Project Name. PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No.: AB2168 Support for Strategic Local Development and Investment Project

Transcription

1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Project Name PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No.: AB2168 Support for Strategic Local Development and Investment Project Region EAST ASIA AND PACIFIC Sector General water, sanitation and flood protection sector (30%);Subnational government administration (20%);Roads and highways (20%);Solid waste management (20%);Housing construction (10%) Project ID P Borrower(s) Land Bank of the Philippines Implementing Agency Land Bank of the Philippines Environment Category [ ] A [ ] B [ ] C [x] FI [ ] TBD Date PID Prepared May 31, 2006 Date of Appraisal March 6, 2006 Authorization Date of Board Approval June 29, Country and Sector Background Decentralization. The Local Government Code of 1991 empowered local government units (LGU) to manage the growth of their areas, including giving them the mandate for providing local public services. However, LGUs continue to confront a myriad of problems - uncertain access to potable water and electricity, declining literacy rates, environmental degradation, high unemployment, lack of low-cost housing, and inadequate rural services. In addition, the national government s tight fiscal situation has squeezed central transfers, and policies on municipal finance have hamstrung LGU access to private capital. As a result, local government investment in infrastructure and social services has been constrained and operations and maintenance expenditures curtailed. Low technical capacity among local governments and weak support from national government agencies also impede a large number of LGUs from effectively carrying out their responsibilities. Fragmentation at the local level further undermines urban and metropolitan growth, which requires strong coordination and collaboration among LGUs. Urbanization Challenges. The Philippines has one of the highest rates of urban growth in the developing world. More than half of the population is already living in urban areas, and every year over 1.3 million people will be added. Urban and peri-urban areas are the centers of manufacturing and services, accounting for 75-80% of the country s economic output. However, the declining performance of the urban system in the last two decades relative to other countries in East Asia is seriously undermining the country s overall development. Promoting growth and reducing poverty are key challenges facing LGUs in the Philippines today. The League of Cities of the Philippines (LCP), an association of 115 cities, plays an important advocacy role. The World Bank (the Bank), with funding from the Cities Alliance and PHRD Grants, has been working with 47 cities to help them develop comprehensive long-term development strategies, or City Development Strategies (CDS) as part of the CDS program under the LCP. Prepared through a participatory process, the CDS has resulted in a large number of

2 prioritized projects. To implement these projects, cities require access to financing and technical assistance (TA). The LCP is committed to working with the national government and the Bank to secure financing for these priority projects, and to spread the success of well-performing cities to other local governments in the country. Beyond these cities, similar financing needs exist as a result of other strategic planning processes. In fact, many development partners have provided assistance on local planning for example, the Asia Development Bank implemented provincial planning with National Economic Development Authority (NEDA). The Local Government Support Program financed by the Canadian International Development Agency (CIDA) assisted a wide range of municipalities on planning for the Executive-Legislative Agenda. Similar to the experience of cities participating in CDS, these LGUs are facing the challenges of implementing priority investments arising from these strategies through appropriate access to financing. The Need for Additional Local Government Financing While financial resources have been a key constraint for urban and local development, progress has been slow at the LGU level in finance mobilization. There are several key, closely linked, impediments to local government financing in the Philippines: First, LGU own source revenue mobilization remains low and currently covers only one-third of LGU expenditures on average even though local revenue authority has increased significantly under the 1991 Local Government Code. It should be noted, however, that there is significant variation among LGUs in terms of own-resource mobilization. In particular, cities collect more revenue from their own sources than either provinces or municipalities. In 2004, own source revenue accounted for 56% of cities total revenue, while only 18% for provinces and 23% for municipalities (see Annex 9 table on LGU finance). Second, LGUs remain dependent on intergovernmental transfers and grants from the national government. Internal Revenue Allotment (IRA), or unconditional transfer, finances the majority of LGU expenditure. While the IRA distribution formula has the advantage of being simple and predictable, it is also perceived as being inequitable, with poorer provinces and municipalities considerably under funded. Moreover, as an automatic block grant, IRA is not designed to foster LGU financial discipline or influence agenda setting at the LGU level. Non-IRA (conditional) transfers, though small compared to IRA (approximately 18% of IRA in 2003), play a critical role for LGU investment financing, as non-ira grant from national government finances approximately half of LGUs capital expenditure. As detailed in a recent Bank policy note (Annex 12), the current non-ira grants suffer from the lack of overall allocation rationale and fragmentation. In fact, they often undermine, rather than strengthen LGUs incentives for more resource mobilization either from higher revenue collection or borrowing. Third, private sector financing to LGUs is limited. There has been some progress in this area, the most significant development being the creation of the LGU Guarantee Corporation (LGUCC) to guarantee debt issues of local governments financed from private sources. Since its inception, ten LGUs have floated bonds with the backing of LGUCC. Further progress is dependent on addressing institutional and regulatory issues, such as information asymmetry between potential issuers (i.e. local governments) and potential bond investors, higher costs in issuing bonds than direct borrowing, lack of reliable information about LGUs, the possibility of political interference in project management or in debt servicing, uncertainty about LGU management capacity and the quality of feasibility studies, lack of an independent rating agency, lack of a

3 market for secondary trading, and lack of access by private financial institutions (PFI) to IRA or LGU depository accounts as security for LGU obligations. Fourth, while LGU borrowing has expanded in the last ten years, it still makes up a small share of LGU spending. In 2004, according to the Bureau of Local Government Finance (BLGF), loans and borrowings only account for 1.8% of LGUs total revenue, and debt service only accounts for 2.8% of their total expenditure. Prudent expansion of LGU borrowing for development investments can promote stronger discipline and accountability, and introduce a longer term horizon in planning and implementation. A number of factors contribute to the low level of borrowing. Fiscally conservative Local Finance Commissions often see borrowing as an instrument of last resort. They may also regard borrowing as entailing excessive accountability, especially compared with grants. The availability of various grants, including congressional allocations, presents disincentive for local borrowing. Another impediment is the low LGU capacity to prepare bankable projects and implement these projects. The Government Financial Institutions (GFI), including the Land Bank of the Philippines (LBP) and the Development Bank of the Philippines (DBP), and the Municipal Development Fund Office (MDFO), have played an instrumental role in the last ten years in increasing credit financing to LGUs. GFIs lending to LGUs increased significantly. The LBP is the largest lender, with approximately 75% market share. More importantly, a significant portion of LBP s lending to LGUs is from funding mobilized by LBP s own depository and other financial transactions. While lending to LGUs from LBP s own funds entails shorter tenures (usually between 5 to 7 years), this has nevertheless placed LBP as a sustainable financier for LGUs without external assistance. The quality of the LGU lending portfolio is good across all GFIs, and the level of non-performing loan (NPL) has been almost negligible. GFI lending also faces many of the same difficulties as private financing to LGUs: low LGU revenue limiting the base; non-transparent grant financing limiting LGU incentives to borrow; low capacity delaying project implementation (thus slow funding disbursement); and competitions from other funding windows. One issue is the existence of a multitude of windows as specified by funders, often with specific sectoral focus and donor-specific requirements. Such requirements, while enabling heightened attention to sector priorities and approaches, have limited the use of funding, and have sometimes been unnecessarily cumbersome. There is need to simplify the process, and create open menu type of operations. In addition to provide financing, GFIs have also provided technical assistance to LGUs, sometimes in specific sectors such as water supply, sanitation, and drainage. The implementation experience has highlighted the difficulty of imposing sectoral and technical requirements through the on-lending windows of GFIs. Overall, GFIs do not, and are not supposed to, have strong technical expertise in particular sectors. They also have extremely limited mandates in supervising sectoral areas. GFIs also have valid concerns about the cost implications of the technical assistance cost, which they have to absorb in their lending operations. The Way Forward. To improve local government financing so that LGUs can more effectively undertake public service delivery functions as mandated by the Local Government Code, three inter-related issues need to be addressed: increasing LGU own-source revenue generation; rationalizing grants to LGUs; and facilitating LGU access to credit in a prudent manner to increase local public investment.

4 For LGU access to credit, the long term objective is to establish a competitive market where the majority of financing to local governments will be provided by PFIs and bonds. Policy reform, particularly with regard to opening LGU deposit accounts to selected PFIs, is critical for achieving such a long term objective, and is being pursued in the ongoing Philippines Development Forum (PDF), where the Working Group on Decentralization and Local Government is actively pursuing policy dialogues with participation of national government, local governments, private sectors and development partners. Close coordination among various funding institutions is important to ensure that efforts to develop private financing to LGUs are not being undermined. In the immediate future, LGU demand for financing can be met with more responsive GFI lending. 2. Objectives The project development objective is to improve local public service provision and management by facilitating LGU access to viable financing to implement strategic infrastructure investments. To be eligible for funding, investment subprojects should be part of a long-term development strategy prepared by the LGUs. The Project will also finance revenue improvement and enhancement programs for LGUs including fiscal and management improvements to ensure financial sustainability. The key indicators are: a. the number of households benefited from the project with improved access to basic social, economic and environmental infrastructure services from baseline year to end-of-project year; and b. increase in proportion of capital expenditure to total expenditure among participating LGUs by end-of-project. The government s Medium Term Philippines Development Plan (MTPDP) laid out an ambitious agenda for poverty reduction, good governance, and efficient delivery of basic services. Achieving the goals set out in the MTPDP will require significant contributions from LGUs, who are responsible for a substantial part of the improvement in service delivery. Similarly, in order for the Philippines to achieve the Millennium Development Goals, LGUs have to rise to the challenges of improving basic local service delivery. For the CAS period , the Bank Group aims to focus its program towards making a contribution in two primary objectives of the Bank s mission--economic growth and social inclusion. This assistance will be strategically focused on two key levers: fiscal reforms as the essential short term challenge, and more effective public institutions as the critical medium to long term challenge. The strategy is to support Islands of Good Governance in those government agencies, local governments, and dynamic sectors in the Philippines that demonstrate how improved accountability and service delivery will lead to better economic and social outcomes. The CAS aims to expand these successful experiences and thus stimulate a virtuous cycle of more effective public institutions, fiscal improvements, economic growth, poverty reduction, and greater social inclusion. The Local Platform is a key pillar in the Bank s engagement strategy to support islands of good governance. As successful and well-managed LGUs have become a visible example of islands of good governance, the CAS intends to support a strand of LGUs committed to performance improvement by helping them achieve a cycle of improved service provision which, in turn, generates citizens trust and increased resources to the public sector.

5 As a key element of the Local Platform of the CAS, the Project will engage LGUs differently from previous project by enabling them to decide which priority investment to be funded under the project will contribute to: (a) improving service delivery and governance at local level by providing financing to LGUs to implement their strategic priorities, and (b) strengthening decentralization and empowering LGU decision-making with a credit facility responsive to LGU priorities in a financially prudent way, while reducing their reliance on, and the burden to, national government expenditure. On LGU financing, the CAS envisages separate lending and grant financing windows, with loans being channeled through GFIs, and grants through line agencies. The proposed lending window will make funds available if LGUs want to borrow as counterpart funding to implement other Bank-funded projects which provide grants to LGUs. At the level of policy reform, coordination has been taken up by the Decentralization Working Group of the PDF. This addresses the lack of coordination in the past, and collaboration among donors started to take place in terms of the overall local government capacity building initiatives. Much closer collaboration is still needed in terms of financing, and the financing partners are starting to work on a common position paper with regard to LGU borrowing strategy. 3. Rationale for Bank Involvement The Bank has been a key partner of the Government of the Philippines during its on-going decentralization process, providing policy advice, TA and investment support. It has supported over ten operations involving local governments from which it has accumulated considerable sector knowledge and experience, as well as developed long-standing institutional relationships with a number of key stakeholders. The Bank has also been providing TA on LGU financing policy issues, including the recent study on Decentralization in the Philippines: Strengthening Local Government Financing and Resource Management in the Short Term (jointly with ADB), and ongoing technical advice in this area. The Philippines Country Assistance Strategy (CAS, for ) gave high importance to local governments, and sketched out the overall strategy for the Bank s assistance at the local level. As one of the three platforms to implement the key CAS objectives, the Bank s Local Platform will involve greater integrated cross-sectoral focus on the local government units (LGU) as the direct client in order to increase the likelihood of better outcomes across all services delivered by the LGU. Our assistance will strengthen decentralization by empowering LGU decision-making and supporting LGU-led programs. This emphasis reflects a shift to dealing with LGUs as our clients, rather than implementers of national projects. The overall local platform is to be anchored in a LGU performance and capacity framework. The Bank s financial assistance to LGUs is to be offered with a combination of loans and grants, as both forms are important at the current stage for LGU financing. Bank support to national government grants to LGUs includes both cross-sectoral performance-based grants and sectorspecific grants channeled through line agencies. Grant financing to LGUs are being undertaken through sectoral operations (such as the Second Mindanao Rural Development Project) and the proposed Performance Grant Project. Bank support to lending to LGUs will be mainly channeled through the GFIs, while support for PFIs will be provided by IFC (or the Bank-IFC Municipal Fund, which may also lend directly to LGUs without sovereign guarantee). Loans and grants for investments, however, should be implemented by separate entities with GFIs and PFIs

6 providing loans on a commercial basis, and government agencies providing grants following national government policies and priorities. The local platform strategy under the new CAS proposes a new mode of engagement with LGUs which places LGUs at the center, as implementers and movers of the Philippine development agenda. The point of departure between the Project and previous urban operations in the Philippines is its integrated approach which makes available to both LGUs and even public and private operator alike, a wide range of subprojects (open menu) which can be financed under project. This approach provides LGUs with more choices in terms of financing, and greater autonomy in determining their priorities, and will lead to faster funding utilization. At the same time, it enables the Bank to establish closer partnerships with a wider range of LGUs. While the on-going Local Government Finance and Development (LOGOFIND) project has some of the similar features of an open menu operation, the Project uses a well established banking institution that has branches and lending centers all over the country, and already has a much larger LGU loan portfolio than this project is intended to finance. Significant efforts have been made to simplify procedures and utilize as much as local process as possible. This is expected to significantly speed up implementation. Finally, the proposed project can be an important vehicle for launching innovations and good practice in service delivery. Through CDS and other TA efforts, the Bank is well positioned to identify and support progressive LGU clients using loans to undertake innovations in local service delivery. Successful examples in the past include the first local sanitary landfill development under the Design-Build-Operate scheme (San Fernando City), the first Output-Based-Aid approach for water supply (La Union Province), and community and cost-recovery based water and sanitation expansion (Panabo City, Palawan Province, etc). With its flexibility, the Project provides an opportunity to scale up such innovations. The role of the Project in supporting the overall LGU finance strengthening, however, should be looked at in the context of other Bank assistance mentioned above, beyond the proposed project. Policy dialogues on LGU financing, performance framework, and capacity building are being undertaken in parallel in a government-partner working group on decentralization and local government of the Philippine Development Forum (PDF). 4. Description The project includes two components. Component 1: Subprojects for Infrastructure and Finance Improvement (US$99 Million): The objective of this component is to enable LGUs to implement infrastructure sub-projects that have been identified in development plans and multi-year investment programs as a result of CDS or similar participatory, multi-year planning exercises. The LBP will provide sub-loans to LGUs, public utilities and private operators providing local infrastructure services. In principle, all investments projects prioritized from the CDS or CDS-type planning process are eligible for finance. Examples of eligible subprojects include: water supply and sanitation facilities; solid waste management facilities; wastewater treatment and disposal; housing and new site development; road and bridges; drainage and flood protection facilities; mini-hydropower

7 development; schools and health clinics; improvement of municipal enterprise structures such as public markets; slaughterhouses, bus terminals, and other related income generating projects; and equipment for local infrastructure construction and maintenance. Details of the eligibility of subprojects to be financed will be specified in the Operations Manual. The first batch of subprojects to be financed is listed in Annex 4. The component will finance costs of civil works, goods and consultant services for the preparation and implementation of LGU subprojects. This component also supports LGU revenue generation efforts through improved real property and business tax mapping operations, codification, updating of records and automation in tax assessment, billing and collection automation, and other related revenue enhancement measures. The component will provide sub-loans to LGUs for the acquisition of consulting services and information technologies (hardware and software) that are necessary for the automation and implementation of revenue enhancement program. Sub-loans may also be provided to municipal enterprises, public service utilities for improving their financial management and reporting. Component 2: LGU Capacity Building and Project Implementation Support (US$ 9.75 million). This component will provide assistance to LGUs participating in the subprojects for the: (i) preparation of TOR for subproject preparation work including feasibility studies and detailed engineering design, (ii) procurement, (iii) supervision and management including monitoring of outcomes during construction, and (iv) improved management and operations of municipal enterprises and services. Funding allocated under this component for LGU capacity building will be used as matching funds to additional grant funding for various types of assistance to LGUs, particularly in the area of environment management and improvement (for example, solid waste management), pro-poor intervention (for example, upgrading of informal settlements), and enhancing LGU investment quality and sustainability (for example, improving subproject design quality, construction supervision, and monitoring of development effectiveness). The component will also support the LBP in the screening and evaluation of subprojects, and strengthen the capacity of the LBP to provide technical guidance and support to sub-borrowers in subproject identification, preparation and implementation. A Project Management Office (PMO) will help subproject evaluation, assist LGUs in subproject preparation and implementation, and identify training requirements for LGUs. This component will also support training and study visits of LBP staff. Funding allocation for this component will be reviewed during project mid-term review and may be reallocated with Component Financing Source: ($m.) BORROWER 9 INTERNATIONAL BANK FOR RECONSTRUCTION AND 100 DEVELOPMENT Total Implementation The LBP is the executing agency for the Project. The LBP has the largest and most diversified LGU portfolio, and is presently the biggest source of credit to the LGUs. The LBP also has substantive experience in implementing Overseas Development Assistance (ODA) projects including Bank financed projects that are designed to support LGUs infrastructure rehabilitation

8 and upgrading program. Over the years, the LBP s implementation capacity has been strengthened through actual implementation of ODA projects. With LBP s vast network in all the administrative regions in the country (293 branches, and 33 Lending Centers strategically located in 224 cities/municipalities), the Project will easily reach out to a large number of qualified LGU borrowers. As the executing agency, LBP will be responsible for screening LGUs, evaluating their net borrowing capacity and technical capacity to implement the subproject, and approving LGU loan applications. LBP lends to LGUs on the basis of well-defined procedures for credit evaluation and monitoring, including an internal LGU credit risk rating system. This system has been in use for more than three years and reflects prudent banking principles. LBP also provides technical assistance to LGUs in project development. The LBP will retain a small PMO which will be responsible for general implementation of the project. A draft Operations Manual specifying procedures has been reviewed by the Bank and will be followed during implementation. The Operations Manual will contain simplified, and to the extent possible, local procedures on subproject identification, preparation, technical appraisal and implementation (procurement process, construction supervision, financial management, and monitoring and evaluation) to facilitate PMO s implementation of the Project and to make it easy for LGUs to understand and refer to during subproject preparation and implementation. Partnerships are established with the LGU Leagues. In particular, the LCP has demonstrated strong commitment to working with the national government and the Bank in securing financing for projects identified through the CDS process. A new phase of CDS, financed by the Cities Alliance, will enable more cities to participate in the CDS process, while the process itself will be improved to strengthen the implementation aspects, especially with regard to access to financing. Similar efforts are being explored with the League of Provinces. A JSDF application for co-financing for slum upgrading has been submitted. Other partnership is being explored on the TA component aimed at strengthening the capacity of LGUs to deliver effective and sustainable urban services. 7. Sustainability LBP is committed to the objectives of the project. LBP has an outstanding loan portfolio with LGUs of 20 billion Pesos, the majority of which are from the funds generated by LBP itself. The Bank s loan for the Project will enable LBP to provide loans of longer tenor to LGUs for investment in long-life infrastructure assets, and provide technical assistance to LGUs. The operations procedure adopted for the project tries to maximize the use of the existing LBP process, also in consideration of sustainability. The proposed operations will also enable LBP to recover the cost of operations, and achieve a reasonable return, even with the inclusion of TA and operating cost of LBP. Financial sustainability at LGUs is being promoted with the prudential credit assessment by LBP, and the component included in the project on LGU financial management. Sustainability of subproject will be a critical issue. The technical guidelines for subproject appraisal in the Operations Manual will help ensure subprojects meet minimum required criteria. However, LBP itself not being a sectoral agency, the ability of LBP in controlling quality for a wide range of subprojects is unavoidably limited. Mitigating measures include the LGU capacity building component, the engagement of technical consultant by LBP for implementation support, and

9 PMO s planned liaison with responsible government agencies on technical standards. Other grant support in this area will be sought to strengthen quality and sustainability of the results. 8. Lessons Learned from Past Operations in the Country/Sector The Bank has supported a range of urban and local investment projects, and has an on-going portfolio of six projects that on-lend partial or full amount of IBRD loans to local governments, three of which are in the urban and water sector: the Water Districts Development Project (WDDP) implemented by LBP; the LGU Urban Water and Sanitation Project implemented by DBP; and LOGOFIND Project implemented by MDFO. In addition, three projects in the rural, environment and health sectors have on-lending components with MDFO (Annex 2). Other Bank operations with LGUs currently only involve grants. The difficulties encountered in these onlending operations include: low demand (LGUs unwilling to borrow for investments in the selected sectors; credit facilities having to compete with numerous grant facilities); inadequate capacities (LGUs not able to meet preparation requirements or failed in implementation, particularly for more complicated infrastructure); governance issues, particularly with regard to procurement; and lack of capacity at the level of financial intermediaries in assisting LGUs. Despite these difficulties, implementation experiences with these operations over the last seven years (starting with WDDP of LBP), demonstrated that lending to LGUs, though challenging, can be successful and can lead to significant development impact with very limited fiscal burden on the national government. Through these operations, the Bank established critical partnerships with a number of progressive LGUs that set the models of islands of good governance. In fact, out of the six ongoing Bank projects with on-lending to LGUs, five of them already have their funds fully or close to fully committed. LBP has been performing satisfactorily in implementing WDDP (to close December 2006), after difficulties at startup were overcome. The project targets a relatively narrow and difficult segment of the LGU credit market (for drainage and sewerage only), and LBP is credited for moving this difficult agenda forward without any grant assistance from the government. From these implementation lessons, the project will advance the agenda on LGU partnership and financing enhancement with the following approaches: Create stronger LGU demand for infrastructure financing: offering a broad menu of eligible subprojects instead of being limited to specific sectors, which is more responsive to LGU needs and enables LGUs to select and finance development priorities from their multi-year investment program; fostering close partnership with LGUs, including the Leagues of LGUs, to help build awareness of the program and to obtain commitment for a strong pipeline of subprojects from local governments. The ongoing dialogues under the PDF with regard to policies on rationalizing LGU grants, including the separation of loans and capital grants, will also help improve the environment for LGU borrowing. Streamlining subproject processing. The Operations Manual for the Project will use streamlined process to make it easy for LGUs to access funding. Sub-loan approval is to be based principally on LGU creditworthiness or borrowing capacity, instead of technical

10 evaluation. The credit approval process is to be close to the LBP s own process. LBP will also adopt a programmatic approach for selected LGUs where a package of investment projects will be approved under a sub-loan, instead of requiring the approval of each single investment. Providing TA to LGUs on subproject development, preparation and implementation, which has been a key bottleneck. However, it is important to ensure that the lending operation is financially viable from the perspective of the LBP as primarily a financial institution (instead of a government agency). Financing is allocated in the Project for TA to LGUs on a matching basis. Further grant funding in this area is being sought after with other development partners. For example, JSDF is planned to be approached for technical assistance on improving community infrastructure in urban informal settlements. Past experience also showed that direct involvement by the Bank team with the LGUs can make critical difference in enhancing LGU capacities. 9. Safeguard Policies (including public consultation) Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP/GP 4.01) [x] [ ] Natural Habitats (OP/BP 4.04) [x] [ ] Pest Management (OP 4.09) [ ] [ ] Cultural Property (OPN 11.03, being revised as OP 4.11) [x] [ ] Involuntary Resettlement (OP/BP 4.12) [x] [ ] Indigenous Peoples (OD 4.20, being revised as OP 4.10) [ ] [x] Forests (OP/BP 4.36) [ ] [x] Safety of Dams (OP/BP 4.37) [ ] [x] Projects in Disputed Areas (OP/BP/GP 7.60) [ ] [x] Projects on International Waterways (OP/BP/GP 7.50) [ ] [x] Environmental screening category: FI As a project implemented by a financial intermediary where the majority of subprojects are yet to be defined, LBP prepared a Social and Environmental Safeguards Framework to guide the project and the sub-borrowers to adequately address safeguard issues if any of the policies are triggered. An initial safeguard screening will determine the policies that will be triggered by each subproject. As of project appraisal, no requirements for involuntary resettlement were identified for the potential pipeline of subprojects. Similarly, these subprojects will not affect natural habitats or cultural property. However, appropriate guidelines have been included in the Safeguards Framework in case these policies will be triggered as feasibility studies progress. Responsibility. According to the project Safeguards Framework, it is the responsibility of the sub-borrower of the loan, the LGUs, to carry out both Environmental Assessment and Social Assessment as required under the Philippine regulatory framework and the Bank s safeguard policies, and obtain clearances required of each individual subproject before starting project implementation. On the other hand, it is the responsibility of the borrower, the LBP, to supervise and monitor the participating province, city and municipal LGUs with regard to the process and requirements prescribed in the Safeguards Framework.

11 LBP is ISO certified, and its corporate environmental policy states that it is fully committed to support environmental protection and sustainable development and shall ensure implementation of effective environmental management practices in its banking operations, services and decisions. LBP has demonstrated its capacity to implement the Safeguards Framework with its recent experience in satisfactorily implementing several Bank assisted projects, particularly the WDDP, an Environment Category A project. The PMO for WDDP, under the Program Management Department, with the assistance of the Environment Unit of the Program Lending Group, will also be used for the implementation of the Project. The Project s Social and Environmental Safeguards Framework has been made available locally and at the InfoShop before project appraisal mission departs. 10. List of Factual Technical Documents 11. Contact point Contact: Ming Zhang Title: Sr Economist Tel: Fax: mzhang1@worldbank.org Location: Manila, Philippines (IBRD) 12. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C Telephone: (202) Fax: (202) Web: