Philippines - Public Sector Reform Loan Project

Report No. PID7978 Project Name Philippines-Public Sector Reform Loan Region East Asia and Pacific Region Sector Public Sector Project ID PHPE56523 Borrower Republic of the Philippines Implementing Agencies Office of the President Mabini Hall, Malacanang Manila Tel: (63-2) 736-1165 Fax: (63-2) 736-1010 Department of Finance 5-Storey Building BSP Complex A. Mabini Street Manila, Philippines Tel: (63-2) 525-0380 Fax: (63-2) 522-3987 Department of Budget and Management Mabini Hall, Malacanang Manila, Philippines Tel. (63-2) 735-1984 Tel. (63-2) 735-1740 National Economic Development Authority NEDA sa Pasig, Amber Avenue Pasig City, Philippines Tel. (63-2) 631-0956 to 68 Date PID prepared July 20, 1999 Projected Appraisal Date February 2000 Projected Board Date September 2000 Background The administration has on a number of occasions emphasized the importance it gives to improving governance. Indeed, this is one of the six priorities of the government's new Medium Term Development Plan. Under the heading "Reinforcing Governance," the latter's opening statement proclaims that: "Government shall create a more effective and efficient public sector by re-engineering and rightsizing the bureaucracy and forging a more equitable sharing of responsibilities and resources with local governments. It will continue its active partnership with the business sector and civil society in the delivery of public service. The government will strengthen its economic diplomacy. Criminality and corruption will be addressed by  reinforcing the five pillars of the justice system: the courts, prosecution, law enforcement, corrections, and community involvement." The Asia crisis has also revealed the importance of improved governance and transparency across society and generated a broad public demand for government, as well as private entities to undertake credible efforts in this regard. It is in this respect that the Philippine authorities requested assistance from the World Bank. In January 1999, the government wrote to the Bank requesting a PSRL and a counterpart group was set up in April 1999. A PSRL preparation mission was conducted in May and the subsequent findings of the mission were submitted to government in June 1999. Objectives The purpose of the proposed loan is to enhance the performance, probity and accountability of government activities and programs through a comprehensive fiscal reform program. The major objectives of this program are to: (1) redefine government mandates, structures, financial and human resource management practices and procedures in the light of decentralization and private sector participation in the provision of public services; and (2) improving revenue performance to allow the government to assume this redefined role in a sustainable way. Description Reforms to strengthen the public sector to be supported by the proposed loan include policies to: (1) strengthen national expenditure management in the pursuit of greater allocative and operational efficiency, particularly through the introduction of a medium-term expenditure framework and related budget reforms, and the implementation of the "streamlining the bureaucracy" process; (2) improve revenue performance by streamlining tax incentives and privileges and strengthening tax administration; (3) reassess the scope of decentralization in view of the actual performance of local governments, and revising the Internal Revenue Allotment (IRA) formula with a view to improve its equity, incentives for local revenue mobilization, as well as its overall fiscal sustainability; and (4) enhance transparency and accountability at all levels of government. Financing A fast disbursing, adjustment loan of US$ 100 million is proposed. The closing date of the loan is expected to be December 2001. Environmental Aspects In accordance with Bank guidelines, the proposed operation has been placed in Category "U" and will not require an environmental assessment. Poverty Category -2-  Not applicable Contact Point: InfoShop The World Bank 1818 H Street, NW Washington, DC 20433 Telephone: (202) 458-5454 Fax: (202) 522-1500 Bernard Funck Task Manager Processed by the InfoShop week ending July 23, 1999. Note: This is information on an evolving project. Certain components may not be necessarily included in the final project. - 3 -