Countries and Regions

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p. 3 of 4 BACK | NEXT I. Development Situation II. Implementation of the Country Strategy and Program III. Portfolio Management Issues IV. Country Performance and Lending Levels

Country Strategy and Program Update 2002-2004: Philippines

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III. Portofolio Management Issues

A. Portfolio Performance Implementation

23. ADB had approved 183 loans (169 for public and 14 for private sector projects) totaling $7.9 billion to the Philippines since 1966, when the Philippines became a member country. This constitutes 8.9 percent of total ADB lending. Of these projects, 60 are still active. In addition, 274 TA grants amounting to $97 million have been approved. Contract awards totaled $176.6 million in 2000, bringing the cumulative total to $4.6 billion. The contract award ratio for 2000 was 11.1 percent lower than the ADB-wide average of 21 percent. Total disbursements for the year amounted to $228.0 million and cumulative disbursements reached $4.9 billion. The disbursement ratio for 2000 was 11.3 percent, lower than the ADB-wide average of 20.5 percent. The ratio of public sector projects rated as unsatisfactory and partially satisfactory remains about 30 percent of loan projects portfolio in 1999 and 2000. The overall performance of projects in the Philippines is still not satisfactory. Detailed portfolio performance indicators are given in Appendix 3.

24. During the year, the Government, however, achieved several of the targets established during ADB’s 2000 country portfolio review (CPRM), notably (i) adopting a set of project preparedness filters⁵ by the Investment Coordination Committee in June 2000, as agreed on by the Government, ADB, Japan Bank for International Cooperation (JBIC), and World Bank during the first Joint ODA Portfolio Review in 1999; (ii) disbursing $228 million (63 percent of the $360.5 million target), almost double the $128 million (38 percent of original target) disbursed in 1999; and (iii) putting in place measures to address implementation problems. However, progress in resolving many other issues was mixed. The total cumulative undisbursed funds stood at $1.9 billion in December 2000. Concrete steps initiated by the 2001 CPRM included restructuring of a number of project subcomponents and cancellation of $138.2 million of unutilized loan surplus (about 8% of the outstanding loan portfolio). The most common problem is implementation delays—delays in effectivity, recruitment of consultants, procurement, establishment of the project management office, cumbersome government approval procedures, and progress of reforms under policy-based program lending—resulting in slow disbursement. The importance of complying with policy reforms associated with lending operations and their implications on portfolio performance is particularly emphasized.

B. Counterpart Funding

25. In view of current deteriorating budget deficits, the Government has conducted an intensive internal discussion to prudently prioritize ongoing and new loans and aimed at better portfolio performance and a more focus pipeline. The Government, during the Country Programming Mission, stressed that budget allocations for ongoing and foreign-assisted projects depend on agencies’ capacity to accommodate the activities within their budget ceilings, thus forcing them to realign resources to high priority activities. In 2003, the budget situation is expected to improve, given the current Government effort to improve revenue collection. The Government has also started to assure that a project meets certain criteria before being programmed and approved, as part of the action plan to improve portfolio performance. However, considering the current budget situation, ADB is reviewing its cost sharing policy at the request of the Government.

C. Monitoring and Evaluation

26. To improve the monitoring and evaluation of ADB projects, a time-bound action plan was agreed with the Government. This resulted from activities taken under an ADB technical assistance to Strengthen Results Monitoring and Evaluation (RME), the discussion during the Country Portfolio Review Mission, and the quarterly joint portfolio review meetings with the Government, JBIC, and World Bank. The joint portfolio review has also allowed greater collaboration among the funding agencies and the key oversight agencies of the Government. Special emphasis has been placed on reducing underperforming projects, speeding up disbursement, and improving quality control at entry. Initiatives have been instituted to improve project preparedness before loan approval and to cancel nonperforming loans or loan components whenever these are identified. In response, the Government has taken several important initiatives to improve and resolve portfolio performance such as: (i) appoint Government Agency Undersecretaries as Project Implementation Officers (PIOs) to be held responsible for facilitating the implementation of foreign-assisted projects of their respective agencies, and to raise issues beyond the EA's control to the Oversight Agencies (OAs); (ii) include civil society participation in RME by expanding the existing institutional arrangement of the Regional Development Councils (RDC) to incorporate NGOs; and (iii) increase monitoring of submission of the EA's audited statements by the Commission on Audit (COA). The establishment of the Philippines Country Office in September 2000 was aimed at improving the quality of ADB’s operations and strengthening coordination and partnership with the Government, civil society, and other funding agencies.

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