Regions and Countries

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p. 7 of 9 BACK | NEXT Executive Summary Map I. Introduction II. The ADB-Philippines Partnership Experience III. The Development Context IV. ADB’s Strategy and Assistance Program V. Risks and Assumptions VI. Resourcing the Strategy and Program Appendixes

Country Strategy and Program Update 2005-2007: Philippines

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V. Risks and Assumptions

65. Fiscal consolidation is needed urgently to avoid economic instability and to lay the foundation for renewed development. A solution to the financial stress of the power sector is integral to macroeconomic stability. These, and the other targets of the MTPDP, require time to be achieved; moreover, each target is ambitious, and will require sustained effort. The major risk to the CSP is slower-than-needed progress to reduce the consolidated deficit, which manifests itself as public debt pressure. Increased access to ODA provides an opportunity for the Philippines to contain funding pressures at manageable levels. However, there is a risk the Philippines will not be able to avail fully of the potential ODA if the pace and quality of reform efforts falter. The situation is complicated by the need to forge strong consensus among constituencies with divergent views on the most appropriate course of action. The complex political economy—including political alliances that do not always translate to support for the administration’s legislative agenda, and strong vested interests with effective lobbying—pose risks to a process requiring urgent but unpopular legislative and administrative measures. As

    Figure 4. ADB-PHILIPPINES DEVELOPMENT PARTNERSHIP
    CSP RESULTS FRAMEWORK

    

the administration does not have direct control of the process, slow paced and low quality reforms will adversely affect implementation of the CSP. ADB will help maintain the momentum and quality of reform through advocacy with all stakeholders and policy dialogue with Government (see Appendix 3).
66. To maximize development impact, the pace at which ADB delivers its operational program will be determined by the results framework. The program will be most effective if it does not run ahead of the political commitment, macroeconomic circumstances, and sector reform efforts. The lack of progress towards eliminating poverty is nowhere more evident than in the conflict-affected areas of Mindanao. The risks associated with ongoing hostilities cannot be adequately measured. However, continued conflict weakens investor sentiment not only for Mindanao, but for the country as a whole.
67. The effectiveness of the development partnership depends on ADB’s responsiveness to the needs and priorities of the Philippines. The past 2 years have highlighted the difficulties for ADB being able to provide significant support with its traditional instruments, especially the range of public sector lending tools appropriate to the Government’s tightly constrained fiscal situation. ADB is addressing this in part with a program that concentrates on “off-budget” partnerships, and policy-based operations. The Philippines demand for lending products will require ADB to be responsive by providing instruments that match needs. ADB-wide initiatives being explored to better meet the needs of OCR borrowers (like the Philippines) will be an important determinant of how the partnership evolves during the life of the CSP.

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