Philippines - Debt Management Program Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 12438 PROJECT COMPLETION REPORT THE PHILIPPINES DEBT MANAGEMENT PROGRAM (LOAN 3149-PH) NOVEMER 2, 1993 M4 1 G, f,1)( A E HTIG' Fepcr.>t. N,-^ I 6i1:4 I ve PF:R Country Operations Division Country Departwent I East Asia and Pacific Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their fficial duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currencv Unit = Philippine Peso ( P) US $1.00 = P 22.44 (At Board approval, December 1989) US $1.00 = P 25.58 (At fina 'isbursement, June 1 992) FISCAL YEAR January 1 - Decernber 31 ACRONYMS BOI - Board of Investments CB - Central Bank of the Philippines COA - Commission on Audit CCPAP- Coordinating Council for the Philippines Assistance Program CODA - Committee on Official Development Assistance DBM - Department of Budget and Management DBP - Development Bank of the Philippines DOF - Department of Finance NEDA - National Economic Development Authority PDIC - Philippine Deposit Insurance Corooration  FOR OFFICLkI USE ONLY THE WORLD BANK< Washington, D.C. 20433 U.S.A. Office of DIr.ctorGoneral Operations EvaluaVon November 2, 1993 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on The Philippines - Debt Management Program (Loan 3149-PH) Attached is the Project Completion Report on The Philippines - Debt Management Program (Loan 3149-PH) prepared by the East Asia and Pacific Regional Office. ?art II was prepared by the Borrower. Tlis was the first Debt and Debt Service Reduction Operation financed by the Band It was complemented by other IMF and bilateral funds, and provided US$200 million in 1989-91 towards US$1.4 billion of debt buybacks at a 50 percent discount from low-exposure commercial banks, while encouraging new flows from other banks with a long-term interest in the country. These debt deals were satisfactorily completed, and were followed by other restructuring operations, including a US$4.5 billion Brady-type package in 1992-93. In terms of its conditionality, Loan 3149 extended and deepened the reform program supported by earlier adjustment loans, such as the Economic Recovery Loan (2787-PH), particularly in the areas of macroeconomic management, financial sector reorganization, adequacy and efficiency of public and private investment, and maintenance of the country's productive infrastructure. These reforms have helped to improve the competitiveness and growth prospects of the Philippines. The loan was an important part of a country assistance program that is beginning to achieve positive results. Its outcome is rated as satisfactory, its institutional development impact is rated as partial and its sustainability as likely. The PCR provides an adequate description of the objectives and outcomes of this operation. Part II is particularly comprehensive, and presents the operation within the broader context of the country's econormic restructuring experience. It would have been useful to provide additional data on the underlying financial parameters, and to extend 'he analysis forward uiitil tlie present time. This operation may be audited in parallel with other complementary adjulstment operations. Attachment This document has a restncted distnbution and may be used by recipients only in the performanoe of their o(ffcial duties. Itl Contents GSy not otherwise be disclosed without World Bank authorization.  FOR OFFICIAL USE ONLY PHILIPPINIES DEBT MANAGEMENT PROGRAM (LOAN 3149-z'H) PROJECT COMPLETION REPORT Table of Content, Paz* No. Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Evaluation Summary . . . . . . . . . . . . . . . . . . . . . . . .i PART I: PROJECT REVIEW FROM THE BANK'S PERSPECTIVE . . . . . . . . 1 1. Project Identity . . . . . . . . . . . . . . . . . . . . 1 2. Background 1 3. The Program for Debt Managemenf. . . . . . . . . . . . . . 4 4. The Progrtia of Action under the Debt Management Lcaui . . 5 5. Role of the Bank in the Design of the Operation . . . . . 6 6. Ac':omplishments of the Debt Management Program I . . 6 Exter-ial Debt Management . . . . . . . . . . . . . . . 6 Macroeconomic Management and Performance . . . . . . . 7 Implementation of the Program of Action Suppoitqd by the DL .8 Simplification of Budget Allocation Procedures and Implementation of an Action Plan . . . . . . . . . . 10 7. Monitoring of the Adjustment Program . . . . . . . . . . 12 8. Conclusions ..12 PART II: PROJECT REVIEW FROM THE BORROWER'S PERSPECTIVE . . . . . 13 1. Introduction ..13 2. The Debt Management Program: Description and Objectives ..13 3. The Philippinte's External Debt Problem and Strategy . . . 14 4. The 1989 Commercial Bank Financing and Debt Reduction Package ..17 5. Performance with respect to Specific Policy Commitments under the Loan ..19 Macroeconomic Policies . . . . . . . 19 Cross Conditionality with Other World Bank Policy Loans 20 Public Investment 22 Implementation of the Debt-Equity Conversion Program . 24 Private Investment ..25 6. Conclusions . . . . . . . . . . . . . . . . . . . . . . . 25 PART III: LOAN DATA . . . . . . . . . . . . . . . . . . . . . . . 26 TABLE 1. Key Macroeconomic Indicators . . . . . . . . . . . . . . . 3 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  - i - PHILIPPINES DEBT MANAGEMENT PROGRAM (LOAN 3149-PH) PROJECT COMPLETION REPORT PREFACE The Debt Management Loan (Loar. 3149-PH) for an amount of US$200 million was approved by the Board of the World Bank on December 21, 1989. The Debt Management Loan was fully disbursed in two tranches and closed on June 30, 1992. Parts I and III of this Report were prepared by Country Department 1, East Asia and Pacific Region. Part II was prepared by the Borrower. The Report is based on the President's Report, the Loan Agreement, Supervision Reports, correspondence between the Bank and the Borrower, internal Bank memoranda and interviews with the Task Manager and representatives of the Borrower's Agencies involved in the c?eration.  - iii - PHILIPPINES DEBT MANAGEMENT PROGRAM (LOAN 3149-PH) PROJECI COMPLETION REPORT EVALUATION SUMMARY Ob1ectives: To support the Philippines' efforts to improve macroeconomic management and international creditworthiness, the loan financed, in tandem with the IMF, the first phase of a Brady-type commercial bank debt and debt service reduction (DDSR) operation. The loan also supported policy measures to improve public sector management. I,nplementation Experience: This loan was the first DDSR-type operation by the Bank, and had a number of innovative aspects, such as moving in tandem with the IMF and conditioning the second tranche release upon satisfactory progress in a number cf (then) ongoing adjustment operations. This latter, however, increased the number of monitorable criteria and made the review of the progress of the program more complicated. Results: The debt deal was satisfactorily completed and opened the door to the second phase of commercial debt restructuring that took place in December, 1992. Substantial policy measures, in addition, have been implemented. Sustainability: With continued efforts on debt management, improvement in the country's access to the international capital market has been sustained. Recent experiences, however, have shown that weak fiscal revenuen could jeopardize efficient implementation of public investment significantly. Further efforts, thus, need to be made to improve public resource mobilization and management. Findinqs and Lessons Learnt: With the country's large amount of off,cial debt, eligible commercial bank debt comprised a small portion of the total external debt. Even then, it was demonstrated that the operation supported by the Bank facilitated an easy transition to the second and more significant phase of debt reduction, and subsequently, a fresh start by the country with foreign commercial banks.  PHILIPPINES DEBT MANAGEMENT PROGRAM (LOAN 3149-PH) PROJECT COMPLETION REPORT PART I: Prolect Review from the Bank's Perspective 1 Project Identity Project Name: Debt Management Program Loan Number: 3149-PH RVP Unit: East Asia and Pacific Country: Philippines Loan Amount: TIS$200 million Boad Approval: December 21, 1989 Signature: Decemtber 22, 1989 Effective Date: December 30, 1989 Closing Date: June 30, 1992 2 Background 2.1 While economic growth was rapid during the 1970s, the accumulation of various structural problems produced inefficient patterns of investment, slow growth in employment and low levels of domestic savings. The economy was heavily dependent on imports and foreign capital, and did not adjust well to the severe external shocks of the post-1979 period -- high oil prices, high interest rates, and declining export prices. The exchange rate was allowed to become overvalued, financed by a reliance on relatively short-term commercial borrowings at variable interest rates, which commercial banks were then making available in an attempt to recycle the OPEC surpluses. While some adjustments undertaken at the start of the 1980s were effective, the economy experienced declining growth rates and a deteriorating balance of payments, which resulted in the accumulation of a large external debt. 2.2 Total external debt, already high in the late 1970s, rose rapidly from about S13 billion in 1979 to $24.3 billion (70 percent of GDP) in 1983. Over the same period, interest payments rose to above 40 percent of commodity exports. Overall growth rates fell, and the current account deficit widened as export earnings failed to keep pace with rising debt service demands (See Table 1). A Worldwide debt crisis in 1983, combined with a domestic political crisis, led to a cessation of foreign credits and forced the Government to request a moratorium on principal payments and embark on a major stabilization effort. 2.3 Since 1983 and particularly since the change in Government in 1986, a major effort has been made to remove past distortions and put the economy back on the path of efficient growth. Stabilization programs, supported by IMF Standby Agreements in 1984, 1986, and an Extended Fund Facility in 1989 (and after this loan, by another Standb; in 1991), reduced public sector and balance of payments deficits, reduced inflation, and restored the exchange rate to an equilibrium level. A series of policy-based loans from the Bank have supported the Government's efforts at stabilization and structural reform. SAL I and II (1980 and 1983), Agricultural Inputs (1984), Economic Recovery (1986), Reform for  2 Government Corporations (1987), and Finan Aal Sector (1989) loans have sustained and strengthened the Government's reform program, which has included: a. Macroeconomic Policy and Tax Reform: objectives of continuation of tight monetary policy; maintenance of a competitive exchange rate; improvement of structure and enforcement of tax syetem through the elimination of export taxes, the imposition of a value added tax, and other reforms; reduction of fiscal imbalances by increasing revenue mobilization; b. Public Expenditures: refocusing of public investmcnt towards essential infrastructure; increase operations and maintenance (O&M) expenditures; c. Public Cortorations: reform and privatization of Government corporations; improve financial performance of those remaining in the public sector; d. Trade Reform: niajor reform of the tariff system, supplemented by significant reduction in quantitative import restrictions, thereby shifting incentives towards labor-intensive, export-oriented industries; e. Financial Sector: improved supervision and regulation of the private financial system; reduced intermediation costs; financial and organizational restructuring of Government financial institutions, which had become a serious drain on the budget; f. Agricultural Sector: elimination of government restrictions and price controls on agricultural outputs and inputs, including government sponsored monopolies of the sugar and coconut trade and controls on fertilizer imports; institutional changes directed to improving access to land, inputs, extension services and credit. 2.4 Table 1 below presents the evolution of the main economic indicators during the period 1980-89. During 1987-89, a substantial recovery took place, and inflation was kept under control. On average, GDP, consumption and export growth exceeded the projected targets, while savings and investment did not recover as rapidly as anticipated. Imports also substantially exceeded the targets, and as a result the current account performance was worse than expected in 1989. Equally important were the restoration of domestic confidence and the infusion of official development assistance that were rekindled by the new Government's commitment to economic reform. 2.5 The Government's stabilization efforts have been supported by a series of debt reschedulings by both ofLicial and private creditors. Reschedulings were obtained from the Paris Club in 1984 and 1986, totalling about $1.2 billion in relief. Additional Paris Club rescheduling of all principal and interest falling due in the period 1989-91 was granted in May 1989, yielding approximately $1.6 billion in debt relief. A commercial bank rescheduling agreement concluded in 1985 covered arrears from 1983 and amortization payments due in 1985 and 1986 and provided $925 million of new money from the banks and a $3 billion trade facility. A second agreement in 1987 deferred US$9.3 billion in principal repayments due over the 1987-92 period, a renewal of the trade facility, and a slight improvement in the terms of the 1985 rescheduling. These agreements smootht2d the debt service schedule by postponing principal repa,ments, and the Philippines continued to meet its interest obligations.  3 Table 1: Key Macroeconomic _ndicators 1980 1982 1984 1986 1987 1988 1989 1990 !991 Real Growth Rates: GmuDomesticProduct(GDP) 5.1% 3.6% -7.3% 3.4% 4.8% 63% 6.1% 2.4% -1.0% Grol DomesticIncome(ODY) 2.2% 3,5% -78% 3.7% 6.1% 8.9% 38% 1.2% 1. % Real Per Capita Crowth Rates: Gro" Domestic Prduct (GDP) 2.7% 1.0% -9.6% 1.0% 2.3% 3.8% 3.6% 0. 1% 2.Q% -r.;ai Consumption 2.0'. 1.3% -3.4% 0.6% 1.7% 4 0% 2.7% 3.4% -0.5% Private Consumption 2.1% 0.9% -2.2% 0.9% 1.6% 3.8% 2.6 % 3.0% 0.3% Debt & Debt Se-vices (Total): Total DOD / GDP 53,7% 66.1% 77.5% 94.J'% 89.4% 76.1% 66.7% 68.4% 70.8% Debt Service/ ExporsGh&S 27.3% 43.9% 33 7% 34.1% 49.9% 48.0% 39 1% 46.4% 3'.04 Debt Service /GDP 6.7% 9.5% 8.6% 9.9% 13.7% 13.5% 1i.2% 13.6% 10% 2 Interest/ Expom G&S 18.7% 30.8'A 24.1% IS8% 19.5% 18.7% 17.7% 13.5% 113% interest / GDP 4.6% 6.6% 6.2% 5.4% 5.4% 5.2% 5.1% 4.0% 36% Gross Investment /GDP 29.1% 27.9% 21.8% 16.0% 18.0% 184% 21.8% 22.5% 200% DomesticSavings/GDP 24.2% 22.1% 20.9% 19.9% 18.4% 198% 20.1% 16.9% 18.9% BOP Curmnt Account Balance! GDP -5.9% -8.6% -4.1% 3.2% -1.3% -1.0% -3.4% -6.1% -2.3% GDP Deflator (% growth rate) 14.3% 8.7% 53.3% 3.0% 7.4% 10.2% 8.7% 13.4% 16.5% Real Exchange Rate (1985=100) 102 4 109.7 91.4 78.0 71.8 69 8 74.9 72.9 72.0 Terrc.s of Trade Index (1987-100) .. , 120.7 100.0 111.0 102.6 92.5 105 3 Real Export (GNFS) Growtht Rite 39.8% -8.0% 3.8% 17.1% 6.5% 14.7% 10.7% 1.3% 4.6% Expors (GNFS) / GDP 23.6% 20.3% 24.2% 26.3% 26.6% 28.2% 28.5 % 27,9% 30.2% Real Irnports (GNFS) Growth Rate 19.6% 2.4% -17.5% 10.2% 28.6% 19.6% 15.2% 10,0% -3.1% Import (GNFS) / GDP 28.5% 26.1% 25.1% 22.4% 26.1% 26.8% 30.3% 33.4% 31.3%  4 3 The Proaram for Debt Management 3.1 Although the economy had attained a much stronger position by 1988 than it had in the early years of the 1980s, much of the growth had resulted from the effect of the policy reforms instituted and a better use of existing capacity. It had become increasingly clear that the prospects for continued growth were runnir.g into physical constraints. For growth to continue on a more permanent basis, substantial increases in investment would be required. Although a significant part of financing for this investment would have to come from domestic sources (ard reforms of the tax system were aimed at encouraginq such financing), substantia -xternal financing was also a necessity. 3.2 The Government had made progress in accelerating the level of commitments from official sources and improving the utilization of exiqting loans. A Committee for Official Development Assistance composed ol cabinet members was established to focus attention on the efficient and timely implementation of projects. A Consultative Group (CG) meeting held in Tokyo in July 1989 addressed the Philippines' financing needs. The donors supported the overall thrust )f the Government's development program and acreed to provide $3.5 billio of assistance, about double the level of pledges secured during the previous CG meeting in 1987. However, to close the projected financing gap for 1989-90, it was clear another source of financing was necessary. In the wake of the announcement of the Brady initiative, the Philippines turned to reduction of the burden of external debt payments to commercial banks. 3.3 At end-1988, Philippine externa. debt stood at S29 billion, of which $13.0 billion was held by commercial banks. Of that, a total of $6.6 billion was long-term debt owed by the public sector to commercial banks, representing 24 percent of total external debt, and therefore suitable for debt and debt service reduction (DDSR) based on a general agreement between th3 Philippine government and its commercial banks. The debt operation was envisaged to be implemented in two phases. The 1989 debt deal that the DML. supported comprised the first phase. The second phase was completed in 1992 (see para 6.3). The term sheet for the 1989 commercial bank financing and debt reduction package was distributed on October 11, 1989. It included two principal features: a. New money in the form of either bonds or loans, with a 15 year final maturity, including eight years of grace, and a spread of 13/16 of 1 percent over LIBOR. New money bonds and loans would be exempt from future? new money calls. The Philippine authorities indicated a desire for $1 billion over two years, but participation was voluntary. By December 1989, $612 million had been pledged. The signing date for the new morsy agreement was postponed from January to February 1990, by which time, $715 million was secured. The new money bonds were issued on February 28, 1990. b. Buvbacks of up to $1.3 billion in certain categories of commercial debt weie offered by the Central Bank at 50 percent of face value. By November 10, 1989, when the offer for buyback expired, offers for $1.8 billion were received, exceeding the ceiling set by the authorities (and determined by availability of funds). The buyback of $1.3 billion occurred on January 3, 1990. 3.4 In addition, the financing package restructured $780 million in debt covered by the 1985 New Money Agreement on the same terms as the 1989 bonds. Some debts covered by each Public Sector Restructuring Agreement were also restructured to reduce the interest spread to conform to the terms of the 1989 bonds.  5 3.5 The Pnilippines secured $379.7 million in external resources to finance the buyback of $1.337 billion. The Bank's DML provided a first tranche of $150 million which was disbursed in January 1990; the IM' provided set aside drawings of SDR 94.4 million ($122.7 million equivalent) frori the Extended Fund .acility; and $107 million came from Japan's EXIM Bank in a loan parallel to the IMF and in proportion to IMF drawings. The baltnce requir-_. for the debt Purchase was financed by the Government's own reserves. 3.6 The initial concept of the DML was originally discussed at the rokyo CC Meetinq in July 1989; the loan was appraised during discussions wLth the Covernment in November 1989 and negotiated in the same month. The Bank suppcrt under the DML was in strict compliance with the Operational Guidelines and Procedures for Use of IBRD ResourceL to Support Debt and Debt Service Reductions (R89-104 of May 22, 1989) as approved by the Executive Directors. The set aside of $200 million utilized for this program was derived as 10 percent of the aggregate three-year lendino program of $2.1 billion for FY90-92. 4 The Program of Action under the Debt Management Loan 4.1 The 'HL was set up as a stand-alone debt reduction operation, in keeptng witn the then current guidelines. By design, the resources of the operation were entirely targeted to assist debt reduction Its conditionality was designed to be specifically germar.3 to issues that needed to be addressed to improve utilization of the financin(- and to move the country towards general -reditworthi.ness Sustained and deepened reforms to strengthen macroeconomic performance, the adequacv and efficiency of public and private investment, and the maintenance of puL,ic assets were selected as the key areas for emphasis. 4.2 Macroeconomic Policies. To sustain growth, curb inflation, and improve the balance of payments, following on from the accomplishments of the Economic Recovery Loan and the IMF Extended Fund Facility, the goverrnment agreed to adhere to a strong program of macroeconomic management. The DML was designed and processed in tandem with the IMF's set aside operation. Corntinued acceptable macroeconomic performance was to be monitored during the program. 4.3 Public Investment. To improve the level of public services, the DML continued the requirement of an adequate level of public investment expenditures that was a condition under the Economic Recovery Loan. The target of 5 percent of GNP was retained, recognizing that a level between 4.5 to 4.7 percent was a more likely outcome for 1990. Further, to address the paucity of well-prepared projects ready for commitment and implementation delays, new conditionality focussed on improvements in procurement practices, consultant guidelines, audit and control., release of budgetary funds, coordination of priority investment projects with priority technical assistance, and preparation and monitoring of projects. 4.4 In order to establish a maintenance regimen in the Philippines, whi.ch would allow much more efficient use of existing public assets, a more systematic approach to OS based on engineering and economic criteria was deemed necessary. A comprehensive Study of the agencies responsible for public investment highlighted which would lead to improved maintenance rnanuals, adequate levels of O&M expenditures, and more private participation in O&M. 4.5 Private Investment. The DML sought the continuation of reform efforts regarding trade liberalization, the opening up of financial markets, the competitiveness of the exchange rate, and continued privatization efforts as established under the IMF EFF,  6 the Banks's Economic Recovery Loan, Financial Sector Adjustment Loan, and the Reform Program for Government Corporations Loan. The DML included a renumption ot the Central Bank's debt-equity conversion program, under clear and transparent rules and a study of the impediments to acceleration of private investment, both domestic and foreign, focussing on the regulatory framework and fiscal incentives. 5 Role of the Bank in the Design of the Operation 5.1 The program supported by the DML was to a large extent the result of on-going dialogue involving the Philippines authorities, the Bank, and the IMF. The commercia! bank debt operation itself was negotiated without Bank involvement, as a matter between the Philippine authorities and their commercial bank creditors. In the design of the conditionality of the DML, there was contiinuous cooperation between the IMF and the Bank. The DML and the IMF'o set-asides were processed in tandem to insure that timing would be appropriate for the financing of the debt buyback. The Fund took the lead on macroeconomic issues, while the Bank took the lead role on sector and project-related issues. 5.2 The Bank had been extensively involved in structural adjustment and aspects of macroeconomic management in the Philippines: in the early 1980s two adjustment operations (SAL I and II) had supported reforms in the trade regime, industrial policy and energy policy; in the 1970s several lending operations through Development Bank of the Philippines (DBP) were undertaken but were subsequently halted because of GBP's mounting financial problemn (which were later addressed); and in the early 1980s the Industrial Finance Loan and the Agricultural Credlit Project supported important financial sector reforms, including the liberalization of interest rates and the gradual elimination of subsidized lending in the agricultural sector. The extensive project experience of the Bank in the Philippines had led to the dialogue on how projnct preparation and implementation problems should best be addressed. 5.3 In addition to the lending operations, various Bank economic reports (including "The Philippines: A Framework for Economic Recovery", Report 6350-PH, November 1986) had analyzed the causes of the crisis and the need for policy reform. The 1986 report had identified the public finance problem as the main constraint to economic recovery in the short run, and had recommended improving tax collections, cutting transfers to financial and non-financial Government corporations, and increasing the external financing of the public deficit as the macroeconomic management measures needed to prevent accelerating inflation and further crowding out of private investment. To restore long-run growth prospects, the report recommended further trade liberalization, restructuring of the Government financial institutions, increased public sector revenue generation and collection, re-orientation of public expenditure priorities towards infrastructure investment and O&M expenditures, and an external debt management strategy focused on rescheduling to decrease the burden of debt payments. These recommerndations formed the basis for the dialogue on the Economic Recovery Loan, parts of which were pursued further under the DML. 6 Accomrlishments of the Debt Manaaement Prooram Fxternal Debt Manaoement 6.1 The first stage DDSR operation for the Philippines secured modest debt relief for the country. The new money from commercial banks exceeded the buyback cost, which was mostly financed by official creditors. This success was due partly to recognition by  7 the banks that there was merit to be involved from the early stages especially from the first phase of what was known to be a two phase operation. 6.2 The Government has sustained its successful management of external liabilities. The strategy has continued to concentrate on the achievement of comprehensive rescheduling agreements with bilateral and commercial creditors, as recommended in the Bank economic reports. In June 1991, the 1989-91 rescheduling agreement with the Paris Club was extended from mid-1991 to end-1992, providing $1.1 billion in debt re.iet; a further extension (covering $0.3 billion) through March 1993 was given in accordance with the concurrent extension of the 1991 IMF Standby program. 6.3 External debt management has no; reached a new phase, with the Governrment'o completion of a second stage DDSR operation in 1992. This broad debt restructuring agreement with its creditor banks, a Brady-type agreement, implemented in December, restructured $4.5 billion of Philippine medium and long term commercial bank debt through a package of cash buybacks and issuance at par of principal-collateral ized interest reduction bonds, temporary interest rate reduction bonds, and new money arid conversion bonds. The debt agreement generated gross interest savings of around $1.5 billion and gross deferred principal savings of around $1.8 billion over the next 5 years. As a result, total debt service as a share of exports, having peaked at 44 percent in 1982, is projected at around 18 percent for the medium term. Macroeconomic Management and Performance 6.4 A satisfactory macroeconomic framework was kept in place during the Del. Management Program. The years 1989 to 1991 were especially difficult for the Philippine economy. A prolonged drought in early 1990, a severe earthquake in July 1990, the Gulf crisis, the Mount Pinatubo volcanic eruption of June 1991, and flash floods in Leyte province in November 1991 all have had adverse balance of payments and fiscal effects. Policy slippages in 1990 compounded the situation; in 1990 both the consolidated public sector deficit and the current account deficit widened to 5 percent of GNP while inflation reached 14 percent. The deterioration in eronomic performance led to the cancellation of the 1989 IMF Extended Fund Facility. iiswev?r, after the Government took corrective actions on domestic oil prices and reached agreament with the Fund on fiscal targets for 1991, a new Standby Arrangement was concluded in February 1991. 6.5 The elimination of subsidies on domestic oil products, the introduction of a temporary 9 percent import surcharge and expenditure reductions led to a substantial improvement in fiscal and external balances in 1991. The consolidated public sectcr deficit decreased from 5.5 percent of GNP in 1990 to 2.7 percent in 1991. The decline of domestic and international interest rates and the drop in world o.l prices in 1991 also contributed to the economic improvement. These positive developments were, however, accompanied by a slowdown of economic activity {GDP gzaw by less than I percent in 1991) and inflation which accelerated in the first half of the year but decelerated in the second half, resulting in an overall annual rate of 12 percent for 1991. 6.6 Substantial progress in liberalizing the trade and investment regime was also achieved in 1991. A new more liberal foreign investment law c'ame into eff-ect, which allows foreign ownership in all but a short negative list of sectcrs and streamlines registration procedures. New regulations, extendi.,g the applicability of Build- Operate-Transfer arrangements from the energy sector to infrastructure in general were introduced to stimulate further private sector participation in this area. A new tariff code reduces the level and dispersion of tariff rates in stages over 5 years.  8 Although its effects in 1991 were swamped by the import surcharge (which was lowered to 5 percent anAd then eliminated), the lower rates will reduce significantly the prevailing effective protection rates. Implementation of the Program of Action Supported by the DML 6.7 Government performance in the implementation of the overall program supported by the Debt Management Loan is judged to have been satisfactory. The general ob-ectives of the program, providing support for the Government's debt management efforts, were achieved, as discussed above. Progress only fell short of expectations in the areas of preparing manuals on operations and maintenance and financial sector reforms linked to the Financial Sector Adjustment Loan (FSAL) -- the FSAL problems have been addressed in the context of the dialogue regarding its second tranche release. 6.3 In December 1991, the Government submitted a request that the Bank approve the use of the anount of the second tranche to reimburse the Government for a debt buyback made on December 2, 1991 (the Loan Agreement and the Minutes of Negotiations allowed for withdrawal of funds on a reimbursement basis). The transaction involved the Government's purchase at a 50 percent discount of French francs 558 million (USS 107.2 million equivalent) of debt from one of its commercial banks. Concerning compliance with legal agree,nents, of the eleven conditions for second tranche release contained in Schedule 3 of the Loan Agreement, by March 1992, full compliance was secured on nine. The other two conditions, a cross-reference to the FSAL which had run into delays and a condition relating to improve operations and maintenance procedures, neither central to the impact of the program, were grdnted waivers by the Board. In March 1992, the Board approved this transaction as eligible anca agreed to a waiver of these two conditions. The second tranche was released June 23, 2992. Belo, is a summary description of specific action taken for each of the eleven second tranche conditions. 6.9 Cross Conditionalitv with Other Bank Adclstment Loans Tnt DML required satisfactory progress in the implementation of The pro.jrams and compliance with the cond tionalities under the Economic Recovery Loan (No. 2787-PH), the Reform Program for Government Corporations Loan (No. 2955-PH), and Financial Sector Adjustment Loan (No. 3049-PH). This condition was included as a cross-reference to underpin the Government's need to maintain a satisfactory macroeconomic framework, which is discussed above. The Economic Recovery Program was implemented satisfactorily, and the loan was fully disbursed. Similarly, there has been satisfactory progress under the Reform Program for Governsment Corporations Loan, whosi third and final tranche in an amount of $50 million was released on February 24, 1992 (SecM92-99). 6.10 Regarding the FSAL, there had been considerable progress in implementing the reform measures envisaged by the time of second tranche release of the DML, and the financial system had become much healthier and more competitive than when the FSAL was approved in May 1989. Of the nine conditions icr the release of the second and final tranche, five had been completely met. Firsc, the Central Bank (CB) completed the required studies in the areas of supervision and regulation covering: (i) commercial banks' reporting requirements; (ii) asset valuation and loan loss provisioning; (iii) accounting principlE 3 governing the preparation and repirting of banks' financial statements; and (iv) treatment of trust and investment management accounts. The recommendations of these studieE. had also been implemented in the form of the Monetary Board issuing revised regulations. Second, certain amendments to the Philippines Deposit Insurance Corporation (PDIC) Act were passed by the Congress (although the increase in its authorized capital was less than was agreed). In addition, the PDIC continued to make good progress in its institutional strengthening program. Staff had  9 increased, and training was proceeding apace. Simultaneously, improvements were also betng made in examination and assessment procedures and in the system and procedures governing payment of claims. The PDIC had assumed more responsibility in performing receivership and liquidation functions, as envisaged under FSAL. Third, in order to improve the legal framework for debt collection, insolvency and reorganizations, a new law satisfactory to the Bank had been drafted and presented to Congress. Fourth, the industrial credit programs managed by the CB had been transferred to DBP. Finally, the agricultural credit programs managed by the CB had been transferred to the Land Bank of the Philippines, as agreed. 6.11 As of March 1992, four FSAL conditlons remained to be complied with fcr the second and firal tranche of S150 million to be released. These were: (i) enactment of amendments to the Central Bank Act; (ii) satisfactory action on reducing taxation on financial intermediation; (iii) increase in PDIC's paid-in capital; and (iv) transformation of DBP into a predominantly wholesale bank. The amendments to the CB Act and the increase in PDIC's capital required Congressional action and awaited the seating of the new Congress in July 1992. The reduction in taxation on financial intermediation also needed legislative action but the issue was complicated by the need to deal with the CB's continuing and large accumulated losses, as analyzed i.n the Bank's Capital Market Study (Report 10053-PH, February 24, 1992). Regarding DBP's tLansformation from a retail bank to a primarily wholesale barnk, most of the interim targets had been met except that the agreement to privatize a number of retail brancInes had yet to be carried out. Th delay resulted from problems associated with valuation and methods of privatization raising questions of interpretation of DBP's charter Moreover, based on implementation experience through 1991, it became evident that an amendment in DBP's charter would be needed to achi.eve the privatization objective in a formal and transparent manner, a matter also requiring action by the Congress. Given that there had been sufficient progress on the financial sector reform program and that remaining issues continued to be addressed, a waiver of the cross-condition to the FSAL was granted by the Board. 6.12 Maintenance of an Ade_uate Level and Content of Public Sector Investment Ihe Government was required to maintain a public investment target of at least 5* of GNP, Estimates showed a substantial. increase in public investment, from 4.2 percent of GNPI in 1989 to 4.8 percent in 1990. As of March 1992, the estimates for 1991 indicated that public investment reached about 5.0 percent of GNP. The content of the public investment prograrn also improved. Expenditures proceeded as planned on high priority projects, notwithstanding the fact that some unaiticipated expenditures had to be incurred as a result of the 1990-91 natural disastFe. The Government was also required to increase operations and maintenance expenditures to at least the 1982 levels (in real terms), which it achieved, to relress several. years of a decline in such expenditures. The Bank reviewed the manageinent of public expenditures in its Country Economic Report entitled, Public Sector Resource Mobilization and Expenditure Management (No.10056-PH dated February 20, 1992) This document was distributed at the March 1992 CG meeting. 6.13 Actions to Streamline Prccurement Procedures to Permit Greater Deleoatior, C; Authority; and Apply Specific Standards to Shcrten Contract Award Periods In January 1990, the Implementing Rules and Regulations (IRR) of Preaidential Decree i1594 were revised to incorporate new clauses aimed at improving the efficiency of procurement. The clauses covered a wide variety cf topic3 involving cost. escalation formula, rzcnat payment of claims, and elimination of advance deposit requirements fcr contractors. The IRR were reviewed by the Bank. Further, standard bid documents were compiled for both international and local bidding and were reviewed by the Bank. These were found to be satisfactory.  10 6.14 Regarding the establishment of standard bid-to-award time limits, the revised IRR shortened the contract award period by establishing time limits for critical steps and the bid validity period as the maximum allowable period within which an award could be enforced. In addition, there was greater delegation of authority to line agencies as a result of Executive Order 380 of November 27, 1989, which effectively eliminated the ceiling fot award approval authority of line agency heads regarding publicly bid contracts. Approval ceilings for negotiated contracts were also raised. These actions eliminated a major impediment to appropriate contract groupings and size and resulted in much speedier approval of contracts. 6.15 Improve Consultant Hiring to LvY Down Clear Selection Criteria; Delegate Authority; and Establish Specific Standards to Expedite Contract Award Amended Guidelines for Recruitment of Consultant Services, incorporating Bank comments, were issued effective November 12, 1990 and were signed by the Presijeat in early 1991. Clearer criteria were adopted by the Government for shortlisting and selection of consultants, and greater authority was delegated to line agencies for these decisions. In addition, time standards were established to speed evaluation and award of contracts. 6.16 Delineation of Scope and Responsibility for Internal Audits and Preparation of an Action Plan In mid-1990, a Technical Committee organized by the Legislature submitted to the Department of Justice an Omnibus Accountability Code for Government Assets. Liabilities and Eauitv that would transfer out of the Commission on Audit (COA) various accounting functions and would integrate other auditing functions, such as review of contracts, inspection and appraisal of infrastructure projects, checking of prices of materials, and countersigning of disbursement checks. The code also provided for reorganization of the Accounting Group in the Department of Budget and Management (DBM) into an Office of Management Accounting and Bureau of Systems and Procedures. This new office assumed the technical supervision of the management accounting and internal audit functions. The new Code was submitted to the Senate in December 1990, but the Senate did not act on it. Instead, an Action Plan was developed, which incorporated the main provisions of the Accountability Code, and these were adopted into a circular issued by the Secretary of DBM on September 10, 1990. Progress through 1991 showed adequate strengthening of internal audit systems and that the elimination of COA's pre-audit requirements reduced unnecessary ex-ante controls and established ex-post accountability. Moreover, the Department of Finance (DOF) certified that the provisions of the DBM Circular were being strictly implemented. Simplification of Budget Allocation Procedures and Implementation of an Action Plan 6.17 In 1990, considerable progress was made in speeding up the release of allocated budgetary funds. An Action Plan was developed in mid-1990 in consultation with the Bank at the time of the Country Implementation Review (CIR). In June 1991, a follow-up CIR reviewed progress and agreed with the National Economic Development Authority (NEDA) and DOF on budget allocation procedures. In October 1991, NEDA adopted a formal ranking system for projects, for DBM to use in allocating cash releases for counterpart funding. Moreover, the Government continued to streamline its expenditure allocation procedures, following the introduction in 1991 of a Synchronized Planning, Programming and Budgeting System, which integrated DBM's and NEDA's procedures with those of DOF. Tight controls were necessary because of fiscal pressures, and line agencies did follow DBMs instructions carefully. There was also greater streamlining of the process for review of public investment proposals, including better sequencing of reviews through the Regional DeveLopment Cuunclls and the Local Government Units.  I1 6.18 Provision of an Updated Medium-Term Public Investment Proc!ram (MTPIP) and Integrated with the Medium-Term Technical Assistance Program (MTTAP) In December 1990, NEDA's Board of Directors approved the MTPIP and the MTTAP for the period 1991-94. Both documents were presented to the February 1991 CG meeting. The MTPIP laid out the Government's development goals and the investment program by sector, and the MTTAP was derived from the former document. CG participants welcomed the detailed coverage ot the MTPIP, although they felt that greater prioritization could further strengthen the investment program. As noted above, this prioritization has now been done (See preceding para.). The Government's financing plans were also included in tie CC documentation. The Government also provided adequate information on the status of utilization of donor commitments made at the July 1989 Tokyo Pledging session. 6.19 Establishment of a Prolect Preparation Facility A project Preparation Facility was set up in the Committee on Official Development Assistance (CODA), which works closely with NEDA. Moreover, CODA and the Coordinating Council for the Philippines Assistance Program (CCPAP) have caken various steps to improve project preparation capacity, such as installing a system for monitoring and tracking projects under preparation and implementation. These agencies monitor closely the ODA-funded projects, as well as projects under the J'ublic Investment Program and the Philippines Development Plan. Also, the Government created a special Feasibility Fund to which USAJD provided a grant of $40 million to help finance various feasibility studies. Japan's aid program also continued to make available grants under the Japan Grant Facility for selected projects in the Philippines development program. 6.20 Implementation of the Debt-Ecruity Conversion Program The Central Bank was required to re-introduce the Debt/Equity Conversion Program for Central Bank external liabilities, which had been suspended in February 1988 because of temporary concerni over its monetary implications at the time. The debt-equity scheme was revised in late 1990 to incorporate clear bid-award procedures under an auction system. Also, importantly, the amount planned for deet-equity conversions -- $900 millicn in face value over three years -- was incorporated into the monetary program, reducing the fears of excess liquidity injection. There were four auctions as of end-2991, totalling $300 million, which were received favorably by the market. The success of the auctions, as well as the economic progress in 1991 helped to raise the price of Philippine debt on secondary markets from a low of 37 cents on the dollar in February 1991 to around 52 cents in June 1992. 6.21 Undertakinc and Comnletion of a Study on the Fiscal Incentives. Reculator- Framework, Role of the Board of Investments, and Technology Transfer Arrangements for Private Investment A study on the investment regime and fiscal incentives under the Investment Code was completed in early 1991. The study examined proposals to liberalize access for foreign investment and to replace the discretionary incentives administered by the Board of Investments (BOI) in favor of universal investmernt incentives administered under the tax code. The study also looked at technology transfer arrangements. A second study was undertaken on the restructuring of BOI frorr. a regulatory and incentive administering agency to an exclusi-;e investment promotion agency. In July 1991, a new Foreign Investment Act was enacted which replaced BOI - discretionary control over foreign investment with an explicit negative list of industries beyond which foreign investment would be permitted without prior approval Legislation was also introduced to ease restrictions on land ownership of foreign investors and to establish uniform investment incentives, administered under the tax code, in place of BOI's discretionary system. In addition, of critical importance to the framework for private investment, the Government made important progress in its privatization program, which was reported in the memorandum on the Reform Program for  12 Government Corporations Loan (SecM92-289). Measures to improve technology transfer were undertaken during ongoing dialogue with the Bank. 6.22 Undertaking and Completion of a Study on Operations and Maintenance (O&M) Procedures for Maior sectors: and Revising, and Where Necessary. Developing and Adopting Maintenance Manuals in Respect Ther#.of Terms of Reference for the O&M Study were agreed with the Bank and USAID provided a grant of $360,000 to carry out the study. As of March 1992, the study was completed and progress was satisfactory to the Bank. The delay in launching the study was due to the Government's decision to locate and use grant money for financing the technical assistance. As of March 1992, the Government had not developed the O&M manuals for all of the major infrastructure sectors (highways, ports, railroads, water supply and sewer&ge facilities), but good progress had been made in connection with the Bank's Highway Management Loan, which was approved in December 1991. For the energy sector, complete manuals are available. The completion of the remaining O&M manuals was considered a relatively minor issue (while far more important is the effec.iveness of actual systems in place, which continued to function reasonably satisfactorily even with the unexpected pressures arising from the natural disasters). There was no disagreement between the Bank and Government regard.ng completion of the manuals. A waiver of this second tranche condition was granted by the Board. 7 Monitoring of the Adiustment Program 7.1 Monitorability. In spite of the complexity of the program of action supported by the DML, the policy matrix and the loan agreement spelled out very specific and time-bound actions that could be effectively monitored during the implementation of the program. As discussed above, the delays that arose, due to identification of a eligible transaction and cross-conditionality with the FSAL, did not arise because ot an inability to monitor progress effectively. 7.2 Supervision. Supervision was carried out through communications from Washington to the Government, from the Resident Mission in Manila, and in the course of other economic missions to Manila. A full supervision mission visited Manila in November 1990 specifically to review the implementation of the DML. The Government provided the Bank with a review document in November 1990, illustrating the Government's monitoring the implementation of the program and providing exLremely helpful background for the supervision efforts of the Bank. 7.3 Procurement. The proceeds of the loan were withdrawn for expenditures made in respect of a debt purc.lase or any other debt reduction operation approved by the Bank. Proceeds of the loan were withdrawn against the submission of the Debt Cancellation Certificate or Loan Trust Receipt and Undertaking or other instrument as acceptable to the Bank. 8 Conclusions 8.1 The DML accomplished its objective of supporting the Government's first stage DDSR operation; this, together with the recently completed second-phase commercial bank debt operation, has put major debt service problems behind the country. The operation was also designed to complement policy reforms with institutional improvements aimed at strengthening efficiency primarily in two areas, public investment and project preparation and implementation. Reforms were introduced under the DML as intended, with the exception of some slippage in operations and maintenance and delays in progress on the FSAL; actions in all other areas were undertaken as agreed, both in the letter and in the spirit of the program.  13 PHILIPPINES DEBT MANAGEMENT PROGRAM (LOAN 3149-PH) PROJECT COMPLETION REPORT PART II: Prolect Review from the Borrower's Perspective 1. Introduction This retrospective is an effort on the part of the borrower, the Government of the Philippines, to take stock of the accomplishments and shortcomings, as well as the reasons thereof, of the reforms connected with the Debt Management Loan (DML). This report is divided into four parts: The Debt Management Program: Description and Objectives, The Philippinie's External Debt Problem and Strategy; the 1989 Commercial Bank Financing and Debt Reduction Package; Performance with Respect to Specific Policy Commitments under the Loan; and Conclusions. 2. The Debt Management Program: Description and Objectives Prolect Identitv Proiect Name: Debt Management Program Loan Number: 3149-PH Borrower: Republic of the Philippines Loan Amount: $200 million Terms: 20 year maturity, including 5 years of grace, at the standard variable interest rate Agreement Date: December 22, 1989 Effectivity Date: December 30, 1989 Closing Date: June 30, 1992 The loan was specifically intended to form part of a pool of funds consisting of moneys from the IMF and certain bilateral sources which was to be used to finance the debt buyback component of the 1989 commercial bank financing package. The buyback is part of a continuing strategy designed to reduce the outstanding stock of debt to commercial bank creditors by allowing the Philippines to avail itself of the large secondary market discount for its debt while at the same time mitigating the impact of the outflow of funds from the country arising from such operation. This, in the context of the overall financing package with commercial bank creditors, forms an integral part of the Philippines' medium-term strategy for sustainable growth by rebuilding confidence, attracting new investment, creaAing a more positive domestic environment in which to continue servicing its debt, and establishing a path towards full resumption of voluntary lending.  14 To help in the achievement of the fundamental goals underlying the medium term strategy, tranche release conditions were correspondingly designed for improvement of the macroeconomic: environment, adequacy and efficiency of investment and maintenance of public assets. These are outlined in Annex 1 and discussed in more detail in Section 5. The loan was to be released in two (2) tranches of $150 million and $50 million respectively subject to the completion of the conditionalities as stated above. The first tranche was released in January 1990. The proceeds were utilized to assist the Government of the Philippines to buyback $1,337 million (in face value) of its external debt to commercial banks at a 50 percent discount. The transaction which was concluded in January 3, 1990 required financing of about $668 million. Additional funds came from the IMF ($i25 million), official cofinancing, and from the Government's foreign excharge reserves which were replenished by various budget and balance of payments support loans and grants from the United States and Japanese governments. The release of the second and final tranche was made in June 23, 1992 after an overall assessment of the compliance to commitments under the loan. Conditions prior to tne release of the second tranche which were not completely met (two out of the eleven) relating to the cross-conditionality with the Financial sector Adjustment Loan and a condition on the improvement of operations and maintenance procedures which World Bank assessed to be non-central to the objectives of the program were waived in view of the general perception of the substantial progress achieved by the Government in carrying out the program. Proceeds of $50 million were applied to a buyback transaction involving FF279 million undertaken in December 1991. 3. The Philippine's External Debt Problem and Strategy The dismal external debt situation the country faced upon the assumption of the Aquino government could be traced to a combination of adverse external developments, inappropriate domestic policies and overdependence on foreign debt by the previous government to finance development. The debt condition was aggravated by misuse of foreign credits. In the wake of the first oil shock, the Government resorted to financing the large current account deficits arising from a higher oil import bill. Thus, foreign borrowings at $2.3 billion in 1970 doubled to $4.9 billion by 1975. Within three years, external debt again doubled to $10.7 billion, as government embarked on ambitious investment programs for energy and other basic industries. By 1981, the foreign obligations of the Philippines again doubled to $20.9 billion. This debt level was still perceived as manageable by both international and local financial authorities. With the onset, however of the global debt crisis in 1982, followed by curtailment of credit by international commercial banks to heavily indebted developing countries, Philippine capacity to service its external debt deteriorated dramatically. By 1983, with debt service ratio at 33.5 percent, the Philippine economy plunged into a financial crisis. A debt moratorium was declared on October i7, 1983.  15 The key developments leading to this crisis were the second oil shock of 1979-1980, the historically high international interest rates, and the deep recession in the industrial countries that depressed expert earnings. To accommodate the resulting enlargement of the current account deficits, Government embarked on large foreign borrowings. It failed however to undertake necessary policy adjustments. The vulnerability of the balance of payments was further aggravated by injudicious use of loan proceeds to finance major projects, some of which were overpriced, uneconomic, and generated insufficient savings or earnings of foreign exchange to service debt. Following the debt moratorium, tough adjustment measures were implemented under a stabilization program designed to put the economy back on a sustainable growth path. The program was supported by an IMF standby credit arrangement approved on December 14, 1984 that authorized the purchase of SDR615 million over the oucceeding 18 months. This paved the way for negotiations with commercial bank creditors for three facilities: a New Money Facility of $925 million to update interest arrears; a $3 billion revolving short-term Trade Facility which would ensure the availability of funds for financing trade; and a restructuring agreement on outstanding loans of $5.7 billion falling due between October 17, 1983 and December 31, 1986, that stretched maturities over a ten-year period with a grace period of five years and an interest rate of 1-5/8 percent over LIBOR. An agreement was likewise concluded with the Paris Club for the restructuring of some $1.0 billion in official credits, covering arrears as of end-1984 and amortization due from January 1, 1985 to June 30, 1986. The restructuring agreement provided for a ten-year repayment period with five years grace, for 100 percent of principal and 60 percent of interest payments. Upon the assumption of office of the Aquino administration, the adoption of a national policy on the external debt issue was an extremely difficult one considering the competing demands for the very limited resources of an economy urgently in need of strong infusion of assistance in order to survive. While tending to the immediate needs of a struggling economy, the Aquino government pressed for the establishment of foundations that would shift the direction of the country towards recovery and long-term growth. The Aquino administration took advantage of the more favorable international economic environment by adopting an active approach in harnessing foreign funding. An expanded but cautious foreign borrowing program was pursued in raising the necessary funds to supplement internal resources and generate continued funding support for the government's development programs. At the same time, attention was given on the maintenance of a manageable Investments-Savings gap by keeping the consolidated public sector deficit within prudent levels. In mobilizing external resources, the country exploited opportunities for additionality, using effectively its favorable position in world geopolitics. In 1989, the Philippine Assistance Program (PAP) -- an enlarged convention between the Philippines and its official creditors -- was launched and resulted in additional concessional inflows. Initial pledges for program and project  16 support to the PAP amounted to US$3.5 billion. Official Development Aid (ODA) pledges of US$3.3 billion in early 1991 and $1.9 billion in Mar.h 1992 followed. The country also concluded a series of debt restructuring agreements with commercial and official creditors. Three restructuring agreements were concluded with commercial banks. In addition to new money, the first twc agreements in 1987 and 1989 provided for the extension of coverage of the 1985 agreement to include payments falling due until December 1986 as well as maturities until Decetber 1992. The repayment schedule for debt outstan3ing as of October 17, 1983 was extended from 10 years (in the 1985 agreement) to 17 years (in 1987 Accord). The grace period was stretched from 5 years to 7 1/2 years in 1987 and further to 8 years in 1990. In 1990, after the 5-year grace period had run out on the new money loan contracted in 1985, the country was able to amend the 1987 agreement to include maturities falling due on the 3.985 New Money agreement. Three Paris Club Restructuring agreements were also concluded during the period 1986 to 1991. These ag-reements involved the rescheduling of public sector debts to bilateral creditors amounting to US$1.1 billion, US$1.6 billion, and US$1.5 billion, respectively. The financial terms of these credits were increasingly favorable to the Philippines. In the latest rescheduling agreement concluded in June 1991, the Philippines was able to include principal and interest payments falling due as a result of the country's previous rescheduling agreements. The Philippines likewise substantially lengthened maturity for its repayments from nine vears (as in the 1984 rescheduling agreement) to up to 20 years. Furthermore, the latest rescheduling agreement concluded in 1991 specifically provides for concessional interest rates for ODA loans. Complementing the debt restructuring approach of the Aquino administration was the implementation of voluntary debt reduction schemes which, as of December 1992, reduced the country's debt stock by over US$6.0 billion. The debt-to-equity conversion program launched in August 1986 not only enhanced external debt management through the simultaneous reduction in the level of outstanding external obligations but also stimulated long-term capital investments. As of end-1992, debt reduction under this scheme amounted to US$1.7 billion. A total uf US$2.7 billion of debt stock was also extinguished through the debt buyback scheme which involves the repurchase of outstanding debt from the secondary market at a discount. With the conclusion of the 1989 commercial bank package, the Government took advantage of the debt reduction opportunity offered under the Brady initiative. Through funding from official creditors, the government bought back US$1.337 billion worth of public sector commercial debts at a 50 percent discount in 1990, effectively reducing our obligations by about US$650 million. This was later followed by another major debt buyback undertaking in May of 1993 which involved the repurchase of $1.263 billion at a 48 percent discount. Other debt reduction schemes include the debt-for-debt, debt-for-asset swaps and peso prepayments.  17 The debt strategy resulted in a continuing improvement of the country's capacity to repay its debts. The country's debt-GNP ratio declined steeply from 94 percent in 1986 to 56 percent in 1992. Its debt-exports ratio also dropped from 327 percent to 213 percent. The share of commercial bank debt to total debt. was reduced to 38 percent from 58 percent at the end of 1985. Concessional bilateral credits, on the other hand, increased significantly from 11 percent to 31 percent of the total debt in the same comparable period. This shift toward debt with lower interest rates and longer maturities plus the positive impact of restructuring agreements contributed to the sharp decline in debt service burden relative to exports. From 36 percent in 1985, the country's debt service burden is estimated to have declined to 20 percent in 1992. Without debt restructurings, the average annual debt service to exports ratio should have been close to 50 percent. 4. The 1989 Commercial Bank Financing and Debt Reduction Package Following the World Bank and the IMF approval of a program to support debt and debt service reduction operations in heavily-indebted middle-income countries in mid-1989, the Philippines proceeded to negotiate with its commercial bank creditors for a debt reduction and rescheduling package. An agreement was reached on the basic terms of the package in the latter part of 1989. It had two basic components. The commercial bank financing portion of the package was participated in by 81 banks and financial institution and resulted in the following: a. Issuance by the Central Bank (CB) of transferable bonds in registered form (the "1989 Bonds"), extensions of credit in the form of loans (the "1989 Advances") and conversion of up to 50 percent of then existing advances into 1989 Bonds or 1989 Advances in the following original and outb*anding amounts: 1989 Bonds $ 554,360,000 Conversion to 1989 Bonds 308,042,000 1989 Advances 29,840,000 YEN 111,090,000 DMK 3,273,600 Conversion to 1989 Advances YEN 17,714,690 ECU 4,557,390 DMK 2,805,939 b. Subscription by 50 percent of banks and financial institutions to new money in the form of a relending facility that would be available for public and private sector borrowers. Of the total subscribed amount of $128.1 million, $52.4 million have been granted as lcans to qualified borrowers as of December 31, 1992. These 1989 Bonds, 1989 Advances, and  18 Relending Advances are repayable over 15 years with 8 years grace and carry interest of 13/16% over LIBOR. c. Amendment of the public sector Restructuring Agreements and the 1985 new money agreement. The amendments were to allow the rescheduling of the original 9-year repayment period of the outstanding 1985 new money to 15 years repayment including 8 years grace; to reduce the interest spread on existing commercial bank debt from 7/8 percent t.o 13/16 percent; and to authorize the Philippines to undertake further principal and interest reduction schemes without violating restrictions and covenants in existing loan agreements. The debt rcduction component of the package involved the purchase for cash at a price equal to 50 percent of the face value of certain categories of the external debt of Philippine public sector borrowers. In January 3, 1990, the Philippines completed this transaction by purchasing $1,336.8 million debt owed to 142 lenders. The funding requirements totalling $694.8 million were principally provided by official institutions such as the World Bank (under the Debt Management Loan), the International Monetary Fund, the Export-Import Bank of Japan, and the US Agency fc International Development. With said buyback, the country was able to reduce almost 11 percent of its total debt to foreign banks and about 20 percent of its medium and long term public sector debt. The total amount of debts actually tendered in the buyback was $1.8 billion but only $1.337 billion was accepted due to the limited official resources available plus the fact that some of the debts tendered were ineligible. About 51 percent of the debts accepted with a face amount $687 million were Central Bank debts. About 22 percent with a face amount of $291 million were National Government debts. The balance of about $359 million or 27 percent of the total were debts of 8 Government owned or controlled corporations. The immediate impact of the buyback was to reduce the external debt level by about $660 million, which - less than tne $1.337 billion debts bought back because of the official borrowings that had to be availed to finance the buyback. Net of the cost of these official borrowings, net interest savings to the country was estimated to average about $79 million annually from 1990 to 1995 with cumulative net foreign savings estimated at close to $1 billion from 1990 to 1999. More importantly, the first phase of the debt and debt service reduction operations in the framework of the Brady initiative formed the basis for a second round which not only involved a debt buyback cf US$1.263 billion at 52 percent of face value but options for the conversion of US$3.2 billion of eligible e-',t into long-term bonds, consisting of Floating Rate Bonds (1992 Philippine Bonus), Principal Collateralized Interest Reduction Bonds, and Temporary Interest Rate Reduction Bonds which carry longer maturities and/or lower fixed rates of interest. The combined package was expected to provide cash flow savings to the Philippines of US$1.7 billion through the end of 1997 and provide an estimated net effective debt stock reduction of US$1.1 billion. Additionally, the conclusion of the debt conversion has paved the way for the country's re-entry into the voluntary capital markets with a US$150 million issue in the Eurobond market completed in February 1993.  19 5. Performance with respect to Specific Policy Commitments under the Loan Macroeconomic Policies Consistent with the attainment of real annual growth of 6 percent, single digit inflation, and an improved balance of payments, the Government committed itself to the following as expressed in its policy letter to the World Bank on December 7, 1989: (i) fiscal revenue and expenditures, with the aim of ensuring that the consolidated public sector deficit for 1990 relative to GNP is lower than the 1989 level; (ii) monetary policies, consistent with growth and anti- inflation objectives as reflected in the performance criteria of the then existing Extended Fund Facility Arrangement with the IMF; and (iii) a competitive exchange rate and external policies, with the aim of relucing the c'irrent account deficit for 1990 expressed as a percentage of GNP below its 1989 level. Because of unanticipated external factors and fundamental weaknesses in the internal economy which emerged beginning in the second half of 1990, these policy commitments were not achieved. On the external front, the Gulf crisis and the slowdown in world economic activity, as well as the string of natural calamities not only required additional expenditures from the national government but also disrupted supply lines and employment opportunities. Policy slippages in 1990 compounded the situation. Internally, the country was confronted with serious stabilization problems. The budget gap by the end of 1990 was almost double the previous year's level; inflation accelerated; interest rates continued to rise; the current account deficit widened to 6.1 percent of GNP from 3.5 percent in 1989 as the consolidated public sector deficit rose to over 5 percent. Against this backdrop, the Philippines shifted to an 18-month stabilization program aimed at reducing inflation and fiscal and trade deficits. A tighter fiscal program was adopted in 1991 and revenue raising measures were carried out to keep the budget deficit within target. As a result, the consolidated public sector deficit was reduced to 1.6 percent of GNP in 1991. These efforts were continued through 1992. As a large component of the deficit was on account of losses by the National Power Corporation (NPC), electricity rates were increased by 23 centavos per kwh in early 1992. Additionally, Congress approved several tax proposals, including: (i) the Simplified Net Income Tax System for businesses and prc:essionals; (ii) establishment of a large taxpayers unit to improve tax compliance; (iii) establishment of final withholding tax on purely compensatory income; (iv) creation of :pecial tax courts; and (v) increased penalties for tax evasion. As a result of these tax measures and the agreed expenditure ceilings, the 1992 consolidated public sector deficit was maintained at 1.9 percent of GNP in spite of the additional spending requirements for relief and reconstruction related to the damage caused by the Mt. Pinatubo eruption and the Ormoc floods. Monetary authorities limited liquidity expansion within program levels to ease inflationary pressures. Thus, interest rates were reduced in 1991, and by the middle of the year, interest rates had begun a downward trend with 91-day T- bill rates declining from 28.6 percent in January 1991 to 16.1 percent by end- 1992. Inflation rates likewise declined. From an average of 18.7 percent in 1991, it was successfully contained at single-digit levels beginning Februarv  20 1992, reaching 8.1 percent in December 1992 and averaging 8.9 percent for all of 1992. Imbalances in the external aciounts were narrowed down with the current account deficit declining to 2.3 percent of GNP in 1991 and further to 1 percent in 1992. The improvement came as a result of a lower trade gap and higher net service inflows. Export growth was bolstered partly by government incentives to the sector (e.g., allowinig exporters access to the credit A.acility of Foreign Currency Deposit Units for their peso requirements) and the continued implementation of the Import Liberalization Program that helped reduce cost to exporters. The contraction in imports reflected the slowdown in domestic economic activity and the continuation of the 9 percent import levy imposed in 1991. The improvement in the current account balance was extended through 1992 with the dismantling of foreign exchange regulations. Initial liberalization moves were adopted in January and July 1992 with the partial deregulation of trade and non-trade transactions, respectively. The liberalization efforts were capped by the full deregulation of current account transactions with the effectivity of CB Circular No. 1353 in September of the same year. These reforms, together with greater confidence in the economy as a result of an improved political situation, essentially paved the way for the robust performance in the external sector. The balance of payments position reversed from a deficit of $185 million in 1990 to a surplus of $1,405 million and $690 million in 1991 and 1992, respectively. These surpluses plus the foreign exchange purchases of the Central Bank shored up gross international reserves from 1.5 months of imports of goods and services in 1990 to 3.3 months by 1992. In summary, the DML period 1990 to 1992 may be characterized by fiscal consolidation resulting in a moderate recovery of growth after the debilitating effects of adverse external shocks. The success of the government in containing inflation, fiscal and trade deficits, on the whole, has set in place a stable macroeconomic framework which forms basis for an accelerated growth performance beginning in 1993 and 1994. Cross Conditionality with Other World Bank Policy Loans The DML required satisfactory progress in the implementation of the programs and compliance with the conditionalities under the Economic Recovery Loan (No. 2787-PH), the Reform Program for Government Corporations Loan (No. 2955-PH), and the Financial Sector Adjustment Loan (FSAL) (No. 3049-PH). This condition was included as a cross-reference to underpin the Government's need to maintain a satisfactory macroeconomic framework. Conditionalities under the Economic Recovery Program have been complied with satisfactorily, ana the loan was fully disbursed. Similarly, there has been satisfactory progress under the Reform Program for Government Corporations Loan, whose third and final tranche amounting to $50 million was released on February 24, 1992. Substantial compliance in the implementation of reform measures under the FSAL had been achieved by the time of the second tranche release of the DML. With the implementation of reform measures upon the approval of FSAL in May 1989, the financial system had become much healthier and more competitive. Of the nine FSAL conditions for the release of the second and final tranche, five nad been  21 met. First, the Central Bank completed the required studies in the areas of supervision and regulation covering: (i) commercial banks' reporting requirements; (ii) asset valuation and loan loss provisioning; (iii) accounting principles governing the preparation and reporting of banks' financial statements; and (iv) treatment of trust and investment management accounts. The recommendations of these studies had also been implemented in the form of the Monetary Board issuing revised regulations. Second, the required amendments to the Philippine Deposit Insurance Corporation (PDIC) Act was passed by Congress, including provisions for an increase in its authorized capital stock. In addition, the PDIC continued to make good progress in its institutional strengthening program. Staff had increased, and training was proceeding apace. Simultaneously, improvements were also being made in examination and assessmer.t procedures and in the system and procedures governing payment of clain,s. The PDIC had assumed more responsibility in performing receivership and liquidation functions, as envisaged under FSAL. Third, a new law had been drafted and presented to Congress in order to improve the legal framework for debt collection, insolvency and reorganizations. Fourth, the industrial credit programs managed by the CB had been transferred to the Development Bank of the Philippines (DBP). Finally, the agricultural credit programs managed by the CB had been transferred to Land Bank of the Philippines. As of June 30, 1993, four FSAL conditions remained to be complied with for the second and final tranche disbursement of $150 million. These were: (i) restructuring of the Central Bank's finances; (ii) increase in PDIC's paid-in capital; (iii) transformation of DBP from a retail. to a predominantly wholesalle financial institution; and (iv) satisfactory action on reducing taxes o,a financial intermediation. The new Central Monetary Authority (CMA) Act or Republic Act No. 7653 was enacted by Congress on June 10, 1993, and the CB's financial restructuring program is expected to be completed before November 30, 1993. The amendments to the PDIC Charter were passed in February 1992 with the authorized capital stock increased from P1 billion to P3 billion, of which P2 billion is paid in. The increase in the paid-in capital as required by the Bank will be addressed in conjunct.on with the financial restructuring of the Central Bank. On the transformation of DBP to a predominantly wholesale bank, most of the interim targets had been met except for the privatization of a number of retail branches. This resulted from problems associated with valuation and methods of privatization raising questions of interpretations of DBP's charter. However, the share of wholesale loans as a percentage of the total portfolio as of December 31, 1992 was 38 percent against the targer of 34 percent owing to the rapid disbursements of the wholesale lending operationls funded by bilateral and multilateral sources. The share of wholesale loans as of 30 June 1993 was 52 percent. The reduction in taxation on financial intermediation also needed legislative action, but the issue was complicated by the need to deal with the CB's huge accumulated losses, as analyzed in the Bank's Capital Market Study (Report 10053-PH, 24 February 1992). The condition for reduction in the cost of financial intermediation, the study points out, could indirectly be met through the restructuring of the Central Bank. Given that there had been sufficient progress in the financial sector reform program and that the remaining issues continued to be addressed, a waiver of the cross-condition to the FSAL was grAnted by the Board,  22 Public Investment Complementing the maintenance of a stable macroeconomic environment, key infrastructural bottlenecks which have lowered the growth potential of the Philippine economy in the past were addressed. Pursuant to its commitments under the loan and recognizing the need to improve the quality and quantity of projects in the pipeline, the government implemented the following reforms: a. Improved the efficiency of ;rocuirement practices throug,a rne amendment of bid procedures. Since 1989, the Implementing Rules and Regulations (IRR) of Presidential Decree (PD) No. 1594 which govern t:ie co.tracting by government implementing agencies of civil works art..vities have been amended three (3) times for the purpose of eliminating ambiguities therein, to be more consistent with the procuremsnt rules/guidelines of ODA contracting process. The improvements involved the inclusion of cost escalation formula, provisions for the prompt payment of claims and elimination of required advance deposits for contractors. The amendments were effected on 15 March 1990, 13 April 1991 and I May 1992, and this exercise of amending the IRR with the aim of further improving the process has been a continuing activity of the Government through the NEDA. Likewise, the impact and effects of these amendments particularly with respect to the implementatiorn of the government's infrastructure development program is being monitored by the Government through NEDA. b. Facilitated the Implementation of a faster procurement procoss through the establishment of standard bid-to-award time limits. The provision of time limits/deadlines for the various stages of the contracting process, from the advertisement of the works to the issuance of the Notice to Proceed to the winning bidder, has been incorporated in the 13 April 1991 amendment to the IRR. Additionally, Executive Order (EO) 380 was issued by the President on 27 November 27 1989 which authorized line agency heads, regardless of contract amount, to award publicly bid contracts and which raised the approval ceilings for negotiated contracts. c. Revised (Juideli.nes to speed consultant hiring. The NEDA Board-approved Guidelines on the Procurement of Consulting Services for Government Projects (Implementing Rules and Regulations) which govern the engagement by government implementing agencies of consultants for services have been amended on 20 February 1992. The raticnale for these amendments is the same in the case of the IRR for PD 1594. Likewise, the inprovement of the process of consulting service procurement through the amendment of the Guidelines has been a continuing activity of Government. d. Delineated Scope and Responsibility for Internal Audits. The Department of Budget and Management (DBM), through a circular issued on 10 September 1990, adopted an Action Plan which involved the transfer out of the Commission on Audit (COA) of various accounting functions and the integration of other auditing functions, such as review of contracts, inspection and appraisal of infrastructure projects, checking of prices of materials, and countersigning of disbursement of checks. Also in line with this, the Accounting Group in the DBM was reorganized into an Office of Management Accounting and Bureau of Systems and Procedures, which assumed  23 the technical supervision of the management accounting and internal audit functions. As a result, the internal audit systems were strengthened, and the elimination of COA's pre-audit requirements reduced unn.:-ssary ex- ante controls and established ex-post accountability. The provisions of the DBM circular are being strictly implemented. e. Simplified procedures to speed up the release of allocated budgetary funds. In mid-1990, an Action Plan was adopted, in consultation with the Bank at the time of the Country Implementation Review (CIR), to simplify procedures on the release of allocated budgetary funds. In October 1991, NEDA adopted a formal ranking system for projects, for DBM to use in allocating cash releases for counterpart funding. Moreover, the Government continued to streamline its expenditure allocation procedures, following the introduction in 1991 of a Synchronized Planning, Programming and Budgeting System, which integrated DBM's and NEDA's procedures with those of the DOF. right controls were necessary because of fiscal pressures, and line agencies did follow DBM's instructions carefully. There was also greater streamlining of the process for review of public investment proposals, including better sequencing of reviews through the Regional Development Councils and the local go-ernment units. f. Updated the Medium-Term Public Investment Program (MTPIP) and integrated with the Medium Term Technical Assistance Program (MTTAP). In December 1990, an integrated MTPIP and MTTAP for 1991 to 1994 which laid out the government's development goals Lnd investment program was approved by the NEDA Board. This was subsequenLly presented to the donor community in February 1991. In the formulation of the objectives for the period 1993 to 1998, changes in the investment programming process were initiated to make the MTPIP more responsive to the needs of the country and to address the concerns raised by the donor communities. The new MffPIP is composed of two basic parts: the Public Investment List (PIL) and the Priority Subsector Ac, vities (PSAs). The PIL is a prioritized list of projects prepared annually and funded from the annual Priority Projects Fund (PPF). The PSAs, on the other hand, are programs of priority subsector technical assistance and capital forming activities linked to the thrusts of the Development Plan. The PSAs are not concrete projects but more general statements on how the goals of the Plan can be achieved. As such, it gives project proponents more flexibility to Thange their investment programs in the medium term in response to evolviug situations. Inasmuch as the PSAs are linked to sectoral as well as macroeconomic targets, realization of such targets hinges on the effective translation of the PSAs into concrete programs and projects. A careful monitoring of investments and resources flowing to each sector are deemed crucial to ensure consistency of actual investments with sectoral targets. Efforts, through NEDA, are underway to modify existing functions, systems, structures and procedures to respond to the features and challenges in the new MTPIP. g. Improved monitoring of ODA-assisted projects. The Coordinating Council for the Philippine Assistance Program (CCPAP), in cooperation with the Office of the President, has installed a c:omputer-based Project Monitoring System (PROMS). The PROMS architecture is on-line and distributed. It  24 allows agencies to maintain and access the monitoring system. The agencies use the computer network to provide required electronic data on a monthly basis and to view the integrated databases. Linked to these networked central computers are tle microcomputers installed in the central offices of the different implementing agencies. A pilot regional network through the Department of Public Works and Highways is currently being installed to enable submission of electronic data from the regional offices. The system was financed by local funds and USAID grants. h. Improved project preparation capacity through the establishment of a project preparation facility. CCPAP's assumption of the responsibilities of the Project Facilitation Conmnittee (PFC) under Administrative Order No. 259, series of 1992, and the administration of Feasibility Studies Fund facilitated the accelerated utilization of ODA funds. A pre-investment facility overlooked by the CCPAP, the Philippine Assistance Program Support Project (PAPSP) was established by the Government, through USAID assistance, in February 1990. The facility is funded by a US$40 million grant from the USAID, inclusive of a US$29 million public sector component and US$11 million private sector component. The public sector component is being implemented by CCPAP while the private sector component is being implemented by the Economic Development Foundation. The facility has a life of five years ending in January 1995. i. Completed the Study on Operations and Maintenance Procedures for Major Sectors. Terms of reference for the O&M Study were agreed with the Bank and USAID provided a grant of $360,000 to carry out the study. The study was completed in March 1992. The delay in launching the study was due to the Government's decision to locate and use grant money for financing the technical assistance. As of March 1992, the Government had not developed the O&M manuals for all the major infrastructure sectors (highways, ports, railroads, water supply and sewerage facilities), but gocd progress had been made in connection with the Bank's Highway Management Loan, which was approved in December 1991. For the energy sector, complete manuals are available. The completion of the remaining O&M manuals was considered a relatively minor issue (while far more important is the effectiveness of actual systems ir place, which continued to function reasonably satisfactorily even with the unexpected pressures arising from the natural disasters). There was no disagreement between the Bank and Government regarding the completion of the manuals. A waiver of this second tranche condition was granted by the Board. Implementation of the Debt-E uit- Conversion Program In 1991, the Central Bank successfully implemented the revised debt-to- equity conversion program embodied in Circular No. 1267. Under the program, the right to use CB debt paper is determined through the auction system. The four auctions held during the year were significantly oversubscribed with total bids reaching US$996.8 million versus the US$300 million programmed offering. As of December 1992, the aggregate winnir- bids amounted to US$374.5 million out of the US$1.48 billion bids received. Of the former, US$368.6 million were already closed. The winning bids were for investments in export-oriented, energy-  25 related, agriculture and other IPP-listed activities as well as bank privatization/rehabilitation. The debt-to-equity program also enabled the reduction of the country's outstanding debt. From 1986 to 1992, a total of US$1.33 billion debt outstanding has been retired under the scheme. Private Investment A study on the investment regime and fiscal incentives under the Omnibus Investment Code was completed in early 1991. The study examined proposals to liberalize access for foreign investment and to replace the discretionary incentives administered by the Board of Investments (BOI) in favor of universal investment incentives administered under the tax code. The study also looked at technology transfer arrangements. Government also decided to shift BOI from a regulatory and incentive administering agency to an exclusive investment promotion agency. In July 1991, the Foreign Investment Act was enacted which replaced BOI's discretionary control over foreign investment with the explicit negative list of industries beyond which foreign investment would be permitted without prior approval. Legislation was also introduced to ease restrictions on land ownership of foreign investors and to establish uniform investment incentives, administered under the tax code, in place of BOI's discretionary system. Of critical importance to the framework for private investment, the Government also made significant progress in its privatization program, which was reported in the memorandum on the Reform Program for Government Corporations Loan (SecMW2-289). Measures to improve technology transfer were undertaken during ongoi.ig dialogue with the Bank. 6. Conclusions The DML accomplished its objective of supporting the Government's debt and debt service reduction (DDSR) operations in 1989 and 1992, which has put major debt service problems behind the country and cleared the way for renewed access in the voluntary market, as well the policy reforms undertaken by Government to strengthen efficiency of the economy primarily in two areas, public investment and project preparation and implementation. Reforms were introduced under the DML as intended, with the exception of some slippage in operations and maintenance and delays in progress of the FSAL (which were later addressed); actions in all other areas were substantially undertaken as agreed, both in the letter and in the spirit of the program. However, it is imperative that Government pursue the structural reforms and build on the progress already made, particularly with regard to public resource mobilization and efficient public sector management.  26 PHILIPPINES: DEBT MANAGEMENT LOAN PART IiI: LOAN DATA Amount US$200M As of June , 1993 Original Disbursed Canceled Repaid Outstanding Loan No. 3149-PH 200 200 0 Q 200 Original Loan Dates Initiating Memorandum July. 1986 Actual Letter of Dev. Policy Dec. 7. 1989 Actual Negotiations Nov. 24-25. 1989 Actual Board Approval Dec. 21. 1989 Actual Loan Agreement Dec. 22, 1989 Actual Effectiveness Dec. 30, 1989 Actual Loan Closing June 3.0 1Q992 Actual (Revised) Actual Compeletion June 23. 1 992 Actual (Revised) CUMULATIVE LOAN DISBURSEMENT FY90 FY91 FY92 (i) Planned 150 200. 200 (Revised) (ii) Actual 1 50 150 200 (iii) (ii) as % of (i) 100% ?-5. 100% MISSION DATA No. of No. of No. of Date of Month/Year Weeks Persons Weeks Report Appraisal October 1 989 2 1 n/a Supervision Oct/Nov 1990 2 6 3 Nov. 29. 1990 Completion March 1 993 2 2 4 June 1993