PHILIPPINES20918 PH I LlIPP I N ES Volume1 RURAL DEVELOPMENT & NATURAL RESOURCE MANAGEMENT: TRENDS, STRATEGY IMPLEMENTATION, AND FRAMEWORK PERFORMANCE INDICATOR SYSTEM Volume I: Main Report May 2, 2000 A Joint Report of the Government of the Philippines and The World Bank 4~~~~~~~ The World Bank Rural Development and Natural Resources Sector Unit East Asia and Pacific Region ABBREVIATIONS AND ACRONYMS ACPC Agricultural Credit Policy Council (ACPC) LGU Local Government Unit AFMA Agricultural and Fisheries Modernization Act LBMRO Legislative Budget Review and Monitoring Office AGILE Accelerating Growth Investment and Liberalization with Equitv LFS Labor Force Survey AIMCFP Agro-Industry Modern Credit and Facility Program M&E Monitoring and Evaluation AMICFP Agricultural Modernization Credit and Financing Program MOA Memorandum of Agreement APIS Annual Poverty Indicator Survev MOU Memorandum of Understanding ARB Agrarian Reforn Beneficiaries MTPDP Medium Term Philippines Development Plan ARC Agrarian Reform Communities NAMRIA National Mapping and Resource Information Authority BAS Bureau of Agricultural Statistics NAPC National Anti-Poverty Commission BOT Build-Operate-Transfer NCC National Credit Council CARP Comprehensive Agrarian Reform Program NEDA National Economic and Development Authority CAS Country Assistance Strategy NFA National Food Authority CPBO Congressional Planning and Budgeting Office NGA National Government Agencies DA Department of Agriculture NGO Non-Government Organization DAR Department of Agrarian Reform NTISD National Testing of Indicators for Sustainable Development DBM Department of Budget and Management O&M Operation and Maintenance DCP Directed Credit Programs OED Overseas Economic Development DENR Department of Environment and Natural Resources PAMB Protected Area Management Board DILG Department of Interior and Local Government PC Planning Committee DOST Department of Science and Technology PCSD Philippine Council for Sustainable Development DSWD Department of Social Welfare and Development PD Presidential Decree DTI Department of Trade and Industry Pi Project Implementation FCC Fnvironmental Compliance Certificates PIDS Philippine Institute for Development Studies ENRAP Environmental and Natural Resources Accounting Project PMS Presidential Management Staff FAO Food and Agriculture Organization PPAPS Pilot Testing of a Participatory Agricultural Planning Svstem FIES Family Income and Expenditures Survey RD Rural Development GAA General Appropriations Act RDC Regional Development Council GDP Gross Domestic Product RDINRM Rural Development/Natural Resources Management GOP Government of the Philippines RFU Regional Field Unit GVA Gross Value Added SEER Sector Effectiveness and Efficiency Review HH Household SONA State of the Nation Address HPAE High Performing Asian Economies TRP Unilateral Tariff Reform Program [CM Integrated Coa,tal Management UNDP United Nations Development Programme fDF Institutional Development Fund WB The World Bank KRAs Key Result Areas WHO World Health Organization LGC Local Governmcnt Code WTO World Trade Organization Photo Credit: (1) "Dfying Palay", by Ryan Anson; (2) "Class Under The Tree': by Nor Gonzales; (3) 'Carabao"; and (4)"Fishnet"from The World Bank Photo Archive. PREFACE This study is unique in several ways: it responds quickly to Government's request for assistance in a manner where the requesting group (NEDA/Agriculture Staff) becomes a central counterpart and "co-author"; it focuses on assessing the performance of a strategic sector by a premier team of Filipino analysts/consultants/advisers, who build upon and share their analysis and insights with an operational and poverty reduction focus; it links an updated assessment and trends of implementing RD/NRM strategies as outlined in the Medium Terrn Philippines Development Plan (MTPDP) with a proposed framework performance indicator system aimed at promoting improved and sustained results and impacts; it includes 10 Annex reports (Volume 2) on key indicator areas and are aimed at stimulating discussion and strategic actions by the relevant agencies and stakeholders; it follows a consultative process which enhances the content., involving a broad range of strategic rural stakeholders and the members of the Planning Committee of the MTPDP; it is provid,ng a vehicle to facilitating a Filipino-led process of institutionalizing a RD/ NRM performance indicator system, which also aims to support GOP's proposed performance-based approach to budgetary allocations. The study team is very appreciative of the many valuable contributions provided by the "larger study team". It is hoped that readers will find the report useful in supporting the Philippines' efforts to promote shared growth and reduced rural poverty. Study Team Members: R. Anson (WB, Study Team Leader, and Sr. RD Specialist), C. Figueroa-Geron (RD Operations Officer), E. Guiang (NRM Specialist), J. Balbosa (Macro-economist/operations officer) (WB - Manila); Dr. A. de los Angeles (ENRAP), Professor A. Balisacan (UP/Dillman), Professor A. Brillantes (UP/Dillman), Dr. R. Clarete (AGILE Team), Dr. T. David (PIDS), Mr. R. Dy (U. Asia & Pacific), Ms. P. Geron (Consultant), Dr. A. Inocencio (PIDS), Ms. F. Mojica (U of Asia & Pacific), Dr. B. Tolentino (Consultant), Mr. E. Mercado (Consultant/stakeholder/communications expert), C. Umali (Consultant/ Planning and M&E Expert). Ms. Marjorie Espiritu (RD Team Assistant) provided valuable assistance in the production and logistical aspects of the study. GOP Team and Review/Consultative Process: The study team's main GOP counterpart team was NEDA Agricultural Staff, under the overall leadership of its Director, Mr. Felizario Virtucio, who provided the initial and on-going impetus for the study focus and process. The study team also acknowldges the overall guidance and support provided by the MTPDP Planning Committee (PC) members, especially under the guidance of it chairman, Honorable E. Angara (Secretary of Agriculture). Mr. Angara chaired the PC's review meeting of the draft report, held on March 10, 2000. Two phases of regional consultations were held with rural stakeholders in October, 1999 and March. 2000 which provided valuable inputs to the study design and contents. Several follow-up discussions were held with selected members of the PC on key aspects of the revised report and whom also provided valuable contributions to the final report. WB Reviewers: Overall Guidance: Mr. Malcolm Bale (Manager for RD/NRM Unit, E. Asia and Pacific Region. Peer Reviewers: N. Okidegbe (Principal Investment Specialist, RD Dept., WB); J. Heath (Principal Economist, OED, WB); K. Deininger (Economist, WB); S. Tabor (Consultant). Two review meetings, several individual and written suggestions provided valuable inputs and guidance to the finalization of the report. PHILIPPINES RD/NRM: TRENDS, STRATEGY IMPLEMENTATION, AND FRAMEWORK PERFORMANCE INDICATOR SYSTEM TABLE OF CONTENTS VOLUME I Page N ACRONYMS EXECUTIVE SUMMARY i (includes summary matrix of trends & performance indicators) I) INTRODUCTION 1 A) Study Context 1 B) Objectives of Study 2 C) Participatory Approach 3 D) Report Structure 4 II) THE PHILIPPINES RURAL SECTOR: BACKGROUND AND 5 OVERVIEW OF THE MEDIUM TERM PHILIPPINES DEVELOPMENT PLAN (MTPDP) A) Background: Importance and Performance of Rural Sector & 5 Rural Poverty B) MTPDP: Goals, Strategies and Key Result Areas 5 C) MTPDP: Preliminary Assessment & Emerging Priorities 8 III) RDINRM STRATEGIES: UPDATED FRAMEWORK AND 10 ASSESSMENT OF TRENDS AND STRATEGIC PRIORITIES A) RD Strategy Framework (A Synthesis) 10 1) What is Rural Development? 10 2) Overview of Philippines RD Strategy Framework 10 B) Strategic RD/NRM Performance Indicator Areas: Trends, Issues, 12 Strategies and Priority Performance Indicators 1) Agricultural Growth & Performance 14 2) Rural Poverty 17 3) Food Security 21 4) Agrarian Reform 24 5) Rural Sector Investments 26 a) Public Sector (includes assessment of Medium Term Public 26 Investment Development Plan) * (Rural Roads) 30 b) Private Sector Investments 31 c) Rural Finance 32 6) Natural Resource Management 35 7) Institutional Arrangements, Roles and Performance 39 a) Devolution 39 b) Convergence 41 IV) RD/NRM PERFORMANCE: EMERGING CONCLUSIONS AND 43 OPERATIONAL FRAMEWORK OF A PERFORMANCE INDICATOR SYSTEM A) Emerging Conclusions and Recommendations 43 1) Mixed/Poor Performance 43 2) Need for Sharper Priorities and Sequencing and Suggested 44 Mid-Course Adjustments 3) Potential for Improved Performance, Need for "Mindset" 47 Changes, and Role of Two Management Tools 4) Benefits of an Improved Performance Indicator Monitoring 50 System 5) Constraints to and Proposed Mechanisms to Enhance Functional 50 Performance Indicator System B) Recommended Framework and Main Elements of Integrated 57 RD/NRM Performance Indicator System I) Guiding Principles 57 2) Recommended Framework and Key Elements of Performance 58 Indicator System C) Recommended Action Plan for Institutionalizing the RD/NRM 60 Performance Indicator System 1) Establish and Activate the Performance Indicator 60 Sub-Committee 2) Prepare Detailed Operational Plan for Phase 1 61 3) Initiate First Phase 62 4) Implement Second Phase 62 5) Mobilize Funding 62 TEXT FIGURES, TABLES: Figure 3.1: Illustrative Overlay between MTPDP KRAs and Synthesized 12 RD/NRM Strategy Figure 3.2: Rural Well-Being: Score Card Results for the Philippines 14 Figure 3.3: Quarterly Wholesale Prices (1990 - 1990) 22 Table 3.1: Philippines: Growth Rates of Real Gross Value Added in 15 Agriculture, Fishery, and Forestry, 1980 -1999 Table 3.2: Yield Performance of Selected Crops, 1980-98 (% p.a.) 17 Table 3.3: Priority List of Rural Poverty Indicators 20 Table 3.4: Land Distribution Status (1972-1999) 25 Table 3.5: Accomplishment in Landowner's Compensation (1972-1999) 25 Table 3.6: Incidence of Borrowing and Distribution of Borrowers 33 Among Farm Households (%) Table 4.1: RD/NRM Performance Indicator System: Recommended 53 Framework for Operational Plan of Primary Performance Indicators (Outcomes and Results) ANNEXES (15): 1) Summary Report of Stakeholders Feedback Workshops (Phase 2, March, 2000) (by Elmer Mercado, Consultant/Communications Specialist) 2) Updated RD/NRM Strategies and Indicators: Summary Matrices According to Performance Indicator Area (by study team members): Table 1 : Agricultural Growth and Performance Table 2 : Rural Poverty Reduction Table 3 : Food Security Table 4 : Agrarian Reform Table 5 : Rural Sector Public Expenditures Table 6 : Public Expenditures : Rural Roads Table 7 : Private Investments in Agriculture Table 8 : Rural Financial Sector Table 9 : Natural Resources Management Table 10: Decentralization and Devolution 3) RD/NRM Performance Indicator System: Frameworks and Key Elements (by C. Umali): Table 1: Recommended Framework for Operational Plan (Primary and Secondary PIs, outcomes, outputs, data frequency and availability; institutional responsibility) Table 2: Operational/Data Issues and Recommended Actions Table 3: Data System Weaknesses and Recommended Actions 4) MTPDP: Overview and Summary Assessment VOLUME II: 5) Agricultural Growth & Performance (by Dr. Tina David, Senior Research Fellow, Philippines Institute of Development Studies) 6) Rural Poverty (by Professor Arsi Balisacan, U. of the Philippines) 7) Food Security (by Dr. Ramon Clarete, Team Leader, AGILE Group) 8) Agrarian Reform (by Richard Anson, Sr. RD Specialist, WB) 9) Rural Public Sector Investments: Trends, Strategies and Performance Indicators (by Dr. Tina David (Sr. Research Fellow and Dr. Arlene Inocencio, Philippines Institute Development Studies) 10) Rural Sector Investments: Rural Roads (by Dr. Bruce Tolentino, Consultant) 11) Rural Private Sector Investments: Issues, Strategies and Performance Indicators (by Rolly Dy, Executive Director, Center for Food and Agri Business, University of Asia and Pacific) 12) Rural Finance: Trends, Strategies and Performance Indicators (by Payday Geron, Sr. Rural Credit Specialist/Consultant) 13) Natural Resource Management: Trends, Strategies and Performance Indicators (by Dr. Ann de los Angeles, Project Director/ENRAP) 14) Institutional Arrangements, Roles and Performance: Devolution (by Professor Alex Brillantes, University of the Philippines) 15) Institutional Arrangements, Roles and Performance: Convergence (by Dr. Bruce Tolentino, Consultant) EXECUTIVE SUMMARY INTRODUCTION 1. President Estrada's Government has declared war on poverty and accorded top priority to the strategies and programs in support of sustainable rural development (RD). It targets a reduction in the poverty incidence from 32% to 25% of total households (HHs) and expects to achieve average agricultural growth rates of 3.7%-4.6% per annum by the end of 2004. Achieving these ambitious targets will require major improvements in prioritizing and operationalizing RD and natural resource management (NRM) strategies and policies, some mid-course corrections in the implementation of the Medium-Term Philippine Development Plan (MTPDP), and especially more vigorous and effective implementation by the relevant agencies. 2. The Government of the Philippines (GOP) has generally sound strategies for addressing the challenges of rural development and poverty alleviation, and these are embodied in the MTPDP. These are also generally reflected in the World Bank's (WB) Country Assistance Strategy (CAS) for the Philippines (1999). The greater challenge, however, now lies in operationalizing and effectively implementing prioritized strategies and supporting programs, based on available resources. Therefore, it is relevant to address together the priority strategies and corresponding measures of performance in order to focus efforts on better implementation and results. Presently, the GOP needs an explicit and credible mechanism to monitor, on a sustained and regular basis, the implementation of such strategies and performance, within the framework of the MTPDP. Thus, the National Economic and Development Authority (NEDA) requested the WB's assistance in assessing the RDINRM trends, determining the need for any mid-course adjustments, and developing a strategic framework for monitoring the implementation of the RD/NRM strategies. This study was conducted in response to this request. 3. Objectives of Study: In the light of the above mentioned context, the main objectives of this consultative and strategic-oriented "surveillance" study are: to assess the trends in RD/NRM strategies as reflected by selected indicators; to recommend relevant adjustments and improvements which would enhance the prospects for better achieving the stated RD/NRM objectives and impacts; )01 to formulate a strategic and prioritized RD/NRM performance indicator system that can be a cost- effective, timely, and reliable management tool to catalyze strategic and timely actions toward achieving the priority MTPDP/CAS objectives. The study team also recommends a framework and action plan for institutionalizing this RD/NRM performance indicator system by the relevant GOP agencies, with participation by other key stakeholders. 4. Participatory Approach. The study used innovative participatory approaches to enhancing both its process and the content of its findings and recommendations. First, the study team was comprised of well-respected Filipino specialists who are policy and implementation analysts and advisors on RD/ NRM. They are professionally committed and well qualified to assess trends and update priority strategies, as well as formulate an appropriate operational performance indicator system for the Philippines. Second, the study approach involved the participation of strategically selected stakeholders in the initial design of the study (Phase 1) and in forging a consensus on the priority strategies and performance indicator system ii based on the draft report (Phase 2). Additional funding from the Bank's Participation Grant Fund enabled this participation. For each phase, a series of three regional consultation workshops with representatives of concerned government agencies at the national and regional levels, non-governmental organizations (NGOs), farmer organizations, and the private sector, was conducted to validate and gather feedback on the design and results of the study. Annex I includes a summary of the main conclusions and contributions from the Phase 2 stakeholder workshop. The study team also consulted key policy-makers and implementors. These participatory approaches in effect made the stakeholders "co-authors" of the report's substantive recommendations, thereby enhancing the ownership by key decision-makers and implementers. Accordingly, the study process and report is being used as a vehicle for facilitating consensus building and improved implementation and results by the relevant GOP agencies and rural stakeholders. 5. Report Structure. Chapter 2 summarizes the background, the main features and a preliminary assessment of the MTPDP for the rural sector. The core of this report is presented in Chapters 3 and 4. Chapter 3 summarizes the results of in-depth analysis of RD/NRM trends and updated prioritized strategies according to seven performance indicator areas. Chapter 4 pulls together the strategic and operational implications of these trends in terms of 5 major conclusions, with special emphasis on developing a framework for a RD/NRM Performance Indicator System to support an improved implementation of the MTPDP. It also outlines a proposed action plan for institutionalizing in a phased manner the RD/NRM performance indicator monitoring system by the relevant agencies. THE MTPDP AND RD/NRM 6. The main RD objectives of the GOP are reducing rural poverty, enhancing food security, and fostering agricultural modernization. Central to achieving these objectives of the MTPDP are the agriculture, agrarian reform and natural resources sectors whose growth have lagged over the last twenty years, despite the implementation of broad policy reforms and the implementation of many rural development programs and projects during the 1 980s and 1990s. To pursue the objectives, the MTPDP has identified the following five (5) key result areas (KRAs): productivity and competitiveness enhancement; diversification of production and resource use; access to land and other productive resources; promoting environmental sustainability; and rationalizing institutional structures and empowerment of stakeholders. 7. This plan is generally sound, but needs to be significantly prioritized and operationalized, with explicit strategic linkages to public sector policies and expenditures. iii 3. UPDATING PRIORITY RD/NRM STRATEGIES AND IMPROVED RESULTS: EMERGING TRENDS, FRAMEWORK FOR A PERFORMANCE INDICATOR SYSTEM, AND RECOMMENDED ACTION PLAN 8. The study team developed strategic performance indicators for the Philippines RD/NRM sector and grouped them according to seven strategic performance indicator areas. These indicator areas generally correspond to the thrusts of the MTPDP's KRAs and the synthesized RD strategy framework outlined in the report. These are: (a) Agricultural Growth and Performance (KRAs 1 and 2); (b) Rural Poverty (all KRAs); (c) Food Security (KRAs land 5); (d) Agrarian Reform (KRA 3); (e) Rural Sector Investments (all KRAs, including public and private sector investments, and rural finance; (f) Natural Resource Management (KRA 4); and (g) Institutional Arrangements, Roles and Performance (KRA 5). The groupings and their component indicators have been chosen to help assess the progress of the implementation and attainment of the Philippines' RD goals and strategies. The trend analysis provided a foundation for the selection of appropriate yardsticks, taken in the context of a mid-course finetuning of rural development strategy reforms. Accordingly, the assessment helped focus on showing outcomes rather than processes, and the direction of change over time rather than statistical comparisons per se. 9. Conclusions and Recommendations: The study team has generated five major conclusions and supporting recommendations: (a) Mixed/Poor Performance: Based on trends and the implementation of priority RD/NRM strategies, progress toward achieving the MTPDP targets and outcomes lags significantly behind (paras. 3.7 - 3.122; Annexes 5-15). Moreover, a recently developed "rural scorecard" for developing countries shows that a composite index (both level and trend) of "rural well-being" for the Philippines is significantly below the composite index for other East Asian and Pacific developing countries; (b) Need for Sharper Priorities and Sequencing, and Mid-Course Adjustments: There is an urgent need for GOP RD/NRM agencies, especially the DA, DENR, DAR, to prioritize, operationalize, properly sequence, and monitor strategies and actions, supported by a more efficient and strategic allocation and utilization of public sector expenditures. Even prior to the mid-term review of the MTPDP, it is recommended that the GOP update some of the RD/NRM strategies and targets to more realistic levels and effective operational approaches. It then needs to prioritize and operationalize strategic interventions and medium-term and annual public investment plans to support the timely and effective implementation of such interventions. The study team has recommended priority and updated RD/NRM strategies, and in some cases, suggested some mid-course adjustments to the MTPDP. In some cases, there is a need to improve the strategic directions of certain policies (e.g., food security, CARP modalities, and budgetary reforms). The following eight mid-course policy and strategy adjustments are recommended for consideration by the GOP's Inter-Agency Rural Sector Planning Committee for the MTPDP (Planning Committee) (para. 4.4; Annexes 5-15): Growth Targets: The GOP may consider to decrease the agricultural growth targets to more realistic levels, while intensifying efforts to formulate and implement strategic action plans to achieve sustainable growth rates which exceed significantly the historical growth rates of about 2% p.a.; Competitive and Diversified Rural Economy: The Department of Agriculture (DA) should translate general policies and strategies into specific policy decisions and operational action plans, and remove the relevant policy and institutional rigidities and constraints to achieving a more competitive and diversified rural economy, iv Food Security: The DA, with NEDA support, needs to adopt more sustainable policy and operational approaches to achieving national and household food security. Rather than focus on the GOP's "de-facto" policy of rice self-sufficiency, there is a need to broaden operational strategies which promote the enhanced purchasing power of households and more competitive trading system of inputs and outputs. Approving and implementing National Food Authority (NFA) reforms are overdue, and there is a need for the GOP to proceed in a phased manner with a recently-formulated integrated package of reforms involving the NFA and productivity enhancing programs for a broad range of food and cash crops; CARP: The Department of Agrarian Reform (DAR), in consultation with the relevant stakeholders, urgently needs to formulate improvements in the CARP modalities and approaches to expedite the completion of the program, while also promoting more efficient and equitable land markets which would benefit large numbers of the landless; Budgetary Reforms: The DA, Department of Environment and Natural Resources (DENR), and DAR, in close collaboration with the NEDA and Department of Budget Management (DBM), need to formulate operational action plans to reform the budgetary allocation system, initially focusing on improving the utilization of existing allocations, and linking these action plans to the FY01 and FY02 budgets and the three-year medium term expenditure program currently under preparation; Sustainable Rural Finance: The Agricultural Credit Policy Council (ACPC), with the support of the National Credit Council (NCC) and enhanced commitment by the DA, should vigorously promote and monitor the vigorous implementation of the Agro-Industry Modernization Credit and Financing Program; there is also a need to strengthen savings mobilization and financial intermediation to support a more diversified rural economy; Sustainable NRM: The DENR needs to sharpen its NRM strategies and operational programs to: (i) promote more effective and sustainable forest management, including the use of community-based resource management strategies and tenurial instruments, and approaches to forest delineation; (ii) rationalize and implement sustainable timber harvesting policies; (iii) formulate and implement sound NRM pricing/cost recovery policies to promote sustainable resource use, such as the imposition of irrigation service charges and user fees; and (iv) adopt sound operational policies for improved watershed management; Institutional Performance: Devolution and Convergence: The DA, DAR, DENR should fastrack priority institutional reforms to deepen the devolution to local government units (LGUs)/rural communities of priority RD/NRM programs, and to operationalize the convergence strategy and interface between NGAs and LGUs. Greater support is needed to trigger expanded private sector roles in all aspects of RD/ NRM, including enhanced capacity building and empowerment of LGUs and farmer groups. (c) Potential for Improved Performance, Need for "Mindset" Changes, and Role of Two Management Tools: The Philippines has the potential to significantly progress toward fulfilling many of the MTPDP targets and KRAs. The GOP will, however, need to mobilize more vigorous, systematic, and coordinated efforts to establish, operationalize, and implement sharper and more "do-able" strategic priorities and programs. A major "mindset" change within Government is needed to get and sustain improved results. To facilitate this complex process, two management tools are recommended and generally endorsed by the MTPDP Planning Committee and Phase 2 rural stakeholders: a performance indicator (PI) system and a performance-based budgetary allocation system. There are a variety of performance indicator systems for budget, sector, and project monitoring. The DA's on-going initiative to integrate all v three types of systems provides a good reference point to build upon. The DBM has issued the budget call for FY01, and is requesting that agencies prepare and submit their annual budgets according to strategic directions and performance indicators, although the modalities for responding fully are in the initial stages of being developed; (d) Benefits of Improved Performance Indicator Monitoring System: There are major potential benefits in investing in the formulation and implementation of an operational strategy and action plan to monitor strategic rural sector performance indicators on a regular basis, and to use them as the basis for implementing a performance-based public expenditure allocation system; (e) Constraints to and Enhanced Mechanisms for Operationalizing the Performance Indicator System: Currently, there are limited explicit mechanisms in place to systematically monitor the implementation of the MTPDP, either at the global or sectoral levels. This is due to various underlying reasons, including weak data systems, institutional/management "resistance," and weak institutional capacities. These, together with a number of recommendations, are outlined in the report, and need to be addressed systematically. There also is a need to promote appropriate mechanisms and participation of other groups that would enhance the implementation of a credible PI system through carrying out parallel and complementary PI systems. These systems include those provided by suitably qualified NGO(s) that would represent broad rural stakeholder interests and possibly issue "Citizen Report Cards" on the RD/ NRM sector, the Congressional Planning and Budgeting Office (CPBO) PI system as part of strengthening Congress' oversight functions; and the Office of the President's (OP) Presidential Management Staff's (PMS) annual performance reviews of GOP departments. All of these systems would benefit from focusing on a common set of performance indicators, although there would be some differences in focus. 10. Table 1 outlines a summary of the study's updated RD/NRM priority strategies, the recent trends, MTPDP targets, and recommended outcome-oriented primary performance indicators. Table 4.1 provides a summary of the outcome and the corresponding "result" performance indicators; the latter ones aim to attribute results to the actions taken by the relevant agencies, and show the frequency of monitoring and institutional roles in data collection and analysis. While these results emerged from a consensus-building exercise with rural stakeholders during Phases 1 and 2, these indicators would be further validated, reduced to a more manageable number, and refined prior to and during the initial phase of implementing the proposed performance indicator system. 11. The recently completed consultation meetings (in March, 2000) with the MTPDP Planning Committee and with the RD/NRM stakeholders (Phase 2) discussed the draft report and generated strong support for institutionalizing a well designed RD/NRM performance indicator monitoring system. These consultations emphasized that the framework for this system needs to be underpinned by prioritized RD/ NRM strategies, and a strong and explicit link with a performance-based budgetary allocation system for RD/NRM. This scheme will encourage better performance by the relevant GOP agencies in achieving strategic objectives and KRAs, as measured by the agreed performance indicators. Moreover, the participating agencies should be encouraged to "own" the performance indicator system, based on a "bottom-up" approach. The framework should likewise focus on priority RD/NRM strategies which will have a "multiplier" effect; and formulating a manageable number of simple and measurable performance indicators, with explicit linkages between the KRAs/strategic areas and priority strategic programs (e.g., irrigation, research and extension, and forest management, and agrarian reform). vi 12. Recommended Framework of PI System: Based on the results of the study and the consultations with stakeholders and Planning Committee members, it is recommended that the PI system be based on a framework comprised of the following six elements: (a) Priority Performance Indicators: There is a need to further develop an appropriate set of RD/ NRM performance indicators which should include both outcome and result/management-performance- related indicators. Tables 1 and 4.1 provide an initial set of priority performance indicators that can be refined further along the lines discussed in para. 4.7. (b) In-Depth Strategic Studies: There is a need to identify and conduct in-depth studies on strategic aspects of the priority PIs, to be carried out by suitably qualified groups with a proven track record (e.g., PIDS and other research institutions). These studies could address relevant issues involving the priority strategic public sector investment programs. Some of these in-depth studies are already on-going (e.g., Impact Assessment Study for Agrarian Reform/CARP). Other priority topics would require special study and appropriate arrangements (e.g., operational plans for reforming the RD/NRM budgetary system; irrigation subsector; agricultural research and extension; and forest management policies and experiences and approaches to building on successful community-based approaches). (c) Data Systems: Weaknesses and Action Plan: There is an urgent need to address underlying data system weaknesses in order to ensure that reliable data underpin the performance indicator system. Annex 2, Tables 2 and 3 highlight some of the more important data constraints and outline short- and medium- term actions to address them. The design and implementation of the initial PI system should aim at focusing on those PIs whose data constraints are not severe, and where necessary, use "proxy" indicators. (d) Implementation Arrangements and Roles: There is a need to work out appropriate implementation roles and arrangements within the PI system, including the parallel, collaborative and complementary roles of the Planning Committee's subcommittee for the PI indicator system, Congress' CPBO, NGOs, and local-level bodies. The Planning Committee has endorsed the proposal to establish a subcommittee that will take the main responsibility to formulate and recommend to the Planning Committee relevant mid-course corrections to the MTPDP, and to formulate and implement a RD/NRM perforrnance indicator system. This initiative should build on relevant initiatives being taken by other departments, especially the DA. (e) Institutional Capacities: There is a need to identify the institutional weaknesses of the above mentioned participants and to develop a supporting action plan for strengthening their capacity to steer and implement the proposed PI system. It is envisioned that the focus of the capacity-building activities should be in-service training, with some limited support for degree training in sectoral and programmatic M&E systems. (f) Phased Implementation: There is a need to work out an operational plan to implement the proposed PI system in a phased manner, under the day-to-day guidance of the PI subcommittee. It is recommended that the phasing be closely synchronized with the GOP's budgetary cycle, with an initial focus on linking with finalizing the on-going FY01 budget, and applying the system fully to the FY02 cycle. This link with the budgetary cycle will provide a strong incentive and "glue" for the agencies to participate. The PI system also needs to be "sectoralized" by department to focus monitoring and assessment on each agency's performance. vii 13. Recommended Action Plan: Based on the strong consensus to proceed with the suggested RD/ NRM performance indicator monitoring system, the following six (5) point action plan is recommended in order to operationalize the PI system framework: Establish Sub-Committee/Working Group: The MTPDP Planning Committee needs to formally establish and activate soonest a subcommittee which would take responsibility for recommending mid- course adjustments to the MTPDP targets and strategies and for operationalizing and implementing the proposed performance indicator system for RD/NRM. This subcommittee should be comprised of representatives from the DA, DENR, DAR, NEDA, DBM, and CPBO, and should be encouraged to involve and consult with other key stakeholders in formulating and implementing the system. It is understood that some of these agencies may also wish to carry out their own performance indicator system to respond to their institutional mandates, and efforts should be made to cross-fertilize with the PC's subcommittee; Prepare a Detailed Operational Plan for Phase 1: The PI subcommittee, with the support of the relevant departmental technical staff and possible short-term consultancy assistance, would work out a detailed operational plan for the initial Phase of the proposed performance monitoring system. This operational plan could also address three key aspects: formulation of a phased capacity building action plan; identification of the precise role and modality of rural stakeholders in supporting the performance indicator system (including possible independent "audits" to encourage improved accountability by the agencies); identification of the priority areas where independent in-depth assessments on strategic topics (e.g., irrigation subsector, forest management, research and extension systems) should be carried out to complement the performance indicator assessments; Initiate First Phase: It is suggested that this detailed operational planning phase focus on reaching consensus on a manageable number of "primary" performance indicators (say, up to 15-20) to test and work out the implementation modalities. The initial phase could be completed by end-2000. Special attention should be given to developing indicators as part of finalizing the FY2001 budget for the rural sector agencies, and preparing the FY02 budget; Implement Phase 2: Based on the initial results of Phase 1, the application of the performance indicators system could be applied during the full phase of the FY02 budget cycle beginning in late 2000. As the system shows positive results, it could be used by the relevant agencies to support their requests to Congress for increasing funding, and would provide a more objective basis for budget allocations and decisions. Phase 2 would need to be supported by a more comprehensive capacity-building program of the participating agencies; Mobilize Funding: The NEDA, in collaboration with interested donor agencies, could now mobilize funding support in order to operationalize the above proposed action plan and RD/NRM performance monitoring system, and its detailed design and initial phase. There are several options, including the following choices which are not mutually exclusive: * Tap support from an on-going Institutional Development Fund (IDF) being managed by the DBM (ref. "Expenditure Management Improvement Project"); * Mobilize grant funding from interested donors; and * Utilize existing NEDA funds and staff, although these funds are not likely to meet the full requirements. Table 1: Summary Framework of RD/NRM Trends, Updated Strategies and Outcome Performance Indicators" STRATEGIC UPDATED PRIORITY RECOMMENDED PRIMARY PERFORMANCE STRATEGIC TRENDS MTPDP PERFORMANCE INDICATORS INDICATOR AREA OBJECTIVES TARGET (OUTCOMES) 1. Agricultural * Increase public * GVA agri * GVA agri growth of 1) % Aggregate growth rate of: (a) Growth and investments in growth of 3.9 to 4.8% p.a. agric. value-added per rural Performance growth-enhancing 1.9% p.a. in worker; (b) yield per ha. by (KRA 1 & 2) public goods and the 1990s * Increase in budget major commodity services allocation for R&D * Reduce dispersion of 0.34% -1% of of agricultural GVA price protection * Increase public support for market infrastructure, market * Negligible * N.A. (not available) 2) Measures of revealed development, R&D Improvements comparative advantage, trade and extension openness, and price protection activities to (e.g. nominal and effective promote protection rates; QRs, tariff diversification levels for rice, sugar) 11Based on the study team analysis (Annexes 5-15) and inputs from stakeholder consultations. STRATEGIC UPDATED PRIORITY RECOMMENDED PRIMARY PERFORMANCE STRATEGIC TRENDS MTPDP PERFORMANCE INDICATORS INDICATOR AREA OBJECTIVES TARGET (OUTCOMES) 2. Rural Poverty * Reduce absolute * Poverty * Poverty incidence of 1) Decreased poverty incidence, (All KRAs) poverty incidence of 25-28% depth and severity (% of rural * Develop and 32% in 1997 population below absolute implement population line); national and appropriate and regional levels, by key poverty holistic indicator groups) system of rural welfare outcomes to track changes in absolute poverty * Stagnant * N.A. (Assumes rapid 2) Increased primary & secondary over time and space increases) school enrollment rates (in rural areas) 3. Food Security * Access to food * Rice * Rice prod'n growth: (all KRAs) supplies (esp. rice) production 8.3 to 9.2% p.a. 1) Rice balances (production/ at stable prices on growth: 1% in imports, consumption) and year-round basis 1990s at 0.1% price trends (farmgate, * Develop and yield growth wholesale, tariff levels; nat'al/ implement an * Generally * N.A. reg'al levels) integrated program stable rice (Implies stable prices and (trade protection prices (except large decrease in tariffs plusstrtegi pulic 1995) by 2004 in line with plus strategic public 19)WTO guides) expenditures) * Rice tariff level * Implement essential (50% average) NFA reforms (separate regulatory and commercial roles, and phased approach to privatization) STRATEGIC UPDATED PRIORITY RECOMMENDED PRIMARY PERFORMANCE STRATEGIC TRENDS MTPDP PERFORMANCE INDICATORS INDICATOR AREA OBJECTIVES TARGET (OUTCOMES) 2) Decreased prevalence of * Stagnant * N.A. (implies malnutrition (nutrition status, significant % children under 5) improvements) 4. Agrarian * Expedite * Ave. land * CARP completion by 1) Number of (land) hectares Reform implementation of redistribution 2004 (Assumes redistributed (private and public (KRA 3) CARP based on of 165,000 has redistribution of lands, and by modality) reformed annually 320,000 has p.a.) modalities and expanded financing Intensify strategic support infrastructure and * Erratic * N.A. (implies rapid 2) Increases in ARB household services to ARCs/ increases) income (No/% of ARB HH ARBs to enhance Income over nat'al./reg'al incomes absolute poverty level) * Enhance function of land rental markets and use land reform as means to facilitate land access STRATEGIC UPDATED PRIORITY RECOMMENDED PRIMARY PERFORMANCE STRATEGIC TRENDS MTPDP PERFORMANCE INDICATORS INDICATOR AREA OBJECTIVES TARGET (OUTCOMES) 5. Rural Sector * Increase ANRE * DA: 43-54% * N.A. 1. Aggregate trends and patterns, Investments public expenditures budget (Assumes increase with focus on: to increase allocation by PhP 20 Billion to - government expenditures on a) Public Sector productivity and * DENR 16-22% support AFMA) ANRE as a percentage of total Investments reduce poverty budget government expenditures (all KRAs) * Reform ANRE allocation - expenditure reforms by agencies to: * ANRE is about priority policy instruments increase 10% of total (specially irrigation, R & D/ efficiencies; public extension, land distribution, strengthen expenditures natural resources management decentralization and (NRM) community-based cost sharing with activities, regulatory functions LGUs; restore and diversification) balance in: _. a) project vs. * Negligible * N.A. 2) Degree of (increased) fund program funding; reforms and (Reforms are utilization (ratio of used/ b) staff vs 0 & improvements, implied, but not obligated funds vs. total budget M funding; stable and slow fund operationalized) allocations) and stability of budget releases; utilization fund releases by DBM/ Introduce (especially by National Government Agencies performance-based DA) (NGAs) (% of approved budget approach to released per quarter) budgetary allocations and releases STRATEGIC UPDATED PRIORITY RECOMMENDED PRIMARY PERFORMANCE STRATEGIC TRENDS MTPDP PERFORMANCE INDICATORS INDICATOR AREA OBJECTIVES TARGET (OUTCOMFS) * Improve policy and * Agri growth of * GVA agricultural b) Private Sector legal environment 1 .9% p.a. growth of 3.9%- 1) Growth rate in agricultural Investments * Expand rural (since 1980s; - 4.8% p.a. (to be (includes livestock) and fishery (KRAs 1, 2 & 3) infrastructure 6% in 1998; private-sector production * Minimize +6.6% in 1999) driven) bureaucratic "red- * Fishery growth tape" of 1.3% p.a. * Expand access to N.A. (negligible) * N.A. 2) Aggregate value and private c) Rural Finance financing (assumes rapid rate) investments in breeding stocks (KRAs 1, 2, 3) (especially long- and tree crops term) * Mobilize additional * 65 to 85% * N.A. 1) % of rural population with financing for and borrow from (Assumes rapid increasing access to formal -. savings for rural informal increases) financial system as depositor sector sources; and/or borrower * Expand sustainable * Only about access to rural 11% borrow finance (especially from formal by smallholders and financial medium scale agro- institutions based enterprises) * 38% of the * N.A. * Implement Agro- farm (Implies rapid Industry Modem households increases in savings, Credit and Facility borrow money; access to formal Program (AMCFP), finance, and high with focus on * Declining credit recovery rates phasing out directed credit recovery based on market- credit programs levels determined rates) STRATEGIC UPDATED PRIORITY RECOMMENDED PRIMARY PERFORMANCE STRATEGIC TRENDS MTPDP PERFORMANCE INDICATORS INDICATOR AREA OBJECTIVES TARGET (OUTCOMES) 6. Natural * Enhance sustainable * Rate of * Protection of 6 Resource asset values of key degradation is million has forest 1) Increased aggregate forest Management natural resources decreasing; lands cover (from plantation, (KRA 4) * Promote improved inconsistent * Development/ reforestation, rehabilitation, water pollution policy signals management of and protection of natural control, and actions 1,017 CBFM forests and mangrove areas) rehabilitation of agreement degraded rivers * Rehabilitation of * Expedite gazetting 200,000 has of of Priority Protected degraded forest Areas, Strengthen PAMB & formulate * Deteriorating * N.A. (Implies rapid 2) Reduced pollution in key and implement PA improvements) coastal and industrial areas and management plans improved water quality levels of key rural areas * Fishery prod. * Rehabilitation of Growth of five major rivers 1.3% p.a. * Rehabilitation of * Slow progress 2,000 mangrove in areas and 25,000 has implementing of coral reefs actions to meet * Establish water targets pricing policy and NRM user fee system STRATEGIC UPDATED PRIORITY RECOMMENDED PRIMARY PERFORMANCE STRATEGIC TRENDS MTPDP PERFORMANCE INDICATORS IND)ICATOR AREiA OBJECTIVES TARGET (OUTCOMES) 7. Institutional * Complete review * N.A. (although * N.A. (implies rapid I) Number/value of cost-sharing Arrangements and reform appears to be trends) arrangements by and between devolution LGC/ increasing National Government Agencies a) Devolution processes trend (NGAs) and LGUs to support (KRA 5) * LGUs to update (especially by strategic activities priority investment DA) and development financing * N.A. (appears * N.A. (implies rapid 2) Expanded membership patterns requirements and to be trend) and number of local bodies to * plans increasing ensure meaningful * LGUs to promote trend) participation of civil society meaningful participation of civil society in re- activated local councils * Strengthen national/ local partnerships through sound * N.A. (poor) * N.A. (implies high 3) Improved Service Delivery MOAs/MOUs level) Effectiveness of LGUs (proxy * Broaden capacity of measures to be used) LGUs to deliver basic services and responsibilities STRATEGIC UPDATED PRIORITY RECOMMENDED PRIMARY PERFORMANCE STRATEGIC TRENDS MTPDP PERFORMANCE INDICATORS INDICATOR AREA OBJECTIVES TARGET (OUTCOMES) b) Convergence * Re-activate role and * N.A. * N.A. (implies 1) Budgetary allocations and (KRA 5) give clear directions (negligible) significant issuance/ implementation of and signals to increases) relevant supporting corresponding departmental orders to reflect departments to priority convergence activities operationalize convergence strategies and NGA/ LGU interface * Work out priority joint activities and reflect in annual budgets * Ensure full ownership by and/or partnerships with LGUs in common strategies and programs * Strengthen coordination capacities & effect. CHAPTER 1: INTRODUCTION A) Study Context 1.1 The Philippine agricultural sector has been growing erratically since the early 1980s, its growth well below potential and required rates. Its growth has averaged below 2% per annum (p.a.), in contrast to a required sustained growth of at least 3.5% p.a. This reflects the lack of dynamism in the rural sector as will discussed in this report. Rural poverty continues to be pervasive with about 50% of the rural population living below the poverty line, and the income gap between rural and urban areas appearing to be growing. 1.2 Over the past two years, the Government of the Philippines (GOP), the World Bank (WB) rural sector team for the Philippines, and other groups have carried out several studies which have assessed rural development (RD) and natural resource management (NRM) issues and strategies.' The WB-supported studies also provided the main basis for the Rural Development (RD) section of the recently completed WB Country Assistance Strategy (CAS, May 1999) for the Philippines, which was widely consulted with various stakeholders. These studies became the impetus for the forging of a general consensus among the Bank, other donors, and the GOP on the diagnosis of the main sector issues and the main strategy elements needed to achieve the Medium-Term Philippine Development Plan (MTPDP) goals of achieving broad-based rural growth and poverty alleviation. 1.3 While the MTPDP outlines basically a sound strategy for addressing the challenges of rural development and poverty alleviation, the greater challenge now lies in prioritizing, operationalizing, and effectively implementing focused strategies and supporting programs, based on available resources. This requires, among others, an appropriate performance monitoring system. There is, however, general consensus that the GOP needs to develop and improve a credible mechanism to monitor, on a sustained and regular basis, the implementation of rural strategies, as well as the explicit link between policies and programs and outcomes. 2 To more effectively fulfill its role of monitoring the implementation of the MTPDP, the NEDA requested the WB's assistance in developing a strategic framework for monitoring the implementation of the rural sector strategies. Recent rural sector work reports include: (a) by the WB: Philippines: Promoting Equitable Rural Growth (May, 1998); and Philippines: Tree Crops for Rural Development: Issues and Strategy Options (June, 1999); by the ADB: An abridged and updated version of the Rural Sector Report (July, 1999) and various supporting reports; (c) by the USAID: various reports, including NFA Restructuring and Strategy Options (January, 2000); and rural credit studies, (d) by the AusAID: "Rural Incomes Strategy and Program Identification", draft report, February, 2000; and (e) various reports by Filipino researchers, including many of the study team members. 2 Performance indicators can be broadly classified into 3 major categories: (a) inputs: consist of resources used to produce goods and services; (b) outputs re the goods and services delivered or performed, ranging from policy advice to the enforcement of regulations and delivery of basic services; (c) outcomes refer to the impacts or results that the Government want to achieve, such as reduction in poverty incidence. Some of the pioneering work in developing public performance monitoring systems relevant to the Philippines were initiated in New Zealand ("Putting it Together: An Exploratory Guide to New Zealand Public Sector Financial Management System", 1996, New Zealand Treasury). 2 B) Objectives of Study 1.4 In the light of the above mentioned context, the main objectives of this consultative and strategy-oriented "surveillancc" study are: I i to assess the trends in rural development and natural resource management strategies as reflected by selected performance indicators, especially those linked to the implementation of priority elements of the Philippines' RD/NRM strategies; : to suggest to the GOP agencies relevant adjustments and improvements involving RD/NRM strategies and implementation performance which would enhance the prospects for better achieving the stated RD/NRM objectives and results/outcomes; and > to formulate a strategic and prioritized RD/NRM performance indicator svstem focusing on key outcomes and emerging from the strategy assessments, which could be used as a management monitoring tool to catalyze appropriate and timely actions toward achieving the priority MTPDP/ CAS objectives. Such a system would provide cost-effective, timely, and reliable information to enhance decision-making and implementation effectiveness. 1.5 An important related objective of the study is to formulate and suggest a phased action plan for institutionalizing an RD/NRM performance indicator system by the relevant GOP agencies. Currently, there are five related initiatives which are at the conceptual stage and which provide potential supplementation for this initiative. First, the NEDA is carrying out "sector effectiveness reviews" (SERs) of the performance of government agencies. Second, the DBM is at the early stages of developing mechanisms for improving implementation and monitoring for all sectors under the Public Sector Expenditure Management Improvement Project which is supported by an Institutional Development Fund (IDF) grant. Third, the Congressional Planning and Budget Office (CPBO) is in the early stages of developing a conceptual framework for a performance-based budgetary allocation system, as part of strengthening the oversight role of Congress.4 Fourth, several NGOs (e.g., PHILRAA) are carrying out partial, and somewhat ad-hoc, monitoring activities of the implementation of the MTPDP. Fifth, the Department of Agriculture's Planning Service is currently in the process of developing a sector monitoring system to enable the DA to better link its agricultural programs and projects to overall sector performance. This provides a good model and framework within which to further refine and implement the performance indicator system developed through this study and outlined below. None of these efforts, however, are aimed at developing an operational performance indicator system for the entire RD/NRM sector, underpinned by analysis of the relevant trends and by corresponding While this study is NOT a RD strategy study, it is understood that assessing the implementation of the RD strategies and the implied performance of the relevant agencies will provide an improved and objectivc basis for refining operational strategies and implementation modalities to achieve the desired outcomes and impacts of broad-based rural development and reduced poverty. Accordingly, an indirect result of the present study is to contribute to the updating of operational RD/NRM strategies and enhanced implementation modalities and performance indicator system. The CPBO recently wrote an excellent Policy Brief outlining the general rationale and approach: "Legislative Oversight: A Proposed Conceptual Framework and Methodology", by Dr. R. Miral,and V. Canicosa. CPBO, Policy Brief (No. 9905. May 1999). 3 performnance indicators, and linking priority strategies with implementation performance outcomes/ results and the implied activities. The availability of this performanice system is also expected to enhance the capacity and efforts of the World Bank and other interested donors to better monitor the effectiveness and outcomes of their respective strategies and assistance programs for RD/NRM.5 The study team is aware of the complexity and pathbreaking nature of this study, and has therefore focused its efforts on developing a phased program, beginning with the conceptual and operational framework. The Chairman of the GOP's Inter-Agency Rural Sector Planning Committee (PC) for the MTPDP has directed the PC to further develop the operational plan as part of a phased performance indicators system. The PC is charged with the monitoring of the implementation of the agriculture/agrarian reform/NRM component of the MTPDP. C) Participatory A roach 1.6 Setting up an effective and relevant rural strategy monitoring system requires the participation of key members of civil society as active partners in improving plan implementation and refining strategic interventions. Accordingly, from the outset, the study design and implementation process has included the active participation by key stakeholders in RD/NRM. The underlying analyses for each of these performance indicator areas were prepared by a study team comprised primarily of Filipino RD/NRM specialists/researchers who are familiar with these issues and who also are providing policy/strategy advice to key decision makers and implementors. These analyses and the consequent recommendations have been reviewed by the GOP The main counterpart of the study is the National Economic Development Authority (NEDA) Agriculture staff. The GOP's inter-agency Rural Sector Planning Committee for the MTPDP, which has been charged with the monitoring of the implementation of the agriculture/agrarian reform/NRM component of the MTPDP, is providing overall guidance in the study design and process. Another innovative feature of the study to promote meaningful participation was the convening of three Regional RD/NRM stakeholder workshops6 from the outset. The outputs of the initial stakeholder consultations workshops, referred hereafter as "Phase I", provided valuable inputs to study team members in the conduct of their analyses and in identifying strategic performance indicators. Follow-up regional stakeholder I The World Bank developed an initial developing country rural development strategy in 1996 ("Rural Development: From Vision to Action"). To assess the progress in implementing this strategy, as well as its role in such implementation, the Bank is carrying out six country-level case studies (including that for the Philippines). It also developed a concept paper outlining a "rural scorecard" which aims to develop a core set of performance indicators, and measured by a composite index of "rural well-being", based on five key outcome indicators ("Monitoring Rural Well-Being: A Rural Score Card", N. Okidegbe, Rural Development Dept.. World Bank, February, 2000). The present study is one of the initial attempts to apply the principles outlined in this concept paper to a specific country, within its own strategy framework. This complements the traditional approach of having M&E system for investments projects, whereas there has been negligible attention to monitoring the implementation of RD strategies, even as part of many agricultural sector adjustment programs in the 1980s and 1990s, and agricultural sector investment programs since the mid-1990s. 6 The study team was able to mobilize additional funding from the Bank's Participation Fund to support these regional workshops, spread over two phases (covering Davao. Cebu and Manila, with Phase I held in October, 1999, and Phase 2 was carried out in March. 2000 involving primarily the same participants). These participants were carefully selected to represent various rural sector stakeholder perspectives and included the following major stakeholder groups: representatives from primary stakeholder groups (e.g., fisherfolk, farmer groups. indigenous peoples, women), national and regional-based representatives from national and LGU agencies, and the private sector. Cross-country experience suggests that securing meaningful participation, especially primary stakeholders. in the study design and implementation stages will enhance the quality and relevance of studies and implementation of recommendations. 4 workshops were recently completed as part of Phase 2. These workshops elicited valuable feedback on the draft report's findings and recommendations from the RD/NRM stakeholders, most of who were the same participants as in Phase 1. Already, it is evident that these workshops have prove a valuable source of feedback and consensus on assessing trends, and prioritizing and sharpening strategies and performance indicators. Their participants, together with the Planning Committee members, directly contributed to the content of this report. They also committed themselves to participate in the operationalization and implementation of the proposed monitoring system. Annex 1 provides a summary of the methodology and outcomes of the Phases I & 2 stakeholder workshops. In the formulation of the study's recommended performance indicator system, the study team established collaborative arrangements with the relevant initiatives outlined in para. 1.5, to broaden the participatory and sustainable approaches used in their phased institutionalization. 1.7 In addition, the study team had endeavored to consult key policy makers/implementers during the course of preparing the draft report. Among other activities, it conducted informal focused group discussions of selected initial draft working papers. The feedback from such activities had provided valuable inputs in enhancing the relevance and focus of the recommendations, and reportedly, had helped to trigger key actions involving a number of lagging strategies. D) Report Structure 1.8 Chapter 2 summarizes the main features and a preliminary assessment of the MTPDP for the rural sector. Chapter 3 contains a discussion of the RD/NRM trends, classified under each of the seven performance indicator areas. It also details a proposed RD/NRM strategic performance monitoring framework, focusing on the formulation of priority performance indicators for the rural sector within the framework of a consolidated RD/NRM strategy and seven RD/NRM performance indicator areas. The final section of Chapter 3 outlines a suggested phased action plan for institutionalizing the monitoring system by relevant agencies. Table I of the Executive Summary outlines the conceptual framework of the recommended "primary" performance indicators, including the priority strategies, trends, and targets. Table 4.1 provides an operational framework for the performance indicator system which includes the primary outcomes and corresponding result indicators which could be attributed to short-term actions by implementing agencies. The framework also includes the required the frequency of data collection, and the roles of the institutions involved. The longer list of performance indicators is shown in Annex 3, Table 1. Annex 2. Tables 1-10 provide summary matrices/tables for each of the study's seven performance indicator areas and their components: key issues, prioritized strategies, performance indicators, and institutional arrangements. To the extent feasible, the report's recommendations are presented according to whether they address RD/NRM policy/strategy issues or GOP management/performance issues, although in some cases these are closely inter-related and difficult to completely separate from each other. CHAPTER 2: THE PHILIPPINES RURAL SECTOR: BACKGROUND & OVERVIEW OF THE MTPDP A) Background 2.1 Importance and Performance of RD/NRM. Although data on the contribution of the rural sector to the national economy are not available, the contribution of the agricultural sector is a good proxy. In 1998, the sector, excluding agricultural-based industry, accounted for about 17% of the country's Gross Domestic Product (GDP) and employed about 40% of the work force. When all economic activities related to agro-processing and the supply of non-farm agricultural inputs are included, the agricultural sector, as broadly defined, accounts for about two-thirds of the labor force and 40% of the GDP (Annexes 5-15 includes additional background information on most of the major subsectors). The sector, therefore, has a strategic role in the country's overall economic development through its strong growth linkage effects as a source of food and raw material supply to the rest of the economy, and as a source of demand for non-agricultural inputs and consumer goods and services. 2.2 The crops subsector accounted for 58% of the agricultural gross value added (GVA) for the period 1990-1998, followed by the livestock (20%), fisheries (20%), and forestry (2%) subsectors. Excluding forestry, the rate of growth of agriculture slowed from 5.8% a year in the 1970-80 period to 1.7 % and 1.9% per annum in 1980-89 and 1990-98 periods. This decline has mainly been the result of the erratic and low growth rates of the traditional crops rice, corn, and coconut, all of which account for the more substantial portion of the agricultural GVA. Crops accounted for only 7% of the total agricultural sector growth in the 1990s. In contrast, livestock, poultry, and fisheries accounted for 35%, 36.5%, and 21.5% of the growth of the sector in the same decade, respectively. 2.3 The agricultural sector growth rates are well below the high population growth rate of about 2.7%, resulting in declining per capita growth rates. While the growth rate in 1999 was about 6.6%, this followed a negative growth of about 6 % in 1998, and was primarily due to favorable weather conditions. 2.4 Rural Poverty. Poverty in the Philippines is predominantly a rural problem. The rural poor made up about 44 % of the rural population and accounted for nearly two-thirds of the poor nationwide in 1997. Rural poverty is greatest among landless workers and small farmers. Of the rural households employed in agriculture, about 63% have incomes below the poverty line. In comparison, households employed in rural industry and service have a poverty incidence of nearly 40%. There are also large regional differences in rural poverty incidence. Poverty is particularly widespread in the Cordillera Administrative region, as well as in Mindanao which alone accounts for nearly a third of the country's poor. The low and erratic agricultural growth rates have resulted in a meager decline in the incidence in rural poverty during the 1990s, and an increase in the absolute number of poor rural households. B) MTPDP: Goals, Strategies, Key Result Areas 2.5 Overview. In July 1999, the GOP approved its latest MTPDP with the avowed objective of eradicating poverty, especially in the rural areas, through sustainable rural development. The main RD objectives to be addressed in the next six years are rural poverty reduction, food security, 6 and agricultural modernization. Central to achieving these objectives are the agriculture, agrarian reform, and natural resources sectors whose growth rates have lagged behind over the last six years, despite the implementation of some policy reforms and many rural development programs and projects during the 1980s and 1990s. 2.6 The overarching goal set forth in the new MTPDP is the attainment of sustainable rural development over the next six years (1999- 2004). This goal is to be achieved through the following development strategies: (a) modernization of the Philippine agriculture and fisheries sector; (b) diversification of the rural economy; (c) sound practices of resource use efficiency and sustainability; and (d) adoption of the 'Convergence Framework" as the innovative institutional framework for sustainable rural development. 2.7 To pursue these strategies, the new MTPDP has identified five (5) key result areas (KRAs), namely: > productivity and competitiveness enhancement; > diversification of production and resource use; access to land and other productive resources; , promoting environmental sustainability; and > rationalizing institutional structures and empowerment of stakeholders. 2.8 Some of the main rural sector targets presented in the new MTPDP include: an average growth rate of 3.9 to 4.7% for the agriculture sector over the plan period; > increase in the total area of irrigated lands from 43 to 54% of the total irrigable area; > completion by 2004 of the distribution of the remaining 3.3 million hectares of lands under the Comprehensive Agrarian Reform Program (CARP); ;0 expansion of the Agrarian Reform Communities (ARCs) and increased access of Agrarian Reform Beneficiaries (ARBs) to support services to 60%; > increase in the allocation for agricultural R & D to I% of the agricultural GVA in 2001; > protection and management of 6 million hectares of forestlands; > implementation of integrated coastal management (ICM) by 250 LGUs along 6,000 kms of coast line; THE MODERNIZATION OF THE PHILIPPINE AGRICULTURAL AND FISHERIES SECTOR 2.9 The MTPDP envision (a) the transformation of subsistence farmers to entrepreneurs; (b) a rural sector characterized by increased productivity; and (c) broader and more intensified management of natural resources through community-based approaches and more appropriate resource pricing for natural resource users. The modernization of the agriculture and fisheries sector shall have three principal features: (a) dynamism, innovation and adaptability to change; (b) high productivity and competitiveness; and (c) emphasis on enterprising tillers with informed choices on the type of technology to use, crops to raise, and markets to tap for their products. 2.10 To realize this vision for the rural sector, the MTPDP aims to diversify the rural economy through alternative employment opportunities in farm and non-farm activities and to increase the sector's productivity and production through modern technologies and sustainable farm practices. 7 It also aims to promote and expand opportunities for equitable access to productive assets (i.e. land); and empower sector stakeholders and provide stronger institutional structures through improved capacity building and extension services. Finally, it aims to remove policy biases against sector competitiveness; mobilize financial resources; enhance private sector participation; and promote environmentally-sound practices. THE "CONVERGENCE FRAMEWORK" FOR SUSTAINABLE RURAL DEVELOPMENT 2.11 The effective implementation of the new MTPDP's RD strategy largely depends on the effectiveness and efficiency of the institutions and agencies responsible for the sector. Under the MTPDP, two key areas for institutional reform and change are highlighted: (a) the overall relationship of the key sector stakeholders and agencies, i.e. national agencies, LGUs, private sector, communities and civil society, under a devolved set-up; and (b) integrated and coordinated roles and responsibilities of the primary agencies managing the development of the sector - the Departments of Agriculture (DA) , Agrarian Reform (DAR), and Environment and Natural Resources (DENR). 2.12 Under the MTPDP, the national government is expected to assume an indirect, non- interventionist role in designing and implementing development initiatives in the rural areas. It will intervene only in cases of market failures and distortions, when demand for service in areas not covered by the private sector, and equity issues, need advocacy and attention. More specifically, it will set national policies and over-all regulatory frameworks; design programs of national concern with potential for LGU replications; set relevant technical standards; provide technical assistance to LGUs; and, together with the LGUs, jointly monitor and evaluate the implementation and impact of national programs. 2.13 The LGUs are the focal points for the prioritization and provision of localized services and development assistance; design and implementation of specific development programs; and mobilization of resources and investments for local projects. The civil society, for its part, would play the crucial role of facilitating partnerships in local governance among NGAs, LGUs, communities, and the private sector as well as in strengthening capacities of local communities to enhance their participation in the overall development of the rural sector. 2.14 The MTPDP identifies a "convergence framework" for integrating and joining the complimentary initiatives among the principal government institutions in the rural sector. This framework is the 'principal modality' to attain sustainable rural development over the next six years. Under the convergence framework, the DENR will carry out a holistic management of the "life forces" of water, soil, air, flora and fauna through the integrated management of watersheds, forests and soils. The DA will put into productive use the regenerative life forces nurtured by the DENR. Finally, the DAR will ensure the equitable sharing/distribution of access to, and benefits of, development. THE FIVE (5) KEY RESULT AREAS (KRAS) FOR THE RURAL SECTOR 2.15 The MTPDP's five KRAs, which will guide the implementation of the RD strategy, are summarized below. Further details on the assessment of these KRAs are provided in Annex 4, including relevant feedback from the Phase 1 stakeholder workshops. 8 2.16 KRA 1: Productivity and competitiveness enhancement: This includes two general policy thrusts: (a) ensuring an environment conducive for improving sector competitiveness; and (b) enhancing and improving the delivery of support services. 2.17 KRA 2: Diversification of production and resource use: The main elements of this KRA include (a) broadening the research agenda by focusing on integrated farming, resource management, and market-oriented systems; (b) strengthening agriculture and industry linkages; and (c) expanding planning approaches from terrestrial to marine and coastal areas. 2.18 KRA 3: Access to land and other productive resources. This KRA involves two main strategies: expediting the completion of the CARP and broadening options to enhance land access for non-CARP beneficiaries. 2.19 KRA 4: Promoting environmental sustainability. The MTPDP proposed eleven (11) major policy initiatives to promote environmental sustainability in the sector. A separate set of policy initiatives under KRA 4 covers the six (6) sectoral resource areas of forestry, land, freshwater, coastal and marine, biodiversity and protected areas, and minerals. 2.20 KRA 5: Rationalizing institutional structures and empowerment of stakeholders. This includes two major policy initiatives - to rationalize institutional structures in the sector and to strengthen the institutional capabilities of sector stakeholders. 2.21 Finally, the MTPDP outlined other policies and strategies to support the five KRAs for the rural sector. These are the adoption of a spatially oriented approach to sector planning and development, and the integration of gender equity and sensitivities in the formulation of sector policies, strategies, and programs and projects in the MTDPD. C) MTPDP: Preliminary Assessment & Emerging Priorities 2.22 While assessing the linkages among the MTPDP strategic objectives, supporting strategies, KRAs, and priority inputs/activities, the study team identified five key themes which reflect relevant feedback from the Phase I stakeholder consultations and which merit further attention during the implementation phase (Further details are contained in Annex 4). These themes are (a) Need to correlate MTPDP objectives and strategies with priority inputs; (b) Need to prioritize inputs with MTPDP objectives and strategic outcomes; (c) Need for a stronger sense of integration and complementation; (d) Need for more program, sustainable, system-based approaches, rather than short-term. high impact, project-based strategies; and (e) Need to shift (or better balance) rural support programs from infrastructure-based to social (human) capital formation inputs. 2.23 The key issues in the country's rural development have been clearly painted in the MTPDP. The solutions or approaches identified pursue a longer view towards the resolution of these issues. Towards these ends, it is expected that the strategies and inputs aimed at addressing these issues should go beyond rhetoric and contain concrete, appropriate and rationale methodologies and mechanisms for action. 9 2.24 However, a good part of the strategic policies listed in the KRAs of the MTPDP are broad declarations and repetitions of previously stated programs and strategies contained in previous plans. Indeed, the KRAs under the Angat Pinoy 2004 Plan are reformulations, if not repetitions, of previous KRAs and strategies of past plans. A clear example is the productivity and competitiveness objectives in the KRA and the subsequent program of upgrading and improving post-harvest facilities and infrastructure in the sector. While these are indeed important, if not fundamental, requirements of any rural development strategy, these items have been the staple menu of previous plans. 2.25 Indeed, rural infrastructure and public works as key elements of RD strategies in previous MTPDPs have become a sort of a 'panacea' to the problems in the rural sector. In the consultations, while sector stakeholders did prioritize the need for post-harvest facilities and rural infrastructure, they similarly raised the need for evaluating and assessing the performance of previous rural sector plans that included the same set of proposed strategies and programs contained in the new plan. 2.26 Likewise, the recognition of the need to prioritize other types of services and inputs, particularly on social capital formation such as health, education, capability building, entrepreneurship, human resource development and gender, has been growing and creating a demand for integrating 'non-infrastructure' based programs in the rural sector strategy. In the MTPDP, these social capital formation programs have yet to achieve equal prominence with traditional types of infrastructure and technology-based services and continue to receive inadequate attention in investment programs. CHAPTER 3: RD/NRM STRATEGIES: UPDATED FRAMEWORK AND ASSESSMENT OF TRENDS AND PRIORITIES A) RD Strategy Framework: A Holistic Approach 3.1 What is RD? 7 The migration of unprepared rural household members to urban areas has not solved, and will not solve, rural poverty. Rural poverty needs to be addressed by appropriate programs that improve rural living standards, increase employment opportunities for residents of rural areas, and prepare the rural youth for future integration into the urban labor force. A WB Rural Development Strategy paper on E. Asia & Pacific states that: "Rural development thus includes, inter alia, the provision of social and physical infrastructure, the provision of financial services in non urban areas, non-farm and small-medium enterprises activities in rural communities and market towns that are more closely linked to the rural economy than they are to the economies of larger urban cities, as well as the development of traditional rural sectors, such as agriculture and natural resource management ......... The conclusion is that programs to reduce rural poverty must be comprehensive and must include the views of the poor and the actions of local communities, civil society organizations, central and local government, bilateral and multilateral donors acting in partnership. When rural development interventions are taken holistically and extend beyond the traditional sectors, there appears to be a synergistic outcome" (WB, Bale, p. 8). 3.2 Overview of a Philippines RD Strategy Framework. Taking into account a holistic approach to RD, the five KRAs of the MTPDP, the WB's CAS, and relevant inputs from the stakeholder consultations, below is a synthesized RD strategy framework comprised of four broad elements. These emerging elements also provide a framework for the proposed rural sector performance indicators developed by the study team (ref. paras. 3.3 - 3.5). The four strategic elements, which are closely correlated with the KRAs, can be summarized as follows: (a) Deepen and implement key structural reforms to help ensure a sustained, higher, and broad- based growth of agriculture, by removing policy and institutional distortions and making the sector more efficient and internationally more competitive (refers to KRAs 1, 2, and 3), with priority actions including: ' For rice: replacing quantitative restrictions/QRs with appropriate and adjustable tariff levels which will be reduced over time, as the rice sector is supported with productivity enhancing measures; restructuring the National Food Authority (NFA) and separating its proprietary and regulatory roles; and devising and implementing more effective rice targeting approaches to directly benefit low income consumers; > For corn/livestock: reducing tariff protection and adopting uniform tariffs; and designing support programs for marginal corn farmers; 7This section draws on and adapts to the Philippine case relevant points from a recent RD Strategy Paper prepared by the World Bank ("The Rural Poor: A Thematic Approach", M. Bale, E. Asia and Pacific Region, December, 1999). 11 For sugar: reducing trade protection in support of the food processing industry and providing appropriate investment incentives for modernizing the industry's production and milling operations; In forest management: developing, stabilizing, and operationalizing forestry policies and community-based resource management approaches, including tenurial instruments for upland and coastal populations; In land use: developing and implementing a comprehensive land use policy; and developing, approving, and implementing improved land tax policies and land administration and management (especially improved land security); and For the CARP: expediting funding and implementation based on reformed modalities of land reform; and achieving enhanced productivity increases among the agrarian reform beneficiaries and reasonable progress in attaining social justice. (b) Facilitate increased and prioritized strategic public and private investments (refers to KRAs 1, 2, and 3), with priority actions including: Providing priority support for smallholder productivity enhancement programs, including institutional and funding reforms involving research and extension systems, and support for rural infrastructure, especially rural roads and communal irrigation systems; Providing essential social rural infrastructure, particularly rural primary, secondary, and technical educational institutions, water supply systems, and health clinics/services; Promoting agro-based diversification toward higher value crops and value-added processing; ) Increasing funding to support the CARP's land acquisition, complemented by reforms in CARP modalities, land taxes, and community-driven and decentralized approaches Developing and implementing effective targeting programs for disadvantaged rural groups and provinces/municipalities, including a rice price targeting program for the urban poor and the landless; and Expanding access to rural finance, with focus on the strengthening of rural financial intermediation, the consolidation of rural programs, the promotion of market-based interest rates, the implementation of a savings-led approach to microfinance, and enhanced cost- effectiveness of rural financial intermediation; (c) Improve natural resource management (refers to KRA 4), with priority actions including: Supporting community-based natural resource management programs that would increase and sustain household incomes, increase and stabilize the supply of goods and services from natural resources, promote sustainable forest management, and enhance the decentralization of the management of protected areas; and Supporting a decentralized and integrated approach to the protection, management, and rehabilitation of coastal resources. (d) Strengthen institutional framework, capacity and performance (refers to KRA 5), with priority actions including: 12 > Refining and implementing the RD Convergence Strategy with clearer definitions of the roles and responsibilities of the DENR, DA, and DAR, and with a greater role for LGUs, and NGOs/ POs; and > Strengthening strategic programs/activities for a more effective devolution and decentralization of rural development, such activities to include capacity building programs for LGUs; and rationalizing (and expanding, as relevant) cost sharing arrangements between NGAs/LGUs/ communities, in accordance with the intent of the Local Government Code. B) Strategic RD/NRM Performance Indicator Areas: Trends, Issues, Strategies, and Priority Performance Indicators 3.3 Within the above mentioned RD/NRM strategy framework, and in consultation with the key stakeholders, the study team's core work involved assessing the RD/NRM trends and implementation performance of priority strategies, and developing strategic performance indicators for the Philippines' RD/NRM.' The indicators have been grouped according to seven strategic performance indicator areas which generally correspond to the thrusts of the KRAs of the MTPDP and the synthesized RD strategy framework outlined in para. 3.2. It was not possible to achieve a 1: 1 correspondence between the KRAs and the broader strategic performance indicator areas, and there is some inevitable overlap of these frameworks due to varying perspectives on cross-cutting issues (e.g., food security and rural poverty). Figure I illustrates these overlap and close inter- relationships. These indicator groupings and their component indicators (prioritized by "primary" and "secondary") have been chosen to assess progress in achieving the Philippines RD goals and strategies, with an emphasis on showing outcomes rather than processes, and the direction of change over time rather than statistical comparisons per se. The outcome indicators would complement the traditional, but inadequate, sectoral indicators (e.g.. agricultural production, education levels, etc.) for assessing the progress of rural development. It is also recognized that there are a variety of performance indicators systems which should be used in a complementary manner- for budgct monitoring, sector monitoring and project monitoring. Accordingly, the seven categories of the performance indicators should be viewed as a means to focus and organize the suggested priority indicators, which can easily be correlated with the KRAs and the above updated RD strategy framework: (2) Synthesized (-K ATs RDINRM Strategy Elements~ == ---- =KRAs (Performance Indicator Areas: l+2)===== Figure 3.1: Illustrative Overlay of MTPDP/KRAs and Synthesized RD/NRM Strategies 8 Nearly all of the study team members are recognized Filipino experts/analysts involving a particular strategic indicator area, and therefore each analyst developed the initial indicators based on cumulative past and on-going analytical work and implementation experiences of the relevant subject. 13 3.4 Some of the most relevant questions to ask regarding these indicators over time are whether the value has increased/decreased; and whether there is a pattern of improvement/deterioration. Clear and timely answers to these key questions could help determine needed policy/implementation interventions.9 The suggested performance indicators are designed to be further operationalized and used by the relevant agencies as a management tool to facilitate the monitoring and implementation of priority MTPDP strategies. These performance indicators could also be used by the civil society and donor agencies. The process of determining the priority indicators highlighted several underlying weaknesses in data systems and institutional roles and arrangements for the collection, analysis, and monitoring of, and follow up on, the indicators. These data system weaknesses and recommended improvements are summarized in para. 4.17 (c) and Annex 3, Tables 2 and 3. Two of the study's main conclusions are that: (a) improving information feedback to key decision-makers and implementors will enhance the effectiveness of the rural policies and strategies and of the GOP's performance in implementing its RD strategies; and (b) there is a need to address the underlying policy and institutional constraints and rigidities to establishing and using this type of strategy performance monitoring. 3.5 The section below summarizes the study team's papers (Annexes 5-15) according to each of these seven strategic performance indicator areas. Each section discusses main trends, emerging issues, improved priority strategies, and the suggested priority performance indicators. The trend analysis provided an improved foundation for the selection of appropriate yardsticks, and the indicators were used to facilitate discussions of recent developments. Accordingly, an important premise of this study is that defining sound performance indicators means that there is a need to link prioritized RD/NRM policies and strategies, programs, and expected results/outcomes. Giving clear definition to some of the policies means recommending ways that general policy initiatives and thrusts can be translated into "doable" programs. To the extent feasible, the study team has attempted to show a distinction between recommendations involving RD/NRM strategies on the one hand, and action-oriented recommendations involving public sector management performance and performance indicators. 3.6 The last section also proposes a phased approach to institutionalizing an operational framework for a RD/NRM performance indicator system. The linkages with the KRAs are shown in parenthesis, and further details are provided in the study team's discussion papers contained in Annexes 5-15. To facilitate the process of reaching a reasonable consensus on the prioity strategic 9 The WB (headquarters) has developed a "rural scorecard" for all developing countries in terms of a conceptual framework and an initial quantified composite index of "rural well being", based on 11 indicators involving the following 5 outcomes: proportion of rural population with below poverty lcvels reduced; social and physical well-being improvcd; enhanced human development; increased gender equity; enhanced food security. The composite index assumes equal weights for the various indicators, and uses available data. Figure 3.2 shows the comparison for the Philippines vis-a- vis other E. Asia and Pacific region developing countries, showing that the level and trends of the Philippines index are well below other countries. While having this index as a reference point, the study team decided that in the Philippines case it would be more appropriate for GOP and other stakeholders to develop its own performance indicator system which is linked cxplicitly to the Philippines RD/NRM strategies as outlined in the MTPDP, supported by other priority strategies. It is suggested that the implementation phase of the performance indicator monitoring system attempt to formulate an appropriate methodology and basis for a quantifiable Philippines rural scorecard. This would provide an additional refinement to its sector management tools in order to facilitate focused discussions and improved implementation performance and outcomes, in addition to developing short-term result performance indicators. 14 performance indicators, during the course of finalizing this report, the study team subjected the report's findings and recommendations to further consultations with the MTPDP Planning Committee and strategically selected RD/NRM stakeholders convened in a Phase 2 regional stakeholder workshops. These consultations provided valuable inputs to prioritizing and refining the RD/NRM strategies and performance indicators. Annex 1 includes the summary table which consolidates the outcome of the Phase 2 stakeholder workshops (showing primary and secondary indicators). These seven performance indicator areas are as follows (and links with the MTPDP KRAs): > Agricultural Growth and Performance (KRA 1. 2); > Rural Poverty (all KRAs) > Food Security (focus on rice) (KRAs 1, 5) > Agrarian Reform (KRA 3) ; Rural Sector Investments (all KRAs) * Public Sector (includes rural roads and a preliminary assessment of the medium term investment plan) - Private Sector e Rural Finance t Natural Resource Management (KRA 4) > Institutional Arrangements, Roles and Performance (KRA 5) Figure 3.2: Rural WVell-Being - Score Card Results for Philippines 118 116 114 112 110 -n 1018 - 106 104 102 100 98 1990 1991 1992 1993 1994 1995 1996 1997 1998 Years 00 Philipinesift t0S0A E0ast Asia Aand PaScific:;; (1) Agricultural Growth and Performance: (Annex 5) 3.7 Main Trends and Emerging Issues. The agricultural sector is pivotal in the structure of the Philippine national economy. Rapid agricultural growth is key to achieving the country's 15 developmental and social goals. The performance of the agricultural sector is also strategically important in the country's food security and poverty alleviation efforts since a large majority of the poor are located in the rural sector and depend directly on agriculture-related economic activities for their major source of livelihood. 3.8 Unfortunately, the performance of the agriculture sector has been quite erratic and poor since the 1980s. While it performed well relative to other Asian countries in the 1970s, it has had one of the Region's lowest average growth rates in agricultural gross value added (GVA) and exports over the past two decades. The sharp increase in the agricultural GVA in 1999 was due mostly to better weather conditions, after a particularly long and severe drought brought on by the El Nifio phenomenon in 1997 and 1998. Except for livestock, poultry and a few crops such as mangoes and other non-traditional crops, the production of most crops and fisheries grew at rates below that of population growth. (See Table 3.1). Table 3.1 -Philippines: Growth Rates of Real Gross Value Added in Agriculture, Fishery and Forestry, 1980-1999 (in percent per annum) ITEM 1980-90 1990-98 1998 1999 Crops 0.5 1.1 -12.9 10.6 Palay 2.6 1.1 -24.1 37.8 Corn 3.5 (2.2) -11.8 19.9 Coconut (5.2) (0.3) -13.1 -7.4 Sugarcane (5.9) 0.6 -13.8 22.7 Banana (3.4) 1.9 -5.8 6.7 Other Crops 1.2 2.1 -5.8 -4.5 Livestock 5.0 4.3 4.1 4.7 Poultry 4.1 6.0 -0.3 0 Agri. Act. and Services 3.7 (0.1) -5.9 1.6 Fishery 2.4 1.4 1.2 2.5 Agriculture and Fishery 1.7 1.9 -6.6 6.7 (excluding Forestry) Forestry Na Na -19.3 -16.7 Agriculture, Fishery 1.0** 1.5** -6.6 6.6 And Forestry Source of basic data: NSCB ** World Bank data 3.9 The fact that the growth rates of the agricultural gross value added and exports have lagged behind those of other developing countries suggests that the country has been losing its competitive advantage in the sector. Indeed, measures of revealed comparative advantage have declined sharply for agriculture as a whole, and for all major agricultural exports. By the early 1990's, the agricultural sector has ceased to be a net earner of foreign exchange. 16 3.10 Agricultural imports (including manufactured agricultural imports) rose from just 30% of agricultural exports in 1980, to more than 150% by the late 1990s. The composition of agricultural exports changed as fishery products and fruits and vegetables grew rapidly up to the mid- 1990's and together now constitute 40-45% of total exports. Despite the growth in the exports of these items, total export growth in the 1990s declined relative to the 1980s. The share of coconut products stayed at about 35-40%; but exports of sugar, which was second only to coconut as a leading agricultural export in the 1980s, dropped dramatically in the 1 990s. The share of processed products (mainly coconut oil, prepared/preserved fishery, fruits and vegetables) relative to primary agricultural exports expanded. 3.11 Declining competitive advantage of the sector is also evident from the increasing trend in protection among the major import-competing agricultural commodities, mostly staples. This policy highly distorts price incentives (especially protected rice prices) which, in turn, misallocate resources, thereby lowering agricultural and overall economic growth. High food prices raise the clamor for higher wages, thus reducing the country's competitive advantages. Moreover, high food prices (especially of rice) hurt the real incomes and food security of the majority of the poor, including fisherfolks, non-rice and corn farmers, landless rural households, and the urban poor. The poor are net buyers of food, and the cost of food constitutes a high proportion of their total expenditures. 3.12 Increasing price protection over import-competing commodities is likewise consistent with the apparent decrease in the measure of agriculture's trade openness (i.e., imports plus exports as ratio of the GVA), mainly due to the slow growth of exports. It lowers incentives for the production of exportable commodities relative to all non-tradeables and relative to the highly protected agricultural commodities competing with scarce land and capital resources. Agricultural imports, as a consequence, grew steadily over the past two decades led by wheat, dairy products, and agricultural inputs such as animal feedstuffs and fertilizers. Ironically, imports of sugar, rice, and corn have grown significantly in recent years despite increasing trade protection. 3.13 Whether and to what extent the declining trend in the competitive advantage of agriculture will be reversed and such reversal sustained depend critically on the rate of productivity growth. Table 3.2 shows the decline in crop productivity growth rates during the 1990s, which is a major factor explaining low agricultural sector growth rates. Over the past two decades, labor productivity has virtually stagnated while land productivity per hectare incrcased at a much lower pace than in the 1960s and 1970s. The set of policies and cxpenditure programs identified in the MTPDP addresses this concern. These policies include the key elements for increasing productivity and overall efficiency in the sector, i.e., an incentive structure that promotes efficient allocation of resources; an expenditure program that provides adequate public goods and support services, property rights, and other institutional structure that allow the efficient operation of output, land, and other markets; and a bureaucracy and governance that is transparent, predictable, accountable, and participatory. 17 Table 3.2: Yield Performance* of Selected Crops, 1980-98 (in percent per annum) Commodity 1980-90 1990-98 1998 Palay 2.1 -0.1 -8.0 Corn 2.9 3.0 2.2 Copra 0.9 -0.4 -2.2 Tobacco 0.4 0.9 17.0 Sugarcane 2.4 -5.4 -11.6 Pineapple 5.5 3.8 -8.3 Mango 0.6 6.1 -8.1 Banana -1.4 1.4 -5.3 Coffee 0.9 -2.1 -5.7 Rubber 4.2 1.8 2.6 Onion 3.8 -3.9 -4.4 Abaca 0.7 0.9 12.4 * computed using ordinary least squares mnethod exceptfor 1998 Note: 1999 data not yet available; Source of basic data: BAS, UCAP (for copra) 3.14 The more complete measure of productivity is total factor productivity which relates the growth of output to the growth of total inputs, including not only labor and land, but also other capital (machine, animal, trees, etc.) and current inputs (fertilizer, agricultural chemicals, feeds, etc.). Because of limited data availability, however, total factor productivity cannot as yet be computed with a reasonable degree of accuracy, especially for the recent years. 3.15 Annex 2. Table 1 outlines the key indicators proposed to monitor the impact of the MTPDP on the economic performance of agriculture. These include: growth rates at aggregate levels by major commodities, which factor in yields and total factor productivity; relevant measures of revealed competitive advantage, trade openness. and price protection; the ratio of non-traditional commodities to total gross value added as a measure of diversification; and measures of dispersion of agricultural protection across commodities. (2) Rural Poverty (Annex 6)10 3.16 Poverty estimates based on official measurement practice suggest that rural poverty is not only alarmingly high - with one-half of the rural population deemed poor - but also seemingly unresponsive to overall economic growth. The relatively high GDP growth during 1994-97 hardly trickled to the rural poor. Indeed the estimates suggest that their number in fact increased from 18.0 million in 1994 to 19.5 million in 1997 (see Table 3.3). 3.17 The Estrada Administration recognizes the imperative of bringing about broad-based rural development to win the war against poverty. But whether or not it succeeds in winning this war 10 For further details on a recently completed Poverty Study, see: Philippines Poverth Assessment, April 28, 2000, World Bank. Washington D.C.) 18 depends largely on its political commitment to mobilize resources and to reform institutions and policies for equitable growth and rural development. 3.18 At present, a credible monitoring system linking policies and programs with rural welfare outcomes is not in place. Such a system requires a clear understanding of (i) economic and institutional constraints to broad-based rural development, (ii) policies and programs needed to effectively address these constraints, and (iii) household responses, especially by the poor, to these policies and programs. By implication, it also involves access to good analysis and reliable, current, and transparent data. 3.19 The current practice of generating "rural performance" indicators is technically flawed as to be useful in informing actual achievements (or failures) in the war against poverty. The first problem has to do with the shifting of the definition of "rural areas" over time, thereby systematically creating a downward bias on rural performance indicators. The second pertains to spatial (and intertemporal) inconsistency in published poverty profiles. 3.20 The physical area of the "rural sector" is, almost by definition, shifting over time. As population grows and/or economic activity expands, an initially rural area will sooner or later be classified as urban. While this may not pose a problem in measuring, say, urbanization trends, it tends to create a systematic downward bias on rural performance indicators, including rural poverty, employment, and household income. 3.21 Assuming that the main yardstick against which outcomes of national government policy are judged is the reduction of absolute poverty, it is imperative that the poverty measurement and monitoring system can track well the changes in absolute poverty over time and across administrative areas of the country. The present system falls short of this requirement. It is dependent on poverty norms that are quite sensitive to spatial differences - and to changes over time - in overall living standards, as well as on current household income as a broad proxy for household welfare. It is thus unsuitable for either national poverty monitoring or assessing comparative performance across regions or areas of the country. The poverty lines need to be anchored on the consistency feature of a poverty norm. For a broad measure of household welfare, consumption expenditure is preferable to income from both conceptual and empirical grounds. The current (official) practice may, however, still be appropriate for local poverty monitoring, especially in a decentralized governance regime. In this regime, LGUs define their own poverty standards, given their development priorities and general living conditions. 3.22 Conventional money-based indicators of rural welfare outcomes need to be complemented by non-money indicators, since there is usually no guarantee that an improvement in the former, including the preferred expenditure-based poverty measures suggested in this paper, will always mean an improvement in the latter. The choice of indicators has to be guided by a clear understanding of the objective of monitoring, as well as fiscal constraint. In this regard, rural welfare indicators should not be equated with indicators of government agency performance. The former are independent of the structure of government organization and authority and their evolution does not depend exclusively on government action (or inaction). 3.23 High on the list of indicators of rural welfare outcomes should be: (I) expenditure-based poverty incidence; (2) education indicators, namely, functional literacy, and primary and high- 19 school enrolment rates; (3) health and nutrition indicators, namely infant mortality rate, child malnutrition rate, proportion of households with access to safe water, and proportion of households with access to health care; (4) rural non-farm income as measured by the share of rural non-farm income in total household income; and (5) food expenditure as measured by the share of food in total household expenditure. The current statistical system supports the generation of these indicators for each province of the country. In addition, it would also be useful to complement this performance system with the work involving the updating of the UNDP-sponsored "Human Development Index".`" (Annex 3 includes some of the summary tables for the Philippines HDI). It is important to ensure that the design of the performance indicator system strengthens the linkages between poverty indicators and cost-effective interventions. 3.24 An effective monitoring and evaluation system focused on rural welfare outcomes has likewise to be incentive-compatible, i.e., the agents (government agencies) acting in behalf of the principal (society) find that it is in their interest to advance the interest of the principal. This requires, among other things, that agents responsible for program implementation should not be at the same time the monitors of rural welfare indicators. 3.25 The functions of the National Anti-Poverty Commission (NAPC), which is mandated to coordinate and monitor poverty alleviation programs, should therefore be sharpened to enable it to take an increasing role in devising an appropriate national poverty monitoring system, coordinating the monitoring and evaluation systems of the various agencies vis-a-vis welfare outcome indicators, and overseeing the generation and reporting of information on poverty concerns. Unfortunately, the NAPC's current capacity to perform the above tasks is rather weak. Capacity building for the Commission must be a high priority. In the meantime, the NEDA would play a key role in coordinating this effort, and work out collaborative arrangements with the NAPC as the latter's capacity is strengthened. UNDP publishes annual Human Development Reports (worldwide coverage) and periodic country-level updates (Philippines Human Development Report 2000, 2000). 20 Table 3.3: Priority List of Rural Poverty Indicators Poverty Concern/ Information Frequency Content/Description & Source Level of sub- Priority Component System Purpose national _____________________ aggregation "Ends" Measures Poverty incidence, Family Triennial, Family income and NSO Provincial depth, & severity Income and since 1985 expenditures, sources of (since 1994), Expenditures incomes, spending sectoral Survey patterns: benchmark (FIES) information for CPI Annual Annual Family income and NSO Provincial Poverty (except expenditures; access (since 1998) Indicator FIES indicators to basic needs Survey years), and social services; (APIS) since 1998 employment status of household members Education (i) Functional FLEMMS Data on functional literacy, NSO Regional literacy education, and mass media exposure (ii) Primary & HS enrolment rate Infant mortality Health Info Annual Data on mortality/ DOH Sectoral System morbidity from notifiable diseases, nutrition status & deficiencies, health services & sanitation Malnutrition National Once every Nutrition status, food FNRI Regional prevalence Nutrition 5 years adequacy, nutrition Survey deficiencies, and related socio-economic info "Meso" Measures Rural employment ISH-Labor Quarterly Data on the employed/ NSO Regional Force Suvey unemployed, & other (LFS) relevant HH characteristics Rural nonfarm FIES Triennial, See FIES above NSO Provincial income (as % of since 1985 (since 1994) total HH income) Food expenditure FIES Triennial, See FIES above NSO Provincial (as % of total HH since 1985 (since 1994) expenditure) Access to safe water FIES, APIS Annual, See FIES/APIS above NSO Provincial & health care since 1997 21 (3) Food Security (Annex 7) 3.26 This Section aims to assess food security trends and consolidate a framework for an improved food security strategy and performance monitoring system, and suggest arrangements for the implementation of such a system. It outlines key concerns related to food security, and then lays down a strategy for enhancing food security. A concluding section lays down the institutional aspects for implementing such a strategy. 3.27 Food security may be defined as access of the population to food supplies at stable market prices on a year-round basis. In a broad context, enhancing food security involves improving the availability and distribution of food supplies at the national level and enhancing purchasing power capacity at the household level. 3.28 In discussing food security, three issues are raised: the scope of any food security program, the meaning of price stability, and the extent of local sourcing of food items identified as critical in any food security program. At least three considerations would seem to define the coverage of food security policy: the calorie-intensiveness of the food item, the lack of substitutes due to existing preferences of the population, and the high proportion of expenditure on the food item to total household budget. It is thus recommended that the government focus primarily on rice in its food security program, while also supporting an integrated and sequenced program of supporting yield increases by smallholders, cost-effective rice targeting for the poor as a safety net, and key trade reforms to enable the Philippines farm sector to become more globally competitive. This reinforces the GOP's intention of maintaining a uniform tariff level for all agricultural commodities which is expected to be much lower than the level of protection presently being accorded to rice. 3.29 Price stability is attained if market rice prices fluctuate within a given range expected by the population, such fluctuations measured in terms of both intra-period and inter-period variation of prices. Intra-period variability is measured in terms of the deviation of the market prices of rice from their moving average. In periods of stable prices, intra-period fluctuations are within plus and minus five percent of average. Inter-period variability refers to the rate of change of annual average market price. Data suggest (see Figure 3.3) that the population tolerates increases of annual average rice prices up to ten percent. These features are then used as inputs in designing a program for stabilizing rice prices. 22 Figure 3.3: Quarterly Rice Wholesale Prices (1990-1999) 20.00 17.00 1 14.00 o , y = 0.0862x + 7.1722 R 2= 0.8541 0~ 8.00 b.OO Il Il II I II 1 l l l ; IIII 1f 1 l 1 Fi I 1I I I I II I i ,I I II II I II I (0 (D <D CD (C CD CD CD CD C D AD CD CD CD (D CO tD <D ED o o W -\ M~ M3 Cw c; *> -> 0 m O~ 0) -. m4 X CD C O o o o o o o o o o o o o o0 o o o o o o _4 -4 -\ - - -.4 4- - --4 - -4 -4 - -4 Month/Year Source of Basic Data: Bureau of Agrcultural Statistics 3.30 Officially, food self-sufficiency, i.e. "the availability of enough food sourced from domestic production" is a necessary condition for attaining food security in the Philippines. During the National Food Summit in August 1998, the national government has urged provincial local governments to lead the effort for individual provinces to be "self sufficient" in rice production. Accordingly, some of the GOP statements appear to be confusing rice self-sufficiency with food security. Statistics show that the country's rice imports had been increasing particularly in the second half of the 1990s. The trend is explained by the facts that rice output has grown since 1980 at the annual rate of 2.4%, while rice use has increased about a percent higher each year. While the Philippines has the potential to close the supply-demand gap, numerous cross-country studies show that sector performance and household welfare are enhanced by enabling farmers to produce the crop mix which best fits their resource endowments, while ensuring an efficient system for procuring and distributing food, including cost-effective safety nets for the poor. This approach is also consistent with the current strategy being followed by the DA to promote the zoning of farm lands according to "food baskets" to enhance net farm incomes. This implies that trade should be used to close any emerging rice gap which may arise over time, especially as the world rice market is becoming increasingly competitive and using vast land areas for rice may not be the most efficient way of using scare land resources by Filipino smallholders. 3.3 t Any improvement in the current policy regime for food security has to involve changes in the charter of the National Food Authority (NFA). The country's food security policy as embodied in Presidential Decree No. 4, as amended, also known as the NFA Charter, merged the regulatory and proprietary functions required to carry out these mandates in the NFA. The NFA is a government corporation, receiving significant annual budgetary support, as well as being allowed to issue 23 commercial papers with full financial guarantees from the national government. Besides these powers, the NFA is likewise granted an import monopoly for rice. This arrangement has contributed to what appears to be costly and excessive rice imports. 3.32 The current food security program has avoidable large budgetary costs. Since 1986, the NFA's net operating loss had fluctuated from nearly PHP 387 million in 1990 to over PHP 2.3 billion in 1992. It was only in 1996, when it imported rice, that the NFA posted a net operating profit of PHP1.2 billion. 3.33 Not only are financial losses incurred, the current regime can be made more effective in attaining the goals of stabilizing rice prices, providing rice consumption subsidies to the poor, and ensuring competitive returns to palay farmers. In order to improve the design of the country's food security program, the following reforms are proposed: > stabilize rice prices within a band, adjusting the level of imports for this purpose; > replace the current general rice price subsidy with a targeted rice price subsidy for the poor, based on a carefully designed and implemented beneficiary eligibility criteria and monitoring system to track program effectiveness and impacts; and . focus government assistance to rice farmers from recurrent price supports to a package of appropriate trade protection and public expenditures intended to increase productivity, enhance international competitiveness, reduce market transaction costs, and promote more competitive grain markets and trade facilitation. 3.34 Public expenditures for improving agriculture infrastructures and basic technology development remain to be an important gap in this area. One important problem preventing a sustained increase in productive public spending for agricultural development is the absorptive capacity of the DA. To alleviate this problem, a partnership with the local government units is essential. 3.35 There is still scope for further improving rice productivity through appropriate rice productivity programs, especially if there are rice biotechnology breakthroughs. Nevertheless, at some point in time, with continuing growth in both population and per capita income, the country is likely to reach the limits imposed by technology and especially land -its most constraining factor. When land scarcity becomes the constraining factor in increasing rice productivity, the government appears to be relying on trade protection or regulations on the use of farmlands to attain self-sufficiency. These interventions, in turn, embody more expensive strategies for Philippine society than alternative and more sustainable strategies as outlined in Section 7. 3.36 The key result areas and tasks required for attaining these food security objectives include the following performance indicators: rice prices; fiscal subsidies to the NFA; the cost-effectiveness of a rice program targeted on the poor; rice balance indicators (e.g., opening stocks, domestic availabilities, stocks, and required imports); and key public expenditures for and progress in increasing rice productivity. Among the key government agencies identified as having the single or joint responsibility for attaining these results is DA's Planning Service, and the proposed National Rice Board which is to absorb the regulatory functions of the NFA. It will be important to give special attention to the transitional phases of these reforms and institutional arrangements to minimize any possible disruptions in the rice market and in the availability of rice to the poor. 24 (4) Agrarian Reform: Access to Land and its Productivity'2 (Annex 8) 3.37 Trends and Emerging Issues: Land reform has had a significant impact on improving farmers' well being (Deininger, et.al.). The 1998 per capita consumption of beneficiaries from the 1972 land reform was significantly higher at (about 45%) than that of non-beneficiaries. Econometric estimates using a number of different indicators confirm that children of land reform beneficiaries had accumulated human capital faster than those from non-beneficiaries. The rates of physical asset accumulation by land reform beneficiaries were also significantly higher than those of non- beneficiaries. Finally, land reform had longer-term effects through which land reform beneficiaries were able to improve their productivity and income more than non-beneficiaries in the 1985-98 period. 3.38 The MTPDP highlights three major thrusts involving agrarian reform: (a) expediting the implementation of the CARP so that all remaining public and private lands are redistributed by 2004; (b) intensifying the provision of support services and infrastructure to about 1000 ARCs; and (c) broadening options for enhancing land access for non-CARP beneficiaries. 3.39 Notwithstanding the large tracts of land that had been redistributed in the ten years of implementing the CARP, progress is lagging well behind the original target of completing the program by 1998. Moreover, the current Government's stated target of completing the CARP by 2004 will require a doubling of its historical rate of about 160,000 has per year to about 322,000 has per year. Table 3.4 shows the status of agrarian reform between 1972-1999. During the past 27 years, the DAR redistributed only about 4.9 million has of public and private land, or about 61 % of the original CARP target of 8 million has. It redistributed 2.99 million has of private lands or only about 68 % of the original target of 4.3 million has and 1.9 million has of public lands, which is only 50% of the original target of about 3.7 million has. 3.40 The DAR has distributed almost all government-owned and public lands and is left with a balance of 1.4 million hectares of accessible private lands for distribution. The distribution of these lands is, however, jeopardized by the removal from the 1999 CARP budget of funds for landowners' compensation. Under PD 27, EO 228 and RA 6657, landowner's compensation reached P24 billion as of mid 1999 covering 1.1 million hectares or only about 72% of the total private lands distributed (Table 3.5). Accordingly, redistributing the balance of about 1.4 million has of private lands by 2004 implies that about 322,000 has of private lands will need to be redistributed each year, requiring as much as PHP 20 B per year, assuming an average compensation price of PHP 60,000 per ha. Based on the historical rate of land redistribution, it could take up to 17 additional years to complete the CARP. 12 This section draws and synthesizes from several recent papers and empirical studies, particularly: (a) "The Philippine Comprehensive Agrarian Reform Program: Perspectives and Issues", paper presented by Undersecretary C. Navarro, DAR, at an International Conference W/CARRD 20/20: Emerging Trends and Perspectives of Agrarian Reform in Asia, October 6 and 7, 1999; and (b) "Redistribution, Investment, and Human Capital Accumulation: The Case of Agrarian Reform in the Philippines" by K. Deininger, F. Lara Jr., P. Olinto, and M. Maertens, draft Discussion Paper, World Bank, Washington, D.C., February, 2000; and (c) various background notes/papers involving the CARP Impact Assessment Study, currently being carried as an independent study, under the overall supervision of DAR, and funded by several donors. 25 Table 3.4 LAND DISTRIBUTION STATUS, 1972-1999 By Land Type/Mode of Coverage In Hectares LAND TYPE SCOPE ACCOMP PERCENT BALANCE DAR 4,290,453 2,991,934 69.73 1,298,519 * PAL 2,996,105 1,572,074 52.47 1,424,031 * Non-PAL 1,294,348 1,419,860 109.70 - DENR 3,771,411 1,918,735 50.88 1,852,676 * Public A & D Lands 2,502,000 1,140,002 45.56 1,361,998 * ISF Areas 1,269,411 778,733 61.35 490,678 TOTAL CARP 8,061,864 4,910,669 60.91 3,151,195 Source: PARC Table 3.5 ACCOMPLISHMENT IN LANDOWNER'S COMPENSATION Approved for Payment (1972 to June 1999) PARTICULARS A RA 6657 TOTAL PD 27/E0 228 No. of Cfs approved 33,310 55,847 89,157 Area Covered (Ha) 392,926 695,325 1,088,251 Total Land Value (Ph M) 2,823 21,183 24,006 No. of LO's 25,547 35,657 61,204 No. of FBs 235,814 399,522 635,336 Source: PARC 3.41 While few disagree with the importance of agrarian reform, there is growing and intense debate on the extent and modalities for implementing the CARP, due to underlying constraints. These constraints include inadequate funding from a sustainable source of financing; landowner resistance; and the complex and time-consuming litigation process in settling disputes over the coverage of lands. They also include deficient modalities, with current modalities being overly centralized, thereby lacking adequate accountability and the lack of support services needed to realize the full productive potential and ineffective and variable management. 3.42 The ARC Program: Aside from land redistribution, the CARP likewise involves the provision of support services to the ARCs. There about 10 donor-funded projects which provide economic and social infrastructure, such as rural roads, irrigation, and water supply systems, and support services such as community organizing and skills development and facilitation in promoting viable livelihood/agricultural enterprises, to ARCs. Many of these programs are having substantial positive impacts on increasing household incomes. However, their implementation is hampered by various constraints, including limited budgetary allocations, variability in management effectiveness, and weak coordination with various agencies, especially in the light of the devolution of a substantial number of government responsibilities and functions to the LGUs. 26 3.43 Emerging Priority Strategies. Notwithstanding the need for further empirical research, the slow rate of CARP implementation and the underlying constraints outlined above suggest the need for the GOP to proactively intensify the implementation of the following strategies: ) Increase significantly public sector funding for the purchase and redistribution of private lands, and improve land compensation formulas, and alternative methods of payment and modalities for implementing CARP, including complementing the current administrative approach with a demand- driven and community-based approach to land distribution. ; Develop alternatives to increasing funding for CARP implementation, one of which is the implementation of a more effective collection of existing land taxes, possibly introducing a reformed and progressive land tax structure and at the same time providing strong incentive to increase the efficiency of land use. Another alternative is to structure the land tax receipts such that the LGUs could use these revenues to assist in financing land acquisition by poor communities on a mutually agreeable basis; > Promote an integrated approach in land acquisition and distribution activities, right from the beginning; > Promote the newly launched program MAGKASAKA to generate or access the financial, technical and/or managerial resources needed to derive maximum benefit from the new lands; ; Reduce land rental restrictions through a rental arrangement while also ensuring that the CARP guidelines are not compromised; and > Promote greater progress toward agricultural trade liberalization. 3.44 The above strategies need to be approached as an integrated package with variants to be applied to different situations. This package would also address the MTPDP strategy of promoting options for enhancing land access for non-CARP beneficiaries. 3.45 Proposed Indicators. To help focus greater attention on implementing one of the most important structural reforms in Philippine society, the following primary performance indicators are suggested for use mainly by the DAR in operationalizing and implementing its recent innovative strategies (Annex 2 provides further details according to strategic objectives and secondary indicators): > No. of hectares redistributed (private and public lands, and by modality); > No. of landless and poor being able to access land (ref. rental markets) > ARCs supported/funded (and level of social organization) > No. of CARP beneficiaries/households income over the national (regional) poverty threshold (5) Rural Sector Investments (5) (a) Public Investments (Annex 9) 3.46 Public Expenditure Patterns: Public expenditures for agriculture, natural resources and the environment (ANRE) reached a total of about PHP 35 billion in 1998. As ratios to total public expenditures (8%) and gross value added (8%) in the sector, these expenditures are comparable with other developing countries. The DA accounted for about 50% to total public expenditures while the DENR and combined DAR and LBP had similar shares of about 15% each. The LGUs share steadily grew to 11% since the devolution in 1992. Almost three-fourths of LGU expenditures 27 were for agricultural services, mainly for extension; while veterinary services accounted for 20%, and natural resource services, 6%. 3.47 Strategic Directions and Priorities. Strategic directions and priorities for ANRE may be inferred from the distribution of public expenditures by policy instruments and by commodity. Less than 40% of the budgetary appropriations was allocated for productivity-enhancing expenditures such as irrigation, research and development, extension, and other support services. Management of natural resources and the environment accounted for about 20% of expenditures, mostly on forest management and rehabilitation. Close to 20% was allocated for land acquisition and distribution; but at least half of that was used for operational expenses. The remainder (at least 20%) was spent for price stabilization, and production support such as seed and planting materials, postharvest facilities, farm equipment, and credit subsidies. Since most of these are private and not public goods and services, their purpose is more redistributive, rather than growth-enhancing. 3.48 In fact, many of these production support activities did not prove to be as useful to recipients and cost-effective in redistributing income as expected, while providing opportunities for graft and corruption. For example, the NFA's monopoly on grain imports together with its domestic marketing operations, was found to exacerbate seasonal price instability. The use of variable import levies will be more effective in achieving the agency's objectives without incurring huge marketing losses. In the case of production support, the grain dryers/farm equipment distributed, and the agro- processing centers/farm level grain centers constructed by the government, had been hardly utilized. 3.49 Among growth-enhancing investments, irrigation received the highest allocation. Yet, because of low world rice prices and high cost of irrigation per hectare, gravity irrigation projects have shown low social rates of return since the 1980s. Continuing investments in rehabilitation begged the question of how to improve the operation and maintenance (O&M) of irrigation systems. Too little effort has been devoted to strengthen irrigators' associations that can take over O&M, nor to raising collection rates of irrigation fees to cover O&M costs. As water becomes increasingly scarce and groundwater use expands, the role of the public sector may have to shift away from direct provision of water service towards ensuring the appropriate, regulatory policy, and institutional framework for allocating and managing water resources. 3.50 The budgetary allocations for extension were relatively large at PHP 4 billion, about twice as much as that for R&D. However, questions may be raised about the balance in funding between technology generation and extension, the effectiveness of the linkage between research and extension, the methodologies adopted in technology transfer activities given dramatic changes in information technology, and the increasing role of the private sector in R&D and therefore in extension. R&D is clearly underfunded; public expenditures should increase by two or three-fold to be comparable with research intensity ratios in other countries. 3.51 Bias toward Rice: Public expenditures for agriculture, about half of the total, continue to be disproportionately in favor of the rice sector, which presently contributes about 15% of the agricultural GVA. Aside from the budgetary allocation for irrigation and price stabilization, rice dominated expenditures for extension, land redistribution, credit programs, subsidies for farm machineries and postharvest facilities. By contrast, the budgetary allocation for the exportable agricultural and fisheiy subsector was been quite meager. R&D expenditures for corn, coconut, fruits, and fishery, for example, were very low relative to these commodities gross valued added 28 contribution. The strong and persistent bias of public expenditure towards rice is often justified in terms of the food security goal, defined as rice self-sufficiency. Such a bias, however, is counter to the MTPDPs objective of promoting diversification, and ultimately to the goal of food security. It is imperative that (a) public resources are allocated in activities where social rates of return are highest, (b) food prices reflect their social opportunity cost and not determined by policy intervention, and (c) any food subsidies be targeted specifically for the poor. 3.52 Decentralization Patterns. Despite decentralization and devolution efforts, central offices of national government departments continue to have dominant control over budgetary resources (about 80%), particularly at the DA. Thus, the ability of the LGUs and regional offices to influence the strategic directions and program designs developed by the central offices has been extremely limited. Indeed, studies have shown that IRA transfers were much less than commensurate to the responsibilities devolved to the LGU. Moreover, poorer regions which have a greater proportion of population in agriculture, have also been allocated lower budgetary resources and fewer devolved personnel. 3.53 Program vs. Project Funding. The mechanism for funding affects allocation of expenditures, predictability of funding, accountability, efficiency, and effectiveness of governance. The increasing dominance of project vs. program funding has led to more unstable and unpredictable funding, promoted short-term vs. long-term projects, and favored redistributive rather than public good type, productivity-enhancing investments, and other essential regulatory and other support activities. It has also perpetuated the centralized nature of ANRE governance as the central offices generally control local and foreign-funded projects. 3.54 The DENR had the highest rate of regular program funding (60%); and most of its projects was foreign-funded, reflecting the high priority accorded to environmental issues by external agencies. These ratios were much lower for the DAR (30%) and DA (20%). Project funds of the DAR are primarily from the Agrarian Reform Fund specifically appropriated by Congress to finance the CARP within the 10-year implementation period. 3.55 In the case of the DA, the ratio of project funding rose dramatically from 30% in the late 1980s to 80% of available appropriations by 1998. The level of regular program funding in real terms generally stagnated, and even declined in a number of agencies; whereas appropriations for projects increased more than ten-fold. Two-thirds of DA projects was locally funded, and only a third was funded by foreign loans and grant proceeds. 3.56 Fund Utilization Patterns. The relatively low rate of fund utilization is another source of inefficiency in public expenditure programs that may be caused both by bureaucratic and allocation problems at the user end and by cash flow constraints on the supply side. The ratio of unused/ unauthorized funds to total available appropriations averaged 20%, with the DAR having the best record of 10%, followed by the DENR and DOST (15%). The DA had the lowest absorptive capacity with rates of unused or unobligated funds ranging from 20-30%. This is mainly because of the larger size of project vs. program funding, substantial allocations for irrigation that requires a complicated bidding process, and the higher degree of centralization that causes delays in the liquidation of central office funds disbursed to the regions and LGUs. 29 3.57 Preliminary Observations on the draft Medium Term Public Investment Plan (MTPIP). The draft MTPIP (December, 1999) does portray MTPIP activities in accordance with the five identified key result areas for strategic elements of the MTPDP's chapter on Agriculture, Agrarian Reform, and Environment. Also, the timeframe for the draft MTPIP is only for four years (from 1999 to 2002). This further contributes to the impression that the activity listing in the MTPIP is just a continuation of the previous years' activities and hence, are not adjusted and refined at the start of each medium term in order to correspond to the agreed strategies and key result areas. 3.58 The MTPIP is supposed to operationalize the MTPDP by providing/allocating the appropriate financial resources required for achieving the latter's objectives. The long list of the MTPIP becomes then a sort of wish list, instead of as an investment framework by which MTPDP objectives and key result areas can be realistically achieved. An examination of the MTPIP entries shows that these are sometimes too specific to the point that their relevance to the MTPDP objectives and key result areas seem to be too far off (e.g., improvement and supervision of the racehorse breeding industry, etc.). Some other entries are too general to the point that almost everything can be rationalized under the said activities (e.g., Research, Extension, Public Information Services, etc.). Clearly, there are some gaps between the proposed investments listed in the draft MTPIP and the prioritized recommendations from the stakeholder consultations. 3.59 Strategic Directions for ANRE Expenditure Reforms: Faulty allocation of public expenditures, coupled with weaknesses in the budgetary process, suggest major potential gains for improving the efficiency and effectiveness of the public expenditure program in ANRE. These areas of reform relates to whether or not: (a) public expenditures are being used to perform/provide public roles/goods vs. private ones; (b) the choice of policy instruments (i.e., expenditure program vs. other market-based instruments to achieve goals) is most cost-effective; and (c) public expenditures for ANRE are optimally allocated across policy instruments, agencies of government, levels of government, regions, and types of expenditures. The areas also relate to whether or not mechanisms for funding and other related budgetary procedures (e.g., project vs. program funding, local vs. foreign-funded, user charges such as irrigation services fees, etc.) promote efficient and effective allocation of public expenditures. Finally, there is a need to determine whether or not cost-effective mechanisms for timely monitoring, evaluation, and impact analysis of public expenditures are adopted. Key Public Expenditure Indicators and the MTPDP 3.60 The level and allocation across several dimensions of the public expenditure program will be a critical factor in attaining the targets set for the five MTPDP key result areas. To assess the efficiency and impact of public expenditures in the main subsectors, there is a need for independent in-depth assessments to be carried out, based on sound terms of reference (TOR) (e.g., irrigation, research and extension). To monitor whether and to what extent the ANRE public expenditure program is consistent with the attainment of the RD/NRM strategies, the following primary performance indicators are recommended (Annex 2 provides further details and secondary performance indicators; the full paper is provided in Annex 9): > Aggregate expenditure trends and patterns, with focus on: - government expenditures on ANRE as a percentage of total government expenditures; - expenditures by priority policy instruments (specially irrigation, R & D/extension, land 30 distribution, natural resources management (NRM) community-based activities, regulatory functions and diversification), > Degree of fund utilization (ratio of used/obligated funds vs. total budget allocations) and stability of fund releases by the DBM/National Government Agencies (NGAs) (% of approved budget released per quarter); > Project vs. priority program funding (% of each vs. total agency expenditures, with focus on the strategic programs involving the DA, DAR, and DENR); 3 Allocations of type of expenditure (% of MOOE allocations vs. total allocations and % of PS vs. total allocations, again for each of the main programs implemented by the DA, DAR, and DENR) Rural Roads (Annex 10) 3.61 The substantial and sustained investment in rural roads has been a very important component of the successful rural/ agricultural/ and economy-wide development experience of the high- performing Asian economies (HPAEs). In the HPAEs, road infrastructure investments have also been effectively deployed as instruments for targeted poverty alleviation, productivity improvement and the enhancement of market efficiency. Hence, this study has given special attention to reviewing these strategic public investments. This Section establishes the current status of the rural and agricultural road network in the country and describes the goals of the government in the improvement of the road network as part of the implementation of the 1999-2004 MTPDP, and assesses the prospects of the attainment of these goals, based on current trends and historical performance. 3.62 The 1999-2004 MTPDP targets the pavement and improvement of a total of 14,091 kilometers of national roads over the plan period. Of the total, 8,123 kilometers are national arterial roads, implying that by 2004, 100% of such roads will be paved. The remaining 5,968 kilometers are national secondary roads; thus by the end of the plan period 67% of national secondary roads will be paved. However, the record shows that between 1992 and 1998 the government was able to raise the percentage of paved national roads by only 10 %, 12% for arterial roads and 7% for secondary roads. The MTPDP calls for an overall improvement of 24% - more than twice the record of the previous plan period - consisting of 29% in arterial roads and 20% in secondary roads. It is highly unlikely that the government can meet this target in pavements. The period of greatest growth in road length was a decade average exceeding 9% per year, and ranging from a low of 3.37% to as much as 23.22% during the decade of the seventies. 3.63 It is also highly unlikely that the government can meet the overall requirements for the maintenance of the existing road network. The estimated annual cost of maintenance exceeds P 11 Billion, which is a multiple of current levels allocated in the national government budget. 3.64 A system of prioritizing and targeting of investments and O&M requirements is in order. The selection of those roads and transport links most crucial to growth, and the targeting of available resources to these, would allow the government to stretch its constrained resources for maximum possible gain. Key performance indicators include: kilometers (kms.) built vs. kms. targeted; kms. maintained vs. kms. substandard vs. kms targeted; total funds required vs. total allocated; total 31 funds allocated vs. total obligated; and total funds obligated vs. total expended. The Department of Public Works and Highways (DPWH) could carry out the institutionalization of these indicators, with the NEDA Infrastructure staff playing a coordinating role. (5) (b) Private Investments (Annex 11) 3.65 There is general consensus that the sustainable engine of rural sector growth will arise from expanded private sector investments at all levels of the rural economy, triggered by increases in smallholder productivity, rural population consumption, and non-farm enterprises and related services. Private investment is one of the key factors in reversing the slow growth of agriculture. Investments must flow into the sector not only to increase the productivity of existing stock of capital, but more so to reverse the depletion of aging stocks, such as tree crops. But the MTPDP was rather silent on the explicit strategies to tap this private sector role. This Annex outlined various trends, identified constraints to expanded private role and updated the priority strategies and supporting performance indicators to monitor. 3.66 The MTPDP investment-to-GNP ratio is projected to increase from 20.9% in 1999 to 24.6% in 2004. On the other hand, the domestic savings rate will fall from 23% of the GNP in 1999 to 22.6% in 2004. The 2004 figures indicate a gap that must be financed from foreign sources. Meanwhile, the aggregate incremental capital-output ratio will fall from 7.7 in 1999 to 4.7 in 2004, and averaging 4.7 for the whole period. This indicates an improving efficiency in investment. 3.67 Total investments in real terms are projected to grow by 5% to 5.2% p.a. from 1999 to 2004, assuming El Nino occurs in 2001 and 2004. Without El Nifno, investments can expand by 5.2% to 5.3% p.a. Agricultural investments are projected to reach some PHP 93.5 to PHP 198.2 billion p.a. at current prices, assuming 10-20% share of agriculture to total investment. 3.68 The monitoring of private investments leaves room for improvement. While there are good sources of data, they fail to capture the overall investment picture. The national income accounts measures total investments, but it is a partial measure and is not segregated. 3.69 Nevertheless, even from partial measures, the share of private investments to total investments from various sources appear small compared to the sectoral share to the GDP, and growth appears to be declining. This may not be reflective of the actual picture as the sector accounts for about 20% of the GDP. Still, the trends do not augur well for a sustained sectoral growth. 3.70 Within the framework of available recent studies, which have assessed the constraints to investment, this study carried out a supplemented survey to probe the constraints further. The November/December 1999 survey revealed interesting results. Most of the respondents indicated they have invested in the past five years. The bulk of the investments went to Mindanao. However, on the aggregate, the only factor identified favorable to investments in the past five years was the growing domestic market, with Inter-regional comparisons indicating that access to land was found important in Mindanao and Luzon and a growing export market was being cited by Mindanao respondents. It was distantly followed by better information. Trade liberalization rated third but it had a borderline rating. The rest, (a) access to land, (b) access to good human resource, (c) growing export market, (d) access to financing, (e) government incentives, (f) peace and order, (g) 32 supportive LGUs, and (h) better infrastructure, in that order were considered not helpful. Their low ratings indicated that the investors are not satisfied with progress in these factors. 3.71 The respondents felt that the key result areas that must be addressed to promote investments are: (a) clear and consistent government policies, (b) infrastructure, (c) government bureaucracy, (d) access to credit, and (e) peace and order, in that order. Also considered important are incentives, agrarian reform, access to information, extension services, and local governance, also in that order. What is perhaps not obvious is that the distortions in the land markets have discouraged investments, not only for existing owners who could not access credit, but also for potential investors who could not buy land. The survey revealed that investment-friendly environment is essential to the growth of agricultural investment. Moreover, public investments, say infrastructure, fulfill a complementary role with private investments. In many respects, they have also a leading effect. 3.72 There is a need to focus on priority strategies to promote expanded private sector investments. These strategies include: (a) improving policy and legal environment; (b) developing infrastructure; (c) removing distortions in land markets; and (d) minimizing bureaucratic red tape. They also include enhancing access to financing; providing support to R & D; enhancing access to market information; and promoting peace and order. 3.73 As part of the MTPDP monitoring system, key indicators must be identified for private investments in agriculture. The current indicators are all partial and do not capture the total picture. The primary indicators that should be monitored include: (a) agricultural and fishery production levels/trends; and (b) breeding stocks and investments in tree crops. Secondary performance indicators could include: (a) number of business registrations in rural-based activities; (b) actual bank loans to agriculture/NRM activities; and (c) access to bank loans to agriculture (especially long term). Data is available for most of these indicators, although some proxy data need to be used until improved data collection systems are developed as a collaborative effort of government and relevant private sector organizations. In addition, it would be useful to monitor some of the constraints identified in the survey which affect the "enabling environment" for private sector investors, including: infrastructure adequacy, law and order, governance standards, and policy consistency. The survey results suggests that private sector investors are influenced by their perception of these intermediate variables. (5) (c) Rural Finance: (Annex 12) 3.74 Mobilization of greater financial resources for sector development is identified as one of the key concerns in achieving sustainable rural development. This will be achieved by establishing a viable and sustainable rural financial system that caters to the financing needs of the rural household. It is believed that mobilizing greater financial resources for sector development would lead to the small farmers' increased access to credit. 3.75 The MTPDP identifies the following specific policies and strategies for rural finance: 3 Increase in the access of small farmers, fisherfolk, upland dwellers and indigenous peoples (IPs) to credit, including long-term financing; > Promotion of a savings-led approach to encourage capital formation among farmer, fisherfolk, upland dwellers and IPs, household micro-enterprises, and rural banks; and 33 > Prioritization of the implementation of the Agro-Industry Modernization Credit and Financing Program (AMCFP), as provided under RA 8435 through the phase-out and consolidation of all directed credit programs by no later than December, 2001. 3.76 These strategies are aimed at increasing the flow of financial resources to the rural areas and improving the access of the rural population to these resources. While this has been the objective of rural finance since the 70s there seem to be a continuing search for the sustainable interventions that would bring about the expanded access of the rural population to financial services. 3.77 Trends in the rural sector's access to credit. Data on lending to the sector show that on the average, only 38% of farm households borrow. Of the borrowing farm households, only about one- third (29%) borrow from formal sources of credit, implying that only about 11% of the farm households borrow from formal financial institutions. Thus, over the years, informal sources of credit have continued to play an important role in the rural financial market. Meanwhile, total loans granted by formal financial institutions have dramatically declined during the period from 1980 to 1998. The declining proportion of loan granted by formal financial institutions to the agricultural sector, however, does not provide very conclusive evidence on the extent of financing in the rural areas. The proportion of formal finance going to non-farn enterprises in the rural areas is equally important in determining the extent of financial resource mobilization in the rural areas. Unfortunately this classification of loan portfolio is not available from existing data. 3.78 In an attempt to expand the rural sector's access to credit, government provided credit in the form of directed credit programs (DCPs). These programs direct the flow of credit resources to targeted sectors of the population for specific purposes. These programs, however, impose huge fiscal costs in terms of both default and interest subsidies on the part of the government. Data from the studies conducted by the Credit Policy Improvement Program of the National Credit Council in 1998 show that there were 12 DCPs implemented by the DA and 21 by the Land Bank of the Philippines. Total interest and default subsidies for 20 of these credit programs were estimated to totaled P1.89 billion in 1996. Interest subsidies total P1.39 billion while principal and interest subsidies amounted to PHP 0.51 billion. Table 3.6: Incidence of Borrowing and Distribution of Borrowers among Farm Households: Survey Results (In percent) Period ~~Incidence ofFomlIfra Period ~BorrowingFomlIoma 1985-85 32 32 65 1986-87 37 28 66 1988-89 44 20 82 1991-92 35 26 85 1992-93 36 32 68 1994-95 33 31 69 1996-97 40 33 67 1997-98 47 24 76 Average 38 29 72 34 3.79 In view of the huge costs of government credit programs, the need to mobilize financial resources for the development of the rural sector and the continuing problem of credit access in the rural sector, the government through the Agriculture and Fisheries Modernization Act (AFMA) seeks to establish a viable and sustainable financial market and encourage increased private sector participation in the rural financial market. Along this line, the government seeks to phase-out the implementation of DCPs in the agriculture sector by year 2002. Under the AFMA, the funds from the phased-out DCPs will be transferred to the Agricultural Modernization Credit and Financing Program (AMCFP) which will be made available to both government and private financial institutions at market rates of interest. 3.80 Emerging Issues. Policy reforms that changed the nature of government intervention from a highly supply -led approach in the 70s to one that deregulated the rural credit markets in the mid 80s did not seem to have significant changes in the agriculture credit market. The following issues are raised: > Declining proportion of agricultural loans. The proportion of agricultural loans to total loans granted by formal financial institutions has been declining over time. > Constant proportion of borrowers borrowing from formal sources. Likewise, the proportion of borrowers borrowing from the informal sector compared to the proportion of borrowers borrowing from the formal sources has remained within the range of 65% to around 85% over the years. t Inconsistency in interest rate policy. While both the Central Bank and the other economic agencies of the government have announced the adoption of market-based interest rates, such policy does not seem to be implemented at the operations level. Interest rate subsidies continued to be provided (Lim and Adams, 1998), especially in the credit programs implemented by the government. > Policy Reversals. While the government has been well meaning in the pursuit of reforms that would deregulate and liberalize the financial market, political considerations motivate the design and implementation of programs and projects that are highly visible and popular. Politicians usually perceive the implementation of government DCPs as the most expedient and visible way of disbursing funds. 3.81 Performance Indicators. To monitor the objectives indicated in the 1999-2004 MTPDP, several primary performance indicators are suggested below. They help determine the extent of financial resources mobilized for the rural sector, whether access to rural finance has been expanded, and loan repayment rates. Additional operational details on these indicators and suggested secondary performance indicators (outcome and output) are included in Annexes 2 and 12. > Proportion of rural savings vs. total savings > Proportion of agricultural loans vs. total loans > Proportion of borrowers from formal and informal sources > Incidence of borrowing > Loan repayment rates (formal borrowings) 3.82 Institutionalizing the indicators. With the current institutional set-up, monitoring the proposed priority indicators in rural finance would not be difficult. The Agricultural Credit Policy Council (ACPC) is currently mandated to oversee agricultural credit policies and programs. In the AFMA 35 and in the draft implementing rules of EO 138, it in coordination with the National Credit Council (NCC), is tasked to monitor the phase-out of the DCPs in the agriculture sector. 3.83 The NEDA can tap the existing system in the ACPC in generating the proposed indicators. Most of the basic data needed to generate the indicators are already being monitored by the ACPC, and the Council may be requested by the NEDA to include the generation of these indicators in their monitoring system. 6) Natural Resource Management (Annex 13) Emerging Trends and Issues 3.84 As a result of declining stocks, much of the Philippine natural resources experienced decreasing economic values. High deforestation rates during the 1970s depreciated the value of Philippine dipterocarp forest by PHP 823 million in 1988, although this depreciation slowed down to PHP 162 million13 and by PHP 416 million in 1996/7 because of investments in reforestation and the management of residual forests by communities. 3.85 The continuing depreciation of upland soils, however, has negated the appreciation of the forest resources and is an increasing concern because a large area of 9 million hectares of forest lands remained open access and this accelerated degradation of forest lands. The depreciation of upland soils directly affects on- and off-site productivity of upland agriculture, irrigated lands, and coastal/mangrove areas. Erosion in areas with at least 8% slope averaged 30 Mt/ha/yr. in the 80s, resulting in a depreciation in the value of this resource by PHP 334 million in 1988 and a much higher PHP 906 million in 1996. Thirty per cent of erosion occurs in agricultural lands under the jurisdiction of the DA while a higher 70% is in forests and other areas under the jurisdiction of the DENR. 3.86 The worsening forest degradation and the increasing open access condition of forest lands are also threatening existing biodiversity and critical habitats in protected areas. This is further complicated by the inadequacy of government budgets, and unstable and unpredictable government policies on the participation of communities, private sector and LGUs in the management of forests and forest lands in non-PA areas and buffer zones. 3.87 Apart from the opportunity costs associated with the foregone earning from well-managed land, soil erosion imposes high costs on the downstream sector - infrastructures, roads, bridges, agricultural production areas, settlements, water districts, etc. - because forests provide watershed protection. The environmental damage of soil erosion drastically increased from PHP 11 million in 1988 to PHP 1.2 billion in 1997. 3.88 Fishery resources depreciated by PHP 737 million in 1988, PHP 5,786 million in 1992 and PHP 299 million in 1997. The erratic depreciation of pelagic (surface-dwelling) fisheries may be due to a series of alternating entry to and exit from the open access waters, as fishers note cycles of negative and positive fishing rents. Fish habitats were also destroyed because of various destructive fishing techniques and pollution from silts. The economic costs in the form of foregone earnings Unless otherwise noted, all values in this report are in real terms at 1985 prices. 36 from low coral reef productivity was estimated to be PHP 610 million in 1988, increasing fast to PHP 1,653 million by 1996. 3.89 For mineral resources, the depreciation of major metallic minerals is estimated at P HP 658 million in 1988 and a lower PHP 194 million in 1996. This decline in depreciation is caused by low extraction rates associated with the softening of metallic mineral prices in the long term. The environmental damages associated with pollution and mining accidents and competition with other land uses, such as areas protected for biodiversity purposes and the preservation of indigenous peoples, warrant serious attention towards improving the mining industry. 3.90 The depreciation of the forests and top soils contributes to the increasing poverty of at least 20 million upland people, considered to be the poorest among the poor. Their only hope for socioeconomic developments are improved rural development interventions that will help them increase production while helping improve the environment. 3.91 The management of the environment and natural resources has only been partially devolved to the LGUs. This institutional issue has constrained many LGUs from participating in the optimal allocation of forest lands, in reviewing applications for resource use rights, facilitating the land titling process, and in helping enforce the conditions of the environmental compliance certificates (ECCs). 3.92 Strategic Objectives: > Enhance the sustainable asset values of key natural resources, especially forestry, water, fisheries, biodiversity, minerals, and soil fertility following sound incentive pricing strategies, broad- based participation of forest lands management and development, community-based tenurial instruments, and deregulated policies/regulation/enforcement; E Promote and encourage a more direct and broader participation of LGUs, civil society, communities, other concerned NGAs, and the private sector in the protection, management, and development of forest lands which are now considered to be open access; > Promote and enforce ECCs, environmental management plans, and pollution control policies and regulations; > Protect, manage, and rehabilitate degraded rivers, coastal and mangrove areas, fish sanctuaries. habitats, degraded forest lands, and polluted lakes; and > Expedite the gazetting of priority protected areas, strengthen protected areas management (PAMBs), and formulate and implement PA management plans. Strategies 3.93 The environment and natural resources sector should adopt prioritized strategies within the broad framework of the MTPDP. The proposed strategies are highly interrelated with each other because of the interconnectedness of the uplands and the lowlands, the forests with the agricultural production areas, irrigation systems, and coastal/fishery resources. After all, poverty in the uplands might have been the result of an iniquitous system of allocating prime agricultural lands, the lack of productive employment and economic opportunities in the urban areas, or declining productivity of the prime agricultural lands. 37 (a) Promote stability by passing the proposed Sustainable Forest Management Act, Land Use Code, Clean Water Act, and various bills on the gazetting of critical protected areas 3.94 In addition to the passages of the Clean Air Act, the Mining Law, and the AFMA, Congress has yet to legislate the proposed Sustainable Forest Management Act, Land Use Code, and Clean Water Act, and pass various bills for the gazetting of Critical Protected Areas. These laws will stabilize and strengthen ENR policies and; clarify the roles and responsibilities of the LGUs, private sector, and other concerned agencies for a more holistic and stakeholder-focused management of the environment and natural resources. They will also mandate the DENR to delineate forest lands and A & D; ban commercial logging in protected areas and critical watersheds; and provide annual budgets and support systems for the protection and management of highly diverse habitats, coastal areas, and protected areas. (b) Delineate forest lands and allocate these to various stakeholders for appropriate management 3.95 To protect and manage forest lands, there will be an urgent need to clearly delineate forest lands at the municipal and provincial levels. Each municipality or province with the assistance of the DENR and information available from the NAMRIA, LMB, and concerned LGUs will have to determine and delineate the boundaries of forest lands within their respective political jurisdictions. After delineation and through a process of joint forest land use planning, efforts should be exerted by the DENR and the LGUs to place all forest lands that are covered with tenure or agreements under protection, development, and management. All forest lands that are considered "open access" should be allocated to the concerned and most suitable stakeholders. (c) Improve capacity for arbitrating and resolving use conflicts 3.96 The process of delineation and allocation of forest lands will inevitably ignite conflicts that will need urgent resolutions. Some conflicts could delay the overall intent of reducing open access and uncertainty. The DENR has to strengthen its capacity for arbitration, especially in the field offices. Other agencies such as the DA, DAR, NEDA and LGUs can help in the arbitration and conflict resolution process. In the long term, a transparent system of gathering, analyzing, and using environmental information in this process will reduce conflicts. (d) Adopt ecosystem-based planning and implementation by political units 3.97 The DENR and LGUs should jointly develop ecosystem-based plans for implementation. These plans should allow interrelationships among various sub-systems to simultaneously address economic, social, political, and biophysical concerns. These plans should also consider the interconnectedness of uplands, agricultural production areas, and coastal areas. 3.98 There will be a need to support the NEDA and DBM operationalize the economic- environmental interactions. Funds should be allocated for watershed management planning, the monitoring of key indicators of environmental accounts, and the determination of the net benefits to society of resource allocation and use. After all, natural resources are an integral part of an ecosystem; their unintended effects of primary resource use may inevitably impact on other sectors of the society. 38 (e) Adopt and institutionalize economic instruments to enhance ENR management 3.99 The traditional "command and control" mode of implementing regulatory policies tends to be complex, expensive, and ineffective. In addition, detailed rule making allows little room for flexibility among those being regulated to choose the appropriate technology. The use of economic instruments to complement rule making should therefore be pushed further. These instruments include property rights that provide the basis for market-based transactions and various fee systems aimed at getting the resource user to internalize the full cost of his actions. The resource prices aim to regulate the use rates and encourage conservation and in the process generate revenues for monitoring, rehabilitation, and payment of damages in the event of accidents caused by environmental risk. (f) Set up an environmental trust fund 3.100 The revenues generated from the market-based instruments should be placed in a newly established environmental trust fund. This trust fund should follow transparent and accountability principles. Funds deposited in the trust fund can then be accessed to fund environmental monitoring, provide incentives, or pay environmental damages. (g) Establish a DENR-assisted but LGU-based support and extension delivery system for the upland farmers and municipal fishermen 3.101 This strategy will shift the DENR's main focus in assisting upland farmers and artisanal fishermen. The DENR through the LGUs will now provide needed support and extension services to the upland farmers and fishermen in the protection, management, and development of the uplands and coastal areas. Assistance in making planting materials available, technology transfer, community organizing, cooperative development, construction and rehabilitation of farm-to-market roads, and providing access to credit are only a few of critical services that both the LGUs and DENR and other NGAs can provide. This can be done initially in the identified "convergence areas" of the DENR, DA, and DAR. (h) Institutionalize a simple, participatory, and performance indicator-oriented ENR monitoring system > Adopt and transform various indicators of resource scarcity (or sufficiency) to measure performance towards attaining sustainable development. > Regularly support the process of developing and operationalizing basic resource information systems at the DENR and DA. > Transform resources information into timely and digestible pieces of knowledge for policy formulation, review, and implementation. 3.102 Recommended Priority Performance Indicators: The following primary performance indicators are suggested (further operational details and secondary performance indicators are outlined in Annex 2): > Improvement of forest cover (plantation, natural forests, mangrove rehabilitation and protection); 39 > Pollution levels and water quality; > Fishery production levels; > Number and area of tenurial instruments issued as a percentage of total open access; and > Protected Areas gazetted and protected areas plans finalized/approved (7) Institutional Arrangements, Roles and Performance Indicators 3.103 The Philippines faces two major institutional challenges in rural development: the need to address vertical devolution - the transfer of power, authority, and functions from the national to local governments; and the need to improve horizontal coordination across departments, especially among national agencies which are involved in the "convergence" strategy, particularly the DA, DENR, and DAR. A) Devolution (Annex 14) 3.104 The devolution's strategic objectives are to rationalize the institutional framework and structures of the LGUs and NGAs and to strengthen and capacitate key stakeholders, especially the LGUs, as they take more responsibilities in program/project implementation and become active players in the convergence program. Emerging Issues 3.105 The devolution process must be viewed at two levels of implementation - national and local. At the national level, the four major issues/concerns that impinge on the devolution process include lapses in the implementation of the Local Government Code (LGC) that may need periodic review and the amendment of the same Code. They also include limited financing base and inadequate funds for the LGUs to implement devolution. Finally, these concerns likewise consist of inactive development councils and weak participation of civil society in these bodies, and the ad hoc nature of national and local relations and the case to case arrangements on collaborations. 3.106 Learnings, experiences, and lapses in devolution should provide the chance to improve and refine the process over time. Nonetheless, there is a need to continue providing a balance to the centralist tendency of the national government. 3.107 Local finance captures the heart of the devolution process. Presently, most LGUs are largely dependent on their internal revenue allotments (IRAs) for financing most of the devolved functions. Many LGUs need to broaden their base of funding sources by expanding the IRA formula to include national tariffs and custom duties and by putting more weight on population rather than physical area. Their funding base can also be expanded by tapping the private sector through build-operate- and-transfer (BOT) and joint venture projects, lobbying for congressional insertions or initiatives on behalf of their municipalities or provinces, accessing ODA funds, and entering into cost sharing arrangements with national line agencies. 3.108 The civil society's inadequate participation has further weakened the effectiveness of local bodies to carry out devolution and partly hampered efforts to improve transparency, democratization, and empowerment at the local level. Multisectoral and interagency initiatives with the LGUs provide a check and balance in the devolution process. A broader level of participation in local 40 governance can improve the LGUs' credibility and help the NGAs, NGOs, and the private sector become more comfortable with devolution. 3.109 The devolution process has continued to highlight the need to gradually define the most appropriate and relevant roles for the LGUs and the national line agencies at the local level. As experiences have shown in the last eight years, these relations have highlighted the need for the NGAs to work with the LGUs in policy making, setting technical standards for the quality performance of devolved functions, providing technical assistance and support services, and designing and carrying out capacity building programs to empower the LGUs. 3.110 At the local level, the key devolution issues are: > Many LGUs are inefficient and ineffective in performing their devolved responsibilities as mandated in the LGC, not being able to institutionalize, internalize, and operationalize their devolved powers and responsibilities. > Many LGUs admit that they have limited capability and capacity for carrying out the mandates of the devolution. This weakness, however, could partly be minimized if the newly-elected LGU leaders and NGA field officers are committed to providing continuity in policies and programs of the past administration after objective assessment of past efforts. The frequent changes in operational policies and re-shuffling of staff among NGAs are further complicating the task of strengthening and capacitating the LGUs to carry out various devolved functions. Capacity-building interventions that would accelerate the institutionalization of basic services and systems in local planning, budgeting, investment planning, resource mobilization and information management are critical components for strengthening the LGUs. > With local finance being the centerpiece of devolution, the dependency of the LGUs on the national government has limited their flexibility to respond to local needs. Thus, devolution must also be seen in the context of how the LGUs are becoming accountable and how they are broadening their sources of funds over time. > Conflicts and confusion besetting the relationship between the provincial LGUs and lower level LGUs. Specifically, there is a need to clearly delineate and clarify the roles and responsibilities including the territorial and operational jurisdictions of provinces and municipalities with respect to the delivery of agricultural extension services, technical assistance on watershed and coastal resource management, and law enforcement. Strategies 3.111 Review of the devolution processes at both national and local levels. The leagues/ULAP in cooperation with Congress, civil society, and academic/research institutions should work together to consolidate and review proposed amendments to the present LGC. 3.112 Local Finance. The LGUs have to formulate and update their development and investment plans. These can be the only basis of many LGUs to lobby for higher IRAs, get more of the national tariff and custom duties, attract private investments, identify strategic areas for cost sharing arrangements (especially rural infrastructure, community-based resource management interventions, 41 and technology transfer), and encourage the civil society to support more grassroot-oriented development projects. 3.113 Participation. The LGUs and the leagues have to proactively seek the participation of civil society in the local development councils. The LGUs will have to take actions to re-activate their local bodies and improve their credibility in local governance. Possible areas where the civil society can participate may include policy-making, budgeting and planning, implementation, funding, and monitoring and evaluation of LGU plans and programs. 3.114 National-Local Rclations. Based on ad hoc experiences, mother memoranda of agreement and understanding (MOAs and MOUs) with generic provisions may be developed, validated, and executed between and among the leagues, DILG, and LGUs. These MOAs or MOUs can cover a broad range of areas for collaboration - capacity-building, provision of technical assistance, and joint project implementation, among others. The recommended primary performance indicators of the devolution process whose further operational details and secondary performance indicators are outlined in Annex 2, Table 10 are: > Reviews/amendments to the Local Government Code, R Revenues collected by LGUs and share of total expenditure, ' Continuity of policies and programs of the LGUs and the NGA over time, > No./value of cost-sharing arrangements by and between NGAs and LGUs to support strategic activities, > No. of development and investment plans finalized by LGUs, > Amount of investments generated by LGUs, > Membership patterns & no. of local bodies to ensure meaningful participation of civil society, and > Service delivery effectiveness of LGUs (focus on main rural sector services, such as extension, health, education, water supply). B) Rural Sector Convergetce (Annex 15) 3.115 The Philippine government's convergence strategy under the MTPDP attempts to achieve effective institutional coordination in the planning, implementation, and monitoring of complimentary initiatives in selected "convergence" areas. Specifically, it focuses on attaining convergence in strategies and operations of each of the concerned departments - the DA, DENR, and DAR- to ensure ..."adequate and affordable supplies of food and water...." Emerging Issues: 3.116 Several key issues confront the convergence strategy. First, the government convergence program appears to be "stuck" at the conceptual level. It has to move from concepts into implementable and doable strategies. The three departments are still at the exploratory and "talking" level. They are still formulating the operational details of the strategy. They have not allocated budgets in support of convergence. 42 3.117 Second, the LGUs have not been identified and involved as the 'integrating and converging" force at the local level. They are not in the "driver's seat", despite the devolution law and the local and international experiences providing evidences that LGUs are much more effective than national line agencies as integrators in convergence areas. 3.118 Third, the convergence as an institutional framework demands major changes in the institutional mindsets and in the way things are done in the three departments. Despite the analysis that the " institutional coordination of the three departments was perceived to be the solution to overlapping and fragmentation of functions and responsibilities in rural areas," none of the three departments is driving the process to refine the concept and implementation strategy. 3.119 Lastly, the absence of an effective facilitator and integrator for implementing the convergence strategy at the national and regional levels has kept the strategy in hibernation. Strategies 3.120 Refining and Operationalizing the Strategy. The NEDA, DILG, and probably the Office of the President should organize a tripartite meeting among the LGUs, concerned departments, and DILG to refine the concept and implementation strategy. An action plan to move from the concept to operation should be the main focus of the meeting. The action plan may be generated where each LGU, the concerned departments, NEDA, and DILG allocate portions of their GAA in support of the refinement and mobilization phase of the convergence strategy. 3.121 Giving LGUs Ownership of the Strategy. Being the most logical integrators of the convergence strategy, the LGUs should pass resolutions and ordinances owning the convergence strategy to make it work at the local level. The DENR, DA, and DAR should support the LGUs initiatives for integrating various sectoral concerns in their political jurisdiction. The LGUs need to realize and accept their lead role and the supportive role of the NGAs in each convergence area. With the refined and doable concept, a defined implementation strategy, acceptable decentralized and devolved arrangements, and budgetary support, the strategy could harness the power of both vertical devolution and horizontal coordination in achieving the MTPDP KRAs and RD objectives. 3.122 Commitments in terms of support, personnel, and funds from each of the key players have to be translated into signed MOAs and MOUs with attached site development plans for the convergence areas. 3.123 The recommended primary performance indicators for the convergence strategy further details on the operational aspects and secondary performnance indicators are provided in Annex 2, Table 10) are: > Number of operational convergence areas that are covered with MOUs or MOAs (with operational plans and funding), and effectiveness of the coordination efforts; and > Budgetary allocations and issuance/implementation of relevant supporting department orders to reflect priority convergence activities. CHAPTER 4: RD/NRM PERFORMANCE: EMERGING CONCLUSIONS AND OPERATIONAL FRAMEWORK OF A PERFORMANCE INDICATOR SYSTEM (A) RD/NRM Trends and Strategy Implementation: Emerging Conclusions and Recommendations 4.1 Based on a comprehensive assessment of the RD/NRM trends and the GOP's implementation of priority strategies, the study team generated 5 major conclusions: > There is mixed/poor RD/NRM performance due to a combination of factors involving deficient design aspects (including absence of operational strategies) and weak implementation performance and capacities by the relevant departments; > There is a need for the GOP, under the overall guidance of the Planning Committee, to sharpen, and in some cases, redirect and/or readjust, RD/NRM priorities and the sequencing of a number of strategies and programs (some of the more important ones are recommended below); ) There are a number of encouraging RD/NRM initiatives, but a MINDSET change by the relevant departments is required in order to enhance the prospects for significantly improving progress toward the ambitious MTPDP objectives/KRAs/targets. These behavioral and operational changes could be facilitated by the phased implementation of two management tools recommended by the study team: an explicit RD/NRM performance indicator system and a performance-based budgetary allocation system (to be worked out in close collaboration with NEDA and DBM). The operational framework for combining these 2 tools in terms of a RD/ NRM performance indicator system is outlined below; - There are major benefits to establishing and implementing a phased improved performance indicator monitoring system for RD/NRM; ) There are generic data and capacity constraints to institutionalizing a RD/NRM performance indicator system which need to be addressed. A framework operational plan is outlined below. (1) Mixed/Poor Performance 4.2 The trends and implementation performance in priority RD/NRM strategies show that progress toward achieving the ambitious MTPDP targets and outcomes are lagging significantly behind. This is also consistent with the "rural well being composite index" developed for the Philippines, in comparison with other East Asian countries (see Figure 3.2). While it is not possible at this time to come up with an overall "rural scorecard" based on the performance indicators developed by the study team, a tentative conclusioncan be achieved. Based on a qualitative judgement of the study's comprehensive analysis involving the seven performance indicator areas, the overall progress can be summarized as unsatisfactory, although there are some promising developments (see below). The analytical dimensions and underlying causes of this performance are provided in Annexes 5-15. The main underlying reason for this performance level is a combination of deficient policies, absence of prioritized operational strategies, and poor institutional coordination and performance by the relevant agencies. The absence of prioritized operational strategies and poor institutional coordination and performance, in turn, are due to capacity 44 weaknesses, and a lack of suitable accountability mechanisms, incentives and, a "mindset" to promote better performance. These deeper issues are also observed in other sectors, and therefore sustained improvements need to be addressed as part of a broader public sector management reform program (currently under preparation by the GOP, as part of its proposal to "Re-Engineer Government). Some of the more strategically important shortfalls include the following areas: > Large gap between historical agricultural sector growth rates and targeted agricultural growth rates (1.9% p.a., vs. 3.8-4.6% p.a., respectively), notwithstanding various reforms in the 1990s; > Sluggish and erratic rural sector growth rates and lagging rural sector diversification and dynamism, which put in question the feasibility of meeting the GOP's poverty targets by 2004; > The "de-facto" policy'4of equating rice self-sufficiency with food security, compounded by a distorted rice trading regime brought about by the NFA's monopoly of rice imports, high protection of rice trade resulting in excessive rice prices hurting the poor, and protracted approval and implementation of urgently required reforms of the NFA; > The large shortfall in the CARP public sector funding and cumbersome and costly CARP modalities, raises serious questions on the feasibility of completing the CARP in less than five years; > The faulty allocation of rural sector budgetary resources, weaknesses in the budgetary system, and inefficient utilization of public resources to achieve strategic RD/NRM objectives; > Meager private sector investments going to the countryside compounded by a rural financial system which severely limits access to finance, the lack of clear and sustainable rural finance policies, and the proliferation of directed and subsidized credit programs; E Deteriorating natural resources are further complicated by a combination of factors, including: a lack of firm commitment to promote the appropriate mixture of incentives and enforcement measures; inadequate public funding to fulfill essential regulatory and conservation functions; mixed policy statements which may undermine decades of successful experiences involving community-managed resource management initiatives; and a regulated and centralized policy environment that discourages on-site and private investments for the protection and management of improved natural resources; and > A devolution process which has resulted in a breakdown of some essential services to smallholders, and a convergence strategy which is still "stuck" at the conceptual level. (2) Need for Sharper Priorities and Sequencing. and Suggested Mid-Course Adjustments 4.3 While the MTPDP KRAs for the rural sector are generally sound, the study team's assessment of strategy implementation highlights an urgent need for GOP RD/NRM agencies (especially the DA, DENR, DAR, NEDA, spurred by the Planning Committee) to prioritize, operationalize, properly sequence and monitor the strategies and actions. These efforts need to be supported by a more efficient and strategic allocation and utilization of public sector expenditures. Even prior to the MTPDP's mid-term review, the study team recommends that the GOP consider updating some of the RD/NRM strategies and targets to more realistic levels. It also recommends that the government prioritize and operationalize strategic interventions and its medium term and annual public investment " The MTPDP document (and intent) aims to promote a food security agenda that is consistent with the provisions outlined in the AFMA. The AFMA, in turn, stipulates promotion of food security, including sufficiency in staple foods (not necessarily implying self-sufficiency in rice). Senior GOP officials have made frequent public statements equating food security with rice self-sufficiency by the year 2003. 45 plans to support timely and effective implementation of priority strategies. The study team has recommended priority RD/NRM strategies, and in some cases, suggested some directional and mid-course adjustments to the MTPDP. in order to enhance the prospects of achieving the MTPDP KRAs and attain sustainable tangible impacts in reducing rural poverty. Some of the strategies where directional improvements need to be considered by the GOP involve food security and approaches to CARP modalities and land markets. This prioritization is summarized in Table 1 of the executive summary, with further summary details of the suggested mid-course adjustments outlined in paras. 3.7-3.122 of the text and the summary tables outlined in Annex 2 (Tables 1-10). The full analysis according to performance indicator areas are presented in Annexes 5-15. 4.4 Recommended Adjustments: Based on the detailed analysis of the study team, the following eight (8) priority mid-course policy and strategy adjustments are recommended for consideration to the Planning Committee in order to close the gap between the MTPDP and actual RD/NRM strategies/performance, and thereby enhance their sustainable impacts: (a) Growth Targets: DA, in consultation with the NEDA, DENR, and DAR, could work out updated and realistic agricultural growth targets, and recommend to the Planning Committee the updated targets and policy and resource requirements."5 This proposal should be driven by renewed PC commitment to formulate and implement strategic and prioritized action plans to achieve the updated targets, hopefully exceeding significantly the historical growth rate of about 2% per year; (b) Competitive and Diversified Rural Economy: The DA needs to translate general policies, strategies, and plans into specific policy decisions and operational action plans, and remove policy and institutional rigidities and constraints to promote a more competitive and diversified agricultural sector. These reforms are needed to enhance the modernization, dynamism and profitability of the rural sector (including rural non-farm enterprises). It is suggested that the GOP give special attention to enhancing farmer choices and profitability by: promoting more competitive input and output markets for agricultural commodities and transport services, including inter-island transportation; reforming a demand-driven research and extension support services; and providing essential rural infrastructure; (c) Food Security: The GOP, with DA and NEDA support, should adopt a more sustainable policy and implement operational approaches to achieve national and household food security. The current de-facto approach of focusing on rice self-sufficiency and the GOP's postponing the final approval of reforms on the (NFA) is resulting in continued significant resource allocation distortions, while failing to provide a sustainable rice support system for poor consumers and producers. There is an urgent need to shift the GOP's food security focus on rice "self-sufficiency" to strategies which will enhance household incomes and the purchasing power of the poor, and help ensure the availability of rice throughout the year at stable prices. This does not preclude attaining rice self-sufficiency, provided the farmers' commodity choices are expanded. It is suggested that the food security stratcgy include the following integrated, well-sequenced, and operational components: (a) implementation of a vigorous and phased reforms on the NFA, especially the IS Any adjustments to the agricultural growth rate targets would have implications on other macro- and sectoral economic targets. especially on sectors which are closely linked to the agricultural sector. During the course of preparing the MNTPDP there was extensive debate on the growth targets and underlying assumptions. These assumptions, especially involving rice yields and pace of commodity diversification, should be revisited. 46 separation of the agency's regulatory and commercial functions, enhancing of transparency in rice imports, and import liberalization; (b) promotion of smallholder food productivity programs involving rice, livestock, poultry and fisheries; (c) actions to promote a more competitive trading sector and a more diversified rural economy, spurred by expanded private sector investments which would also stimulate non-farm enterprises and agro-processing activities; (d) actions for reducing trade barriers, especially for rice and sugar, in line with the WTO agreements, and (e) design and implementation of more effective rice targeting programs for the poor consumers; (d) CARP: The DAR, in consultation with the relevant stakeholders, should intensify its on- going efforts to improve the CARP modalities and approaches that will enhance the prospects for expediting the completion of the CARP. There is a need for it to move more vigorously from strategizing to operationalizing and implementing its emerging initiatives. The CARP modalities should be less costly, demand/community-driven, faster, better-targeted to the poor and landless, and integrated so that ARB productivity and incomes of the poor are enhanced. These improvements should also build on the findings of the on-going impact assessment study of the CARP and other relevant studies. These concrete actions and improved results would enhance the prospects for mobilizing Congressional support to expand public sector funding for land redistribution. Given the availability of a large amount of open access lands, estimated to amount to up to 5.0 M hectares, it is also suggested that the DAR promote stronger collaboration with the DENR to identify suitable public alienable and disposable lands to expedite CARP implementation. This may include an "uplands version" of the CARP for eligible ARBs, taking into account the DENR's strategies of implementing its forest management policies and forest demarcation. While the current administration aims to complete the CARP by the 2004, the DAR, in consultation with the Planning Committee, may wish to update the CARP targets to more realistic levels, or introduce two accomplishment scenarios based on updated and more realistic assumptions, especially involving public funding. Congress should also be more accountable to supporting CARP reforms and funding; (e) Budgetary Reforms: The DA, DENR, and DAR, in close collaboration with the NEDA and DBM, need to formulate operational action plans which would help reform their departmental budgetary allocation systems and ensure that their allocations are more consistent with priority strategies. In parallel, there is a need to establish a rational allocation and prioritization mechanism in Congress, with perhaps the CBPO spearheading the advocacy effort to promote such reforms. It is recommended that each of the agencies approach the preparation of the FY01 budget and their three-year medium term expenditure program currently under preparation in a manner which strengthens explicitly the linkages between the MTPDP KRAs and the budgetary allocations for strategic programs. These agencies should also link explicitly these priorities expenditure programs with performance indicators (both outcomes and results); and encourage the CPBO to promote budgetary review reforms within the relevant Congressional Committees/subcommittees, as this will help complement needed budgetary reforms in the Executive Branch. Based on the study team's assessment, eight strategic programs are suggested on a priority basis: irrigation, especially small-scale systems rural roads, CARP land distribution, support services for ARCs, reforestation, watershed management, research and extension programs, and market information. These indicators could be used as management tools to monitor the performance of the implementing unit(s); (f) Sustainable Rural Finance: The ACPC, with the support of the NCC and enhanced commitment by the DA, should focus on promoting and monitoring the implementation of the Agro-Industry Modernization Credit and Financing Program. Special attention should be placed 47 on expanding sustainable and expanded access to rural finance for financially and economically viable investments, and strengthening financial intermediation, supporting sustainable approaches to viable livelihood enterprises, and the systematic phasing out of DCPS. In practice, DCPs undermine the achievement of sustainable expanded access to finance by smallholders and small entrepreneurs. Currently, there are mixed "signals" and micro-finance programs/activities that appear to be undermining the GOP's stated rural finance policies; (g) Sustainable NRM: The DENR should sharpen its NRM strategies and operational programs, with emphasis on the following priority areas in the light of relevant implementation experiences and strategic objectives: improving community-based resource management strategies; strengthening various tenurial instruments for closing open access land areas; adopting a sound operational framework for guiding a program on delineation of forest boundaries; implementing a clear and consistent logging policy; supporting priority conservation and protection efforts; implementing operational strategies for sound watershed management and development; finalizing and implementing sound pricing/cost recovery policies, including the imposition of service fees to promote sustainable resource use; and further decentralizing and devolving key natural resource management responsibilities to achieve effective and sustainable management, supported by enhanced capacity-building at the LGU level. These interventions should adopt a holistic and sustainable perspective. (h) Institutional Performance: Devolution and Convergence: The DA, DAR, and DENR needs to fastrack priority institutional reforms to strengthen the devolution to LGUs/rural communities of priority RD/NRM programs, and to operationalize the convergence strategy and interface between the NGAs and LGUs. These improvements should focus on strengthened capacities, coordination, and monitoring mechanisms in order to improve the performance and accountabilities of the participating agencies and departments in implementing priority RD/NRM strategies of the MTPDP/ KRAs. (3) Potential for Improved Performance. Need for "Mindset" Changes. and Role of Two Management Tools 4.5 The study findings also shows that the Philippines has the potential for significantly improving its progress toward many of the MTPDP targets and KRAs. The GOP, however, will need to mobilize a more pro-active, systematic, and coordinated effort to establish, operationalize, and implement sharper and "do-able" strategic priorities and programs. Although the DA, DAR, and DENR are making some progress in addressing each of the above mentioned issues, the current efforts are not likely to be adequate to achieve the MTPDP targets, unless the actions are prioritized and significantly intensified. This will require more proactive approaches, greater results-oriented policies and budgetary allocations, and a performance-based "mindset" among key GOP decision- makers and implementors. While these changes are part of broader on-going reforms, achieving macro and sector-level reforms is a complex process and will require some time. Given that poverty in the Philippines is concentrated in rural areas, there is a need to "jumpstart" this mindset change in RD/NRM. This could build on the leadership being shown by the Chairman and Secretariat of the Planning Committee who are actively promoting these reforms. These results and momentum would also facilitate the implementation of reforms in other sectors, as part of GOP's on-going institutional reforms. 48 4.6 To "jumpstart" this complex process and mindset change, the study team recommends the use of two management tools: (a) a performance indicator system which aims to assess progress towards achieving priority outcomes and results of improved rural well being and performance by Government agencies in implementing the MTPDP; and (b) a performance-based budgetary allocation system which aims to encourage improved department management performance and effectiveness in formulating and implementing public sector policies and investment programs. Clearly, these two systems are closely inter-related, although they have different areas of emphasis and approaches. The section below outlines the frameworks of these two management tools and how they can be combined to meet the multiple objectives of improving both strategy implementation to get better outcomes/impacts in reducing rural poverty; and public sector management performance in the budgetary system. 4.7 Performance Indicator (PI) System: The DA, DAR, and DENR, with the support of the NEDA and guidance of the Planning Committee, should carefully select and operationalize strategic performance indicators for RD/NRM and use them as an effective management tool. This tool should aim to facilitate the process of redefining strategic priorities, re-aligning resources, and systematically monitoring key performance indicators of the MTPDP goals. and getting improved results and impacts. Annex 3, Table 1 contains an operational framework of the proposed indicator system emerging from the study. It shows, for each performance indicator area, both outcome and result indicators, frequency of data collection and analysis, and institutional roles. The outcome and result indicators have been discussed with the Planning Committee members, and further validated and refined during a series of regional workshops participated in by multi-sectoral stakeholders. Prior to the initial implementationi of the proposed PI system, the outcome and result indicators should be further validated, reduced to a manageable number, and refined through a participatory working group process involving the concerned line agencies (the DA, DAR, DENR, and facilitated by the NEDA and DBM). Based on this longer list of performance indicators, Table 4.1 shows a suggested prioritized and reduced set of outcome and results performance indicators. This list could provide the basis for further refinements during the course of operationalizing the PI system. The development of the system's operational plan should also take into account relevant initiatives being carried out by several departments to meet their operational objectives (e.g., the DBM as part of its efforts to encourage a performance-based budgetary allocation system/see below: the DENR as part of its efforts to promote watershed development; the DAR as part of its efforts to expedite implementation of the CARP and providing support to ARCs; the DA as part of its efforts to develop and implement regional and national Agriculture and Fisheries Modernization Plans (AFMPs); and Congress. 4.8 The major constraints to operationalizing the PI system include fragmented institutional arrangements and weak capacities. varying degrees of operational commitment to fully implementing the PI system, and the partial availability of data in the required format and level of detail/regional disaggregation. Annex 3. Tables 2 and 3 highlight these constraints and outline short and medium term actions to address them. In summary, there are three main operational strategies to address these constraints. First is the establishment of a sub-committee of the Planning Committee to implement and oversee the operationalization and implementation of the PI system. Second is the formulation and implementation of a capacity-building action plan to enable subcommittee members and personnel in the agencies concerned to adapt and extend "best practices" of M&E methodologies to suit the required P1 system, together with the performance-based budgetary allocation system being proposed in subsequent sections. Third is the promotion of confidence-building in the PI 49 system through (i) validation of the operational issues with each agency (ref. Annex 3. Tables 1 and 2); and (ii) immediate pilot testing of the PI system in one agency (e.g., the DA). 4.9 Performance-Based Budgetary Allocation System: In 1999, the DBM announced its plans to introduce a performance-based approach to budgetary allocations. This forms a part of the reforms the GOP is pursuing which are under discussion in Congress (ref. "Re-Engineering Government). It is recognized that embarking on this approach is a complex process, and will require mindset changes and a phased approach. To support this effort, the DBM is using an on- going Expenditure Management Improvement Project that is funded by the Institutional Development Fund (IDF). This project seeks to support performance-based approaches to strengthening public sector agencies and programs, and budget allocations. More specifically, it aims to develop operational approaches by line departments in preparing their forward expenditure programs and output and organizational level indicators while formulating their annual budget estimates. In 2000, the DBM plans to work closely with one department, with the DA being proposed, and agency to prepare the FY02 budget estimates, and use this experience to replicate the approach in other departments. The DBM's budget call for FY2001 is also requesting all line departments to present their budgetary requirements in a manner that links the activities and expenditures to priority strategies and performance indicators. It is recognized that full implementation of this approach will require more time, building on the above mentioned on-going initiative. Congress, through the CPBO, is also promoting a performance-based budgetary allocation approach as part of strengthening its oversight role.'6 These proposals are still at their early stages of operational development. The phased implementation of the proposed PI system for RD/NRM sector provides a timely opportunity to support and link with the above initiatives. Preliminary discussions with officials from the DBM and CBPO also confirm their interest in collaborating closely with the proposed RD/NRM PI system subcommittee. 4.10 The effectiveness of using and linking these two complementary management tools as part of a single system will hinge on the commitment and participation of the implementing departments. A proposed operational approach is for the agencies to develop with the DBM and NEDA the most relevant performance indicators, as part of the budgetary preparation and discussion process for FY02 and possibly for finalizing the FY01 budgetary process, in response to the DBM's budget call guidelines. The CPBO could also work in parallel to meet its own requirements, and participate in this process with the subcommittee, especially after the initial agreement between the line departments and the NEDA and DBM. Further refinements could be made and agreed by all of the parties concerned. This process would also facilitate budget discussions with Congress, with the aim of focusing on the FY02 budget cycle. 6 The CPBO is promoting the adoption of a performance-based management system, as outlined in the Policy Brief ("Legislative Oversight: A Proposed Conceptual Framework and Methodology", dated May, 1999). This article states: "For legislative oversight to be an effective tool in brining about greater accountability and efficiency in the use of public resources. it should be linked to a system of reward and punishment. Congress can issue a quarterly or semestral report card of agencies' performance to promote transparency. accountability and competition among government agencies. On the basis of such performance rating, good performers can be rewarded and bad performers can be punished" (p. 5)s ....Government agencies which have shown good performance can be given greater flexibility in their budget." i....Agencies that are wanting in performance should face the threat of budget cuts." 50 (4) Benefits of an Improved Performance Indicator Monitoring System 4.11 There are major potential benefits in investing in the detailed design and implementation of an operational strategy and action plan to monitor strategic RD/NRM performance indicators on a regular basis, especially if they are linked to implementing a performance-based public expenditure system. First, the outcome-oriented performance indicators will provide the GOP with improved management tools to enhance the role and effectiveness of its current programs in achieving the KRAs of the MTPDP. Second, operationalizing the analysis and feedback systems for the RD/ NRM performance indicators, and linking the results to a performance-based public expenditure system, will be essential in developing and updating responsive and strategic interventions, It will also be vital in budgeting and re-aligning scarce public resources and in crafting responsive, market- oriented, and deregulated government policies which will instill greater dynamism in the rural sector. Third, promoting a transparent PI system is made more urgent by a budgetary system which aims to reward departments which are committed to implementing a performance-based budgetary allocation system. The politicians and policy makers would justify this demand on the basis and clamor for increased budgetary allocation for RD-related programs and interventions. This demand for better monitoring is also reflected in the initiative taken by the CPBO. But devising such an improved information system that is linked to expenditure allocations is a complex process, and is not costless. Careful attention should be taken to develop a well-focused system that will yield operational benefits and results on the ground. (5) Constraints to and Proposed Mechanisms for Operationalizing the Performance Indicator System 4.12 Currently, there are limited explicit mechanisms in place to systematically monitor the implementation of the MTPDP, either at the global or the sectoral levels. At the level of the implementing departments, there are limited mechanisms to translate the strategies into operational programs, and to systematically monitor their implementation and explicit links with prioritized investment plans and the budgetary allocation process. There appears to be a limited demand for this type of information and strategy monitoring system from the main decision-makers, except on an ad-hoc basis, usually related to the annual performance evaluations of each Secretary/Department as required by the President. Below are a brief assessment of why past efforts appear to have failed in many developing countries, including the Philippines, and a suggested strategy under the Philippines context. Recently, there was an IDF grant-supported project that attempted to assist the NEDA establish a sector performance monitoring system, focusing on project implementation. During most of its implementation period, this project performed unsatisfactorily due to a number of reasons. This poor performance pattern in both the supply of, and demand for, strategy monitoring information and system is similar to most developing countries. There are various complex underlying reasons that need to be well grasped, if this pattern is going to change. These reasons include the following: > Policy makers at various levels of the agencies (e.g., central, regional, provincial, field) may be unconvinced that the existing information is accurate or useful, and in some cases, distrust official statistics; 51 i Policy-makers might be well aware of the state of RD and the status of RD efforts in qualitative terms and/or have better information, but are constrained by budget and political considerations in forging progress; > Some policy-makers might have proclaimed some grand RD strategies in order to win votes, and might not be terribly keen to monitor their own electioneering promises; ) Policy-makers might not want any part of a monitoring system that they or their staff did not have a primary role in designing; ) Emphasis had been placed on the achievement of physical targets as a measure of an agency's success, rather than the contribution of the agency to clear impacts or changes in the quality of the sector; > A systematic and clear monitoring system may reveal implementing agency and management inefficiencies and program weaknesses. Accordingly, there is no real incentive(s) for officials, even at the planning level, to take a proactive role in monitoring, even to rectify problems; and ) The management styles and strategic orientations of the relevant Secretaries vary. 4.13 The full commitment of the senior management of the DA, DAR, DENR, NEDA and DBM will be vital in establishing and implementing a strategic performance indicator system. If they wish to be assured of achieving the desired targets, they should ensure that the proposed monitoring system is designed, effectively implemented, and institutionalized. They likewise need to ensure that the analyses and recommendations emanating from the use of the PI system are utilized to improve the prioritization of public sector interventions that would help achieve broad-based rural sector development and poverty reduction within the next four years. This will be further enhanced when the PI system will be clearly linked with the budget preparation, allocation, and approval system. As stated above, achieving this challenge in practice may also require a "retooling" of mindsets towards greater performance and accountability. 4.14 Mechanisms to Ensure Functional and Credible PI System: A strong demand from communities, local government units, and the civil society, especially the NGOs, for a more transparent and performance-based governance will further strengthen the process and commitment to setting up and institutionalizing an outcome and results-oriented perforrnance indicator monitoring system at various levels of government's operations. Building on the constructive and effective role played by rural stakeholders in formulating the study's recommended RD/NRM strategies and performance indicators, other country experiences'' show that strategically selected rural stakeholders and oversight agencies should also play an important role in the implementation phase of the PI system. The stakeholder and agency oversight role can be carried out in several ways, adapted to the specific circumstances and institutional structure of the Philippines, to help minimize the constraints observed worldwide in performance monitoring systems (ref. para. 4.12). These 17 For example. in various parts of India "Citizen Report Cards" have evolved as an effective mechanism of holding public service providers to account on minimum performance standards by gathering client feedback on key performance indicators, and gathering primary stakeholder proposals for continuous improvements. In the case of the Philippines, the Social Weather Station plays an important role in eliciting public perceptions on public sector issues and performance. 52 options, which are not mutually exclusive, and are further developed in para. 4.17 (d), would include the following: (a) One or two consortia of RD/NRM-based NGOs15 could be included as a member (or observer) in the proposed PI sub-committee, and participate in the periodic meetings where the periodic (say, six-monthly) PI assessment reports (or "rural scorecards") would be presented and discussed; (b) A suitably-qualified independent group (say, contracted by a consortium of rural NGOs) could carry out an independent periodic (say, annual) RD/NRM "audit" of both the process and results of the PI monitoring system."9 This approach would help address the constraints to attaining effective and transparent performance monitoring systems outlined in para. 4.12. Recently, the CODE NGO is carrying out citizen monitoring of Government pro-poor programs and policies in the Philippines; (c) The CPBO could carry-out their own perfonnance indicator system to enhance their oversight role and effectiveness, and these efforts could be further enhanced through collaborating with the RD/NRM PI subcommittee; (d) The Presidential Management Staff (PMS) could also draw on the results of the RD/NRM P1 indicator system as inputs to their internal monitoring and the annual performance reports submitted by each Department to the President. The PMS has regional offices and technical staff who are in a position to validate key results and outputs on the ground 18 Some of the national-level NGOs which are giving special attention to monitoring rural sector performance and which could participate include: Philippines Participation for Development of Human Resources in Rural Areas; Philippines Community Organizers Society; and CODE-NGO Co-Multiversity. During the course of the Phase 2 stakeholder consultations. PHILRA representative expressed keen interest in contributing to this PI system, given that its current work program includes periodic monitorinlg of the implementation of the MTPDP for the rural sector. These independent "social audits" have been effectively carried out in other countries as a model for "auditing" performance monitoring of public ageticies in order to enhlanice credibility of the self-assessmenits by Governmenit agencies, as well as to encourage improved quality of performance monitoring over time. Table 4.1: RD/NRM Performance Indicator System: Recommended Framework for Operational Plan1' STRATEGIC PRIMARY RESULT PERFORMANCE INDICATORS 3 FREQUENCY & INSTITUTION PERFORMANCE OUTCOME PERFORMANCE (Sub-indicators defining the "character" of AVAILABILITY (Analysis/ INDICATOR AREA INDICATORS2' major indicators to be determined during (of Data on Result Collection) (Primary & Secondary) Phase 1) Indicators) 1. Agricultural 1) % Aggregate growth rate of: (a) agric. 1) % of and trend in DA budget expended * Annual (data NEDA/DA Growth and value-added per rural worker; (b) for: on labor and Performance yield per ha. by major commodity (a) Increasing production by major capital (KRA 1 & 2) commodity productivity (b) Enhancing of productivity of land, labor not available) & capital by major commodity c) Supporting non-traditional commodities/ diversification 2) Measures of revealed comparative 2) Relevant DA policies, admin orders (ref. * Annual (data/ DA advantage, trade openness, and price QRs, MAVs, tariff levels), programs, DA- info are protcction (e.g. nominal and effective initiated bills filed in Congress available) _ protection rates; QRs, tariff levels for rice, sugar) 2. Rural Poverty 1) Decreased poverty incidence, depth I) % of NGAs' (DA, DENR, DAR) budget * Annual (data NEDA/DA/ (All KRAs) and severity (% of rural population approved and expended for projects not readily DAR/DENR below absolute population line); targeting poverty groups available; national and regional levels, by key regional data to poverty groups) be generated) 2) Increased primary & secondary school 2) % of DOE budget for rtiral areas * Annual (data to DOE/DII-G enrollment rates (in rural areas) be generated) 3. Food Security 1) Rice balances (production/imports, I) Regularly updated action plans for ensuring * Quarterly DA/NSO & (all KRAs) consumption) and price trends adequate rice balances and rice price (most data is BAS (farmgate, wholesale, tariff levels; analysis and action plans for price available) nat'al/reg'al levels) stabilization (by private sector/NFA) 2) Decreased prevalence of malnutrition 1) Proportion of relevant NGAs' budget for * Annual (data NEDA/FNRI (nutrition status, % children under 5) improved malnutrition to total budget available) STRATEGIC PRIMARY RESULT PERFORMANCE INDICATORS 31 FREQUENCY & INSTITUTION PERFORMANCE OUTCOME PERFORMANCE (Sub-indicators defining the "character" of AVAILABILITY (Analysis/ INDICATOR AREA MNDICATORS2' major indicators to be determined during (of Data on Result Collection) (Primary & Secondary) Phase 1) Indicators) 4. Agrarian 1) Number of (land) hectares 1) Budgetary allocations for land acquisition * Annual (data NEDA/DAR Reform redistributed (private and public lands, and % of approved budget utilized for land available) (KRA 3) and by modality) acquisition; * Annual (data NEDA/DAR 2) Increases in ARB household income 2) % of DAR budget and expenditures for available) (No/% of ARB HH Income over programs and projects to increase HH nat'al./reg'al absolute poverty level) income of ARBs 5. Rural Sector 1) Aggregate trends and patterns, with I) * Annual (data NEDA & Investments focus on: * % of NGAs' budget proposed versus available) CPBO/DA, - Government expenditures on approved versus released DAR, DENR a) Public Sector ANRE as a percentage of total * % of NGAs' expenditures versus total Investments government expenditures government expenditures 4n (all KRAs) - expenditures by priority policy * Budget expenditure trends * Annual instruments (specially irrigation, R & * Modernization versus maintenance budget (modernization D/extension, land distribution, natural and expenditures ("modernization" defined data not readily resources management (NRM) to mean a systematic shift of resources available) community-based activities, towards promising sub-sectors and regulatory functions and geographical areas) diversification) 2) Degree of (increased) fund utilization 2) * Annual (data DBM & (ratio of used/obligated funds vs. total * NGAs' absorptive capacity (% budgetary not readily NEDA/DA, budget allocations) and stability of allocation utilized) available) DAR, DENR fund releases by DBM/National * Profile of budget approvals versus Government Agencies (NGAs) (% of releases (proportion & timing of releases) approved budget released per quarter) STRATEGIC PRIMARY RESULT PERFORMANCE INDICATORS 3 FREQUENCY & INSTITUTION PERFORMANCE OUTCOME PERFORMANCE (Sub-indicators defining the "character" of AVAILABILITY (Analysis/ INDICATOR AREA INDICATORS2' major indicators to be determined during (of Data on Result Collection) (Primary & Secondary) Phase 1) Indicators) b) Private Sector 1) Growth rate in agricultural (includes 1) Investments livestock) and fishery production * Actual private sector investments in * Annual - NEDA/DA & (KRAs 1, 2 & 3) production quarterly (data BAS * Modernization versus maintenance not readily investments ("modernization" defined to available) mean shifting of investments towards more promising business activities) * Number and value of NGAs' program support to private investments 2) Aggregate value and private 2) investments in breeding stocks and * Actual private sector investments in * Annual - NEDA/DA & tree crops breeding stocks and tree crops projects quarterly (data BAS * Number and value of NGAs' program not readily support to private sector investments available) c) Rural Finance 1) % of rural population with increasing 1) Trends in and profile of rural pop. * Annual (most ACPC/banks (KRAs 1, 2, 3) access to formal financial system as Borrowing and savings in formal fin'al data available) & financial depositor and/or borrower system institutions 1) 6. Natural 1) Increased aggregate forest cover (from * % of DENR budget expended for * Annual (data NEDAIDENR, Resource plantation, reforestation, improvement of forest cover, protected available) FMB Management rehabilitation, and protection of areas (KRA 4) natural forests and mangrove areas) * No.of DENR projects & beneficiaries 2) Reduced pollution in key coastal and 2) % of DENR approved budget for programs * Annual (proxy NEDA/DENR, industrial areas and improved water and projects directed towards reduced data available) EMB quality levels of key rural areas pollution and improved water quality management; available indicators from key areas STRATEGIC PRIMARY RESULT PERFORMANCE INDICATORS3/ FREQUENCY & INSTITUTION PERFORMANCE OUTCOME PERFORMANCE (Sub-indicators derining the "character" of AVAILABILITY (Analysis/ INDICATOR AREA INDICATORS2' major indicators to be determined during (or Data on Result Collection) (Primary & Secondary) Phase 1) Indicators) 7. Institutional 1) Numberlvalue of cost-sharing I) Amount and % of NGAs' budget actually * Annual (data DILG/DA, Arrangements arrangements by and between "surrendered" to LGUs in thc form of available) DENR, DAR, a) Devolution National Government Agencics counterpart fund to support mutually LGUs (KRA 5) (NGAs) and LGUs to support agreed-upon programs and projects strategic activities 2) Expanded membership patterns and 2) Breadth of stakeholder membership base * Annual (data DILG/1.GUs number of local bodies to ensure of local bodies such as LDCs; Number and not readily & NGO meaningful participation of civil geographical distribution of active versus available) federations society inactive local bodies 3) Improved serviccielivery 3) Selected result indicators on service * Annual (data DlLG/LGUs effectiveness of LGUs cffectiveness not available) b) Convergence I) Budgetary allocations and issuance/ 1) % of DA, DENR, & DAR budget & * Aniual (data NEDA/DA, (KRA 5) implementation of relevant supporting actual expenditurcs for convergence not readily DAR, DENR departmental orders to reflect priority activities versus non-convergence activities available) convergence activities Based on the Conceptual Sumimiary Framework outlined in Table I (See Executivc Summary) 2' Refers to "outcome" indicators (or impacts) "Result" perforimiance indicators aims to reflect the actions which arc withiin reasonable control of the relevant department/agency, for which it can be held accountable. These should be linkecd to the relevant outcome indicators. 57 (B) Recommended Framework and Main Elements of an Integrated RD/NRM Performance Indicator System 4.15 It is preferable to integrate the two above mentioned and complementary management tools within an operational framework which could be based on some key guiding principles and six elements. These are outlined below. (1) Guiding Principles 4.16 To help ensure a constructive and credible approach to the PI system, it is desirable that the process of operationalizing the PI system considers the following guiding principles: > Secure active ownership by the DA, DAR, and DENR, supported and facilitated by the NEDA, DBM, CBPO, and selected RD/NRM stakeholders. In some cases, the data collection agency will be specialized (e.g., National Statistical Office), and close coordination with the relevant department will be essential. These institutions will help ensure accountability in the effective implementation of the systems. A related principle is that the relevant government agency primarily responsible for the particular performance indicator should take the primary role for gathering, analyzing, and acting upon the relevant information. It would be desirable for the Planning Committee, on the recommendation of the PI subcommittee, to designate clearly the relevant performance indicators to the relevant departments/agency, under the overall responsibility of its Policy and Planning Unit, so that this exercise becomes integrated in the department's core activities; L Focus on priority RD/NRM strategies and policies, especially those which will generate a ,,multiplier" effect and help trigger improved strategic results in rural well-being; > Use simple and measurable performance indicators, with explicit linkages between the KRAs/ strategic areas and programs. A clear distinction between the outcome and result indicators, must also be established, such that the latter ones can be attributed directly to the performance of the implementing agency. Agreement on the final set of performance indicators will involve a process of discussion (and "negotiation") between the implementing departments and the NEDA and DBM. The key is to ensure a common set of PIs that both the implementing agencies and respective stakeholders will buy-in and serve as a benchmark for the periodic assessments. Accordingly, it is suggested that the selection of the specific indicators should aim to ensure acceptable, fair, and appropriate coverage of common parameters, from the perspectives of both implementing agencies and stakeholders; > Promote the PI system as a mechanism for promoting incentives and motivation to get better results, rather than fault-finding or evoking punitive reactions. > Institutionalize the systems in a phased manner, this process to include capacity building in terms of improved data systems and technical capacity to analyze and monitor implementation performance. Periodic management reviews by the Planning Committee should be built into the implementation plans in order to make improvements an integral part of the implementation process. 58 (2) Recommended Framework of the PI System 4.17 The section below includes a recommended action plan to implement in a phased manner the above outlined RD/NRM PI system, which provides an effective management tool to getting improved results and rural well-being as envisioned under the MTPDP. (a) Priority Performance Indicators: The formulation of an appropriate set of RD/NRM performance indicators (PIs) should include both outcome and result/management-related indicators. Table 4.1 provides an initial set of priority performance indicators which can be further refined along the lines discussed in para. 4.7. (b) In-depth Strategic Studies: There is a need to identify and conduct in-depth studies on strategic aspects of the priority PIs. These studies could address relevant issues involving the priority strategic public sector investment programs. Some of these in-depth studies are already on- going (e.g., Impact Assessment Study for Agrarian Reformi/CARP). Other topics would require special study (e.g., operational plans for reforming the RD/NRM budgetary system; irrigation subsector; agricultural research and extension; forest management policies and experiences and approaches to building on successful community-based approaches). Given the analytical nature of these studies, it is envisioned that the PI subcommittee should encourage the relevant Department to contract out the studies to suitably qualified research institutions (e.g., PIDS, several universities, consulting firms). These analytical activities and results should also endeavor to provide stronger underpinning to the DA, DENR and DAR in developing and adapting department-based modalities and mechanisms for integrating MTPDP performance indicators in their internal planning and budgeting processes. In this regard, the PI subcommittee would coordinate closely with the DA's Planning Service which currently is developing performance-oriented agricultural plans (see item (d) below). This experience will provide relevant inputs to the other departments. (c) Data Systems and Weaknesses and Action Plan: There is an urgent need to address underlying data system weaknesses in order to ensure that reliable data underpin the performance indicator system. Annex 3, Tables 1 and 2 highlight some of the more important data constraints and outlines short and medium term actions to address them. The design and implementation of the PI system should aim to focus on those PIs where these data constraints are not severe, and where necessary, use "proxy" indicators. The identified generic data constraints include the following factors: (i) data gathering is of generally low priority across the bureaucracy, especially in the light of usual budget constraints; (ii) data processing is of even lower priority, so that raw data becomes obsolete; (iii) data supply does not always match data demand; (iv) Government-generated data is perceived by the private sector to be not highly reliable; (v) there is inconsistency of overlapping data across different agencies; (vi) there is difficulty in getting reliable income data due to their sensitive and non-cash subsistence nature; (vii) development planning, annual budgeting, and monitoring and evaluation are not closely linked; (viii) there is a lack of linkage between sector level monitoring and evaluation, and program! project level monitoring and evaluation. 59 Annex 3, Tables 1 and 2 provide further detailed assessment of these constraints according to the seven strategy performance indicator areas as well as recommended actions in the short to medium terms. (d) Implementation Arrangements and Roles: Working out implementation roles and arrangements of the PI system, including the complementary roles of the Planning Committee's subcommittee for the PI indicator system, Congress' CPBO, the NGOs, and local-level bodies. The Planning Committee has endorsed the proposal to establish a subcommittee which will take the main responsibility to formulate and recommend to the Planning Committee relevant mid- course corrections to the MTPDP, and to formulate and implement a RD/NRM performance indicator system. This initiative should build on relevant initiatives being taken by other departments. For example, under the "Pilot-Testing of a Participatory Agricultural Planning System (PPAPS) Project" (January to December 2000), the DA is applying a development planning activity and methodology towards the formulation of the agriculture and fishery modernization plans (AFMPs). These are serving as "context" for the annual DA budget beginning in Year 2001. The AFMPs contain performance indicators (physical and financial targets) for programs and projects which when aggregated at the macro level, contribute towards the achievement of sector level performance indicators based on the MTPDP. The PI system should build on DA initiatives on sector and program/project level monitoring and evaluation, by interfacing the relevant organizational and data systems. Building on the DA's initiative will also enable the subcommittee to regionalize the PI system, perhaps using the Regional Development Councils (RDCs) which are chaired by the NEDA and also mandated to monitor the implementation of sectoral programs. In parallel, it is proposed that the CPBO proceed with its plans to operationalize its performance- based framework for assessing the budgetary allocation process, working with and building on the initiative being spearheaded by the PI subcommittee, and that it is also made a member of the PI subcommittee. It is further suggested that efforts should also be made to include relevant "umbrella" or sectoral-based NGOs to participate in the national and regional-based PI system and implementation. These NGOs could also promote broader rural stakeholder consensus and support to the implementation of priority strategies and the proposed performance indicator system, perhaps in the form of a "Citizen Report Card" for the rural sector. This would enable the participating NGO(s) to provide independent and ground-level inputs to the Planning Committee, perhaps working from a similar set of performance indicators. The precise nature and form of this collaboration between the subcommittee and the relevant NGO(s) should be worked out as soon as possible. (e) Institutional Capacities: There is a need to identify the institutional weaknesses of the above mentioned participants and to develop a supporting action plan for strengthening their capacity to steer and implement the proposed PI system. It is envisioned that the focus of the capacity- building should be in-service training, with some limited support for degree training in sectoral and programmatic M&E systems. (f) Phased Implementation: Working out an operational plan to implement the proposed PI system, and beginning implementation in a phased manner, under the day-to-day guidance of the PI subcommittee. It is recommended that the phasing be closely synchronized with the GOP's budgetary cycle, with an initial focus on linking with finalizing the on-going FY01 budget, and applying the system fully to the FY02 cycle. This link with the budgetary cycle will provide a strong incentive and "glue" for the agencies to participate. The PI system also needs to be 60 "sectoralized" by department to focus monitoring and assessment of each agency's performance. A multiple-track and phased approach is suggested. This approach involves beginning the process with an initial set of PJs to be carried out by the DA, DENR, and DAR, as spearheaded by the PI subcommittee. It then calls for the gradual regionalization of the PI system to ensure disaggregated analysis and monitoring of key PIs and target groups of the poor; with the approach perhaps beginning with the identified "convergence areas" as initial focal areas for testing the regional dimensions of the PI system. The DBM and CPBO will then need to initiate the institutionalization of the performance-based budgetary allocation system, somewhat in parallel the implementation of performance-based systems, and coordinate closely with the subcommittee. Finally, relevant NGOs will need to begin the phased implementation of their system, perhaps using a "Citizen Report Card" for the RD/NRM sector. Over time, the PC's PI subcommittee should take the initiative to promote collaboration amongst these parallel efforts, with each meeting their own operational objectives, although aiming to address some common questions and Pis. During the periodic presentations to the Planning Committee by the PI subcommittee, the CPBO and NGO representatives could be invited to contribute to the discussions and decision-miiaking process. Using the budgetary cycle, which would act as the "glue" of these initiatives, could influence the timing and degree of convergence of these efforts. C) Recommended Action Plan for Institutionalizing the RD/NRM Performance Indicator System 4.1 8 Notwithstanding the difficulties in establishing and implementing an effective RD/NRM strategy performance indicator monitoring system, the recently completed consultation meetings with the MTPDP Planning Committee and the regional stakeholders on the draft report generated strong support for the GOP/stakeholders to institutionalize a well-designed performance indicator monitoring system for RD/NRM. These consultations emphasized that the framework for this system needs to be underpinned by prioritized RD/NRM strategies, operational guiding principles, and a strong and explicit link with a performance-based budgetary allocation system for RD/NRM. This mechanism will encourage good performance by the relevant GOP agencies in the achievement of strategic objectives and KRAs, as measured by performance indicators mutually agreed between the DBM/NEDA and the relevant departments/agencies. 4.19 Based on the strong consensus to proceed with the operationalization of the suggested RD/ NRM performance monitoring system emerging from this study, and building on the PI system framework outlined above, the following six (5) point action plan is recommended: (1) Establish and Activate the P1 Sub-Committee/Working Group: Based on the endorsement expressed by the Chairman and members of the Planning Committee, there is a need to establish as soon as possible a PT system sub-committee to operationalize the proposed RD/NRM performance indicator system. It is suggested that the NEDA coordinate the formal establishment of this body, perhaps through an appropriate administrative circular signed by the PC Chairman, and activate this PI subcommittee. In the meantime, the NEDA-Agricultural staff is already taking the initiative to convene on an informal basis the likely core members of the proposed subcommittee. The members of this subcommittee should be senior officials, perhaps with the rank of at least an Assistant Secretary, and Director as alternate member, supported by the relevant technical staff. These officials should come from the DA, DAR, DENR, DBM, CPBO, selected NGOs (e.g., CODE NGO, PHILRA), and NEDA. The NEDA-Agricultural staff would act as the Secretariat, and the 61 subcommittee members could select the Chairman/Co-Chairman. The main framework TOR for this subcommittee could include three key elements to be further developed and agreed during its first meeting. The first of these elements is the working out of the principles and arrangements for developing, perhaps by mid-2000, specific recommendations for mid-course corrections/ improvements of the relevant RD/NRM strategies involving the MTPDP. Relevant recommendations would then need to be made to the Planning Committee as decision points, perhaps building on the recommendations outlined in para. 4.4). The subcommittee could also recommend to the PC of the MTPDP improved approaches and mechanisms that would improve the implementation and results of the priority RD/NRM strategies. The second element is the establishment and implementation of an RD/NRM PI system that could be used as a tool to monitor implementation of the MTPDP priority strategies, building on the framework outlined in para. 4.17. The third element is the conduct of relevant sectoral and multi-sectoral consultations and feedback activities with key stakeholders on the implementation of the MTPDP, and to use this feedback as part of the first and second elements. It is also suggested that each Department Secretary formally designate, perhaps by issuing an internal administrative order, the relevant unit and working staff within its department to implement the relevant PIs. As discussed in para. 4.14, it is also recommended that this subcommitte be complemented by additional PI monitoring mechanisms to help ensure timely and credible implementation of the PI system. Accordingly, the NEDA's active support for the implementation of this performance indicator and performance-based budgetary allocation systems would help reinforce the perception that the NEDA is taking a proactive role in promoting the effective implementation of the MTPDP. It is understood that carrying out the above functions will require highly motivated and professional staff. Accordingly, the Management in each Department concerned is encouraged to appoint dedicated staff and to give due recognition of their contributions within the Government's existing system of financial and non-financial incentives. The participation of NGOs is based on their specific mandates and resource availabilities to enable their participation. (2) Prepare Detailed Operational Plan for Phase 1: The Performance Indicator System subcommittee, supported by the relevant department technical staff and possible short term consultancy assistance, would work out a detailed operational plan for the initial phase of the proposed performance monitoring system. This work could build on and further sharpen the suggested Pls developed by the study team. These "primary" and "secondary" performance indicators are outlined in Annex 3, Table 1, with a reduced number of primary PIs (outcome and results) illustrated in Table 4.1. The operational plan should include the spatial and timeframe dimensions of the PIs. Also, over the next few months, the study team members and members of the PI subcommittee plan to continue focus group discussions with the relevant departments on selected study report annexes. The results of these discussions could also contribute to this consensus- building process, and to the formulation and implementation of priority performance indicators. The PI subcommittee/working group should also aim for the detailed operational plan to include disaggregated performance indicators according to regions and key poverty groups, subject to the availability of data. The study team has identified the main data and institutional issues and recommended actions to help operationalize the proposed performance indicator system in a phased, disaggregated and bottom-up manner. Finally, the operational plan would include identifying the required data systems and, capacity-building, and technical assistance needs of the participating agencies, along the lines outlined in para. 4.17 (c), with further details outlined in Annex 3, Tables 2 and 3. 62 The analytical aspects of the foregoing activities in terms of impact assessments may be complemented and supported by the participation of a suitably qualified independent research institution(s) (ref. para. 4.17 (b)). The PI subcommittee should aim to include in the operational plan the priority areas for in-depth assessment, prepare focused TOR, and help arrange their funding and implementation. (3) Initiate First Phase: It is suggested that the result of the detailed operational planning phase focus on reaching consensus on a small and manageable number of "primary" performance indicators as the basis of an initial implementation phase. The initial phase would aim to test and work out the implementation modalities, and address both "supply" and "demand" issues involving the PI system. It could be completed by end-2000, and give special attention to developing indicators as part of finalizing the FY01 and FY02 budgets for the rural sector agencies. The focus on the FY01 and FY02 budgets will enhance the operational focus of this PI system framework. Based on the initial results of the first phase, it is anticipated that the performance monitoring system could be fully applied during the FY02 budget cycle. The first phase could be coordinated and facilitated by the PIs subcommittee; the day-to-day implementation of the Phase 1 would be the main responsibility of the NEDA Agriculture Staff, supported by short-term consultant(s), and working closely with the relevant participating institutions. The PC would provide overall guidance, based on periodic management reviews, conducted, perhaps every six months. This first phase could also include the application of the PI system in a number of "convergence" sites agreed by the subcommittee, and the use of the system to test the "convergence" of the local and national performance monitoring systems. The PI subcommittee should also endeavor to coordinate closely with the parallel performance indicator systems which are also in the process of being launched by other stakeholders (para. 4.14). (4) Implement Phase 2: Based on the implementation experiences of Phase 1, the PI subcommittee would endeavor to formulate and implement Phase 2, with a focus on supporting the implementation of the full FY02 budget cycle. It may also expand the participation of the NEDA Regional Staff, Regional Development Councils, DILG Regional Development Councils and the League of LGUs, in the institutionalization of steps to further decentralize the performance monitoring system to the regional/local levels. It is also envisioned that NGOs would take a more active role during this phase, as already discussed in para. 4.14 (b). This approach is also likely to broaden the effective demand for, and credibility of, sustaining the performance indicator system. As this system shows positive results, it could be used by the relevant agencies to support their requests to Congress for increasing funding, and would provide a more objective basis for budget allocations and decisions, compared to the current ad-hoc system of budget negotiations. (5) Mobilize Funding: The NEDA, in collaboration with interested donor agencies, should now mobilize funding support in order to operationalize the RD/NRM performance monitoring system. There are several options, including the following choices which are not mutually exclusive: 3> Mobilize support from the on-going Expenditure Management Improvement Project that is funded by the Institutional Development Fund (IDF) and being managed by the DBM. The NEDA is already discussing with DBM staff the specific arrangements of the collaboration arrangements. Apparently, funds are currently available to support this initiative, and the IDF Project's priority of focusing on addressing these needs as part of the FY02 budget cycle coincides 63 with the thrust of the proposed PI system. The experiences gained from the rural sector could also be applied by the DBM and NEDA to other sectors; ) Mobilize grant funding from interested donors, especially for efforts to enhance capacities and strengthening data systems, although accessing this fund source may take some time; and - Utilize existing NEDA funds and staff to initiate implementation of the recommended PI framework and supporting operational plan for the initial phase, although these funds and manpower are not likely to meet the full requirements. ANNEX 1 MTPDPD Rural Development /Natural Resources Management Trends and Strategies Implementation Stakeholders Feedback Workshops (Draft Report) By Elmer S. Mercado2" World Bank Manila, Philippines March 2000 20 Natural Resource Management Policy Advocacy Advisor, Natural Resources Management Programme-Coastal Resources Management Project (NRMP-CRMP), a DENR project funded by the United States Agency for International Development and former Undersecretary for Environment and Field Operations. DENR. Annex 1/2 of 12 1. Background Phase 2 of the RD/NRM is part of the continuing effort between the Government of the Philippines (GOP) and the World Bank (WB) in seeking an approach to operationalise rural sector work in the context of the implementation of the new Philippine Medium-term Development Plan (1999-2004). This effort is focused on the development of strategic performance monitoring indicators that shall serve as decision-making inputs to the MTPDP Planning Committee on Agriculture and Natural Resources Management in the identification of relevant institutional, policy, operational and planning directions to key rural sector area agencies. The stakeholders' feedback workshop is the second stage of a two-step consultation process that started last October 1999 involving key rural sector stakeholders, including basic sector and civil society participants, representing Luzon, Visayas and Mindanao. The results of the first stakeholders consultation workshops was a prioritisation of strategic objectives, inputs and performance indicators from the long list of objectives, targets and inputs identified in the 5 Key Result Areas (KRAs) of the MTPDP. The workshop results served as inputs in the rural sector study commissioned by the Bank as key component element of the Bank's assistance to the GOP. The second stage of the stakeholders' workshop is a feedback workshop of the results of the outputs of the rural sector study team on the trends and analysis of the country's rural development strategies as it relates to the priorities, objectives and targets of the MTPDP. The feedback workshops was composed of the same core of representatives from the first stakeholders consultation last October 1999 as a follow-through and link up of the stakeholders' output with the study team's. This process of engaging the participation of local stakeholders in the rural sector in formulation, identification, planning and monitoring of the implementation of the MTPDP is expected to serve as initial steps towards the institutionalisation of a system of participatory and consultation process in the performance monitoring activities of the GOP. 2. Workshop Process and Methodology The phase 2 stakeholders' workshop is basically a feedback consultation of the findings of the rural study team on the trends and analysis of the country's rural development strategies, priority strategies and objectives as related to the new MTPDP, and suggested performance monitoring indicators (i.e. outcomes and outputs) on the implementation of the MTPDP. A consolidated matrix of recommended summary framework of strategic RD/NRM performance monitoring indicators is one of the outputs of the study. The matrix is divided into seven (7) strategic performance indicator areas: * agricultural growth and performance * rural poverty * food security * rural sector investments(public sector, private sector and rural finance) * agrarian reform * natural resource management * institutional arrangements ( devolution/convergence) Annex 1/3 of 12 The matrix consolidates and integrates the 5 KRAs in the MTPDP and the strategic area objectives (i.e. rural poverty and food security) of the Plan. Other components of the matrix lists down a set of strategic objectives and priority performance indicators for each of the 7 strategic areas. The feedback workshop used the consolidate matrix as the main document for discussion. A critical focus of the participants is the appreciation of a holistic view of the interrelationship and linkages of strategic objectives with the key issues and trends for each strategic area. The reduced list of priority indicators was also seen as integrated elements for performance monitoring of the strategic area. The seven strategic areas were further divided into two main discussion areas of the workshop. One focuses on core objectives - agricultural growth and performance, rural poverty, food security and rural sector investments, and the other focused on sectoral objectives - agrarian reform, natural resource management and institutional arrangements. Discussion on these areas centered on further refinements and focus for both strategic objectives and performance indicators. A further prioritisation of performance monitoring indicators of the proposed 64 indicators for the 7 strategic areas was also done. A third level of discussion focused on suggestions and recommendations for operationalisation and institutionalisation of the MTPDP performance indicators system. 3. Overview of Workshop Results a. General Observations 1) Most of the strategic objectives and priority indicators in the study team matrix mostly validated the observations and prioritisation laid down by the stakeholders during the first consultation workshop. This indicated that the results of the 'expert' study on the trends and analysis of the country's rural development strategies over the years were clearly manifested and appreciated by the sector's stakeholders; 2) There was a general agreement on the 7 strategic areas of the matrix as a further expansion of the 5 KRAs identified in the MTPDP; 3) In most cases, the stakeholders agreed to the strategic objectives identified in the matrix. Only in the area of devolution were the stakeholders actually proposed the inclusion of another strategic objective on LGU capacity building. At most, further refinements and clarification in formulation were proposed reflecting specific stakeholders interest areas (i.e. fishery) and assurances over coverage of the objectives (i.e. market infrastructure includes transportation, market information, etc.). There is a further need to emphasize the interrelationship and holistic viewing of the identified strategic objectives; Annex I /4 of 12 4) In the area of priority indicators, stakeholders had a more active and more dynamic participation and interest in redefining, refining and further specifying the parameters of the proposed indicators. Of the 64 proposed performance indicators, a total of 41 were prioritised as primary indicators. At least 5 new performance indicators were suggested outside of those in the recommended list; 5) A good number of the proposed indicators were further subjected to more focused and more relevant (i.e. practical) presentations. Among those that generated more focused formulations were the priority indicators on agrarian reform, devolution and private sector investments; 6) The stakeholders tended to mix both output (results) and outcome indicators. A good number of the stakeholders were focusing on issues of implementation and operationalisation of the indicators in the course of the prioritisation of performance indicators. 7) Most of the stakeholders recommendation on institutionalisation and operationalisation of the performance indicator monitoring system focused on expanding and assuring the participation of regional and local stakeholders and agencies in planning, budgeting and monitoring of performance. 8) Mindanao and Visayas workshop participants expressed apprehension on the reliability, availability, capacity and support on the generation and integration of performance data and benchmarks of each agency in the rural sector. There is a general sentiment that the process of generating the proposed indicators will result to a major over-all of existing and more familiar data gathering and reporting systems of government agencies and units. 9) A majority of the participants acknowledge the need for the NEDA to play a more active role in the performance monitoring of the key rural sector agencies. In Mindanao, it was recommended that NEDA be given a mandate by the key rural sector agencies (i.e. DAR, DA and DENR) to play an active and direct role in providing guidance and recommendations in the planning and implementation of agency performance commitments to the MTPDP. b. Process observations 1) The content of the workshop was generally more focused and less tedious than the first phase workshop. The fact that the feedback workshop focused on a more holistic viewing of the activity provided the participants with a clearer idea of the discussion. This afforded the participants more time in discussion of issues while being able to complete the expected outputs of the workshop; Annex 1/5 of 12 2) Participants had more opportunities for discussion and interaction because of the focused matrix. These resulted into further refinements and contextualisation of the parameters by which the strategic objectives and proposed performance indicators shall be based. In the case of the Luzon workshop, participants had a very active discussion on the core objectives of agricultural growth, rural poverty, food security and rural sector investments; 3) The Luzon arid Visayas workshop had a more balance representation in terms of basic sector representatives as well as participants in the first phase workshops. The Mindanao workshop was limited to core agency (i.e. NEDA NROs); basic and civil society representatives due to a regionwide transport strike during the workshop day. 4) The expanded participation of NEDA NROs provided extended views of the regional conditions of the current status of the MTPDP's implementation at the regional level. 5) For Visayas and Mindanao, the workshop was conducted in plenary discussion while the Luzon workshop participants were divided into two workshop groups along the two discussion areas from the proposed 7 strategic performance areas. 4. Summary Workshop Results and Remarks a. Strategic Objectives 1) Agricultural growth and perfornance * Stakeholders have a general consensus on the objectives of this strategic area. Emphasis, however, were expressed on the composition and type of public (govermment) support to rural infrastructure, markets, R&D and extension activities. A strong focus on improvement of transportation, i.e. shipping, was expressed by Mindanao stakeholders. * Government structural reforms must be rationalized so that when other sectors which are non agri-based industries are being benefited by government policies, this will not be counterproductive to the agricultural sector. * The economic share of the agricultural sector is not reflected in terms of actual capital infusion (either from public and private sources) to the agricultural sector. There should be a balance of budgetary allocation as a reflection of plowing back the contribution of the agricultural sector instead of the funds being unfairly diverted to development activities in the urban areas. Annex I / 6 of 12 * Government policy intervention should address both ends of the production system. Any appropriate intervention should address inputs (both domestically sourced and imported raw materials such as fertilizers). These policies should encourage positioning and dispersion of agri-industries to the rural areas. * Public support should not only focus on basic agricultural production but more importantly on on-site value-added agri-based processing to increase returns to the local communities (as supported by R and D and extension services). In areas where there is dearth in private investments, the government should provide the needed infrastructure under BOT-type arrangements. 2) Rural poverty * All the workshops supported the basic objectives in this strategic area with further refinements on the context of relating rural welfare outcomes with respect to absolute poverty. - There has to be a definitive, consistent and complementary anti-poverty framework and action agenda among the different agencies of government. Only then can an acceptable poverty monitoring indicator system be instituted holistically and made measurable over time. - Government must enlist the participation of the basic sectors in developing a sound poverty monitoring system to ensure transparency, accountability and ownership. 3) Food security * General consensus was achieved by the 3 workshops on the stated objectives in this area. This component was largely related and tied to the strategic area on agricultural growth and performance as interrelated to assure that both objectives of growth and food security compliment each other. * It was also suggested that trade protection and public expenditure must be focused on enhancing small holder productivity, competitiveness and facilitation of private sector trade. * "Access" in the context of the study include people's capacity to avail of "mixed commodities" at stable prices on year-round basis. 4) Rural sector investments * No major refinements in the strategic objective were suggested by the stakeholders except emphasis and clarification on areas of rural savings generation and the allocation of private sector investment to infrastructure on rural development projects. Annex 1/7 of 12 * In the case of public sector investments, closer integration between planning and budgeting among ANRE agencies is being pursued in order to strengthen decentralisation and cost sharing with LGUs. * Other comments centered on the issue that budget restructuring should be taken in the perspective of institutional restructuring. 5) Agrarian reform * Outside of a basic consensus on the objectives, other stakeholder comments focused highlighting the development of ARB's capabilities and expanding ARBs to include CARP beneficiaries in the upland areas. 6) Natural resource management * Some of the refinements in the NRM strategic objectives called for emphasis on indigenous peoples rights in the context of issuance of tenurial instruments, i.e. ancestral domains, and appropriate representation in NRM management bodies such as the protected area management boards (PAMBs). * Other comments highlighted implementation of national coastal and marine management policy and practice. 7) Institutional arrangements * A major addition to the strategic objectives on devolution was on the capacity building of LGUs to perform basic social services and mandated tasks under the Local Government Code. * Some participants also expressed indifference on the prioritisation of the review and amendment to the Local Government Code which was largely due to the legislative requirement on its review after 5 years of implementation. * On convergence, a major refinement by Luzon and Mindanao stakeholders was highlighting the objectives on operationalisation of the convergence strategy at the national level. b. Priority Performance Indicators I) Agricultural growth and productivity * There was a consensus on the priority indicators identified by the study team and the stakeholders, specially on the indicator for growth rates by major commodities and measures of revealed competitive advantage where all workshops identified them as priority indicator. Annex I /8 of 12 * However, in the case of growth rates Luzon stakeholdersthat emphasized that there are distortions in the pricing of major commodities from the inputs to the outputs and that an indicator should be developed to capture these distortions. * For secondary indicators, a new indicator was suggested to include funding for R&D. 2) Rural poverty * From the four (4) priority indicators identified in the study team matrix, the stakeholders supported two (2) indicators as primary - food expenditures vs total household (HH) expenditures and poverty incidence, depth and severity. Stakeholders from Visayas and Mindanao prioritised measures for rural employment based on criteria set by Labor Force Survey as primary indicator. * Similarly, Mindanao and Luzon stakeholders felt that there was no single social service sector indicator that could be prioritised and therefore suggested a general "access to basic services (education, health care, water and other utilities, mass housing and electrification) as a primary indicator, if not break them into sub- indicators. In the case of Luzon stakeholders, rural electrification was also cited as a priority indicator. * For secondary indicators, measures for safe water, malnutrition, infant mortality, and rural non-farm income were commonly identified by all 3 workshops. 3) Food security * A general consensus was reached between the study team recommended three (3) priority indicators and the stakeholders for food security - rice prices, fiscal subsidy and effectiveness of rice targeting, and public expenditures for rice productivity (i.e. irrigation and technology). Public expenditures for rice productivity was the common primary indicator for all 3 workshops. * For secondary indicators, stakeholders proposed an indicator for NFA reforms and related financial indicators on grains trading and management. This is primarily due to the common appreciation of the stakeholders that rice supply and rice transactions remains a major national food security policy element. In the Luzon workshop, "rice" was viewed as proxy performance indicator to mark trends on food security. 4) Rural sector investments Public sector investments * The stakeholders identified as primary indicators all the four (4) performance indicators proposed by the study team (only two were prioritised in the matrix). Annex 1I /9 of 12 This came from the general sentiments of the stakeholders that public sector investments in the sector has to be accelerated to propel growth and productivity. Luzon stakeholders related budgetary allocations must be tied to efficiency and effectiveness of use of public funds. * A fifth (5) indicator was proposed by Mindanao stakeholders on strengthening the role of Regional Development Councils (RDCs) in the budgetary process. Private sector investments * Stakeholders prioritised only one (1), breeding stocks and tree crops investments, of the three (3) indicators proposed as primary by the study team. The other primary indicator relates to agricultural and fishery production. * Many of the stakeholders expressed that private sector investments are necessarily tied to incentives and relaxation of bureaucratic procedures for private sector investments to come into the sector. This involves among other things simplification of regulatory and permitting functions of both national and local government agencies. * For secondary indicators, bank loans to agriculture was the most common but with qualifiers that include actual loans and long-term loans to agriculture. Rural finance * The stakeholders prioritised three (3) indicators as primary but felt that others could be merged. These include proportion of borrowings( formal/informal sources) with incidence of borrowings and loan repayment for AMCFP with collection efficiency of AMCFP. * It should be stressed that in the case of rural finance, stakeholders were strongly recommending measures for increasing access to loan by small and medium farmholders and actual loans/savings generated for the rural sector. 5) Agrarian reform * Of the three (3) priority indicators in the matrix, two indicators were identified by stakeholders as primary but with more focused and specific refinements. In the case of the indicator for number of hectares of land redistributed, Luzon stakeholders broke down the indicator to include number of hectares redistributed actually occupied and redistributed lanzds reverted. This qualifier stems from the premise that existing data merely captures paper or documented releases of land but not necessarily lead to actual occupation by target beneficiaries. Luzon stakeholders mentioned that this indicator should also be related to land conversion rates. Annex 1/ 10 of 12 * The other primary indicator that was redefined was the trend in household income. All stakeholders held the view that increases in household income must be focused to CARP beneficiaries and with the national or regional poverty incidence as a benchmark. * For secondary indicators, the stakeholders have a consensus on extent of land rental transactions, length of time to litigate land disputes and number of landless and poor being able to access land. Further refinements were added to indicators on joint ventures by CARP beneficiaries in 'terms of arrangements and schemes' while Visayas stakeholders suggested indicators for landlord reinvestment (CARP payments) to rural sector. 6) Natural resource management Five (5) priority indicators were suggested by the stakeholders from the eight (8) listed in the matrix. The improvement of forest cover, pollution levels (and water quality), number of tenurial instruments and fishery production levels were common priorities to at least two workshops. In the case of forest cover, it was clarified that the indicator relates to actual tree stands in reforested areas not just replanted trees or reforestation activities. For secondary indicators, fees systems and user fees collected and land conversion rates were supported by a majority of the stakeholders. Land conversion rates is considered as both a positive or negative indicator (e.g. forestland to kaingin/agricultural use or abandoned fishpond areas to recovered mangrove areas). 7) Institutional arrangements Devolution * Stakeholders had a varied prioritisation of primary indicators on devolution than the study team's. Stakeholders viewed LGU generation of revenues and civil society participation in LGU special bodies as critical indicators of devolution. This comes from the understanding that the main arena for devolution to work is at the local level and therefore prioritisation must be focused on making actual local governance work. * Similarly, Luzon stakeholders suggested new indicators (priority) on investment generation by LGUs and local service delivery effectiveness as well as actual plans prepared and implemented by LGUs (secondary). Convergence * Indicators related to actual implementation and operationalisation of the convergence strategy at the field level were the focused of the suggested primary indicators of the stakeholders. These include budgetary allocations and issuance/implementation Annex 1/11 of 12 orders by agencies on convergence activities and MOUs/MOAs entered into by the agencies to implement specific aspects of convergence activities in priority areas. * As a result of the reformulation of the strategic objective on national level operationalisation of convergence, the reactivation and regular functioning of the convergence steering committee was seen as a primary indicator by Luzon and Visayas stakeholders. 5. Recommended Institutionalisation and Operationalisation of Performance Indicators Many of the discussions during the feedback workshops inevitably veered towards questions of institutionalisation and operationalisation of the performance indicators not only within the national agencies but also in regional and local agencies. Stakeholders felt that coming out with a mechanism to integrate both local and regional stakeholders and agencies, i.e. NEDA regional offices and Regional Development Councils, will provide a better appreciation and groundlevel validation of the prioritisation and accomplishments being reported by the agencies. Others expressed apprehension that operationalisation of performance indicators will lead to drastic changes in the existing reporting and monitoring system already being utilised by key agencies, i.e. NEDA, Bureau of Agricultural Statistics. Such changes will eventually delay the functionality of the indicators not only as measures of performance by agencies but also as tools for decision-making and allocation. Other recommendations from the stakeholders include: a) Expanding the role of private sector and civil society as equal partner at both national and local level of the performance monitoring system; b) Assure continuing commitment of NGAs to monitoring targets and indicators that should be reflected in actual budget or resources allocated to implement monitoring process and the responsiveness of the Planning Committee to act on outputs and results of monitoring process, i.e. shifts in direction and changes in allocation; c) Development of a rural development governance index patterned after the Human Development Index of the UNDP. The RD governance index shall be a composite of the prioritised performance monitoring indicators that shall serve as basis for evaluation qualitative changes in rural sector; d) Installation and recasting of appropriate database and information generation and strengthening of relevant database systems in key agencies; Annex I / 12 of 12 e) Use of performance indicators as a measure of effective management and accountability for key rural sector agency management and officials; f) Strengthening of regional participation and involvement, i.e. RDCs, in the budgeting and planning process for the sector; and, g) Strengthening of NEDA's mandate (national and regional) as main monitoring body for performance indicator along with Regional Development Councils as counterpart of the Planning Committee at the regional level. Several inputs from the NEDA regional offices and central units suggested that the indicators be related to either the Sector Effectiveness and Efficiency Review (SEER) or the National Testing o Indicators for Sustainable Development (NTISD) project of the Philippine Council for Sustainable Development (PCSD). At the regional level, this could be made a specific section on the annual regional development report being prepared by the NEDA regional offices in coordination with the respective regional offices of the various national agencies. Other areas for integrating the performance indicator system in the Executive Department will be through the Presidential Management System (PMS) which prepares the annual performance report of the Executive, i.e. Ulat sa Bayan, and yearly State of the Nation Address (SONA) delivered by the President at the start of the new year in January and opening of Congress in July, respectively. A further step is to relate the performance indicators in the legislative process of the General Appropriations Act (GAA). The House of Representatives and Senate have their respective committee on appropriation/finance who are mandated to provide oversight functions on government agency performance and use of budgets appropriated by Congress. There are also technical offices in both chambers who actually conduct reviews and analysis of government agency performance and budgets. These are the Congressional Planning and Budgeting Office (CPBO) in the House and the Legislative Budget Review and Monitoring Office (LBRMO) in the Senate. Both of these offices provide technical and analytical support to both chambers' committees on appropriation and finance, respectively. These along with efforts to achieve a common framework and consensus between the planning and budgeting agencies of thc GOP on the targets, objectives and monitoring indicators for the rural sector are areas for the subsequent institutionalisation and operationalisation of performance indicator monitoring in the GOP. ANNEX 2 RD/NRM Performance Indicator System: Summary Matrices According to Performance Indicator Area Summary Matrices According to Performance Indicator Area (1) Agricultural Growth and Performance (Annex 5) (2) Rural Poverty Reduction (Annex 6) (3) Food Security (Annex 7) (4) Agrarian Reform (Annex 8) (5) Rural Sector Public Expenditures (Annex 9) (6) Public expenditures: Rural Roads (Annex 10) (7) Private Investments in Agriculture (Annex 11) (8) Rural Financial Sector (Annex 12) (9) Natural Resources Management (Annex 13) (10) Decentralization and Devolution (Annex 14 and 15) Table 1: Agricultural Growth Performance (Annex 5) Key Issues Strategic Intervention Suggested Indicators Institution Remarks Declining competitive Public investments in Growth rates at aggregate level NEDA Due to wide annual advantage/stagnating growth-enhancing and by major commodities fluctuation of agricultural productivity public goods and a) gross value production, average growth services, particularly added/production rates must be estimated using R&D and extension, b) total factor regression analysis or irrigation, etc. productivity computed on a 5-year moving c) land productivity or average. yield Measures of revealed competitive NEDA Requires improvement in data advantage trade openness, and availability and quality, price production. particularly for total factor productivity measurement and for proper attribution to the MTPDP. Limited Reducing dispersion of Ratio of non-traditional NEDA Computed based on nominal diversification agricultural protection commodities (and fisheries and real terms across commodities. livestock and poultry) to total GVA. Greater public support Measure of dispersion (e.g., CV) NEDA for market of agricultural protection across infrastructure, market commodities. development, R&D and extension activities for non-traditional commodities. Annex 2/3 of 28 Table 2: Rural Poverty (Annex 6) Priority List of Rural Poverty Indicators Poverty Concern/ Information Frequency Content/Description & Source Level of sub-national Priority Component System Purpose aggregation "Ends" Measures Family Triennial, Family income and NSO Provincial (since 1994), Income and since 1985 expenditures, sources of sectoral Poverty Expenditures incomes, spending incidence, depth, & Survey patterns; benchmark severity (FIES) information for CPI Annual Annual Family income and NSO Provincial (since 1998) Poverty (except expenditures; access Indicator FIES indicators to basic needs Survey years), and social services; (APIS) since 1998 employment status of Education household members (i) Functional FLEMMS Data on functional NSO Regional literacy literacy, education, and mass media exposure (ii) Primary & HS enrolment rate Infant mortality Health Info Annual Data on mortality/ DOH Sectoral System morbidity from notifiable diseases, nutrition status & deficiencies, health services & sanitation Malnutrition National Once Nutrition status, food FNRI Regional prevalence Nutrition every 5 adequacy, nutrition Survey years deficiencies, and related socio-economic "Meso" Measures information Rural employment ISH-Labor Quarterly Data on the employed/ NSO Regional Force Suvey unemployed, and on other (LFS) relevant characteristics of household Rural nonfarm FIES Triennial, See FIES above NSO Provincial (since 1994) income (as % of since 1985 total HH income) Food expenditure FIES Triennial, See FIES above NSO Provincial (since 1994) (as % of total HH since 1985 expenditure) Access to safe water FIES, APIS Annual, See FIES/APIS above NSO Provincial since 1997 Access to health care FIES, APIS Annual, See FIES/APIS above NSO Provincial since 1997 Table 3: Food Security (Annex 7) Enhancing Food Security in the Philippines: Interim Key Result Areas, Indicators and Agencies Responsible for Result Areas Key Issue Priority Strategy/Key Result Area Suggested Indicator Responsibility Remarks The government maintains a buffer stock equal to 30- Level of buffer stocks held by National Food Authority days of national consumption at the onset of the lean government by July 1; season each year. The stocks are either sourced from budgetary outlay of domestic procurement or from importation. government for maintaining the buffer stocks Wholesale and retail rice Department of Agriculture- prices Bureau of Agricultural Statistics In January of each year, the rice import quota is Wholesale and retail rice Department of Agriculture- determined (based on the gap between local supply and prices Bureau of Agricultural Statistics Rice Price demand, net of the NFA's requirements for buffer Stabilization stocking) and auctioned off to private sector importers. Utilization of auctioned rice National Food Authority Aside from addressing possible import permits Department of Agriculture-MAV shortages, allocating the quota Secretariat mainly to the more efficient private importers will result in lower prices for consumers. The NFA's procurement and release prices are made Farmgate palay prices; Department of Agriculture- If permits are not utilized, there more responsive to market prices. Local production wholesale and retail rice Bureau of Agricultural Statistics could be a shortage. costs, world prices and movements in the exchange rate prices are factored into the computation of these NFA prices. Intemationally Marketing costs for primary agricultural products Farm-to-market road density Department of Agriculture; The stress on roads is for a Competitive reduced through improved road system Local government units sector-neutral market Agriculture infrastructure. (also a long- Improved, and better access of farmers to, irrigation Private sector investments in Department of Agriculture; Local irrigation facilities/services term issue) services irrigation facilities, including National Irrigation can be supplied by private maintenance thereof Administration; Local sector providers, particularly for government units communal projects. Farmers may enter into a contract with such providers where they pay irrigation service fees in the same way that road users pay for toll roads. Government can > encourage such contracts to occur through regulations or laws (if needed) or technical assistance in project develop- 4~ ment particularly from the NIA. o Table 3: Food Security (Annex 7) Enhancing Food Security in the Philippines: Interim Key Result Areas, Indicators and Agencies Responsible for Result Areas Key Issue Priority Strategy/Key Result Area Suggested Indicator Responsibility Remarks Access of farmers to more and improved agricultural Amount appropriated for Congress; Department of The AFMA already provides technologies broadened subsidizing basic agricultural Agriculture that amounts be set aside for technology development this purpose. Plant variety protection and Congress; Department of This is a commitment to the registration bill enacted Agriculture WTO under the TRIPs Agreement. Regulations issued for the Department of Agriculture; With availability of such commercialization of Department of Science and technologies in other transgenic agricultural Technology countries, the prospect of products accelerating agricultural modernization is higher if farmers are provided better access to such improved technologies. To address concerns for bio-safety particularly from environmental groups, the review of existing field testing regulations for transgenic materials needs to be done. Regulations reviewed and Department of Agriculture; improvements adopted for the Department of Science and field testing of transgenic Technology agricultural products Reduced tariff rates on products used as inputs in Statutory tariff rates Department of Agriculture- The Philippines has agriculture, including packaging materials and Policy Analysis Service; NEDA unilaterally committed to transportation equipment Tariff and Related Matters APEC a tariff policy regime Committee between 0-5% in 2003 except for sensitive agricultural products. An Executive Order has yet to be issued to enable ;> this. 0< I' Table 3: Food Security (Annex 7) Enhancing Food Security in the Philippines: Interim Key Result Areas, Indicators and Agencies Responsible for Result Areas Key Issue Priority Strategy/Key Result Area Suggested Indicator Responsibility Remarks Agricultural products better safeguarded against Legislation enacted and Congress; Department of The proposed legislation dumping, subsidized agricultural exports, and import regulations issued for WTO- Agriculture; Tariff Commission include: General Safeguards surges consistent anti-dumping, Law and Agriculture Special Targeted countervailing, and Safeguards Law. Rice safeguards measures Implementing rules and Subsidies to regulations are yet to be the Poor issued on these and the anti- (also a long- dumping and countervailing term issue) laws. Enhanced capacity to export agri-based products International sanitary and Department of Agriculture - This will also protect locally phytosanitary standards Bureau of Agriculture and grown crops and livestock adopted Fishery Product Standards, from pests and diseases that Bureau of Plant Industry, agricultural imports may Bureau of Animal Industry, introduce into the country. National Meat Inspection Commission, Bureau of Fisheries and Aquatic Resources Department of Health - Bureau of Food and Drugs A cost-effective scheme designed, adopted, and Delivery scheme of targeted Department of Agriculture- The NFA has piloted a small implemented to target rice subsidies for lower income marketing assistance for Policy Analysis Service, program since 1997. The groups. missionary local rice markets proposed Grains Sector Amount appropriated each Department of Agriculture; Development Program of the year for targeted rice NEDA Development Budget ADB lists this reform in the subsidies benefiting lower Coordinating Committee; program's policy reform income groups. Congress matrix. Institution(s) set up to Department of Agriculture; implement the targeted rice Department of Budget and subsidies program. Management . Table 3: Food Security (Annex 7) Enhancing Food Security in the Philippines: Interim Key Result Areas, Indicators and Agencies Responsible for Result Areas Key Issue Priority Strategy/Key Result Area Suggested Indicator Responsibility Remarks Fiscal Given the above results, fiscal subsidies to the NFA, and Amount of operational Department of Agriculture; assistance ceilings for DOF-guaranteed commercial notes of the subsidies to the NFA Department of Finance; to the NFA NFA reduced indicated in the General National Food Authority reduced to Appropriations Act; ceiling in lower the the financial guarantees budgetary granted by the Department of deficit while Finance ensuring Given the above results, non-core and special assets of Proceeds from NFA asset Department of Finance; food security the NFA sold to partially retire its debts. sale; amount of NFA debt National Food Authority (also a long- retired term issue) 00 Table 3: Food Security (Annex 7) Table 4.2 Enhancing Food Security in the Philippines: Long-Term Key Result Areas, Indicators and Agencies Responsible for Result Areas Key Issue Priority Strategy/Key Result Area Suggested Indicator Responsibility Remarks In January of each year, rice import quota is determined Target and market wholesale Department of Agriculture- Requires amendments to NFA and auctioned to private sector importers to support the and retail rice prices National Rice Board; Bureau Charter to decouple the NFA current annual national rice consumption at the target of Agricultural Statistics wholesale price set initially at 50% above first warehouse Local rice production; target Department of Agriculture- Requires amendments to NFA price of imported rice. Target price changes kept within national use of rice; target rice National Rice Board; Bureau Charter to decouple the NFA plus or minus ten percent from immediately preceding imports of Agricultural Statistics level by appropriate adjustments in statutory in-quota Utilization of auctioned rice Department of Agriculture- If permits are not utilized, tariff for rice. Market wholesale rice prices fluctuate import permits National Rice Board; Bureau there could be a shortage. within plus and minus five percentage points around the of Agricultural Statistics The assumption is that the target price. WTO tariff binding commitment in rice allows Department of Finance- flexibility for varying applied in- Bureau of Customs quota tariff rates. Regional wholesale rice prices deviate from the national Regional wholesale and retail Department of Agriculture- Regional rice markets are Rice Price target price to the extent of competitive rice marketing rice prices; marketing costs National Rice Board; Bureau reasonably integrated. Stabilization costs. Regions with extraordinarily high marketing cost of Agricultural Statistics are identified and provided with marketing assistance to Delivery scheme of targeted Department of Agriculture- The scope of work for this can keep rice prices in these markets at comparable levels marketing assistance for Policy Analysis Service be incorporated in that for with the rest of the country. Mechanism for delivering missionary local rice markets poverty-group targeted rice assistance to be designed. subsidy. Fiscal subsidy for targeted Department of Agriculture- The National Rice Board shall marketing assistance National Rice Board have access to a contingency fund. Average palay price at the farm level is no less than fitty Regional farmgate prices of Department of Agriculture- Market farmgate palay prices percent of target rice price. Regional palay farmgate palay National Rice Board; Bureau on average are half their prices may deviate from this average to the extent of of Agricultural Statistics corresponding rice wholesale competitive marketing cost. prices. Extraordinary situations, including but not limited to Local rice production; world Department of Agriculture- NDCC intervenes only after bumper harvests, sharp changes in world rice prices prices; exchange rate; National Rice Board; Bureau the President makes an official and/or currency value, area-specific natural calamities or regional rice prices; regional of Agricultural Statistics declaration that there is a temporary disruptions in domestic trade in rice for any farmgate prices; utilization of calamity. > reason other than natural calamities are appropriately rice contingency fund; NDCC National Disaster dealt with using the contingency fund of the National expenditures related to rice Coordinating Council Rice Board. Natural calamities are addressed following existing procedures of the National Disaster Coordinating Local government units Council for responding to natural calamities. ._ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 0 0 Table 3: Food Security (Annex 7) Table 4.2 Enhancing Food Security in the Philippines: Long-Term Key Result Areas, Indicators and Agencies Responsible for Result Areas Key Issue Priority Strategy/Key Result Area Suggested Indicator Responsibility Remarks Internationally Marketing costs for primary agricultural products reduced Farm-to-market road density Department of Agriculture The stress on roads is for a Competitive through improved road system sector-neutral market Agriculture Local government units infrastructure. (also an Improved, and better access of farmers to, irrigation Private sector investments in Department of Agriculture- Local irrigation facilities/services interim services irrigation facilities including National Irrigation can be supplied by private issue) maintenance thereof Administration sector providers, particularly for communal projects. Farmers Local government units may enter into a contract with such providers where they pay irrigation service fees in the same way that road users pay for toll roads. Government can encourage such contracts to occur through regulations or laws (if needed) or technical assistance in project development particularly from the NIA. Access of farmers to more and improved agricultural Amount appropriated for Congress The AFMA already provides that technologies broadened subsidizing basic agricultural amounts be set aside for this technology development Department of Agriculture purpose. Plant variety protection and Congress This is a commitment to the registration bill enacted WTO under the TRIPs Department of Agriculture Agreement. Regulations issued for the Department of Agriculture With availability of such commercialization of technologies in other countries, transgenic agricultural Department of Science and the prospect of accelerating products Technology agricultural modernization is higher if farmers are provided better access to such improved technologies. To address concerns for bio-safety particularly from environmental groups, the review of existing field testing regulations for transgenic materials needs to be done. Table 3: Food Security (Annex 7) Table 4.2 Enhancing Food Security in the Philippines: LonS-Term Key Result Areas, Indicators and Agencies Responsible for Result Areas Key Issue Priority Strategy/Key Result Area Suggested Indicator Responsibility Remarks Regulations reviewed and Department of Agriculture improvements adopted for the field testing of transgenic Department of Science and agricultural products Technology Reduced tariff rates on products used as inputs in Statutory tariff rates Department of Agriculture- The Philippines has agriculture, including packaging materials and Policy Analysis Service unilaterally committed to transportation equipment APEC a tariff policy regime NEDA Tariff and Related between 0-5% in 2003 except Matters Committee for sensitive agricultural products. An Executive Order has yet to be issued to enable this. Agricultural products better safeguarded against Legislation enacted and Congress The proposed legislation dumping, subsidized agricultural exports, and import regulations issued for WTO- include the General surges consistent anti-dumping, Department of Agriculture Safeguards Law and countervailing, and safeguards Agriculture Special measures National Economic and Safeguards Law. Development Authority -Tariff Implementing rules and Commission regulations are yet to issued on these and the anti- dumping and countervailing laws. Enhanced capacity to export agri-based products International sanitary and Department of Agriculture - This will also protect locally phytosanitary standards Bureau of Agriculture and grown crops and livestock adopted Fishery Product Standards, from pests and diseases that Bureau of Plant Industry, agricultural imports may Bureau of Animal Industry, introduce into the country. National Meat Inspection The NFA has piloted a small Commission, Bureau of program since 1997. The Fisheries and Aquatic proposed Grains Sector Resources Development Program of the > Department of Health - ADB lists this reform in the C Bureau of Food and Drugs program's policy reform matrix. 00 Table 3: Food Security (Annex 7) Key Issue Priority Strategy/Key Result Area Suggested Indicator Responsibility Remarks Targeted Rice A cost-effective scheme designed, adopted, and Delivery scheme of targeted Department of Agriculture- Subsidies to implemented to target rice subsidies for lower income marketing assistance for Policy Analysis Service the Poor groups. missionary local rice markets (also an Amount appropriated each Department of Agriculture interim issue) year for targeted rice subsidies benefiting lower income NEDA Development Budget groups. Coordinating Committee; Congress Institution(s) set up to Department of Agriculture implement the targeted rice subsidies program. Department of Budget and Management Fiscal Given above results, remaining assets of the NFA sold Assets sold; NFA debt retired Department of Agriculture assistance to to finance the NFA restructuring and retire all of its the NFA debts Department of Finance reduced to lower National Food Authority budgetary deficit while ensuring food security (also an interim issue) 0C Annex 2/ 12 of 28 Table 4: Agrarian Reform (Annex 8) STRATEGIC PERFORMANCE PRIMARY OBJECTIVES INDICATORS RESPONSIBILITY 1) Expedite implementation of * No. of Has. Redistributed * DAR (with support from CARP based on reformed/ and their prices (private regional offices) innovative modalities. and public lands); * Budgetary funds approved and released by GOP for land acquisition; * Land taxes collected and used for land acquisition; * % of has. Redistributed & no. of beneficiaries (based on the main modalities, with emphasis on voluntary transfer); * No.of length of time to litigate land disputes. 2) Provide strategic support * No. of ARCs supported * DAR (with support from infrastructure and services tc (and reaching higher level independent surveys and enhance household incomes of social organization); analysts) and agricultural productivity * No. of joint ventures, volume of investments; * Household income increases (compared to control groups) (P); * Issuance of individual CLOAs (no.) 3) Improve the functioning of * Number of landless and * DAR (with support from land rental markets and use poor being able to access independent syrveys and land reform as a means to land (P) analysts) facilitate increased land * Extent of rental access by the poor (and non- transactions. CARP beneficiaries). Annex 2/ 13 of 28 Table 5: Rural Sector Public Expenditures (Annex 9) Summary of key indicators for public expenditures for ANRE Key Issues Strategic Interventions Suggested Indicators Priority Institutional Responsibility 1. Stagnating productivity/declining Increase productivity - enhancing public Expenditure by policy instruments (P) DA competitiveness expenditutre. i.e. ;public goods and services Irrigation such as imgation, R&D . extension, market R & D infrastructure. Extension Credit Increase public expenditure for market Production Support development, policy analysis, statistical Market development service. Policy analysis. statistical service, etc. Provide greater financial support for Regulation strengthening regulatory functions to address extemalities, asymmetric information, e.g., quarantine services, seed and planting material quality regulation, fertilizer qualtty and pesticide regulation, etc. 2. Concentration of production on a few Redistribution of public expenditure away from Expenditure by commodity (P) DA commodities. any commodity bias towards more neutrality Rice across all policy or program instruments and if Non-rice crops applicable within each policy instrument. Livestock and poultry Fisheiy R & D by commodity (P) DA-BAR 3. Unequal distribution of land ownership Facilitate redistrbution of land ownership. Trends and distribution of DAR and ARF badget by land fP) DAR and access tn other productive acquisition and distribution vs. beneficiaries resources. development 4. Rapid degradation of forest, land, Appropriate levels of budgetary allocation to Trends and distribution of DENR cxpenditurcs for forcst (P) DENR water and fishery resources. effectively carry out the sustainable management, land management, mines and geo-science, management of natural resources through environmental management, protected areas and wildlife regulatorv interventions, rehabilitation resources development. programs, R&D. policy analysis and advocacy, etc. 5. Weak quality of govemance of the sector arising from: over-centralization of the budget of Reallocate budget in favor of regional offices Degree of Decentralization (P) DA. DAR. DENR, LGUs DA and LGUs. Ga by level of govemance - national (central, regionalt, local DA, DAR, DENR, LGUs Regional allocation of DA, DAR, DENR & (S) LGUs as ratios of GVA, rural pop'n., no. of farm household,l farm areas. Regional DA & SCUs R & D as ramos of GVA IS) DA * liisited moultotrig. evaluation, anid Institutionalize iimechaniismiis. Expenditures on monitoring, evaluation and impact (P) NEDA, DA, DAR, impact analysis of program and Allocate necessarv budgets. analysis of program and projects. DENR. LGUs projects. Bureaucratic constraints to timely Streamline bidding procedures for CO. Degree of fund utilization as measured by the ratio of (P) DA, DAR, DENR release and spending of budgetary Further decentralizanon at DA. unused funds or unobligated funds to total available allocation. appropriations. * Dominance of project vs. program Reallocate budget in favor of program funding. Available appropriations according to program and (P) DA, DAR. DENR funding project by agency Ratio of regular program of total expenditures by agency. (P) DA, DAR, DENR Overly high share of budgetary allocation Reallocate budget, address overstaffing in Allocation by type of expenditure as measured by the (P) DA, DAR, DENR for PS relative to MOOE and PS in the certain agencies. ratios of PS. MOOR, and CO to total expenditures by regular program budget. agency. Allocation by type of R&D expenditure as measured by (S) DA-BAR the ratios of PS, MOOE, and CO to total expenditures by agency Degree of utilization of public funds for undertaking (P) NEDA private sector roles. Underfunding of ANRE-related public Maintain a ratio of public expenditure for Real Ga. Ga as a ratio of G, G. and GVA (P) NEDA, (DA. DAR. sector investments/chronic fiscal deficits ANRE to GVA that is comparable to other DENR) progressive developing countries. Ga as a ratio of rural pop'n. no, of farm households, farm (P) NEDA, (DA, DAR, area. DENR) Highly unstable and unpredictable budgetary and releases. Maintain more stable budgetary allocation. Available appropriations according to program and (P) DA, DAR, DENR _________ ________ ________ ________ ___________________ project by agency Annex 2 /14 of 28 Table 6: Key Issues and Monitoring Indicators for Roads (Annex 10) Road 1 Targeting of0 Contracting and |Consultations Cosrction 2 e iks. engineering: DPWH required with| I I I 2 ~~~~~(maximize contracting and IDA, LGUs I l i | | ~~~~~devolution to LGUs, |and 4 | | g ~~~~~minimize administration). agriblusines Road |Targeting of Monitoring: DPWH, DILG |of crucial Maintenance |key links. reporting system, NSO for links. periodic census of infrastructure. Fianin Inesfe Stregthe advocacy, adocc by tente * GAA |proj-ect II DM and LGUs. enabling LGU development activism. and resourceI * Obligations |Obligate up DBM and LGUs. Focussed |to maximum I programming |allocated I required. |under GAA. * Expenditures |To expend l EDBM and LGUs |Facilitate Imaximum I contracting g obligated. and payment| Annex 2 /15 of 28 Table 7: Private Investments in Agriculture (Annex 11) Key Issues Priority Suggested Primary Remarks Strategies Indicators Institution Lack of Increasing Good indicator but NSCB has to investments due productivity; PRIMARY strengthen database to: NEDA/ Improving sector NSCB Strength (S): Availability of time * Perceived risks competitiveness; Breeding stocks series data on investments in due to natural and and orchard (with private livestock and poultry. calamities and development sector and Weakness (W): Data not natural events; Diversification of component of the LGU inputs) disaggregated by component; * Poor production and gross domestic measures only infrastructure; resource use capital formation breeding stocks * Peace and in the National and afforestation; order situation; By: promoting Income Accounts does not capture * Lack of access private investments investments in to financing in agriculture orchard (short and development, farm long-term); Specifics construction, and * Weak domestic purchases of demand; and * Improve policy equipment. * High incidence and legal of rural environment poverty. * Develop infrastructure; * Remove distortions in land markets: * Minimize bureaucratic red tape; * Enhance access to financing; * Provide support to R& D; * Enhance access to market information; and * Promote peace and order. Annex 2 / 16 of 28 Table 8: Rural Financial Sector (Annex 12) To monitor and be able to take actions so that the achievement of the objectives indicated in the 1999-2004 MTPDP are ensured, the following priority indicators are proposed: Key Issues Priority Proposed Definition of the Primary Strategies Indicators (C - Indicator, Frequency of Institutional core indicator; S- Collection Responsibility secondary indicator Declining Greater financial * Proportion of * This is the proportion of * CPC (lead), proportion of resources loans going to loans going to non-farm BSP, NSO, agricultural loans mobilized for the non-farm enterprises. Main data DA-BAS to total loans sector enterprises source is the. * This is the volume of loans granted by formal financial institutions to the * ACPC (lead), * Proportion of agri sector as percentage BSP agricultural of total loans granted. loans to total Main data source is the loans granted BSP. Data may be (C) collected quarterly. * This is the volume of savings from the rural areas as percentage of total savings. * Proportion of * ACPC (lead), rural savings to BSP total savings deposits (S) Constant Access to rural * Proportion of * This the no. of borrowers * ACPC (lead), proportion of finance expanded borrowers from formal/informal SWS borrowers from borrowing sources as percentage of the formal from formal total borrowers sources and informal sources (C) This is the no. of borrowing farmers as percentage of total no. of farmers. Main data source * Incidence of is the annual survey being * ACPC (lead), borrowing (S) conducted by SWS. SWS Huge fiscal costs Agriculture * Proportion of * This is the no. of DCPs * ACPC (lead), arising from the directed credit rural credit phased-out as percentage NCC implementation programs phased- programs of total DCPs. Main data of govemment out and phased-out to source is the ACPC and directed credit consolidated into total DCPs (C) the NCC. programs the AMCFP Annex 2/17 of 28 Key Issues Priority Proposed Definition of the Primary Strategies Indicators (C - Indicator, Frequency of Institutional core indicator; S- Collection Responsibility secondary indicator * This is the amount of budget earmarked and released to credit programs as percentage of * Proportion of total budget to the sector. budget going to Main data source is the rural credit DBM. This may be * NCC (lead), programs (C) collected annually. ACPC, DBM * This is the amount of agri credit funds phased-out and consolidated into the AMCFP as percentage of total DCP funds in Agriculture. Main data source is the ACPC. This may be collected annually. * This is the amount of * Proportion of donor funds allocated to DCP funds in credit programs as agriculture percentage of total ODA phased-out and to the sector. Main data consolidated source is the NEDA-PIS * ACPC (lead), into the AMCFP and the DOF-IFG but NCC (C) NCC monitors all these data. * This is the no. of DCPs transferred to GFIs as percentage of total DCPs. Main data source is the ACPC and the NCC. * Proportion of donor funds going to rural credit programs (S) * CC (lead) NEDA, Annex 2/ 18 of 28 Key Issues Priority Proposed Definition of the Primary Strategies Indicators (C - Indicator, Frequency of Institutional core indicator; S- Collection Responsibility secondary indicator * Proportion of rural credit programs transferred to GFIs (5) * CPC (lead). NCC, GFIs Huge fiscal costs AMCFP * Proportion of * '[his is the amount of the * ACPC (lead), arising from the implemented agricultural agricultural budget going DIBM DA, implementation budget going to to the AMCFP. Main data NCC of government AMCFP source is the DBM. This directed credit may be collected annually. programs * This is the volume of loans released to agri borrowers as percentage of total funds in the AMCFP. Main data source are the * Agricultural GFIs. The data may be * ACPC (lead), loans granted as collected quarterly. NCC, GFIs % of the total funds in the * This is the no. of program AMCFP (C) borrowers as percentagc of total small-farmer borrower. Main data source are the GFIs and the PFIs. The data may be collected quarterly. * This will determine the collection efficiency and sustainability of the program. Main data * No. of program source is the GFls. Data * ACPC (lead), borrowers as % may be collected quarterly. NCC, GFIs of small farmer- borrowers (C) * This is the average interest rates charged for loans granted under the AMCFP Annex 21 19 of 28 Key Issues Priority Proposed Definition of the Primary Strategies Indicators (C - Indicator, Frequency of Institutional core indicator; S- Collection Responsibility secondary indicator * This will determine the level of government subsidy for the program. Since funds from the budget will still be appropriated for the AMCFP, this indicator should be considered to determine actual fiscal * Repayment rate cost of the program. The for AMCFP data may be reported annually. Main data source * ACPC (lead). are the GFIs and the GFIs DBM. * Average interest rate of agricultural loans granted (S) * ACPC (lead), GFls * Subsidy Dependency Index (SDI) for AMCFP (5) * ACPC (lead), GEls, DBM Annex 2/20 of 28 Table 9: Natural Resources Management (Annex 13) SUMMARY OF ISSUES, KEY STRATEGIES AND PRIORITY INDICATORS KEY ISSUE PRIORITY PRIORITY PRIMARY (INDEX); / SUB-STRATEGY PERFORMANCE / RESPONSIBILITY indicators INDICATORS Deforestation & Degradation Build on community-oriented Income of stakeholders P DENR/FMB forest management and production systems Effective area conserved R Open access area P (Change in the S Continue rehabilitation and Tenurial instruments (holders P DENRINFDO/ Asset Value of conservation efforts of & area) FMB Forest Resource) prioritized watershed areas Reforestation R Secure user rights & Conservation practices R DENR; Congress (area, volume) responsibilities (URR) for various stakeholders Strengthen multi-sectoral Incidence of destructive R DENR, DILG, protection practices Civil Society Encourage private sector Investments in plantation R DENR, DTI investments Correct pricing of resources Instruments operationalized R Environmental Fund R created Overfishing and Degradation of Coastal Resources (Change in the S Define access to fisheries Territories & users R DA, PCG, DENR Asset Value of (TURF) Fishery (Secure URR) Delineated & defined Resource) Build on community-oriented Common property rules R DA, DTLG, DENR coastal resources formulated management Income of fisherfolk P Catch/effort P Effective fishing R DENR, DA communities S Mangroves rehabilitation Area effectively managed R DENR, DA Foreshore area managed Inventory & user fees R DENR, LGU Annex 2/21 of 28 KEY ISSUE PRIORITY PRIORITY PRIMARY (INDEX); / SUB-STRATEGY PERFORMANCE I RESPONSIBILITY indicators INDICATORS Degraded Freshwater Resources Environmental S Strengthen monitoring & Ambient monitoring R DENR; LGUs Damage enforcement Pollution load reduced R Ambient water S Apply wastewater discharge Fee collected R DENR; LGUs fees Quality Groundwater extraction Fee collected R DENR. LGUs, descriptors NWRB, LWDs Rehabilitate prioritized Investments in R degraded rivers Rehabilitation (from fees DENR. LGUs, DBM collected) Endgangered Biodiversity Reserves & Indigenous Peoples Value of Direct S Complete the designation of Area delineated R DENR, PAMBs Nature Services PAs Implement NIPAS provisions Buffer zones established R DENR, PAMBs IPAF established Biodiversity S Appropriate fee system in Fees collected & in IPAF R DENR, PAMBs place Descriptors R DENR, PAMBs User groups' P Harmonize conflicting Survey and registration R practices legislations Resolved conflicts R Safeguard indigenous peoples Livelihood enhanced R NCIP:DENR, and ancestral domains PAMBs Sustaining use of Mineral Resources Environmental S Mitigate risk: Pollution load P DENR/MGB Risk & Damage from Mining Develop env'l regulations: Safety measures installed R DENR/MGB EIA System Monitor compliance to IRR Incidence of P DENRIMGB; LGUs of Mining Act failure/accidents Econ. Impacts on host R LGUs, NEDA communities Develop compacts among Joint decisions & R DENR/MGB; LGUs various stakeholders enforcement MPSA issued P Annex 2/22 of 28 KEY ISSUE PRIORITY PRIORITY PRIMARY (INDEX); / SUB-STRATEGY PERFORMANCE / RESPONSIBILITY indicators INDICATORS Convergence Area Operational Adopt watershed & Coordinating mechanism R NEDA, DENR, DA ecosystem set up Approach to planning/mgmt. Joint personnel training R Delineate forest lines Boundaries established R DENR, DA Conduct eco-profilin, and Plans developed R NEDA, DENR, physical framework planning LGUs Market Failure & Institutional Failure Full cost internalization: Instruments formulated R DENR, DOF. valuation Congress Property rights reforms Enforced rules R DENR. DOD. Congress Government budget Environmental trust fund R DENR, DBM., allocation created Congress Streamline bureaucracy N.B.: Primary responsibility for index formulation and monitoring: DENR P = Pressure Indicator S = State of resource index R = Response indicator Table 10: Decentralization and Devolution (Annexes 14 and 15) Institutional Arrangements: Roles and Performance MTDP/CAS Key Issues Priority Rationale Priority Primary Action Plan Strategic Strategies Indicators Responsibility For Institutional Objectives (Outcome) Peformance Indicators A. Devolution A.) Rationalize the Continuing Review of institutional the Devolution Process: framework and structures; The mandatory review Amend the LGC to The LGC provides for a Interagency and Congress a. Consolidate and of the LGC has not address partial mandatory review in multisectoral reviews Leagues/ULAP review all proposed A.2 Strengthen and occupied a high priority devolution, increased every five years. Over of the LGC with DILG amendments to the capacitate key in the Congress. shares of LGUs from the last eight years, there recommended LGC stakeholders national taxes, have been adequate amendments (especially at Various issuances and inadequate provision on experiences and lessons b. Provide key analyses the LGU level) circulars from national the mandatory to improve the present Amendments to the and summary to for rural lines agencies are consultation of the Code version of the LGC. LGC by the Congress justify the proposed development undermining the spirit for national Devolution must be seen based on lessons LGC amendments programs of autonomy and governments, and as dynamic and a learned and emperical devolution unclear relations between continuing process. evidence. c. File the bill amending the LCE and the local the LGC Partial devolution of the law making body with Over the years, the environmental sector respect to personnel various leagues d. Advocate the passage (in contrast to health, appointment. (governors, mayors, vice- of the LGC agriculture, and social mayors, barangay amendments. services) -DENR has Encourage the various captains) have emerged maintained its power to leagues, the Union of as a strong advocate for control, supervision and Local Authorities LGUs. These groups review of community (ULAP) and NGOs to together with the other forestry projects. advocate for the local stakeholders can amendment of the LGC. provide a balance for the Congress deliberation 'centralizing" tendencies of bills seeking to of the national recentralize and government. renationalize powers devolved to LGUs. O0 MTDP/CAS Key Issues Priority Rationale Priority Primary Action Plan Strategic Strategies Indicators Responsibility For Institutional Objectives (Outcome) Peformance Indicators Local Finance: The IRA share of LGU LGUs to seek ways to Local finance is at the Number and value of Congress a. LGUs to formulate is based on a sharing gradually become less heart of the devolution cost sharing DOF development and scheme/formnula that is dependent on IRA for process: devolution arrangements of LGUs DILG investment plans biased for LGUs with local financing and without financial with NGAs DA/DENR/DAR larger land areas but not explore financing devolution is DTI b. Determine and heavily populated; arrangement with the meaningless. Extent ol transfer of Leagues identify sources of private sector, ODA, financing to the LGUs funds for the plans Most LGUs are heavily joint ventures, bond through the IRA dependent on IRA for flotation, etc. c. Proactively seek financing Percentage decrease in funding support from LGUs to step up efforts the dependency of the IRA, joint LGUs have still no to get their right share LGUs from IRA ventures, cost sharing share in national tariffs from national wealth financing arrangements, private and customs duties. located within their sector, ODAs, NGOs, jurisdiction. Increased Congress and Congress Limited borrowing insertions and capacity of most LGUs, LGUs to sclectively enter initiatives for LGUs d. Sponsor investment especially those who into cost sharing and for a for LGUs who belong to the lower matching funds Increased private sector have development class LGUs. arrangement with the financing for local level and investment plans national line agencies for developments Despite devolution, the undertakings that are budgets of devolved supportive to their national agencies overall development continued to increase plans over the past five years. Strategize and advocate Congressional for the Congress > initiatives and initiatives and insertions insertions are through the LGU > predominantly through budgets. the NGA budgets. MTDP/CAS Key Issues Priority Rationale Priority Primary Action Plan Strategic Strategies Indicators Responsibility For Institutional Objectives (Outcome) Peformance Indicators Participation: Some local development councils Elect qualified sectoral Increase participation in Extent of involvement Leagues/ULAP a. Develop and validate are inactive and representatives to the the process of of civil society in local NGOs a multisectoral and concerns were raised special bodies - governance is a governance DILG interagency about the quality and Sanggunians and fundamental principle of monitoring system nature of NGOs in the development councils the devolution process. Tactical alliance and for the participation councils. This is part of the sectoral representations of the civil society in NGOs/POs to strategize broader concern of in support of the LGU LGU special bodies Some NGO/PO on how to enter into democratization and plans and local governance networks are frustrated tactical alliances with developing and in their participation in other sectors (e.g. implementing programs Extent of funding b. Conduct periodic the local governance leagues) to advocate that are responsive to the support for the LGU monitoring of process. common causes at the stakeholders. plans sourced by the participation in local local level. civil society governance NGOs/POs with access c. Discuss results of to external funds should the M &E with implement projects in leagues/ULAP and support of the LGU other interested development plans. parties. National Local Relations: Ad hoc and case to case Authorize and direct the It is imperative to MOUs/MOAs signed Leagues/ULAP a. Develop and validate arrangements through consolidated leagues continue clarifying the by the ULAP/leagues NGAs a generic MOU and MOAs and MOUs under the ULAP to nature of the relationship with NGAs covering Training MOA for each of the between local-national represent the LGUs and between the national various concerns and Institutions key NGAs to cover > agencies regarding execute mother MOUs government agencies and collaborative efforts policies, standards, Z provision of technical and MOAs to cover joint the loca government training, technical assistance and on other undertakings at the local especially in the areas of Institutionalized assistance, and collaborative level. overall policy setting, training programs to collaboration undertakings. access and provision of capacitate local N) MTDP/CAS Key Issues Priority Rationale Priority Primary Action Plan Strategic Strategies Indicators Responsibility For Institutional Objectives (Outcome) Peformance Indicators Strengthen institutions technical assistance, stakeholders especially b. Execute MOAs or that are capacitating the capacity building and the LGUs and field MOUs LGUs, especially the training. staff of NGAs Centers for Local c. Monitor the Governance, or Institutes The change of roles of Continuity of policies implementation of of Local Government the LGUs and the and programs at the MOAs and MOUs. Administration, to enable national line agencies LGU and NGA levels the LGUs to meet the depends on the with change in capacity demands under effectiveness of capacity administration. the devolution. building and engineering/ Standards and local refocusing the national policies for Identify and pursue areas line agencies as service implementing devolved where collaborative and providers to the LGUs. functions. cost sharing arrangement for implementation may take place. National line agencies in close consultation with LGUs should jointly set the technical standards for devolved functions for monitoring quality performance. Advocate and work towards changing the role of national line agcncies into becoming providers of technical > services to LGUs in support of autonomy. C) MTDP/CAS Key Issues Priority Rationale Priority Primary Action Plan Strategic Strategies Indicators Responsibility For Institutional Objectives (Outcome) Peformance Indicators B. Convergence To achieve effective Conceptual Stage of the institutional Convergence Program coordination in the planning, The convergence Jointly refine and The convergence Reactivated and NEDA, DILG a. NEDA , to organize implementation, program that will validate the concept and framework has been functional Convergence DA, DAR, DENR a tripartite meeting and monitoring of facilitate the implementation strategy perceived to solve or Steering Committee among the LGUs, complimentary institutional of the convergence minimize problems of concerned NGAs, initiatives in the coordination of the program fragmentation, overlap, Refined and doable and DILG to refine rural areas under three agencies remains waste, diffused concept and the concept, the "convergence" to be largely Develop a consensus and effectiveness and implementation implementation strategy conceptual. It is slow increase ownership for confusion in strategy for the strategy, and in moving out from the short and medium implementing rural convergence program. institutional To accomplish concepts and get term sub-strategies of the development. With the Budgets to the three arrangements for the convergence in translated into ground program clear delineation of roles departments from GAA convergence strategies and realities. It is still open Mobilize resources to of DA, DENR, and DAR, in support of the program. operations for each to re-examination and implement the it is expected that rural convergence program of the three specification toward convergence strategy in development could take a with supporting b. Conduct field departments successful rural selected sites. much faster and effective departmental orders to validation of the (DENR, DA, and development. pace. reflect priority refined concept and DAR) and lay the convergence activities. implementation foundation for strategy on selected sustainable rural Number of convergence sites. development. convergence area covered with MOAs or c. Seek funding for the MOUs with operational planning of programs plans and identified and projects for each lead and support of the convergcncc agencies per site. sites. Plans, programs, M& E C system, and implementation arrangement per site are o in place e MTDP/CAS Key Issues Priority Rationale Priority Primary Action Plan Strategic Strategies Indicators Responsibility For Institutional Objectives (Outcome) Pcformance Indicators LGUs Role in the Convergency Strategy LGUs ownership of the Identify and clarify the Both local and Roles and NEDA a. NEDA, the NGAs, convergence strategy is roles and responsibilities international experiences responsibilities of DILG and LGUs to review weak because they have of LGUs as the lead have shown that the LGUs as the lead and Leagucs/ULAP the concept and not been identified as organizations in LGUs are much more the NGAs as support implementation the major or primay implementing the effective as the clarified strategy of the player/actor in the convergenice prograimi sustainable integrating convergence program conceptualization and and 'convergeing" force Training programs in with the purpose of planned implementationi Build the LGUs capacity in rural and local support of the LGUs identifying the roles of the strategy. as the lead organizations development with and the NGAs field and responsibilitics and those of the NGAs national departments as staff. of LGUs as the lead (DENR, DAR, DA) as playing supportive role agencics. the support organizations or service provides. b. Conduct orientation Institutionalize the and training for the convergence strategy at LGUs and NGA the LGU level support staff. c. Conduct implementation planning per convergence site with the concerned NGAs providin, technical assistance and support. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 00~~~~~~~~~~~~~~~~~~~~~o ANNEX 3 RD/NRM Performance Indicator System: Framework and Key Elements Table 1: Recommended Framework for Operational Plan: Outcome and Result Performance Indicators Table 2: Operational/Data Issues and Recommended Actions Table 3: Data System Weaknesses and Recommended Actions Table 1: RD/NRM Performance Indicator System: Recommended Framework for Operational Plan" STRATEGIC RESULT PERFORMANCE FREQUENCY & PERFORMANCE OUTCOME PERFORMANCE INDICATORS 3' AVAILABILITY INSTITUTION INDICATOR INDICATORS2' (Sub-indicators defining the "character" (of Data on (Analysis/ AREA (Primary & Secondary) of major indicators to be determined Result Indicators) Collection) during Phase 1) PRIMARY INDICATORS: 1. Agricultural 1) % Aggregate growth rate of: 1) % of and trend in DA budget expended for: * Annual (data on NEDA/DA Growth and (a) agric. value-added per rural (a) Increasing production by major labor and capital Performance worker; (b) yield per ha. by major commodity productivity not (KRA 1 & 2) commodity (b) Enhancing of productivity of available) land, labor & capital by major commodity c) Supporting non-traditional commodities/diversification * Annual (data/info DA 2) Measures of revealed comparative 2) Relevant DA policies, admin orders (ref. are available) advantage, trade openness, and price QRs, MAVs, tariff levels), programs, DA- protection (e.g. nominal and initiated bills filed in Congress effective protection rates; QRs, tariff levels for rice, sugar) SECONDARY INDICATORS: 1) Ratio of non-traditional commodities I) % of DA budget actually expended in * Annual (data NEDA/DA to total GVA (in PhP) support of non-traditional commodities available) 2) % of modernization versus maintenance * Annual (data not 1) Farmer adoption rates of improved budget & expenditures of DA available) technologies (e.g., improved seed ("modernization" defined to mean less of varieties of rice) low value/income traditional commodities) 3) LGUs with annual operational action plans * Annual (data to be DA/LGUs of improved technological packages; generated) 0C STRATEGIC RESULT PERFORMANCE FREQUENCY & PERFORMANCE OUTCOME PERFORMANCE INDICATORS 3 (Sub-indicators AVAILABILITY INSTITUTION INDICATOR INDICATORS2' defining the "character" of major (of Data on (Analysis/ AREA (Primary & Secondary) indicators to be determined during Result Indicators) Collection) Phase 1) 4) Proportion of modernization versus Annual NEDA & CPBO/ maintenance DA R&D budget, strategies, DA programs, and projects (C'modernization" in R&D defined to mean greater focus on non-traditional but high value/income commodities) 2. Rural Poverty PRIMARY INDICATORS: (All KRAs) 1) Decreased poverty incidence, depth 1) % of NGAs' (DA, DENR, DAR) budget * Annual (data not NEDA/DA/DAR/ and severity (% of rural population approved and expended for projects readily available; DENR below absolute population line); targeting poverty groups regional data to be national and regional levels, by key generated) poverty groups) 2) Increased primary & secondary 2) % of DOE budget for rural areas school enrollment rates (in rural . Annual (data to be DOE/DILG areas) generated) SECONDARY INDICATORS: ]) Increased rural employment (based 1) % of NGAs' total budget of NGAs for . Annual (data not NEDA & DOLE/ on criteria set by Labor Force employment and income-generating readily available) NGAs Survey) programs and projects 2) Decreased food expenditure as 2) * Annual (data not NEDA/NGAs percentage of total household readily available) expenditure (rural and urban) > 3) Increased % of Households with 3) Budget as % of total and results of * Annual (data not NEDAINGAs access to safe water household water supply programs and readily available) projects of NGAs STRATEGIC RESULT PERFORMANCE FREQUENCY & PERFORMANCE OUTCOME PERFORMANCE INDICATORS 3' (Sub-indicators AVAILABILITY INSTITUTION INDICATOR INDICATORS2/ derining the "character" of major (of Data on (Analysis/ AREA (Primary & Secondary) indicators to be determined during Result Indicators) Collection) Phase 1) 4) Infant mortality (mortality/morbidity 4) Actual expenditures and trends on * Annual (data NEDA/DOH from notifiable diseases, nutrition relevant programs and projects available) status & deficiencies, health services 5) Preventive versus curative strategies, * Annual (data and sanitation) programs and projects available) 5) Improved access to health care 6) Geographical distribution of health care * Annual (data NEDA/DOH & facilities and services (supply) available) NSO 7) Number of and trends in population * Annual (data served (demand) available) 6) Improved education (functional 8) % of and trends in NGA budget expended * Annual (data NEDA/DOE literacy inclusive of mass media for training of marginalized groups available) exposure; primary and high school 9) % of trainees from NGAs versus those * Annual (data enrollment rates) from farm & fisheries sector available) IO)Proportion of budget, programs, and * Annual (data projects for functional literacy, primary, available) and high school programs versus total 7) Rural non-farm income as percentage 12)% of NGAs' budget and expenditures for * Annual (data NEDA/NGAs & of total household income non-farm income-generating projects available) NSO 3. Food Security PRIMARY INDICATORS: (all KRAs) I) Rice balances (production/imports, I) Regularly updated action plans for ensuring * Quarterly (most DA/NSO & BAS consumption) and price trends adequate rice balances and rice price data is available) (farmgate, wholesale, tariff levels) analysis and action plans for price > (national and regional levels) stabilization (by private sector/NFA) x 2) Decreased prevalence of malnutrition 2) Proportion of relevant NGAs' budget for * Annual (data NEDA/FNRI (nutrition status, % children under 5) improved malnutrition to total budget available) _____________ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~cc STRATEGIC RESULT PERFORMANCE FREQUENCY & PERFORMANCE OUTCOME PERFORMANCE INDICATORS 3/ (Sub-indicators AVAILABILITY INSTITUTION INDICATOR INDICATORS2' defining the "character" of major (of Data on (Analysis/ AREA (Primary & Secondary) indicators to be determined during Result Indicators) Collection) Phase 1) SECONDARY INDICATORS: 1) NFA reforms and related finanicial 1) NFA Reform Indicators: * Annual (data NEDA/DA, BAS, indicators (profits, losses, fiscal * Magnitude of NFA market intervenition available) and NFA subsidies, progress toward * Trends in NFA budget NEDA & privatization and establishment of * NFA budget, income, and expenditures DBM/NFA & regulatory body) * DA and NFA Council policies, NEDA & administrative orders DBM/DA & NFA * DA-initiated bills filed in Congress; advocacy 2) Improved rice productivity 2) % of DA budget expended for projects to * Annual (partial data NEDA/DA & NIA increase rice productivity available) Number of and benefit trends in DA projects 3) Reduced fiscal subsidy and improved 3) % of NFA budget used for subsidy * Annual (data NEDA & DBMI effectiveness of rice targeting available) DA & NFA program for the poor * Subsidy per direct beneficiary served * Annual (data not readily available) 4. Agrarian PRIMARY INDICATORS: Reform Number of (land) hectares redistributed 1) Budgetary allocations for land acquisition * Annual (data NEDA/DAR (KRA 3) (private and public lands, and by and % of approved budget utilized for land available) modality) acquisition; I) Increases in ARB household income * % of DAR budget and expenditures for * Annual (data NEDA/DAR (No/% of ARB HH Income over programs and projects to increase HH available) nat'al./reg'al absolute poverty level) income of ARBs STRATEGIC RESULT PERFORMANCE FREQUENCY & PERFORMANCE OUTCOME PERFORMANCE INDICATORS 3' (Sub-indicators AVAILABILITY INSTITUTION INDICATOR INDICATORS21 defining the "character" of major (of Data on (Analysis/ AREA (Primary & Secondary) indicators to be determined during Result Indicators) Collection) Phase 1) SECONDARY INDICATORS: 1) ARCs supported/ funded (and level I) % of DAR budget actually released and * Annual (all data NEDA/DAR of social organization) absorbed by DAR for ARC support; % available) budgetary allocations for ARCs absorbed; 2) Number of landless and poor being Result trends in ARCs projects able to access land 2) DAR action plans for expanding access to * Annual (to be NEDA/DAR landless and profile of direct beneficiaries generated) 3) Numberlvolume of joint ventures 3) * Annual (all data NEDA/DAR with ARCs * % of NGA budget expended in support available) of joint ventures * Trends in number and direct beneficiaries of joint ventures with 4) Length of time to litigate land ARCs disputes 4) * Annual (data NEDA/DAR * % of DAR budget to litigate land available) disputes 5) Extent of land rental transactions * Profile of litigation cases 5) . Annual (data NEDA/DAR * DAR's relevant program and projects available) . Profile of land rental transactions 6) Landlord Reinvestment to Rural 6) Geographic (rural vs. urban) distribution * Biennial (data NEDA & BOI/ Sector of investments available) DAR & DA 5. Rural Sector PRIMARY INDICATORS: 1) * Annual (data NEDA & CPBO/ Investments 1. Aggregate trends and patterns, with . % of NGAs' budget proposed versus available) DA, DAR, DENR > focus on: approved versus released C a) Public Sector - Government expenditures on * % of NGAs' expenditures versus total Investments ANRE as a percentage of total government expenditures (all KRAs) government expenditures * Budget expenditure trends STRATEGIC RESULT PERFORMANCE FREQUENCY & PERFORMANCE OUTCOME PERFORMANCE INDICATORS 3' (Sub-indicators AVAILABILITY INSTITUTION INDICATOR INDICATORS2' derining the "character" of major (of Data on (Analysis/ AREA (Primary & Secondary) indicators to be determined during Result Indicators) Collection) Phase 1) - expenditures by priority policy * Modermization versus maintenance * Annual instruments (specially irrigation, R & budget and expenditures (modernization data D/extension, land distribution, natural ("modernization" defined to mean a not readily resources inanagenient (NRM) systematic shift of resources towards available) community-based activities, promising sub-sectors and geographical regulatory functions and areas) diversification) 2. Degree of (increased) fund utilization 2) (ratio of used/obligated funds vs. total * NGAs' absorptive capacity (% * Annual (data not DBM & NEDA/ budget allocations) and stability of budgetary allocation utilized) readily available) DA, DAR, DENR fund releases by DBM/National * Profile of budget approvals versus Government Agencies (NGAs) (% of releases (proportion & timing of approved budget released per quarter) releases) SECONDARY INDICATORS: 1) . Annual (data not DBM & NEDA/ 1) Project vs. Priority program funding * NGAs' prioritized budget proposals readily available) DA, DAR, DENR (% of each vs. total agency * Profile of proposed versus approved expenditures) budgets 2) Allocations of type of expenditure 2) Profile of expenditures * Annual (data not DA, DAR, DENR (% of MOOE allocations vs. total readily available) allocations and % of PS vs. total allocations) b) Private Sector PRIORITY INDICATORS: Investments 1. Growth rate in agricultural (includes 1) * Annual - quarterly NEDA/DA & (KRAs 1, 2 & 3) livestock) and fishery production * Actual private sector investments in (data not readily BAS production available) STRATEGIC RESULT PERFORMANCE FREQUENCY & PERFORMANCE OUTCOME PERFORMANCE INDICATORS I (Sub-indicators AVAILABILITY INSTITUTION INDICATOR INDICATORS2' defining the "character" of major (of Data on (Analysis/ AREA (Primary & Secondary) indicators to be determined during Result Indicators) Collection) Phase I) 2. Aggregate value and private * Modernization versus maintenance investments in breeding stocks and investments ("modernization" defined tree crops to mean shifting of investments towards more promising business activities) * Number and value of NGAs' program support to private investments 2) * Actual private sector investments in * Annual - quarterly NEDA/DA & breeding stocks and tree crops projects (data not readily BAS * Number and value of NGAs' program available) support to private sector investments SECONDARY INDICATORS: 1) BOI/SEC I) Number of business registrations in * Number and size of new rural-based * Annual - quarterly rural-based activities enterprises (data not readily * NGAs' assistance in business available) development 2) Actual bank loans to agriculture 2) Loan profile . Annual (data BSP/LBP & DBP 3) available) 3) Agricultural AND FISHERY exports * Volume and value of exports . Annual - quarterly NEDA/DA & DTI * NGAs' export promotion programs (not all data readily available) c) Rural Finance PRIORITY INDICATORS: I) Trends in and profile of rural pop. a Annual (most data ACPC/banks & (KRAs 1, 2, 3) 1) % of rural population with increasing borrowing and savings in formal fin'al available) financial access to formal financial system as system institutions > depositor and/or borrower 00 0c STRATEGIC RESULT PERFORMANCE FREQUENCY & PERFORMANCE OUTCOME PERFORMANCE INDICATORS 3 (Sub-indicators AVAILABILITY INSTITUTION INDICATOR INDICATORS2" defining the "character" of major (of Data on (Analysis/ AREA (Primary & Secondary) indicators to be determined during Result Indicators) Collection) Phase 1) SECONDARY INDICATORS: 1) Volume of savings from rural areas as * Annual (data ACPC/banks and 1) Proportion of rural savings vs. total percentage of total savings available) financial savings institutions 2) Proportion of borrowers from formal 2) No. of borrowers from formal versus . Annual (data not and informal sources informal sources as % of total borrowers readily available) 4) Loan repayment rates for AMCFP 4) Trends in % of repayments * Annual (data ACPC/AMCFP available) implementers 5) Proportion of agricultural loans vs. 5) Loan distribution profile * Annual (data ACPC/association total loans available) of banks and financial institutions 6) Proportion of Directed Credit 6) DCPs actually phased out versus planned * Annual (data ACPC/agencies Programs (DCPs) phased out to total phasing out versus total DCPs available) involved in DCPs DCPs (in numbers and denomination) 7) Proportions of loans to non-farm 7) Loan distribution profile * Annual (data ACPC/association enterprises available) of banks and financial institutions 8) Proportion of agricultural loans 8) Profile of loans granted * Annual - quarterly ACPC/AMCFP approved as percentage of total loans (data available) implementors in AMCFP 9) Collection efficiency of AMCFP 9) Loans versus collections * Annual (data ACPC/AMFCP available) implementors Subsidy Dependency Index for AMCFP I O)Level of government subsidy * Annual (data ACPC/GFIs available) __________________________ _____________________________ _______________ _____________ 00 STRATEGIC RESULT PERFORMANCE FREQUENCY & PERFORMANCE OUTCOME PERFORMANCE INDICATORS 3' (Sub-indicators AVAILABILITY INSTITUTION INDICATOR INDICATORS2' derining the "character" of major (of Data on (Analysis/ AREA (Primary & Secondary) indicators to be determined during Result Indicators) Collection) Phase 1) PRIMARY INDICATORS: I) 6. Natural 1. Increased aggregate forest cover . % of DENR budget expended for . Annual (data NEDA/DENR, Resource (from plantation, reforestation, improvement of forest cover, protected available) FMB Management rehabilitation, and protection of areas (KRA 4) natural forests and mangrove areas) * No.of DENR projects & beneficiaries 2) Reduced pollution in key coastal and 2) % of DENR approved budget for programs * Annual (proxy data NEDA/DENR, industrial areas and improved water and projects directed towards reduced available) EMB quality levels of key rural areas pollution and improved water quality management; available indicators from key areas SECONDARY INDICATORS: 1) Improved productivity of major 1) BFAR and DENR budget and * Annual (proxy data NEDA/DENR, fishery grounds (% increases/year) expenditures on programs and projects on available) DA, LGUs fishery production 2) Number and area of tenurial 2) Profile of tenurial instrunments issued . Annual (data NEDA/DENR & instruments issued as a percentage of available) LGUs total open access 3) Protected areas gazetted and 3) DENR programs and projects on * Annual (data NEDA/DENR, protected areas plans finalized/ protected areas available) PAWB, PAMBs approved 4) Land conversion rates (focus in key 4) Area covered by approved conversion * Annual (data not NEDA/DENR, urban/peri-urban areas) versus applications versus total convertible/ readily available) DA, LGUs agricultural area > rD 5) Establish improved NRM fee system 5) . Annual (data NEDA/PAMBs and fees collected * Installation of improved fee system available) . Trends in fees collected _0 STRATEGIC RESULT PERFORMANCE FREQUENCY & PERFORMANCE OUTCOME PERFORMANCE INDICATORS 3/ (Sub-indicators AVAILABILITY INSTITUTION INDICATOR INDICATORS2 defining the "character" of major (of Data on (Analysis/ AREA (Primary & Secondary) indicators to be determined during Result Indicators) Collection) Phase 1) PRIMARY INDICATORS: 1. Number/value of cost-sharing 1) Amount and % of NGAs' budget actually * Annual (data DILG/DA, DENR, 7. Institutional arrangements by and between "surrendered" to LGUs in the form of available) DAR, LGUs Arrangements National Government Agencies counterpart fund to support mutually (NGAs) and LGUs to support agreed-upon programs and projects a) Devolution strategic activities (KRA 5) 2. Expanded membership patterns and 2) Breadth of stakeholder membership base * Annual (data not DILG/LGUs & number of local bodies to ensure of local bodies such as LDCs; Number and readily available) NGO federations meaningful participation of civil geographical distribution of active versus society inactive local bodies 3. Improved service delivery 3) Selected result indicators on service * Annual (data not DILG/LGUs effectiveness of LGUs effectiveness available) SECONDARY INDICATORS: 1) I) Reviews/amendments to LGC . NGAs' proposals to Congress to amend . Based on the CPBO & DILG/ LGC legislature's DA, DENR, DAR, * LGUs/Leagues' proposals to Congress calendar (data Leagues that have been endorsed by NGAs available) * NGAs' advocacy activities in Congress 2) Increased revenues collected by 2) Trends in revenues collected versus total * Annual (data DILG & DOFN LGUs and revenues as % of total expenditure versus IRA available) LGUs expenditure 3) Number of development and 3) Number of plans approved by the local * Annual (data not DILG/LGUs & investment plans finalized by LGUs legislature readily available) Leagues 00 STRATEGIC RESULT PERFORMANCE FREQUENCY & PERFORMANCE OUTCOME PERFORMANCE INDICATORS 3' (Sub-indicators AVAILABILITY INSTITUTION INDICATOR INDICATORS2' defining the "character" of major (of Data on (Analysis/ AREA (Primary & Secondary) indicators to be determined during Result Indicators) Collection) Phase 1) 4) Number and scope of MOAs/MOUs * Trends in nature, coverage, and funding * Annual (data not DILG/DA, DENR, finalized and implemented at local for relevant MOAs/MOUs readily available) DAR,, LGUs level 5) Amount of Internal Revenue * LGU absorptive capacity * Annual (data not DILG & DOF/ Allotment (IRA) transfers to and fund * LGUs financial requirements versus readily available) LGUs, Leagues utilization rate by LGUs available IRA plus local revenues PRIMARY INDICATORS: 1) b) Convergence I) Budgetary allocations and issuance/ * % of DA, DENR, & DAR budget & * Annual (data not NEDA/DA, DAR, (KRA 5) implementation of relevant actual expenditures for convergence readily available) DENR supporting departmental orders to activities versus non-conivergence reflect priority convergence activities activities SECONDARY INDICATORS: 1) Reactivation and Functional 1) Office of the Convergence Steering Committee * Action Plan and Achievements * Annual (data not President & * Agenda folders, minutes of meetings readily available) NEDA/DA, * Resolutions and reports DENR. DAR 2) Number of convergence areas 2) covered with MOUs/MOAs (with * Profile of relevant MOAs/ MOUs * Annual (data not NEDA/TWG, DA, operational plans and funding), * Trends in convergence programs and readily available) DENR, DAR achievements, and the effectiveness activities that havc been completed and of the coordination efforts are on-going Based on the Coniceptual Summary Framework outlined in Table I (See Executive Summlary) m 2/ Refers to "outcome" indicators (or impacts) " "Result" peiforimance indicators aims to reflect the actions which are within reasonable control of the relevant departmenit/agency, for which it can be held accountable. These should be linked to the relevant outcome indicators. Table 2: Operational Issues and Recommended Actions Performance Indicator Areas Overall Key Issues 21 Recommended Action OVERALL * Organizational structure to operationalize the * A sub-committee within the Planning Committee should system of performance indicators be officially tasked to oversee the performance indicator system * NEDA should be designated as lead agency * Sub-committee should as soon as possible formulate a work plan that could include some/all of the actions recommended below * Capability-building program for the above- * Resources from the GOP and/or WB should be provided mentioned organizational structure for technical assistance to adapt and extend state-of-the- art Monitoring and Evaluation technology to suit the macro performance indicator system * Complementary capability-building support should be provided to each of the agencies concerned * Defining the major results indicators * To avoid varying interpretations as to what is to be monitored, the major "results indicators" in the "Operational Plan" should be clearly and precisely defined by way of sub-indicators; this would be part of the above-mentioned capability-building support 1. Agricultural Growth and * Data presentation and presentation formats * An immediate review of data available at DA should be Performance made vis-a-vis the requirements of the macro perfornance indicator system * Required re-formatting should be drawn up in collaboration with concerned DA offices * Lack o f data or inadequate level of detail * Same as above; measures to efficiently collect lacking data and/or to provide required level of detail should be identified and implemented 2. Rural Poverty X Data not disaggregated by target socio- * Study should be carried out to determine how existing economic and/or income group/s data could be efficiently disaggregated ?' Specific details on key issues are provided in the tables on "Data System Weaknesses". Performance Indicator Areas Overall Key Issues 20 Recommended Action a Inter-regional differences in the "character" * After establishing a performance indicator system on rural of poverty poverty at the national level, ways to disaggregate the system by region should be considered 3. Food Security * Definition of "food security" * DA should establish a firm definition in terms of commodities covered 4. Agrarian Reform * Lack of effective sectoral impact assessment * Study should be commissioned to review recent initiatives model/s to assess overall agrarian reform performance and to pick out the more promising methodological aspects 5a. Public Sector Investments * Political intervention in resource allocation * Performance indicator system should be refined to distinguish non-market factors that affect investment prioritization, allocation, and expenditures 5b. Private Sector Investments * Level of detail of existing data * Existing data should be reviewed to determine need to collect/extract required detailed data 5c. Rural Finance * Data not disaggregated by target socio- * Study should be carried out to determine how existing data economic and/or income group/s could be efficiently disaggregated 6. Natural Resource * Data gathering and analysis could he * Overlaps should be reviewed in terms of how these could Management constrained by overlaps across DA, DENR, affect the performance indicator system and DAR 7a. Devolution * Questions regarding land conversion process * Process for land conversion should be reviewed in terms of how it could affect the performance indicator system * Generally weak data base across LGUs * As part of the above-mentioned capability-building support, review the relevant portions of the data base of sample LGUs, and recommend responsive capability- building measures * Work with Leagues (of Provinces, Cities, Municipalities) 7b. Convergence * Weak operationalization a Allow some time for the convergence strategy to be implemented before attempting to monitor performance | Annex 3/ 15 of 18 Table 3: Data System Weaknesses and Recommended Actions GENERAL WEAKNESSES Generic Issues Priority Recommended Actions 1. Data gathering of low priority across the * NEDA should strengthen advocacy for bureaucracy, particularly in light of the Executive and Legislative Branches to usual budget constraints allocate more resources for purposive data gathering 2. Data processing even of lower priority, so * Same as above; immediate processing of that raw data become obsolete priority data as determined by NEDA for purposes of assessing macro socio- economic performance based on the MTPDP 3. Data supply does not always match data * NEDA should lead a demand-driven demand review of existing data systems in support of development planning including assessment of macro growth targets 4. Government-generated data perceived by * Review "independence" of data private sector to be not highly reliable generators such as BAS vis-a-vis DA . Increase collaboration between private data banks (UAP/CRC; FRLD; universities; think tanks) and relevant government agencies (BAS; NSO) 5. Inconsistency of overlapping data across * Inter-related agencies should set up different agencies stronger coordinative mechanisms * Inter-related agencies should enhance triangulation and validation of data, as well as analysis of discrepancies 6. Difficulty in gathering reliable income * Income data should be cross checked with data because of (a) sensitive nature other variables, e.g., assets (personal and tax concerns); and (b) partly * Proxy indicators should be reviewed non-cash subsistence economies 7. Development planning, annual budgeting, * Individual agencies should review and monitoring and evaluation not closely linkages across planning, budgeting, and linked monitoring and evaluation systems 8. Lack of linkage between sector level * NEDA NRM sector staffs should integrate monitoring and evaluation, and program/ sector review with project level review by project level monitoring and evaluation NEDA Project Monitoring Staff that coordinates with individual agencies Annex 3/16 of 18 SPECIFIC WEAKNESSES Performance Key Issues Priority Suggestions Indicator Area Immediate Longer-Term 1. Agricultural Not all expenditures DA should study DA should pilot Growth and across DA bureaus, report refinements test and possibly Performance agencies, and based on institutionalize regional offices are performance promising consolidated indicators refinements Not all expenditures * Same as above * Same as above across DA bureaus and agencies are organized by commodity DA budget and * Same as above * Same as above expenditures are not organized in terms of factor (esp. capital and labor) productivity Except for special * DBM and NEDA * DBM should projects, NGAs not should study adjust budget systematically inclusion of forms monitoring number of number of accordingly beneficiaries beneficiaries as performance indicator DA does not yet * DA should provide Planning, clearly distinguish appropriate budgeting, ad between planning and monitoring and "modernization" and budgeting evaluation should "maintenance" guidelines consistently programs, project, differentiate and activities between modernization and maintenance 2. Rural Poverty Budget and * DBM and NEDA * DBM should expenditures of should review make the NGAs not presented budget forms appropriate in terms of targeting adjustments in specific socio- forms economic groups Annex 3/17 of 18 Performance Key Issues Priority Suggestions Indicator Area Immediate Longer-Term Data on income- * Individual Agencies should generating projects agencies should institutionalize remain to be begin to separate reporting on extracted data on income- income- generating projects generating versus other types programs and of data projects 3. Food Security Reliable data on rice * NFA should NFA should targeting difficult to review its data continually obtain base analyze reports on rice targeting 4. Agrarian DAR data base still * DAR should * DAR should Reform needs to be formulate a TOR channel more strengthened for strengthening support for data its data base generation and management 5a. Public NGA project * DBM should * DBM should Investments proposals normally consider requiring provide presented as shopping agencies to appropriate list rather than in prioritize project guidelines order of priority proposals 5b. Private Sector Private sector * Concerned GOP * Concerned GOP Investments investments not agencies should agencies should clearly presented as collaborate in the institute "modernization" review of the appropriate versus "maintenance" presentation of changes in investment data/ investment data/ reports reports Private sector * Same as above * Same as above investments not presented in terms of desired level of specificity, e.g., "breeding stocks" 6. Natural Data on land * Inter-agency * Inter-agency Resource conversion not (NGAs-LGUs) committee Management available in committee should should review consolidated format; review reporting land conversion process itself for land on land conversion process conversion remains an issue Annex 3 / 18 of 18 Performance Key Issues Priority Suggestions Indicator Area Immediate Longer-Term 7a. Devolution Composition of local * DILG should * DILG should bodies such as LDCs consider issue appropriate not being monitored monitoring of directives to status of local LGUs bodies mandated by law Number of active * Same as above * Same as above local bodies not available Number of approved * Same as above * Same as above local plans continually changing; quality of plans varies widely NGA-LGU * DBM and NEDA * DBM and NEDA cooperation not being should review should adopt continually monitoring system appropriate monitored for NGA-LGU measures cooperation 7b. Convergence Possible non- or * Inter-agency * Inter-agency duplicative reporting committee should committee on convergence by discuss and should institute agencies concerned coordinate coordinated reporting on reporting on incipient convergence to convergence the Office of the activities President ANNEX 4 MTPDP: OVERVIEW OF GOALS, STRATEGIES, KEY RESULT AREAS AND PRELIMINARY ASSESSMENT 1. Overview. In July 1999, the Philippine Government approved its latest MTPDP with the avowed objective of eradicating poverty, especially in the rural areas, with special emphasis on sustainable rural development. The main RD objectives to be addressed in the next six years are reduction of rural poverty, food security and agricultural modernization. Central to achieving the objectives of the MTPDP are the agriculture, agrarian reform and natural resources sectors of the economy which have lagged behind over the last six years, despite some policy reforms in the rural sector and implementation of many rural development programs and projects during the 1980s and 1990s. 2. The overarching goal set forth in the new MTPDP is the attainment of sustainable rural development over the next six years (1999-2004), based on the following development strategies: (a) modernization of the Philippine agriculture and fisheries sector (i.e. AFMA); (b) diversification of the rural economy; (c) sound practices of resource use efficiency and sustainability; and (d) adoption of the 'Convergence Framework' as innovative institutional framework for sustainable rural development. 3. To pursue these strategies, the new MTPDP has identified five (5) key result areas (KRAs), namely (further summarized in para. 2.16-2.26): > Productivity and competitiveness enhancement; L Diversification of production and resource use; t Access to land and other productive resources; > Promoting environmental sustainability; and > Rationalizing institutional structures and empowerment of stakeholders. 4. Some of the main rural sector targets presented in the new MTPDP include: > Average growth rate of 3.9 to 4.7% for the agriculture sector over the plan period; > Increase in the total of irrigated lands from 43 to 54 percent; k Completion by 2004 of the distribution of the remaining 3.3 million hectares CARPable lands; > Expansion of ARCs and increase to 60 percent ARBs access to support services; * Increase to 1% of agriculture GVA in 2001 for agricultural R&D; > Protection and management of 6 million hectares of forestlands; > Implementation of integrated coastal management (ICM) by 250 LGUs on 6,000 kms of coast lines; Annex 4/2 of 6 Modernization of the Philippine agricultural and fisheries sector 5. The MTPDP envisions a transformation of subsistence farmers to entrepreneurs, a rural sector which would be characterized by increased productivity, broader and more intensified management of natural resources through community-based approaches and more appropriate resource pricing for natural resource users. The modernization of the agriculture and fisheries sector shall have three principal features: (a) dynamism, innovation and adaptability to change; (b) high productivity and competitiveness; and (c) emphasis on enterprising tillers with informed choices on the type of technology to use, crop to raise, and market for their products. 6. To realize this vision for the rural sector, the MTPDP aims to: (a) diversify the rural economy through alternative employment opportunities in farm and non-farm activities; (b) increase sector productivity and production through modem technologies and sustainable farm practices; (c) promote and expand opportunities for equitable access to productive assets (i.e. land); (d) empower sector stakeholders and provide stronger institutional structures through improved capacity building and extension services; (e) remove policy biases against sector competitiveness; (f) mobilize financial resources; (g) enhance private sector participation; and (h) adopt environmentally-sound practices. "Convergence Framiework" for sustainable rural development 7. The effective implementation of the new MTPDP's sustainable rural development strategy largely depends on the effectiveness and efficiency of the institutions and agencies responsible for the sector. Under the MTPDP, two key areas for institutional reform and change are highlighted: (a) the overall relationship of the key sector stakeholders and agencies, i.e., national agencies, LGUs, private sector, communities and civil society, under a devolved set-up; and (b) an integrated and coordinated roles and responsibilities of the primary agencies managing the development of he sector - Department of Agriculture (DA), Department of Agrarian Reform (DAR) and the Department of Environment and Natural Resources (DENR). 8. Under the MTPDP, the national government, is expected to assume and indirect, non- interventionist role in designing and implementing development initiatives in the rural areas and will intervene only in cases of market failures and distortions, when demand for service in areas not covered by the private sector, and when equity issues need advocacy and attention. In its relation with LGUs, the new MTPDP highlights the national government's responsibilities under a devolved set-up, namely: (a) setting of national policies and over-all regulatory frameworks; (b) designing programs of national concern with potential for LGU replications; (c) setting of relevant technical standards; (d) providing technical assistance service to LGUs; and (e) joint monitoring and evaluation, of the implementation and impact of national programs. 9. The LGUs are the focal points of priority setting and provision of localized services and development assistance; design and implementation of specific development programs; and resource and investment mobilization for locally based development and poverty alleviation projects. The civil society would play the crucial role of facilitating partnerships in local governance among NGAs, LGUs, communities and the private sector as well as strengthening capacities of local communities to enhance their participation in the overall rural development. Annex 4 / 3 of 6 10. The MTPDP identifies a "convergence framework" for integrating and joining the complimentary initiatives among the principal government institutions in the rural sector (i.e. DA, DENR and DAR) as the 'principal modality' to attain sustainable rural development over the next six (6) years. Under the convergence framework, the roles of the three departments would be as follows: (a) DENR will carry out a holistic management of the "life forces" of water, soil, air, flora and fauna through the integrated management of watersheds, forests and soils; (b) DA will put into productive use the regenerative life forces nurtured by the DENR through assistance in the provision of communal irrigation systems, seeds, feedstuffs and fertilizers, among others; and (c) DAR will ensure the equitable sharing/distribution of access to and benefits of development (i.e. land distribution and shifts to social capital formation and local empowerment). Five (5) Key Result Areas for the Rural Sector 11. The MTPDP's 5 key result areas (KRAs) will guide the implementation of its rural sector development strategy and are summarized below. Further details on the content of these KRAs are provided in Annex 4, including relevant feedback from the Phase 1 stakeholder workshops. 12. KRA 1: Productivity and competitiveness enhancement: This includes two general policy thrusts: (a) ensure a conducive environment for improving sector competitiveness; and (b) enhance and improve in the delivery of support services. Eight (8) major policy and program initiatives are proposed to improve sector competitiveness. 13. KRA 2: Diversification of production and resource use: The main elements include (a) broadening the research agenda by focusing on integrated farming, resource management and market- oriented system; (b) strengthening agriculture and industry linkages; and (c) expanding planning approaches from terrestrial to marine and coastal services. 14. KRA 3: Access to land and other productive resources. This KRA promotes two main strategic areas: expediting the completion of CARP and broadening options to enhance land access for non-CARP beneficiaries. Eight (8) policy initiatives were submitted to achieve the objectives of this KRA. 15. KRA 4: Promoting environmental sustainability. The MTPDP proposed eleven (11) major policy initiatives to promote environmental sustainability in the sector. A separate set of policy initiatives under KRA 4 cover the six (6) sectoral resource areas of forestry, land, freshwater, coastal and marine, biodiversity and protected areas, and minerals. 16. KRA 5: Rationalizing institutional structures and empowerment of stakeholders. This includes two major policy initiatives - to rationalize institutional structures in the sector and to strengthen institutional capabilities of sector stakeholders. 17. Finally, the MTPDP outline other policies and strategies to support the five (5) main KRAs for the rural sector. These are the adoption of a spatially oriented approach to sectoral planning and development, and the integration of gender equity and sensitivities in the formulation of sectoral policies, strategies and programs and projects in the MTPDP. Annex 4 /4 of 6 MTPDP: Preliminary Assessment & Emerging Priorities (by themes) 18. While NEDA organized stakeholder consultations prior to finalizing the MTPDP, it is not clear which of the specific feedback was reflected in the final version. The emphasis should be its implementation. Nonetheless, it is still relevant to assess various aspects of Chapter 3 as it will affect the expected outcomes. While assessing the linkages between the MTPDP strategic objectives, supporting strategies, KRAs and priority inputs/activities, the study team identified 5 key themes which reflect relevant feedback from the Phase 1 stakeholder consultations and which merit further attention during the implementation phase, and these are summarized: (a) Need to Correlate MTPDP objectives and strategies with priority inputs 19. A preliminary view of the MTPDP's strategic objectives and the identified strategies, KRAs and priority inputs/activities show that there is a strong need to correlate the contribution of the identified priority sectoral activities with priority inputs (or activities) in achieving the strategic objectives and KRAs in the MTPDP. For example, in the case of inducing sector competitiveness through corrections in the current tariff reform regime in the sector, no clear inputs or proposals on tariff reform outside of proposed amendments to the Agricultural Tariffication Act (RA8 178)) were indicated as the priority support activities (PSAs) for the productivity and competitiveness enhancement KRA. In the case of the KRA for diversification of production and resource use, PSAs identified in the MTPDP covered only a limited section of the general and specific policies identified in the KRA. In fact, the total number of areas, around fifteen (15), to be covered in the general and specific policies in the KRA far outnumber the total of seven (7) proposed PSAs for the KRA. (b) Need to prioritize inputs with MTPDP objectives and strategic outcomes 20. While there is a general consensus and acceptance (as shown from the stakeholders workshop) of the strategic issues, objectives and outcomes, including the identified six (6) KRAs of the MTPDP, the long list of priority sectoral activities (PSAs) or inputs listed in the MTPDP is seen more of a 'wish list' rather than real, implementable and realizable activities. In the list of PSAs for the six (6) KRAs, seventy-four (74) PSAs were identified. Seventy percent (70%), or a total of 53 PSAs were concentrated for the KRAs for productivity and competitiveness enhancement (21 PSAs) and promoting environmental sustainability (32 PSAs), while the rest of the PSAs are distributed unevenly to the rest of the 4 remaining KRAs. Out of the long list of PSAs, no ranking or sense of priority was laid down in relation to the KRAs' strategic outcomes and targets. 21. The same is true for the list of key policies and strategies listed under most of the KRAs. As reflected during the stakeholders workshops and meetings of the Planning Committee, there is a felt need to trim down or prioritize the key inputs for each KRA in order to achieve efficiencies and effectiveness to achieve the goals of the MTPDP and a more prudent use of scarce public resources. (c) Need for stronger sense of integration and complementation 22. The current plan strongly pointed out the need for integration and complementation among the agencies involved in the rural sector. The adoption of the 'convergence framework' as institutional Annex 41 5 of 6 framework for sustainable rural development clearly shows this stated commitment to achieve greater integration and complementation among agencies in the sector, specially in 3 key agencies of the DA, DAR and DENR. However, the current plan appears to be precisely more of a list of outputs with little sense of prioritization and sequencing of programs and activities, if not integration and complementation, with other activities of other national agencies. The list of PSAs identified by each agencies as their inputs to the achievement of the KRAs has no clear unifying element that would show how each activity will lead or support the other activities listed under the PSAs for the KRAs, much more, contribute to achieving the KRA itself. 23. An example is directly linking the specific areas covered by the watershed areas being managed by the DENR with SAFDZs and ARCs of both DA and DAR, respectively, to induce greater productivity and increase incomes of agrarian reform beneficiaries in these areas. Another example is the matching of proposed establishment of rural infrastructure and investments with potential areas planted to high-yielding crops. In the stakeholder workshops, participants similarly noted the need for linkages not only among activities and inputs within the rural sector programs but also with other sectoral programs, i.e. industrial and technology. (d) Needfor more program, long-gestating, system-based approachtes than short-term, high-impact, project-based strategies 24. Because of the growing need for integration and complementation in the sector, rural development strategies and approaches are shifting into a more integrative, evolving, broad-based and area-based program approach rather than short-term, high-impact projects. These can be seen in the institutionalization of more system-based and integrative planning frameworks into the MTPDP. 25. A very clear example is the adoption of the 'convergence strategy' of integrated rural support services among the key rural sector agencies. Similar types of strategies, approaches and inputs such as eco-system based resource management, integrated watershed management, integrated coastal management, integrated farming practices, agricultural information system among others, are generously scattered in the strategic policies listed under the KRAs as well as the PSAs or inputs identified by the lead agencies. In this aspect, stakeholders expressed strong support to such broad- based program planning approaches. However, as earlier expressed in this report, rural stakeholders are seeking simplified yet clear lines of responsibilities and roles to be played in the MTPDCP by the key players in the sector. (e) Need to shifting rural supportprogramrls fi-om infr-astructure-based to 'social (human) capital formation' inputs 26. The key issues in the country's rural development strategy are deeply rooted problems that have affected the sector for the last five decades. This has been clearly painted in the MTPDP. Likewise, the solutions or approaches identified in the MTPDP pursues a longer view towards the resolution of these issues and thereby achieving the goal of poverty alleviation and rural growth. Towards these ends it is expected that the strategies and inputs aimed at addressing these issues should go beyond rhetoric and contain concrete, appropriate and rationale methodologies and mechanisms for action that would implement the strategies in the MTPDP. Anniex 4 / 6 of 6 27. A good part of the strategic policies listed in the KRAs of the MTPDP are broad declarations and repetition of previously stated programs and strategies contained in previous plans. Indeed, the same KRAs under the Angat Pinoy 2004 Plan are reformulation, if not repetition, of previous KRAs and strategies of past plans. A clear example is the identification of productivity and competitiveness objective sin the KRA and the subsequent program of upgrading the improving post-harvest facilities and infrastructure in the sector. While these are indeed important, if not fundamental, requirements of any rural development strategy, these items have been the staple menu of previous plans. 28. Indeed, the propensity for rural infrastructure and public works as key elements of development strategies in rural sector in previous MTPDP's has become a sort of 'panacea' to the problems in the rural sector. In the consultations, while sectoral stakeholders did prioritize post- harvest facilities and rural infrastructure in achieving enhanced productivity in the sector, they similarly raised the need for evaluating and assessing the performance of previous rural sector plans that included the same set of proposed strategies and programs contained in the new plan. 29. Likewise, prioritization of other types of services and inputs particularly on social capital formation such as health, education, capability building, entrepreneurship, human resource development and gender have been growing and creating a demand for integrating 'non-infrastructure' based programs in the rural sector strategy. In the MTPDP, these social capital formation programs have yet to achieve equal prominence to traditional types of infrastructure and technology-based services and continue to receive inadequate attention in investment programs.
World Bank Group · Working Paper
Philippines - rural development & natural resource management : trends, strategy implementation, and framework performance indicator system (Vol. 1 of 2) : Main report
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