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Governance in Justice Sector Reform Program

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Governance in Justice Sector Reform Program Report and Recommendation of the President to the Board of Directors Project Number: 41380 November 2008 Proposed Program Cluster, Loan for Subprogram 1, and Technical Assistance Grant Republic of the Philippines: Governance in Justice Sector Reform Program CURRENCY EQUIVALENTS (as of 17 November 2008) Currency Unit – peso (P) P1.00 = $0.02023 $1.00 = P49.42 ABBREVIATIONS ADB – Asian Development Bank APJR – Action Program for Judicial Reform AusAID – Australian Agency for International Development BIR – Bureau of Internal Revenue BJMP – Bureau of Jail Management and Penology BSP – Bangko Sentral ng Pilipinas (Central Bank of the Philippines) BuCor – Bureau of Corrections CA – Court of Appeals CIDA – Canadian International Development Agency CTA – Court of Tax Appeals DBM – Department of Budget and Management DILG – Department of the Interior and Local Government DOF – Department of Finance DOJ – Department of Justice GDP – gross domestic product GJSRP – Governance in Justice Sector Reform Program IBP – Integrated Bar of the Philippines JAF – Judiciary Autonomy Fund JBC – Judicial and Bar Council JDF – Judiciary Development Fund JELAC – Judiciary, Executive, Legislative Advisory, and Consultative Council JICA – Japanese International Coordination Agency JSCC – Justice Sector Coordination Council LGU – local government unit MDG – Millennium Development Goal MTEP – medium-term expenditure program MTPDP – medium-term Philippine development plan NBI – National Bureau of Investigation NEDA – National Economic Development Authority NLRC – National Labor Relations Commission NPS – National Prosecution Service NSCB – National Statistical Coordination Board OPIF – Organizational Performance Indicator Framework PNP – Philippine National Police RCAO 7 – Regional Court Administration Office in Region 7 TA – technical assistance UNDP – United Nations Development Programme USAID – United States Agency for International Development NOTES (i) The fiscal year (FY) of the Government and its agencies ends on 31 December. (ii) In this report, "$" refers to US dollars. Vice-President C. Lawrence Greenwood Jr., Operations 2 Director General A. Thapan, Southeast Asia Department (SERD) Director J. Ahmed, Governance, Finance, and Trade Division, SERD Team leader J. Balbosa, Economist (Fiscal Management), SERD Team members K. Bird, Economist, SERD K. M. Emzita, Senior Counsel, Office of the General Counsel T. Hla, Economist (Financial Sector), SERD P. Jena, Governance Specialist, SERD L. Kulp, Social Development Specialist, SERD T. Niazi, Public Sector Management Specialist, SERD F. Tornieri, Social Development Specialist (Gender and Development), Regional and Sustainable Development Department TABLE OF CONTENTS Page LOAN AND PROGRAM SUMMARY i I. THE PROPOSAL 1 II. THE MACROECONOMIC CONTEXT 1 A. Review of the Economy and Investment 1 B. Development Strategies and the Government’s Justice Sector Reform Program 2 C. The Government and Its ADB Partnership 3 III. THE SECTOR 7 A. Governance in the Philippines 7 B. Sector Description and Performance 8 C. Issues and Opportunities 11 D. Lesson 22 IV. THE PROPOSED PROGRAM 22 A. Objective and Scope 22 B. Policy Framework and Actions under Subprogram 1 23 C. Policy Triggers for Subprogram 2 29 D. Financing Plan 29 E. Implementation Arrangements 31 V. TECHNICAL ASSISTANCE 32 VI. PROGRAM BENEFITS, IMPACTS, AND RISKS 34 VII. SPECIFIC ASSURANCES 36 VIII. RECOMMENDATION 37 APPENDIXES 1. Design and Monitoring Framework 38 2. Development Policy Letter and Policy Matrix 41 3. Development Partners’ Coordination Matrix 53 4. Sector Analysis 57 5. Summary Poverty Reduction and Social Strategy 69 6. List of Ineligible Items 72 SUPPLEMENTARY APPENDIX (available upon request) A. Special Features B. Economic Governance Assessment LOAN AND PROGRAM SUMMARY Borrower Republic of the Philippines The Proposal Support to the Government of the Philippines for the proposed Governance in Justice Sector Reform Program (GJSRP) cluster comprising two subprograms. Subprogram 1 is proposed to be supported by a loan of $300 million to be released in two tranches. Classification Target Classification: General intervention Sector Classification: Law, economic management, and public policy Subsectors: National government administration, law and judiciary, public finance and expenditure management Themes: Governance, capacity development Subtheme: Public governance, anticorruption, institutional development Environmental Category C Assessment Social Sector Involuntary resettlement – Category C Assessment Impact on indigenous people – Category C Program Rationale. The Philippines suffers from poor perceptions of governance as captured in social weather surveys, investment climate surveys, and international comparisons. While progress is being made in macroeconomic management and fiscal stability, other performance indicators have deteriorated, including those of corruption. Recognizing these challenges, the Medium- Term Philippine Development Plan 2004–2010 (MTPDP) lays out the agenda to improve institutions and governance outcomes through actions that will enhance both the supply and demand for good governance. MTPDP includes an extensive discussion on the rule of law and needed governance reforms in justice sector institutions. On the supply side of the reform dynamics, the Government, as the provider of public goods and service delivery, is undertaking a multi-year reform program to strengthen the state’s administrative capability—skills, incentives and salaries, human resources, and financial management systems—to deliver public goods and services at both the national and local government level. The Government recognizes that supply-side factors are necessary, but not sufficient to improve public services and reduce corruption. Demand-led “voice” and empowerment elements are also needed to strengthen accountability arrangements. A vibrant civil society, coupled with measures in support of transparency and accountability, provides an incentive to change behavior and improve the public service performance of government institutions. ii Civil society and nongovernmental organization stakeholders play an important role in sustaining policy dialogue on justice sector reforms. These groups hold strong interests that protect the reforms from state capture, and their advocacy during policy dialogue makes the justice sector and government actions more responsive to the needs of its users. The MTPDP envisions a judiciary that is independent, effective, and efficient, resulting from a holistic and integrated reform effort in the justice system. In addition, it recognizes the important link between the rule of law and institutional reforms in the justice sector, and a strategy to fight poverty and promote inclusive growth. The justice sector is an interlocking set of agencies that includes the judiciary, which is an independent branch of government, and agencies from the executive branch, including the institutions responsible for prosecutions, enforcement, corrections, penology, and public legal assistance. Improving the public service delivery of justice sector agencies requires a number of interlinked reforms, including strengthened incentives to deliver public services, enhanced expenditure and budget management capabilities, accountability for the use of resources, more efficient delivery of justice, greater citizen voice and participation, and increased access to justice. A key factor in the weakness of justice sector institutions has been poor incentives and a lack of financial resources that have constrained expenditures and capacities, and ultimately resulted in poor public service delivery. The impact of budgetary constraints has led justice sector agencies to prioritize recurrent expenses (primarily personnel). Budgetary compression has also resulted in low salaries that when coupled with antiquated equipment and infrastructure create vacancies in staff positions and disincentives for efficient performance. Resource constraints also make justice sector agencies—particularly the judiciary, prosecution service, and law enforcement—susceptible to external influence, which undermines the independence of courts and the integrity of other justice sector agencies. Justice sector fiscal management capabilities, particularly in budget planning that can play an important role in strengthening fiscal autonomy in spite of government budget constraints, is currently weak. This prevents justice sector agencies from defending their budget requests and obtaining the resources that they need. The absence of resources in justice sector agencies to exercise stronger oversight functions concerning their field offices and the dearth of transparent procedures and accountability mechanisms with respect to the use of public funds contribute to the perception that the agencies are susceptible to corruption. iii ADB’s focus on governance, macroeconomic management, public expenditure management, and anticorruption in the Philippines is anchored in ADB’s Development Policy Support Program for the Philippines, which complements and reinforces ADB’s sector loan programs and projects that are aligned with the Government’s strategies. The Development Policy Support Program sets out broad policy outcomes for improving public expenditure management, but leaves the rollout to sector programs such as the Local Government Finance and Budget Reform Program and the proposed Governance in Justice Sector Reform Program (GJSRP). The proposed GJSRP will support increased budget
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