Statement by Surendra Singh at the meeting of May 4, 1999

International Bank for Reconstruction and Development International Development Association 87504 International Finance Corporation Multilateral Investment Guarantee Agency FOR OFFICV\L CSE O~LY CONFIDENTIAL EDS99-115 May 3, 1999 Statement by Surendra Smgh Date of Meeting: May 4, 1999 Philippines -Country Assistance Strategy We welcome the opportunity to discuss the joint CAS prepared by IBRD and IFC for Philippines. We congratulate the Staff for this candid and analytical document. In spite of the severe crisis in the neighboring countries, Philippines has successfully shielded its economy from the contagion. We congratulate the government of Philippines for their success in stabilizing the economy. The vision document of the Government - Directions for the 21st Century - is a bold commitment on the part of the Government in giving a long term thrust to the economy and reducing poverty. We are happy to note that this CAS is in consonance with this vision document. The consultative process used by the country team in finalising this CAS is also a welcome factor. The candid admission of the Government about the immediate need of enhancing government efficiency and anti-corruption measures and the initiative taken by the Government voluntarily to address these issues, will set an example to other countries facing similar problems. Eliminating graft and corruption by mounting a multi-pronged strategy encompassing further liberalization, coupled with civil service reform will go a long way in reducing poverty and improving the quality of life of all Fillipino which is the overarching of the objective of the Philippine National Development Plan. We greatly appreciate that the current CAS is geared to achieving this grand vision. However, we feel that the target of reducing poverty from 32% to 25% by the year 2004 could be This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without \Vorld Bank authorization. ambitious. Failure to meet this highly ambitious target could lead to frustration and loss of credibility of the Bank. We need to be cautious in this regard. The enthusiasm of the government in borrowing heavily m the international market in the interest of providing fiscal stimulus to the domestic economy is a disturbing factor, since the debt is already at a very high level- 92% ofthe GNP. The down side risk of this excessive borrowing needs no over-emphasis. It is not clear as to what extent the Government as well as the Bank have planned to mitigate these risks. Fiscal consolidation is essential for a stable economy and to create appropriate environment for private capital flow and growth. Since the Country Assistance Review (CAR) has concluded that Bank's assistance over the previous 10 years was satisfactory but below potential, it is very important for the management and the staff to identify the reasons and take steps to improve the effectiveness. In this connection, we welcome the proposed framework for evaluating the Bank's performance with regard to CAS objectives- both through external and internal methods- as an ongoing process. We would like to emphasize that adequate care should be taken while designing the program itself, so that it can respond effectively to meet any crisis eventually. Steps should also be taken to reduce the number of projects at risk, which show an increasing trend in the recent past. Though the CAS claims that the partnership approach is intensifying in the Bank's activities in Philippines, it is totally absent in giving an insight into the role of ADB, which we presume is a major partner in Philippines' development. We would like to know staffs comments on this. We welcome IFC's major initiatives m private sector development and their determination in reaching out to spread the impact of their activities - both geographically and sectorally. Their plans in financing education in private sector and the support for institution building efforts in the financial sector to establish credit rating institutions and to help finance rural electric cooperatives are some of the bold, innovative steps which we welcome. On the whole, this CAS has a number of positive features and it is well integrated in the long term and medium term development plan of Philippines, prepared by the Government itself after extensive consultation. We extend our full support to the proposed Country Assistance Strategy.