved although they did not reflect the key priorities of the government; (iii) there was a loose connection between lending and technical assistance, reflecting in part the late preparation of a knowledge plan; and (iv) delays in implementing some emergency response projects reduced their relevance by the time they delivered benefits. 26. The CPSFR capably captures the country context37 and links the ADB program to it. It lays out the increasingly favorable macroeconomic fundamentals near the start of the CPS period, noting however the stubborn persistence of poverty and regional inequalities. It highlights the approach taken to the CPS preparation; the substantive

37 See details of the country context in Chapter 1.B.


dialogue on national development strategies, prior to and during CPS formulation and attention to political signals. Against this backdrop, the CPSFR notes that ADB sought to align its program with government development objectives as specified in the PDP, 2011–2016. A country knowledge plan38 was belatedly produced—in conjunction with the COBP, 2012–2014—which provides a useful summary of knowledge products produced up to 2015, as well as setting out the anticipated knowledge needs articulated in the main CPS assistance areas. The program also showed adaptability, as it responded to signals of political support and renewed government priorities. In the implementation of the program, ADB revised its strategy to acknowledge the government’s formal changes to the PDP in 2014,39 when “inclusive growth – defined as poverty reduction in multiple dimensions and massive creation of quality employment” was declared the desired outcome. To ensure alignment between the ADB and government programs, the CPS shared selected results targets from the government’s PDP targets. 27. The ADB program was equally mindful of ADB’s own Strategy 2020. The CPSFR explains that the CPS focused on core operational areas (transport, energy, education, agriculture and natural resources, and water resources and other urban services), making PSM a driver of change. Moreover, RCI was integrated as a theme in strategic planning. Subsequent to the government’s PDP midterm update in 2014, ADB and the government agreed in 2015 that ADB should formally reorient the COBP so ADB could focus more strategically on four inter-related program areas: (i) sustainable and climate-resilient infrastructure; (ii) good governance and inclusive finance; (iii) inclusive employment and education; and (iv) regional integration.

28. To demonstrate that the ADB program was implemented with an appropriate degree of flexibility, the CPSFR notes ADB’s response to several economic, social and political events, chief among these the devastating impacts of Typhoon Yolanda in late 2013 and the opportunities presented by the 2014 signing of the Comprehensive Agreement on the Bangsamoro,40 to target the poorest regions of the Philippines. ADB’s Yolanda support was notable in that it was the first time an ADB loan adopted the performance-based lending modality based on ADB’s Disaster and Emergency Assistance Policy.41 Moreover, there was an important transformational aspect to ADB’s emergency assistance to the typhoon-affected areas, which sought to rebuild better than before and trigger an economic transformative effect in these areas. The PVR for the Typhoon Yolanda cited this economic transformative effect as one of the key factors for assessing the project highly relevant.42 29. The CPSFR alludes to the CPS’s intention to increase the share of project lending in total financing,43 suggesting that this had been realized, but its data (and Figure 2 of the CPSFR) do not fully reflect the operations active or approved in the CPS period. The validation has recalculated the data (Figure 7) and they show that program lending continued to be substantial, and even dominant in the latter part of the CPS period. The continued reliance on program lending highlights the relevance of the CPS intention (drawing on CAPE recommendations) to mainstream policy lending so ADB can provide

38 ADB. 2016. Report on the Philippines Country Knowledge Strategy and Plans 2012-2015. Manila. 39 During a mid-term review of PDP implementation in 2014 (http://www.neda.gov.ph/?p=2909), adjustments

were made to “policies, strategies, measures and programs based on updated information, and lessons learned during the first half of the Plan’s implementation”.

40 Available online at: http://www.officialgazette.gov.ph/2014/03/27/document-cab 41 ADB. 2004. Disaster and Emergency Assistance Policy. Manila. 42 ADB. 2016. Validation Report: Philippines: Emergency Assistance for Relief and Recovery from Typhoon

Yolanda. Manila. 43 The CPSFR’s assertion in its para. 8 is unsubstantiated, since no reference to increasing project lending’s

share in total finance is to be found in the CPS, 2011–2016.

Validation of the Country Partnership Strategy Final Review 15

more holistic programmatic assistance in selected sectors. This intention appears to have been partly realized. Among sovereign loans, a high proportion (63% by number, 69% by amount) used programmatic approaches such as policy-based lending (PBL), results-based lending, special assistance loans and sector loans. However, PBL has not always been well supported or well linked to TA. The ADB TA program appears to have arisen in an ad hoc way in response to government requests. In part, this can be attributed to the lateness in preparing a knowledge plan that could have established a tighter connection between lending and technical assistance. 30. The consistency of implementation of the overall planned program also contributed to the relevance of the program (Table 3 and Appendix 3). This comprehensive view reveals substantial consistency in the education and public sector management sectors, the latter being the dominant sector in both planning and implementation. However, a planned health and social protection project was not approved and an unplanned lending operation in the industry and trade sector was approved, which the validation understands was more a reflection of shifts in government demand than factors internal to ADB.

Figure 7: Trends in Project and Program Lending (Approval of Sovereign Loans) ($ million)

31. Assessment of actual versus planned sovereign lending. There were important

differences between the lending envisaged at the time of the approval of the CPS, 2011–

2016 in 2011 and the loans that were actually delivered, although there were often good

reasons for these differences as they were mainly in response to shifts in government

demand. In the program planning conducted in 2011, the multisector, PSM, social

protection projects that formed part of the emergency response (approved in 2013 and

2014) were not planned; 44 the loans (together with grants, see Appendix 1) were

however an appropriate response to needs arising from Typhoon Yolanda. Nevertheless,

there was a loosening of focus over the implementation period. The CPS results

framework’s list of five sectors plus PSM as a crosscutting sector expanded during

implementation to eight sectors plus PSM. While this suggests inconsistent

implementation, it is important to note that many of the shifts in course followed the

government’s PDP, 2011–2016 midterm update, in which case the inconsistency should

be viewed as an appropriate response to government’s new priorities. Appendix 3

44 A “regular” Kalahi-NCDDP was already in the design stage prior to the disaster and this program was quickly

refitted to address the emergency needs.

0

100

200

300

400

500

600

700

800

-

200.0

400.0

600.0

800.0

1,000.0

1,200.0

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Project Program 3-year Average Project 3-year Average Program



compares the planned and approved subset of lending operations for the period 2014–

2016, which should reflect ADB strategy shifts (through the COBP prepared in December

2014) to accommodate the government plan revision (undertaken in early 2014).

32. There is little in the planned program for 2015 that suggests a quick pivot toward

the new government priorities established in the government plan update. To begin with,

the Capital Markets and Nonbank Reforms Program, Subprogram 1 (approved 16

November 2015) was not focused on inclusive financing as the priorities require; it was

about deepening the bond market. The intent of this loan clearly indicates that inclusive

financing will not be made the focus in this sector in ADB support until 2018–2020.45 A

TA for developing a framework for inclusive financing was approved in August 2016,46

but it only became effective in January 2017 and progress towards achievement of

outcome is not yet available.

33. Some planned operations are aligned with the revised strategy. The Improving

National Roads for Inclusive Growth in Mindanao Project for example, could be seen as

supporting regional integration, since it opens up the interior to port facilities that can

link to neighbouring countries, although the project history indicates that it has been a

quite long drawn out effort.47 Moreover, if the loan reflects the current TA48 provided in

the sector it will explicitly address climate change adaptation. Operations that were more

closely aligned with the new priorities were nearing approval by late 2016, e.g., the

Youth School to Work Program and the Local Government Finance and Fiscal

Decentralization Reform Program, Subprogram 2. The path toward the Youth School to

Work program is being prepared by a 2015 TA, but there is a concern that the TA

promises more than its actual design can deliver.49 It should be noted that these two

evidently relevant programs in skills development and LGU financing were “firm” in the

COBP, 2016-2018 pipeline, yet were approved after a water sector project that was a

“stand-by” project in the COBP.

34. Additionally, some recent TA has been applied to the new priority areas, to

develop capacity and set the stage for subsequent lending; a TA focused on the

Mindanao Development Authority (MINDA), approved in July 2015, is heavily oriented

toward encouraging investment with a regional integration perspective, specifically

addressing the Philippines’ commitments under the implementation blueprint of the

Brunei-Indonesia-Malaysia-Philippines East ASEAN Growth Area (BIMP-EAGA).50

45 ADB. 2015. Report and Recommendation of the President to the Board of Directors: Proposed Programmatic

Approach and Policy-Based Loan for Subprogram 1 Republic of the Philippines: Encouraging Investment through Capital Market Reforms Program. Manila. Figure 2. Loan 3334.

46 ADB. 2016. Philippines: Financial Inclusion Framework Strengthening. Technical Assistance Report. Manila, 15 April. TA 9166-PHI.

47 A PPTA (ADB. 2013. Improving National Roads for Inclusive Growth in Mindanao Project. Manila. PPTA 8574-PHI) was approved in December 2013 and closed in March 2016. The ensuing loan with the same name (project number 41076-046) is tagged as “dropped” in the e-Ops database. A related loan for $62 million (ADB. 2011. Road Improvement and Institutional Development Project. Manila. Loan 2836) with $30 million cofinancing from OPEC was approved in December 2011 and is closing in June 2018. There is another related loan under the same project group (project number 41076-048) with the title “Road Improvement and Institutional Development Project” that is tagged “firm” in the e-Ops and is programmed for 2017 approval, but project details are not available.

48 See the TA for $1.2 million that was approved 16 December 2013: ADB. 2013. Improving National Roads for Inclusive Growth in Mindanao Project. Manila. TA 8574-PHI.

49 ADB. 2015. Capacity Development Technical Assistance: Support for the Nationwide Rollout of JobStart Philippines. October, Manila. TA 8984.

50 ADB. 2015. Strengthening Institutions for Investments in Mindanao. Manila. TA 8924-PHI. The TA was for $225,000 and it was approved on 6 July 2015.


35. In conclusion, the list and speed of approvals under COBP, 2015–2017 indicates

that ADB is a rather slow boat to turn. It is has proved difficult to drop operations that

have been in the design stage for years and to replace these with new designs. The speed

and readiness shown in ADB’s response to the Yolanda disaster has been hard to transfer

to other priority areas of government. The attempt by ADB to be responsive, within the

usual institutional constraints, is nonetheless evident.

36. Relevance of the nonsovereign portfolio. ADB focused its efforts on the needs of the private sector, in line with the priorities of the government. In infrastructure, operational priority was given to critical national and local infrastructure projects in: (i) energy; (ii) water and sanitation; (iii) transport (including toll roads, ports, and mass transit systems); (iv) education; (v) infrastructure finance; and (vi) financing for microbusinesses and small and medium-sized enterprises. These priorities accord somewhat with the approved private sector operations shown in Table A1.3 in Appendix 1, which includes the four operations approved in the CPS period plus two approved before CPS period but largely implemented during the CPS period. However, there were too few operations to cover all the government-identified priority areas. During the CPS period, ADB continued to focus on energy financing, especially for renewable energy projects, signaling a shift away from the more conventional energy financing it had provided up to 2009. In addition, ADB’s recent participation in financing of the Mactan Cebu International Passenger Airport Project was a milestone transaction, which validated the work that had been carried out by the authorities (with technical support by ADB on the sovereign side) to develop a public–private partnership (PPP) framework encouraging private sector participation in the provision of public services. 37. The CPSFR’s assertion that ADB’s private sector operation complemented those in the public sector is borne out in the case of the reinforcement of PPP initiatives; the PSM support helped to set the framework and fill the pipeline, while the nonsovereign lending helped to realize the PPP. However, nonsovereign operations approved in the CPS period are not tightly linked with either the initial or revised CPS objectives, particularly regarding poverty reduction and inclusive growth, giving the impression that there is a separate or additional set of factors that drive nonsovereign operations. Nevertheless, it’s the validation’s view that overall the NSO portfolio was relevant. 38. Relevance of the sector program. This validation acknowledges the ADB

program’s relevance, including its strategic positioning, as it was well aligned with the

Philippines’ needs and governmental policies. The validation emphasizes the following

positive points: (i) the ADB program was based on a firm analytical foundation and on

engagement with relevant stakeholders; (ii) ADB’s assistance was implemented with an

appropriate degree of flexibility and, in the case of the emergency assistance provided

for Typhoon Yolanda, had an important economic transformative effect on the typhoon-

affected areas; and (iii) the overall planned program was implemented consistently.

However, this validation assesses the program relevant for the following reasons:

(i) the program’s consistency with the overall strategy varied across sectors, and

(ii) a realignment to reflect the government’s PDP midterm review was slow to take

effect.

39. Relevance of crosscutting objectives. The CPSFR states that the ADB program was relevant to the Philippines’ key economic, social, and environmental issues. Strategy 2020 has three strategic agendas: inclusive economic growth, environmentally sustainable growth, and regional integration. The support for inclusive economic growth is visible in most projects covering all sectors. The CPS focused on three of the five core operational


areas of Strategy 2020—infrastructure, environment and education—and also promoted four program objectives: (i) improved investment climate and private sector development; (ii) more efficient, effective, and equitable social services delivery; (iii) reduced environmental degradation and vulnerability to climate change and disasters; and (iv) strengthened governance and reduced corruption. ADB realigned its COBP in response to the government’s midterm review of the PDP and the resulting program focused on RCI among other areas. Regional cooperation has been explicitly addressed through activities linked to the BIMP-EAGA program, which covers the Mindanao region. The ADB program also addressed social development through improved education access and quality, community development programs, and social protection programs, and via its assistance for post-typhoon recovery. The CPS’s design framework was aligned with Strategy 2020 and its Midterm Review. Overall, the crosscutting objectives of the CPS are assessed relevant. Combining the relevance ratings for the sector program and crosscutting work, the validation assesses ADB’s program relevant.

B. Efficiency 40. The validation concurs with the CPSFR’s assessment of the ADB program performance efficient. For the ongoing portfolio, the processing time of all loans from approval to effectivity averaged 6.9 months, slightly below the bank average of 7.0 months. Ongoing Philippines project loans took longer to process, 8.2 months versus the ADB average of 6.7 months, while ongoing PBL was processed more efficiently at 3.0 months compared with the ADB average of 8.7 months during the same period (2011–2016). The overall disbursement ratio of the Philippine loans has been better than the ADB average for much of the CPS period, although this appears to be more to do with the shift to PBL and other programmatic lending than to improvements in project implementation. PBL disburses quickly and is often based on already-achieved policy measures, hence such loans tend to disburse soon after program effectiveness. Delays in investment project implementation are still an issue and need to be further improved. The three completed program loans were rated highly efficient by both the PCRs and the PVRs. For nonsovereign operations, both coal-fired energy projects carried over from the previous CPS ranked high in terms of economic performance, with the Masinloc Power Plant in Zambales Province deemed very efficient. 41. Disbursements and implementation risk. Any efficiency assessment of the ADB program in the Philippines must be set against its ability to grow during the CPS period—attaining an annual average of $700 million in the portfolio, compared with $614 million during the previous CPS period (2005–2010).51 This growth in itself could place some stress on the efforts to maintain efficiency. The disbursement ratio of the Philippines portfolio has been above the Southeast Asia Department (SERD) and ADB averages for much of the CPS period (except in 2013 and 2016), but the modalities mix, with a strong tendency toward program loans, appears to account for much of the good performance. The emergency reconstruction loans provided in 2013 and 2014 boosted the uncontracted ratio for loans (up to 82% in 2013), but this had eased somewhat by 2015 (to 55%), approaching the SERD average (47%). Although the CPSFR cited efforts in the early 2000s to adopt quality-at-entry measures, the share of at-risk projects continues to be disappointing, and generally has been higher than the SERD and ADB averages except

51 As of March 2016, the ADB Board had approved two more sovereign loans: ADB. 2015. Report and

Recommendation of the President to the Board of Directors: Proposed Loan for Additional Financing and Technical Assistance Grant to the Republic of the Philippines: Social Protection Support Project. Manila. Loan 3369-PHI; and ADB. 2016. Report and Recommendation of the President to the Board of Directors: Proposed Loan to the Republic of the Philippines: Angat Water Transmission Improvement Project. Manila. Loan 3377-PHI.


for the 2016 operations (Table 4)—a surprising result in view of the ADB’s proximity to its client. In general, at-risk projects appear to have had problems that “originate at the programming and design stage” (as per the 2012 Country Project Portfolio Review). Such projects do not appear to fully address “weaker capacity of local government units than national government agencies and complexities with local government financing mechanisms” (CPSFR, para. 25).

Table 4: Disbursement Ratio and Implementation Risk, 2012–2015 Disbursement Ratio (%)a Implementation Risk (%)

2012 2013 2014 2015 2016 2012 2013 2014 2015 2016

Philippines 20 15 27 40 14 31 46 29 33 18

SERD 14 19 20 17 16 37 26 21 32 19

ADB 18 19 18 17 18 31 21 20 24 20 a Covers project loans and grants only

Source: ADB Annual Portfolio Performance Reports (2012–2016) 42. Net resource transfer. In view of the reliance on program lending in the current CPS, it would be expected that the net resource transfer (NRT) for ordinary capital resources (OCR) would be favorable, and this can be seen in 2014, 2015, and 2016 (Table 6). On the whole, the OCR NRT increased from -$157.27 million in 2011 to a total for the whole period of $319.39 million, although the huge $1.146 billion negative transfer in 2013 was the main factor affecting the period. A secondary factor that contributed to the negative NRT for the entire program (-$202.71 million) was the cessation of finance from the ADF,52 leaving a purely repayment trail for the period 2011–2016, and an NRT of -$526.82 million for the 2011–2016 period. This unfavourable balance compares badly with the positive transfer of resources amounting to $982 million in the last country strategy period, 2005–2010 (as reported in the CPSFR).

Table 5: Net Transfer of Resources ADB-Philippines Amount in $ millions

2011 2012 2013 2014 2015 2016 Totals

Ordinary Capital Resourcesa (157.27) 302.44 (1,145.57) 339.55 595.55 384.69 319.39

Asian Development Fundb (60.03) (59.80) (104.74) (106.64) (96.71) (98.90) (526.82)

Grantsc 3.00 - 1.65 0.07 - - 4.72

Totals (214.30) 242.64 (1,248.66) 232.98 498.84 285.79 (202.71) a Net transfer of resources for ordinary capital resources is defined as loan disbursements less principal repayments or prepayments and interest or charges received. Includes nonsovereign loans and net equity investments. b Net transfer of resources for Asian Development Fund (ADF) defined as loan disbursements less principal repayments and interest/charges received. c Net transfer of resources for grants defined as disbursements funded by ADF, Pakistan Earthquake Fund, Climate Change Fund, and Asia Pacific Disaster Response Fund. Source: ADB Annual Reports 2016 and 2013.

43. The systemic obstacles referred to by the CPSFR are still valid, including start-up delays, ineffective flows of funds to local government units (LGUs) through intermediaries, and insufficient implementing agency capacity (especially at the LGU level). These are felt in the lending portfolio, but nonlending also faces challenges. The 61 TA projects approved in the CPS period averaged $1.6 million, whereas the average TA across ADB for the 2011–2014 period was about $1 million. There are indications that in some cases the relatively large size of the TA projects may have made them harder to

52 The Philippines has drawn only from OCR in the current CPS period.


implement. In some cases, TA provided proved to be too rigidly designed to adapt to changing government demands and changes in team leadership; for instance, according to the TA completion report, the studies under a TA project related to inclusive growth policy were not undertaken and policy dialogue with government had to make use of earlier TA inputs.53

1. Sustainable and Climate Resilient Infrastructure 44. The CPSFR adopts the updated CPS grouping of “sustainable and climate resilient infrastructure,” in its analysis, noting that it “has been mostly efficient,” but it does not explain what this subset of infrastructure operations encompasses and what binds it together. Presumably this terminology (responding to the 2014 government plan update) has its roots in the original CPS commitment to improve “sustainable environmental infrastructure in urban areas” (CPSFR, para. 18). Without providing details, the CPSFR notes delays in the transport sector,54 and more specifically in the energy sector, including support for the efficient vehicles project, flagging the at-risk status of this project.55 It does not comment on the unduly long gestation period for the two water projects approved in 2016. In general, it attributes delays in infrastructure projects to policy uncertainty in infrastructure financing policy and local government financing and incentive issues. It foresees a gradual increase in the use of a results-based approach that can make better use of country systems as well improve the effectiveness and efficiency of government sector programs.

2. Good Governance and Inclusive Finance 45. The CPSFR notes the importance of improved coordination between central government and local government agencies to facilitate efficient delivery of support to the lower income and poorest communities, adding that considerable ADB support has been directed towards this pillar with encouraging results. It notes interventions in this area have been consistently rated highly efficient or efficient. It is not clear to the validation which ratings are being discussed here as there has been only one operation in the PSM sector and one in the finance sector that have been rated and that fall within the scope of the CPSFR validation.

46. Public sector management. In the PSM sector, the $500 million emergency response loan for relief and recovery after Typhoon Yolanda did receive a highly efficient rating in the PCR.56 The PCR noted that both ADB and the government fast-tracked processing to ensure a timely response to the disaster. ADB began the processing of the loan while the government was still drafting its recovery plan. The project was approved less than 1 month after the typhoon struck and the loan agreement was signed 45 days thereafter.

53 ADB. 2015. Technical Assistance Completion Report: Strategic Policy Actions for Successful Structural

Transformation and Inclusive Growth. July. Manila. TA 7912-PHI. 54 This likely refers to the Road Improvement and Institutional Development. Loan 2836-PHI. ADB monitoring

found this to have experienced implementation delays due to slow procurement and changes in scope of various portions of the selected road resurfacing, see ADB. 2014. Back to Office Report for Loan Review Mission of Loan 2836-PHI: Road Improvement and Institutional Development. Manila.14 June 2014.

55 ADB. 2012. Report and Recommendation of the President to the Board of Directors: Proposed Loan and Administration of Loan and Grant to the Republic of the Philippines for the Market Transformation through Introduction of Energy-Efficient Electric Vehicles Project. Manila. The CPSFR states that “the efficient delivery and utilization of planned outputs is at risk, and will require the resolution of difficult institutional and incentive issues” (footnote 26).

56 ADB. 2016. Project Completion Report Philippines: Emergency Assistance for Relief and Recovery from Typhoon Yolanda. Manila, June. Loan 3080-PHI.


47. Finance. In the finance sector, the Financial Market Regulation and Intermediation Program was delayed by about 10 months due to stringent contracting requirements imposed by ADB. 57 This delay was significant as the objective of the program was to respond quickly to add depth and stability to the finance sector following the global financial crisis of 2008. The PCR and PVR both rated the combined cluster program (loans 2278 and 2715) less than efficient.58 48. Multisector support. The CPSFR notes that multisector support was provided for the National Community-Driven Development Project and related TA projects. Delays were experienced in the start-up of this lending project, but disbursement improved significantly as government agencies gained implementation momentum. The validation notes that the use of government systems for Pantawid Pamilyang Pilipino Program (4Ps or conditional cash transfer [CCT]) and community-driven development (CDD) projects has allowed capacity to be built within the government system, and this ultimately improved the efficiency of program delivery over time.

3. Inclusive Employment and Education 49. Education. The CPSFR notes that the results-based loan for the expansion of senior high school is at an early stage of implementation (it was approved 15 December 2014).59 However, it raises the hope that the shift to providing investment financing through national systems will promote more efficient delivery of ADB support, although it adds that building local implementation capacity remains a key challenge for effective implementation of results-based lending. The validation notes that by the end of 2016 the disbursement rate remained at 33%. The CPSFR hopes for efficient delivery would have been more convincing if they had been accompanied by an update on loan implementation against the implementation schedule mentioned in the loan RRP. 50. Agriculture and natural resources. The CPSFR attributes start-up delays in the Integrated Natural Resources and Environmental Management (IREM) Project60 to the late effectivity of the project, lack of agreement with the executing agency on the procurement modality (delaying project management recruitment) and challenges in preparing watershed management plans that cover wide forest areas in four different regions. The Second Agrarian Reform Communities Project61 (approved under the earlier strategy) also experienced a slow project start-up due to difficulty in complying with national government and local government cost-sharing agreements, which delayed confirmation, procurement, and implementation of subprojects. This was exacerbated by the inability of LGUs and contractors to comply with full documentation requirements and reporting.62

57 ADB. 2010. Report and Recommendation of the President to the Board of Directors: Proposed Loan for

Subprogram 2 Republic of the Philippines: Financial Market Regulation and Intermediation Program. Manila. Loan 2715.

58 ADB. 2014. Project Validation Report for: Financial Market Regulation and Intermediation Program. Manila. November. Loans 2278 and 2715.

59 ADB. 2014. Report and Recommendation of the President to the Board of Directors: Proposed Results-Based Loan for the Philippines: Senior High School Support Program). Manila. Loan 3237.

60 ADB. 2012. Report and Recommendation of the President to the Board of Directors: Proposed Loan, Grant, Administration of Loan, and Administration of Grant to the Republic of the Philippines for the Integrated Natural Resources and Environmental Management Project. Manila. Loan 2957.

61 ADB. 2008. Report and Recommendation of the President to the Board of Directors: Proposed Loan and Administration of Loan to the Republic of the Philippines for the Agrarian Reform Communities Project II. Manila. Loan 2645.

62 Categorized as a problem project under the National Economic and Development Authority–Monitoring and Evaluation Staff Alert Mechanism (as of March 2015) for slow implementation performance.


51. The CPSFR also holds that the ADB shift to support for rural enterprise and rural employment is an effort to deliver support to rural communities more efficiently and effectively. It rightly notes that the challenge will be to design implementation arrangements that can overcome the institutional constraints previously encountered in attempts to support agriculture and natural resource sectors in the Philippines, but does not explain why the anticipated shift is likely to lead to greater success. The validation sees no ready argument for why that would be the case. There is instead evidence that when ADB forges suitable partnerships in the agriculture, natural resources and rural development (ANR) sector these can be efficient and effective, as indicated in the Cordillera Highland Agricultural Resource Management Project (CHARM) I and II partnership with IFAD, where in-country IFAD capacity drew ADB and government closer and made supervision more effective, especially in CHARM II.63 The hurdles faced in the ANR sector appear to stem more from difficulties that ADB project teams face overseeing large numbers of small project activities scattered over wide project areas. For instance, the road to improve access to markets in rural areas in Bicol has incurred 25% slippage due to unreleased funds. The funds could not be released due to lack of liquidation documents and pending approval of a variation order.64 Timely intervention could have avoided such problems. ADB Management subsequently confirmed that the shift to support rural enterprise and rural employment is now being restructured to include a systematic medium- to long-term institutional capacity development program that bridges the gap between current government capacity and the required regionally coordinated planning. The latter is to help local governments realize growth and enhance rural employment generation through increased market access and the expansion of rural enterprises.

4. Regional Cooperation and Integration

52. Regional cooperation and integration (RCI) efforts are described as efficient by the CPSFR, referring both to sector-based efforts and RCI-specific initiatives, such as the Brunei Darussalam-Indonesia-Malaysia-Philippines East ASEAN Growth Area (BIMP-EAGA) working groups, clusters and related TA.65 No evidence is provided for the stated efficiency of this arrangement. Other ADB documentation tends to point to a loose connection between the RCI support provided to Mindanao institutions, the BIMP secretariat, national agencies based in Manila, and the ASEAN secretariat. 53. BIMP-EAGA has some promise as a test-bed of ASEAN policies and regulations. It hives off policies in manageable pieces and puts them into practice before a full ASEAN roll-out. However, this effort has yet to translate into bankable infrastructure projects. Institutionally, BIMP-EAGA has struggled, lacking a full secretariat,66 and is dogged by perceptions that it exists in name but with little real substance on the ground. Its institutional set-up, heavily reliant on ADB support, may not be sustainable. The TA completion report for the regional TA supporting three of ADB’s Southeast Asian sub-regional initiatives (covering BIMP-EAGA and two other programs not related to the

63 IFAD. 2016. IFAD Coordination with the Asian Development Bank. Internal manuscript. 64 NEDA. 2016. Region V Bicol Development Updates: Agrarian Reform Community Project 2. March 2016. p.

15. 65 ADB. 2015. Technical Assistance for Strengthening Institutions for Investments in Mindanao. Manila; ADB.

2014. TA 8924. Advancing Regional Cooperation and Integration through Brunei Darussalam-Indonesia-Malaysia-Philippines East ASEAN Growth Area and Indonesia-Malaysia-Thailand Growth Triangle. December. Manila. TA 8814-REG; ADB. 2010. Promoting Links and Improving Coordination Among the Greater Mekong Subregion (GMS), the Brunei Darussalam-Indonesia-Malaysia-Philippines East ASEAN Growth Area (BIMPEAGA), the Indonesia-Malaysia-Thailand Growth Triangle (IMT-GT), and the Association of Southeast Asian Nations (ASEAN). Manila. TA 7718-REG.

66 C. Dent and R. Richter. 2011. Sub-Regional Cooperation and Developmental Regionalism: The Case of BIMP-EAGA. Contemporary Southeast Asia, Vol. 33, No. 1. April. pp. 29-55.


Philippines, Greater Mekong Subregion and the Indonesia-Malaysia-Thailand Growth Triangle) suggested that ASEAN may need to take a more active role in coordinating these initiatives, 67 echoing observations already made earlier by others, 68 but other sources indicate that ASEAN may not have enough capacity and resources to undertake this role.69 How to unblock BIMP-EAGA is a very important, unresolved issue.

5. Nonsovereign operations 54. Given that most nonsovereign approvals occurred recently, efficiency is measured only for the two coal-fired energy projects carried over from the previous CPS, which ranked highly in economic performance. The Masinloc Power Plant in Zambales Province, in particular, is deemed very efficient given an economic internal rate of return (EIRR) of 25%. The economic benefits were largely due the relatively modest expenditure required to rehabilitate the existing power plant to generate additional capacity compared with the much higher capital costs of building a new power plant. In particular, foreign investors recognized that Masinloc was the lowest cost option for adding base-load generation capacity and had significant potential for an extension of its economic life.

C. Effectiveness 55. The validation assesses the ADB program performance less than effective. There were shortfalls in achieving project and program outputs and outcomes as set out in the design and monitoring frameworks, as described in the ensuing paragraphs. Capacity development components in certain sectors (e.g., agriculture and natural resources) have seen shortfalls in outputs and outcomes as against the envisaged targets. There has been lack of progress toward achieving some of the government’s sector-level outcomes set in the CPS. Of the 14 sector-level results framework outcome indicators identified in the CPS, only six (43%) have been achieved or are on track to be achieved. For example, in the education sector, the sector target of improved access and quality of basic education does not seem to be on track, while in the PSM sector (the most prominent sector in terms of ADB operations) the picture is mixed, with one indicator likely to be achieved (investment ratio), another dropped (participation target), and other indicators lacking recent data. On the positive side, most stakeholders, particularly beneficiaries of CDD initiatives related to disaster relief and recovery who were interviewed during the independent evaluation mission, assessed ADB’s overall performance effective or better. For nonsovereign operations, ADB’s role was deemed effective in adding both conventional and nonconventional generation capacity.

1. Progress Toward Sector-Level Outcomes

56. Of the 14 sector-level results framework outcome indicators identified in the CPS, two have been achieved, four are on track to be achieved, four are not on track to be achieved, three are deemed inappropriate, and one was dropped. Overall, only 43% of the envisaged outcomes have been achieved or are on track to be achieved. However, the assessment of sector outcomes is not straightforward for two reasons. First, some outcomes and indicators were modified following the mid-term review and updating of

67 ADB. 2014. Technical Assistance Completion Report Promoting Links and Improving Coordination Among

the Greater Mekong Subregion (GMS), the Brunei Darussalam-Indonesia-Malaysia-Philippines East ASEAN Growth Area (BIMP-EAGA), the Indonesia-Malaysia-Thailand Growth Triangle (IMT-GT), and the Association of Southeast Asian Nations (ASEAN). Manila. TA 7718-REG.

68 Footnote 65. 69 Asian Development Bank Institute. 2014. ASEAN 2030: Toward a Borderless Economic Community. Tokyo.


the PDP. The CPSFR presents the original and modified results indicators in an appendix, and this is reproduced in Appendix 4 with the IED comments in the far-right column. In the education sector, for example, while the sector target of improved access and quality of basic education remained the same, the target indicators for secondary level net enrollment, completion and national assessment test achievement rates for 2016 have all been increased. Although the national data for these indicators from 2014 onwards are not available, progress towards achieving these targets does not seem to be on track.

57. Second, assessment of progress against sector outcomes and indicators is frustrated by a lack of information on achievements. Some outcomes appear inappropriate for lack of significant programming in the sector (water, agriculture). In the case of the energy sector, the possible sector outcome of alleviation of electricity blackouts and shortages was not included as a sector outcome, despite this being a key issue (particularly in Mindanao) and ADB having actively financed power projects. Nonetheless, from available data, it appears that in the energy sector progress is on track, while in education progress is unlikely to be sufficient to meet the targets. In PSM, the picture is mixed, with the investment ratio likely to be achieved, but the participation target being dropped altogether (the other indicators lack recent data).

2. Sustainable and Climate Resilient Infrastructure

58. Transport. ADB sought to support the government in developing climate resilient infrastructure, to be realized largely in the Re-Structuring Road Improvement and Institutional Development Project; despite implementation delays, ADB will probably meet the target of 340 km of road upgrading. However, the nine institutional capacity development output targets in the project will probably not be met at all since they were dropped to shift resources to other physical improvements besides road upgrading.70 This shortfall is not addressed in the CPSFR. Some capacity development in the sector was achieved through TA provided for Davao Sustainable Urban Transport Project,71 although this appears to have been limited to the development of a capacity development program with a listing of training needs.72 59. Energy and water. For the energy sector, partial achievement of expected energy savings was attained in the energy efficiency project.73 The CPSFR highlights the piloting of efficient tricycles (e-trikes) in Manila74 and renewable energy in Visayas-Mindanao. It acknowledges these have not had a national scale impact as they have yet to be scaled-up. However, there seems little scope for scaling up the e-trike introduction (only 3,000 are likely to be produced) as the government has cancelled the project as a cost-cutting measure.75 In the water sector the CPSFR claims some success in strengthening the

70 Department of Public Works and Highways. 2014. Proposed Loan Extension and Re-Structuring Road

Improvement and Institutional Development Project (RIIDP) ADB Loan No. 2836-PHI: Co-Financed by OPEC Fund for International Development, OFID Loan No. 1446P. Manila. 27 May.

71 ADB. 2012. Technical Assistance to the Philippines for the Davao Sustainable Urban Transport Project. Manila. TA 8195-PHI.

72 ADB. 2015. Technical Assistance Completion Report for Davao Sustainable Urban Transport Project. Manila. TA 8195-PHI.

73 ADB. 2015. Project Completion Report Loan and Grant Numbers: 2507 and 0142 Philippines: Philippine Energy Efficiency Project. June, Manila.

74 ADB. 2012. Report and Recommendation of the President to the Board of Directors: Proposed Loan and Administration of Loan and Grant to the Republic of the Philippines for the Market Transformation through Introduction of Energy-Efficient Electric Vehicles Project. Manila. Loan 2964.

75 DOE ENER.GIST. 2017. DOE Targets Rollout of 3k E-Trikes This Year. https://www.doe.gov.ph/ energist/ index.php/about-ener-gist/76-categorised/alternative-energy-technology/e-vehicles/12324-doe-targets-rollout-of-3k-e-trikes-this-year


institutional capacity but acknowledges that the links between programming and sector level results are tenuous. 60. Taken together, it is hard to see how the operations falling under this objective have made a significant contribution to sustainability or climate change mitigation or adaptation. The reduced and modest institutional development achievements seem inadequate. In particular, the lack of scale-up in the e-trike initiative points to insufficient analysis of the market, and the project is a poor model for climate change mitigation.

3. Good Governance and Inclusive Finance

61. The CPSFR asserts that ADB has directly contributed to major policy and institutional reforms; improved public sector management; and laid the foundations for increased business investment. Unfortunately, it does not offer any link to programming to support these claims. The flagship program in this sector, the Financial Market Regulation and Intermediation Program Subprogram 2 does in fact show evidence of success.76 Its PCR explains how its long gestation period through the turbulent global financial crisis helped focus the program on the vulnerabilities that had been revealed by the crisis. Additional stability was added to the system through such measures as establishing a Financial Stability Forum, enabling Bangko Sentral ng Pilipinas to carry out open market operations, and a supporting a doubling of deposit insurance coverage. The program was rated successful and most of its design and monitoring framework targets were achieved. Progress toward the other targets was also seen.77 Even so, as the breadth and depth of reforms originally envisaged at appraisal had not been realized, the PVR rated the program less than effective.78 It must be added that any success shown by ADB operations in this sector over the CPS period has not been centred on “inclusiveness” as the CPS objective would suggest. 62. Public sector management. While the two completed loans for the Increasing Competition for Inclusive Growth Program were rated highly effective by their respective PCRs, the PVR downgraded the rating to effective.79 The PVR noted that, although three out of the four outcome indicators (75%) for the envisaged outcome on improving competitiveness either met or exceeded the targets, one indicator (global logistics performance index) was not achieved. Also, only 72% of the program output indicators were achieved. Public sector management support has contributed to the government’s policy reform agenda as well as to systems and capacity in public fiscal revenue and expenditure management, decentralization and PPP initiatives. The CPSFR does not provide a convincing case for its claims, but evidence of some success can be found. The institutional strengthening for PPP support is particularly evident, with a Public–Private Partnership Centre established, 80 improvements made to the legal

76 ADB. 2010: Report and Recommendation of the President to the Board of Directors: Proposed Loan to the

Republic of the Philippines for Subprogram 2 Financial Market Regulation and Intermediation Program. Manila. Loan 2715.

77 ADB. 2013. Project Completion Report: Financial Market Regulation and Intermediation Program. September. Manila. Loans 2278 and 1715.

78 ADB. 2014. Project Validation Report: Philippines: Financial Market Regulation and Intermediation Program. November. Manila. Loans 2278 and 2715

79 ADB. 2012. Report and Recommendation of the President to the Board of Directors: Proposed Loan to the Republic of the Philippines for the Proposed Programmatic Approach and Policy-Based Loan for Subprogram 1 Increasing Competitiveness for Inclusive Growth Program. Manila. Loan 2872; and ADB. 2014. Report and Recommendation of the President to the Board of Directors: Proposed Loan to the Republic of the Philippines for the Proposed Programmatic Approach and Policy-Based Loan for Subprogram 2 Increasing Competitiveness for Inclusive Growth Program. Manila. Loan 3233.

80 For details, see http://ppp.gov.ph/. The development of the PPP Center website is supported by an ADB TA for PPP.


framework, and a pipeline of PPPs established. These have already led to the implementation of key initiatives that can serve as models in the Philippines and beyond.81 ADB has also supported a review of the Local Government Code, with two bills now in Congress focusing on LGU revenue generation. The validation cannot find support for progress in ADB’s support for court administration and policy reforms in the judiciary. This long-standing support has stagnated compared with its early days a decade or more ago. 63. Multisector support. The completed loan for Emergency Assistance for Relief and Recovery from Typhoon Yolanda82 was rated highly effective by PCR and the ensuing PVR. Both the PCR and PVR noted that the expected outcome and outputs were all fully achieved. Under the multisector umbrella, the KC-NCDDP (para. 16) provided support for recovery and rehabilitation activities in over 14,000 barangays (villages) in more than 500 municipalities across 39 provinces affected by Typhoon Yolanda and the Bohol earthquake in 2013, benefiting about 3.3 million households. A broad range of community infrastructure was funded, with subprojects decided by the barangay assembly, employing local workers, 10%–30% of whom were women. The response to natural disasters also included fast disbursing loans and grants83 (listed in Appendix 1), and additional funds to supplement CDD approaches already seen in the KC-NCDDP. These have been implemented by government and NGOs, and their work has generally been appreciated by beneficiaries.84 Less positively, the high expectations for the multidonor trust fund (MDTF) were not realized in view of the slow establishment of the fund. 64. Social protection. In social protection, ADB not only funded cash transfers, it also helped to strengthen the national household targeting system. As a result, 53% of 4P beneficiaries in 2013 were from the poorest quintile and a further 29% were from the next poorest quintile. Both of these groups survive on less than $1.90 per day, the international poverty line.85

4. Inclusive Employment and Education

65. Education. The CPSFR notes the boost this objective received in the 2014 PDP review, linking it to the subsequent ADB change in focus in its rural development support to rural enterprise and rural employment programs. Education reform also received more attention, in view of its potential to improve employment prospects. ADB assisted the government in formulating and building support for revamped education policy and delivery mechanisms, especially in the expanded kindergarten to 12th grade program. Moreover, ADB fashioned an innovative, results-based lending program for senior high school. The related youth skill development support has been provided through TA (the JobStart pilot) and the associated loan is under development. This loan is expected to be a policy loan, making it unlikely that it will quickly boost LGU skill development units (called public employment service offices). It is too early to assess results in this new thrust in the education and skill development sector, but the innovations (e.g., a voucher system and curriculum change, and bolstered LGU public employment service offices) could eventually improve the quality of teaching outcomes and increase the

81 P. Taruc, 2015. ADB pledges more funding for Philippines. CNN Philippines, Thursday, 30 July.

http://cnnphilippines.com/ business/2015/07/29/adb-pledges-more-funding-philippines.html 82 Footnote 36. 83 ADB. 2013. Proposed Grant Assistance Republic of the Philippines: Emergency Assistance and Early Recovery

for Poor Municipalities Affected by Typhoon Yolanda (Financed by the Japan Fund for Poverty Reduction). December. Manila. Grant 9175.

84 Results of the survey of beneficiaries conducted by the Independent Evaluation Mission of the operation. 85 https://www.adb.org/sites/default/files/linked-documents/43407-014-sd-01.pdf


employability of entrants to the labor force. To achieve these aims, the scale of the skill development support will probably need to be expanded.86 66. Rural development. The shift in ADB’s rural development programming reflects the poor performance of ADB programs in the ANR sector. The ADB information system shows no disbursement for the grant for the Agribusiness Development Assistance for Smallholders in Mindanao, suggesting that the ground was not adequately established for this grant to proceed following approval. It was to be implemented in relation with the Agrarian Reform Communities Project II, which has itself faced difficulties in disbursing and achieving its outputs, particularly in its community infrastructure component. It follows on the heels of another problematic project in the sector; Southern Philippines Irrigation Sector Project, which was rated less than effective (by both its PCR and PVR) in achieving production increases through user participation in irrigation development projects.87 The institutional side of these projects presents the most difficult challenges in this sector, requiring significant supervision and support from ADB to achieve success.

5. Regional Cooperation and Integration

67. As the CPSFR points out, ADB support to Mindanao includes a strong focus on expanding RCI. ADB is assisting in improving transport connectivity and developing economic corridors within BIMP-EAGA. In close coordination with the Mindanao Development Authority, ADB is supporting the preparation of the western and the south central Mindanao growth corridors. These are worthwhile efforts, well received by enthusiastic Mindanao Development Authority staff. However, progress has been very slow. Strategic electricity grid connection projects have not been launched, and the air linkage expansion that has occurred has been through other efforts (e.g., by regional airports themselves, as shown by Mactan International Airport in Cebu). Some air links that were initiated in the 1990s (e.g., Manado–Davao, Kota Kinabalu–Davao) have disappeared. In the crucial agricultural sector, which can be the basis for regional exports, other countries are making strides in developing their halal agro-businesses, but the Philippines has only recently gained Brunei Darussalam’s commitment to assist in certifying halal products.

6. Factors impinging on effectiveness

68. While the CPSFR does not provide a list of projects that it considers to fall outside the core priorities of the government, it would seem that some of the projects facing difficulties in achieving their outputs (in the energy and ANR sectors) may be what the CPSFR had in mind. These projects call into question ADB’s design and approval procedures. 69. The weak capacity of local government units has hindered implementation of the portfolio. Projects implemented by local government units make up about 70% of the active portfolio. Problems with complex local government financing mechanisms were flagged in the CPS,88 but do not seem to have been adequately addressed thereafter.

86 The concept paper for the loan aims for coverage of only 64 public employment service offices to implement

JobStart for the period 2016–2021, see ADB. 2016. Proposed Programmatic Approach and Policy-Based Loan for Subprogram 1 Republic of the Philippines: Facilitating Youth School-to-Work Transition Program. February, Manila. Loan 3530.

87 ADB. 2013. Project Validation Report: Southern Philippines Irrigation Sector Project. December. Manila. Loan 1668.

88 ADB. 2012. Development Effectiveness Brief: Philippines: A New Horizon for One of Asia’s Most Promising Nations. June. Manila.


70. A great deal of the success of lending programs hinges on suitable complementary TA to prepare the ground for reforms and to see them through after broad policy and regulatory changes. In investment projects, TA is crucial in raising the capacity of implementers to play their roles in managing investment funds. ADB TA has been weak in both respects. 71. In some cases, the role of TA support has not been sufficiently tracked to enable an assessment of its contribution to reforms. For instance, the ultimate success of the TA Capacity Development of Financial Regulators hinged on a single outcome: the total local currency bonds were to increase to 38% of GDP by December 2013 (baseline 35.4% in 2010).89 The CPSFR notes that this outcome was achieved in 2013, but fails to note the subsequent decline to 34% of GDP by 201690—far below the Philippines’ regional peers, which have local currency debt markets exceeding 70% of GDP. The extent to which capacity development was actually achieved in financial regulation is left unanswered; teasing this out from the larger dynamics appears to be beyond the design and monitoring capabilities of ADB. 72. In other cases, it is evident that the design of some TA has been inadequate, in terms of understanding its context or in gaining the buy-in of critical stakeholders. For instance, the Increasing Competitiveness for Inclusive Growth Program91 included a new five-star rating system for hotels and resorts, but the TA provided92 was a rushed effort that failed to consult stakeholders properly and led to much resistance.93

7. Nonsovereign operations

73. In the energy area, ADB’s role was effective in adding both conventional and nonconventional generation capacity. In the existing portfolio of conventional coal-fired power projects, the rehabilitation of the Masinloc plant was completed successfully. Before rehabilitation, there was only one generating unit capable of operating at half a load, i.e., 150 megawatt (MW), while the other generating unit was inoperable. After the 3-year rehabilitation plan (2008–2011) had been executed, the plant’s capacity had increased from 25% at the time of the private sector takeover in 2008 to 70% by 2011, and the availability factor jumped from 65% to 92% over the same period. The plant is now able to run at its full load capability of 630 MW. Similarly, the other coal-fired power plant, the Visayas Base-Load Power Project financed by the KEPCO SPC Power Corporation in Cebu Province, although initially encountering environmental and social resistance, introduced much-needed base-load power that stabilized power supply in the Visayas. Since 2011, the Visayas Base-Load Power Project has provided the Visayas grid with 200 MW of base-load power, which translates to more than 1,300 GWh of electricity per year. This accounts for roughly 12% of total electricity supply in the grid. 74. Projects in the nonconventional, renewable energy subsector are more recent, but some have already reached their output milestones. For instance, the 150-MW

89 ADB. 2012. Technical Assistance to the Philippines for Capacity Development of Financial Regulators

(Financed by the Japan Fund for Poverty Reduction). Manila. TA 8038. 90 ADB. 2016. Size of LCY Bond Market in % of GDP. Asian Bonds Online. Accessed December 28, 2016 at

https://asianbondsonline.adb.org/philippines/data/bondmarket.php?code=LCY_in_GDP_Local 91 ADB. 2014. Report and Recommendation of the President to the Board of Directors, Proposed Policy-Based

Loan for Subprogram 2 Republic of the Philippines: Increasing Competitiveness for Inclusive Growth Program. November. Manila. Loan 3233.

92 ADB. 2013. Improving Competitiveness in the Tourism Sector. Manila. TA 8334-PHI: 93 See for instance D. Torrevillas. 2016. The fault in star-rating system- From the Stands. The Philippine Star, 14

January. http://www.philstar.com/opinion/2016/01/14/1542410/fault-star-rating-system


Burgos Wind Farm Project in Ilocos Norte Province was already built and started commercial operations at the end of 2015, helping to demonstrate the feasibility and sustainability of large-scale private sector wind farms and to meet the government’s target of 200 MW of wind power capacity. Other infrastructure finance projects have also been effective. The Philippine Investment Alliance for Infrastructure fund (approved in 2012) was effective in reaching its target of at least $525 million in committed capital from ADB, Langoer Investments Holding B.V. (APG), the Government Service Insurance System (GSIS), and Macquarie Group, since it closed on 31 July 2012 with a total committed capital of $625 million. However, while the fund is on track to demonstrate the viability of the private equity fund structure for infrastructure finance in the Philippines, it’s not clear whether it will reach the outcome of having 100% of the fund’s underlying assets complying with ADB’s safeguard policy requirements, since ADB had participated in only three out of the six investments made by the fund as of July 2016. The Tiwi and Makiling-Banahaw (Mak-Ban) Geothermal Power Green Bonds Project was also effective in reaching its output of successfully introducing the Tiwi–MakBan green project bonds for geothermal energy, demonstrating the viability of green project bonds for renewable energy in the Philippines.

D. Sustainability 75. The validation concurs with the CPSFR assessment of program performance as likely sustainable. The program was complementary to existing government efforts, it supported the implementation of structural policy reforms and helped to advance competition policy, regulatory efficiency, PPPs in infrastructure, and competitive labor markets. The institutional arrangements and additional financing to carry out the Yolanda Rehabilitation and Recovery Plan were adequate and sustainable. The PCRs and PVRs rated two of the three completed loans highly likely sustainable, since many of the reforms under the program were institutionalized and funded by the government. Although the government has demonstrated good commitment to sustaining the reforms related to ADB’s programs, this has been variable across the different areas supported by ADB. Some notable successes were noted, an example being ADB’s support for the PPP initiative. Financing of operation and maintenance has improved through ADB PSM support that has helped the government rethink its approaches to fiscal revenue management, including cost recovery by central and local governments. A key initiative has been the Local Government Finance and Fiscal Decentralization Reform Program. However, there are also some initiatives where success is not yet completely assured; such as the CCD program in the social protection subsector (4Ps and KC-NCDDP) where some uncertainty in the government’s commitment has been apparent with the change in the administration in 2016. There are some other initiatives which appear less sustainable, such as the agriculture and natural resources sector which struggled to realize full commitment of counterpart funding and institutional resources. For nonsovereign operations, all the four projects approved under the CPS, 2011–2016 are likely to be sustainable given their on-time performance.

1. Government Commitment to Reform Policies and Capacity Development

76. The CPSFR notes that a core objective of the realignment of ADB’s strategic focus in response to the government’s PDP midterm update in 2014 was to help ensure that ADB remained focused on areas likely to be strongly supported by any new government. ADB has gained government support for the program pipeline through to 2018, in the form of the COBP, 2016-2018. Going forward, continuing efforts should be made to stay engaged in the process of the PDP, 2017-2022 preparation, thus reducing the likelihood of disruptive shifts away from previous areas of ADB support.


77. The validation concurs with this view. In the area of infrastructure, the CPSFR provides some PSM examples where it is evident that ADB is supporting reforms that have high political commitment and a high chance of retaining political support. For instance, ADB is supporting the government’s PPP initiative to ensure alignment with government priorities and to address sustainability. This includes updating the legislative framework for PPPs (the build-operate-transfer law amendment), making the government commitment to PPPs more visible, high level, and durable. Moreover, at an institutional level, the PPP Centre has embarked on an effort to expand the network of regional institutions nationwide that can lend support to PPPs outside Manila where developing bankable transactions is more challenging. 78. ADB support that has not been as well aligned with government priorities will be less sustainable. The CPSFR suggests that some projects (e.g., in ANR) have struggled to receive full funding commitments from counterparts. Some doubt about the sustainability of ADB PSM projects is also discernable. In the case of the law and judiciary subsector, the attention given by the current administration to the “war on drugs” obscures the progress still needed across all pillars, draining the momentum from reform efforts dating back two CPS periods. In the decentralization and local governance subsector, ADB’s impact has been blunted by shifts in the national government’s programming (e.g., the reformulation of “bottom-up budgeting”) and uncertainty in its overall policy directions. In this complex sector, the CPSFR rightly notes that continuity in programming from the previous CPS to the current has served to lay a foundation for more ambitious reforms, in particular the Local Government Finance and Budget Reform (LGFBR) Program. 94 While the completion report rated this program most likely sustainable, the lack of an agreed or operating platform to track progress on actions outlined in the LGFBR post-program framework (falling into the current CPS) undermines the claim that the program will be sustainable. 79. The CPSFR notes that ADB support and engagement has helped build broad-based support for difficult reforms, making these likely to be sustained even under the new administration. The validation believes that, while the style of engagement is praiseworthy, the conclusion is too hopeful. Some uncertainty is apparent in the government’s commitment to current programming, e.g., in social protection and PSM. Beneficiaries of 4Ps and KC-NCDDP programs and their government advocates have voiced the concern that the idea of “convergence” among the various social protection programs being implemented remains shallow, inhibiting the proper institutionalization, integration, and scaling-up of approaches that have proven themselves in the field. Moreover, completing the journey for these initiatives requires that a new administration recognize the progress that has been made and suppress any tendency to replace existing programs with new ones to simply create the new administration’s brand. 80. The CPSFR could also have taken a more critical view of the effectiveness of the Philippines Development Forum. The sustainability of reforms could indeed have benefited by the government taking a stronger leadership role, but what is critical is that the forum brings all the key stakeholders to the table for useful dialogue and policy ideas. That has not generally been the case in the CPS period, even if some technical working groups tried to stay active.

94 ADB. 2007. Report and Recommendation of the President to the Board of Directors: Proposed Program Loan

and Technical Assistance Grant to the Republic of the Philippines for the Local Government Financing and Budget Reform Program Cluster (Subprogram 1). Manila; and ADB. 2009. Report and Recommendation of the President to the Board of Directors: Proposed Loan for Subprogram 2 to the Republic of the Philippines for the Local Government Financing and Budget Reform Program. Manila. Loan2387 and Loan 2584.


2. Operation and Maintenance Practice and Capacity

81. The CPSFR points to the increasing focus on support for national programs as the impetus for a sectorwide adoption of good operation and maintenance (O&M) practices, utilizing a credible medium-term expenditure plan, spurred by the medium-term expenditure framework ADB has promoted in the education sector. ADB would like to see this approach taken up in other sectors, such as road infrastructure investment and maintenance. Financing of O&M has also been advanced through ADB PSM support that has helped the government rethink its approaches to fiscal revenue management, including cost recovery by central and local governments. The Local Government Finance and Fiscal Decentralization Reform Program is a key initiative. The CPSFR acknowledges, however, that this aspect needs more work for its goals to be realized.

3. Nonsovereign operations

82. All the four projects approved under the CPS, 2011–2016 are likely to be sustainable given their high disbursement ratio and on-time performance. Only the Mactan-Cebu International Airport project is slightly behind schedule as the order of activities has shifted (improvement activities in Terminal 1 have begun before starting the work on Terminal 2 construction), which reflects the 41% disbursement ratio (only $31 million out the $75 million approved). The two carry-over projects from the earlier CPS, the Masinloc and the Visayas Base-Load power projects, both have financially sound positions and remain profitable. Therefore this validation also assesses the NSO portfolio likely sustainable.

E. Development Impacts 83. The validation assesses the development impact of the CPS program to be less than satisfactory. In terms of achievement of the government’s overall targets, only three targets out six are likely to be achieved or exceeded (para. 84). The three targets that are likely to be achieved or exceeded are: (i) improvements in the human development index, (ii) reduction in the fiscal deficit, and (iii) consolidation of the public-sector deficit. Achievements are lagging in terms of GDP growth, rate of growth of employment, and poverty incidence. Given the importance of the unachieved targets, particularly GDP growth and poverty incidence, the validation assesses overall progress toward achievement of these targets to be less than satisfactory. Achievements on the crosscutting issues have been satisfactory, with progress made in private sector development, good governance and inclusive finance, and inclusive employment and education, but considerably less progress than expected has been made on RCI issues. Out of the three completed sovereign loans, one (Emergency Assistance for Relief and Recovery from Typhoon Yolanda) was assessed by the PCR to have had a satisfactory impact while the other two loans (both for the Competition for Inclusive Growth Program) were assessed by the PCR to have had a highly satisfactory impact. The validation report for the latter two loans reassessed the rating to satisfactory, noting that only one of the two envisaged impact indicators was on track to be achieved. Combining the development impact results of less than satisfactory for the achievement of overall targets (para. 84) and satisfactory ratings for achievement of crosscutting work (para. 85-90) achievements, the validation assesses the development impacts of ADB’s program less than satisfactory.


1. Progress Toward Government’s Overall Targets

84. Overall progress on the six country development goals specified in the CPS results framework is well presented in the CPSFR. The three targeted goals that are likely to be achieved or exceeded are: improvements in the human development index, reduction in the fiscal deficit, and consolidation of the public sector deficit, while the three remaining goals that appear unlikely to be achieved are: (i) GDP growth, (i) rate of growth in employment, and (ii) poverty incidence. Looking at each of the lagging goals in turn, GDP growth averaged 6.1% during 2011–2016, just 1% below the targeted goal, but still a strong growth rate. However, given the small size of the ADB program when compared with the Philippines economy, ADB’s contribution towards this GDP growth is at best marginal. The goal for rate of employment growth had two parts: (i) 0.74 million jobs a year should be created during the CPS period and (ii) women should account for at least 50% of the nonagriculture employment increase. The first goal has been achieved, with an average annual employment increase of 0.77 million; however, women accounted for only 45.5% of the increase and this goal is unlikely to be achieved. The poverty incidence goal was the goal that was furthest from being achieved, with poverty incidence 21.6% in 2015, far below the target of 16.6%. Given the relative importance of the unachieved indicators, particularly GDP growth and poverty incidence, the validation assessed the overall progress toward the government’s overall targets to be less than satisfactory.

2. Progress on Crosscutting Thematic Issues

85. Taking into consideration the CPS’s priorities as well as those stemming from its realignment in 2014 following the government’s PDP midterm review in the same year, the main crosscutting thematic issues of the program are (i) private sector development, (ii) good governance and inclusive finance, (iii) inclusive employment and education, and (iv) RCI.

86. Private sector development. In energy, ADB has committed itself to supporting the shift from conventional generation to renewable. While coal-based generating projects (Masinloc and Visayas Base Load Power) are still in ADB’s portfolio, all new nonsovereign projects in the sector have targeted renewable sources, some through innovative financing instruments in support of large wind farm investments and the issuance of the first climate bond in Asia. In addition, ADB’s recent participation in the financing of the Mactan Cebu International Passenger Airport Project represented a milestone transaction, which validated the work that has been carried out by the authorities (with technical support by ADB on the public sector side) to develop a PPP framework encouraging private sector participation in the provision of public services. ADB will try to replicate this successful PPP experience as some of the TA support to the Public-Private Partnership Center is being used to leverage private sector investment in the transport sector, particularly for railways. While the NSO portfolio performance has generally been successful, there were weaknesses in terms of screening, appraisal, and structuring performance. Although the selection of infrastructure projects has improved in recent years, the sourcing of finance sector projects, especially in terms of SME support through nonsovereign operations, have slowed down considerably in the past decade, with no new facility being processed during the CPS, 2011–2016 mainly due to lack of market appetite caused by excess liquidity. In general, the validation supports the CPSFR’s view that ADB has effectively promoted private sector development in the Philippines.

87. Good governance and inclusive finance. Activities related to governance and inclusive finance have made progress, with ADB’s public sector management support contributing to the government’s policy reform agenda and governance improvements


and CCD approaches under the KC-NCDDP and the conditional cash transfers supporting inclusive finance. In terms of good governance, public sector management support has contributed to the government’s policy reform agenda in the areas of public fiscal revenue and expenditure management, decentralization, and a review of the Local Government Code. In terms of inclusive finance, ADB’s assisted 39 provinces affected by Typhoon Yolanda and the Bohol earthquake by funding a broad range of community infrastructure, benefiting about 3.3 million households. There was a very high positive satisfaction rate (88%) from the 108 respondents who responded to IED’s beneficiary survey interviews conducted in 10 villages in Bohol, Leyte and Western Samar provinces that received assistance in the aftermath of the Bohol Earthquake and Typhoon Yolanda in 2013 (detailed survey results in Supplementary Appendix A, particularly Table SAB.8).

88. Inclusive employment and education. In terms of education, there has been good progress on education reform, especially in the expanded kindergarten to 12th grade program and the new results-based lending program for senior high school. In terms of inclusive employment, the JobStart pilot to increase the employability of new labor force entrants is underway, but it is too early to assess results.

89. Regional cooperation. Although ADB has actively promoted regional cooperation through the BIMP-EAGA program, the assistance to date has been via technical assistance and studies and no investments in hard or soft infrastructure have yet taken place. In terms of transport connectivity, ADB is supporting the preparation of the western and south-central Mindanao growth corridors, two of the priority economic corridors in the BIMP-EAGA program. ADB should consider providing additional assistance in other infrastructure subsectors that could potentially yield high regional and subregional impacts, such as port development, airport development, and electricity grid interconnection.

90. Development impacts of crosscutting work assessment. The validation finds the development impacts of the crosscutting work to be satisfactory.

3. Evidence of and Plausible Links for CPS Likely Contribution to Development Impact

91. The validation concurs with the CPSFR that ADB can make a credible connection between its sustained programmatic support and certain reforms that have yielded significant results, e.g., improved revenue and expenditure management and PPP advancement. In particular, the magnitude of the lending and TA support provide justification for this stance. The additional assertion in the CPSFR that ADB made some contribution to social protection and education and national progress in improving key subindexes of the Human Development Index rating is perhaps optimistic because the relative contribution of ADB resources to the social sectors is very modest, although the progress made was significant (mean years of schooling increased from 8.4 in 2011 to 8.9 in 2014; life expectancy increased from 67.8 to 68.2 years in the same period).95

92. The acknowledgement in the CPSFR that the ADB-financed upgrading of roads (340 km) has made a “modest” contribution to government objectives of increased and more efficient movement of goods and people is more in keeping with the scale of the support. The conclusion that planned outputs to improve water supply and sanitation,

95 F. Aldaba. 2016. The Philippines Human Development Index Ranking. Philippine Human Development

Network Regional Launch of the 2015 Human Development Report. 18 January. The Peninsula Manila, Makati City, Philippines.


and to reduce resource degradation have not yet generated expected results is candid, but it misses the point—programming has been limited in these areas. 93. Of the three completed sovereign loans, one (Emergency Assistance for Relief and Recovery from Typhoon Yolanda) was assessed by the PCR to have had significant impact while the other two loans (both for the Competition for Inclusive Growth Program) were assessed by the PCR to have had substantial impact. The PVR for the latter two loans downgraded the rating to significant impact, noting that the impact indicators were partly achieved. The achieved impact indicator concerned the country’s improved ranking in the competitive index from 85 in 2010 to 47 in 2015, which was substantially exceeded. However, the targeted 5% per annum increase in the number of youth in full-time employment was not met. The increase was only 1.29% per annum during 2010–2015.

4. Factors Affecting the Development Impacts of ADB Support

94. As the CPSFR points out, the anticipated shift to more programmatic support is underway for PSM and education, and these efforts appear promising. But it is early days in terms of fashioning a more coherent programmatic approach, let alone discerning results. In decentralization and local governance and in the justice sector there are persistent obstacles to deep and broad reforms. The CPSFR’s conclusion that the challenge is to further build capacity is fully supported, but a great deal of dialogue (springing from sound evidence) will be needed as well. Expanding such an approach to other sectors is further down the road and remains to be taken up in the new CPS.

95. Development impact is to some degree also affected by the integrity of ADB operations. ADB can demonstrate to the government that assessing risks in key areas (procurement, financial procedures, anti-corruption measures) and mitigating these risks systematically can greatly improve project delivery. Guidance for conducting such an assessment comes in the form of the ADB Second Governance and Anticorruption Action Plan (GACAP II). There is some evidence that this is yielding fruit in the recent performance of the Philippines Corruption Perception Index (Figure 8) and also, more narrowly, in the number of project-related cases of integrity violation in ADB’s portfolio in recent years (Table 7).

Figure 8: Philippines Corruption Perception Index, 2007–2016

Source: Transparency International. 2016. http://www.tradingeconomics.com/philippines/corruption-rank


Table 6: Project-Related Cases of Integrity Violations in the Philippines (2004–2015)

Year Closed with No Further Action

Closed with Action Taken Still Open Total

2004 5 2 0 7

2005 4 0 0 4

2006 7 5 0 12

2007 15 2 0 17

2008 4 0 0 4

2009 2 0 0 2

2010 5 1 0 6

2011 2 0 0 2

2012 2 0 0 2

2013 3 0 0 3

2014 1 0 1 2

2015 1 0 0 1

51 10 1 62 Source: ADB Office of Anticorruption and Integrity (as of 29 February 2016).

F. ADB and Borrower Performance

1. ADB Performance 96. The CPSFR does not rate ADB performance, but the validation assesses it satisfactory. The validation concurs with many of the CPSFR’s points about the entire ADB portfolio and the relationship of ADB with the government. ADB has worked hard to align its program and build a trusting relationship with government, giving it access to reform fields of a strategic and sensitive nature. For instance, ADB has engaged with intensity and a constructive approach with the government to address the thorny problems in central government–LGU relations that hinder intergovernmental relations and the effectiveness of delivery of public services. 97. The validation also acknowledges other positive or promising features of ADB support mentioned by the CPSFR, including the strong coordination with the government and stakeholders in responding to the Yolanda disaster; the establishment of the Extended Mission for Yolanda-Affected Areas (Box 1); the shift to more programmatic approaches that will make it easier to influence nationwide reforms, while reducing procedural inefficiencies; and increased knowledge sharing that has in the last half of the CPS period underpinned program design. In the case of its emergency assistance operations, there was a very high positive satisfaction rate (88%) from the respondents who responded to IED’s beneficiary survey interviews conducted in Bohol, Leyte and Western Samar provinces, which received assistance in the aftermath of the Bohol Earthquake and Typhoon Yolanda in 2013 (Supplementary Appendix A).


Box 1: Benefits of the Extended Mission for Yolanda-Affected Areas In response to the devastating aftermath of Typhoon Yolanda in November 2013, ADB designed and approved more than $900 million in assistance for relief, recovery and reconstruction of typhoon-hit areas. Relevant ongoing projects were adjusted to help affected communities.96 ADB responded quickly to the government’s request for emergency assistance and was proactive in dealing with the government from processing up to full disbursement. Immediately after the disaster, it mobilized its staff resources and worked closely with the National Economic and Development Authority (NEDA) and other development partners in preparing the damage and loss assessment, which formed the basis of the government’s recovery plan. In addition, less than a month after the catastrophic event, ADB Management approved the establishment of an extended mission to Yolanda-affected areas in Tacloban City, Leyte Province. The main purpose of the extended mission was to facilitate the overall coordination and implementation of ADB’s assistance program to Yolanda-affected areas. The establishment of the extended mission was beneficial in: (i) facilitating ADB’s immediate field presence in the affected areas; (ii) providing the necessary support to the government’s efforts in transitioning from planning of reconstruction to implementation; (iii) hosting the counterpart unit that implemented the Japan Fund for Poverty Reduction (JFPR) grants; (iv) supporting the implementation of the KALAHI-CIDSS National Community Driven Development project; (v) providing additional monitoring for the overall implementation of the Government’s Comprehensive Rehabilitation and Recovery Plan, which included ADB’s Emergency Assistance for Relief and Recovery from Typhoon Yolanda; and (vi) facilitating immediate feedback on the situation at the field level. The extended mission was closed on 30 April 2016 and its remaining functions were turned over to the Southeast Asia Department Social and Human Development Division and the Philippines country office in Manila. Source: Independent Evaluation Department.

98. The validation notes that placing the Philippines country office in ADB headquarters has allowed it to develop strong inter-departmental coordination and delegation. This in turn translates into timely and appropriate responses to government demands. The independent evaluation mission also noted the widespread appreciation of most counterparts and stakeholders with the presence and effectiveness of the Philippines country office. There were indications from some in-country development partners that more interaction would be useful. However, that closeness with government can have its downside; in some cases, the ADB program appears to have responded to needs and demand without always closely considering how such new support could best advance the specific objectives or targets set in the CPS. As a result, some of the TA projects were not well-targeted.

99. In moving forward, the CPSFR notes the need for ADB to allocate more staff resources to maximize its participation in Philippine Development Forum working groups, increase its consultation and partnerships with other stakeholders, and increase coordination in the emerging program in Mindanao. ADB could also work more intensively to improve the tracking of design and monitoring frameworks in policy loans and to ensure the maximum utility of post-program partnership frameworks that contain key actions to sustain policy dialogue. The suboptimal example of the Local Government Finance and Budget Reform Program reflects on ADB as much as it does on the inability of the government to use its platforms to periodically assess progress against design and monitoring framework and post-program framework indicators.

96 ADB. 2014. Typhoon Yolanda (Haiyan): ADB's Response Infographic. 7 November.


100. The CPSFR regards ADB supervision to have been mostly adequate, but with some lapses. This assertion sits uneasily alongside the recognition that the government has expressed concerns about delays in ADB approval and subsequent processes, calling for a simplification and acceleration of ADB procedures. Moreover, there are examples of the serious consequences of insufficient supervision, as in the case of the Agrarian Reform Communities Project II, where ADB acknowledges that its weak project supervision resulted in it missing the rapid acceleration of the liquidation problem that began in 2012 and created a large bottleneck in disbursements by 2015.97

2. Government Performance 101. The CPSFR does not rate government performance, but the validation assesses it satisfactory. The assessment is based on the government’s consistent commitment to governance reform. Chief among the government accomplishments, as the CPSFR points out, has been the government’s prudent macroeconomic management. This has provided greater fiscal space to enable it to improve the effectiveness of public spending and to address social and equity concerns.

102. In its response to Typhoon Yolanda, the government reacted quickly, including mobilizing development partners. Its coordination of the regular programming of development partners has been less impressive, with the Philippine Development Forum being underutilized (although some working groups continued to function to a degree).

103. In terms of facilitating the implementation of ADB operations in PSM, the government has shown considerable ownership, flexibility and responsiveness. For instance, the Department of Finance, the executing agency for the Typhoon Yolanda emergency loan, effected drawdowns that were not pre-planned, but by staying in regular direct communication regarding the possible timing of installment releases a suitable coordinated and timely release of loan proceeds was made possible.

104. Continued room for improvement is evident in the government’s engagement in some operations. For instance, greater, and more consistent and helpful involvement of national agencies in regionally implemented projects is desirable. As a case in point, in the Davao Sustainable Urban Transport TA project, the national executing agency managed to attend only the final set of meetings in Davao.98

105. In the government’s approach to monitoring, regional offices of the National Economic Development Authority (NEDA) have been overburdened at times or understaffed, and poorly linked to NEDA headquarters. In the PSM area, weaknesses are evident in the tracking of the design and monitoring framework and post-program partnership objectives and actions relating to decentralization and local governance loans. The validation for the LGFBR program (with targets spilling far into the current CPS) found that there was not a clear institutional set up to track agreed outcome indicators.99 In lagging reform areas, such as in the law and justice sector, programs have not been revamped in a timely way, suggesting that feedback loops from implementation to programming are inadequate.

97 ADB. 2014. Back to Office Report of the Midterm Review Mission, 24 June–8 July. Loan 2465-PHI: Agrarian

Reform Communities Project (ARCP) II. 18 September. Manila. 98 This shortfall accounts for the less than satisfactory rating given to the performance of the executing agency

in the TCR, see ADB. 2015. Technical Assistance Completion Report for: Davao Sustainable Urban Transport Project. Manila. TA 8195-PHI.

99 ADB. 2014. Project Validation Report Philippines: Local Government Financing and Budget Reform Program Cluster. December. Manila. Loans 2387 and 2584.


106. Securing adequate counterpart funding for some projects implemented through LGUs could also benefit from a concerted government effort to ensure that budgets are sufficient and committed at appropriate times in the project and LGUs budgeting cycles. The government could also provide continued capacity building to support and empower disadvantaged LGUs to perform their decentralized functions better, including budget planning and execution, project implementation, and monitoring and evaluation.

G. Overall Assessment 107. The validation assesses the ADB program performance successful on the borderline, based on the integration of the individual ratings for relevance, efficiency, effectiveness, development impact, and sustainability. The validation includes three downgrades in the evaluation criteria for relevance, effectiveness, and development impact. The validation assesses both ADB’s performance and the government’s performance satisfactory (Tables 7 and 8).

Table 7: Ratings Comparison between the CPSFR and the IED Validation Report

Evaluation Criteria CPSFR Rating

Validation Rating Reasons for Rating Deviations

Relevance Highly relevant Relevant Program varies too much across sectors. The realignment to reflect the government’s 2014 PDP midterm update was slow to take effect.

Efficiency Efficient Efficient

Effectiveness Highly effective Less than effective There were shortfalls in achieving project and program outputs and (in some cases) outcomes in the design and monitoring frameworks, especially in capacity development components. Some sector outcomes (e.g., in education) also do not seem on track to be achieved.

Sustainability Likely Likely

Development impacts

Satisfactory Less than satisfactory Only three of the government’s six overall targets were achieved. Considerably less progress than expected has been achieved on regional cooperation and integration issues.

Overall rating Successful Successful on the borderline

ADB performance Not rated Satisfactory Borrower performance Not rated Satisfactory

CPSFR Quality Satisfactory

ADB = Asian Development Bank, CPSFR = country partnership strategy final review. Source: Validation assessment.


Table 8: Overall Score of Sector Programs and Country Partnership Strategy Crosscutting Objectives

Item Relevance Effectiveness Efficiency Sustainability Development

Impacts Overall Overall sector 2.0 1.0 2.0 2.0 1.0 1.6 Crosscutting objectives

2.0 2.0

Weighted score 2.0 1.0 2.0 2.0 1.5 1.7 Note: Equal weight is accorded to the overall sector and crosscutting objectives. Source: Validation assessment.

CHAPTER 3

Key Lessons and Recommendations

A. Lessons Learned

1. Comments on Key Lessons Captured in the CPSFR 108. Lessons from national development experiences. The positive picture of progress made by the Philippines over the CPS, 2011–2016 period, and the road still to be travelled, as captured by the CPSFR, is generally valid. However, the account in the CPSFR tends to gloss over the persistence of poverty and regional imbalances, and appears optimistic that greater fiscal space will be used to target vulnerable groups and ensure more inclusive and resilient growth in employment and incomes. But the main lesson to be drawn is incontestable: sustained and pro-active commitment by the national leadership is critical to the success of reforms. The CPSFR hopes that the revised strategy agreed with ADB in 2014 will continue to fall within the priorities of the new administration. In the lead up to the new CPS, ADB will need to mount an engagement similar to that seen at the start of the current CPS, to ensure that there is indeed alignment between the objectives of ADB and those of the government. 109. Lessons from recent ADB support. Treating the CPS as a flexible guide allowed ADB to stay aligned with the government’s evolving PDP, to maintain relevance, and to ensure government ownership of the strategy. ADB’s adaptation of the planned program was made possible through its frequent and proactive engagement with NEDA and the Department of Finance counterparts. The validation adds that revising outcomes and indicators in response to a changing environment is both an opportunity and a challenge that carries important issues for eventual CPS assessments and accountability; these issues must be broached in a fuller fashion when changes occur. 110. Long-term programmatic support to priority national programs in areas where ADB has a comparative advantage tends to generate better returns than investments in a series of stand-alone projects that are typically structured as add-ons to government programs. The CPSFR offers the PSM and governance sector work as positive cases in point, but leaves the reader in the dark about which support was “add-on” in nature. Subsequent discussions with Philippines country office staff clarified that such projects were in fact relatively few, with the E-Trikes project being the prime example. In future, such add-on projects should still be considered for inclusion in the country program, but there is a need to ensure that they are better prepared and that sufficient resources are provided for a more robust pre-approval due diligence exercise. Also, it would have been useful for the CPSFR to be more explicit about the other sectors wherein ADB holds a comparative advantage over its main comparators.

Key Lessons and Recommendations 41

111. Modalities. The CPSFR noted that ADB continues to face challenges in effectively delivering traditional project loans, especially when these are channeled through multiple government agencies or LGUs. The CPSFR further asserts that ADB notes the opportunity to lend directly100 to eligible LGUs but whether this will take place remains uncertain. In this regard, it would have been informative if the CPSFR had mentioned that in the 1990s ADB tried to provide direct support to a local government in Cebu Province and explained briefly the reasons that this did not come to fruition. The validation notes that other middle-income DMCs are experimenting with a variety of financing mechanisms for subnational governments,101 and finds that ADB support to LGUs needs some fresh thinking and breakthroughs.

112. CPS Results framework. The CPS results framework helped ADB to focus on intended outcomes. However, its reliance on a limited number of quantitative indicators may, at times, have distracted from the big picture (i.e., the achievement of outcomes and outputs). The CPSFR argued that a mix of concise qualitative and quantitative descriptors of targeted results at the outcome and output level, directly linked to planned interventions, may have been more useful. 102 The validation concurs with this observation.

2. Additional Lessons from Validation 113. Continuous support over an extended period is key for success. For institutional reforms to take hold, continuous capacity building is required. Coherence in TA support is equally important; fragmented or poorly timed TA can fall short of providing the support required. The current comprehensive and long-term approach contemplated for Mindanao is to be encouraged.

114. Government ownership in design and use of TA yields better results. Some TA projects are neglected or underutilized, usually because the government has not been fully consulted during the design and monitoring phases of the TA. Admittedly, government capacity to take on more of the management of TAs is hampered by complicated ADB procedures. ADB should support more government ownership of TA design and use, while guarding against the danger of overburdening counterparts.

115. Policy-based lending has served the government reform effort well, but it is not always effective. Accompanied by TA, policy-based lending (PBL) has helped the government to make headway on some important reforms. However, such loans have proved less effective in addressing regional issues and development constraints that are closely tied to institutional capacity. The Philippines country office is already sounding out NEDA on whether borrowing TA for capacity development efforts in this direction are worthwhile. A more judicious balancing of PBL with investment projects may be appropriate. In addition, there are indications that more coordination between the Philippines country office and in-country development partners would be useful in the formulation of PBL.

116. Conflict, geography, ethnicity, and culture complicate development efforts. Delivering programs such as KC-NCDDP and 4Ps becomes more challenging in areas with

100 Under Republic Act 7160 (June 2009). 101 P. Sood, et al. 2012. Subnational Finance for Infrastructure: Potential Roles and Opportunities for ADB. ADB

Sustainable Development Working Paper Series No. 20, April. 102 Such linkages were clear in some sectors (e.g., education) under the previous strategy, but much less clear

in other sectors (e.g., energy).


security and conflict problems, such as the three western regions of Mindanao.103 This will be accentuated following the violence in Marawi City in 2017 and the subsequent declaration of martial law over the whole of Mindanao (para. 13). When remoteness and culture (e.g., the particular circumstances of indigenous people) are added to the mix, this increases the complexity of design and delivery and the cost of operations. Government agencies such as the regional offices of the Department of Social Welfare and Development struggle to deal with these challenges. They would benefit from specific training in delivering social programs in conflict and remote areas (e.g., conflict management and resolution, dealing with security issues, innovations in service delivery) in line with ADB’s staff handbook104 on the topic. 117. Local presence is crucial in undertaking complex operations in difficult circumstances. The establishment of the Extended Mission for Yolanda-Affected Areas (Box 1) in Tacloban City, Leyte ensured that ADB had an immediate field presence in the affected areas less than a month after typhoon Yolanda hit the area.

B. Recommendations

1. CPSFR Recommendations 118. A long list of recommendations is provided in the CPSFR, covering strategic objectives, aid effectiveness and building partnerships, modalities, and sectors. They call for staying the course in the new CPS on the revised strategy agreed in the 2014 and 2015 strategy revision, remaining flexible on targets and priorities, and responding to natural disasters. A more focused and programmatic approach is suggested, pursuing a limited number of business lines directly related to priority national programs, where ADB has a proven record of adding value and working well with partners. The CPSFR urges ADB to further strengthen government ownership of institutional and policy reforms; encourage an open and transparent engagement with civil society on reform issues; focus strongly on performance orientation for both ADB and government operations (with a judicious selection of outcomes and indicators); and engage with the Philippine Development Forum process in priority ADB sectors. 119. Under aid effectiveness, the CPSFR argues for engagement similar to that under the current CPS, where the government leads the coordination effort, but efforts are made to reduce transaction costs by increasing the share of development assistance delivered through the national system where agencies can demonstrate readiness capacity (e.g., with increased use of results-based lending). ADB could also strengthen its role in Philippine Development Forum working groups in CPS priority areas, bolstering the staff and expertise needed for evidence-based analytical work and dialogue. 120. A mix of modalities is suggested by the CPSFR, which stresses more programmatic approaches in priority sectors, exploring the wider use of results-based lending, and carrying out more lending through LGUs as these are strengthened. It recommends that ADB continue to make the most of PBL and closely linked and cluster TA operations. It also argues that knowledge products should play a greater role in supporting reforms, based on ADB’s first knowledge plan for the Philippines. Nonsovereign lending is expected to play an increasingly important role in infrastructure financing.

103 These are Regions IX, XII, and the Autonomous Region in Muslim Mindanao (ARMM). 104 ADB. 2012. Working Differently in Fragile and Conflict-Affected Situations: The ADB Experience. Manila.


121. According to the CPSFR, ADB should maintain its current priority sectors (especially PSM and education), but it should also develop clusters of support in the poorest areas, with a focus on boosting local government and governance capacity. Support for water supply and sanitation and transport should remain, with the understanding that the likely impact of ADB support will be relatively narrow and localized, and focused on removing institutional constraints. In view of the mixed performance in the energy and agriculture and natural resources sectors, future levels of support should depend on progress in building viable partnerships that enhance ADB’s capacity to deliver support effectively. Continuing support in finance will be critical as the government tries to mobilize financial resources and to allocate them to infrastructure and business investment. ADB could continue to promote RCI by linking public and private sector operations to help develop economic corridors and clusters.

122. The validation agrees with these CPSFR recommendations and adds additional recommendations below.

2. Validation Recommendations

123. In light of the lessons above, ADB should consider the following actions in anticipation of the new CPS, 2017–2020:

a. Strategic Recommendations

(i) Scale up ADB work in Mindanao. Given Mindanao’s poverty and general lack of infrastructure and regional connectivity (paras. 11-13), there is a strong rationale for ADB to scale up its operations there. The government is also giving heightened priority to Mindanao in its new PDP (para. 17). ADB already has a strong relationship with the main agencies in Mindanao (NEDA, Mindanao Development Authority, and ARMM) gained through its long history and experience of implementing projects in the region and is a trusted partner (para. 67). By scaling up operations, ADB would meet the government’s stated needs as set out in its new PDP, as well as reinvigorating the activities of BIMP-EAGA in Mindanao and contributing to ongoing regional integration efforts (including those in the recently-released BIMP-EAGA Strategy and its Vision 2025105). Mindanao has great potential for regional cooperation and integration with Brunei Darussalam, Indonesia and Malaysia, given its geographical proximity to these countries and historic links rooted in culture and religion. If ADB is to scale up operations in Mindanao, it will need to consider the ongoing conflict and security situation and may be focused initially mainly in non-conflict areas. The financial and institutional capacity of Mindanao agencies and the activities of other development partners in the region will also need to be taken into careful consideration.

(ii) Support LGUs to enhance their financing capabilities. This validation has mentioned the need to achieve breakthroughs in ADB support to LGUs (para. 111). ADB may need to think beyond providing support for nationally managed lending and ongranting to LGUs, instead preparing the groundwork for market-based mechanisms for LGU financing. ADB could build more intensively on the tentative steps already taken in the

105 BIMP-EAGA Secretariat. 2017. BIMP-EAGA Vision 2025. Kota Kinabalu, Malaysia.


Philippines with municipal bonds—which have thus far been limited to private placement.

(iii) Link nonsovereign lending more tightly to the CPS objectives. The relevance assessment found that nonsovereign operations approved in the CPS period were only loosely linked with the initial and revised CPS objectives, particularly with regard to poverty reduction and inclusive growth (para. 36). The PPP development undertaken under the PSM subsector provides a good example of how better links can be established. A greater effort to discern additional opportunities in private sector operations that directly support CPS objectives would make for a stronger overall program.

b. Operational Recommendations

(iv) ADB should consider establishing a local presence in Mindanao. Related to the first strategic recommendation above, ADB should consider establishing a local presence in Mindanao via a liaison office or other such satellite office reporting to the Philippine country office. Currently, several areas of Mindanao are considered to be conflict-affected areas which severely impacts ADB’s operations. The experience with the extended mission for Yolanda-affected areas indicates that a local presence could be very useful in difficult situations such as those in Mindanao (Box 1 and para. 117). In addition, to better complement ADB’s ongoing capacity development activities in Mindanao, consideration should be given to granting the liaison office a knowledge hub role linked to BIMP-EAGA work.

(v) Weave education support more effectively into social protection support.

ADB is successfully undertaking important and innovative work to improve the education sector and the social protection subsector (para. 64), but there is still scope to improve the synergies between these activities. This may call for a greater effort to scale up the public employment service offices and to strengthen JobStart, depending on the findings of the ongoing impact evaluation. Such initiatives could provide a bridge between expanded senior high school enrollment and the job market. Support for the sustainable livelihoods component that is so crucial to the eventual convergence and maturation of social protection and community-driven development initiatives (e.g., 4Ps and KC-NCDDP) could also be more tightly linked to the JobStart initiative.

3. Conclusions and Assessment of the Quality of the CPSFR

124. The success in implementing the CPS owes much to its sound initial design and to ADB’s efforts to remain relevant as government priorities shifted. The response shown to the Yolanda typhoon disaster indicates that ADB is able to leverage its proximity to areas of concern and its close relationships with the government to carry out a timely and relevant programmatic response. However, looking at the whole portfolio, this same closeness has led to a pattern of response, particularly in terms of TA, that has undermined the sectoral focus intended in the CPS, with a corresponding drift away from core government priorities and lowered capabilities of ADB and government to make the most of the approved operations.


125. The CPSFR adequately captures the challenges, successes, and shortcomings of the CPS. However, a good part of the material could have been shed (e.g., data from the 1980s) or better placed in terms of sections (program activity in the “efficiency” discussion would have been better placed in the ADB program description, or in the relevance discussion). Discussions on criteria could have been more incisive, with links to programs. In places the CPSFR is rather cryptic, particularly in its general observation that some interventions were not closely aligned to government’s strategic objectives and did not enjoy the latter’s full support; this left the validation team scouring the portfolio without real guidance of where to look. 126. Inconsistent sector designation by ADB operations complicates the assessment of program performance and this inconsistency is only partly flagged by the CPSFR. Inconsistent sector designation also makes the CPSFR sector grouping underpinning the narratives for the three CPS objectives (created post-2014) problematic. It may have been better, in view of the inconsistent designations, to allow each objective to be fed by any of the sectors of focus that had relevance to it. 127. The quality of the CPSFR might have been improved if a mature draft had been shared with government counterparts. 106 Given the unclear guidelines for CPSFR formulation,107 it is currently not clear what degree of counterpart involvement ADB requires in terms of the CPSFR drafting process. However, if preparation of the CPSFR is to be analogous to the CAPE and CPSFR validation process, before finalization a draft should be sent out for comment (see the CAPE and CPSFR validation guidelines, para. 65). It would appear that clarification of the stakeholder consultation requirements of the CPSFR process is necessary.

106 One government agency visited noted it had seen a draft of the CPSFR, but that this was an early draft; it

appears that no counterpart agency had seen or submitted comments on a mature draft. 107 CPSFR guidance is provided mainly via the following documents: (i) CPSFR template dated 4 August 2010,

(ii) supplementary CPSFR template attached to SPD memo dated 8 September 2010, (iii) OM Section K1/BP issued 1 October 2013, and (iv) OM Section A2/BP issued 20 September 2016.

Appendixes

APPENDIX 1: ONGOING AND COMPLETED PROGRAM DURING THE COUNTRY PARTNERSHIP STRATEGY FINAL REVIEW PERIOD (2011–2016): LOANS, GRANTS, AND NONSOVEREIGN INVESTMENT FACILITIES

Table A1.1: ADB Approved, Active, and Completed Sovereign Loans during the CPSFR Period, 2011–2016

Loan No. Project Name Approval

Date Closing Date

Amount ($ million)

Status PCR

Rating PVR

Rating

A. Agriculture and Natural Resources

1772 Infrastructure for Rural Productivity Enhancement Sector Project 31-Oct-00 16-Aug-12 75.00 Closed PS

2311 Integrated Coastal Resources Management 23-Jan-07 30-Jun-14 33.80 Closed

2465 Agrarian Reform Communities Project II 27-Oct-08 30-Jun-17 70.00 Active

2957 Integrated Natural Resources and Environmental Management Project 3-Dec-12 31-Dec-20 100.00 Active

Subtotal 278.80

B. Education

2662 Social Protection Support 2-Sep-10 31-Jan-17 400.00 Active

3100 KALAHI-CIDSS National Community-Driven Development Project 16-Dec-13 30-Jun-18 372.10 Active

3237 Senior High School Support Program 15-Dec-14 30-Jun-20 300.00 Active

3369 Social Protection Support - Additional Financing 09-Feb-16 30-Jun-20 400.00 Active

Subtotal 1,472.10

C. Energy

2507 Philippine Energy Efficiency Project 29-Jan-09 8-May-14 31.10 Closed S S

2964 Market Transformation through Introduction of Energy-Efficient Electric Vehicles Project

11-Dec-12 30-Jun-18 300.00 Active

Subtotal 331.10

D. Finance

2715 Financial Market Regulation and Intermediation Program (Subprogram II) 7-Dec-10 15-Apr-12 200.00 Closed S LS

3334 Encouraging Investment through Capital Market Reforms Program (Subprogram 1) 26-Nov-15 31-Aug-16 300.00 Closed

Subtotal 500.00

E. Health

2137 Health Sector Development Program 15-Dec-04 16-May-13 13.00 Closed S LS 2515 Credit for Better Health Care 25-Mar-09 19-Aug-15 50.00 Closed

Subtotal 63.00

F. Industry and Trade

3233 Increasing Competitiveness for Inclusive Growth Program - Subprogram 2 15-Dec-14 10-Nov-15 350.00 Closed HS HS

Subtotal 350.00

G. Public Sector Management

2315 Development Policy Support Program Subprogram 1 8-Feb-07 31-Dec-12 250.00 Closed S

48 Appendix 1

Loan No. Project Name Approval

Date Closing Date

Amount ($ million)

Status PCR

Rating PVR

Rating

2450 Development Policy Support Program (Subprogram 2) 30-Sep-08 31-Dec-12 250.00 Closed S

2489 Governance in Justice Sector Reform Program (Subprogram 1) 16-Dec-08 31-May-12 300.00 Closed 2840 Governance in Justice Sector Reform Program - Subprogram 2 16-Dec-11 31-Mar-12 300.00 Closed

2872 Increasing Competitiveness for Inclusive Growth Program - Subprogram 1 26-Jun-12 7-Dec-12 350.00 Closed HS HS

3080 Emergency Assistance for Relief and Recovery from Typhoon Yolanda 6-Dec-13 30-Jun-15 500.00 Closed HS HS

3111 Local Government Finance and Fiscal Decentralization Reform Program - Subprogram 1 13-Feb-14 15-Aug-14 250.00 Closed

3333 Expanding Private Participation in Infrastructure Program - Subprogram 1 26-Nov-15 31-Aug-16 300.00 Closed

3505 Local Government Finance and Fiscal Decentralization Reform

Program (Subprogram 2) 13-Dec-16 30-Jun-17 250.00 Active

Subtotal 2,750.00

H. Transport

2836 Road Improvement and Institutional Development 15-Dec-11 30-Jun-18 62.00 Active

Subtotal 62.00

Total 5,990.30 As of 31 December 2015. HS = highly successful, KALAHI–CIDSS = Kapit-Bisig Laban sa Kahirapan, Comprehensive Integrated Delivery of Social Services, LS = less than successful, PCR = project completion report, PS = partly successful, PVR = project validation report, S= successful Sources: Project data sheets, reports and recommendations of the president, project completion reports, project completion report validations, ADB database.

Ongoing and Completed Program during the Country Partnership Strategy Final Review Period (2011–2016): Loans, Grants, and Nonsovereign Investment Facilities 49

Table A1.2: ADB Approved, Active, and Completed Sovereign Grants during the CPSFR Period, 2011–2016

Grant No. Project Name Approval

Date Closing

Date

Amount ($ million)

Status GCR

Rating ADF Special Funds

Special Funds Source JFPR Others

Other Sources Total


0071 Integrated Coastal Resources Management 23-Jan-07 30-Jun-14 8.00 GEF 8.00 Closed

0324 Integrated Natural Resources and Environmental Management 3-Dec-12 31-Dec-20 1.41 CCF 1.41 Active

0325 Integrated Natural Resources and Environmental Management 3-Dec-12 31-Dec-20 2.50 GEF 2.50 Active

9169 Agribusiness Development Assistance for Smallholders in Mindanao 11-Dec-12 28-Feb-21 2.00 2.00 Active

Subtotal

13.91

B. Education

9161 Enhancing Access to Quality Early

Childhood Education Services for Children in Poor Communities 20-Feb-12 20-May-16 1.50 1.50 Closed

0472 KALAHI–CIDSS National Community-

Driven Development - Additional Financing 04-Mar-16 30-Jun-18 5,0 TYMTF 5.00 Active

Subtotal

6.50

C. Energy

0142 Philippine Energy Efficiency Project 29-Jan-09 11-Oct-13

1.50 ACEF-CEFPF

1.50 Closed Sa

0326 Market Transformation through

Introduction of Energy-Efficient Electric Vehicles Project 11-Dec-12 30-Jun-18 5.00 CTF 5.00 Active

Subtotal

6.50

D. Finance

9088 Developing Financial Cooperatives 14-Mar-06 30-Jun-11

0.90

0.90 Closed

9118 Developing Microinsurance Project 15-Feb-08 26-Jul-13

1.00

1.00 Closed

Subtotal

1.90

E. Health

0148 Enhancing Midwives' Entrepreneurial

and Financial Literacy (Credit for Better Health Project 25-Mar-09 13-Nov-13 0.40 GDCF 0.40 Closed

Subtotal

0.40

F. Multisector

9162 Promoting Partnerships and Innovation in Poor and Underserved Communities 9-Apr-12 30-Nov-16 1.50 1.50 Active

50 Appendix 1

Grant No. Project Name Approval

Date Closing

Date

Amount ($ million)

Status GCR

Rating ADF Special Funds

Special Funds Source JFPR Others

Other Sources Total

9175 Emergency Assistance and Early

Recovery for Poor Municipalities Affected by Typhoon Yolanda 13-Dec-13 30-Jun-17 20.00 20.00 Active

Subtotal

21.50

G. Public Sector Management

0162 Typhoon Ketsana (Ondoy) 29-Sep-09 23-Nov-15

3.00 APDRF

3.00 Closed

0279 Tropical Storm Washi (Sendong) 22-Dec-11

3.00 APDRF

3.00 Closed

0369 Typhoon Yolanda 13-Nov-13 14-May-14

3.00 APDRF

3.00 Closed

Subtotal

9.00

H. Water and other urban infrastructure and services

0477 Water District Development Sector 22-Apr-16 31-Oct-22

2.00 UEIF-UFPF

2.00 Active

Subtotal

2.00

Total 61.71 As of 31 December 2015. a Rating shared with Loan 2507. ADF= Asian Development Fund, ACEF–CEFPF = Asian Clean Energy Fund–Clean Energy Financing Partnership Facility, APDRF = Asia Pacific Disaster Response Fund, CCF = Climate Change Fund, CTF = Clean Technology Fund, GCR = grant completion report, GDCF = Gender and Development Cooperation Fund, GEF = Global Environment Facility, JFPR = Japan Fund for Poverty Reduction, KALAHI–CIDSS = Kapit-Bisig Laban sa Kahirapan, Comprehensive Integrated Delivery of Social Services, OCR = ordinary capital resources, S = successful, TYTMF = Typhoon Yolanda Multi-Donor Trust Fund, UEIF-UFPF = Urban Environmental Infrastructure Fund under the Urban Financing Partnership Facility. Sources: Project data sheets, reports and recommendations of the President, grant assistance reports, ADB database.

Ongoing and Completed Program during the Country Partnership Strategy Final Review Period (2011–2016): Loans, Grants, and Nonsovereign Investment Facilities 51

Table A1.3: ADB Approved, Active, and Completed Nonsovereign Loans During the CPSFR Period, 2011–2016

Loan/ Investment No. Project Name

Approval Date

Amount ($ million)

XARR Rating

XVR Rating

PPER Rating

Equity Facility OCR ADF Total B-Loan Guarantee Combined

A. Energy

7273/ 2405

Masinloc Power Partners Company Limited (MPPC) 15-Jan-08 200.00 200.00 200.00 HS HS HS

7303/ 2612

KEPCO SPC Power Corporation/ Visayas Base Load Power Development 11-Dec-09 120.00 120.00 120.00 S

7442/ 3246

EDC Burgos Wind Power Corporation/150-MW Burgos Wind Farm Project 26-Jan-15 20.00 20.00 20.00

Subtotal 340.00

B. Finance

7193 LGU Guarantee Corp. 19-Jan-04 2.00

2.00

2.00 S S

7206/ 2155

Balikatan Housing Finance, Inc. 17-Dec-04 1.00 33.00

34.00

34.00 S

7212/ 2173

Cameron Grandville Asset Management Inc. 24-Jun-05 5.00 5.00 5.00 S S

7218 Security Bank Corporation 29-Sep-05 10.50 10.50 LS U

7221 Bahay Financial Services 17-Dec-04 1.00 1.00 1.00 S S

7357 Philippine Investment Alliance for Infrastructure Fund 30-Jul-12 25.00 25.00 25.00

7451/ 3266

AP Renewables, Inc./Tiwi and MAKBAN Geothermal Power Green Bonds 2-Jul-15 40.60 40.60 181.20 221.80

Subtotal 299.30

C. Transport

7439/ 3224

GMR Megawide Cebu Airport Corporation/Mactan Cebu International Passenger Terminal Project 9-Dec-14 75.00 75.00 75.00

Subtotal 75.00

Total 714.30

As of 31 December 2015. ADF= Asian Development Fund, AP = Aboitiz Power, EDC = Energy Development Corporation, HS = highly successful, KEPCO = Korea Electric Power Corporation, LS = less than successful, MW = megawatt, OCR = ordinary capital resources, PPER = project performance evaluation report, S = successful, U = unsuccessful, XARR = extended annual review report, XVR = XARR validation report Source: ADB Loan, Grant, TA and Equity Approvals database.

APPENDIX 2: ONGOING AND COMPLETED PROGRAM DURING THE COUNTRY PARTNERSHIP STRATEGY FINAL REVIEW PERIOD (2011–2016): TECHNICAL ASSISTANCE

TA No. Project Name Approval

Date Closing

Date TA

Type

Amount ($’000) Status TCR

Rating

TASF JSF Special Funds

Special Funds Source Others

Other Sources Total


7716 Decentralized Framework for

Sustainable Natural Resources and Rural Infrastructure Management 17-Dec-10 31-Jul-14 CD 1,300.00 JFPR 1,300.00 Closed HS

8106 Enhancing Social Protection through Community Driven Development Approach 4-Jul-12 31-Dec-17 PA 800.00 800.00 Active

8106 Enhancing Social Protection through

Community Driven Development Approach (Supplementary) 17-Jan-13 31-Dec-17 PA 225.00 225.00 Active

8493 Climate Resilience and Green Growth

in Critical Watersheds 25-Oct-13 30-Jun-17 CD 1,750.00 JFPR 1,750.00 Active

8106 Enhancing Social Protection Through

Community-Driven Development Approach (Supplementary) 17-Aug-15 31-Dec-17 PA 750.00 TYMTF 750.00 Active

Subtotal

4,825.00

B. Education

7513 Computer Access Mentorship

Program—A Public-Private Partnership for Enhancing Education Quality 12-Apr-10 17-Jul-13 CD 500.00 EAKPF 500.00 Closed HS

7586 Capacity Development for Social Protection 2-Sep-10 31-Aug-14 CD 800.00 800.00 Closed

7587 Strengthened Gender Impacts of Social Protection 2-Sep-10 31-Dec-14 CD 300.00 GDCF 300.00 Closed

8164 Strengthening Knowledge-Based Economic and Social Development 14-Sep-12 15-Oct-16 CD 500.00 EAKPF 500.00 Closed

8590 Enhancing Capacities for the KALAHI-CIDSS National Community-Driven Development Project 18-Dec-13 31-Dec-18 CD 1,500.00 JFPR 1,500.00 Active

8695 Teach for the Philippines 7-Aug-14 31-Dec-16 CD

500.00 EAKPF 500.00 Closed

9004 Implementing the Senior High School

Support Program 3-Dec-15 30-Nov-17 CD 1,500.00 JFPR 1,500.00 Active

Subtotal

5,600.00

Ongoing and Completed Program During the Country Partnership Strategy Final Review Period (2011–2016): Technical Assistance 53


Date Closing

Date TA

Type


Rating



Other Sources Total

C. Energy 7781 Rural Community-Based Renewable

Energy Development in Mindanao 16-Feb-11 23-Dec-15 PA 2,000.00 ACEF 2,000.00 Closed S 8073 Consumer Protection in a Competitive

Electricity Market with Open Access 16-Apr-12 15-Aug-14 PA 500.00 EAKPF 500.00 Closed U Subtotal

2,500.00

D. Finance

8038 Capacity Development of Financial

Regulators 16-Dec-11 31-Dec-15 CD 1,000.00 JFPR 1,000.00 Closed 8037 Developing a Public-Private

Earthquake Pool in the Philippines 27-Dec-11 24-Oct-14 CD 225.00 225.00 Closed S 8258 Capacity Building for Microinsurance 11-Dec-12 1-Mar-17 CD

1,000.00 JFPR 1,000.00 Active

8495 Strengthening Treasury's Liquidity

Management 10-Oct-13 31-Mar-15 CD 210.00 210.00 Closed S 8608 Capacity Development to Support

Regulation and Oversight at the Insurance Commission 13-Dec-13 30-Jun-16 CD 225.00 225.00 Closed

8718 Strengthening Treasury Operations and Capital Market Reform 17-Sep-14 30-Oct-17 CD 500.00 JFPR 500.00 Active

8984 Support for the Nationwide Rollout of Jobstart Philippines 30-Oct-15 31-Dec-20 CD 1,300.00 1,300.00 Active

9166 Financial Inclusion Framework Strengthening 31-Aug-16 31-Oct-18 CD 600.00 600.00 Active

Subtotal

4,460.00

E. Industry and Trade

7870 Strengthening Institutions for an

Improved Investment Climate 26-Sep-11 24-Aug-15 PA 1,000.00 JFPR 1,000.00 Closed S 7912 Strategic Policy Actions for Successful

Structural Transformation and Inclusive Growth 24-Oct-11 17-Apr-15 PA 225.00 225.00 Closed U

8334 Improving Competitiveness in Tourism 5-Mar-13

31-Aug-17 CD 7,116.90 CAN 7,116.90 Active

8335 Employment Facilitation for Inclusive Growth 5-Mar-13 28-Feb-17 CD 5,591.90 CAN 5,591.90 Active

8335 Employment Facilitation for Inclusive Growth (Supplementary 18-Jul-16 28-Feb-17 CD 70.00 70.00 Active Subtotal

14,003.80

54 Appendix 2


Date Closing

Date TA

Type


Rating



Other Sources Total

F. Public Sector Management

7035 Enhancing Revenue Collection and

Strengthening the Criminal Prosecution of Tax Evasion Cases 12-Dec-07 29-Mar-11 AD 500.00 500.00 Closed PS

7074 Strengthening Provincial and Local Planning and Expenditure Management Phase 2 4-Apr-08 31-Dec-11 AD 650.00 650.00 Closed S

7138 Improving Public Expenditure Management 30-Sep-08 28-Feb-13 AD 800.00 800.00 Closed PS

7190 Harmonization and Development Effectiveness 8-Dec-08 26-Jun-13 AD 900.00 900.00 Closed S

7210 Supporting Governance in Justice Sector Reform in the Philippines 16-Dec-08 31-May-12 AD 1,500.00 500.00 GDCF 2,000.00 Closed

7244 Strengthening the Philippine Government Electronic Procurement System 6-Mar-09 19-Feb-13 PA 600.00 600.00 Closed S

7332 Support to Policy Formulation to the Philippines 12-Aug-09 27-Jul-12 PA 225.00 225.00 Closed S

7346 Improving Public Expenditure Management 2 15-Sep-09 10-Nov-11 PA 800.00 800.00 Closed S

7482 Support for the Preparation of Harmonized Sector Assessments, Strategies, and Roadmaps for the Philippines 12-Dec-09 27-Jul-12 PA 225.00 225.00 Closed PS

7451 Support to Local Government Financing 15-Dec-09 30-Sep-12 PA 700.00 700.00 Closed

7654 Structural Transformation Study of the Philippines Economy 18-Nov-10 29-Jan-13 PA 150.00 150.00 Closed HS

7733 Support for Social Protection Reform (formerly MDG Acceleration and Poverty Reduction) 13-Dec-10 31-Jan-16 PA 1,400.00 JFPR 1,400.00 Active

7796 Strengthening Public-Private Partnerships in the Philippines 24-Mar-11 31-Jul-18 CD 1,500.00 8,200.00 AUS/CAN 9,700.00 Active

7806 Results-Oriented Strategic Planning and Development Management for Inclusive Growth 13-Apr-11 31-Dec-16 CD 1,000.00 JFPR 1,000.00 Closed

Ongoing and Completed Program During the Country Partnership Strategy Final Review Period (2011–2016): Technical Assistance 55


Date Closing

Date TA

Type


Rating



Other Sources Total

7809 Support to Local Government Revenue Generation and Land Administration Reforms 19-May-11 30-Apr-16 CD 1,500.00 JFPR 1,500.00 Closed

8006 Capacity Development for the Judiciary and Justice Sector Agencies 16-Dec-11 31-Oct-15 CD 1,000.00 1,000.00 Closed

7796 Strengthening Public-Private Partnerships in the Philippines (Supplementary) 20-Apr-12 31-Jul-18 CD 500.00 15,000.00 AUS 15,500.00 Active

7796 Strengthening Public-Private Partnerships in the Philippines (Supplementary) 10-Jan-13 31-Jul-18 CD 3,000.00 CAN 3,000.00 Active

8354 Supporting Capacity Development for the Bureau of Internal Revenue 12-Apr-13 31-Aug-15 CD 1,000.00 JFPR 1,000.00 Closed

8397 Support for Data Management for Performance Reporting and Assessment 4-Jul-13 30-Jun-15 CD 225.00 225.00 Closed

8419 Strengthening Results-Based Human Resource Processes at the Department of Finance 5-Aug-13 30-May-15 CD 225.00 225.00 Closed

8536 Support for Post Typhoon Yolanda Disaster Needs Assessment and Response 20-Nov-13 31-Dec-16 PA 225.00 225.00 Active

7809 Support to Local Government Revenue Generation and Land Administration Reforms (Supplementary) 3-Dec-13 30-Apr-16 CD 750.00 750.00 Closed

8536 Support for Post Typhoon Yolanda Disaster Needs Assessment and Response (Supplementary) 23-Dec-13 31-Dec-16 PA 500.00 500.00 Active

8650 Strengthening Evaluation and Fiscal Cost Management of Public-Private Partnerships 15-May-14 31-May-17 CD 2,000.00 JFPR 2,000.00 Active

8419 Strengthening Results-Based Human Resource Processes at the Department of Finance (Supplementary) 24-Nov-14 30-May-15 CD 50.00 50.00 Closed

8924 Strengthening Institutions for Investments in Mindanao 6-Jul-15 31-Dec-16 CD 225.00 225.00 Active

8536 Support for Post Typhoon Yolanda Disaster Needs Assessment and Response (Supplementary) 12-Oct-15 31-Dec-16 PA - 160.00 IDRM 160.00 Active

56 Appendix 2


Date Closing

Date TA

Type


Rating



Other Sources Total

9041 Support to Local Government Accountability Systems 10-Dec-15 30-Sep-17 CD 500.00 500.00 Active

9079 Strengthening Social Protection Reforms 09-Feb-16 31-Dec-19 PA 1,000 1,000.00 Active

9250 Strengthening Tax and Fiscal Policy Capacity for Inclusive Growth 29-Nov-16 31-Dec-19 PA 2,000 2,000.00 Active

Subtotal

49,510.00

G. Transport

7434 Strengthening Transparency and

Accountability in the Road Subsector 10-Dec-09 31-May-16 CD 1,000.00 1,000.00 Closed LS 8195 Davao Sustainable Urban Transport 19-Oct-12 20-Feb-15 PA

1,000.00 JFPR 1,000.00 Closed S

Subtotal

2,000.00

H. Water and Other Urban Infrastructure and Services

8111 Climate Resilience and Green Growth

in the Upper Marikina River Basin Protected Landscape-Demonstrating the Eco-town Framework 16-Jul-12 18-May-16 CD 450.0 CCF 450.00 Closed S

8135 Design of a Pilot Project to Improve Environmental Conditions of Estero de Paco 8-Aug-12 30-Apr-15 CD 220.00 SPCF 220.00 Closed S

8135 Design of a Pilot Project to Improve Environmental Conditions of Estero de Paco (Supplementary) 10-Oct-13 30-Apr-15 CD 220.00

MDTF-WFPF 220.00 Closed S

9103 Water District Development Sector 22-Apr-16 30-Jun-18 CD 1,000 MDTF-WFPF &

UFPF-UEIF

1,000.00 Active

Subtotal

1,890.00

Total

86,388.80

As of 31 December 2015. ACEF = Asian Clean Energy Fund, AD = advisory TA, AUS = Australia, CAN = Canada, CCF = Climate Change Fund, CD = capacity development TA, EAKPF = e-Asia Knowledge Partnership Fund, GDCF = Gender and Development Cooperation Fund, HS = highly successful, IDRM = Integrated Disaster Risk Management Fund, JFPR = Japan Fund for Poverty Reduction, JSF = Japan Special Fund, KALAHI–CIDSS = Kapit-Bisig Laban sa Kahirapan, Comprehensive Integrated Delivery of Social Services, LS = less than successful, MDTF = Multi-Donor Trust Fund, PA = policy and advisory TA, PS = partly successful, S= successful, SPCF = Spanish Cooperation Fund for Technical Assistance, TA = technical assistance, TCR = technical assistance completion report, TYMTF = Typhoon Yolanda Multi-Donor Trust Fund, U = unsuccessful, UEIF-UFPF = Urban Environmental Infrastructure Fund under the Urban Financing Partnership Facility, WFPF = Water Financing Partnership Facility Sources: Project data sheets, technical assistance reports, reports and recommendations of the President, technical assistance completion reports, ADB database.

APPENDIX 3: PLANNED VERSUS ACTUAL LOANS TO THE PHILIPPINES

Table A3.1: Planned Versus Actual Loans to the Philippines, 2011–2016 (to July)

Loan No. Loan Title (Project Name)

Year Planned a Actual b

ADB Loan

Planned Actual

$ million %

share $ million %

share

A. Agriculture and Natural Resources 475.00 10% 102.00 3%

Irrigation Systems Operation Efficiency Improvement Project 2011 (F) 75.00

Comprehensive Development for the Agusan River Basin Project (formerly Agusan Integrated Water Resources Management) 2012 (F) 100.00

L2957 Integrated Natural Resources and Environmental

Management Project 2012 (F) 3-Dec-12 100.00 100.00

Enhancing Rural Enterprise and Rural Employment Program 2016 (S) 200.00

G9169 Agribusiness Development Assistance for Smallholders in Mindanao 11-Dec-12 2.00

B. Education 700.00 15% 700.00 17%

L3237 Senior High School Support Program (formerly Education Improvement

Sector Development Program) 2014 (F) 15-Dec-14 300.00 300.00

L3369 Social Protection Support Project (additional financing) 2016 (S) 15-Feb-16 400.00 400.00

C. Energy 200.00 4% 300.00 7%

Energy-Efficient Electric Vehicle Investment Program (PFR 1) 2011 (F) 200.00

L2964 Market Transformation through Introduction of Energy-Efficient Electric Vehicles Project

11-Dec-12 300.00

D. Finance 300.00 6% 300.00 7%

Capital Markets and Nonbank Reforms Program, Subprogram 1 2015 (F) 300.00

L3334 Encouraging Investment through Capital Market Reforms Program (Subprogram 1)

26-Nov-15 300.00

E. Health and Social Protection 70.00 1% 0%

Disaster Risk Financing Project 2013 (F) 70.00

F. Industry and Trade 0.00 0% 350.00 9%

L3233 Increasing Competitiveness for Inclusive Growth (Subprogram 2) 15-Dec-14 350.00

58 Appendix 3



ADB Loan

Planned Actual

$ million %

share $ million %

share

G. Transport and ICT 652.00 14% 62.00 2%

L 2836 Road Sector Institutional Development and Investment Project (renamed

Road Improvement and Institutional Development Project) 2011 (F) 15-Dec-11 62.00 62.00

Second Road Sector Institutional Development and Investment Program 2014 (F) 200.00

Infrastructure Improvement Support Program, Subprogram 1 2015 (S) 100.00

Improving National Roads for Inclusive Growth in Mindanao Project

(formerly Second Road Improvement and Institutional Development Project) 2016 (F) 220.00

Davao Public Transport Modernization Project 2016 (S) 70.00

H. Water Supply and Other Municipal Infrastructure and Services 394.00 8% 185.30 5%

Urban Water Supply and Sanitation Project (PFR 1) 2012 (F) 70.00

Solid Waste Management Sector Project 2014 (F) 70.00

L3377 Angat Water Transmission Improvement Project 2015 (F) /

2016 (S) 18-Mar-16 124.00 123.30

L3389/ G0477

Water District Development Sector Project 2013 (F)/ 2016 (S) 22-Apr-16 60.00 62.00

Solid Waste Management Sector Project (Pilot)

2016 (S) 70.00

I. Public Sector Management 1,225.00 26% 1,700.00 42%

Justice Reform Program 2011 (F) 75.00

L2840 Governance in Justice Sector Reform Program - Subprogram 2 16-Dec-11 300.00

L2872 Increasing Competitiveness for Inclusive Growth Program (Subprogram 1)

(formerly Investment Climate Program) 2012 (F) 26-Jun-12 350.00 350.00

L3111 Local Government Finance and Budget Reform Program (formerly Local

Government Finance and Budget Reform Program Phase 2, Subprogram 1) 2013 (F) 13-Feb-14 200.00 250.00

L3080 Emergency Assistance for Relief and Recovery from Typhoon Yolanda 6-Dec-13 500.00

Increasing Competitiveness for Inclusive Growth

(Subprogram 2) (formerly Investment Climate Program) 2014 (F) 350.00

Local Government Finance and Fiscal Decentralization Reform Program,

Subprogram 2 2016 (F) 250.00

L3333 Expanding Private Participation in Infrastructure Program, Subprogram 1 26-Nov-15 300.00

J. Multisector 700.00 15% 372.10 9%

Planned versus Actual Loans to the Philippines 59



ADB Loan

Planned Actual

$ million %

share $ million %

share

Convergent Social Protection and Community-Driven Development (formerly

Second Social Protection Support Project) 2013 (F) 400.00

L3100 KALAHI-CIDSS National Community-Driven Development Project c 16-Dec-13 372.10

Enhancing Youth School-to-Work Transition Program, Subprogram 1

(formerly Addressing the Youth Employment Challenge Program) c 2016 (F) 300.00

Total 4,716.00 100% 4,071.40 100%

F=firm, S=standby a Year in which project was listed as planned based on relevant Philippines country operations business plans (COBPs). b Date of project approval. c For sectors Education and Public Sector Management Sources: ADB Projects Database; Country Operations Business Plan: Philippines, 2016-2018, December 2015; Country Operations Business Plan: Philippines, 2015-2017, December 2014; Country Operations Business Plan: Philippines, 2014-2016, October 2013; Country Operations Business Plan: Philippines, 2013-2015, October 2012; Country Operations Business Plan: Philippines, 2012-2014, September 2011.

APPENDIX 4: VALIDATION COMMENTS ON SECTOR OUTCOME ACHIEVEMENTS

Planned Sector Indicators and Targets Updateda Sector Indicators and Targets Actual Results Comment on Actual Compared to Updated

TRANSPORT

Improved accessibility of transport infrastructure and services • Average road user cost reduced to

P17/km in 2017 (2008 baseline: P21.17/km)

• 80% of roads in good and fair condition in 2017 (2008 baseline: 55%)

Improved accessibility, sustainability and climate-resiliency of transport infrastructure and services • National paved road density improves to

0.3 km per 1,000 persons by 2016 (2010 baseline: 0.261)

2011 – 0.269 2012 – 0.275 2013 – 0.290

On track. Data for results have not been updated since 2013; however, it appears the updated target will be achieved National scope of indicator is not appropriate in view of the limited ADB contribution in this sector.

ENERGY

Improved energy efficiency • Transport sector emissions reduced

by 230,000 tons in 2015 (2010 baseline: 1,870,000 tons)

Improved access to reliable and secure supply of electricity • 88% of households provided with

electric power supply by 2016 (2010 baseline: 72.1%)

• 60% target of energy self-sufficiency met by 2016 (2010 baseline: 58.3%).

2011 - 73.7% 2012 - 76.7% 2013 - 77.4% 2011 - 59.6% 2012 - 56.3% 2013 - 59.0%

Not on track. Household data have not been updated since 2013, and do not appear to be on track. However, the TCR for TA 7781 offers a figure of 83% in December 2014, which is close to the target. On track. The self-sufficiency target is aligned with government target and may be achievable, but needs updated data.

EDUCATION

Improved access and quality of basic education • Net G7-10 enrollment rate of 93.3%

in 2015/16 (compared with 59.5% in 2009/10)

• G7-10 completion rate of 75.5% in 2015/16 (compared with 73.7% in 2009/10)

• Mean national achievement test scores for secondary students increased to 75.0% in 2015/16 (from 45.6% in 2009/2010)

Improved access and quality of basic education • Net enrollment rate in the secondary

level reaches 71.0% in 2016 • Completion rate in the secondary level

increased to 80% in 2016 • Achievement rate (NAT MPS) in the

secondary level increased to 65% in 2016

SY2010/11: 64.7% SY2011/12: 64.8% SY2012/13: 64.6% SY2010/11: 75.1% SY2011/12: 74.2% SY2012/13: 74.8% SY2010/11: 47.9% SY2011/12: 48.9 SY2012/13: 51.4%

None of the three indicators is on track. Data not updated since 2013 for all three indicators, but none seems to be on track.

Validation Comments on Sector Outcome Achievements 61


AGRICULTURE AND NATURAL RESOURCES

Improved conservation, protection, rehabilitation, and management of natural resources • 63 million hectares land degradation

hot spots with developed sustainable land management practices in 2016 (2010 baseline: 53 million ha)

Improved conservation, protection, rehabilitation, and management of natural resources • Reduced degradation hotspots in 2016

(2010 baseline: 5,295,332 ha of degradation hot spots).

Increased access to rural employment Average annual family income increased [2009 baseline: P206,000 (national); P356,000 (NCR); P165,000 (Region X)]. Current values: 2012: P235,000 (national); P379,000 (NCR); P190,000 (Region X)

5,295,014 ha (2011) 5,294,800 ha (2012) n.a. (2013) 2012: P235,000 (national) P379,000 (NCR) P190,000 (Region X)

Retaining the reduction of degradation hotspots target seems rather remote from the ADB programming provided in the CPS. Not on track. “Reduced” provides no sense of magnitude – and no data past 2012 have been provided. Inappropriate indicator. “Increased” provides no sense of magnitude – and no data past 2012 have been provided.

Enhanced access of population to water, sanitation, and waste management facilities and services • 86.6% percentage of population

with access to potable water in 2016 (2007 baseline: 82.9%)

• 83.3% percentage of population with access to basic sanitation in 2016 (2008 baseline: 76%)

Improved access of urban population to adequate solid waste disposal Share of LGUs served by sanitary landfills increased to 7.8% in 2016 (from 2.7% in 2010)

Enhanced access of population to water, sanitation, and waste management facilities and services • By 2016, 88% of population had access

to level I and II potable water (2007 baseline: 82.9%).

• Access to basic sanitation is greater than

92% by 2016 (2008 baseline: 76%); Share of LGUs served by sanitary landfills increased to 7.8% in 2016 (from 3.0% in 2010)

84.8% (2010) 84.2% (2011) 84.5% (2012) 86.1% (2013) n.a. (2010) 92.5% (2011) n.a. (2012 and 2013) 4.4% (2011) 5.0% (2012) 7.4% (2013)

On track. No data on potable water past 2013, but progress appears to be on track. No data since 2011 for basic sanitation; as 2011 already exceeds target, the target is likely to be met but was set in 2014 so it may have been set too low). Achieved. No data on sanitary landfills beyond 2013, but seems on track. On track. Retaining these indicators appears odd in view of the lack of programming in the sector during the 2011-2014 period (and even during 2015).

PUBLIC SECTOR MANAGEMENT

Improved investment climate and private sector development • 20% investment–GDP ratio by 2016

(2010 baseline: 15.6%)

Improved investment climate and private sector development • Investment–GDP ratio at 20.1% by 2016

(baseline using 2004–2010 average and 1985 base year: 15.3%)

18.7% (2011); 19.6% (2012); 20.5% (2013); 21.7% (2014, Q1)

Achieved. Investment ratio likely to be achieved (it was achieved by 2013)

62 Appendix 4


• At least five major PPPs reach contractual closure by 2016 (2010 baseline: 0)

Improved decentralization and local governance • Increase in real property tax

collections by 20% in 2015 (2010 baseline: P29.61 billion)

Improved fiscal policy • Tax–GDP ratio of 16% in 2016 (2009

baseline: 12.2%) Improved stakeholder participation 22 departments or agencies conduct budget consultations with CSOs, private sector, and other stakeholders by 2016 (2011 baseline: 6 national government agencies and 3 government-owned and/or government-controlled organizations

Improved decentralization and local governance • Increasing share of real property tax in

total current LGU operating income (%) (2010 baseline: 9.86%).

Improved fiscal policy • Tax–GDP ratio of 16.1% in 2016 (2010

baseline: 12.1%).

9.8% (2011); 10.7% (2012); 10.6% (2013) 12.4% (2011); 12.9% (2012); 13.3% (2013) 13.6% (2014)

Inappropriate indicator. “Increasing” provides no sense of magnitude. Value decreased from 2012 to 2013. No data past 2012 have been provided. No data past 2014 in CPSFR. ADB indicates 2015 is 13.5%c which does not appear to be on track; 13% as of Q1 2016, see http://www.dof.gov.ph/index.php/data/taxeffort/ Not on track. Data not updated since 2014 and target does not seem to be on track. Dropped indicator. It appears that ADB backed away from a more robust consultation with civil society; this was never explained in the COBP, 2015-2017 or the CPSFR.

CSO = civil society organization, COBP = country operations business plan, CPSFR = country partnership strategy final review, GDP = gross domestic product, LGU = local government unit, n.a = not available, NCR = National Capital Region, PPP = public–private partnership a ADB. 2014. Country Operations Business Plan: Philippines 2015-2017. Manila. b This was added at the time of the preparation of the Country Operations Business Plan: Philippines, 2015–2017. c ADB. 2016. Republic of the Philippines: Strengthening Tax and Fiscal Policy Capacity for Inclusive Growth Technical Assistance (TA) Concept Paper. 21 October. Manila. Sources: Country Partnership Strategy, 2011–2016 and country partnership strategy final report validation assessments.

APPENDIX 5: 2008 PHILIPPINES COUNTRY ASSISTANCE PROGRAM EVALUATION (CAPE) RECOMMENDATIONS AND THE COUNTRY PARTNERSHIP STRATEGY (CPS), 2011–2016 RESPONSE

2008 CAPE Recommendations 2011–2016 CPS Response

1. Maintain the strategic focus on improving national public finance governance and management: (i) Continue to support the Government’s fiscal reforms including the revenue effort from income tax and customs collection and related institutional reforms; and (ii) Continue to support improved budget allocations for priority sectors including infrastructure, education, agriculture, and health.

2. Deepen support for local governance and decentralized service delivery to improve public expenditure efficiency and governance: (i) Continue to support strengthening of local government finances; (ii) Continue support for systematic capacity development to improve public expenditure management and upscale support to local level capacity development in country systems-based planning, management, and internal audit systems to support performance budgeting and governance and anticorruption efforts; and (iii) Focus on national agencies and local government units that support local level goods and services delivery.

Strengthened governance and reduced corruption. ADB will continue and deepen its efforts to strengthen governance and reduce corruption at the country, sector, and project levels. The main priorities for reform include (i) legal and regulatory reforms in budget execution and reporting; (ii) strengthening national and LGU capacity for revenue generation, planning, budgeting, public financial management, and procurement; (iii) further institutionalizing results- based management reforms in key sector and oversight agencies; (iv) strengthening the capacity of accountability institutions, including the judiciary; and (v) capacity development for social accountability measures with an emphasis on procurement, budget transparency, accountability, and performance monitoring. ADB will support constructive engagement between civil society organizations and sector agencies as well as local governments.

3. Continue to support private sector enabling environment improvements: (i) Build on microfinance reforms with a focus on constraints to increasing access by the poor; (ii) Identify and introduce alternative approaches over and above the current facility to improving SME access to bank finance; (iii) Systematically assess and identify where and how ADB can best contribute to infrastructure development; and (iv) Advance strengthening of the judiciary to improve enforcement of the rule of law.

Improved investment climate and private sector development. The investment climate will be improved and private sector development expanded through the scaling up of transport and energy infrastructure investments and through support for policy reforms that (i) improve the quality of competition and regulation, (ii) enhance fiscal policy and expenditure management, and (iii) strengthen legal and judiciary reforms.

64 Appendix 5

2008 CAPE Recommendations 2011–2016 CPS Response

4. Focus on poor provinces to address poverty reduction and build on synergies between local development and regional cooperation initiatives, in particular BIMP-EAGA: (i) Support linkages between rural development, SME development, and regional trade opportunities; (ii) Replicate support for local urban services and utilities; (iii) Develop programmatic approaches to supporting local-level rural and urban development; and (iv) Use a regional development approach and pooled financing for supporting peace and development initiatives in ARMM.

More efficient, effective, and equitable social services delivery. ADB will increase support for the efficient, effective, and equitable delivery of social services. Drawing on CAPE lessons, experience with the application of policy-based approaches in the health sector will guide ADB support for policy, institutional, organizational, and investment needs in other social sectors at national, sector, and local levels. Supply-side interventions in social sectors will be complemented by demand-side interventions via ADB's medium-term support for social protection. The support will be aligned with the government's new social protection reform agenda, in particular the development and implementation of an improved social protection framework and a targeting system for the poor. Policy reforms will address decentralization and local governance, with special emphasis on intergovernmental fiscal relations, local government budgets, and performance at the LGU and sector-agency levels.

ADB will also focus on

strengthening capacity in lagging regions.

5. Enhance services to the client through expanded policy dialogue, further harmonization with development partners, greater use of programmatic approaches, balance staff resource allocation, and clarify the country office role: (i) Expand economic and sector work and continue policy dialogue with Government to overcoming key constraints and improving the development effectiveness of the ADB– Philippines partnership; (ii) Continue to support country-based development partner harmonization in operations; (iii) Adapt existing assistance modalities to expand systematic institutional strengthening including phasing projects to allow upfront capacity development, TA, loans, and partnerships approaches that pool assistance; (iv) Further develop and expand the use of sector-wide and programmatic approaches; (v) Provide adequate resources and incentives for project and program implementation; and (vi) Clarify the role and responsibilities of the Philippines Country Office.

During country partnership strategy (CPS) implementation, ADB will strengthen partnerships through (i) intensified engagement in the Philippine Development Forum and its working groups; (ii) stakeholder consultations; and (iii) establishment of an advisory board of eminent people, including academics and representatives of civil society organizations, to advise on ADB’s country program and operations and on ways to strengthen development effectiveness in the context of country developments.

Supplementary Appendixes (available from IED upon request)

A. ADB Client Survey Findings

B. Beneficiary Survey Findings

C. Summary of Public Sector Management Program Assessment

D. Summary of Education and Social Protection Program Assessment

E. Summary of Private Sector Operations Assessment

Documents

Validation Report Philippines: Country Partnership ... 21 November 2017 Validation Report Philippines: Country Partnership Strategy Final Review Validation, 2011–2016 The attached