PHILIPPINES

	FY 1998 Actual	FY 1999 Estimate	FY 2000 Request
Development Assistance	$39,000,000	$22,750,000	$31,500,000
Child Survival and Disease	$3,622,000	$4,400,000	$7,900,000
Economic Support Funds	---	---	$5,000,000
P.L. 480 Title II	$46,833,000	$11,563,000	---

Introduction

As we enter the second century of U.S.-Philippine ties, the bilateral relationship is grounded in a shared belief in democracy, growing economic interaction and the prospect of a revitalized security relationship. The Philippine economy has suffered significantly from the feedback effects of the regional financial crisis, but the Government of the Philippines (GOP) has maintained a basic commitment to liberal trade and investment policies. We have a vital interest in preserving the economic basis for a viable Philippine democracy that allows more social sectors to participate in local and national government. Economic growth is also a key to success of the Mindanao peace process, which is important for Philippines political stability. Global environmental problems, such as increasing production of greenhouse gases and decreasing coastal and forest biodiversity, are not only key to food security but are also issues affecting U.S. national interests. Unchecked population growth is an important obstacle to achieving an environmentally sustainable economy. In addressing these challenges, USAID will support stability in Philippine society and its economic institutions as well as expand business opportunities for American firms.

Development Challenge

The Philippine economy suffered significantly from spillover effects of the Asia financial crisis, as GNP growth fell to zero, GNP per capita dropped almost 3%, imports declined precipitously, the nominal exchange rate fell by about 40% and unemployment reached double-digit figures. Prior to the crisis, however, the Philippines had a significantly large proportion of its population below or at the poverty line. Consequently, the crisis has the potential to increase poverty levels significantly, despite the fact that macroeconomic aggregates were not as severely affected as those of neighboring countries. In response, USAID must expand its collaboration with the GOP in addressing core macroeconomic and structural reform issues, such as tax policy and administration, intergovernmental finance, reduction of tariff and non-tariff trade barriers and restrictions on trade in services, protection of intellectual property rights, and legal/regulatory reform in key infrastructure sectors, including telecommunications and power. USAID also must help the GOP adopt and implement reforms addressing weaknesses in financial and corporate governance, which made the country vulnerable to regional financial turmoil.

The Philippines has one of the highest population growth rates in East Asia, at 2.3%. Modern contraceptive use at 28% is one the lowest in the region. The 30 year-old GOP family planning program is excessively dependent on donor support. In addition, private sector participation in family planning service delivery is negligible. To help build a sustainable family planning system, USAID now is emphasizing private sector strategies for delivering family planning services and helping the GOP focus its scarce resources on those who cannot afford to pay for such services.

The country's burgeoning population is putting pressure on the natural resource base and contributing to the global problem of greenhouse gases. USAID is helping local communities manage forest and coastal resources more effectively and develop sustainable income-generating activities. The Philippines is in the vanguard of efforts to develop community-based resource management models. USAID is helping create demand for pollution abatement and energy-efficient equipment, which can both increase profits and improve environmental quality. It is also helping the GOP promote clean energy. The Philippines' democratic, decentralized governance system is unique in the region, and major strides have been made in increasing government accountability and decentralizing power. But the quality of governance is uneven, and access to Government is often closed to the disadvantaged. USAID programs are increasing participation of the disadvantaged and improving the autonomy and responsiveness of local governments. In addition, USAID is strengthening the capacity of Government at all levels to adopt sound economic policies and carry out social and environmental programs. The success of the peace agreement signed in 1996 between Muslim rebels and the GOP will depend on the degree to which the inhabitants of Muslim Mindanao benefit from increased economic growth and expanded employment opportunities. USAID is expanding its successful employment and export promotion activities in Mindanao to the island's Muslim areas.

While the Asian financial crisis has set back progress temporarily, USAID has achieved significant results in the Philippines. In 1997, USAID helped the private sector in Mindanao create 79,000 new jobs and facilitated the shipment of $4.2 billion of higher-value products from the island. Through support for policy reform measures in such areas as tax policy, telecommunications, and intellectual property rights, USAID helped the GOP increase investor confidence in the country's economy. Consequently, gross capital formation as a percentage of gross domestic product increased from 22.2% in 1995 to 26.6% in 1997. The openness of the Philippine economy, as measured by ratio of total exports plus imports to gross domestic product rose from 74% in 1994 to 114% in 1997. USAID played a key role in the decentralization of health services in 66 local government units and in expanding integrated delivery of family planning and maternal and child health services. The HIV seroprevalence of those at greatest risk of being infected with AIDS remains below 1%, due in part to USAID's educational programs to reduce high risk behaviors. In the environment sector, USAID assisted the GOP and local communities in decentralizing management of forest and coastal resources. As a result, 250 upland communities have improved their management of more than 500,000 hectares of forests, and coastal communities have initiated improved management of more than 2,500 kilometers of shoreline. USAID's work on climate change is supporting restructuring and privatization of the energy sector and has helped industries and large energy consumers improve their energy efficiency. USAID's support for coalitions of NGOs has resulted in some important changes in Government policy potentially affecting millions of the poor. For example, a coalition of labor organizations helped pass a new law protecting workers in export zones, most of whom are female. With assistance from USAID, targeted local governments have increased their revenues by 17% annually.

Other Donors

In Mindanao, USAID works closely with the United Nations Development Program (UNDP), the European Union (EU), Australia, Japan, the World Bank, and the Asian Development Bank (ADB). USAID is the leading donor in family planning and works with the United Nations Population Fund, UNICEF, Australia, the ADB, the World Bank, Germany, and the EU. The Philippines is a priority country for the U.S-Japan Common Agenda. In the environment sector, USAID works closely with the World Bank, the ADB, UNDP, Canada, Japan, and Germany. USAID coordinates its democracy programs with Canada, and the Ford and Asia Foundations.

FY 2000 Program

USAID requests $31.5 million DA, $7.9 million CSD, and $5.0 million ESF for the FY 2000 assistance program to the Philippines. The program will catalyze private sector growth in Mindanao; facilitate economic recovery and promote U.S. trade and investment (under a new initiative--Accelerating Economic Recovery in Asia); strengthen advocacy efforts of civil society and improve local governance; increase the use of contraceptives; and help industry reduce greenhouse gases.

PHILIPPINES

FY 2000 PROGRAM SUMMARY
(in thousands of dollars)

USAID Mission Director: Patricia K. Buckles

USAID Strategic & Special Objectives	Economic Growth & Agriculture	Population & Health	Environment	Democracy	Human Capacity Developmnt	Humanitarian Assistance	TOTALS
S.O.1. Economic Mindanao - DA - ESF	2,720 ---	--- ---	--- ---	--- 3,500	--- ---	--- ---	2,720 3,500
S.O.2. Trade and investment - DA	1,780	---	---	---	---	---	1,780
S.O.3. Fertility rate & MCH - DA - CSD	--- ---	16,500 3,500	--- ---	--- ---	--- ---	--- ---	16,500 3,500
S.O.4. Renewable natural resources - DA	1,000	---	2,000	---	---	---	3,000
S.O.5. Emissions of greenhouse gases - DA	---	---	4,000	---	---	---	4,000
S.O.6. Participation in public policy - DA - ESF	1,000 ---	--- ---	--- ---	2,500 1,500	--- ---	--- ---	3,500 1,500
SpO1. HIV/AIDS - CSD	---	4,400	---	---	---	---	4,400
Totals: - DA - CSD - ESF	6,500 --- ---	16,500 7,900 ---	6,000 --- ---	2,500 --- 5,000	--- --- ---	--- --- ---	31,500 7,900 5,000

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ACTIVITY DATA SHEET

PROGRAM: PHILIPPINES
TITLE AND NUMBER: Accelerate the Economic Transformation of Mindanao, 492-S001
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCES: FY 2000: $2,720,000 DA; $3,500,000 ESF
INITIAL OBLIGATION: FY 1995 ESTIMATED COMPLETION DATE: FY 2001

Summary: Mindanao is an island with more than a third of the landmass of the Philippines and is home to about one-fourth of the country's population. Indicators show that the quality of life in Mindanao is well below the national average. Nevertheless, Mindanao has the potential for substantial and accelerated economic growth. To expand the participation of lower-income groups in productive enterprises, USAID is implementing an aggressive and broad-ranging enterprise development program aimed at facilitating maximum participation of small farmers, fishers, and small and microentrepreneurs in the economy. This economic transformation requires an improved trade and investment environment. USAID is helping Mindanao's leaders identify and modify governmental policies that support the island's continued economic progress. The program helps these leaders assure appropriate levels of public infrastructure funding and facilitate private investment. USAID also assists finance institutions in Mindanao to develop their capacity to provide profitable banking services to small and microenterprises. To promote equity and solidify the peace needed to encourage investment, USAID is intensifying assistance to the Mindanao's Muslims, including transition programs for ex-combatants.

Key Results: Three key results were identified in measuring this objective: (1) growth in employment; (2) increase in value of Mindanao’s direct exports to foreign markets; (3) increase in value of higher-value products shipped from Mindanao.

Performance and Prospects: Progress through 1997 met expectations, although Mindanao was beginning to feel the effects of the Asian financial crisis. USAID helped the private sector in Mindanao to create 79,000 new jobs (which is significantly less than the amount targeted or the baseline level; the targets will be revised this year). USAID also helped to increase the value of Mindanao's direct exports to foreign markets to $1.5 billion, and to facilitate the shipment of $4.2 billion of higher-value products from the island. In 1998, however, performance was adversely and significantly affected by the financial crisis, the El Nino drought, and an air transportation crisis. For example, the total value of exports from Mindanao to foreign markets surpassed the target of $4.03 billion in 1997, while the value for the first half of FY 1998 was less than 70% of the half year target.

It is unlikely that the economy will recover fully from the financial crisis in 1999. The economic rebound expected for 2000 will enable Mindanao to benefit from the human and financial capacity USAID is helping it to develop. USAID training and market linkages have given farmers' groups, including former combatants, and microentrepreneurs the skills to seek out and benefit from market opportunities. USAID also assisted in bringing about critical policy reforms, such as consolidation and market-determined pricing of government credit programs, increased microenterprise access to the formal financial sector, and lower tariff levels for important agricultural inputs. USAID is increasing the size of its transition assistance programs to Muslim ex-combatants. More than 4,000 former combatants of the Moro National Liberation Front (MNLF) have received substantial assistance from USAID in initiating and expanding agriculture or aquaculture production activities. Expanding the program to help more of the currently unemployed MNLF ex-combatants transition into peaceful and productive farmers will contribute significantly to sustaining the peace effort in Mindanao. In FY 1998, USAID initiated an innovative institutional development program for microfinance activities in the formal financial sector.

Possible Adjustments to Plans: USAID will focus more resources on attracting bigger anchor investments, particularly from Europe, North America, Japan, the Middle East, and Taiwan -- countries not affected by the Asian financial crisis. In addition, we are seeking to accelerate agriculture and aquaculture business expansions and access to export markets, intensifying promotion of Mindanao products abroad, modifying our approach to investment acquisition activities, and promoting the establishment of industries less vulnerable to exchange rate instability.

Other Donor Programs: USAID is the 7th largest donor. Mindanao is the focus of intense donor interest, and USAID plays an important role in coordinating assistance. The ADB is funding infrastructure, agriculture, fisheries and education activities. Canada is working with local governments and the Muslim Mindanao Autonomous Region. Japan has major infrastructure investments and a coastal protection program. The World Bank is implementing projects in water, rural finance and rural infrastructure. It also has established a social development fund for small infrastructure requirements in the Muslim areas. UNDP is implementing a program to assist the Muslim ex-combatants, to which several donors have contributed. The Asian Development Bank, Germany and Canada also are providing assistance in micro-financial service development. USAID coordinates closely its economic transformation activities in Mindanao with its other activities in local governance, coastal and forest management, family planning, child survival and AIDS.

Principal Contractors, Grantees, or Agencies: USAID relies on a U.S. firm, Louis Berger, as the principal contractor. Another U.S. firm, Chemonics International, implements the microfinance sub-activity with the rural banks. The World Council of Credit Unions implements a microfinance activity.

Selected Performance Measures:

	Baseline	FY 2000 Target	FY 2001 Target
Av. no. of jobs created annually	240,000 (1992-95)1	250,000	260,000
Value of Mindanao's direct exports to foreign markets	$1.2 billion (1994)2	$2.0 billion	$2.2 billion
Value of higher-value products shipped from Mindanao	3.7 billion (1996)2	$4.5 billion	$4.8 billion
1Source: Integrated Survey of Households, National Statistics Office 2Source: National Statistics Office and commissioned surveys

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ACTIVITY DATA SHEET

PROGRAM: PHILIPPINES
TITLE AND NUMBER: Improved National Systems for Trade and Investment, 492-S002
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCES: FY 2000: $1,780,000 DA
INITIAL OBLIGATION: FY 1995 ESTIMATED COMPLETION DATE: FY 2001

Summary: Compared with the highly protected and regulated business environment of the 1970s, the Philippine trade and investment regime has become increasingly open and liberalized. The GOP Administration elected in 1998 has maintained a stable macroeconomic policy framework and moved forward on trade and investment liberalization policies. However, the spillover effects of the regional financial crisis, combined with the effects of El Nino, stifled real GNP and private investment growth in 1998. The crisis revealed underlying financial market and corporate governance policy and institutional distortions, which must be addressed to restore the growth momentum lost in 1998.

This activity seeks to create an environment conducive to trade and investment through liberalized policies, improved financial markets, and improved mobilization and allocation of fiscal resources. To liberalize trade and investment policy, USAID is promoting the reduction of barriers to entry in domestic industries and the improvement of transportation and communications services. To stabilize and improve the efficiency of financial markets, USAID plans to support the adoption and implementation of prudential oversight reforms in the banking sector and capital markets, and to promote securities market institutional development. To improve the mobilization and allocation of fiscal resources, USAID is supporting improvement of tax policy and administration. It also is supporting rationalization of the intergovernmental finance system to promote better targeting of fiscal transfers and improve revenue-raising incentives at the local level. USAID also plans to support policy and institutional reforms that will facilitate more rapid corporate restructuring, a key priority in the wake of the regional financial crisis.

The ultimate beneficiaries are unemployed and underemployed Filipino workers, now estimated at 9 million; Filipino consumers, who benefit from lower prices and greater selection of goods and services; Filipinos below the poverty line (41% of the population), who are dependent on public provision of basic services; and U.S. and other foreign firms whose trade with the Philippines will grow with the Philippine economy.

Key Results: Several key results were identified to achieve this objective: (1) growth of gross capital formation (as measured by ratio of gross domestic capital formation to gross domestic product): the ratio increase from 24.1% in 1994 to 30.0% in 2001; (2) increasing openness of the Philippine economy (as measured by ratio of total exports plus imports to gross domestic product): the ratio increase from 74% in 1994 to 92% in 2001; and (3) increasing tax revenues (as measured by ratio of tax revenues to gross domestic product): the ratio increase from 16.0% in 1994 to 23.0% in 2001.

Performance and Prospects: USAID activities in trade and investment policies and financial markets remain successful, but the financial crisis has prevented these successes from being translated into strong near-term growth. In 1997, USAID helped the GOP adopt policies to reduce tariff and non-tariff barriers, legalize electronic data interchange transactions, pass the Intellectual Property Code, pass the third phase of the Comprehensive Tax Reform Package, liberalize coastal shipping rules, finalize the proposed Securities Act and the Revised Investment Company Act, and restructure public sector microfinance activities. In 1998, USAID initiated activities to assist the Philippine Central Bank in improving its macro-financial planning capacity, the Bureau of Customs to implement an import valuation system based on transactions value, and the Build-Operate-Transfer Center to implement activities leading to increased investment in non-power infrastructure projects. USAID also assisted in effectively implementing new tax and intellectual property rights legislation.

USAID has had less success in its efforts to improve fiscal resource mobilization and allocation. The Agency provided crucial support for the development and passage of the Comprehensive Tax Reform Program and worked with the Administration to promulgate the relevant implementing rules and regulations. However, implementation needs to be significantly improved. In addition, the current intergovernmental finance system provides weak revenue enhancement incentives at the sub-national level. Thus overall revenue performance remains inadequate. While the financial crisis has cut GOP revenues, the Government can do a much better job of revenue collection.

USAID supports continued implementation of the Philippine agenda for reform, which started in 1989. This agenda is helping create and sustain an environment conducive to private sector-led investment, sustainable growth, and alleviation of widespread poverty. Among the major policy reforms to which USAID contributed significantly are: accession to the terms of the Uruguay Round of the General Agreement on Tariffs and Trade (GATT), conversion of quotas to tariffs and further tariff reduction and simplification, legislation of the Export Development Act, introduction of self-regulation among stockbrokers and dealers, facilitation of electronic transfers of securities, tax and financial sector reform, and liberalization of banking, inter-island shipping, telecommunications and retail trade.

Possible Adjustments to Plans: The weaknesses in financial and corporate governance systems revealed by the crisis highlight the importance of reforms in the financial regulatory oversight, institutional development and core commercial law reform areas. Within the current flexible mechanism, Accelerated Growth, Investment, and Liberalization with Equity (AGILE), USAID will refocus its activities to address these concerns.

Other Donor Programs: The IMF, World Bank, and ADB financing for the Philippines macroeconomic and sectoral adjustment program in 1998 was approximately $1 billion, largely to help the Philippines build foreign-exchange reserves and stabilize the macroeconomy. These donors also supply a small amount of technical assistance, both in-kind (e.g., IMF staff) and through consultants. However, USAID is the principal single source of financing of targeted technical assistance for design, advocacy, and implementation of economic policy reform. USAID works closely with other donors in assuring that our work is both complementary and within the structural adjustment framework agreed to between the GOP and the multilateral donors. The Asian Development Bank supports capital markets development. The World Bank's assistance is primarily for tax administration, financial markets development and supervision of financial institutions. The Canadian International Development Agency supports improved implementation of economic and social policies and telecommunications. Private sector contributions come from business and trade groups in cash and in kind for studies, workshops and advocacy efforts.

Principal Contractors, Grantees, or Agencies: USAID implements activities through contracts with the Internal Revenue Service, Bureau of Census, Development Alternatives, Barents and Arthur Andersen and through grants with local NGOs.

Selected Performance Measures:

	Baseline*	FY 2000 Target	FY 2001 Target
Ratio of gross domestic capital formation to GDP	24% (1994)	28%	30%
Ratio of total exports plus imports to GDP	74% (1989-94)	90%	92%
Ratio of tax revenue to GDP	16% (1994)	22%	23%
*Source: Phil. National Accounts, National Statistical Coordination Board, Department of Finance

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ACTIVITY DATA SHEET

PROGRAM: PHILIPPINES
TITLE AND NUMBER: Reduced Fertility Rate and Improved Maternal and Child Health, 492-SO03
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCES: FY 2000 $16,500,000 DA, $3,500,000 CSD
INITIAL OBLIGATION: FY 1995 ESTIMATED COMPLETION DATE: FY 2004

Summary: The high fertility rate of the Philippines (3.7 children per mother in 1998) puts stress on the country's environment, dilutes the benefits of economic growth and presents a challenge to the provision of social services. Filipinos, despite being better educated than citizens of other Asian countries (94.4% adult literacy in 1994) have a low level of modern contraceptive use (28% in 1998). Infant mortality, a key factor in parents' decision to have additional children, was 35/1000 live births in 1998, higher than Thailand or Malaysia. Addressing these problems is key to USAID's success in achieving its objectives for economic growth, environment and democracy. The purpose of USAID's program is to improve the health of women and children by expanding access to quality family planning and selected other reproductive health services in the public and private sectors as well as fostering the continued provision of selected child survival interventions at the local government level. Approximately 10.9 million married women of reproductive age and 2 million children under age one are the direct beneficiaries.

The program has a three-pronged approach: increasing the public sector provision of family planning/maternal child health (FP/MCH) services, strengthening national systems to promote and support the FP/MCH Program, and increasing private sector provision of contraceptives and FP/MCH services. To increase the public sector provision of FP/MCH services, USAID releases a tranche of funds to 75 local governments after the Department of Health (DOH) and participating local governments meet a series of family planning and maternal child health services performance benchmarks. To strengthen national systems to promote and support the FP/MCH Program, USAID provides technical assistance and training to the GOP on information, education and communication, logistics, policy formulation, applied research, quality assurance, and management information systems. To increase private sector provision of contraceptives and FP/MCH services, USAID works with NGOs and the private commercial sector to reach those who can afford to purchase contraceptives and pay for quality MCH services at partial or full cost. USAID funds have also been used to procure U.S. contraceptive commodities.

Key Results: A number of key results were identified to achieve this objective: (1) decrease in total fertility rate; (2) decrease in infant mortality rate; (3) increase in contraceptive prevalence rate for all methods; (4) increase in contraceptive prevalence rate for modern methods; and (5) decrease in percent of births in high-risk groups.

Performance and Prospects: Results to date are mixed, as documented by the 1998 Demographic and Health Survey. The Contraceptive Prevalence Rates (CPR) for all methods increased from 1993 (40.0) to 1998 (48.1). However, credible annual surveys undertaken in 1997 and 1998 suggest a decline in modern contraceptive use. As a result, the CPR targets for 2000 are unlikely to be met. On the other hand, USAID support helped sustain the gains achieved by the GOP's maternal and child health programs in the last five years. The percent of births to women in high-risk groups declined from 62.4% in 1993 to 56.2% in 1997, and infant mortality rate (IMR) has declined from 56.7 per 1,000 live births in 1990 to 48.9 per 1,000 in 1995. (Later data are not available for IMR since they are collected only once every 5 years.)

Possible Adjustments to Plans: USAID has assessed each of its three program components and led policy discussions among senior GOP leaders to develop a fresh approach to family planning. The GOP now agrees that the public sector should focus its attention on meeting the FP/MCH needs of the 41% of Filipinos who fall below the poverty threshold. The private sector will meet the needs of the rest of the population. The Agency is exploring with the GOP the option of establishing a private sector foundation to expand coverage and to deliver services to those who can afford to pay for them.

Other Donor Programs: USAID remains the largest donor to the Philippine National Family Planning Program (PNFPP). In 1995-99, the United Nations Population Fund will contribute approximately $25 million to the PNFPP for activities complementary to the USAID program. A combined World Bank, Australian AID, Asian Development Bank, European Union, and Germany Loan/Grant Agreement supports a five year $120 million Women's Health and Safe Motherhood project, which complements USAID's family planning and reproductive health approach. The DOH, as an indication of its support for family planning, increased the Family Planning Service budget by 50% in 1998 over the 1997 allocation.

Principal Contractors, Grantees, or Agencies: USAID implements activities through the Department of Health, the Commission on Population, local governments, and non-Government organizations (local and U.S. PVOs and private commercial sector entities) involved in the Philippine National Family Planning Program. Major contractors include Management Sciences for Health, John Snow Inc., the Futures Group, the Population Council, Association for Voluntary Surgical Contraception, and Macro International.

Selected Performance Measures:

	Baseline1	FY 2000 Target	FY 2004 Target
Total Fertility Rate (TFR)	4.1 (1991)	3.5	3.0
Infant Mortality Rate (IMR)	35.0 (1990)	33.0	30.0
Contraceptive Prevalence Rate (all methods)	40.0% (1993)	48.0%	53.0%
Contraceptive Prevalence Rate (modern methods)	25.2% (1993)	30.0%	38.0%
Percent of Births in High-Risk Groups	62.4% (1993)	55.0%	51.0%
1 Baseline data from 1993 Demographic and Health Survey 2 Targets based on the results of the 1998 Demographic and Health Survey

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ACTIVITY DATA SHEET

PROGRAM: PHILIPPINES
TITLE AND NUMBER: Enhanced Management of Renewable Natural Resources, 492-SO04
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCES: FY 2000 $3,000,000 DA
INITIAL OBLIGATION: FY 1995; ESTIMATED COMPLETION DATE: FY 2002

Summary: The Philippines has more biological diversity per unit area than any other country and has been described by Conservation International as the world's most urgent conservation priority. Nearly one-third of the country's 12,000 plant species are endemic, found nowhere else on earth; its coastal waters host a staggering 488 of the world's 500 known corals. An estimated 30% of coral reefs, 50% of mangrove forests and merely 10% (one million hectares) of old growth forests are intact.

The purpose of USAID's program is to enhance and sustain the management of natural resources by communities and businesses, and thereby prevent environmental collapse while the opportunity still exists. To enhance the management of renewable natural resources, USAID must ensure that coastal waters are managed for sustainable use, forest areas are under improved resource management and industrial production in coastal areas is cleaner. USAID was the first donor in the Philippines to develop a strategic initiative to support community-based coastal and forest resources management. This initiative is creating a "social fence" in coastal and forest ecosystems through a community-based management approach. The program is contributing to the reduction of forest clearance, soil erosion, damaging fishing practices and near-shore pollution in critical areas. By 2002, USAID's efforts will lead to communities controlling access to and managing sustainable harvests in coastal waters along 3,000 kilometers of shoreline. In addition, upland communities will have management authority and responsibility for at least 500,000 hectares of the country's public forest lands as well as the capacity to manage these lands sustainably. Consequently, fish should become more abundant and coral and forest cover should increase. Increased fish, coral and forest resources will help achieve food security.

The forestry resources management activity is working with upland communities in Mindanao, Palawan, and Northern Luzon (those regions of the Philippines with the greatest remaining residual forest). The coastal resources management activity is targeting coastal communities in Palawan, the country's richest fishery, the Central Visayas, where USAID can build on previous initiatives in community-based resource management, and Mindanao. The coastal industrial pollution activity will work with 400 industries within selected sectors located in eight coastal areas.

Key Results: Several key results were identified to achieve this objective: (1) improved coastal resources management (CRM): By 2002, 3000 km of coast lines will be under improved management; (2) cleaner industrial production in coastal areas: By 2002, the percentage reduction of pollutants within exposure pathways will decrease (baselines and targets will be determined later this year); (3) improved forest resources management: By 1999, 500,000 hectares of forest will be under improved management.

Performance and Prospects: The activity has three major components: coastal, forestry, and industrial (municipal coastal environment). The following results have been achieved:

Coastal Resources Management: The management of coastal resources is being assumed by local, community-based user groups with support from the local governments and the private sector. USAID consciousness-raising efforts have also convinced the national government to make CRM a priority program. This year, one million people attended an exhibit promoting participation of community groups in CRM activities, and 300,000 people participated in the annual coastal clean-up. Coastal communities have initiated improved management of 2,573 kilometers of shoreline. Twenty-eight out of 29 target Local Government Units (LGUs) have signed memoranda of agreement to commit funds and implement CRM activities, resulting in a 123% increase in local budget allocations for sustainable resource management between 1995 and 1997. Community-based CRM has likewise expanded to 10 other LGUs. The League of Municipalities has established a campaign to promote "Best CRM Practices" throughout the country. This progress leads us to believe that the activity will achieve its 2002 targets.

Forestry Resources Management: USAID has made excellent progress in advancing a policy and regulatory environment that supports the widespread implementation of community-based forest resource management (CBFRM) as the mandated national forest management strategy of the GOP. This has resulted in a dramatic increase in the area coverage of CBFRM, and allowed USAID to exceed its targets (546,000 hectares actual vs. 375,000 hectares target). The program reduced transaction costs from $20 to $7/hectare to place forest lands under better management, by fully involving all local stakeholders. As a result of these policy changes and USAID's direct support, the GOP has placed another million hectares under community management. Targets for 1999, the current activity termination date, have already been surpassed.

Municipal Coastal Environmental Initiative: This initiative will begin in FY 1999.

Possible Adjustments to Plans: The GOP has asked USAID to help it restructure the Department of Environment and Natural Resources. A restructured Department would better address the nation's environmental problems and provide a more integrated approach to environmental planning. It would also give greater priority to coastal resource management issues. USAID will need to ensure sustainability at the community level. While we have addressed this issue effectively at the national level, we need to focus now on local governments and the private sector. Following extensive consultations on developing a new strategy, USAID is considering developing a new integrated approach to address the range of environmental issues in such ecological units as watersheds and small islands.

Other Donor Programs: Natural resource management activities are implemented directly with the GOP and closely coordinated with initiatives by the World Bank, Japan, the ADB, Canada, UNDP and Sweden. In support of the US-Japan Common Initiative, USAID held extensive discussions with the Japanese agency, Overseas Economic Cooperation Fund, which resulted in an agreement to work together in two coastal resource management sites. USAID initiated similar collaboration agreements with UNDP and ADB. The CRM program also works with the private sector to leverage resources for CRM activities and with other donors too establish a unified approach to coastal resources management. In the forestry sector, USAID's model has been adopted by the ADB, which has negotiated an $80 million loan with GOP for such activities.

Principal Contractors, Grantees, or Agencies: USAID implements activities through GOP agencies, U.S. contractors, and U.S. and local NGOs. Major contractors include Development Alternatives, Inc., Tetratech, Inc. and the International Resources Group. USAID also works with groups such as the U.S. Peace Corps, CARE, and the International Marinelife Alliance.

Selected Performance Measures:

	Baseline	FY 2000 Target	Target
Hectares of forests where improved management is being implemented	79,000 (1995)	NA	500,000 (1999)
Kilometers of shoreline where improved management is being implemented	0 (1995)	1,200	3,000 (2002)
Increase in fish abundance at marine sanctuaries	0% inside (1995) 0% adjacent	20% 5%	20% (2002) 5% (2002)

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ACTIVITY DATA SHEET

PROGRAM: PHILIPPINES
TITLE AND NUMBER: Reduced Emission of Greenhouse Gases, 492-SO05
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 2000 $4,000,000 DA
INITIAL OBLIGATION: FY 1995; ESTIMATED COMPLETION DATE: FY 2002

Summary: Unmitigated global climate change patterns have the potential to affect global ecosystems adversely, increase the severity of weather extremes (e.g., typhoons, droughts and floods) and increase associated losses in life, infrastructure, and food supplies. They also may create new geographical niches for deadly diseases. USAID's global climate change mitigation strategy in the Philippines is to mitigate greenhouse gas emissions from the power sector. Power industry emissions are expected to increase four-fold in the next ten years as a result of the country's economic and population growth. USAID has developed a strategy for slowing this significant growth in greenhouse gas emissions from the power sector. The strategy focuses on promoting investments that improve profitability but reduce global warming, expanding the use of cleaner fuels and promoting more efficient generation, distribution and consumption of electricity. These activities are facilitated through building the capacity for improved energy sector development and management. The program builds on USAID's past policy and program support to the GOP's National Electrification Administration and the Department of Energy and on extensive U.S. experience in the promotion of environmentally-friendly and efficient power. These activities provide potential opportunities for the U.S. private sector to invest in the rapidly expanding power industry in the Philippines. By 2002, 19,155 metric tons of carbon dioxide (CO₂) equivalents will be avoided by the use of cleaner fuels (such as natural gas, hydro and geothermal), and 1,665 metric tons will be avoided by improved efficiency in power generation, transmission, distribution and consumption. Given the sensitive political nature of global climate change negotiations, the GOP supports USAID efforts but at this time neither considers this target as a GOP commitment nor expects to use avoided CO₂ equivalents to provide any credits under the clean development mechanism.

The benefits of reducing emissions will be felt not only by Filipinos in the next decade, but also by future generations. Because of the global nature of climate change, benefits will spread even beyond the East Asian region. Indirect beneficiaries include those firms and agencies that gain experience in the implementation of an environmentally friendly power industry.

Key Results: Two key results were identified to achieve this objective: (1) decreased emission of CO2-equivalents avoided through improvements in the energy sector; and (2) policy advances that contribute to the adoption of legislative or administrative actions which increase efficiency and/or cleaner production in the Philippine energy sector.

Performance and Prospects: The Philippines continues to be a leader among developing nations on global climate change mitigation, and USAID has been an important partner as the GOP plays this role. The Agency facilitated GOP negotiations with a private consortium (including the American firm Occidental Petroleum) for a $4.5 billion deal to develop a natural gas field. This agreement will provide 2,700 MW of clean power, displacing nearly half the greenhouse emissions associated with nine typical 300 MW coal-fired units. USAID has funded technical assistance for the development of new legislation for power sector restructuring and privatization, the Omnibus Electric Power Industry Bill. The program is also beginning to support an increasing demand for energy-efficient equipment and services, particularly among owners of major industries, commercial buildings, malls and major hotels. Over the next decade, it is estimated that private sector investments for clean and efficient power systems will approximate $20 billion. For cooperatives receiving USAID assistance, line losses have been reduced by an average of 5.4%, thereby avoiding needed investment of approximately $56 million to construct 56 MW of additional electricity generating capacity. In addition, the GOP continues to incorporate demand side management into its electricity regulatory framework, which encourages utilities to invest in increasing the end-use efficiency of their power generation and distribution networks. The confluence of environmental and commercial interests is the rationale for the strong support this program enjoys from the GOP, the U.S. Embassy in Manila and the U.S. Department of Energy. Efforts continue to target the development of natural gas, renewable energy, and clean coal, and greater end-use efficiency by industrial and commercial enterprises. Prospects are good for achievement of all program results by 2002.

Possible Adjustments to Plans: The GOP wishes to electrify 11,000 villages currently without power. USAID will investigate spreading the use of renewable energy in many of these remote, off-grid areas. We also are considering extending the program focus to the transportation sector, given assurances of adequate funding.

Other Donor Programs: USAID is practically the only donor that specifically addresses global climate change. USAID collaborates with 10 other U.S. Government agencies in implementing the country studies program to reduce greenhouse gas emissions, with 12 GOP agencies in the Inter-Agency Climate Change Committee, and with several environment sector non-Governmental and private sector organizations. USAID technical assistance grants to improve energy sector policies are providing the basis for other donors and multilateral banks, e.g., World Bank and ADB, to extend energy loans to the Philippines. The Agency has responded positively to a request by the ADB to fund technical expert teams to help in the restructuring and privatization of the power sector, facilitating the approval of a $300 million energy project. USAID has also collaborated with UNDP, Economic and Social Council for Asia and the Pacific, and bilateral agencies of Germany, Australia, Switzerland, the Netherlands, United Kingdom, and Japan in efforts to reduce greenhouse gas emissions from the power industry.

Principal Contractors, Grantees or Agencies: USAID implements activities through GOP agencies, U.S. contractors, and NGOs. Major contractors include Hagler Bailly Consulting Inc. and the National Energy Laboratory.

Selected Performance Measures:

	Baseline	FY 2000 Target	FY 2002 Target
Emissions of CO2-equivalents avoided through improvements in the energy sector (MT)	242 (1995)	1,000,000	20,000,000
Av. percentage score of all policy goals each year*	0 (1997)	50%	100%
*There are nine policy goals that USAID/Philippines is trying to achieve in this program. For each of them, there are four policy steps that are being measured: policy preparation, consensus building, adoption, and implementation. Each year, progress on each policy is scored according to an index and the average percentage score is reported.

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ACTIVITY DATA SHEET

PROGRAM: PHILIPPINES
TITLE AND NUMBER: Broadened Participation in the Formulation and Implementation of Public Policies in Selected Areas, 492-SO06
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCES: FY 2000 $3,500,000 DA; $1,500,000 ESF
INITIAL OBLIGATION: FY 1995; ESTIMATED COMPLETION DATE: FY 2001

Summary: The purpose of USAID's democracy program is to broaden participation in the formulation and implementation of public policies in selected areas. It strives for effective local governments with broad-based participation and effective participation of the disadvantaged. These activities have been strengthened by efforts of Filipinos to articulate critical issues and actions to sustain democracy in the Philippines. By 1999, 50% of the population will believe that their priority concerns are being addressed by their local government. The impact of coalitions is measured by the importance of the issues that they address. Beneficiaries are: (1) the citizens of Philippine local governments working with USAID to improve governance with broad participation; and (2) coalitions and coalition members of socio-economically disadvantaged and under-represented groups and interests.

Over the past decade, decentralization efforts have enhanced local autonomy and moved decision-making closer to affected sectors - organized groups of citizens, communities and local governments. The 1987 Philippine Constitution and the 1991 Philippine Local Government Code grant local governments and NGOs key roles in developing self-reliant communities. Significant progress has been made in building practical mechanisms for promoting participation and developing managerial capability to bring about more responsive democratic institutions. Now is the time to begin sharing best practices throughout the Philippines. USAID in the Philippines has provided over $80 million to NGOs and other civil society organizations to deliver vital services throughout the country. The Agency's support has contributed to building a foundation for a strong and vibrant civil society. The work of these organizations has provided the constituency base for policy and legislative reforms.

Key Results: Several key results were identified to achieve this objective: (1) number of NGO representatives actively participating in local special bodies; (2) percent of people in project areas who feel their priority concerns are being addressed by local government; and (3) use of research and analytical capability by all funded coalitions to develop issues.

Performance and Prospects: USAID is providing assistance to local government units of 10 provinces and their municipalities and cities. Premised on "assisted self-reliance," participatory mechanisms are used for planning and implementing service delivery systems that establish new performance standards. Work is ongoing in resource mobilization, investment prioritization and environmental planning and management. Under the local governance program, introduction of a participatory planning method to help local leaders and community members plan, budget, and set development priorities has been a great success. USAID-supported programs are contributing to promising experiments and breakthroughs in local government revenue generation in six provinces. In Naga City, the Naga River Strategic Watershed Management Plan was adopted after a series of lively participatory public consultations. Reporting surveys indicate that in USAID's project areas, the net percentage of people who feel that their priority concerns are being addressed by local governments increased from 36% in 1995 to 45% in 1997. Involvement of NGOs and peoples' organizations in planning is allowing the integration of community needs in local development plans and national legislation. In 1997, 693 NGO representatives participated in local government committees, a 100% increase from the 1995 baseline number. Establishment of an association of governors, mayors, and local councils modeled on the National Civic League in the U.S. is helping local leaders share information, disseminate successful ideas, and serves as a platform for advocacy on behalf of local governments.

USAID is assisting disadvantaged groups to unite into coalitions of member-controlled associations that promote under-represented interests. Over four years, several major coalitions or alliances are being established, broadened, and strengthened. These coalitions focus on the needs of fishers, the urban poor, indigenous people, informal sector workers, coconut farmers, Muslim schoolgirls, the microfinance sector, women, children, marginalized groups in high-growth areas, and street traders. New coalitions are advocating for improvement of the justice system at the national and local levels. The coalitions are being strengthened to the point where they are able to analyze and debate public policy issues and participate actively in the public policy arena. Achievements under the civil society program demonstrate that well-organized coalitions can influence public policy formulation and implementation. With USAID support, the coconut farmers were able to gain the support of newly-elected President Estrada to distribute fairly revenues from the coconut sector that had been misappropriated under previous administrations. Key urban poor representatives have been appointed to Cabinet-level positions and elected as sectoral representatives to the House of Representatives, with the active support of the urban poor coalition. The Department of Environment and Natural Resources has agreed to resolve mining and ancestral domain issues brought to it by the indigenous people's coalition. As long as the GOP continues to support a decentralized governance system, it is clear that USAID will achieve its intended results in the democracy area by the end of the planning period.

Possible Adjustments to Plans: To fight recentralization initiatives, USAID will work with the Leagues of Local Governments and perhaps National Government agencies to carry out advocacy campaigns. Initial work on improving the justice sector will need to be followed up by other activities, perhaps through support to the courts as well as to public interest organizations. Similarly, there is a need to develop an effective strategy for addressing corruption and inadequate transparency at the national and local government levels.

Other Donor Programs: USAID is a medium-sized donor in this area but is widely recognized as an intellectual leader in both local governance and civil society. USAID coordinates with the Ford Foundation, which supports research on local governance and capacity strengthening of indigenous people's groups, as well as with other donors. The local government leagues, supported by several donors, are assuming leadership in decentralized government policy and practices. Major NGOs are putting in substantial matching resources to strengthen civil society. Canada's program is similar to that of USAID, building the capacity of local governments and NGOs. Various local academic institutions monitor democracy and decentralization and generate policy options.

Principal Contractors, Grantee or Agencies: USAID implements activities through U.S. and Philippine private consulting firms, U.S. and local NGOs, and Philippine local government leagues, cities, provinces, and municipalities. The major contractor is Associates in Rural Development. Major grantees include Agricultural Cooperative Development International, American Center for International Labor Solidarity, Volunteers in Overseas Cooperative Assistance, World Vision Relief and Development, CARE and several Philippine NGOs, notably Philippine Business for Social Progress.

Selected Performance Measures:

	Baseline	FY 2000 Target	FY 2001 Target
Number of NGO representatives actively participating in local special bodies	293 (1995)	1,100	1,200
Percent of people in project areas who feel their priority concerns are being addressed by local government	36% (1995)	51%	52%
Use of research and analytical capability to develop issues	0 coalitions	12	All funded coalitions

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ACTIVITY DATA SHEET

PROGRAM: PHILIPPINES
TITLE AND NUMBER: The Threat of HIV/AIDS and Selected Infectious Diseases is Reduced, 492-SP01
STATUS: Continuing
PROPOSED OBLIGATION AND FUNDING SOURCE: FY 2000: $4,400,000 CSD
INITIAL OBLIGATION: FY 1995; ESTIMATED COMPLETION DATE: FY 2004

Summary: AIDS has become a major problem in the countries of southeast Asia. The Philippines has been spared until now, despite an active sex industry and a sizable population of injecting drug users. The country can still prevent extensive spread of HIV and sexually transmitted infections in the general population if individuals engaging in high-risk behaviors can be persuaded to change their practices. Accordingly, USAID is directing education and condom promotion efforts at these high-risk individuals. The GOP and USAID have designed a program to control HIV/AIDS transmission within the Philippine population by institutionalizing public and private sector mechanisms for monitoring HIV prevalence and by encouraging behaviors among target groups that reduce individual risk for contracting or transmitting sexually transmitted disease (STDs) and HIV. The purpose is to prevent the rapid increase of HIV/AIDS in the Philippines by monitoring the prevalence and transmission of HIV infection and encouraging behaviors that reduce HIV transmissions. Direct beneficiaries are individuals who engage in high-risk behaviors. Indirect beneficiaries include the general population in the Philippines, who will face a lower risk of contracting AIDS. The program will be successful if HIV seroprevalence rates among registered female commercial sex workers remain less than 3% through 2000.

Key Results: Maintaining the HIV seroprevalence rates among registered female commercial sex workers in sentinel surveillance sites below 3%, and establishing local capacity to identify and reduce the threat of leading infectious diseases (e.g., tuberculosis, dengue and malaria).

Performance and Prospects: HIV prevalence rates among the target population has remained below 1% since 1993, indicating that for now there is little threat of a major epidemic among the general population. USAID is assisting the GOP's Department of Health, NGOs and other government organizations to: implement a national sentinel surveillance system to monitor the transmission of the disease and risk behaviors among population groups at risk; develop and implement effective communication and behavioral change programs about AIDS prevention before AIDS reaches major epidemic proportions in the Philippines; and establish model sites for STD care and management. The program provides technical assistance, supplies, and materials for the effective delivery of information, education and communication services to STD/HIV/AIDS high risk groups by a network of NGOs, government organizations and private commercial sector groups. With USAID support, the GOP and NGOs will develop, implement and evaluate a set of STD interventions among groups with high prevalence of STDs in selected sentinel sites. USAID will also support analysis, dissemination of results, and implementation of advocacy efforts on policy and environmental and structural constraints to promoting STD/HIV prevention.

The ninth round of the national HIV sentinel surveillance system of the GOP's Department of Health was conducted in April 1998. Survey results show that HIV prevalence rates among the sentinel group, registered female commercial sex workers, have remained at below 3% in all of the eight sentinel surveillance sites. Risk behavior data also show an increase in condom usage rates in both men and women at risk. These behaviors suggest increasing prevention practices, although high levels of risk behavior continue among the injecting drug users. Prospects are good that HIV prevalence rates for the target group will remain below 3% through the year 2000.

Infectious diseases is the focus of a new initiative. As with the prevention and control of HIV/AIDS, activities will be undertaken to develop and institutionalize sustainable surveillance systems. Information generated by epidemiological surveillance will serve as a basis for decision-making by local government officials to allocate funding and implement activities to combat infectious diseases, such as tuberculosis, malaria and dengue.

Possible Adjustments to Plans: If HIV prevalence increases beyond 3% among the target group, USAID will need to develop a strategy focusing on the general population. For the moment, it is important to develop plans for sustaining prevention activities beyond 2000 to ensure HIV prevalence remains well below 3% among the target group.

Other Donor Programs: USAID has been and continues to be the largest contributor to the Philippine National AIDS/STD Prevention and Control Program. USAID's grant to the World Health Organization (WHO) to support the establishment of the HIV sentinel surveillance system is complemented by the Government of Japan's contribution. USAID focuses on financing and providing technical assistance to the surveillance system itself, while Japan provides laboratory, office and communications equipment. The US-Japan Common Agenda has been an important forum for this collaboration. USAID-supported training activities on STD syndromic case management are also being complemented by the Netherlands' contribution for STD drugs. USAID's focus on HIV/AIDS education for high-risk groups is complemented by support from other donors for educational activities directed towards the broader general population. Both Australia and the European Union support NGO projects to strengthen community-based responses to AIDS. In addition, Australia supports NGO projects to improve STD management in model clinics in commercial sex areas in a few selected urban areas. A number of donors are upgrading selected public sector services for STD/HIV/AIDS diagnosis and treatment - an essential complement to the IEC activities supported by USAID. Australia and the European Union are the major players, and emphasize integration of these services into primary health care. Other donors are placing special importance on diagnosis and treatment of STDs and reproductive tract infections. These include the World Bank, through the Women's Health and Safe Motherhood Project, and the United Nations Population Fund through its reproductive health program. Various United Nations and multilateral agencies concentrate on support for intra-governmental activities on HIV/AIDS prevention. USAID meets frequently with other donors to ensure complementarity of activities that are supportive of the programs of the GOP.

Principal Contractors, Grantees, or Agencies: USAID implements the program through the GOP's Department of Health and selected local government units, U.S. Centers for Disease Control, WHO, Program for Appropriate Technology in Health and local NGOs.

Selected Performance Measures:

	Baseline	FY 2000 Target	FY 2004 Target
Percent HIV seroprevalence rate among the sentinel target risk group - registered female commercial sex workers	<1.0% (1993)	*<3.0%	<3.0%
*Source: Field Epidemiology Training Program - Department of Health National HIV Sentinel Surveillance Surveys.

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