Growth in the Philippines has been averaging at about 5 percent over the past 10 years, significantly higher than the rate achieved in the previous two decades. In 2010, the Philippines grew by 7.6 percent, the highest in 30 years. In recent years, the Philippines has restored macroeconomic stability and proved resilient to recent external shocks, such as food and fuel price hikes, the global financial crisis and recession, and the impact of typhoons and El Niño. Rising and counter-cyclical remittances have provided a strong basis for currency stability and a healthy build up of international reserves. The country currently enjoys a savings rate that exceeds investment. Its human resources are in high demand around the world.

Despite these achievements, inclusive growth that benefits the poor has been a continuing challenge for the Philippines. Poverty has remained at about the same level during the last decade, with a little over a quarter of the population below the poverty line. A key challenge has been to deploy these financial and human resources more effectively in the country, especially in rural areas, by improving investment climate and creating job opportunities. The Government has now prioritized an improved business climate, infrastructure development, and public-private partnerships. Investment in human capital and social protection is another critical pillar addressed by the Government to improve the livelihoods of the poor; budget allocations have been increased for health, education, and conditional cash transfer programs.

Good governance remains a high priority for the country. The current Administration’s focus on anti-corruption is intended not only to improve the investment climate for domestic and foreign investors, but also to enhance social service delivery and help reduce poverty through more accountable governance. The country has a dynamic civil society and a vibrant media that help articulate the voice of the public for urgent reforms. The work of civil society groups, often highlighted in the media, has contributed to the successful promotion of specific reforms in the fields of procurement, textbook delivery, budget transparency, and community infrastructure, among others.

To address these challenges and achieve inclusive growth, the Philippines Development Plan 2011-2016 under the administration of President Benigno S. Aquino III has adopted three broad strategies, namely:

• Attaining high and sustained economic growth that provides productive employment opportunities;
• Promoting equal access to development opportunities through: better education, primary health care and nutrition, and other basic social services; equal access to infrastructure, credit, land, technology, and other productive inputs; and good governance and strong institutions to promote competition; and
• Establishing effective and responsive social protection to protect and enable those who do not have the capability to participate in the economic growth process.

Underlying these broad strategies is the overarching theme of good governance. Since President Aquino’s assumption of office in June 2010, he has pursued an agenda of transparency and accountability, civil society participation and anti-corruption.

The World Bank’s Country Assistance Strategy (CAS) for the Philippines for FY10-13 was built under the theme, “Making Growth Work for the Poor,” to support these Government’s priorities. It intends to assist the Philippines in pursuing macroeconomic stability, an improved investment climate, better public service delivery for the poor, reduced vulnerabilities, and better governance.

The Bank’s strategy supports government agencies, local government units, and other sectors of society demonstrate improve accountability and transparency for better economic and social outcomes. It also addresses emerging global challenges such as climate change, disaster risk management, and resilience to external shocks, and emphasizes a knowledge agenda that supports the Philippines in addressing its own development challenges.

The strategy seeks deeper integration of the operations of the World Bank and the International Finance Corporation (IFC), the private sector financing arm of the World Bank Group. Specific areas of joint IFC and Bank collaboration are in infrastructure, agribusiness, and the financial sector.

At the beginning of FY12, the Philippines portfolio is comprised of 26 active projects with a total net commitment of US$ 2.03 billion.  This includes 18 loan-financed operations and eight stand-alone grant-financed operations.  In terms of sector distribution, human development tops at 38 percent of the total, followed by infrastructure, rural development and environment, and social development.

The Philippines received its first World Bank loan in November 1957. In those early years,  the Bank’s support to the country played an important role in financing critical infrastructure and rural development needs.  The country program has since significantly expanded in scope to cover a wide range of lending and knowledge products, policy advice and capacity development in support of the country’s diverse development agenda. 

Investments in the roads sector have evolved from construction and upgrading of roads towards improving roads management through asset preservation, business process improvements and governance and anti-corruption.  In energy, the Bank has supported power generation, transmission and distribution, rural electrification, geothermal energy development, and recently the implementation of power sector reforms. Projects in health and education sector helped to lay the foundations for sector-wide approaches. The Bank supported projects that contributed to: improvements in test scores in project schools; improvements in textbook to pupil ratio in math, science and other key subjects; improvement in TB cure rates; and reduction in the incidence of measles.   

Recent results include:

The Kapitbisig Laban sa Kahirapan-Comprehensive and Integrated Delivery of Social Services Project empowered local communities through a community-driven development (CDD) approach to participate in local governance activities and boosted their capacity to create, implement and manage poverty-fighting development projects. It provided benefits to more than a million households through new water systems, school buildings, day care centers, health stations, and post-harvest facilities. Average per capita consumption in beneficiary households has increased by 6-15% compared to households outside the project. In barangays (the smallest local government unit) that have implemented two sub-projects, the increase in accessibility to basic services is 22% higher than the increase in the non-beneficiary barangays.

The Early Childhood Development Project set out to ensure child survival and improving child physical and mental development.  The situation of children in the Philippines in the 1990s was considerably worse off compared to other countries at the same level of economic development.  Ill health, malnutrition, and poor psychological development among pre-schoolers were costing the country substantial amounts in terms of premature deaths, permanent disabilities, and lost future productivity and income.  The project contributed to the decline in overall mortality rate of children under five by 16.7% between 1998 and 2003; malnutrition among children under seven was also reduced; proportion of anemic children and those with low hemoglobin counts declined from 26% to 8%; and early childhood development programs and services in participating municipalities increased.

In water and sanitation, the Bank has been supporting the Government’s effort to improve services by partnering with the private sector through water concessions. The Manila Second Sewerage Project, implemented by Manila Water Company, Inc. (MWCI), sought to improve the quality of wastewater and septage management service in Manila (from 2001 to 2005) and expand MWCI’s sewerage and septage program.  The Manila Third Sewerage Project is a public-private partnership-led wastewater project to extend improvements in sewerage and sanitation across the East Zone concession area, for the period 2005-2010.  Through the Water Districts Development Project, the Bank also extended technical assistance designed to pilot and field-test a public performance audit system in the Metropolitan Waterworks Sewerage System (MWSS) in the post-privatization phase.  The Bank’s interventions through MWCI contributed to a dramatic increase in 24-hour water supply from 26% in 1997 to 99% in 2009; number of people served with potable water doubled from 3.1 million in 1997 to 6.1 million in 2009; mortality rates due to risk of sickness from exposure to sewage contamination reduced by 20%.