InTouch 4 (2)

A newsletter of the World Bank f O U C1j | Resident Mission in the Philippines December 1998 Volume 4 Number 2 23221 RP, World Bank Sign US$600-M Package P r-resi'dent joseph Ej'ercito Estrada witnessed the loan signing F for US$600 million between the Philippine Government and the World Bank. Finance Secretary Edgard Espiritu and World Bank Country Director for the Philippines Vinay Bhargava signed the agreement. The financial package will support three program/projects that will help boost the economic recovery of the Phllppp injes.i "We welcome the efforts ma tde by the World Bank to extend loan financing in support of strengthening' the prudential and supervision I~~~ systems in the banking sector, in providing wholesale credit facilities to small and medium enterprises, and in enhancing economic activities in thearcountryside,"a Prsidentn cesradan The US$600 Million Handshake. President Joseph Ejercito Estrada at the loan signing between remared a the oan ignin cermony the Philippines and the World Bank. DOF Secretary Espiritu and World Bank Country Director held in Malacanang. Bhargava shake hands after the signing. The Banking System Reform and create jobs and sustain basic social early this year. They complement an Project, Private Enterprise Credit services, especially for the poor. These earlier package of close to US$80 million Support Project, and Third Rural projects form part of the US$1 billion in projects for protecting children, Finance Project are designed to package pledged to the Philippines by providing a social fund for development strengthen the country's banking system, World Bank President James D. of Special Zone for Peace and Devel- stimulate private sector development, Wolfensohn during his visit to Manila opment (SZOPAD) areas in RP, World Bank 2 An Organizer's Story 7 In This Issue Country Review 3 Successful Cities 8 CAS Consultations 4-5  I -t Mindanao, and assisting communities with environment management. In his remarks, President Estrada expressed optimism on the positive impact of the loans to the Philippine economy. "Our collohoration in undertaking these activites is a signal to the world of our joint resolve to address the root causes of the Asian Financial crisis and thercey inspimre confidence that this will come to an edsoonlynan, ' st aostarethed. th President Estrada witnesses the signing of the loan agreement between the Philippines and the World Bank. Executive Secretary RonaldoZanmora(farright), DBPPresidentRemedios L.Macaincaga adForidoP. Casuea, The World Bank gave its assurance Land Bank President look on. of continuing support for the Philippines. Bhargava stated, "We are honored to presev adcreateobs. ItweDas be a partner in the government's I g eserve eaterjobs. thwluas efforts to restore stronger growth with fiirther strengthen the Development Bank greater equity. As a development The US$300 million Banking opf the Philippines (DBP)fto enable itover institution, we pledge to provide not SystemReform Loan supports a time to raise all required resources only financing, but also share the the comprehensive banking reform program independently (without government knowledge and lessons learned in whose medium-term objective is to raise guarantee) and hedge foreign currency other parts of the world, on the Philippine banking standards towards risks without government assistance. A chleges facing the country today."' international best practice, rendering it well main component of the proj'ect is a line positioned to meet the challenges of of credit which will be onlent by the DBP Espiritu stressed the need for globalization. The loan proceeds will be to eligible enterprises through deeper reforms and new funding used as a source of budget financing and Participating Financial Institutions (PFIs). resources, in spite of the relatively good will thus help protect pro-poor The project will focus on the industrial standing of the country, compared to its expenditures in the budget. It is a fast- sector but viable private sector projects neighbors. Said he, "While the system disbursing floating rate single currency in other sectors such as utilities, power, has proven its relative strength and loan (SCL) and is to be disbursed in three and telecommunications will also be resiliency compared with those equal tranches, with repayments over 20 eligible for assistance provided they have affected by the regional economic years with a five-year grace period, strong linkages to manufacturing, are crisis, deeper reforms and new located in the countryside, and would funtdrng resources are needed to rectify a contri Signifinlyio t rovision regula tory and institutional ***-of essential services not currently weaknesses as well as to continue availabe credit access particularly by the more The US$150 million Private vulnerable enterprises in the Enterprise Credit Support Project will The estimated cost of US$315 Project~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~~'lo foomto ouet r vial t|Wl assnepieorsrcuead bsdtrms wthe Piat Enterrise ofC0rears, industrial and agricultural sectors. I augment long-term resources of the millo fo1 h rvt nepieCei therefore commend the World Bank Philippine banking system to minimize the Support Project will be financed by the for its responsiveness to the current negative impact of the regional financial IBRD loan of US$150 million, a economic circumstances of the crisis on the Philippines' private sector by contribution by the DBP and PFIs, and co untry." providing urgently needed funds for a further US$115 million from sub- investment, particularly in small- and borrowers. The IBRD loan is to be medium-term enterprises. This project provided on single currency LIBOR- Project information documents are available at will assist etrissto restructure and based terms, with a maturity of 20 years, www.worldbank.org or at the Bank's PIG on theenrpis 23rd floor of the Taipan Place, Emerald Avenue, to meet their permanent working capital a grace. period of five years, and a Ortigas Center, Pasig. needs, improve productivity, and commitment fee of 0.75 percent. 6 2  GOP, WB Identify Actions to Improve Project Performance T hirty two government projects being assisted by the Bank were recently reviewed by government agencies and the World Bank. Total commitments for these projects, as of June 1998, is US$2.6 Billion. The review was conducted to examine the status of the portfolio and to assess results in relation to the actions/ targets agreed in 1997. Problems were identified and an action plan to improve performance of the projects and enhance their development impact was discussed. A special focus of this year's review was the impact of the Asian regional financial crisis on the portfolio. Key Government and WB officials at the Review. DOF Undesecretaries Lily Gruba and Joel Banares, TESDA Director General Edicio dela Torre; WB's V Bhargava; Major Points of Agreement A higher disbursement ratio of 24% Socioeconomic Planning Secretary Felipe Medalla; NEDA in fiscal year 1998, compared to last year's Deputy Director General Ruperto Alonzo; DBM | Five out of 11 projects with closing dates ratio of 19% was praised. Most of the Undersecretary CynthiaCastel; NEDA Director Rolando falling due in 1999 would be considered for actions agreed last year have, by and large, Tungpalan and WB Portfolio Manager Aloysius Ordu extension; others are to close on schedule; been accomplished. The achievements o Four projects are to be restructured by March during the year have, unfortunately, been secure financing for priority projects 1999; overshadowed by: a decline in regional of the Government but must also see | Six projects out of 32 would be subjected to a economic activity and in the value of the to it that secured financing, either rapid summaryassessment by March 1999 towork Peso; government budgetary constraints through revenues or borrowing, be out the operational implications of the devalua- which have been exacerbated by the crisis; wisely and efficiently used " Secretary tion and constrained counterpart funding; and a decline in the performance of a Espitiru also called on all government S To ensure sufficient funding for foreign-as- number of key projects. The review also agencies implementing the projects to sisted projects (FAPs), particularly in 1999 and noted that US$ 1 Billion, or close to half take the initiative to assess their capabilities 2000, DBM would undertake initiatives such as: of the total outstanding commitments and undertake capacity building activities, priority budgetary allocation and no "reserve remain undisbursed. if needed. imposition" on FAPs; recreation of a "one-stop shop" FAPs bureau within DBM; and participation In a statement read by Socio-Economic Planning of the donor community in the determination of Undersecretary of Finance, Joel Secretary Felipe Medalla was annual budget levels for FAPs.; and Banares, for Secretary of Finance, impressed with the overall process of | Continued Bank support for technical Edgardo Espiritu, the Finance official review of the World Bank portfolio assistance and training to enhance the capacity of expressed concern over the undisbursed remarking that 'Thisreviewshould be implementing agencies in procurement and US$ 1 Billion fund to which the a model for all activities which I financial management. government continues to pay involve public funds." commitment charges. "As Secretarv of Finance, my concern is not only to 3  $IINSULTATIONS ON COUNTRY ASSISTANCE STRATEGY M [ ore than 200 representatives The CAS provides the framework The main obj ective of the from non government for the World Bank, International Finance consultations was to obtain a wide range organizations, peoples Corporation, and Multilateral Investment of perspectives and recommendations to groups, academe, trade unions, and Guarantee Agency 's overall business plan the proposed CAS from various sectors the business sector gathered last and lending operations in the Philippines. of civil society and to consider these in November to give their suggestions It describes the Bank Group's strategy the formulation of the new CAS. To and feedback to the World Bank's based on an assessment of priorities in get the views of these groups across the Country Assistance Strategy (CAS) the country and indicates the for the Philippines. The CAS is level and composition of _ E - being developed in consultation with assistance to be provided in Government and other major accordance with the country's stakeholders, and will be finalized portfolio and economic by second quarter of 1999. performance. Small group discussions in Davao City. country, four consultation workshops were held in Metro Manila, La Union, Cebu Gity and Davao City. Besides these sessions, separate meetings with top economists in the country, leaders of big business groups, local govern- ment officials, and donors, were also conducted. WB Director explains the proposed CAS at the workshop for participants from the National Capital Region. 4  World Bank presents feedback from civil society to DOF Secretary Espiritu and DBM Secretary Benjamin Diokno. Others in photo (l-r) are Altan Ruby, Julian Schweitzer, Director B3hargava, and NEDA Deputy Director General Ruperto Ms. Maitet Diokno of Freedom from Debt Coalition i raises a point during the open forum. Cyber Dyaryo of CODE-WAN we do see this feedback as an impor- the results of the consultations early (Countrywide Development wide Area tant contribution in moving forward next year. Network), an electronic communica- on the criticaldebate on how the Phil- The four consultation workshops tions network of many NGOs in the ippines can aggressively move ahead with civil society were facilitated and Philippines, called the gatherings, "a in its fight against poverty " he con- organized by the Community Organizers landmark consultation workshop tinued. Multiversity (CO-Train) under the with one of the primary lending in- leadership of Mary Racelis and Dinky stitutions, the World Bank." Results of the consultations were Soliman. (See related article on page 7.) presented to the World Bank country The consultations recognized the team and to Government officials dur- At the opening of the workshop strong presence and the role that civil ing a weekend CAS Retreat held at Subic for representatives from the National society plays in the Philippines. "We Bay. The Bank would also give feed- Capital Region, Mary Racelis, said, "..for very much value the views of civil so- back to all workshop participants on those who remember the image of the ciety and ...all these World Bank in the 70s during the will be carefully and Marcosyears, this type ofconsultation seriously studied, " with civil societyrepresentatives is in- wrote Vinay deed remarkable." Bhargava, World Bank's Country Di- r Many of the participants agreed rector for the Philip- with the proposed CAS goal and pines in his invita- objectives. tnon. "Even if we Goal: to help the Philippines in restoring mayv not necessarily growth with poverty reduction and agree on all points, greater equity. Specific objectives: t Address crisis effects and promote economic recovery * Enhance human development, pov- Heidi Hennrich-Hanson, Task Manager erty alleviation and social safety nets for CAS '99 and Country Program * Accelerate environmentally sustain- = Coordinator, Philippines, at the closing able rural and urban development ceremony of the workshop in Cebsu Ci'ty. * Develop infrastrucutre, particularly The plenary session at the La Union in the provinces Workshop. o Enable expansion of the private sector. * Improve governance and combat corruption. 5 Ct2' 6  5X=tj~ 2 9 safe water Major Recommendations from Civil The USS150 million Third Rural Society Representatives Finance Project will provide financial or support to the Philippines' rural economy Continued re-thinking of the trade to overcome difficulties created by the 1 liberalization policy and its impact on regional financial crisis and the devaluation the agriculture sector; of the peso through the establishment of Review current banking policies spe- the Countryside Loan Fund III (CLFIII). cifically those that restrict credit access This fund will assist farmers and ilipinos from around 80 towns to the poor; agribusinesses to proceed with expansion will soon receive clean water and Use alternative community-based and modernization pl ans, to undertake improved sanitation as a result financial intermediaries for agricultural new projects, and to finance working of a loan approved by the Executive credit; capital requirements. Board of the World Bank last December Accelerate land distribution through 15,19198. the Comprehensive Agrarian Reform The project will also alleviate rural Program; poverty through the provision of Make housing more available for financial and institutional support to the the poor and review of social housing country's micro-finance system. A US$7 finance mechanisms; million micro-finance component is Address gender concerns, such as included in the project to supplement their violence against women and children; on-going micro-finance programs and Incorporate Philippine Agenda 21 help satisfy demand for credit by micro in the CAS framework; and small-scale enterprises. Compel government to strictly implement and enforce environmental This project is estimated to cost policies and institutionalize environ- US$216.1 millionwhichwillbefinanced The $23.3 million Local mental accounting systems; by IBRD loan of US$150 million, a Government Units Urban Water and Improve governance and tighten contribution by the LBP of US$2 million, Sanitation project will benefit towns with measures to combat corruption; US$300,000 from the PCFC, US$21.4 populations of 30,000 or less. The loan Support law enforcement and moves million from other PFIs., and US$42.4 is the first of three to be disbursed to improve and expedite the judicial million from sub-borrowers. through an adaptable program loan sytem; (APL), which aims to change the way Increase stakeholder participation in small towns gain access to financing for Bank-assisted projects - from planning basic municipal services. Residents and to implementation, to monitoring and elected officials will build partnerships to evaluations. manage the projects that also encourages Focus on the poor in planning pro- the private sector to operate the facilities grams and directly address the root for long-term operation. Around 250 causes of poverty; cities and muicipalities which currently Inform and update stakeholders on operate their own water systems will also Bank-assisted projects and all stages of benefit as a result of future loans to be project development; given. Give public access to the CAS Total project cost is estimated to document. be US$31.9 million of which IBRD is expected to finance about 73 percent or US$23.3 million.The loan will be channeled through the Development Bank of the Philippines. 6  Community Organizers Multiversity, she is also Chairperson of the Caucus in Olyaitzer t Sorp for Development NGOs. A graduate of social work from the University of the Philippines, Dinky has a masteral degree in public administration "The basis ofour service is to be holders. The Bank for its part sent from the Kennedy School of part of community empowerment." out a background information paper Government, Harvard University. Her on their analysis of the Philippine de- commitment to helping the country's Thus, says social worker and velopmeint situation and what strategic poorest of the poor stemmed from her community organizer Corazon "Dinky" direction it plans to undertake. There was childhood years. Her parents were active Juliano Soliman as she, together with the also an orientation for the networks of Catholic Church volunteers and she grew staff of CO-TRAIN Multiversity, helped POs and NGOs conducted by the Bank up in the Central Luzon province of organize the consultations for World to familiarize the participants on the CAS Tarlac where she saw the turmoil of the Bank's Country Assistance Strategy for process. This orientation, the organizers parents of her playmates being killed the Philippines. later saw, was actually the "bible" of the because thev were either suspected of Bank on their assistance process, being pro-government or The organizational plan members of the New People's first began with informal Army. meetings with a small group _ of NGO leaders, called by "1 grew up as a child Country Director Bhargava asking: Why do these things during the months of Au- happen?" gust and September 1998. 1 i The meetings identified sev- VA When she got to college, she eral steps to be undertaken was in the midst of the First for a successful consultation. Quarter Storm era of student ; :i ~~~~~~~~$ ~~~~ t- ~~~~activism. "While I respected gWe athered all that the political grand we had in terms of a narratives of the different universe of all significant 4 ideologies, I was really just stakeholders on the Bank's asking Mmyself what is it that performance," recalls A& iwould mean a better life for Dinky. Dinky Soliman at the Ia Union workshop. the farmers of Tarlac. That's how I got into social work because it made During their meetings, the me get in touch with people and to- participants brainstormed as a group and For the organizers, the challenge was gether with them grow, develop, and designed a process of consultation which to be able to explain to the invitees what be part of an empowered comma- would allow for information to flow CAS was all about. The response ranged nity." from the Bank to the participants who in from suspicion towards the organizers' turn would give their analysis, critique and involvement to realizing the opportunity During the actual consultations, comments on the proposed CAS. to work with the Bank. To avoid any organizers and participants found the speculations, Director Bhargava wrote a presence of the teams from WB "Wegot into a dialogue with the letter explaining the reasons why the Washington and Philippine Missions quite Bank's staff, narrates Soliman. The Community Organizers Multiversity was useful. "It was a good combination dialogue was both on what we involved and what the organizers' because you could immediately be wanted from our perspective, and roles were. presented with the different facets of what would be the best and the work that they were doing, "says appropriate design for the output that For Dinky, helping to organize CAS Dinky. "And from the NGOs' and should come about." proved to be a memorable experience. POs' points of view, we could be A mother of two, Dinky has been a social candid and spontaneous because we The organizers felt that it was quite worker and community organizer since had very clear messages to the Bank important that as much information 1974. Aside from being involved with regarding issues of transparency, use would be disseminated to as many stake- of funds, and participation." 7  fo orking Towards aVision of Successful Cities S% u cc e s s fu 1 cities must be resources to perform essential functions countries in the world with almost half competitive, livable, well within budgetary constraints. the population living in urban centers. managed, and bankable. By 2020 this figure will be about 65 The World Bank's new Global In a series of meetings in Manila percent. With the current rate of Urban Strategy (GUS), a work- last November, mayors, city managers, population growth and the high price in-progress, is focused on helping national officials, academics and other of urban land, as much as 40 percent cities to achieve these four essential urban specialists from the Philippines, of the urban population may live in c h a ract e r i s t i c s. Thailand, Indonesia, Vietnam and China slums and squatter colonies. Since the met with World Bank staff to discuss the Local Government Code was enacted Competitive cities serve as a base many urgent problems facing cities today. in 1991, Local Government Units of operations for productive businesses These consultations, organized and (LGUs) have had primary responsibility and households while livable cities facilitated by the United Nations for guiding and financing urban provide a healthy and safe environment Development Program (UNDP) Urban development. The challenge in the for human activity. Good governance Management Program and hosted by coming years will be to strengthen the and good managementare a prerequisite Metro Manila Development Authority, capacity of the LGUs to confront these for both competitiveness and livability- yielded valuable information that will help issues. authorities must be accountable to their the Bank develop and refine its new For more information, please citizens, and budgetary processes using Global Urban Strategy. contact Messrs. Toru Hashimoto and public funds must be transparent. Well- Jose League, Urban Development managed cities require municipal workers Parallel to the meetings on the Team, Resident Mission Manila. with the knowledge, competence and Global Strategy, the draft of the capacity to execute their responsibilities Philippines Urban Assistance Strategy, to their constituents. Finally, bankable was also discussed with more than 50 f Irrat// Au issue of INTOUCH, Ms. .. . , ,. , . ., . . . . .............. ~~~~~~In our AugustisuofITUHM. cities require the creditworthiness to access Filipino governors and city mayors. The Marla Huddleston was mistakenly identified on financial markets, plus the ability to fulfill meeting was facilitated by the (UNDP). page 8 as Ms. Concepcion del Castillo. Our their 'social compact' whereby The participants acknowledged that the apologies to both. governments makes the best use of scarce Philippines is one of the fastest urbanizing The Editor The World Bank Resident Mission in the Philippines STAMP 23/F, The Taipan Place HERB Emerald Ave., Ortigas Center Pasig City InTouch is a quarterly newsletter of the World Bank Resident Mission in the Philippines. All correspondence may be addressed to: The World Bank Resident Mission in the Philippines 23/F. The Taipan Place Emerald Ave., Ortigas Center Pasig City Tel. 637-58-55 to 64 Editorial Staff: Vinay K. Bhagava, Editorial Adviser; Leonora Gonzales, Editor; Bonita Brindley, Contributor; Charito Cabalang. Production Asst.