Philippines Compact
April 3, 2018
- Signed: September 23, 2010
- Entry into Force: May 25, 2011
- Compact End Date: May 25, 2016
Introduction
The Millennium Challenge Corporation’s $385 million compact in the Philippines supported reforms and infrastructure in the country through three projects. First, the compact modernized the Bureau of Internal Revenue by redesigning and computerizing business processes that sought to increase the efficiency and sustainability of revenue collection. Second, the compact expanded and improved community-driven development projects that strengthened community participation in development activities at the village and municipal levels. Third, it rehabilitated a critical secondary national road on Samar Island that is reducing transportation costs for the island’s people.
As a result of the compact, through reforms at the Philippine Bureau of Internal Revenue, MCC helped the Government of the Philippines strengthen tax administration and case management systems, which helped raise tax revenues, reduce tax evasion, and address agent-related corruption. The project helped generate more than $300 million in additional domestic tax revenue since 2013. In 2017, the project contributed to the collection of $600 million from a single taxpayer. 1 In addition, 222 km of a national road serving as a lifeline for numerous towns and municipalities in one of the poorest and most typhoon-prone areas of the country was rehabilitated to new climate-resilient standards. And close to 4,000 small-scale community-driven development projects in basic infrastructure and social services were completed in rural, high-poverty areas based on needs identified and prioritized by residents across Filipino communities.
This report provides a summary of the outputs of the compact program, documentation of changes in compact activities and the reasons behind them, information on performance against targets in the monitoring plan, and the results of independent evaluations that have been completed. Further details of compact results will be shared in a forthcoming performance evaluation expected in 2024 (Secondary National Roads Development Project).
Country Context
The Philippines is a sovereign island country in Southeast Asia situated in the western Pacific Ocean. It is one of Asia’s two archipelagic states (along with Indonesia), comprised of more than 7,000 islands dividing the Pacific Ocean from the South China Sea. The country’s development performance during the past several decades had been less impressive than that of many of its East and Southeast Asian neighbors. In the 1950s and 1960s, the country had one of the highest per capita gross domestic products (GDPs) of about $612 in the region 2 ; however, the Philippines fell behind following the 1997 Asian financial crisis. Household incomes were stagnant and inequality remained high when the country was selected as eligible to develop an MCC compact in 2008. The Philippines successfully completed a three-year Threshold Program to improve revenue administration and anti-corruption efforts in 2009.
As part of its compact development process, MCC utilized an economic report published by the Asian Development Bank in 2007 to identify the binding constraints to economic growth in the country. The report identified a lack of fiscal space for growth-enhancing public investments, poor infrastructure – namely transport and energy, weak investor confidence due to poor governance and corruption concerns, and an inability of government to address market failures that led to a very narrow industrial base.
MCC and the Government of the Philippines signed a five-year, $434 million compact in September 2010 to address the constraints outlined above. The program aimed to lay the groundwork for sustained economic growth by improving critical road infrastructure in one of the country’s poorest regions; empowering citizen participation in local economic development activities, including managing community assets in a sustainable manner; and improving the effectiveness and integrity of revenue collection and administration to increase public investment and reduce tax evasion. The compact was implemented by MCA-Philippines, an institution established by the Government soon after compact signing as a condition of the MCC grant. 3
- Original Amount at Compact Signing:
$433,910,000 - Amount spent:
$385,072,218
- Signed:
September 23, 2010 - Entry Into Force:
May 25, 2011 - Closed:
May 25, 2016
Estimated benefits correspond to $434 million of compact funds, where cost benefit analysis was conducted.
- 125,822,000Estimated beneficiaries at the time of signing over 20 years
- $464,400,000Estimated net benefits at the time of signing over 20 years
The Kalahi-CIDSS Project
Kalahi-CIDSS Community-Driven Development Project
- $120,000,000Original Compact Project Amount
- $124,999,276Total Disbursed
Estimated Benefits
Estimated benefits correspond to $120.0 million of project funds, where cost-benefit analysis was conducted.
| Time | Estimated Economic Rate of Return (ERR) over 20 years | Estimated beneficiaries over 20 years | Estimated net benefits over 20 years |
|---|---|---|---|
| At the time of signing | 12.6% | 5,200,000 | $16,600,000 |
| Based on final independent evaluation report | 3% (The ERR rises to 28% if rice farmers are excluded from the calculation.) | N/A | N/A |
Project Summary
During the previous five decades, the Philippines had consistently lagged behind other countries in the region with respect to government development expenditures as a percentage of GDP and infrastructure investment and quality. Inadequacies in infrastructure were a critical constraint to economic growth in the country, and the availability of basic infrastructure (water, sanitation, roads, and electricity) had deteriorated. In addition, the provision and use of education and health services varied across regions, particularly as a function of income.
The Kalahi-CIDSS Project – Kapit-Bisig Laban sa Kahirapan (Linking Arms Against Poverty) Comprehensive and Integrated Delivery of Social Services – aimed to improve welfare in rural areas by targeting communities where poverty incidence was greater than the national average with small-scale, community driven development projects that targeted basic infrastructure needs. The project built upon and supported the application of the participatory planning, implementation, and evaluation methodology developed by the Government of the Philippines Department of Social Welfare and Development, in collaboration with the World Bank. The first phase of the World Bank-funded project (called KC1) was successfully implemented from 2003 to 2009 in 4,229 villages, or barangays, across 42 provinces, providing a wealth of information for MCC’s project appraisal.
Communities were selected to participate in the Kalahi-CIDSS Project based on specific criteria, including geographic location, poverty incidence, and the ability of communities to participate in the entire program. After a community was enrolled in Kalahi-CIDSS, the Community Empowerment Activity Cycle began. Each cycle followed a progression of strategies and activities to promote transparency and accountability. Projects were designed through a consultative process that incorporated input and priorities of the entire community, including women. From procurement to implementation to maintenance, all processes were discussed and agreed upon by the community. Over the course of three cycles, MCA-Philippines’ National Project Management Office gradually handed off responsibilities for the implementation of Kalahi-CIDSS activities to local governments to sustain.
The project empowered communities to participate fully in development activities that addressed the needs they identified and provided guidance on managing assets in a sustainable way. It improved the link between community priorities and the development programs of local government, and used investments in a transparent manner to promote greater accountability and reduce poverty. Grants were provided directly to local communities, who were then responsible for project selection, the procurement of goods and services, and in many cases, the operations and maintenance of physical assets.
Complementing projects like farm-to-market roads, school buildings, health stations, drainage systems and footpaths, the program also included a $1 million Gender Incentive Grant to promote gender equality and women’s empowerment at the village and municipal levels. The Gender Incentive Grant funded activities that addressed barriers to either men or women participating in community activities, decision-making processes, and economic activities such as non-traditional skills training for women, women support shelters, and maternity services. The effort particularly emphasized and encouraged women’s leadership and opportunities for paid employment through Kalahi-CIDSS. Women community volunteers made up 10 percent of paid skilled and unskilled labor in community project construction in 2015, a significant increase from a baseline of 3 percent in 2010. And more than 1,399 women benefited from certificate training on non-traditional skills such as plumbing, welding, electrical installation, carpentry, painting, tile-setting, hollow blocks-making and masonry.
With 3,760 small-scale, community-driven development projects in six regions of the Philippines, nearly 1 million households were served by Kalahi-CIDSS. In 2014, citing the success of the Kalahi-CIDSS Project and other community-driven development programs around the world, the Government made Kalahi-CIDSS a national model for development project planning and implementation with a focus on inclusive development and poverty alleviation. The nationwide roll-out incorporated compact-introduced enhancements, such as environmental safeguards, enhanced methods of design and construction, and support for gender integration into project design and implementation.
Evaluation Findings
The evaluation of the Kalahi-CIDSS Project was a randomized, impact evaluation. Because the project could not fund all eligible munipalities, eligible municipalities were randomly selected into the two groups. One group received the project (treatment group), and the other group did not (control group). The evaluation tracked outcomes for both groups and assessed impacts in three dimensions: (1) socioeconomic welfare, (2) local governance, and (3) community empowerment. In addition, within each of these dimensions, the evaluation examined whether impacts were different for different subgroups, including men/women, poor/nonpoor, indigenous/nonindigenous, among others. Findings within each of these dimensions are summarized below.
Socioeconomic Welfare
Kalahi-CIDSS Project investments in water, transportation, and education infrastructure were effective in delivering benefits to residents via 4,000 citizen-prioritized sub-projects. Improved infrastructure decreased the time and cost spent to obtain water, expedited travel, and increased school enrollment. Yet, contrary to expectations, improved infrastructure reduced agricultural productivity.
The infrastructure sub-projects were effective at improving community access to key services, while showing no evidence that overall poverty status was affected. The construction of new classrooms through education sub-projects had significant effects on educational outcomes, with increased school enrollments and decreased student-to-teacher ratios in project areas compared to control areas (0.42 standard deviations). Water sub-projects substantially reduced the time and cost to obtain water.
In general, households in villages with road sub-projects had improved access to key services, such as schools, health clinics, and markets. However, road sub-projects had no effect on fishery, livestock, or poultry productivity, and unexpectedly reduced agricultural productivity. This is likely due to that fact that smallholder farmers shifted out of rice cultivation in villages where roads improved, though this evaluation was not designed to determine why farmers made this shift out of rice production. Since these smallholders typically have higher yields per hectare than larger holders, the average yield per hectare among remaining rice farmers declined.
Local Governance
The project improved local government responsiveness to community needs and effectively delivered services that communities preferred, such as classrooms, health clinics, and farm-to-market roads. The project increased knowledge and awareness of local governance among residents of project communities. Unexpectedly, residents in project areas felt less able to make changes compared to non-project communities.
Kalahi-CIDSS participatory processes were more effective than the status quo at delivering services that communities preferred, such as classrooms, health clinics, and farm-to-market roads. Consistent with this finding, 93 percent of respondents felt that the project addressed the most important priorities. Residents in project communities were also more familiar with local officials and governing bodies, and it was expected that they would use those skills outside of the project. At the same time, this knowledge was accompanied by a worsening perception of confidence and feeling less empowered to make change. Additionally, the project had no effect on participation in and knowledge of formal governance structures beyond Kalahi-CIDSS.
Community Empowerment
While Kalahi-CIDSS encouraged communities to engage in development activities, it was less effective at generating broader social changes related to community empowerment after the project ended. Exposure to project activities led residents to contribute to other civic activities at greater levels. On the interim survey, the intensity and frequency of interaction with neighbors about problems in the village were rated as significant and positive, but by the third survey, these peer interactions were no longer rated as significant. By the third round, however, there was no evidence that project communities were dealing any better with hardships or natural disasters. However, in 2015, before the third round of data collection, control groups began to implement the successor project to Kalahi-CIDSS, the Kalahi-CIDSS-National Community-Driven Development Project, funded by the Philippines government and World Bank, wherein the control group was exposed to socialization treatments. This may have diminished the measured impact of the project.
Differential Impact for Groups
Results were analyzed for different sub-groups (women vs. men, Indigenous Persons vs. Non- Indigenous Persons, and poor vs. non-poor). For most cases, there were no observable differential effects in the sub-groups. The only cases in which Kalhi-CIDSS affected people differently were for indigenous persons. Indigenous persons appeared to benefit substantially more from improvements in access to education than non-indigenous persons.
Learning from the Evaluation
- The participatory Kalahi-CIDSS process is better than the status quo at identifying residents’ small infrastructure preferences. Incorporating community-driven development-like processes into future projects should allow for selection, design, and/or siting of small community infrastructure that better matches community preferences.
- Kalahi-CIDSS does not appear to have changed citizen participation in local governance beyond the project. If this is to remain a key aspect of the community-driven development theory of change, consider targeting local political leaders for capacity-building or other project interventions.
- The quality and sustainability of community infrastructure should be prioritized over cost and implementation time. In order to determine the appropriate design, consider both local design guidelines as well as international standards.
- It may be worth further research to test which implementation modality results in superior infrastructure quality. One can envision that a non-community-driven development implementation model with heavy citizen engagement and input at the outset could still generate projects that meet community needs.
| Component | Status |
|---|---|
| Baseline Report | Completed in 2013. Report and de-identified data are public. |
| Midline Report | Completed in 2015. Report and de-identified data are public. |
| Endline Report | Completed in 2018. Report and de-identified data are public. |
Key performance indicators and outputs at compact end date
| Activity/Outcome | Key Performance Indicator | Baseline | End of Compact Target | Quarter 1 through Quarter 20 Actuals (as of Dec 2012) | Percent Compact Target Satisfied (as of Dec 2012) |
|---|---|---|---|---|---|
| Grants for Community Projects Activity | Number of barangays that have completed all trainings during the social preparation stage | 0 | 3,000 | 3,760 | 125% |
| Number of Gender Incentive Grant-Funded Sub-Projects | 0 | No Target | 55 | No Target | |
| Number of sub-projects completed with 100% physical accomplishment | 0 | 3,217 | 4,011 | 125% | |
| Number of sub-projects that contribute to disaster risk reduction (e.g. flood control, soil and water protection, coastal rehabilitation, mangrove management) | 0 | No Target | 674 | No Target |
Explanation of Results
As highlighted above, the Government of the Philippines Department of Social Welfare and Development exceeded implementation targets, specifically, more villages completed all five stages of training and more small-infrastructure sub-projects were constructed than planned.
Revenue Administration Reform Project
Revenue Administration Reform Project
- $54,300,000Original Compact Project Amount
- $30,280,930Total Disbursed
Estimated Benefits
Estimated benefits correspond to $30.2 million of project funds, where cost-benefit analysis was conducted.
| Time | Estimated Economic Rate of Return (ERR) over 20 years | Estimated beneficiaries over 20 years | Estimated net benefits over 20 years |
|---|---|---|---|
| At the time of signing | 40.3% | 125,000,000 | $224,500,000 |
| At compact closure | 34.7% | 125,000,000
The beneficiary count for the Project is under review by MCC and may change in the future. |
$166,100,000 |
| Activity and Sub-Activity | Time | Estimated Economic Rate of Return (ERR) over 20 years | Estimated beneficiaries over 20 years | Estimated net benefits over 20 years | |
|---|---|---|---|---|---|
| Bureau of Internal Revenue (BIR) Reform Activity | Automated Audit Tools Sub-Activity (AATS) | At the time of signing | 74.9% | $6,000,000 | |
| At compact closure | 74.9% | $6,000,000 | |||
| Electronic Tax Administration Sub-Activity (eTIS) | At the time of signing | 37.5% | $171,000,000 | ||
| At compact closure | 32.4% | $112,500,000 | |||
| Revenue Integrity Protection Service Activity | At the time of signing | 50.2% | $47,500,000 | ||
| At compact closure | 50.2% | $47,500,000 | |||
The Revenue Administration Reform Project ERR declined from 40.3 percent at the time of signing to 34.7 percent at closure, as the eTIS activity achieved 75 percent of its original target 4 by the compact end date. The 34.7 percent ERR assumes a persistent commitment to policy reform and continued investment in the staff and infrastructure of BIR after compact closure.
Project Summary
One consequence of the Philippines’ tight fiscal situation was a limited ability of the Government to fund its growing needs for basic infrastructure and social programs. Tax-related patterns of non-compliance and tax administration inefficiencies contributed to a poor business climate, and ultimately impacted the rate of both domestic and foreign-direct investment. 5 One of the most pervasive embodiments of corruption in the Philippines was the low rate of taxpayer compliance and alleged active collusion of revenue agents in the negotiation of tax assessments. 6
Through its earlier threshold program, MCC provided extensive training; support for inter-agency collaboration; and IT equipment to investigators, lawyers and prosecutors in charge of pursuing corruption, tax evasion, and smuggling cases. The Revenue Administration Reform Project built on these efforts by increasing and improving the Philippines’ ability to sustain higher collection of tax revenues and helping to reduce tax-related graft and malfeasance.
Project activities and sub-activities included:
- The Bureau of Internal Revenue (BIR) Reform Activity included three sub-activities:
- The Electronic Tax Administration Sub-Activity (eTIS) computerized the business processes of the BIR, modernizing the Bureau and providing an enhanced tax administration system expected to cover 95 percent of taxpayers in the country. It increased the operational efficiency in registering taxpayers and processing tax returns and accounting payments. These enhanced business processes also worked to improve compliance, audit, and enforcement and increased tax revenue collection. Additionally, MCC co-financed technical assistance to the Bureau of Internal Revenue with the International Monetary Fund’s Fiscal Affairs Department to implement reforms in basic tax administration at the procedural and technical levels, with the objective of improving core business processes for different taxpayer segments.The technical assistance redesigned procedures and identified key risks and compliance objectives in each core functional area and measures needed to address them. Through cross-project coordination, these procedural improvements were integrated with eTIS.
- The Automated Audit Tools Sub-Activity (AATS) supplied the Large Taxpayer Unit of BIR with software tools for use in auditing taxpayers who have automated records. These tax auditing tools significantly reduced the amount of time needed to complete an audit and addressed taxpayer concerns about fairness of tax audits based on sampling rather than a review of all transactions. The reduction in person days per tax audit helped BIR reduce its backlog of unfinished audits, promoted taxpayer satisfaction, and led to increased revenue collection of 30 percent per audit.
- The Public Awareness Campaign Sub-Activity educated the public on BIR services and programs. It disseminated information on the reforms, modernization and enforcement initiatives of BIR to support increasing tax revenues over time. The Public Awareness Campaign promoted greater understanding of tax obligations and increased the ability of taxpayers to access tax information, which is expected to lead to better tax compliance. Greater utilization of online services also led to improved compliance by reducing taxpayer errors, such as those that might result from the introduction of a new form or new regulations.
- The Revenue Integrity Protection Service Activity strengthened revenue agency surveillance and discipline of Department of Finance staff. Through the acquisition and customization of case management software, a data repository system, training, reinforcing its surveillance capacity, and instilling discipline in Department of Finance agencies, the activity advanced the detection and punishment of forms of malfeasance that allowed revenue agents to reap financial rewards from taxpayers. By increasing the likelihood of detection and punishment, the frequency of such incidents was expected to decline, thereby improving the image of revenue generating agencies, increasing tax collection in the country.
The Revenue Administration Reform Project also facilitated an improved understanding of key gender and taxation issues through learning sessions on gender, taxation and corruption for government counterpart agencies; a study on gender and tax administration; and collection and analysis of sex-disaggregated data on taxation and corruption issues.
The goal of the Project (as reflected in the ERR) was to increase the share of government revenues as a share of GDP by 0.3 percent, which is too small an effect to measure statistically. MCC and MCA-Philippines instead tracked whether government revenue collections continued their robust growth trend, which they did — by the end of the compact, revenue from new and existing business registrants had increased from 822,624 million PhP to 1,441,571 million PhP. The project contributed to this effort by narrowing the gap between potential and actual collections and reducing the discretion of individual revenue collection officers. It also helped improve the predictability and impartiality of revenue laws and regulations enforcement. Other outcomes related to BIR efficiency generally improved, such as shorter processing times and more automated audits 7 . The Public Awareness Campaign received Araw Values Advertising awards from the Advertising Foundation of the Philippines for its effort to increase awareness of taxpayer obligations and provide information regarding how to file returns. The Automated Auditing Tools Sub-Activity reported substantial gains in tax audit and arrears management programs. Additionally, as part of the Revenue Integrity Activity, 220 people were charged with graft, corruption, lifestyle and/or criminal offenses. 8
While the Revenue Administration Reform Project achieved impressive results, MCC and the Government of the Philippines did encounter significant challenges implementing the two systems development and systems infrastructure components of the project: (i) the new Revenue Integrity Protection Service automated system to help detect possible illicit financial gains by employees of the government’s revenue agencies; and (ii) eTIS, the tax administration system intended to eventually replace the BIR’s legacy tax administration system, ITS. While the Revenue Integrity Protection Service activity consisted of the design and implementation of a new software application to sit on a new, stand-alone hardware infrastructure within a refurbished and secure office space, eTIS was the continuation of a project started by the BIR several years before the compact. The primary hurdles that had to be overcome had to do with, respectively, the newness of the Revenue Integrity Protection Service activity’s automated system and linking eTIS to past systems. Both represented the first significant systems development efforts funded by an MCC compact.
As initially envisioned, eTIS would complement broader reform efforts with technical assistance from the IMF that would help incorporate improved policies and procedures regarding tax administration at BIR. This involved expanding the level of effort and cost to customize the auditing and compliance modules of the system, cleaning up the existing registration data base and making the data more accessible, secure, and trustworthy. It also required the BIR to shift its organizational resources to focus on large taxpayers and VAT collection efforts. These ambitious objectives required intense collaboration with BIR to ensure ownership of the direction and implementation of the activity. MCC and MCA-Philippines had to refine procurement preferences and expectations to accomplish the activity’s objectives, which significantly differed from the methodology that was intended in the original design. As a result of implementation challenges, including difficulties in procurement, project management and delays in decision-making, the original target for the number of Revenue District Offices (RDOs) to be covered by eTIS was revised from 128 down to 13 BIR offices, covering 73 percent of taxpayer revenue. Following compact closure, the BIR committed to rolling out eTIS to cover 95 percent of taxpayer revenue and to developing and implementing five additional modules of eTIS. Post-compact, the Government of the Philippines has submitted three Annual Summary Reports. As of the last Annual Summary Report, from 2019, no additional BIR offices had received eTIS. Additionally, the 2019 Annual Summary Report notes that, in July 2018, eTIS broke down due to a hardware issue. BIR restored eTIS in August 2018, but technical issues persist.
Evaluation Findings
A performance evaluation of the Revenue Administration Reform Project was completed in March 2017. The RARP evaluation aimed to measure changes brought about by the project on: (1) efficiency of tax administration, (2) tax revenue, and (3) perceptions of corruption in the tax administration. Findings include:
Project Implementation
Five of the nine modules of the electronic Tax Information System (eTIS) were implemented within 13 pilot offices. BIR staff had limited exposure to the eTIS modules in terms of time (months) and number of staff, but BIR was committed to this new system, as the current system was failing. Approximately 344,000 taxpayers were registered into the new eTIS. Although automated auditing tools have been used in the Large Taxpayer Service office since 2005, the project provided 10 BIR offices with laboratories to train staff and conduct audits, increasing the percentage of Large Taxpayer cases using automated auditing tools from 3 percent to 100 percent. An additional auditing tool, the new ‘transfer-pricing’ database, had not been acquired at the time of the evaluation.
The case management system at the Revenue Integrity Protection Service (RIPS) faced numerous implementation delays. Even so, the capacity building and case management system seems to have improved the efficiency of RIPS investigations: the average number of days between Investigative Authority to Complaint Affidavit decreased from 892 to 194 and between Investigative Authority to Case Resolution decreased from 2582 to 1119.
The project’s Public Awareness Campaigns won awards and were deemed effective in improving taxpayers’ understanding of their tax obligations, per the evaluation. Even so, the impact on tax compliance was not measured by either the PR firm or the evaluation. In the future, each campaign should be analyzed in relation to the desired behavioral change (in this case, tax compliance) to better inform which campaigns should be continued and which should be closed.
This project was the first time that MCC engaged the IMF as a project resource for technical assistance. The IMF was allowed the flexibility to independently identify problems and recommend timely measures to address them. As a result, the IMF advisory activities were free to focus on several critical topics including Value-Added Tax audit and arrears management.
Tax Revenue Levels
Tax revenue from new and existing businesses registered with the BIR rose from approximately $17.5 billion (822,624 million Philippine peso (PHP) using 12/31/2015 exchange rate) to approximately $31 billion (1,441,571 million PHP), but tax revenue was increasing before the project.
Revenue collected per audit increased from $53,000 (2.5 million PHP) to $1.6 million (74.6 million PHP) surpassing the compact target. The percentage of automated audits increased from 3 percent at baseline to 100 percent by compact end.
Taxpayers’ Perception of Corruption
The percentage of taxpayers believing there is a great deal of corruption in the DOF and BIR decreased significantly between 2014 and 2015: DOF from 48 percent to 38 percent and BIR from 52 percent to 46 percent. On the other hand, the percentage of taxpayers believing there is a great deal of corruption in the BOC barely changed: from 74 percent to 72 percent.
Perceptions of corruption in the DOF, BOC, and BIR differ greatly between taxpayers and agency personnel. A far higher percentage of taxpayers, compared to personnel, believed corruption in all three agencies to be extensive. Agency personnel’s perception did not change significantly from 2014 to 2015.
Approximately one-third of the taxpayers surveyed faced bribe solicitation during 2014 and 2015. Compared to other taxpayers, Large Taxpayer Services taxpayers were more frequently approached for bribes by the BIR personnel. A smaller percentage of Large Taxpayer Services taxpayers were solicited for bribes by BIR personnel in 2015 as compared to 2014. Despite this decrease, the reported incidence of paying bribes by the Large Taxpayer Services respondents did not change between the two rounds.
Learning from the Evaluation
- A primary contributor to the successes realized during the compact was the strong support of RARP at the highest levels within the Philippines Government, most notably, the President, the Secretary of the Ministry of Finance, and the Commissioner of the BIR. It is questionable whether a similar project as ambitious as RARP would be possible without such support. The sustainability of RARP’s outputs and outcomes will now depend on whether the new administration has a similar level of commitment and a similar sense of urgency.
- An important lesson for MCC on projects involving major IT systems installation and adoption is that project design must ensure no more than a manageable level of customization to off-the-shelf software systems. The volume of modification and customization of software in the eTIS system was one of the primary sources of implementation delays which ultimately reduced the scope and reach of the final product.
- The development of eTIS software was started by BIR prior to the beginning of the compact by a software consultant engaged by BIR. Shortly after the compact began, it became clear that software development work needed to be restarted almost from scratch. Dealing with procurement issues, redefining user requirements, and implementing new organizational measures within BIR to take primary ownership of the project all contributed to delays in the first two years of the compact. Continued due diligence on the eTIS development effort might have allowed MCC, MCA-P and BIR to identify and deal with these issues sooner.
- At two of the government agencies (BIR and DOF), procurements and decision making were hampered because government employees, who approve a procurement or accept a product as complete, fear that they might be subject to financial loss or charges of misconduct. This reluctance to take ownership and be proactive in implementing projects slowed both the eTIS and RIPS activities. MCC had not identified this risk during due diligence.
- Any complicated information system reform, such as eTIS and AATS, relies on the institutional ability to provide guidance to software designers and train all appropriate staff.
- In terms of staff acceptance of eTIS and AATS, use of current licenses and the Transfer Pricing database should be closely monitored by BIR management to ensure that auditors have access to and use these systems in the conduct of their audit cases. Those auditors who are reluctant to embrace modern audit practices and tools and to use the new eTIS modules (especially CMS) should be counseled and subject to transfer or other sanctions in appropriate cases.
- On the project’s Public Awareness Campaign (PAC), the campaigns were locally well-received, won awards in the local PR industry for their innovative messaging and were deemed effective in improving taxpayers’ understanding of their tax obligations, per the evaluation. Even so, the impact on tax compliance was not measured by either the PR firm or the evaluation. In the future, MCC should track public awareness efforts in relation to the desired behavioral change (in this case, tax compliance) to better inform which campaigns should be continued and which should be closed. This strategy will require close coordination between implementers and M&E.
- This project was the first time that MCC engaged the International Monetary Fund (IMF) as a project resource for technical assistance, and, it was viewed as a successful partnership. Rather than to follow a narrow, prescriptive scope of pre-identified services, the IMF was allowed the flexibility to independently identify problems during the compact period and to recommend timely measures to address them. This flexibility allowed for a range of activities that were not identified initially but were responsive to the prevailing circumstances and the current operational environment. As a result, the IMF advisory activities were free to focus on several critical topics including VAT audit and arrears management.
- In terms of RIPS, despite the fact that the case management system was not fully operational until toward the end of the compact, the project succeeded in improving that investigative unit’s ability to bring cases to the point of prosecution as cited in the report: the average number of days from Investigative Authority (IA) to Complaint Affidavit went from 892 to 194. Even though case resolution went from 2582 to 1119 days, it still takes, on average, more than 3 years to resolve a case, because of other entities in the judicial system, and even the Department of Finance, which refused to establish internal mechanisms for dealing with administrative cases. To assess this issue, the RIPS should track response time by agency and highlight both the problematic and responsive agencies. In addition, MCC should address this risk by including other entities in the project, assuming buy-in can be obtained.
| Component | Status |
|---|---|
| Baseline Report | N/A |
| Midline Report | N/A |
| Endline Report | Reports, Questionnaires and datasets are public. |
Key performance indicators and outputs at compact end date
| Activity/Outcome | Key Performance Indicator | Baseline | End of Compact Target | Quarter 1 through Quarter 20 Actuals (as of Dec 2012) | Percent Compact Target Satisfied (as of Dec 2012) |
|---|---|---|---|---|---|
| Bureau of Internal Revenue (BIR) Reform Activity | Number of BIR offices using the: Tax Registration System (TRS) module, the Returns Filing and Processing (RFP) module, the Collection, Remittance, and Reconciliation (CRR-1) module, the Case Management System module, and the Audit module of the electronic Tax Information System (eTIS)* | 0 | 13 | 13 | 100% |
| Number of new business registrants | 1,821,599 | N/A | 2,405,133 | N/A | |
| Number of tax returns (eTIS) captured in the system | 0 | N/A | 343,748 | N/A | |
| Percentage of audit cases performed using Computer-Assisted Audit Tools (CAATS)* | 3% | 95% | 100% | 105% | |
| Percentage of audit completed in compliance with the prescribed period of 180 days* | 1% | 50% | 4% | 6% | |
| Revenue collection per audit* | 2,500,000 | 4,300,000 | 74,556,854 | 4,003% | |
| Revenue from new and existing business registrants (millions of Philippine Pesos)* | 822,264 | 1,969,999 | 1,441,571 | 54% | |
| Revenue Integrity Protection Service Activity | Number of personnel investigated | 110 | 330 | 475 | 166% |
| Number of successful case resolutions | 28 | 140 | 100 | 64% | |
| Personnel charged with graft, corruption, lifestyle, and/or criminal cases | 67 | 250 | 220 | 84% | |
| Time taken to complete investigation (days) | 120 | 60 | 266 | -243% |
Explanation of Results
All indicators with an asterisk have data from Quarter 18 (October to December of the final compact year) of the compact instead of Quarter 20, which corresponds to annual data from the Bureau of Internal Revenue, which has a year end of December. There are no targets for many of the indicators, because the ERR for this project did not provide targets.
A major component of the eTIS Sub-Activity was replacing the failing software at BIR with a new software package. Although 96 percent of audits still take longer than the proscribed period of 180 days, the increase in revenue collected per audit demonstrates the new focus on auditing large taxpayers.The Automated Audit Tools Sub-Activity enabled auditors to automate time-consuming tasks such as matching transactions based on third-party databases and validating taxpayer identification numbers, but reconciliation, as part of taxpayers’ rights, tends to lengthen the audit process.
While the Revenue Integrity Protection Services (RIPS) have investigated more people than targeted, charging personnel and resolving these cases has been complicated because many components of that process are outside the control of RIPS. In terms of charging personnel, a significant number of cases were closed due to insufficient evidence and the large volume of on-going cases. In terms of case resolutions, the end-of-compact target was not reached because decisions in these cases are made by the Ombudsman or Civil Service Commission and not RIPS. The target was not met for time taken to complete an investigation because RIPS must request documents and wait for replies from agencies within Department of Finance such as BIR and Bureau of Customs and from agencies in other ministries, such as the Bureau of Immigration and the Land Transportation Office.
Secondary National Roads Development Project
Secondary National Roads Development Project
- $214,440,000Original Compact Project Amount
- $199,849,932Total Disbursed
Estimated Benefits
Estimated benefits correspond to $199.8 million of project funds, where cost-benefit analysis was conducted.
| Time | Estimated Economic Rate of Return (ERR) over 20 years | Estimated beneficiaries over 20 years | Estimated net benefits over 20 years |
|---|---|---|---|
| At the time of signing | 13.7% | 282,000 | $25,000,000 |
| At compact closure | 8.9% | 282,000 | $-12,400,000 |
| Based on final independent evaluation report | Forthcoming in 2024 | Forthcoming in 2024 | Forthcoming in 2024 |
The closeout ERR reflects a best estimate of the economic rate of return using the information available at the time of compact closure. Some parameters in the project’s closeout ERR were updated according to data collected by the end of the compact such as traffic counts and vehicle maintenance costs. Other data typically collected after a road is completed, such as road roughness and deflection measurements, were either conflicting or unavailable. The closeout ERR was also calculated following reports received in March 2017 that identified some defects in the newly constructed road during the Defect Notification Period (DNP). The lower closeout ERR reflects higher costs at closeout than anticipated at compact signing and an assumption that the observed defects signaled that the road was likely to deteriorate faster than originally forecast if the defects were not corrected by the end of the DNP. However, the detailed quantitative data that is needed to precisely calculate the impact the defects in the road would have on its longevity was not yet available at the time of closeout. This data will be collected during the independent evaluation of the Roads Project and the ERR will be updated in 2024 when the evaluation report is finalized.
Project Summary
Inter- and intra-island transport systems play a crucial role in supporting the economic development of the widely dispersed regions of the Philippine archipelago. However, the poor condition of infrastructure facilities and lack of reliable, safe, and efficient transport services have significantly hampered the movement of passengers and cargo throughout the country, limiting direct internal and external trade links and tourism, and constituting a major constraint to regional economic growth. This is particularly true in many poor areas of the Philippines, where improved accessibility has the potential to lower marketing costs for local agricultural products, improve access to social services and economic opportunities, and catalyze investments to develop local resources. Secondary national roads are important contributors to economic growth, especially in rural areas. Roads are the dominant mode of transport in the Philippines, accounting for 53 percent of freight and 89 percent of passenger traffic in the country. The Philippines has a total road network of approximately 200,000 km, including some 29,000 km of national roads. Approximately 79 percent of the national arterial roads are paved, and 48 percent of these require rehabilitation. 9
The Secondary National Roads Development Project was designed to reduce transportation costs and provide additional economic opportunities to rural residents in one of the poorest and most typhoon-prone regions of the country. The project was originally designed to reconstruct and rehabilitate 222 km of the Samar road crossing the provinces of Samar and Eastern Samar. The project also provided an opportunity for MCC to partner with other principal donors active in road maintenance so a singular policy framework could be pursued.
The Philippines is susceptible to natural disasters; in particular, typhoons, flooding and landslides present an ever-present threat to road construction. In recent years, the cost of road construction in the Philippines has escalated because of the impact of increasingly frequent severe weather events. Due to the significantly high cost, infrastructure investments are often insufficiently designed and evaluated, resulting in long-term failure. The Secondary National Roads Development Project considered the adverse effects of heavy rainfall, flooding, and typhoons in its design using climate models to examine how changes in storm intensity, numbers and frequency could impact the road, particularly drainage. Drains were changed from a previous standard of withstanding 1 in 20 year events to 1 in 50 year events. Bridges were raised to allow for more clearance during flood events.
The project also faced particularly challenging conditions for implementation due to weather on the island. Recognizing the need to begin construction on the road project as soon as possible, the Government and MCC jointly developed a mechanism for MCC to procure and contract the road design while instituting a management system of the design that was Philippines-led with the Department of Public Works and Highways at the forefront of decision-making and design reviews. This allowed for efficient and effective development of the road design and the procurement of civil works contracts in impressively quick fashion. This creative approach to road design also allowed for an early and proper evaluation of the budget requirement for the project.
As a result, the climate-resilient road ultimately withstood Super Typhoon Yolanda (internationally termed Haiyan) in 2013 and Typhoon Ruby in 2014, providing invaluable connectivity to the 14 municipalities along the road and immediate employment opportunities to more than 2,000 local residents in the aftermath of the storms. Shortly after Typhoon Yolanda struck, the Samar Road was a major conduit for relief supplies on the island of Samar. Compact contractors were able to mobilize equipment quickly to help clear the road and debris in coordination with local governments, and joined the larger relief effort in many communities along the road as well as in the city of Tacloban, Leyte. Protective measures taken by MCA-Philippines, contractors and consultants leading up to the storm, as well as the incorporation of more climate-resilient standards in the road’s design, limited damage to newly constructed road segments. The teams identified practical and helpful solutions to address many cross-cutting issues in the aftermath of the storm, such as ensuring continued resettlement assistance to project affected entities, countering trafficking in persons, and coordinating an expansive tree re-planting program.
MCC and MCA-Philippines collaborated to accelerate the project schedule to ensure the road’s timely completion as a way to directly support and facilitate other ongoing aid and reconstruction efforts in Eastern Samar. Compact-funded contractors voluntarily made their equipment and materials available to clear the roads in Samar so that food, water and medicine were brought to people in need quickly to prevent further devastation and loss of lives. Compact partners also collaborated with local organizations and international donors to reinforce vigilance against human trafficking; historically, a large percentage of victims of human trafficking in the Philippines have come from Samar, and with the typhoon remnants, that population was even more vulnerable as many social safety nets were washed away by the storm.
In addition, the project included efforts to empower communities to address the threat of trafficking in persons (TIP) through education and awareness of this threat. The project utilized innovative tools to address common pitfalls of infrastructure projects which included:
- piloting a ground-breaking community-managed road maintenance program, a joint initiative of the Department of Social Welfare and Development and Department of Public Works and Highways, to ensure effective, sustainable routine maintenance of the newly rehabilitated road;
- implementing a gender toolkit in the design and construction phases to help ensure the project included all beneficiaries, regardless of gender; support for women’s economic opportunities arising from road construction activities;
- utilizing an International Road Assessment Programme (iRAP 10 ) to improve safety characteristics for road users along the road; and
- employing advanced technology to incorporate in-situ materials in the newly constructed road (i.e. recycling existing pavement and using existing pavement as a base layer), thereby minimizing the need to quarry and transport new materials.
With northern sections of the road passing through Samar Natural Island Park, home to several protected species, including the critically endangered Philippines Eagle, MCC and the Government took particular care to build safeguards into the road design. The environmental and social impact assessments were highly detailed, and observations on protection of flora and fauna were built into contractors’ environmental and social management plans. Also noteworthy was the continuing collaboration, guided and encouraged by MCC, between the Department of Natural Resources and Environment and the Department of Public Works and Highways on reforestation of 100 trees for each one removed. The Tree Reforestation Program employed local residents along the road who were trained in establishing nurseries and tree replanting. The replanting program, which included mangrove reforestation – especially relevant for the eastern seaboard as both a natural barrier to storm surges and a source of fisheries-based community livelihoods – will provide a source of future income for residents while ensuring environmental sustainability.
By the end of the compact, the Secondary National Roads Development Project completed rehabilitation of 175 km of road, including 59 bridges, to new climate-resilient standards on a key national road on Samar Island, connecting some 14 municipalities, a city, and 134 barangays. Additionally, the project led the Department of Public Works and Highways to adopt gender-inclusive initiatives in their standard operating procedures.
While nearly all of the originally planned sections of road were completed at the end of compact, conditions exacerbated by climate events on parts of the road, including new landslide remediation and enhanced bridge repair, required a time extension beyond the compact to complete the work. The Government committed its own resources to successfully finish the remaining work, mainly focusing on rehabilitation works on two bridges and land remediation, as well as assurance to commit necessary funds and resources for the operations and maintenance of all project roads. All 222 km are now open to traffic, and the roadway is functioning safely for its intended purpose.
Evaluation Findings
Road improvement is expected to reduce vehicle operating costs, reduce travel time, decrease maintenance costs, and increase the value of goods moved and the frequency of travel. MCC’s independent evaluation of this project will: (i) determine the post-compact ERR using HDM-4 analysis 11 ; (ii) assess the road maintenance system; (iii) analyze the composition of road users; and (iv) assess the transportation market structure.
| Component | Status |
|---|---|
| Baseline Report | N/A |
| Midline Report | N/A |
| Endline Report | The evaluation is scheduled to be completed in fall 2024 due to delays from COVID, after an eight-year exposure period, with a final report to be submitted in 2024. |
Key performance indicators and outputs at compact end date
| Activity/Outcome | Key Performance Indicators | Baseline | End of Compact Target | Quarter 1 through Quarter 20 Actuals (Jun 2016) | Percent Compact Target Satisfied (Jun 2016) |
|---|---|---|---|---|---|
| Secondary Roads Activity
Outcome: Reconstruction and rehabilitation of 220 km of the Samar road. The replacement or upgrading of associated structures, such as bridges and culverts, to eliminate flooding and improve road safety. |
Kilometers of roads vehicle-passable (lanes) | 0 | 444 | 444 | 100% |
| Roughness | 7.1 | 3.5 | 1.83 | 191% | |
|
Average annual daily traffic |
1179 | 1450 | 2030 | 140% | |
| Road traffic accidents | 59 | N/A | 55 | N/A |
Explanation of Results
At compact end, although all 222 kilometers of the road were vehicle-passable, i.e. drivable, certain sections of the road were not complete. The contractor issued turn-over certificates for 175 kilometers of road to the Department of Public Works and Highways of the Philippines, indicating that these kilometers were completed. For the other 47 kilometers, the main carriageway was finished but drainage and shoulders remained incomplete.These remaining kilometers were completed, and turn-over certificates were issued to the Department of Public Works in June 2017.
Compact Changes
In July 2015, MCC approved reallocation of $23 million from total anticipated compact savings, of which up to $12 million would be used to fund additional projects under the Kalahi-CIDSS Community-Driven Development Project and up to $11 million would be used to cover a projected budget shortfall on the Secondary National Roads Development Project. Compact savings were attributed to a clarification of the scope of the Revenue Administration Reform Project’s Electronic Tax Information sub-activity, and savings in program management and oversight.
Coordination and Partnerships
The Philippines Compact is an example of collaborative and committed coordination on many levels. Throughout the implementation of the compact and across two presidential administrations, the Government of the Philippines consistently fulfilled its commitments, both operationally and financially, and provided high-level support for each of the projects, including active participation at the Cabinet level for specific project matters requiring special attention, as well as involvement at quarterly MCA-Philippines Board meetings.
Collaboration between Peace Corps and MCC played a significant role in the execution of the Kalahi-CIDSS Community-Driven Development Project. Peace Corps Volunteers assisted implementing partners in documenting projects’ impacts. Additionally, MCC engaged the World Bank in developing a rigorous impact evaluation of both MCC and World Bank-funded municipalities within Kalahi-CIDSS. This innovative evaluation informed the scale-up of the government’s national community driven development project, revealing deficiencies in the original model, and provided an independent assessment of Kalahi-CIDSS’ impact, specifically on returns to MCC’s investment. Furthermore, it contributed to broader research about the impacts of community-driven development programs.
In collaboration with the Department of Public Works and Highways and the Department of Social Welfare and Development, the first contract package of the Secondary National Roads Development Project served as a pilot for the Government’s Community Managed Road Maintenance Program, whereby residents along the road managed routine road maintenance works, helping to sustain its quality and life in addition to providing employment for women residing in nearby communities. The program was scaled up in the remaining three contract packages within MCC’s roads project. MCC supported the government in updating guidelines for the road maintenance program, incorporating a provision on women’s employment that helped ensure the sustainability of MCC’s efforts to provide these opportunities to women residing in communities where the road was being constructed.
The Revenue Administration Reform Project was the first time that MCC engaged the International Monetary Fund as a project resource for technical assistance, and it was viewed as a successful partnership. The IMF was given the flexibility to independently identify problems and recommend timely measures to address them. This flexibility allowed the IMF to focus on critical topics such as a Value Added Tax (VAT) audit and arrears management. As a result, revenue performance improved markedly in the Bureau of Internal Revenue, with new techniques and procedures adopted that have uncovered large amounts of outstanding tax debt and identified large amounts of undeclared VAT through audits. More generally, these and other successes led the staff most closely associated with these reforms to become more comfortable about questioning the old ways of doing things, and instead, looking for more efficient and effective options. For the first time in BIR’s history, information was compiled on the large amount of tax debt currently outstanding, and informed decisions were made about which debts were collectible. Using the re-engineered procedures and a centralized organizational structure, actual debt collections improved dramatically. In VAT audit both the amounts of outstanding VAT assessed as owing and actual collections of those amounts improved significantly.
In conjunction with civil society, the Government of the Philippines advanced an open government initiative (prompted by a call to improve performance on the MCC scorecard), where government agencies are required to report public performance on targets and be open to public discourse and evaluation. Quarterly public fora occurred throughout the compact period. MCC representatives participated as observers, and participation by government agencies expanded.
MCA-Philippines fostered an agreement among several government departments to implement a robust Tree Replacement Program on Samar Island. Some 772,900 trees 12 were planted in Samar to replace about 7,729 trees affected by the Secondary National Roads Development Project. The Tree Replacement Program contributed to the government’s National Greening Program, and it also encouraged the employment of women.
In support of vigorous reforms at the Bureau of Internal Revenue, the Revenue Administration Reform Project benefited from unique and collaborative partnerships. The Project brokered assistance from the U.S. Treasury Office of Technical Assistance to re-design tax forms that were used in recent tax collection campaigns. It also utilized technical assistance from the IMF, which has also served as a coordination mechanism among donors at BIR, including USAID.
MCA-Philippines also undertook a series of educational and outreach activities on anti-trafficking in partnership with local and national governments as well as NGOs, as many communities where compact projects were being implemented were deemed at risk, including in particular, Eastern Samar. In carrying out outreach and training in communities, MCA-Philippines partnered with Pact, an international NGO, and with the national Inter-Agency Council Against Trafficking and local councils against trafficking.
Conditions Precedent
Key Conditions Precedent
To encourage desired investment outcomes under the compact, MCC and the Government of the Philippines agreed that the following conditions had to be met before critical funding would be available:
| Key Compact Component(s) | Major Condition Precedent or Policy Reform Required | Rating: Met on Time/Deferred/Met late/Not Met |
|---|---|---|
| Secondary National Roads Development Project | Department of Public Works and Highways shall provide proof of the availability of sufficient funds for the acquisition of land required for the Secondary National Road Project implementation. | Department of Public Works and Highways included requisite funding in their budget request on time. However, fulfillment of the CP had to be deferred until the budget was passed by the Philippine Congress. CP was satisfied in July 2012. |
| Kalahi-CIDSS Community-Driven Development Project | Prior to EIF and annually thereafter, Department of Social Welfare and Development will provide MCC with a staffing plan and budget illustrating DSWD’s total contribution of USD $12 million in staff and funding over the life of the compact. | Met on Time |
| Revenue Administration Reform ProjectRevenue Administration Reform ProjectRevenue Administration Reform Project | Bureau of Internal Revenue shall have established a Project Implementation and Monitoring Office who will have: (i) full time permanent staff members dedicated to the design and implementation of tax reform initiatives; (ii) sufficient number of support staff to complete eTIS; and (iii) clear responsibility for all modernization initiatives. | Met one quarter late so that BIR could complete development of a staffing plan. |
| By February 27, 2012 and annually thereafter, the IMF shall submit an annual assessment of BIR’s continued demonstration of commitment to tax reform, as evidenced by: (i) follow-through on decisions to reallocate staff to high-priority tasks; (ii) successful deployment of eTIS; and (iii) the maintenance and satisfactory staffing of the tax reform group. | Met on time and annually thereafter, despite some difficulties fully implementing eTIS. A prerequisite for the continuation of eTIS was that each year the IMF in its assessment would rate BIR’s dedication of resources and progress toward goals as “satisfactory.” The BIR’s performance was rated as satisfactory in each of the IMF’s annual assessments. | |
| RIPS shall have: (i) an approved and funded budget to hire a minimum of 25 full-time and permanent staff; and (ii) hired or acquired through internal transfers key members of the RIPS and an adequate number of support staff. | Met on Time |
Lessons Learned
Finish detailed design work before compact signing. Given the complexities of implementing a very large development assistance program within five years, a key lesson from the Philippines Compact is that programs must be as fully designed as possible at compact signing, balancing aspirational objectives, MCC investment considerations, and the mandated implementation timeline. In each of the Philippines Compact projects, the extent to which the activities benefitted from a thorough and advanced design had both positive and negative implications for results throughout the course of implementation. For example, the creful incorporation of climate-resistance considerations in the road project designs provided opportunities to overcome the significant challenges posed by Super Typhoon Haiyan, not only for the project, but also for the impacted communities. The Kalahi-CIDSS project focused on taking a proven design and incorporating key improvements to broaden its impact and coverage, and served as a model for a larger national program. In contrast, the Revenue Administration Reform Project suffered most notably from some project design weaknesses, which created significant implementation issues that were ultimately overcome, but provided important lessons.
Kalahi-CIDSS Community Driven Development Project
Improve oversight of small-scale infrastructure projects through shared tools and processes. Three-fourths of poor people in the Philippines live in rural areas. For Kalahi-CIDSS, a very complex project over a geographically disperse area, effective oversight and management of the project was a risk. However, after approximately two years of compact implementation, MCC oversight of the Kalahi-CIDSS project established a rhythm of oversight where several key stakeholders – MCC, MCA-Philippines, and the Department of Social Welfare and Development – began using the same oversight tools and processes in field visits. Whenever a member of the MCA-Philippines or MCC project and technical teams traveled to the project sites, they used similar tools and processes, such as a project completion report summary and rating form which monitored performance at a technical level. This allowed for a shared understanding of oversight and common language and understanding as site visit findings were discussed, best practices were shared, and problems were resolved. This shared approach reduced the perceived risk of project oversight and management and can be adopted by other widely dispersed small infrastructure projects as well.
Incorporate sustainability measures in project design. The sustainability of results was considered a risk in the Kalahi-CIDSS project. To ensure the sustainability of sub-projects, MCC and MCA-Philippines incorporated several key activities into project design. First, the organization of operations and maintenance groups in the project communities was critical. Moreover, the project provided technical support to educate project beneficiaries on operations and maintenance matters through technical manuals and training on the repair and maintenance of the facilities. Finally, developing partnerships with local NGOs and the private sector served to enhance project performance and functionality of sub-projects. MCA-Philippines partnered with local companies FELTA Multi-media, Inc. and Synergeia to provide training on the use of Lego blocks as educational tools for early childhood development to 121 day care center teachers. The training was accompanied by a donation of a Lego Charity Box to each of the day care centers. These partnerships included training of teachers and local school boards on Lego blocks as educational tools in early childhood development and teaching problem solving, visual and motor skills, and values formation. This thoughtful and layered approach to sustainability could serve as a model for small, community-led development projects in the future.
Revenue Administration Reform Project
Design with implementation in mind. The Revenue Administration Reform Project included four distinct activities that together were intended to increase tax revenues over time and support the Department of Finance initiatives to detect and deter corruption within its revenue agencies. This investment would have been more effective with greater focus on fewer integrated activities, developing achievable goals and timelines, recalibrating scope definitions in the face of technical setbacks, and managing expectations. While a number of sub-activities were implemented smoothly, the absence of these factors was evident in the implementation of the eTIS sub-activity. Setbacks resulted in partial implementation and system development that continued past the compact end date, creating challenges for the government in securing donor funding to build upon the systems and procedures initiated under the project. The primary hurdle to overcome related to the size and scope of the system development effort, the first investment of its kind for MCC. The result was implementation challenges involving several sequential stages and reassessments of the project’s direction, coupled with slow decision making.
Drawing from this experience going forward, projects involving major IT systems installation and adoption must ensure no more than a manageable level of customization of off-the-shelf software. For eTIS, the volume of software customization was one of the main sources of implementation delays, which ultimately reduced the scope and reach of the final product. The system will require continued investment to not only adapt its functionality to changes in tax laws and regulations, but also to modify and implement several modules that were not part of the version that was implemented during the compact. A persistent commitment to policy reform and continued investment in the staff and infrastructure of BIR is required for the project to be sustained.
Explore donor partnerships to improve program sustainability and maximize sectoral impact. Given MCC’s technical expertise and timeline limitations, the agency engaged the expertise of the International Monetary Fund (IMF) as a third-party project resource to provide technical assistance to the Bureau of Internal Revenue to implement a program of tax administration reforms over a five year period. Rather than follow a narrow, prescriptive scope of pre-identified services, the IMF had the flexibility to independently identify problems during the compact period and to recommend timely measures to address them. This allowed for a range of activities that were not identified initially but were responsive to the prevailing circumstances and the current operational environment. As a result, the IMF advisory activities were free to focus on several critical topics, including VAT audit and arrears management.
The experience illustrates the benefits of engaging third-party assistance to meet a country’s needs in a sector. The long-standing partnerships and technical expertise that these agencies enjoy in the recipient countries and the donor community, coupled with their process flexibility, can be used as a comparative advantage and enable technical assistance to be developed on the basis of a more inclusive dialogue and within the context of a coherent development framework that goes beyond just the financial aspect. As part of this effort, MCC can use these existing relationships to strengthen its partnerships with the donor community by collaborating on a broader, longer-term and more strategic basis.
Gender Integration
Leadership support and capacity building activities help ensure gender integration is a priority for compacts during implementation. MCA-Philippines had high capacity, willingness and openness to integrate gender equality objectives throughout compact activities. High-level CEO support trickled down to team leads and other members of the team, helping to ensure that the compact was highly successful in gender integration. At the same time, in particular during compact implementation, experiences in this compact reinforced the importance of continued capacity building for contractors, implementing entities, and others tasked with implementing gender requirements that may be unfamiliar to them. These experiences reiterate several critical lessons for future compacts. The first is the importance of MCA leadership setting the tone about the importance of gender integration from the beginning of compact implementation. Ensuring and incentivizing MCA CEOs to show leadership for social and gender integration is critical and could be encouraged through a variety of ways by MCC, such as performance evaluations or annual recognition by MCC for MCAs that do a good job with social and gender integration. The second lesson suggests the need for incorporating capacity building activities, such as training on critical social and gender issues in infrastructure, into compact implementation processes and milestones, in order to ensure that implementers and contractors understand and can adequately address these requirements. Contractual clauses, Social and Gender Integration Plans, and implementing entity agreements are good tools for such capacity building.