Philippines - Country assistance strategy public information notice (CPIN)

Report No. PIN11 Philippines CAS: Public Information Notice World Bank Board Discusses Philippines Country Assistance Strategy 1. On May 4, 1999, the World Bank's Board of Executive Directors discussed the Bank Group's Country Assistance Strategy (CAS) for the Republic of the Philippines, covering July 1999-June 2002. Country Context 2. Poverty reduction remains a formidable challenge, in view of the slowdown of growth and a relatively high population growth rate. The proportion of households living in poverty fell from 40 percent in 1991 to 32 percent in 1997.(l) However, the number of rural poor grew by 2.4 million, and rich- poor, urban-rural income gaps are thought to have widened. Rural development has become a top national priority, as agriculture's poor growth record is directly associated with rural poverty. To protect past gains and make progress in the future, human development efforts will have to be redoubled. Protecting the environment remains a key challenge, as the Philippines is rapidly urbanizing. 3. The Philippines faces these challenges with a number of strengths. It has become a relatively stable democracy, with the peaceful transition to a third presidency last year. The distribution of power among three branches of government, decentralization of political power to local government units, active participation by civil society, freedom of expression, and broad social consensus on an outward-oriented society all support political stability. The new administration is demonstrating its commitment to promarket policies, growth with equity, and combating graft and corruption. 4. The Philippine Economy has withstood the regional financial crisis better than most other East Asian market economies, but GNP growth collapsed to about 0.1 percent in 1998. The government forecasts steady recovery, starting in 1999, unless world market developments derail these projections. Bank Strategy 5. Restoring economic growth while reducing poverty and improving equity is the overarching goal of the Medium Term Philippines Development Plan and the Bank Group's CAS,(2) endorsed by all participants in the preparation process. To support poverty reduction, the Bank Group will join with government, donors, civil society, and the private sector to generate and disseminate information on effective poverty reduction programs and to invest in antipoverty programs 6. The proposed IBRD lending program for FY00-02 totals US$1.3 billion, including one new crisis-related adjustment loan. About half the investments are planned as Adaptable Program Loans for poverty reduction and sectors needing long-term interventions for sustained impact. Analytical and advisory services, comprehensive monitoring of developments in the economic, financial, corporate, human development, agricultural, and environmental areas complement Bank lending. In addition, IFC plans to invest between $350 and $500 million in private sector projects. Priorities for Bank Assistance 7. The Bank Group CAS focuses on seven strategic action areas, reflecting closely the government's own development priorities. A. Address crisis effects and promote economic recovery. Assistance will focus on enhanced economic and financial monitoring and designing and implementing selected structural reforms to strengthen the financial sector and public sector management. B. Enhance human development and social services for the poor. Lending and  advisory services will focus on measures to enhance social services for the poor and on intensifying investments and reforms in education and health to cut poverty and income inequalities in the long term. C. Accelerate environmentally sustainable rural development. The Bank will strongly support the Estrada administration's goal of accelerating environmentally sustainable agricultural growth and alleviating rural poverty by making agriculture more competitive internationally, assuring essential rural infrastructure investments, investing in research and extension and investments to least developed areas and groups, and improving natural resource management. D. Promote sustainable urban development and combat urban poverty. For urban development the Bank will assist government's five strategic areas: urban poverty, affordable urban housing, safe water and improved sanitation, environmental health, and urban governance. E. Develop infrastructure, particularly in the provinces. The Bank will continue to assist infrastructure development by selective interventions where prospects of private financing are limited, and structural reform is necessary. Since other donors and private investors are also active, the Bank Group will focus on specific subsectors in energy and transport where it expects to be most effective. F. Enable expansion of the private sector. The Bank will focus on: corporate restructuring and governance reform, competition enhancement, small and medium enterprise growth, private participation in infrastructure, and attracting foreign direct investments. G. Improve governance and transparency and combat corruption. The Bank will strengthen procurement, financial management, and auditing functions in its projects; support reforms to enhance transparency and competition; selectively support government's efforts to improve governance in public institutions; and work closely with the donor community and civil society to assist government efforts. Partnerships 8. The Bank Group (International Bank for Reconstruction and Development, International Finance Corporation, Multilateral Investment Guarantee Agency, World Bank Institute) will work together to support CAS objectives. Partnership culture, inherent in the Bank's activities in the Philippines, transcends the relationship with the Bank's main partner--government--to other stakeholders (donors, nongovernmental organizations, private citizens and companies). Selectivity and focus in the Bank's assistance strategy entails agreement among these actors to achieve common development goals--and partnership with them. The Consultative Group will continue to enable consistency of priorities. (1) Government measures of poverty use a higher income cutoff level than in many other countries, which inflates Philippines poverty estimates somewhat in international comparisons. (2) The Bank strategy benefited from analyses done in the Country Assistance Review (CAR) by the Operations Evaluation Department (World Bank, Philippines: Country Assistance Review, March 2, 1998, Report No.17417) and a client survey. The feedback gained from consultations throughout the Philippines with national and local government offices, and with civil society, helped shape the final CAS. -2 -