JBIC ODA Loan Projects: Mid-term Review
Project Title: Philippines “Local Government Units Support Credit Program” (PH-P195)[Outline of Loan Agreement]
Loan Amount/Disbursed Amount: 6,072 million yen/3,628 million yen (as of March 2005)
Loan Agreement: September 1998 (7th year)
Executing Agency: Land Bank of the Philippines (LBP)[Project Objective]
The project’s objective was to support the development of social infrastructure in sectors where it is difficult to recover costs via the provision of low-interest** medium to long-term funds to Local Government Units (LGU*) with medium orhigh financial credibility, thereby promoting decentralization and contributing to improvements in living standards. Further, technical assistance was extended to the Land Bank of the Philippines (LBP), the project’s executing agency, and toLGUs covered by sub-loans with a view to improving competence in the area of project execution thereby contributing to the smooth execution of project loans per se.
(*Predominantly, provincial, city and municipal LGUs with a credibility ranking of 1-3 on the LBP’s 5-rank credit scale.
** Interest rates on loans extended to LGUs with comparatively low financial credibility were lower than those applied to the regional development fund)Consultant: NJS Consulting (Nippon Jogesuido Sekkei Co., Ltd.), etc.

[Outline of Results] (Field Survey : December 2004)
Item
Ex-Ante Evaluation (October 1997)[Relevance](1) With the promulgation of the Local Government Code (1991) responsibility for anumber of the projects that had formerly been executed by the central government(water supply, sewerage, sanitation, healthcare, medical treatment, solid waste
management, environmental conservation, housing, etc.) was transferred to Local
Government Units (LGUs), and a system for regional subsidies and local tax
collection established.
(2) All sectors targeted for sub-loan projects under this project had been identified as
requiring urgent policy measures under the Medium-Term Philippine Development
Plan (1993-1998). Support for skills development within LGUs had also been
assigned a priority position.
(3) This project was a high priority undertaking that was designed to support LGUs inproviding better public services through the provision of policy-based loans
throughout the nation.

[Effectiveness](1) No indicators on the effectiveness of individual sub-projects have been set [(1)water supply, (2) flood control/sanitation, (3) reforestation, (4) sewerage/solid
waste management, (5) healthcare/medical facilities, (6) low-cost housing](2) No indicators on the effectiveness of the individual technical assistance to beextended to LBP and the target LGUs have been set [(1) Support LBP in thecreation of implementation guidelines and the identification of sub-projects; (2)support LBP in screening, supervising and assessing sub-loan projects; (3) support
LGUs in the formulation and implementation of sub-loan projects; (4) provide
training to LBP and LGU personnel].

Contractors: Local companies, etc.

Mid-term Review(1) The decentralization of authority was developed systematically under the Local Government Code (LGC), but LGUs arehampered by deficient administrative capabilities and a poor fiscal base, and there are still calls for improvements to bemade in these areas.

(2) The current Medium-Term Philippine Development Plan (2004-2010) also identifies all sectors targeted for sub-loanprojects under this project as requiring urgent policy measures and, from a perspective of good governance, is calling forthe development of planning, execution and management skills that correspond to the development needs of the variousLGUs. In addition, high emphasis is placed on financing for LGUs by LBP which consists 17% of the total portofolio.
(3) The significance of this project, which aims to support LGUs in providing better public services through the provision ofpolicy-based loans, remains high.
(4)* F/S: Government of the Philippines (LBP).
(1) An outline of data on effectiveness (water supply facilities) obtained during the course of this survey is given below.
(a) Bulacan (Pulilan) Waterworks System
Target at appraisal / Actual achievement
Population served:
16,50017,070Rate of population served:
24%
N.A.

1(b)

Sara (Iloilo) Waterworks System (The targets represent the projections for 2005)
Target at appraisal / Actual achievement
Population served:
1,900
1,950
Rate of population served:
N.A.
19%

(c)

Passi City (Iloilo) Waterworks System
Target at appraisal / Actual achievement
Population served:
9,800
7,840
Rate of population served:
60%.
19%

(d)

Sogod (Cebu) Waterworks System
Target at appraisal/actual achievement
Population served:
13,350
1,958
Rate of population served:
45%.
6.6%

(e)

Bontoc (Leyte) Waterworks System
Target at appraisal / Actual achievement
Population served:
4,690
6,890

Rate of population served:

16.35%.

24.33%* There are people who take wait-and-see attitude about the initial operation of the project, while some of the project area
have achieved the target in terms of the percentage of the population served. Thus, it is not possible to express theeffectiveness of this project using current achievements.
(2) Training is being provided in the following areas:
・ LBP officials gave presentations on this project and undertaking orientation activities on project guidelines, revised
guidelines and specifically, the law (RA9184) relating to domestic procurement procedures.
・ Technical forums on environmental issues were offered to LGU officials.
・ Training was provided to account officers and appraisers working in the LBP Financing Center.
However, no indicators to facilitate the evaluation of the effectiveness of these activities were set.
Reference Information[Efficiency](1) Outputs(1) Outputs
・ Loans for sub-project execution[Target sectors] (No targets have been set for fund allocation or project numbers)(1) Water supply facilities(2) Flood control/sanitation facilities(3) Reforestation programs(4) Sewage/solid waste management facilities(5) Healthcare/medical facilities(6) Low-cost housing[Breakdown] ODA loan: 65%; LBP loans (central government budget) 10%; LGU
funding: 25%[Loan amounts] P5 million – P50 million per LGU[Interest] High credibility (14-15.5%); medium credibility (14.5-16%)[Duration] 1-3 years (with a maximum deferral of 2 years)
・Loans for sub-project formation[Loan amounts] Up to P3 million per LGU[Interest] High credibility (14%), medium credibility (14.5%)[Duration] 1-3 years (no deferral)(1) Outputs
・ Loans for sub-project execution[Target sectors] Although changes were made to category-based “combinations”, no changes were made to the parameters
per se. The number of sub-projects executed through 2004 is as given below.)(1) Water supply, flood control, sanitation: 65 sub-projects(2) Reforestation, sewerage, solid waste management: 28 sub-projects(3) Low-cost housing, healthcare/medical facilities: 4 sub-projects(Total: 97 sub-projects)* The average amount disbursed was 33 million yen/sub-project[Breakdown] ODA loan: 80%, LBP loan (central government budget): 10%; LGU funds: 10% (This was changed because manyLGUs were reluctant to use the loans due to difficulties putting up 25% of the funds independently. On a similar
project being executed by the World Bank, the self-financing rate has been dropped from 35% to 10%.)[Loan amounts] As at appraisal.
[Interest] 11%-13% (Reviewed in line with the decrease in market interest rates)
・ Loans for sub-project formation[Results] Sub-project formation: 2 loans[Loan amounts] As at appraisal.
[Interest] 11%-13% (Reviewed in line with the decrease in market interest rates)

・Consulting services: 120M/M (man-months)(2) Sept. 1998 – Jan. 2006 (89 months)(Reasons for delays)
・ Deficiencies in the technical capabilities, experience and degree of understanding among the LGUs held up project
formation, planning and execution. Demand for funds is expected to reach 2.3 billion yen per annum, however,careful watch and promotion of the project implementation is necessary.

(2) Project period(2) Sept. 1998 – Dec. 2003 (64 months)(3) Project cost[Lessons Learned andRecommendations](3) 6,072 million yen (ODA loan portion)(3) 5,460 million yen (ODA loan portion plus the above demand forecasts)
・Project loans were extended to many LGUs scattered throughout the Philippines and it is necessary to confirm the feasibility of standardizing the necessary evaluation indicators and acquiring these data for theex-post evaluation immediately.

[Indicators set for theex-post evaluation]n.a.

To be set upon consultation with the executing agency.

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