Philippines - Mindanao Emergency Social Fund

Report No. PIC5534 Project Name Philippines-Mindanao Emergency Social Fund Region East Asia and Pacific Sector Rural Development Project ID PHPE51386 Borrower Republic of the Philippines Implementing Agency Director of International Finance Operations Department of Finance (Add Address) 5/F Executive Tower Building Central Bank Complex, Manila Tel. (632)523-3230 Fax (632) 522-0164 Date of Initial PID August 29, 1997 Date of this PID August 29, 1997 Appraisal Date November 15, 1997 Projected Board Date February 15, 1998 Background 1. On September 2., 1996, the Government of the Philippines and the Moro National Liberation Front (MNLF) signed a Peace Agreemnt ending a long-running conflict in Mindanao, Southern Philippines. The peace agreement brought with it the establishment of the Southern Philippines Council for Peace and Development (SPCPD) and the Special Zone of Peace and Development (SZOPAD). The Government of the Philippines has agreed with its donors to refocus development assistance in support of implementation of the Peace Agreement, specifically to to accelerate development in the SZOPAD areas. As part of its assistance program, the World Bank has agreed to finance an Emergency Social Fund Project. Project Objectives 2. The overall goal of the project is to facilitate the Government's efforts to implement the first phase of the peace agreement signed on September 2, 1996 between the Government of Philippines (GOP) and the Moro National Liberation Front (MNLF) through speedy financing of local development initiatives. The specific objectives of the project are to: -- support the provision of basic economic and social infrastructure and services; and -- enhance local involvement in the identification and management of small-scale development initiatives. Project Description 3. This project will include two components The first component  will support subprojects, through a Social Fund which will provide grant financing through Local Government Units (LGU), Non- Governmental Organizations (NGOs), and Community Groups. Theses subprojects will be composed of small scale social and economic infrastructure and services such as rural roads, rural water supply and sanitation, small scale irrigation schemes, communal clinics and schools. Financing will also be made for supplies, equipment and technical services, related to the delivery community services such as teaching materials and supplies, medical equipment and supplies, essential medicines and technical assistance for small business development. Sub-projects (up to a maximum cost of US$70,000 each) will be appraised against a set of pre-determined eligibility criteria. Eligibility criteria will be developed during project preparation. The project will benefit population groups in the Special Zone of Peace and Development (SZOPAD) with priority being given to poor people and areas most affected by the conflict. 4. The second component, an institutional support for the Social Fund, will finance Social Fund staff salaries, vehicles, office equipment and operating expenses, as well as technical assistance and training to help improve the Social Funds' Operational Capacity and internal procedures. Project Costs and Financing 5. The project costs are tentatively estimated at US$14.0 million of which the World Bank will finance with a loan of US$10.0 million. Benefits and Target Population 6. Major project benefits include: -- construction and/or rehabilitation of infrastructure and provision of specific services: -- creation of short-term employment opportunities; and -- increased local participation in development projects. More broadly, the project will facilitate the Government's efforts to implement the peace agreement by bringing quick and visible benefits to the underserved and conflict-affected populations of Mindanao. It will also strengthen the capacity of local governments to manage development. The project will cover population groups in the 14 provinces and 9 cities of SZOPAD, with greater focus on poor people and areas most affected by the conflict. Lessons from Previous Bank Operations 7. Lessons Learned and Reflected in Proposed Project Design. While the above projects have generated country-wide lessons, particularly the need for beneficiary participation and firm cost recovery measures, none of the lessons have specific relevance to SZOPAD as these projects did not have any significant support there because of insecurity. A more relevant source of lessons to draw upon are the Social Fund Projects supported by the Bank. A recent review of the Social Fund portfolio commissioned by the Bank's - 2 -  Quality Assurance Group found that Social Funds have proven to be effective instruments for responding to emergency situations through the provision of basic infrastructure while rapidly creating short-term employment opportunities. The proposed project incorporate international best practice relating to the design of Social Fund Projects with emergency objectives as well as approaches to beneficiary participation and cost recovery drawn from past experiences in the Philippines. 8. At the conceptual level, the main lessons of experience incorporated in the design of the present project are two. First, the Social Fund is one element of a much broader development strategy. The Social Fund project is one of three legs of the Bank's assistance strategy for Mindanao. The other two legs include the financing of selected investments based on the priorities identified in the Government of Philippines Development Framework and Investment Priority Plan for SZOPAD; and the fast-tracking of ongoing Bank projects with components in Mindanao. The three legs complement each other. Second, the role and time frame of the Social Fund should be and have been explicitly thought through up front. The Social Fund Project is an emergency operation designed to disburse over a two-year period. Its main role is to facilitate the implementation of the first phase of the peace process through the speedy provision of basic infrastructure while also creating employment opportunities. Towards the end of the two-year period, the appropriateness of a roll-over, expansion, or replication of the project will be examined. Meanwhile, concurrent operations are being supported by UNDP and other donors to build local governmental capacity. If adequate capacity is not built-up in LGUs within the time frame of the Social Fund project or, if a different role is sought for LGUs, a longer term role may emerge for the Social Fund. If so, the design of the Social Fund will be significantly altered to reflect its changed role and objectives. 9. At the operational level, the main lessons incorporated in the design of the proposed project are: -- an independent legal existence for the Social Fund with control over the sub-project approval process in order to avoid political interference; -- streamlined procurement and disbursement rules and regulations to ensure speedy implementation; -- competitive salaries for Social Fund staff to attract highly competent and motivated individuals; -- detailed operational manual, computerized MIS to track project inputs and outputs, standardized accounting procedures, regular and rigorous auditing, and quantitative and qualitative evaluations of Social Fund outcomes all aimed at ensuring transparency, accountability, and development effectiveness (see Block 1, Section 4 on monitoring and evaluation arrangements); -- mechanisms for sector coordination with line ministries that are flexible enough not to compromise the independence and efficiency of the Fund (see Block 1, - 3 -  Section 4 on project coordination arrangements); and -- incorporation of sustainability conditions in the design of the Social Fund to ensure a continued flow of sub-project benefits. Institutional and Implementation Arrangements 10. The project will be implemented over two years, with a possibility for a roll over, expansion and/or replication. It will be executed by a Social Fund to be created as an independent entity under the office of the President. The Social Fund will be created as an autonomous institution under the Office of the President and will appraise and finance sub-project proposals from executing entities (i.e. LGUs, NGOs, and Community Groups). The President of the Philippines will appoint the Board of Directors and of the Social Fund. The Board of Directors will be the policy-setting body of the Social Fund. The Board of Directors will meet every six months and approve the policies, procedures and budget of the Social Fund. 11. The President will appoint also members of the Executive Committee (upon recommendation of the Board) including the Executive. The Executive Committee will represent the Board of Directors in carrying out the Board's policies and approving sub- projects. The Executive Director who will serve as the chief executive of the Social Fund will be responsible for managing and administering the day-to-day operations of the Social Fund. The Executive Committee shall meet every two weeks or more frequently as the Chairman of the Executive Committee may determine. 12. The Executive Director of the Fund shall appoint the staff of the Social Fund's Operational Units, i.e. Finance and Administration, Outreach, Appraisal and Supervision, to carry out the day-to-day operations of the fund. He or she will also appoint he staff of two Support Units, namely, Operations and Administration Advisory Unit and Internal Audit. 13. Sub-project Sponsoring Agencies. The Social Fund itself will not propose sub-projects. It will not be involved in sub-project identification, preparation, and implementation. Instead, the Social Fund will invite sub-project proposals from executing entities which will include: -- Local Government Units (LGUs); -- Non-governmental Organizations (NGOs); -- Community Groups 14. The sub-project sponsoring agencies will be responsible for identifying, designing, and implementing sub-projects. In some cases, they will not themselves implement the sub-projects but will contract them to "implementing agencies", e.g. contractors in the case of civil works. 15. Project Coordination. The Social Fund will be responsible for ensuring the overall coordination of sub-project activities. Its - 4 -  institutional structure will enable it to perform such coordination. There are a number of measures to ensure coordination and consistency of Social Fund activities with sectoral standards and priorities. -- During sub-project appraisal, Social Fund staff will consult and coordinate with local government staff to ensure there is no overlap with planned or ongoing activities; -- Lists of all eligible sub -projects will be submitted to the relevant line ministries for their non-objection within 10 working days; -- Where existing technical standards available from the respective line ministries conform to sectoral best practice, these will be used by the Social Fund; where they do not, the Social Fund will develop them in coordination with the relevant line ministries; -- The policy-setting body of the Social Fund, i.e. the Board of Directors, will include central and local government representatives who will ensure overall coordination of Social Fund activities with Government programs; and -- Where the government agencies are to meet the operations and maintenance costs of the Social Fund-financed investments, they will be appropriately consulted and evaluated in order to ascertain their commitment. 16. Project Oversight. The Social Fund will retain responsibility for overall project oversight and will be responsible for monitoring sub-project activities and for conducting impact evaluations. Adequate mechanisms will be in place to ensure that lessons of experience feedback into the Social Fund's decision- making processes. 17. Monitoring and Evaluation Arrangements. The Social Fund will deploy two mechanisms/instruments for project monitoring and evaluation: -- Management Information System (MIS). The computerized MIS will track three kinds of variables: - financial indicators (e.g. amounts contracted and disbursed). - operational speed indicators (e.g. number of weeks between receiving sub-project proposals from sub-project sponsoring agency and conveying sub-project aproval/rejection decisions; and number of weeks between sub-project approval and first disbursement). - physical indicators (e.g. number of clinics rehabilitated; and kms of roads constructed). -- Sample Surveys. Quantitative surveys will be conducted on a sample of sub-projects to determine the targeting effectiveness of the project to establish the development impact of sub-project activities. These surveys may be contracted out to local or international consultants. The impact of sub-project activities will also be ascertained through qualitative Beneficiary Assessments. In addition, these Assessments will also be used to determine the level - 5 -  of satisfaction of beneficiaries with sub-project activities. Contact Point: Public Information Center The World Bank 1818 H Street N.W. Washington, D.C. 20433 Telephone No.: (202) 458-5454 Fax No.: (202) 522-1500 Note: This is information on an evolving project. Certain components may not necessarily be included in the final project. Processed by the Public Information Center week ending September 5, 1997. - 6 -