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iM eIii QUARTERLY PERFORMANCE MONITORING • ,. REPORT ,Oil JUL Y TO SEPTEMBER 2002 October 30, 2002 USAID AGILE .......******* ' A Consortimn of: Development Alternatives, Inc. Cesar Vrrata & Associates, Inc. PricewaterhouseCoopers Units C&D, 11th Floor, Strata 2000 Building, Emerald Avenue, Ortigas Centre, Pasig City Tel. Nos.: 687-7729 to 32; 687-35 Fax: 687-7728 ... .... "This report was made possible through the support provided by the u.s. Agency for International Development/Manila. The opinions expressed herein are those of the authors and do not reflect the views ,of the U.S. Agency for International Development." QUARlEU.Y REPORT ACCELERATING GROWTH INVESTMENT AND LIBERAUZATION WITH EQUITY TABLE OF CONTENTS 1. BACKGROUND AND CONTRACT OBJECTIVES 1 2. TECHNICAL ACCOMPLISHMENTS 3 IRI. INSTITUTIONS, POLICIES AND PRACTICES l\tADE MORE TRANSPARENT AND ACCOUNT ABLE 8 Commercial Law Strengthened and Enforced 9 Revenue Administration Strengthened 21 .. Expenditure Management Strengthened 31 Government Procurement Made Transparent and Efficient 36 Bank Secrecy Reduced and Banking Sector Better Regulated 38 Achievements Matrix 47 lID. BARRIERS TO COMPETITION IN INFRASTRUCTURE AND TRADE REMOVED 54 Competition Increased in Transportation Senices 55 Competition Increased in Information and Communication Technology 67 Trade and Agriculture Competition Increased I j Competition Policy Strengthened SS Achievements Matrix 89 3. ACTIVITY MANAGEMENT 93 SUCCESS STORIES Leveling the Playing Field: Specific Guidelines for Interconnection Issued 67 Competition and Consumer Choice in Landline Senice Emerging 68 Positive Signal to Investors: Pemzanent Telecommunication Licenses Issued 70 Increasing Access to Telecommunications Senices in they Countryside 72 AGILE Makes Headway in IPR Enforcement at the Border 84 OCTOBER 28, 2002 PAGE i ------------,---.. QUARTERLY REPORT .... ACCELERATING GROWTIi INVESTMENT AND LIBERALIZATION WITH EQUlTY ANNEXES ANNEX 1 LIST OF REPORTS, POLICY BRIEFS & MEMOS, AND PRESENTATION MATERIALS ANNEX 2 CURRENT STAFFING LIST BY TECHNICAL AREA ANNEX 3 LIST OF SAF-FuNDED TRAINING, SEMINARS AND WORKSHOPS ANNEX 4 REVISED AGILE KEy EXPECTED ACCOMPLISHMENTS (KEAS) AND MILESTONES AS OF MAY 2002 ANNEX 5 FINANCIAL REMAINING SHEET ... ,,", OCTOBER 28, 2002 PAGE ii QUARTERLY REPORT ACCELERATING GROIV11{ INVESTMENT AND LlBERAUZATION WITH EQUITY 1. BACKGROUND & CONTRACT OBJECTIVES AGILE is a 6-year, 4-month USAID-funded activity (I June 1998 - 30 September 2004) designed to support economic policy changes in the Philippines, help bring about sustainable economic growth, and improve the country's economic resiliency by augmenting the efforts of pro­ competition partners and stakeholders. It is an important mechanism by which USAIDi Philippines seeks to contribute to the Agency-wide goal of promoting economic growth and development. Specifically, AGILE responds to USAIDI Philippines' Second Strategic Objective (S02): "Governance Enhanced: Corruption Mitigation." Its three areas of focus, resulting from discussions with potential partners, are: - o Stabilizing and deepening fmancial institutions o Making trade and investment more competitive and dynamic o Improving economic governance In the second phase of AGILE's policy reform work (1 June 2001 - 30 September 2004), it places particular emphasis on supporting initiatives that will: • Make public sector institutions, policies and practices more transparent and accountable • Remove barriers to competition in trade and the development of infrastructure The provision of AGILE assistance to reform initiatives is managed by a consortium of Filipino and US organizations (the AGILE Consortium) experienced in economic policy reform in the Philippines and the region. It is led by Development Alternatives, Inc. (DAI), and includes the Harvard Institute for International Development (HIID), Cesar Virata & Associates, Inc. (CVAl), and PricewaterhouseCoopers (pwC). All the work of the AGILE Consortium is demand driven. The broad areas of involvement are set under the strategic guidance of the AGILE Steering Committee, made up of representatives of the government, private sector, academia, and USAID. The Steering Committee is designed to meet on a semi-annual basis to decide on new areas of activity, monitor progress, and evaluate accomplishments. Specific approaches to policy or institutional reforms are designed in collaboration v.ith government, or in some cases, NGO or public-private policy reform partners. AGILE focuses on assisting the GOP and private sector stakeholders conduct focused policy analysis, formulation, and advocacy. Additionally, it provides technical assistance to both the Govemment of the Philippines (GOP) and USAID in the area of policy monitoring, assessment, and reporting for all activities designed to contribute to S02. ... This report focuses on the contribution of AGILE-supported activities undertaken during the 3nl quarter of2002 (3Q2002) in support ofS02 goals. Specifically, it reviews steps towards the achievement of Policy Outcomes (POs) and Results Packages (RPs), outcomes that are to some extent within the control of the AGILE Consortium. For ease of tracking, the section on technical accomplishments is structured according to Policy Outcomes and Results Packages as specified in OCTOBER 28, 2002 PAGEl QUARTERLY REPORT ACCELERATING GROWTH INVESTMENT AND UBERALIZATION WITH EQUITY the Steering Committee-approved AGILE Work Statement for June 200 I - June 2003 with special emphasis given on dated Key Expected Accomplishments.! These are identified as sub-headings in ... the report. Planned accomplishments, and AGILE's success in meeting them, are also included in matrices at the end ofthe text on each Policy Outcome section for easy reference. A section covering Activity (project) administration, and one addressing problems on, and prospects for, improved management and service delivery follow the technical section. Supporting documents, including a list of reports, policy briefs, and memos, and presentation materials; current staffing list by technical area; list of training/seminars and workshops; and financial remaining sheet are included in annex. A new list of Key Expected Accomplishments is also included in annex. ... - "" 1 The Key Expected Accomplishments have been modified further (as of May 2002) to reflect changes in strategies and the longer time frame resulting from an additional project extension, extending the project through to the end of September 2004. These new Key Expected Accomplishments (KEAs) have been communicated to and discussed with USAID. A list of modified and new KEAs is attached in annex. ..., OCTOBER 28, 2002 PAGE 2 QUARTERLY REPORT ACCELERATING GROWTH INVESTMENT AND UBERAL1ZATION WITH EQUITY 2. TECHNICAL ACCOMPLISH.Jl.lENTS Overview The US economy, the main engine of economic growth in the world, and a key consumer of electronic exports from countries like the Philippines, has had a weak recovery. Continuing _ security concerns, accounting scandals, and weakening consumer sentiment have combined to derail the economic recovery that had been foreseen earlier. While the brunt of investor sentiment has been reflected in poor stock market results, the basic economic numbers-employment, .. productivity growth, interest rates, and housing starts-have not been as bad. In the Philippines, the budget deficit appears certain to overshoot its target for the year. This has Oil become the primary economic story. On the expenditure side there has been substantial fiscal discipline and austerity. The deficit has been caused primarily by poor collections on the part of the Bureau of Internal Revenue (BIR), the main tax revenue earner. The lackluster performance of the ... BIR has highlighted the need for important reforms in tax administration. Because of relatively slow growth in lending, the larger than expected budget deficit has not put substantial pressure on interest rates, which have been driven by monetary policy to their lowest levels in years. ... Economic growth has remained at around the 4% level, the inflation rate is low, but with the continued high level of bad loans held by commercial banks, very little new lending is occurring, ... despite the low interest rates . The Philippine peso has remained at a steady level in the vicinity of 52 pesos to one US dollar. Higher than average dollar inflows from remittances of Filipinos working abroad, which could reach as much as 8 billion USD for the year, ",':ill help support the peso. This is especially so as the bulk of remittances come for Christmas and year-end holidays. The Philippines Stock Exchange has put in a lackluster performance during the quarter with the Index sliding to 1,129.34 from the previous quarter and daily turnover rarely exceeding 6-7 million USD. Portfolio investors are not showing much interest in the local stock market. On the political and policy front, legislative action has been slow. A review of the numbers oflaws passed in the First Regular Sessions of Congress under the Ramos, Estrada and Arroyo administrations show that the "Arroyo" Congress has been twice as productive as the "Estrada" Congress, but only half as productive as the "Ramos" Congress. Policy Accomplishments Below is an overview of the nature and extent of progress that AGILE has helped its policy reform counterparts achieve in the past quarter. OCTOBER 28. 2002 PAGE 3 QUARTERLY REPORT ACCELERATING GROWTH INVESTMENT AND LIBERALIZATION WITH EQUITY Commercial Law Strengthening (SEC, SC, OOJ) Capital
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