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Philippine Institute for Development Studies

DEVELOPMENTRESEARCH NEWS

Editor’s Notes

October – December 2015 ISSN 0115-9097Vol. XXXIII No. 4

Surian sa mga Pag-aaral Pangkaunlaran ng Pilipinas

PIDS, NEDA, 3ie bolster campaign to create a culture

of evaluationWe bid goodbye to 2015 by featuring the Institute’s main research work since 2014—impact evaluation. One of the Institute’s biggest challenges to date, this project has two components. One is building the capacity of technical staff of oversight agencies like the National Economic and Development Authority and the Department of Budget and Management in conducting impact evaluation. A total of 300 staff have been trained so far. More will be capacitated in 2016. PIDS and the International Initiative for Impact Evaluation will hold a 10-day intensive impact evaluation course in January. We envision that our “graduates” from these training courses will serve as our partners in diffusing the importance of impact evaluation in governance.

The other component is assessing the effectiveness of key government policies and programs. This component consists of 23 impact evaluation studies on agriculture

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What’s Inside

Knowing what works and what does not is vital in ensuring that government and donor funds are used sensibly, and that limited resources are spent on cost-effective projects and programs.

A new way of doing this is through a special type of research called impact evaluation (IE). Through IE, policymakers and program implementers are able to ascertain whether a particular program is achieving its objectives and whether the results are attributable to the intervention.

The Philippine government, in its efforts to promote greater transparency and accountability, has started doing IE in 2014 through a project of state think tank Philippine Institute for Development Studies (PIDS). Spearheaded by the National Economic and Development Authority (NEDA) and the Department of Budget and Management (DBM), the project involves the conduct of IE studies on key

For IE to become an effective tool in evaluating government policies, projects, and programs, policymakers and program implementers should understand and appreciate its importance in making development interventions work. Photo shows local and foreign staff from various organizations discussing about IE during a workshop at the 2014 international conference “Making Impact Evaluation Matter” organized by the Philippine Instiute for Development Studies, the International Initiative for Impact Evaluation, and the Asian Development Bank. (File photo by Jigs Tenorio / PIDS)

6 PIDS studies explore core irrigation problems, propose means to curb poor irrigation performance

9 PIDS brings research findings to Congress through policy dialogues

12 Bottom-Up Budgeting can empower local communities if refined

14 Community Mortgage Program: Does it work?

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Development Research News October – December 2015

government programs and projects and capacity-building programs for various government agencies and selected state universities and colleges (SUCs). The project was the brainchild of NEDA Director-General and Socioeconomic Planning Secretary Arsenio Balisacan and Budget Secretary Florencio Abad in support of the Aquino administration’s reform program.

For IE to become an effective tool for ensuring that development interventions are achieving their intended objectives, it is important for policymakers and program implementers to understand and appreciate its importance in development work.

Thus, on December 16, senior government officials from the ranks of undersecretary and assistant secretary of government agencies were invited to the Policy Forum on Impact Evaluation held at Marco Polo in Ortigas Center, Pasig City. The event, which was attended by representatives of the Department of Education (DepED), Department of Labor and Employment (DOLE), Office of the Presidential Adviser on the Peace Process (OPAPP), and the Supreme Court, was aimed at discussing ways on how government agencies can use IE in assessing their programs and projects. It was jointly organized by the PIDS, NEDA, and the International Initiative for Impact Evaluation (3ie), with support from the Australian Agency for International Development.

PIDS President Gilberto Llanto, in his opening remarks, explained why the strong support of officials from each department is needed. “To sustain what we started, we need to bring the importance of IE to the consciousness of other officials.”

Llanto also informed the audience that aside from the IE studies that PIDS has been undertaking, it has been involved in conducting technical courses on IE. So far, about 300 staff from NEDA, DBM, and other agencies have been trained. This number is expected to increase because a two-week training course from January 4 to 15 next year is being organized by PIDS and 3ie. Around 30 participants from selected regional universities and other government agencies are expected to attend. Aside from covering the concepts of IE, the course will teach participants commonly used econometric and statistical methods to evaluate the impacts of social and other programs in developing countries. It will include both randomized and nonrandomized IE methods.

Institutionalizing IE

In his opening remarks, NEDA Deputy Director-General Emmanuel Esguerra stressed the importance of institutionalizing IE across government.

“With the institutionalization of rigorous impact evaluation, we will be more confident about the basis for our policy decisions. From a fiscal standpoint, it also assures us that our limited resources are efficiently allocated and effectively utilized,” he maintained.

However, he noted that conducting IE of the “good kind” is not easy to do. The conceptual and measurement issues are aplenty, not to mention the technical difficulty of data collection and the specialized set of skills required to do IE.

“Thus, there is a tendency to underinvest in honest-to-goodness IEs, with policymakers opting to focus only on projects that work well or on the short-term benefits of certain projects. Through this forum, we hope to correct this

underinvestment and start promoting a culture of evaluation,” he stated.

In July this year, the government finalized the National Evaluation Policy Framework (NEPF) through a Joint Memorandum Circular between the NEDA and the DBM.

According to Esguerra, the NEPF provides for the assessment of the outcomes, efficiency, and impact of national projects and programs. It also aims to further improve resource allocation processes for various government projects and programs.

“We want to mainstream IE using standardized procedures in the practices of the bureaucracy so that we are well-informed whether interventions are making a difference in the lives of our people, or if not, whether we can improve them or discard them altogether. Through the budget provisions for the conduct of policy evaluations, we want to make sure that all government agencies, including SUCs, government-owned and controlled corporations, and local financial institutions are equipped with the necessary analytical tools to ensure the relevance and effectiveness of their projects,” Esguerra explained.

Under the NEPF, evaluation units of each implementing agency, namely, the evaluation task forces and the interim technical working groups, will work to ensure the smooth and efficient process flow of evaluation projects. A six-year evaluation agenda will then serve as a guide to align the projects with the Philippine Development Plan and the Public Investment Program.

Esguerra also mentioned three ongoing IE studies being conducted under the 3ie’s Policy Window Philippines. One is for

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the Special Program for the Employment of Youth of the DOLE, which currently serves more than 150,000 students annually by linking low-income youth to formal work opportunities while on school break. Under this program, employers are offered a 40-percent wage subsidy and a matching process is likewise facilitated. Meanwhile, in the Sustainable Livelihood Program of the Department of Social Welfare and Development (DSWD), the beneficiaries of the Pantawid Pamilyang Pilipino Program (4Ps) are directed to either the microenterprise development or the employment facilitation track, both of which have the goal of bringing the poor out of poverty. The third project is the Mapayapa at Masaganang Pamayanan or the PAMANA project of the OPAPP that caters to the peace and development needs of conflict-affected communities through a number of interventions.

“Sometime next year, through these IE studies, we shall be in a better position to say if these projects have improved the


conditions of those who have participated in them and by how much. We shall also be on a more solid ground when we argue whether any of them ought to be discontinued, expanded, modified, or terminated,” he maintained.

Australian Aid Counsellor Robyn Biti, in her message, alluded to the earlier remarks and highlighted the role of IE in assessing policies and programs of government, particularly in determining whether these interventions have actually made a difference in people’s lives.

“Through IE, we will be able to assess whether taxpayers’ money has been used wisely. IE helps inform decisions and provide accountability for actions,” she emphasized.

She added that through the research-based evidence produced from IE, program implementers in Australia are able to get the backing of policymakers and the public for otherwise unpopular but necessary public programs.

“What is not so obvious, but nonetheless a real challenge to policymakers like yourselves, is actually using this research, and making sure that the policy development process you undertake, from formulation of policies to implementation, and to evaluation, is governed by good evidence. In principle, we all agree that it should be like this, but often, it is not so in practice,” Biti noted.

Likewise, she pointed out that research uptake does not come easily and has its own set of challenges. Having a good IE strategy, she said, is needed in order to take advantage of the opportunities that good evidence provides.

She cited the DSWD’s conditional cash transfer program or 4Ps as by far, the most successful policy intervention that has withstood political pressures, misunderstandings, and vested interests. She credited the success of the 4Ps to DSWD’s investment in establishing hard evidence through IE and use of research to explain and defend the program’s worth.

Meanwhile, the Australian Government launched research grants for the Policy Window Program of 3ie, which aims to support the DSWD in undertaking another IE study for its Sustainable Livelihood Program. In addition, as earlier expressed by Esguerra, research grants have been extended to three other agencies of the Philippine government—OPAPP, DOLE, and the Supreme Court—to establish the impact of their respective selected interventions.

“The potential of these studies to demonstrate the value of their policies is huge and we eagerly await their results. As we approach a new Philippine leadership next year, the importance of establishing the impact of these programs

3ie Executive Director Emmanuel Jimenez (left) and NEDA Deputy Director General Emmanuel Esguerra (middle) listen on as PIDS Visiting Research Fellow Vicente Paqueo answers a question from a participant of the Policy Forum on Impact Evaluation held on December 16, 2015, in Pasig City. (Photo by Jigs Tenorio / PIDS)

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to the lives of their beneficiaries is all the more highlighted,” Biti concluded.

What is impact evaluation?

3ie Executive Director Emmanuel Jimenez talked about why IE studies are needed, when they should be used, and how they are implemented.

According to Jimenez, in conducting IE, it is important to study the changes in outcomes that can be attributed to the intervention. An intervention could be a policy, program, or project. To do this, one has to ask the question of the counterfactual: what would have happened without the intervention or program?

To demonstrate this concept, he cited a World Bank-financed health reform pilot project in Russia. It was observed that health outcomes were improving even before the project started and that health outcomes were also improving in all the other regions in Russia. Thus, in this particular case, improvement in health outcomes could not be attributed to the health reform pilot project.

“One problem is the effect of outside factors. When we are evaluating projects, we typically have comparators,” Jimenez stressed.

A second problem, Jimenez pointed out, is implementation. One must make sure that implementation is actually done well. Another issue in implementing IE, according to Jimenez, is selection. “For projects, differences between beneficiaries and nonbeneficiaries may not be due to the project at all. It could be due to participants self-selecting or not,” he explained.

According to Jimenez, there are a number of ways to establish the counterfactual, such as experimental

methods like randomized control trials or quasi-experimental methods.

Thus, he emphasized that rigorous evaluations are needed to be sure that changes in outcomes are attributable to the interventions.

Jimenez also discussed some of the important elements that could lead to successful take-up of evidence, namely, quality, leadership, engagement, and timeliness. First, research should be of high-quality for the findings to be credible. Second, IE requires buy-in from key champions to be sustained and institutionalized. Third, continued engagement between researchers and policymakers across all stages of conducting IE is crucial. It is also important that the demand for IE is coming directly from the implementing agencies. Fourth, results from IE studies must also be communicated well. They should be given to policymakers when they need them and not when researchers are ready to publish.

Among the countries that have institutionalized IE are Mexico and South Africa. Both countries have come up with national evaluation frameworks, which are joint initiatives of both the executive and legislative branches. They are supported by central secretariats of seasoned and qualified professionals that consult across ministries.

“Institutionalizing impact evaluations requires a change in culture that needs strong leadership in a broader evaluation system, an open and credible system of quality assurance, and a constant engagement between evaluators and policymakers and implementers,” Jimenez stressed.

Examples of use of IE in the Philippines

To illustrate how IE methods can be applied to policies, programs, and projects, PIDS Visiting Research Fellow and former World Bank Lead Expert Vicente Paqueo presented three studies that evaluated the impact of the programs

For Education Secretary Bro. Armin Luisto, IE can help many of the government programs to succeed. (Photo by Jigs Tenorio / PIDS)

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project and in ensuring its effectiveness and sustainability.

IE methodology can also be used to evaluate the impact of policy, not just programs and projects.

“The risk and cost of adopting policies without appropriate empirical evidence can be substantial. Likewise, the use of foreign evidence as basis for formulating policy without validating it against local experience can be dangerous and costly,” Paqueo cautioned.

In the case of the legal minimum wage (LMW) policy, IE studies were able to uncover the counterintuitive effects of this policy.

Advocates of the LMW believe that this policy increases household income, particularly of poor minimum-wage workers, and therefore reduces poverty incidence rate. They also cited empirical evidence from the United States and other developed countries to support their contention that LMW does not hurt employment.

However, an IE study of PIDS conducted by Paqueo and colleagues Aniceto Orbeta of PIDS, Leonardo Lanzona of Ateneo de Manila University, and Dean Dulay estimated that a rise in LMW would significantly decrease average household income by 20 percent and increase poverty incidence by 1.7–3.0 percentage points.

“Thus, IE allows us to recognize adverse, unintended consequences of rapid increases in LMW. The evidence is also important for tempering labor unions’ demand for huge LMW increases and for highlighting the need for alternative and compensatory measures,” Paqueo noted.


on their intended beneficiaries. These studies include the impact of 4Ps on education, health, and other welfare outcomes; minimum wage policy on employment and income; and Kapit-Bisig Laban sa Kahirapan-Comprehensive and Integrated Delivery of Social Services (KALAHI-CIDDS) on civil conflict.

According to Paqueo, looking into these studies will help policymakers and program managers appreciate the value of IE in estimating the effects as well as the causal mechanisms that generate those effects, which can eventually lead to more effective and efficient interventions.

The World Bank has cited the 4Ps as one of the largest and best targeted social safety net programs in the world. Paqueo noted that 82 percent of the benefits of the 4Ps go to the bottom 40 percent of the Philippine population. The bottom 40 percent comprises the country’s poorest households and those described as highly vulnerable to poverty.

Patterned after the successful conditional cash transfer programs in Mexico, Brazil, and Colombia, the 4Ps was launched during the Arroyo administration as a small-scale pilot project. The Aquino administration then scaled it up after wide consultations with stakeholders.

Based on studies conducted on the impact of 4Ps, it was established that the project has been effective in improving key education and health indicators like children’s school enrolment rate, school attendance, and reduced stunting. Self-rated poverty among beneficiaries has also been declining. Meanwhile, concerns about 4Ps encouraging laziness and dependency have been found to be baseless.

Thus, these findings are important in responding to concerns about the

Meanwhile, IE studies on the impact of the KALAHI-CIDSS on civil conflict have helped shed new light on the mechanisms that link aid and conflict. There have been studies showing that development projects reduce civil conflicts. However, there is also the alternative view that a promising development program can undermine popular support for insurgents’ cause so there is a tendency for the insurgents to sabotage the program to discourage communities from participating.

One IE study strongly suggests that KALAHI-CIDSS, in fact, led to an increase in violent conflict. Therefore, there is a need for government to recognize this reality so that appropriate measures can be taken proactively to maximize program success without intensifying civil conflicts.

Paqueo pointed out that there has been a trend in promoting the conduct of IE in recent years but this is not enough. There are still too few IE studies. Paqueo noted the lack of capacity, budget, and appreciation of the benefits of a good IE. The costs are also substantial, but it is important for policymakers to consider investing in IE because it can promote transparency and accountability, as well as improve the quality of development interventions.

Appreciating the value IE

The policy forum concluded on a high note with the remarks of Education Secretary Bro. Armin Luistro. Opening his speech by expressing one of his many take-aways from the discussion, Luistro said that paying attention to the value of IE can help many of the government’s programs to succeed.

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This seemingly low public investments on irrigations result in low productivity, issues in construction and design, and major concerns in terms of operation and maintenance (O&M).

This, then, raises the question: what should be done to address the poor performance of the irrigation sector, particularly in its development and management? A PIDS-funded project titled “Characterizing the Governance Structure of the Irrigation Sector in the Philippines”—together with its component studies—pinpoints an inclusive approach to tackle the complex issues that hound the irrigation sector. The project was aimed at assessing the technical and institutional aspects of irrigation systems, analyzing opportunities in increasing farmers’ access to irrigation water, and providing recommendations to strengthen institutional infrastructure.

According to Agnes Rola, also a PIDS consultant, innovation and technological advancements in the sector are not enough to address the issues. The governance aspect, including policies and institutions, should also be included in the picture, she noted.

Irrigation systems

National irrigation systems (NIS) and communal irrigation systems(CIS) are

the two types of irrigation system in the Philippines. NIS are large gravity system that cover more than 1,000 hectares, while CIS are typically smaller in size.

According to Roberto Clemente, a PIDS consultant, and his team, NIS suffer from siltation and flooding problems, as well as from illegal settlers that dwell near NIS, improper waste management, and illegal pumping. These, in return, cause issues in water quality and inequality in water distribution.

To address these issues, the National Irrigation Administration (NIA)—which governs the planning, construction, and O&M of NIS—should adopt an integrated water management approach that (1) controls damaging runoff, (2) conserves water and soil, (3) enhances water resource, (4) moderates flood peaks in downstream areas, and (5) increases water infiltration. Moreover, to improve efficiency in water allocation and distribution, continuous maintenance and timely rehabilitation of canals and other irrigation infrastructures are warranted.

Farmer-owned CIS, meanwhile, are facing challenges brought by lack of water supply, sedimentation (i.e., buildup of sand and dirt in the bottom of the canal), and low irrigation efficiency made more complicated by the shortcomings in dam design. According to Luyun, a water management scheme should be put in

THE SUFFICIENCY OF WATER that flows through every farming system contributes to rice productivity. Water scarcity in rice fields often leads to poor harvest, which, in turn, affects farmers’ incomes, food prices, and food availability. Irrigations, hence, play a fundamental role in making sure there is rice on every Filipino table.

However, the irrigation sector in the Philippines has long been facing issues of underdevelopment, mismanagement, and environmental degradation. Despite receiving a third of the total budget of the Department of Agriculture, the sector has always fallen short in delivering what is expected from it. For instance, according to a study by Roger Luyun Jr., consultant at the Philippine Institute for Development Studies (PIDS), only about 57 percent of the total irrigable area in the Philippines have been developed for irrigation.

“Although there are massive rehabilitation efforts and funds for the construction of new irrigation facilities, the increase in irrigation area is minimal,” Luyun explained.

In fact, a study by Wilfredo David, professor at the University of the Philippines, and his team reported that between 1995 and 2005, the rate of increase in actual irrigation service areas is only about 10,000 hectares per year, while the deterioration rate is overwhelming at 134,000 hectares per year.


PIDS studies explore core irrigation problems, propose means to curb poor

irrigation performance

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place together with a water scheduling agreement to address water scarcity, especially during the dry season. Because water supply—its sufficiency or insufficiency—is interrelated with other CIS problems, addressing this issue is a primary concern.

“When the water supply is unreliable, it also becomes difficult to organize farmers to participate in O&M activities. This, together with ineffective irrigation water management, leads to lower crop yields in both the wet and dry seasons,” Luyun argued. Hence, he suggested for the NIA to collate all historical or generated synthetic streamflow data to identify potential sites for diversion dams and storage reservoir.

To limit sedimentation in the canals, Luyun proposed the provision of silt control devices for sediment-laden rivers, and the use of Sabo dams to minimize the effect of lahar and volcanic flow. Like Clemente and his team, Luyun also called for a watershed protection program in place. Lastly, he urged the NIA to check for design shortcomings—especially those that affect O&M—in existing irrigation systems.

Access to irrigation water

Irrigators associations (IAs) are organized to operate and maintain irrigation facilities or systems, particularly CIS. However, these IAs, based on the study of Miriam Nguyen, another PIDS consultant, and her team, are beset with problems that limit their productivity, particularly for those whose farms are in the downstream area of the irrigation system.

Inadequate water supply—which is attributed to water allocation and distribution, watershed degradation, and

climate change—surfaced to be the main concern of the IAs. Nguyen’s team noted that “water scarcity or declining water quantity, whether in NIS or CIS, needs to be addressed to increase agricultural production.” IAs, then, should implement water scheduling and distribution policies to expand system performance.

To further improve farmers’ access to irrigation water, the team recommended the following: (1) repairing and rehabilitating irrigation facilities, (2) strengthening the capacity of IAs on water and system management, (3) enhancing institutional development of IAs to improve management and governance, and (4) rethinking the policies on irrigation management transfer for the NIS and the devolution of CIS to local government units (LGUs).

Strengthening institutional infrastructure

Together with other government agencies, such as the National Water Resource Board

and the Department of Environment and Natural Resources (DENR), the NIA is tasked to undertake the planning, maintenance, and rehabilitation of irrigation systems, particularly NIS. However, according to Rola, multiple agencies in the country have legal mandates for water governance, but these agencies do not coordinate with each other. For instance, the DENR and the NIA do not coordinate on matters regarding watershed management, which is an important factor in irrigation development.

Rola also found out that even within the irrigation sector, there are multiple agencies that are duplicating various functions. These multiple agencies that have similar tasks weaken the mandate of the NIA. As an example, the Bureau of Soil and Water Management (BSWM) has the same water management mandate as NIA, only in a smaller scale. However, the no-cost-recovery policy of the BSWM confuses the IAs, allowing the farmers to refuse to pay amortization to the NIA.


The Anao CIS dam (above), one of the CIS covered by the PIDS-funded project, was constructed after the previous dam tilted due to the scouring at the downstream area of the dam. (Photo by Engr. Rory Abance / NIA)

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To address all these, Rola suggested to craft an integrated irrigation development plan that will oblige all agencies working on irrigation to coordinate their projects, sites, and respective IAs. She added that there must be a substantial effort to have science-based planning to depoliticize policy decisions. Moreover, Rola put forward the need to revisit the provisions of the Agriculture and Fisheries Modernization Act on the role of LGUs in developing CIS. According to her, LGUs have no technical capacity to manage CIS, and there is yet to be an LGU to embrace such function.

“LGUs are more dominant and have the money, but there are project delays due to many procedures that the LGUs are not familiar with. The NIA provides technical advice, but this step adds another layer to the project cycle,” explained Rola.

Lastly, Rola also said that there is a need to rationalize the many agencies that deal with irrigation. She suggested that the funds for new irrigation projects, rehabilitation, and restoration; O&M cost; and IA management should be delegated to the NIA alone for consistency in role implementation.

Inclusive approach

Policy coordination, hence, is a vital step to correct the inconsistencies in the approach of the government, particularly the NIA, in addressing the poor performance of irrigation systems in the Philippines. An inclusive approach that tackles the issues from the IA level to the national level, which also recognizes the adverse effects of climate change and environmental degradation, should be prioritized.

The PIDS studies, which covered 66 CIS and 22 NIS in 16 provinces in Luzon, clearly demonstrate the need for both short- and long-term solutions to resolve, once and for all, the perennial underperformance of the country’s irrigation sector. These solutions include a systematic approach to water allocation and distribution, an integrated development plan, and a review of existing policies and regulations that possibly hamper the growth of the irrigation sector. Without an inclusive approach, the sector will continue to deliver poorly despite the huge investments it gets. MVPA

References

Clemente, R.S., A.B. Inocencio, A.L. Fajardo, V.G. Ballaran, and J.C. Ureta. 2015. Technical and institutional evaluation of selected national irrigation systems in Luzon,

Philippines. PIDS Policy Note Series. Forthcoming. Quezon City: Philippine Institute for Development Studies.

David, W.P., M.L.F. Delos Reyes, M.G. Villano, and A.L. Fajardo. 2012. Faulty design parameters and criteria of farm water requirements result in poor performance of canal irrigation systems in Ilocos Norte, Philippines. Philippine Agricultural Scientist 95(2):199–208.

Luyun, R.A. 2015. Technical assessment of communal irrigation system in Luzon. PIDS Policy Note No. 2015-26

Quezon City, Philippines: Philippine Institute for Development Studies.

Nguyen, M.R., A.C. Rola, D.D. Elazegui, A.B. Inocencio, M.C.A. Alvarez, and A.C.C. Rola. 2015. Increasing farmers’ access to irrigation water. PIDS Policy Note Series. Forthcoming. Quezon City: Philippine Institute for Development Studies.


Locals take part in clearing the settling basin through combined manual and hydraulic flushing using a silk ejector. (Photo by Engr. Rory Abance / NIA)

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PIDS brings research findings to Congress through policy dialogues

TO FURTHER ENCOURAGE the use of research and evidence in policymaking, state think tank Philippine Institute for Development Studies (PIDS) resumed its partnership with the Congressional Planning and Budget Research Department (CPBRD) of the House of Representatives by co-organizing policy dialogues on a number of issues confronting the country.

Dubbed as the PIDS-CPBRD Legislative Forum Series, the partnership aims to discuss policy issues and options with legislators based on research studies conducted by PIDS.

According to PIDS President Gilberto Llanto, the forum series, which started in 1999, hopes to give legislators concrete basis in coming up with the right policy interventions to society’s problems.

CPBRD Director-General Romulo Miral stressed that the discussions could supplement the committee hearings being conducted by Congress. But unlike committee hearings, the PIDS-CPBRD seminars are less formal, encouraging freewheeling discussions. This year, four research papers were presented as part of the series, touching on the following topics: an evaluation of the bottom-up budgeting process, an assessment of the Department of Agriculture’s postharvest facilities, a system-wide study of the logistics industry in the Greater Capital Region,

and a paper on reducing regulatory burden and improving regulatory quality.

Evaluation of the bottom-up budgeting (BUB) process

Started in 2012, the bottom-up budgeting process aims to promote the participation of citizens in identifying projects at the local level for funding by the national government. It also aims to help the poorest local government units (LGUs) work their way out of poverty by providing additional funding for the most critical poverty-alleviating programs identified by LGUs and civil society organizations (CSOs).

Dr. Rosario Manasan, senior research fellow at PIDS, in a presentation on November 10, noted that the program has performed well in accomplishing its first objective of making the budget process a participatory exercise.

“For the first time, the CSOs felt free to speak and that their inputs were being listened to,” Manasan related. However, to enhance the quality of participation by CSOs, she suggested that there should be enough time for discussions and deliberations to enable them to come up with project proposals that are sustainable and beneficial to more people.

She also pointed out that without the BUB as a mechanism, the participation of CSOs in identifying projects and programs

would be close to nothing. Under the BUB process, CSO participation is at 50 percent, compared to the 25-percent participation of CSOs allowed in the normal local budgeting process under the Local Government Code (LGC).

Despite all of these, however, Manasan remarked that the CSOs will be more empowered and their decisionmaking more enhanced if the BUB process will be refined. Manasan noted that CSOs are generally only able to participate in the BUB process in terms of the planning and project prioritization stages. However, she noted that the mechanisms to monitor the implementation and evaluation of their projects do not exist. This, Manasan emphasized, dampens the inclusiveness of the BUB process.

Meanwhile, on the second objective of alleviating poverty, there has been no concrete evidence showing that BUB has been effective in reducing the number of poor people in a locality. She argued that this is partly due to the absence of monitoring mechanisms and the slow implementation of the projects.

(See box article on page 12 for more information on the BUB assessment.)

Assessment of the government’s postharvest facilities

The government has been spending significant amounts of money to set up

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facilities for reducing postharvest losses among farmers. These programs cover various stages of the food supply chain, such as on-farm postharvest activities, processing, logistics, marketing, and trading. The PIDS, through Drs. Nerlita Manalili, Kevin Yaptenco, and Alessandro Manilay, assessed the effectiveness of these facilities to determine if they are worthy of government investments.

In a presentation on November 25, Manalili and her co-authors noted that, overall, the postharvest facilities (PHFs) they assessed have a positive impact in addressing postharvest losses and improving the marketing system for rice and high-value crops.

They explained that access to PHFs can increase rice farmers’ income because using modern technology allows them to produce good-quality milled rice and reduce postharvest losses.

Specifically, they assessed the rice processing centers (RPCs) in the provinces of Pangasinan, Davao del Sur, Bohol, and Iloilo. These RPCs, which were established through a PHP 648-million grant by the Korea International Development Agency (KOICA) with counterpart investment from government and farmer beneficiaries, are equipped with modern milling and drying equipment. Under the deal with KOICA, the Philippine government, through the Department of Agriculture (DA), provided counterpart investment of PHP 20 million for each of the four sites while farmer organizations who are the beneficiaries of the projects were required to put in an additional PHP 2 million per site as part of the working capital for these RPCs.

“Farmers are assured of competitive prices for their wet paddies even during periods of oversupply because RPCs offer higher

buying prices compared to private traders and millers,” the authors noted.

The authors computed the total gain in farmers’ income due to higher buying prices at around PHP 13.9 million. Without these facilities, farmers could easily lose some PHP 286.96 million.

Food terminals in these four provinces where RPCs are located were also found to be effective in helping provide agro suppliers with access to markets. As a result, availability of commodities and basic goods has improved. Likewise, the increased economic activities brought by these food terminals have created more employment and business opportunities.

The PIDS paper, however, argued that benefits from these facilities can still be improved if the operating capital for these RPCs is increased and if issues related to

the management, operation, viability, and sustainability of these PHFs are addressed.

Based on their design capacities, each RPC can service 1,000 hectares of production area. But in order for these facilities to operate at full capacity, the authors suggested an investment of around PHP 80 million for each site.

Increasing the investment in RPCs will allow them to buy more rice paddies from farmers. To achieve this, RPCs should also invest in more cargo trucks for timely pickup of harvested paddy and delivery of milled rice, the authors proposed.

Additional investments in RPCs, however, should be subject to performance evaluation of factors such as the ability of an RPC to produce good-quality milled rice products, maintain healthy financial standing, and have a positive impact on farmers, the paper suggested.

A normal day at the Port of Manila—the port preferred by shippers because of the availability of shipping lines; its proximity to consignees, importers, and warehouses; and the reliability of its shipping schedule compared to other ports. (Photo by Matikas 0805 via Wikipedia)

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System-wide study of the logistics industry in the Greater Capital Region

Due to the worsening traffic situation, the City of Manila implemented a truck ban in 2014 that lasted for seven months. With the reduced operating hours of container trucks plying the city streets, this resulted in delays in the delivery of goods, accumulation of containers at the port, slowdown in the logistics chain in and out of the port, empty containers returning to the port, and increased trucking and port costs, and shipping line charges.

A PIDS study estimated the economic cost of the port congestion during the truck ban period at PHP 43.85 billion due to decrease in customs revenues, output and productivity losses, and increased vehicle operating costs.

In a presentation on December 2, Dr. Epictetus Patalinghug, professor emeritus at the University of the Philippines and PIDS consultant, presented the findings of a PIDS study that looked into the issues surrounding the congestion in the Port of Manila and the underutilization of the Batangas and Subic Ports. He explained some of the reasons why shippers, freight forwarders, logistics services providers, and truckers prefer the Manila Port over Batangas and Subic Ports. At the same time, he presented short-, medium-, and long-term measures to address the congestion and underutilization issues.

The Port of Manila is preferred because of the availability of shipping lines, its proximity to consignees, importers, and warehouses, and the ease of transaction and release of goods due to the presence of specialized Bureau of Customs staff. The Port of Manila also has a more reliable and frequent shipping schedule compared to Batangas and Subic Ports.

However, the continued dominance of the Port of Manila, which currently has an annual cargo handling capacity of 3.7 million containers, has contributed to the congestion not only of roads within the port area but also along major roads in Metro Manila. The seven-month truck ban aggravated the situation.

As a short-term measure to reduce congestion in the Port of Manila and encourage use of the Batangas and Subic Ports, the PIDS study recommends to government to issue a policy statement that puts a cap on the capacity of Manila’s ports. Moreover, government should allow cargoes bound for or coming from the south of Manila to call on the Batangas Port, while those bound for or coming from the north of Manila should be allowed to call on the Subic Port. The revival of the rail freight by the Philippine National Railway must also be explored. The paper also recommends the rollout of a 24-hour web-based integrated truck dispatching, appointment, and booking system to improve the logistics chain.

However, a long-term solution to the port congestion problem, according to Patalinghug, is to have a national multimodal transport and logistics development plan with special emphasis on connecting the Subic-Clark-Manila-Batangas corridor to the rest of the country. Also, construction of a new and large deep-sea port must be pursued along with an investment plan for new rail, maritime, port, airport, and road infrastructure to link the Philippine ports to the global supply chains.

Reduce regulatory burdens, improve regulatory quality

The last and fourth paper presented in Congress on December 9 as part of the forum series was a paper written by PIDS

President Gilberto Llanto. He examined the case of reducing regulatory burdens and improving regulatory quality in the Philippines.

As a signatory to the ASEAN Economic Community (AEC) 2015 and other regional trade agreements, it is imperative for the Philippines to improve its overall business and economic environment to stimulate investments and growth through regulatory frameworks that are harmonized with those of other ASEAN member-states. However, Llanto stressed that even without globalization or the AEC 2015, there is still a need to improve the quality of regulations in the country.

A poor regulatory environment, according to Llanto, undermines business confidence and competitiveness, erodes public trust in government, and encourages corruption in public institutions and public processes.

To improve the quality of regulations, Llanto is espousing the establishment of a formal regulatory management system (RMS) with four elements: regulatory policies, regulatory institutions, regulatory procedures, and regulatory tools. A formal RMS, he said, can help to reduce regulatory burden on citizens and firms, improve regulatory quality, and identify the best choice of policy options.

He cited the case of Malaysia, which adopted an RMS process, wherein regulators proposing new regulations or regulatory changes must undertake a regulatory impact analysis (RIA). Likewise, notice of proposed regulations and amendments must be given so that there is time to make changes and to take comments from affected parties into account.

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Bottom-Up Budgeting can empower local communities if refined

According to a recent assessment conducted by researchers of state think tank Philippine Institute for Development Studies (PIDS), local community stakeholders of some of the poorest municipalities in the country are pleased to participate in the government’s Bottom-up Budgeting (BUB) program. But to completely succeed in its primary objectives, the program needs refinement, most importantly in the aspect of project implementation.

The research team, led by PIDS Senior Fellow Rosario Manasan, evaluated the BUB process using the participation of civil society organizations (CSOs) as a benchmark to assess the aspects of inclusiveness, quality of participation, and quality of the projects that their respective Local Poverty Reduction Action Team (LPRAT) came up with. The team conducted focused group discussions and key informant interviews in 12 municipalities in the provinces of Agusan del Norte, Zamboanga del Norte, Antique, and Camarines Sur.

The BUB is a participatory budgeting scheme designed to facilitate inclusiveness in local governance, and to help many areas in the Philippines climb out of poverty. The participation of citizens is a fundamental feature of the program.

Known originally as the Grassroots Participatory Budgeting, BUB was rolled out in 2012. Unlike the traditional national budgeting system, which uses a top-

bottom approach in identifying issues and implementing projects and programs, the BUB enjoins the participation of all sectors of the local community.

CSOs and local government units (LGUs) convene to deliberate the issues in their community. They eventually consolidate the results of their deliberation and recommend solutions that they feel are addressing the most pressing concerns they face. They elect representatives to the LPRAT, which identifies and prioritizes the relevant programs and projects, and endorses their final proposal to the Department of Budget and Management (DBM) for review.

After reviewing the proposal, the DBM forwards the approved projects to the concerned national government agencies (NGAs), along with the funding, for implementation. If an LGU has the capacity to implement the projects, as measured by its attainment of minimum governance standards such as the seal of good housekeeping, it may implement the project.

Positive assessment

The assessments done in Agusan del Norte and Camarines Sur revealed varied results and observations. But the common opinion among stakeholders was that the BUB was effectively inclusive. It empowered CSOs and stakeholders by giving them a voice in the decisionmaking process of their LGUs. According to Manasan, the CSOs felt that,

for the first time, they could speak freely and their voices were being heard.

The authors of the Agusan del Norte report, Skilty Labastilla and Clarice Colleen Manuel, said the CSOs were generally pleased to participate in the program, going as far as supporting a nationwide signature campaign to institutionalize the BUB.

In Camarines Sur, the research pair of Cleofe Pastrana and Marites Lagarto reported in their study that trust has been rekindled between local community stakeholders and the national government.

The BUB process bypasses the patronage system of previous special projects funding schemes like the Priority Development Assistance Fund. The structure and process of the BUB give CSOs and the local community a direct bottom-up approach line to the NGAs, which oversee implementation and facilitate funding. Furthermore, the NGAs are in constant engagement with the local stakeholders, providing implementation guidelines and other important information.

But the BUB process is not without its problems.

Issues with inclusiveness and implementation

At a recent seminar held at the House of Representatives, Manasan brought up issues that mired the program’s inclusiveness thrust

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implementation of projects as another reason to lose interest in and withdraw from the process. In Camarines Sur, more than two-thirds of the approved LPRAT projects for 2013 and 2014 have yet to be implemented. There are also no uniform mechanisms for the local communities to closely monitor the progress of their proposed projects.

Addressing shortcomings

The authors of both studies recommend giving emphasis on improving the implementation and monitoring processes.

Lagarto and Pastrana suggest that the BUB should create a local monitoring team, capacitate CSOs, encourage them to actively participate in the process, and create a one-stop LGU office for information dissemination, inquiry, and monitoring of the BUB projects. Regional DBM officers must also undertake monitoring at their own level. Their role is crucial in improving

the coordination between LGUs and other stakeholders in the BUB process.

Labastilla and Manuel constructed their recommendations around the same elements—improve CSO engagement and CSO-LGU relationship, improve facilitation of the BUB process at all phases to ensure fair representation and informed decisionmaking, and strengthen implementation and monitoring mechanisms.

Overall, the studies showed that the BUB is an important mechanism for increasing citizens’ participation in the development of their communities.

Manasan reckons that if the program will be refined further, and the implementation and monitoring processes improved significantly, the BUB can further empower local communities whose voices need to be heard the most. MHB

and questioned its ability to follow through with implementation.

In Agusan del Norte, Labastilla and Manuel observed that political divisions and alliances influenced the process of inviting CSOs to the assembly, thereby weakening inclusiveness.

There were also times when a degree of dissonance between LPRAT members and the CSOs they represented was observed. Sometimes, LGU leaders deliberately interfered and replaced the list of priority projects to usher their own agenda. Currently, there is no mechanism in place to prevent this, or at the very least, ensure that the projects the LPRAT eventually proposed to DBM reflected the issues identified in the CSO assembly. These situations led to disenfranchised CSOs opting to decline from participating in the following year’s assembly.

Another major shortcoming is in the implementation phase. CSOs cited the slow

Fisherfolk in Dagupan receive GPS-enabled Fish Finders—electronic devices that detect fish to help increase yield and lower down costs—funded by the BUB program that empowers communities in determining and implementing their own livelihood projects. (Photo courtesy of DILG via the Official Gazette)

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Community Mortgage Program: Does it work?

THE COMMUNITY MORTGAGE PROGRAM (CMP), run by the Social Housing Finance Corporation (SHFC), is a socialized housing program that makes it possible for informal settlers, as organized communities, to acquire and become legal owners of the land they occupy.

Based on an impact assessment conducted by state think tank Philippine Institute for Development Studies (PIDS), the CMP has remained a relevant program for helping informal settler families (ISFs) improve their lives, since its establishment in 1998. However, Dr. Marife Ballesteros, senior research fellow at PIDS, and her co-authors Tatum Ramos and Jasmine Egana, underscored that the CMP needs to improve significantly its service delivery and program organization if it intends to achieve its objectives of helping poor communities secure property rights and transforming the lives of informal settler residents.

How does the CMP work?

Rapid urbanization begets a surge in population growth, which, in turn, increases the demand for housing. From 1991 to 2012, the size of ISFs in the country grew annually at 7.2 percent. As of 2011, there are over 1.5 million ISFs according to a survey of the National Housing Authority and the Department

of Public Works and Highways. Forty percent of these informal settlers reside in the National Capital Region, particularly in Quezon City.

The CMP addresses a market failure in housing finance by making it possible for the poorest families in informal settlements to legitimize their occupancy. Being able to secure property rights helps informal settlers to improve their status in several ways.

The authors cited studies wherein acquiring land ownership motivates informal settlers to invest in the development of their households and their communities. It also emancipates them from sudden eviction, gives them access to loans, and gives them the ability to transfer the land.

The informal settler community elects a community association (CA) to represent them in the process. The CAs play an important role—the land is titled to their name, they agree on the mortgage with the SHFC, and they are in-charge of individualizing the title and unitizing the mortgage to their member-households. Individualization means the titles are finally transferred from the CA to the individual household, while unitization of the mortgage refers to the transfer from the CA to the individual household of the loan payment transactions.

The SHFC does not directly reach out to specific informal settlements or CAs to acquire its services. Instead, the SHFC relies on agents called CMP mobilizers. CMP mobilizers introduce the program to the community and intermediate to help streamline the requirements, compliances, and obligations of both sides.

The processes of applying for a loan, purchasing the land, developing the site, and improving the houses are long, with meticulous requirements. The CMP mobilizer, who comes from various sectors of the community—government, nongovernment organizations, national agencies, and private entities—helps the CA fulfill a 23-point requirement to get their loans approved.

Once a loan is approved, there are three phases of development where financing occurs in increments. The SHFC loans a maximum of PHP 100,000 for lot acquisition, a maximum of PHP 30,000 for site development, and a maximum of PHP 120,000 for housing materials.

Does the CMP work?

According to Ballesteros and her co-authors, various factors revealed by their case studies show that the CMP needs improvement to be able to provide better service to the communities, make its collection process more efficient

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in order to strengthen the program’s continuity, and transform informal settler communities by strengthening their links to the formal housing finance market.

Right now, some of the phases, requirements, and other elements of the program miss out on its primary target recipients: the poor ISFs.

For example, the CA must grant collateral and provide equity for the portion that the loan does not cover. However, the SHFC does not monitor how equity is raised by the CA or how the CA and the landowner come to an agreement on the price of the property. This makes it possible for the very poor households to be excluded from the program because they do not have the capacity to raise enough money to contribute to the community equity.

The SHFC also lacks a proactive position when it comes to targeting communities

and households. This leaves the program open to issues. That nonresident households can be part of a CA is not necessarily a problem. But the CA tends to be “selective of their members”, preferring those that have the ability to pay because project approval partly depends on it. Again, this opens the door for excluding the very poor.

Another way the poor can be excluded from the program is the system of substitution. On one hand, substitutions can be good for the program. They have a positive impact on the collection efficiency rate. On the other hand, the very poor—the ones who desperately need to access the loans to build their shelters—may be the very ones defaulting in payments and getting substituted.

Aside from elaborate requirements (23 items as earlier mentioned) to get loans approved, the other weaknesses of the

The Community Mortgage Program needs to improve significantly if it intends to achieve its objective of helping informal settlers have a better life. (Photo by Mark Vincent Aranas / PIDS)

program pertain to problems that the SHFC cannot control, such as land constraints, tax-related constraints, and community-related constraints.

Recommendations

That the CMP is a relevant program cannot be denied. But the authors surmise it to be slow in responding to the demand it has created. The number of projects and beneficiaries between 1994 and 2014 has shown no significant change, serving only 13,000 households yearly.

The SHFC needs to be more proactive in addressing targeting issues. It has to be more innovative in identifying the households that qualify and those who do not, those that should but cannot. The authors specifically recommend mapping out the location of ISFs and places in the country where poverty is highest. The SHFC should also provide clear guidelines on loan repayment.

To prevent the poor from being excluded through substitution, the authors recommend designing and implementing “an income-based subsidy scheme to enable access”.

They add that the SHFC should consider its role not as a financier, but as a development partner with an active, clear, and strong presence in the development and transformation of its beneficiary communities. It should initiate capacity-building programs to strengthen the CA and not just rely on the intermediary mobilizers.

Beyond granting loans, the SHFC should pursue an end goal of enabling the CA to transform and mature into a functioning homeowner’s association. MHB

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Policy dialogues... from p. 11

“It is important to undertake a regulatory impact analysis even before a certain policy takes into effect to determine its probable impact on the economy. One way to do this is through the conduct of a cost-benefit analysis, a systematic approach to estimate the strengths and weaknesses of a regulation,” Llanto explained.

As an example, Llanto referred to the truck ban policy imposed by the City of Manila, which was implemented without first computing its costs and benefits to all sectors of the economy. He added that the estimates of the losses from this regulation came only after businesses started to complain about it.

In terms of reducing regulatory burden, Llanto cited the experience of Viet Nam in making its administrative system simpler, more efficient, and more transparent.

To do this, Viet Nam prepared a standardized list of administrative procedures, which are reviewed and assessed for their necessity, suitability, and reasonability. Based on the assessments, these administrative procedures are either retained, simplified, or abolished.

In the case of the Philippines, the closest Philippine equivalent to a

formal regulatory policy statement is the government’s declaration of national competitiveness as a goal through Executive Order No. 571, which established the Public-Private Task Force on Philippine Competitiveness. However, Llanto noted that under this program, regulators are neither required to undertake regulatory impact analysis nor issue regulatory impact statements.

“The most common tools used in assessing the effect of regulatory changes are descriptive analysis and standard cost-benefit analysis. Also, agencies are not required to publish the results of their assessments,” he added.

Thus, Llanto called for government to exercise firm leadership and political will in reducing regulatory burden and improving regulatory quality. He suggested the establishment of a formal RMS through the issuance of an executive order announcing RIA as a whole-of-government policy, and not for sector regulators alone.

A central oversight body that will oversee the implementation of a formal RMS must also be constituted. This body will oversee the conduct of RIA in national government regulatory agencies and the issuance of regulatory impact statements.

He also stressed the need for regulatory agencies to build their capacity in undertaking RIA and formulating RIS. To reduce regulatory burden, he recommended a systematic review of the role, mandate, and stock of regulations of regulatory agencies. Lastly, he called for government oversight agencies like the National Economic and Development Authority to ensure a more intensive involvement of the private sector, civil society, academe, research institutions, and media in regulatory reform. GGM

“Unless an agency is able to identify what works and what doesn’t, a program or a project is just another activity. Government agencies must acknowledge that they need IE,” he stated.

According to Luistro, when secretaries attend budget hearings, they need to supply evidence to stymie legislators’ parochial interventions. Project heads and program leaders are often subjected to sermons citing irrelevant and anecdotal data, and to soapbox grandstanding for political agenda. IE, Luistro said, is an important tool for departments to demonstrate to populist leaders that they cannot go against a whole program on the basis of anecdotes.

“IE is also useful in media engagement. Proper data have to be communicated to counter sensationalist headlines,” Luistro added.

Most of all, Luistro highlighted the value of IE in engaging with other government agencies, nongovernment organizations, and other civil society groups. IE can show the limitations of politics, leadership, and bureaucracy. These limitations include term limits of local government executives and contradictions to national plans and agenda—things that, among others, complicate budgeting.

IE makes it clear that it is important for government to practice coordination and sharing of data. On this, Luistro emphasized what the conduct of IE can teach the government in the area of data handling and sharing.

Lastly, institutionalizing IE, he explained, will help the entities of the government bureaucracy understand

Evaluation... from p. 5

their programs, projects, and policies more comprehensively. IE will also help and compel them to work together in the areas of research, implementation, and evaluation. GGM

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Policy Notes 2015-23Will the Philippines Benefit from the Regional Comprehensive Economic Partnership?by Caesar B. CororatonThe Regional Comprehensive Economic Partnership (RCEP) is a free trade area among the 10 member-states of the Association of Southeast Asian Nations or ASEAN and six non-ASEAN countries in Asia and Oceania (i.e., Australia, China, Japan, South Korea, New Zealand, and India). The economies covered in the RCEP have a total gross domestic product of USD 21 trillion in 2013, and a population of 3.4 billion. This Policy Note examines the potential effects of the reduction in RCEP tariffs and nontariff barriers on the Philippine economy using mathematical modeling.

Policy Notes 2015-24Agricultural Credit and Policy Council (ACPC): Performing More than It Shouldby Ma. Piedad Geron and Doreen Carla ErfeThe Agricultural Credit and Policy Council (ACPC) has the mandate of coordinating all credit policies and programs in support of the Department of Agriculture’s policy and program priorities. It is also the administrator of the Agro-Industry Modernization Credit and Financing Program (AMCFP). This Policy Note discusses the results of an assessment of the ACPC’s role—as evaluator of credit programs, policy research body, and administrator and implementer of the AMCFP vis–à–vis its legal mandates. The review mainly looked at the credit financing activities of the ACPC from 2008 to 2012, specifically those pertaining to the AMCFP.

Policy Notes 2015-25Agriculture and Fisheries Financing

Program (AFFP): Why a Second Look at Its Implementing Guidelines Is a Mustby Ma. Piedad Geron and Gilberto M. LlantoThe Agriculture and Fisheries Financing Program (AFFP) is a PHP 1-billion flexible credit facility that is intended for farmers and fisherfolk who are non-agrarian reform beneficiaries and are engaged in priority commodities identified by the Department of Agriculture in the 20 poorest provinces of the country. It aims to serve as an alternative to the rigid and stringent credit facilities provided by banks. It seeks to ensure the availability of financing for small farmers and fisherfolk and increase their access to loans from formal sources. This Policy Note provides a summary of the key findings and recommendations from an evaluation of the AFFP. The findings point to the need to review the program design and implementing guidelines of the AFFP as the government seems to be going back to an old approach that did not work in the past.

Policy Notes 2015-26An Exegesis of Mediocrity: Institutions and Inclusion in the Philippinesby Raul V. FabellaThe lack of inclusivity of economic growth characterizes Philippine development. This is evident in the perennially inadequate, poor-quality, and non-inclusive public goods and services despite a growing economy. This Policy Note, contributed by a National Scientist of the Philippines, explains this phenomenon through the concept of collective action.

Policy Notes 2015-27Technical Assessment of Communal Irrigation Systems in Luzonby Roger A. Luyun Jr.

Communal irrigation systems (CIS) are a category of irrigation systems that are typically small in scale and constructed with the participation of farmer-beneficiaries through their irrigators’ association. This Policy Note examines the common technical problems associated with the construction and operation and management of CIS based on a study of 66 CIS in 11 provinces in Luzon. The specific technical concerns examined include the sources of water, sedimentation, and design considerations from headworks to the distribution systems of CIS.

PIDS Book 2015-02Building Inclusive Economies, Building a Better World: A Look at the APEC 2015 Priority Areas (Volume 1)by the Philippine Institute for Development Studies and Philippine APEC Study Center NetworkThe Department of Foreign Affairs, as chair of the Asia-Pacific Economic Cooperation (APEC) 2015 National Organizing Council Committee on Host Economy Priorities and as APEC National Secretariat, commissioned the Philippine Institute for Development Studies, through the Philippine APEC Study Center Network, to undertake research on the identified priority areas of APEC 2015 in order to gather expert analyses and insights that can serve as inputs to the various discussions during the summit as well as help advocate domestic reforms in the longer term.

This two-volume publication consists of policy papers written under the Research Project APEC 2015. The project explores the four priority areas of APEC 2015, namely, enhancing regional economic

Research Digests

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integration, fostering small and medium enterprises’ participation in the regional and global economy, investing in human capital development, and building sustainable and resilient communities. Volume I focuses on enhancing regional economic integration and investing in human capital development. It is made up of papers that tackle the pathways to the Free Trade Area of the Asia Pacific, the role of services, APEC-wide connectivity through infrastructure development, supply chain connectivity, and human capacity building.

Research Paper 2015-03Assessment of the DSWD SEA-K Strategyby Marife M. Ballesteros et al.This study assesses the effectiveness of the strategy and the complementary interventions of the Sustainable Livelihood Program’s Self-Employment Assistance Kaunlaran (SLP SEA-K). The SLP SEA-K uses a microcredit strategy to provide credit access to the poor, improve the ability of the group to borrow, and enable it to engage in income-generating activities. Microcredit services are generally believed to have a positive socioeconomic impact; however, the success of projects may depend largely on the management of the program. The authors found out that the government lacks the capacity to handle microcredit programs. Additionally, they see the one-size-fits-all strategy of the program as a problem because of the diverse range of beneficiary profiles.

Discussion Paper 2015-46Options for Supporting Rice Farmers Under a Post-QR Regime: Review and Assessmentby Roehlano M. Briones and Lovely Ann C. TolinUnder the World Trade Organization, the Philippines has maintained special treatment for rice, which expires in July 2017. Tariffication will involve greater competition from imports and the decline of domestic paddy prices,

thereby reducing income of rice farmers. This study evaluates various payment schemes to serve as safety nets for rice farmers after tariffication. Evaluation considers international experience with such schemes based on cost, efficiency, and coverage of farmers. A decoupled payment scheme linked to above-baseline imports emerges as the most favorable option. Financial viability of the payment scheme is further subjected to scenario analysis using a supply-demand model. Results suggest that significant financial support can be provided to the average rice farmer, with cost below the projected revenues from the rice tariff.

Discussion Paper 2015-48Comparative Assessment of Proposals to Amend the Personal Income Tax Lawby Rosario G. ManasanProposals to reform the personal income tax has gained prominence in recent months. This paper aims to evaluate the various proposals in both houses of Congress to amend the existing personal income legislation. Proposals to amend the personal income tax schedule appear to be well-justified from the perspective of (i) the need to eliminate the bracket creep and (ii) easing the tax burden on Filipino personal income taxpayers relative to their ASEAN neighbors. The projected revenue loss from proposals to restructure the personal income tax is best seen in the context of the government’s overall revenue and tax effort. Fiscal prudence dictates that new revenue measures be found to compensate for the projected revenue loss that will arise as a result of the implementation of any one of the various proposals to restructure the personal income tax. Thus, the questions that beg to be asked is: What new revenue measure or combination of measures will allow government to recover the revenue loss from the new personal income tax structure? Possibilities include increasing the VAT rate, excise tax on petroleum products, and road user’s tax.

Discussion Paper 2015-49Nongovernment Reforestation in the Philippines: Review, Analysis, and Ways Forwardby Danilo C. IsraelThe study reviewed and assessed nongovernment reforestation in the Philippines vis–à–vis government and total reforestation using primary and secondary data. The end purpose was to identify issues and problems related to nongovernment reforestation and recommend actions that can be undertaken to address them. The study found that government reforestation dominated total reforestation while nongovernment reforestation only has a relatively small contribution in recent years. During the first three years of implementation of the National Greening Program, in particular, nongovernment reforestation had been erratic, increasing in 2011 but decreasing in 2012 and 2013. The study asserted that private reforestation, or reforestation conducted by the private sector under no agreement with the government, has been the main driver of nongovernment reforestation at present. However, its full development as an industry has been hindered by various institutional, production, and marketing issues and problems. The study recommended ways to address these problems and issues and move nongovernment reforestation forward.

Discussion Paper 2015-50Assessment of Sources and Utilization of Funding of State Universities and Collegesby Rosario G. Manasan and Ma. Laarni D. RevillaThe implementation of the “Higher Education Modernization Act of 1997”, CHED Memorandum Order No. 20, and “Public Higher Education Reform Framework” granted state universities and colleges (SUCs) the right to corporatize and manage their own incomes. Given these laws and rules, an assessment/review on the income

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collection and utilization of SUCs has become mandatory. This study aims to review the specific sources of internally generated incomes (IGI) of SUCs and analyze how these incomes are allocated and utilized. It also evaluates the shares of the national government subsidy and IGI in terms of collection and usage. The study is intended to provide some guidance on how to increase SUCs’ IGI and ensure that the utilization of the same is focused on their instruction, research, and extension activities in a manner that is complementary with the regular subsidy provided to SUCs by the national government. The study, however, does not cover an issue, which is just as

important, if not more so, on the accuracy and integrity of the SUCs’ Financial Accountability Reports (as submitted to the DBM).

Discussion Paper 2015-53The Use of MOOCs as a Potential Avenue to Modernize Learning in the Philippinesby Emmanuel S. De DiosA framework is proposed for understanding the potential value added of massive open online courses (MOOCs) along the lines of curation, credentialing, and cost. MOOCs are likely to appeal differently to universities depending on their current standard and desired goals.

Institutions of a higher standard may be interested in MOOCs primarily as a means of reducing costs and possibly redirecting resources to research or graduate teaching. Universities of a lesser standard, on the other hand, may use MOOCs as a means of improving or augmenting curation, though perhaps at a higher cost. Factors that hinder or promote the adoption of MOOCs are identified that allow realistic expectations to be set regarding the role of MOOCs in Philippine education in the near term. Public policies and private sector initiatives to achieve these expectations are suggested.

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DEVELOPMENT RESEARCH NEWS is a quarterly publication of the

PHILIPPINE INSTITUTE FOR DEVELOPMENT STUDIES (PIDS). It highlights

the findings and recommendations of PIDS research projects and

important policy issues discussed during PIDS seminars. PIDS is a

nonstock, nonprofit government research institution engaged in long-term, policy-oriented research. This

publication is part of the Institute's program to disseminate information to promote the use of research findings.

The views and opinions expressed here are those of the authors and do not necessarily reflect those of the Institute.

Inquiries regarding any of the studies contained in this publication, or any of the PIDS papers, as well as suggestions

or comments are welcome. Please address all correspondence and inquiries to:

Research Information Staff Philippine Institute for Development Studies

18th floor, Three Cyberpod Centris – North Tower, EDSA corner Quezon Avenue

1100 Quezon City, Philippines

Telephone numbers (63-2) 894-2584, 893-9585 up to 893-9592, 372-1291, 372-1292

E-mail address: [email protected]

Reentered as second class mail at the Makati Central Post Office under Permit No. PS-570-04 NCR. Valid until

December 31, 2015. Annual subscription rates are: PHP 200.00 for local subscribers and USD 20.00 for foreign

subscribers. All rates are inclusive of mailing and handling costs. Prices may change without prior notice.

DEVELOPMENTRESEARCH NEWS

Vol. XXXIII No. 4

October – December 2015

ISSN 0115-9097

Staff Box

Editor’s Notes. . . from p. 1

Editorial Board: Dr. Gilberto M. Llanto, President; Dr. Marife M. Ballesteros, OIC Vice-President; Ms. Andrea S. Agcaoili, Director for Operations & Finance; Dr. Sheila V. Siar, Director for Research Information; Ms. Renee Ann Jolina C. Ajayi, Director for Project Services & Development; Atty. Roque A. Sorioso, Legal Consultant.

Staff: Sheila V. Siar, Editor-in-Chief; Gizelle G. Manuel, Misha H. Borbon, and Mark Vincent P. Aranas, Writers; Jane C. Alcantara and Claudette S. Malana, Contributors; Jose Ignacio O. Tenorio, Layout; Rossana P. Cleofas and Clarissa D. Lagoras, Exchange; Gerald Jay S. Libiran, Necita Z. Aquino, and Michael A. Caturan, Circulation and Subscription.

(irrigation, postharvest facilities), natural resources management (reforestation), social services (housing, student financial assistance, school feeding program, hospital facilities’ enhancement), citizen participation in budgeting, water and sanitation, logistics sector, free trade agreements, and fiscal incentives, to name a few.

Within the year, some of these studies were completed and their findings were presented to stakeholders in various seminars, such as the policy forum series organized by PIDS with the Congressional Policy and Budget Research Department and the Senate Economic Planning Office. This Development Research News issue gives a peek into the impact evaluation of the Community Mortgage Program, the irrigation systems

and postharvest facilities, the Bottom-up Budgeting program, and the ports in the Greater Manila Area.

The evaluation results were honest and raw. The unfavorable outcomes may irk some people who wish to hear only positive things. But reporting the facts based on real evidence gathered from rigorous research is the hallmark of PIDS’ relevance and independence, which it constantly strives to maintain. We are a state think tank, funded mainly by government, but our commitment is to the Filipino people.

This year, PIDS received the honor of being included, once again, in the list of top think tanks in the world. Based on the 2014 Go To Think Tanks Index Report released by the Think Tanks and Civil Societies Program of the University of Pennsylvania, the Institute remains the top social policy think tank in

Southeast Asia, ranking 37th among the top 50 in the world. Out of the top 80 international development think tanks, it ranks 69th, and 33rd out of the top 55 top education policy think tanks. These accolades are a source of inspiration to PIDS, to strive harder in bringing relevant and objective research.

Our involvement in impact evaluation work is our way to bring policy research in the country one step higher. Through it, we hope to further elevate the quality of Philippine policymaking and help come up with policies, programs, and projects that are truly inclusive and cost-effective.

We thank everyone who partnered with or supported PIDS this year in the conduct of research and knowledge dissemination, patronized our publication products, attended our seminars and events, and relentlessly believed in the work that we do.

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