ADB-Philippines Partnership

Asia’s “rising tiger,” the Philippines posted significant economic gains last year. The stable investment outlook and the government’s sound fiscal management led to a historic upgrade of the country’s credit ratings. The Philippine economy, which grew 7.2 percent last year, is further bolstered by steady inflows of global remittances and recent acceleration of government spending. This economic expansion, however, has done little to reduce poverty and income inequality in the country. The government has yet to fulfil its promise to provide 1 million jobs annually. Further, current disparities in access to opportunities and basic services provide strong indications that universal primary education and maternal health are not likely to be achieved by 2015. Compounding the Philippines’ problems is its extreme risk to climate change. Over the past five years, the country has suffered devastating natural disasters, including Super Typhoon Haiyan, which left more than 6,000 dead and nearly $900 million in damaged properties. As the only donor agency headquartered in the Philippines, the Asian Development Bank has been a reliable development partner of the Southeast Asian country in efforts to address its socio-economic challenges. Through its 2011-2016 country partnership strategy, the bank aims to help the Philippines achieve high but sustainable and inclusive economic growth. Funding levels Owing to its relatively high pace of economic development, the Philippines is no longer eligible to receive financing from the Asian Development Fund. The ADB instead provides financing via ordinary capital resources and other special funds. Based on the current partnership strategy, ADB has earmarked $3.8 billion worth of assistance through 2016, which will come in the form of loans, grants and guarantees. The bank provides technical assistance to the government as well, particularly in project preparation, implementation reforms and institutional capacity strengthening. Funding priorities ADB aligned its partnership strategy with the Philippine Development Plan, and aims to achieve the following goals: - Help the country attain 7 to 8 percent growth ingross domestic productannually until 2016. - Create 1 million jobs annually and boost women’s share of nonagricultural wage employment to 50 percent. - Reduce poverty incidence to 16.6 percent by 2015. - Raise Human Development Index score from 0.638 in 2010 to 0.670 in 2016. - Cap the national government’s fiscal deficit to 2 percent ofGDPuntil 2016. ADB supports the following sectors in the Philippines: To leverage private financing for development assistance, ADB regularly assesses all investment loans for public-private partnership potential. In 2012, the bank approved the Philippine Investment Alliance for Infrastructure Fund, which is a $625 million private equity account that aims to finance infrastructure projects in the country. Said to be the first of its kind, PINAI was launched in partnership with Dutch pension fund asset manager APG, the Macquarie Group and the Philippine’s state-owned fund, the Government Service Insurance System. Some of projects the bank is currently implementing include: - Social Protection Support Project – a $400 million project that aims to improve delivery and the use of education and health services among poor households and women. - Investment Climate Program (Subprogram I) – a $350 million project that aims to enhance institutional capacity for improved investment climate. - Governance in Justice Sector Reform Program (Subprogram I) – a $300 million project that aims to improve rule of law in the country and strengthen reforms in the justice sector. Devex analysis The top development aid donor to the Philippines in 2013, ADB is expected to further strengthen its already deep ties with Manila. Earlier this year, the bank identified funding post-typhoon rehabilitation in the Visayas region as among its major priorities for 2014. It recently opened an office in Tacloban city in order to effectively oversee and strategically coordinate its aid delivery. To date, ADB’s post-Haiyan assistance has reached $1 billion. Despite the bank’s strong development partnership with the country, ADB notes that its engagement is plagued by poor portfolio management. Based on its 2011-2016 country partnership strategy, the bank’s work since the early 2000s has been characterized by slow project startups that resulted in delayed project implementation, weak project management capacity and ineffective funding mechanisms to local government units. To address this problem, ADB has established project readiness filters and strategically aligned its portfolio management with the Philippine government’s review process of official development assistance. Coordinating ADB’s massive assistance with the Philippine government remains challenging, however, especially against the backdrop of a high-profile pork barrel investigation and doubts about the post-Haiyan capacity of local government units. But there are positive developments. During the Good Governance Summit in January, President Benigno Aquino III launched two new initiatives, the Cashless Purchase Card Program and Open Data Philippines. A high-ranking ADB official who attended the event said the two procurement reform initiatives are “sophisticated” and “one of the best in Asia.” Contact Philippines Country Office Tel: (63-2) 683-1000 Fax: (63-2) 683-1030 Email: phco@adb.org Join the Devex community and gain access to more in-depth analysis, breaking news and business advice — and a host of other services — on international development, humanitarian aid and global health.