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TOWARDS IMPROVING THE PUBLIC INVESTMENT PROGRAMMING
SYSTEM OF THE PHILIPPINES DEPARTMENT OF AGRICULTURE
by
Ulysses J. Lustria Jr.
Submitted to the School of EconomicsUniversity of the Philippines
In Partial Fulfillment of the RequirementsFor Economics 299: Graduate Research Seminar
Adviser:
Prof. RUPERTO P. ALONZODirector, UP-SE Program in Development Economics
October 2002
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ACKNOWLEDGMENTS
The author wishes to express his appreciation and gratitude to the following
persons and organizations for making this piece of work a reality:
Prof. Ruperto P. Alonzo, my Economics 299 Adviser and Program Director of the
UP Program on Development Economics, for his insights and constructive criticisms;
The UP School of Economics; for a wonderful and relevant graduate course;
The Public Investment Program Division headed by Ms. Lerma G. Abesamis, for
the wholehearted support;
The Department of Agriculture Expanded Human Resource DevelopmentProgram and the Ford Foundation, for the scholarship;
My great wife, Dema, and our two kids, Jeyu and Gabriel, for the inspiration;
My parents, Papa and Mama, for their eternal support; and
God, for the wisdom, guidance, and unconditional love.
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ABSTRACT
This paper highlights the importance of developing and institutionalizing an appropriateand rational public investment programming system given the scarce resources of thePhilippine Department of Agriculture (DA) and a high public demand for better
performance especially now that one of the main concerns of the Philippine governmentis agriculture, particularly food security. The paper first described of the existing publicinvestment programming system being used by the DA and then identified the systemsstrengths and weaknesses. The latter was done by assessing consistency with sectoralconsiderations (e.g., goals and resource requirements), assessing consistency withbudget requirements and ceilings, comparing the DAs system with the recommendedmodel of a public investment programming system, and comparing with good practices.The assessment shows that there is indeed a long way to go before achieving optimalresource allocation. The DAs public investment programming system would onlyachieve optimal resource allocation if the right policies are used along with a focus oneconomic efficiency. Thus, political will is needed.
Keywords
public investment programming system, resource allocation, agriculture, Philippines
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TABLE OF CONTENTS
Page
Acknowledgements ii
Abstract iiiTable of Contents iv
I. Background 1
A. Public Investment Programming: A Necessity in theDeveloping Countries 1
B. Public Investment Programming in the Philippines 2
C. Public Investment Programming and Overseas Development
Assistance (ODA) 3
D. The Objectives of This Study 3
II. The Status of the Public Investment Programming System at theDepartment of Agriculture 4
A. The Framework and the Process 4
B. The Methodologies for Public Investment Programming 6
III. Strengths and Weaknesses 10
A. AFPIPs Consistency with Sector Goals 10
B. AFPIPs Consistency with AFMPs Resource Requirements andBudget Ceilings 12
C. Comparison with Variants (Traditional and Stringent) 13
D. Comparison with Good Practices 16
III. Towards an Improved Public Investment Program for the DA 18
References 28
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LIST OF TABLES
TABLE TITLE Page1 Investment Gap (Comparison of the AFPIP, NEP, and GAA) 8
2 The NEDA-EPC Scores per Programs/Activities/Projects in the DAAFPIP CY2003-2005
10
3 AFPIP vs. AFMP Financial Requirements 12
4 DA AFPIP CY2003-2005 Budget Scenarios 13
5 Good Practice vs. DA current Practice in Public InvestmentProgramming
16
6 Suggested DA PAPs Prioritization Criteria 22
LIST OF FIGURES
FIGURE TITLE Page1 The PIP Process: A Stringent Variant (Recommended) 14
2 The Traditional PIP Process 15
LIST OF ANNEXES
ANNEX TITLE Page1 DA AFPIP Format 30
2 Enhanced Prioritization Criteria of the AARNR Sector 33
3 Proposed DA Budget Allocation (CY2003 Presidents Budget)Using GVA Methodology
37
4 Financial Analysis for a Communal Irrigation System:Rehabilitation vs. Construction)
39
5 Financial Analysis for a Road Project: Rehabilitation vs.Regravelling
41
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I. Background
A. Public Investment Programming: A Necessity in the Developing Countries
A rational public investment programming /1 system is very much needed in
developing countries given their scarce resources.
This is in consonance with the allocation challenge, i.e., allocating public
resources (including both external and domestic funds) across strategic priorities. The
capacity to allocate resources across strategic priorities on the basis of both the desires
of the citizenry and opportunity costs of the resources expended is obviously crucial if a
government is to cost-effectively ensure that stabilization, allocative efficiency and
distributional objectives are satisfied (Reid, 1998).
Developing countries would benefit much with having a good Public Investment
Program (PIP). A good PIP is aimed at ensuring five functions: improving economic
management, to ensure that macroeconomic sector strategies are translated into
programs and projects; improving aid coordination and channeling external resources to
priority areas; strengthening the hand of the government in negotiating with external
donors; assisting public financial management, by balancing (partial) commitments and
resources over a multi-year framework; and strengthening the project cycle by providing
a framework within which project preparation, implementation, and monitoring can
occur (Schiavo-Campo and Tommasi, 1999).
Other benefits that developing countries, especially the aid-dependent, can gain
from having good PIPs are that: the process of PIP preparation itself gives an
opportunity to review, and then integrate into the budget, aid-financed expenditures that
were previously non-budgeted; PIP exercises contribute also to extending the horizon of
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financial programming and planning beyond the annual budget, and the perspective of
policymakers in a more realistic way than previous five-year plans; if conducted
rigorously and with full participation, the process can be an invaluable capacity-building
tool, and a way to introduce financial discipline and the awareness of opportunity cost
into the informal rules of the bureaucracy; and a good PIP process can set the stage for
the eventual medium-term programming of all expenditure which is the optional way of
incorporating the needed multi-year perspective into the budget process (Schiavo-
Campo and Tommasi, 1999).
B. Public Investment Programming in the Philippines
The process of public investment programming in the Philippines can be
described as a two-way process wherein programs and projects are simultaneously
identified and programmed at the local and at the national level.
The programs, activities and projects (PAPs), which are expected to be funded
by the national government or from Official Development Assistance sources, are then
submitted to the National Economic and Development Authority (NEDA), where
proposals are reviewed for consistency with the Medium Term Philippine Development
Plan (MTPDP) and where domestic or external resource constraints are considered.
Investment prioritization criteria are used along with public consultations at the local and
national levels (Alonzo, 1993).
The Philippines is also probably one of the few countries in the world whose
government has tried to articulate in a quantitative manner its societys social
preference function by using an explicit set of weights for the different national
objectives. However, although the current system appears smooth and systematic,
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certain kinks still remain. Agencies still complain that fund releases come too late.
There are also problems regarding the criteria for project selection and prioritization
across sectors and regions, and over time (Alonzo, 1993).
The weaknesses identified in the Public Expenditure Handbook of the World
Bank (1998) can also be found in the Philippines and should be looked at, such as:
poor planning; no links between policy making, planning and budgeting; poor
expenditure control, inadequate funding of operations and maintenance; little
relationship between budget as formulated and budget as executed; inadequate
accounting systems; unreliability in the flow of budgeted funds to agencies and to lower
levels of government; poor management of external aid; poor cash management;
inadequate reporting of financial performance, and poorly motivated staff.
C. Public Investment Programming and Overseas Development Assistance
(ODA)
The large amount of ODA funds flowing in calls for careful programming by the
recipient country (Schiavo-Campo and Tommasi, 1999). With a proper investment
programming system in place, the recipient country and the donors would both benefit.
Careful programming of investments is essential. Given the active role of
external aid in the Philippines and its thrust to strengthen economic cooperation, a
public investment programming system that really works in its recipient countries is
important especially to help increase the impact of ODA programs.
D. The Objectives of This Study
The development and institutionalization of an appropriate and rational public
investment programming system is imperative given the scarce resources of the
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Department of Agriculture (DA) and a high public demand for better performance
especially now that one of the main concerns of the Philippine government is
agriculture, particularly food security.
The study seeks to:
a. describe the existing public investment programming system being used by
the DA;
b. identify the systems strengths and weaknesses by:
- assessing consistency with sectoral considerations (e.g., goals and
resource requirements),
- assessing consistency with budget requirements and ceilings,
- comparing the DAs system with the recommended model (in Schiavo-
Campo and Tommasi, 1999) of a public investment programming system,
and
- comparing with good practices; and
c. provide recommendations to enhance the existing system.
This study seeks to answer these objectives and hopes to contribute in the
improvement, specifically, in the selection of the DAs PAPs and generally, the DAs
resource allocation.
II. The Status of the Public Investment Programming System at theDepartment of Agriculture
A. The Framework and the Process
The DA has only recently (starting in year 2000) institutionalized the formulation
of its Agriculture and Fisheries Public Investment Program (AFPIP) using the NEDA-
prescribed three-year rolling format. (see Annex 1) The AFPIP translates the goals and
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strategies of the Agriculture and Fisheries Modernization Program (AFMP) into PAPs
programmed for three years. The DA formulates its MTPIP or AFPIP based on the
investment programs submitted by its central office units, bureaus, attached agencies,
and corporations. The submitted PAPs are then prioritized using the NEDA-prescribed
Enhanced Prioritization Criteria. (See Annex 2)
At this stage, there is no budget constraint imposed yet. The AFPIP thus
represents the total public resource requirement of the agriculture sector, assuming that
local government concerns are already considered.
In past years, this AFPIP-first pass (without budget ceilings) is the one officially
endorsed to the NEDA since it includes the pipeline PAPs which may not yet have firm
funding commitments but may still be immediately activated. These PAPs do not have
budget cover for the first year of the AFPIP but should be included in the AFPIP not only
to show the total public resource requirement of the agriculture sector but also to ensure
that when these are activated, they are already included in the list and as such, have
already been endorsed by the DA. But with this long list, the line agency is basically
letting the oversight agencies determine which PAPs to implement.
With budget constraints, the DA produces AFPIPs using different indicative
budget ceilings. The original AFPIP is scaled down by pro-rated reduction and also by
considering the past budget allocation of each unit (i.e., regional field units or bureaus,
attached agencies, and central office), and each units budget utilization. Pro-rated
reduction is done by proportional decreases in budget allocations of selected PAPs.
The budget allocations of some PAPs, however, are considered fixed and therefore are
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not reduced if they are considered already at a minimum or are considered top priority.
Allowance for inflation is also inputted in the process.
The AFPIPs using different budget scenarios are presented to the DA
management. The DA-approved scenario is the one presented to the NEDA ICC for
approval.
However, the present system of relying so much on past allocation and budget
utilization and downscaling on a pro-rated basis to determine future investments shows
that there is an absence of a rational resource allocation scheme.
The DA is presently developing a scheme which would improve the allocation of
the Departments resources and maximize the impact of its programs and projects. The
scheme would also include an assessment of investment gaps and potentials both at
the sectoral and spatial (regional) levels. The DA also hopes to develop quantitative
methods (e.g., econometric models) for said scheme.
Under the Implementing Rules and Regulations (IRR) of the Agriculture and
Fisheries Modernization Act (AFMA) of 1997, DA has created a Public Investment
Program Division tasked not only to oversee the development and installation of the
said scheme but also to oversee the whole public investment programming process.
B. The Methodologies for Public Investment Programming
1. Steps and Actors Involved in PAP Selection and Prioritization
Proposed PAPs are submitted by DA units to the PIPD. At this stage, there is no
budget ceiling imposed yet. These PAPs were selected by the DA units based on their
internal selection processes.
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Pipeline foreign-assisted projects (FAPs), however, pass through the Project
Development Service for its review and subsequent endorsement to the PIPD.
However, some pipeline FAPs have been directly submitted to the PIPD by the
proponent DA units as part of their respective PIPs. Some of these pipeline FAPs did
not undergo screening by the PDS. Thus, the PIPD endorses this pipeline FAPs to the
PDS for review.
The submitted PAPs are consolidated using the AFPIP format (discussed below).
All PAPs are also assessed by the PIPD using the NEDA Enhanced Prioritization
Criteria. After a DA management review, the DA AFPIP is endorsed to the NEDA.
As mentioned before, however, DA prepared AFPIPs using different budget
scenarios for the AFPIP CY 2003-2005. This required scaling down of budget allocation
per PAP and removal of some PAPs from the priority list.
For the final AFPIP, the DA budget in the National Expenditure Program (NEP)
was used as the budget ceiling. This proposed NEP ceiling was initially recommended
by DBM. The included PAPs were based from an earlier submission of the DA (which
unfortunately was not based from the AFPIP-first pass prepared by the PIPD) but were
scaled down to meet the DBM-recommended ceiling. DA then submits a
counterproposal (which is called DA Comments on the DBM Recommended
Presidents Budget). Finally, the DBM releases a final DA budget which is a part of the
NEP.
The final AFPIP mirrored the NEP ceiling for its priority projects but also included
other PAPs (not prioritized) above this ceiling.
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Note, however, that the results of the NEDAs Prioritization Criteria were never
used for PAP prioritization and eventual selection. As long DA worked within the NEP
ceiling for its priority projects, DBM has no questions. This was unlike before wherein
DBM looked carefully at the list of PAPs and their specific allocations.
2. Investment Gap Analyses
The DA hopes to improve PAP prioritization by better investment gap analyses.
The DA has already done investment gap analyses by comparing AFPIP
requirements with the GAA. Table 1 below demonstrates this analysis. The National
Expenditure Program (NEP) budget requirements for the DA were also included as
additional comparator.
Table 1. Investment Gap (Comparison of the AFPIP, NEP, and GAA).(in billion pesos, at current prices)
Particulars 1999 2000 2001 2002 2003 2004 2005
AFPIP 35.73 32.73 58.54 70.34 44.08 42.94 53.00
NEP 14.96 22.86 23.44 19.81 18.95 n.a. n.a.
GAA 14.70 20.80 16.11 20.47 n.a. n.a. n.a.
Gap (AFPIP minus NEP) 20.77 9.87 35.10 50.53 25.13
Gap (AFPIP minus GAA) 21.03 11.93 42.43 49.87
Gap (NEP minus GAA) 0.26 2.06 7.33 -0.66
Source: DA AFPIP, NEP, GAA (various years)Note: the GAA for CY2001 was a reenacted budget based from the GAA for CY2000.
Table 1 shows that the unconstrained demand requirement (AFPIP) is not being
met by the supply (as represented by GAA or even by the NEP).
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The DA is also conducting calculations of the ideal budget allocation by
commodity using the Gross Value Added analysis recommended by the PLANADES
study (see Annex 3). This analysis requires that the budget ceiling has already been
determined and is then allocated for each of the major commodities (rice and corn, high
value commercial crops (HVCC), livestock, and fisheries) using GVA contribution as the
basis. It should be noted, however, that the method has the added feature of assigning
75% of the allocable DA budget for distribution by commodity using the GVA shares
and 25% for commodity prospects and opportunities.
Annex 3 shows that there is over-allocation for rice and corn and under-
allocation for HVCC, livestock and fisheries using the 2003 NEP as basis. Note that
coconut, although suffering from a very low value of production, is categorized by DA
under high-value commercial crops since it is traditionally under this category.
The DA is also starting to estimate investment gaps by functional grouping using
supply-demand analysis. The processes are discussed in detail in the PLANADES
study. This study proposes at least three methods to determine investment gaps: 1)
comparing requirements vs. existing capacities, 2) identifying intervention areas that
have the highest returns, and 3) comparing benchmarks against actual performance
indicators.
Method 2) is akin to the marginal approach suggested in Alonzo (1993, 1994).
Marginal projects across sectors are compared and the inferior ones are scrapped until
the optimum (marginal projects are on the same plane of acceptability) is reached.
This method could also be possibly used for allocation across commodity sectors
instead of just functional sectors.
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III. Strengths and Weaknesses
The strengths and weaknesses of the DA public investment programming system can
be assessed through various means.
A. AFPIPs Consistency with Sector Goals
The specific question here that should be answered is: Is the AFPIP consistent
with the sector (Agriculture, Agrarian Reform and Natural Resources Sector) goals
espoused in the MTPDP?
The scoring results using the NEDA Enhanced Prioritization Criteria (NEDA-
EPC) could be used to answer this question. This approach considers as parameters
the AARNR sector outcomes, the recommendations of the Sector Effectiveness and
Efficiency Review, as well as the DAs Major Final Outputs. Thus, a high score
approximates consistency with sector goals.
Table 2. The NEDA-EPC Scores per Programs/Activities/Projects in the DAAFPIP CY2003-2005.
NEDA-EPCScores
Number of PAPs
Prioritized NotPrioritized
Total in %
0-35 1 4 5 2.19%36-70 10 29 39 17.11%71-105 29 109 138 60.53%106-150 32 14 46 20.18%
Total 72 156 228 100.00%
Source: DA AFPIP CY2003-2005
Table 2 shows that the DA AFPIP is generally consistent with the sector goals
since most of the PAPs scored high (61% are in the 71-105 range and 20% are in the
106-150 range).
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We should note, however, that the NEDA EPC itself is not without flaws. First,
proposed PAPs which may not be economically feasible can still get good scores.
The NEDA EPC also does not discriminate PAPs which should not be provided
at all by government but by the private sector.
One factor that the NEDA EPC does not consider is the location of the proposed
PAP. Location is very important for the DA because of the AFMA provision that it
should focus its resources on Strategic Agriculture and Fisheries Zones (SAFDZs)2 and
also on the establishment of Model Farms. This is akin to the recommendation from a
PLANADES study (1992) of anchoring the investment program on a physical framework
plan (cited in Alonzo, 1994).
Another factor not included in the NEDA EPC is PAP performance (for ongoing
projects). Thus, projects which have low physical and financial accomplishments can
still get good scores.
Counterparting from LGUs, proponents and/or beneficiaries should also be
emphasized. Although Category III, no. 3 in the NEDA EPC has the criterion Increase
NG-LGU collaboration in RD/NRM interventions, it may still be important to give more
points to PAPs wherein counterpart resources are clearly provided. With resource
sharing, the DA would then be able to invest in more projects.
PAP continuity could be helped ensured by having operations and maintenance
(O & M) plans. PAPs with provisions on how to continue the project activities/gains
after the project life ends should be given more points. The NEDA EPC does not
consider this criterion.
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The NEDA EPC also exhibits inconsistency. Whereas it positively discriminates
on high value commodities (Category I, A, no. 4 and Category III, no. 1), it supports
commodity-neutral interventions (Category III, no. 6).
It should be noted, however, that the NEDA EPC is still being improved or is still
for improvement, according to the NEDA.
B. AFPIPs Consistency with AFMPs Resource Requirements and BudgetCeilings
One way of assessing the strength of the DA public investment programming
system is to see if the AFPIP is consistent with AFMP budget requirements.
Table 3 shows that the AFPIP is much higher than the AFMP by a total of P105
billion for seven years.
Table 3. AFPIP vs. AFMP Financial Requirements.(in billion pesos, at current prices)
PARTICULARS 1999 2000 2001 2002 2003 2004 2005 Total
AFPIP35.73 32.73 58.54 70.34 44.08 42.94 53.00 337.36
AFMP35.73 32.73 32.73 32.73 32.73 32.73 32.73 232.12
Difference- - 25.81 37.61 11.35 10.21 20.27 105.24
Source: DA AFPIP (various years), AFMA IRR
An AFPIP with higher resource requirements could mean the prioritization should
be improved to be able for the AFPIP to approximate the AFMP resource requirement.
However, a big assumption here is that the resource requirements identified for the
AFMP are correct.
Recently, the DA has tried to close the gap for the AFPIP CY 2003-2005 not
just between the AFPIP and the AFMP but between the AFPIP and the estimated
budget ceilings. The DA formulated AFPIPs using different budget scenarios or
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ceilings. Note that the AFPIP budget figures (for CY 2003 to 2005) in Table 3 are large
because theyare based from the first submissions (without budget ceiling). Other
budget scenarios used were P34, P32, and P26 billion as the base budgets for CY 2003
(Table 4). In fact, the final AFPIP CY 2003-2005 (which is P24 billion for CY 2003)
uses the Regular (P3.12 billion) and AFMA (14.37 billion) budget figures from the NEP
CY 2003 for its priority PAPs.
Table 4. DA AFPIP CY2003-2005 Budget Scenarios. (in billion pesos, atcurrent prices)
AFPIP Scenarios 2003 2004 2005 Total
P34 Billion 34.07 33.78 35.56 103.41
P32 Billion 32.03 30.66 33.51 96.2
P26 Billion 26.31 26.16 27.41 79.88
P18.9 Billion (forthe NEP-includedPAPs)
24.21= 18.95(NEP) +5.26 (non-
NEP PAPs)
25.99 29.17 79.37
Source: DA AFPIP CY2003-2005 (various scenarios)
C. Comparison with Variants (Traditional and Stringent)
The strengths and weaknesses of the public investment programming system of
the DA could be determined by describing the current DA public investment
programming system and comparing it with the recommended model (in Schiavo-Campo
and Tommasi, 1999).
Below is Figure 1 which shows a schematic diagram of the recommended PIP
process: a Stringent Variant. Also provided for comparison is Figure 2 which shows the
Traditional PIP Process.
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Figure 1. The PIP Process: A Stringent Variant Recommended).
Source: Schiavo-Campo and Tommasi, 1999.
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Figure 2. The Traditional PIP Process.
Source: Schiavo-Campo and Tommasi, 1999.
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Schiavo-Campo and Tommasi (1999) states that concerning the projects to be included in
the PIPs a more stringent approach for the second and third year would be preferable,
by including only projects for which a decision has been firmly made and the source of
financing is certain (or at least probable).
The DA AFPIP does not adhere to the stringent variant but to the traditional
variant. Many DA PAPs which are still indicative in terms of decision and payment
(financing) are included in Year 2 (t+2). In fact, some PAPs which are still indicative in
terms of payment even enter Year 1 (t +1) although these are of course not included in
the list of PAPs covered by the NEP CY 2003.
This shows that the DA AFPIP process needs more improvement in the selection
of PAPs in terms of status of decision and payment.
D. Comparison with Good Practices
Various literature mention good practices for public investment programming.
Comparing current practices used by DA with the good practices could help us assess
the strengths and weaknesses of the DA AFPIP process.
Table 5. Good Practice vs. DA current Practice in Public InvestmentProgramming.
Good Practice Current Practice Policies drive programs,
programs drive projectsLack of clear-cut policies; weak link betweenpolicies, programs and projects
A dual PIP is inherently abad PIP
The AFPIP is a dual PIP because it has a list ofPAPs included based on a certain budget ceiling
and another list of PAPs above the ceiling Balances between sectors
and subsectors consistentwith government strategy
The AFPIP does not consider balance betweensectors and subsectors as shown by theoverallocation of funds to the grain sector.However, the fund allocation mirrors thegovernment strategy (of prioritizing the grainsector since rice is a political commodity).
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Investment programappropriate to the economicand social environment;compatible withmacroeconomic framework
The AFPIP process is not appropriate to theeconomic and social environment since it stilllacks a rational allocation and PAP prioritizationscheme.
Ranking a set of projectsdepends on the total financialenvelope granted to the setof projects and not vice versa
The DA still ranks PAPs in a straightforwardmanner without considering the financialenvelope/s granted to each set of projects.
the use of simplemethodology
The DA is still in the process of developingresource allocation and PAP prioritizationmethodologies
that projects entering thepublic investment programmust be economically
justified
The DA does not yet discriminate economicallyfeasible PAPs
stringent rule for includingPAPs The DA does not have stringent rules forincluding PAPs. However, it follows the NEDA-ICC guidelines for foreign-assisted projects(FAPs) and locally-funded projects (LFPs) whichpass the said committee.
The use of prioritizationprocedures (e.g., scrappingof marginal projects) toachieve optimum allocation
The DA is still in the process of PAPprioritization methodologies which hopefullywould be towards optimal allocation.
The application of thesubsidiarity principle to
investment decisions
The DA is weak in terms of applying thisprinciple as many PAPs are still processed
from the national level (top-down planning). BigPAPs may actually be local level PAPs whichhave little externalities.
The use of a Red Flagsystem- e.g. minimumrequirements
The DA is still in the process of developingresource allocation and PAP prioritizationmethodologies which hopefully wouldincorporate red flags
The anchoring of theinvestment program on aphysical framework plan
The AFPIP has not yet incorporated the SAFDZas a framework because the DA has not yetdeveloped nationwide SAFDZ integrateddevelopment plans.
Sources: Alonzo, 1994 and 1994; Schiavo-Campo and Tommasi, 1999; and TheWorld Bank, 1998.
Based on Table 5, the DA public investment programming system could be
assessed as still poor in many areas.
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IV. Towards an Improved Public Investment Program for the DA
Below are the recommendations to improve the DAs public investment
programming system based on the abovementioned assessments.
A. Policies, especially domestic, should be defined clearly. These policies should
be included in the prioritization criteria to help ensure that PAPs support said
policies.
There is wide consensus among development experts that the
government should support policy instruments such as agricultural research,
extension, irrigation, and marketing infrastructure, which include farm-to-market
roads and market facilities (Timmer, 1994).
Balisacan (2002) agrees that we have to spend more on rural
infrastructure such as roads and ports but with coordination. He also qualifies
that we should invest more on small-scale irrigation instead of the traditional
gravity irrigation. Other areas mentioned are technical education and skills
development in rural areas, and capacity building for microfinance providers and
LGUs. The areas to spend less include postharvest facilities, since these are
private goods, and general food price subsidies.
David (2002) also cites irrigation; research and development; market
infrastructure; roads; and water transport as areas which need prioritization.
She, however, argues that the issue is not just underspending on the sector but
rather one of inefficiencies in budgetary allocations within the sector
accompanied by low economic returns on many PAPs.
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B. Although a longlist of PAPs may not be avoided, what should be ensured is that
PAPs should be properly evaluated before inclusion in the AFPIP. Thus, the DA
should use red flags which consider criteria such as a list of public and private
goods to be supported by DA and economic efficiency.
C. The DA should continue developing rational resource allocation and PAP
prioritization methodologies such as the GVA analysis demonstrated in Annex 3.
These methodologies should take into account economic feasibility and other
relevant factors.
However, Simple criteria should be developed which is understandable to
the layman (Alonzo, 1993).
D. Investment gap analyses should be done to determine sectoral requirements and
then ranking similar projects to see which would be included in the financial
envelope assigned to the said sector.
E. The DA should fasttrack the development of the SAFDZs integrated development
plans and also model farms 3 as these would help provide the anchor (physical
framework plan) for the AFPIP.
F. The DA should develop participatory processes which would ensure that more
PAPs are identified in the local level.
G. A Proposed PAPs Prioritization Methodology
Moving towards an optimum can be done by screening programs, activi ties,
and projects (PAPs) to weed out undesirable projects (Alonzo, 1993 and 1994). For
this, a PAPs Prioritization Methodology is needed.
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1. First Step
After the DA units have submitted their respective PAPs (wherein budget
ceilings are not yet applied), we could already screen these by instituting red flags.
A red flag indicates that a project fails to meet some minimum requirement with
respect to a given criterion, and should therefore be sent back to the drawing board or
scrapped altogether (Alonzo, 1993 and 1994).
The red flags we could use are:
a. Public and Private goods
The DA should form a list of goods (both public and private) which it should
provide or support. For example, should it provide small postharvest facilities which
could already be provided by the private sector?
Further, should DA provide private goods which are underprovided by the
market? Or could it just provide subsidies or incentives for private production?
(PLANADES, 2000)
With a clear policy, we could already screen out PAPs which are not included in
the list.
b. Economic Efficiency
Only PAPs which are economically feasible should be considered in the MTPIP.
However, since not all PAPs undergo feasibility studies or fullblown economic analysis,
other guidelines (discussed later) could be developed.
Alonzo (1993, 1994) mentions that a thorough, fullblown, cost-benefit analysis
covering the social, financial, and economic aspects may not be warranted for small
projects, but simple guidelines can be developed.
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2. Second Step
After the PAPs have been screened using the red flags, they can be prioritized
using the NEDA-prescribed Enhanced Prioritization Criteria (EPC). The NEDA EPC
would not only be used for compliance with NEDAs requirements but because it is a
good measure of consistency with the AARNR sector outcomes, the recommendations
of the Sector Effectiveness and Efficiency Review, as well as the DAs Major Final
Outputs.
However, we can add other criteria not covered by the NEDA EPC such as:
a. Location PAPs located in the model farms and SAFDZs should have higher
points. (Location is very important as discussed in part III, A, of this paper.)
b. Performance PAPs, which have better physical and financial performance,
should be given higher points. For Pipeline PAPs, economic analysis should be
applied. Pipeline PAPs with higher net returns should have higher points.
c. Counterparting PAPs, which have counterpart from LGUs, proponents and/or
beneficiaries, should be given points. From the start, it is imperative that all
major players during project implementation should share the burden to achieve
the desired results. Counterpart can be in monetary form or in kind.
Counterpart schemes with the LGUs, POs, NGOs and other private group should
be clearly discussed in the project documents.
d. Continuity/Sustainability PAPs which have operations and maintenance (O &
M) plans to ensure their continuity/sustainability should be given points. A plan
should be prepared to enable the project evaluator and implementor to see how
the project activities, gains and investments will be sustained after the project life
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cycle. The scheme shall identify who shall continue the project activities/gains
and how will the project be continued after the project life ends.
Table 6 shows the suggested DA PAPs Prioritization Criteria.
Table 6. Suggested DA PAPs Prioritization Criteria.
Category RawScore
Weight(in %)
Weighted Score
NEDA EPC(perfect score -150 pts./1.5)
20
Location- Model Farm (100 pts.)- SAFDZ (80 pts.)- PAPs supportive of the model farms or
SAFDZs but not located in the said areas (50
pts.)- NPAAAD 4 (30 pts.)- PAPs supportive of NPAAAD but not located
in the said areas (20 pts.)
20
Performance physical and financial1% = 1 pointPerfect score 100% or 100 pts.
20
CounterpartWith counterpart 100 pts.Without counterpart 0 pts.
20
Continuity
With continuity scheme 100 pts.Without continuity scheme 0 pts.
20
Total 100
It should be emphasized that the weights and even the factors in the criteria are
not fixed. These weights should be finalized by DA management preferably with the
help of experts in the field of rural development and agriculture.
3. Third Step
Given a budget ceiling, the budget shares across sectors (e.g., rice and corn,
HVCC, livestock and poultry, and fisheries) should be determined. These shares can
be determined using the Gross Value Added (GVA) Analysis explained in the
PLANADES study (2000). (Please see Annex 3.)
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Given the budget shares and the list of PAPs prioritized per sector, we could
already scrap the PAPs (under each sector) which do not make the cut. However, it
would also be better if budget envelopes (which are percentage shares from the budget
shares per sector) be determined for specific interventions like irrigation, R & D, farm-to-
market roads, extension, and other. The estimation of budget envelopes per
intervention shall be based on technical knowledge to be provided by experts.
PAPs with low scores but are considered necessary by DA can be excluded
from the prioritization in Step 2 and are automatically included in the MTPIP priority list
of PAPs.
We would better understand the methodology by applying it to one of the DAs
units such as the National Irrigation Administration (NIA). All of its proposed PAPs
would first be assessed using the economic efficiency red flag. The goods to be
supported red flag does not apply since irrigation is considered a public good unless
DA has specific policies such as focusing on national irrigation systems and not
including communal irrigation systems anymore.
PAPs not passing the red flag should be dropped. However, the list of PAPs
which failed should be presented to DA management for final decision. This is not only
in consideration to ongoing and pipeline PAPs which have or will have foreign funding
but also to locally-funded PAPs which are ongoing.
Most likely, there would be no economic efficiency problems in terms of pipeline
foreign-funded PAPs and large pipeline locally-funded PAPs since these would be
reviewed by the NEDA ICC. However, small locally-funded PAPs (ongoing and
pipeline) may need careful evaluation.
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The PAPs which pass the first step would undergo the second step. The
information we would be needing are the location of the PAPs, their respective physical
and financial performance, presence of counterpart resources, and O & M scheme.
After scoring them, the NIA PAPs would be included in the total list of PAPs under the
Rice and Corn sector. Given a budget ceiling for the first year and the specific budget
envelope for irrigation, the NIA PAPs which do not make the cut are scrapped from the
priority list and included in the non-prioritized list which is subject for DA management
review and final decision.
However, this s easier said than done. For the AFPIP CY2003-2005, NIA
submitted 58 PAPs wherein 16 are ongoing foreign-funded, 17 pipeline foreign funded,
19 ongoing locally-funded, and 6 pipeline locally-funded with a funding requirement of
P9.96, P11.37, P12.98 (in billions) for years 2003, 2004, and 2005, respectively. Given
a budget envelope of about P5.7 billion (includes government counterpart and loan
proceeds) for CY2003, many NIA PAPs for CY 2003 would be cut. The ongoing
foreign-funded PAPs (also about P5.7 billion) alone will eat up the said budget
envelope.
What NIA did was to extend the project life of the PAPs and thus reducing its
annual budget allocations especially for 2003-2005. Further, pipeline PAPs had to be
slid down to later years. In effect, NIA spread its resources to cover, though partially, all
or almost all its PAPs. There is a problem with this approach because project impacts
are reduced and scarce resources are spread too thinly. The PAPs may already be not
optimal investments with their reduced budgets.
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However, there is still room for PAP prioritization here especially for the next
years. Budget allocation should be based on the scores of the PAPs using the
proposed criteria. Thus, the rationing of budgets could be prorated based on the
scores.
H. PAPs Selection
However, even before DA units such as NIA submit their proposed PAPs, they
should be able to select the optimal set of PAPs on their own. This can be done by
comparing PAPs using simple financial analysis.
For example, it is easy to choose between rehabilitating or constructing an
irrigation system by just comparing the Net Present Values (NPV) of the two options.
(See Annex 4.) Note that even though the investment cost for construction is high, the
very high NPV justifies going for said option as compared to rehabilitation.
The same test could be used for road rehabilitation and road regravelling. (See
Annex 5.) Though the cost for rehabilitation is higher, the higher NPV justifies choosing
the rehabilitation project. Notice that the IRR for regravelling (103.7%) is very much
higher but the NPV is lower. This shows that IRR is not the correct criterion for
assessing efficiency. (The NEDA Manual (2000) explains the strengths of the NPV as
compared to other measures such as the IRR and the BCR.)
End Note
This paper has identified the strengths and weaknesses of the DAs public
investment programming system and has provided recommendations to improve it. The
assessments show that there is indeed a long way to go before achieving optimal
resource allocation.
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We also have to emphasize here that the public investment program is just one
of the ways for government intervention in the development process (Alonzo, 1994).
Another option is through policy changes. This is precisely why the proposed
prioritization criteria included policy directions as one red flag.
The DAs public investment programming system would only achieve optimal
resource allocation if the right policies are used along with a focus on economic
efficiency. Again, political will is needed. But, to paraphrase one DA official, we have
to start somewhere.
Notes:
1. Public Investment Programming is the task of formulating the broad, aggregateportfolio of public investments supportive of optimal rural and agricultural growth,where the portfolio is composed of types of public goods and is proposed as partof the development budget in advance of the identification and financing ofspecific projects and the passage of the General Appropriations Act(PLANADES, 2000).
2. The Strategic Agriculture and Fisheries Zones (SAFDZs) refers to the areas withinthe Network of Protected Areas for Agriculture and Agro-industrial Development(NPAAAD) identified for production, agro-processing and marketing activities tohelp develop and modernize, with the support of government, the agriculture andfisheries sectors in an environmentally and socio-culturally sound manner(Department of Agriculture, 1998 and 2000).
SAFDZs have the following characteristics namely:
agro-climatic and environmental conditions giving the area a competitiveadvantage in the cultivation, culture, production and processing of particularcrops, animals and aquatic products;
strategic location of the area for the establishment of agriculture or fisheriesinfrastructure, industrial complexes, production and processing zones;
strategic location of the area for market development and market networkingboth at the local and international levels; and
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dominant presence of agrarian reform communities (ARCS) and/or small owner-cultivators and amortizing owners/agrarian reform beneficiaries and other smallfarmers and fisherfolks in the area (Department of Agriculture, 1998).
SAFDZ are "special enclaves for production and processing and take-off points
for an aggressive export offensive." This special enclaves shall be linked to majorroads, seaports and airports to make sure the shipment and movement ofagricultural and fishery products to domestic and export markets is smooth andcost-efficient. (Department of Agriculture, 2000)
3. Model Farms refer to efficiently-managed, contiguous area of agricultural land orfisheries characterized by a diversified cropping and integrated farming or fisherysystem which shall serve as a demonstration center for agricultural or fisherytechnologies (Department of Agriculture, 1998).
4. The Network of Protected Areas for Agriculture and Agro-industrial Development
(NPAAAD) refers to agricultural areas identified by the DA to ensure the sustainedproduction of the countrys basic agricultural and fisheries commodities through thestewardship and utilization of the most productive agricultural and fishery land andresources for optimal production, processing and marketing (Department ofAgriculture, 1998).
The NPAAAD includes:
all irrigated areas;
all irrigable land already covered by irrigation projects with firm fundingcommitments;
all alluvial plains highly suitable for agriculture, whether irrigated or not; agro-industrial croplands or land presently planted to industrial crops that
support the viability of existing agricultural infrastructure and agro-basedenterprises;
highland or areas located at an elevation of five hundred (500) meters or aboveand have the potential for growing semi-temperate and high-value crops;
all agricultural land that are ecologically fragile, the conversion of which willresult in serious environmental degradation, and mangrove areas and fishsanctuaries; and
all fishery areas as defined pursuant to the Fisheries Code of 1998 (Departmentof Agriculture, 1998).
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References:
Alonzo, Ruperto P. A Review of Equity-Oriented Investment Criteria and the Medium-Term Public Investment Program. Paper submitted to NEDA/NPPS for theDPRP Project. 1993.
Alonzo, Ruperto P. Integrating Population and Development Concerns in investmentProgramming. Paper submitted to NEDA for the IPDP Project. 1994.
Balisacan, Arsenio M. Food Insecurity, Poverty, and Rural Development. Apresentation during the Training Program on the Economics of RuralDevelopment: Focus on Food Security and Poverty Alleviation in AgrarianReform Communities. September 24-25 2002.
David, Cristina C. Agriculture, in A. Balisacan and H. Hill (eds.), The PhilippineEconomy: Development Policies, and Challenge. 2002.
Department of Agriculture. High growth areas for agriculture: future sites for SAFDZs. Anews article (September 12, 2000). (www.da.gov.ph) 2000.
Department of Agriculture. Implementing Rules and Regulations Pursuant to RepublicAct 8435: The Agriculture and Fisheries Modernization Act of 1997. DAAdministrative Order No. 6. July 10, 1998.
Department of Agriculture. Primer for the Implementation of the Strategic Agriculturaland Fisheries Development Zones. 2000.
Department of Agriculture. The Philippine Agriculture and Fisheries Modernization Plan2001-2004. December 2001.
National Economic and Development Authority. Project Development and EvaluationManual. Vol. 2. 2000.
PLANADES. The Public Investment Programming System of the Department ofAgriculture. Paper submitted to the Department of Agriculture. 2000.
Reid, Gary J. Performance-Oriented Public Sector Modernization in DevelopingCountries: Meeting the Implementation Challenge. March 1998.
Schiavo-Campo, Salvatore and Daniel Tommasi. Managing Government Expenditure.Http://www.adb.org/work/governance/govpub.asp#govtexp . April 1999.
The National Economic Development Authority. The Medium Term PhilippineDevelopment Plan 2001-2004. 2001.
http://www.da.gov.ph/http://www.da.gov.ph/http://www.da.gov.ph/http://www.adb.org/work/governance/govpub.asp#govtexphttp://www.adb.org/work/governance/govpub.asp#govtexphttp://www.adb.org/work/governance/govpub.asp#govtexphttp://www.da.gov.ph/ -
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The National Economic Development Authority. The NEDA Enhanced PrioritizationCriteria for the AARNR Sector. 2002.
The World Bank. Public Expenditure Handbook.Http://www.worldbank.org/publicsector/pe/pehandbook.htm . 1998.
Tenth Congress of the Philippines. Agriculture and Fisheries Modernization Act of 1997.Republic Act No. 8435. July 28, 1997.
Timmer, C. Peter, (ed.). Agriculture and the State: Growth, Employment, and Poverty inDeveloping Countries. 1994.
http://www.worldbank.org/publicsector/pe/pehandbook.htmhttp://www.worldbank.org/publicsector/pe/pehandbook.htmhttp://www.worldbank.org/publicsector/pe/pehandbook.htm -
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Annex 1DA AFPIP Format
Source: Public Investment Program Division, Department of Agriculture.
PROGRAMS/ACTIVITIES/PROJECTSDESIRED
MFOsIMPLEMENTING
AGENCYFUNDING
TYPEFUNDINGSOURCE
CY 2002GAA
CY 2003 CY 2004
GOPLOAN
PROCEEDSGRANT TOTAL GOP
LOANPROCEEDS
GRANT
TO
. RegularA. General Administration and Support Services
B. Operations
C. Support to Operations
I. AFMPA. OSEC + Attached Agencies & Corporations
Foreign-assisted Projects (on-going andpipeline)Locally-funded Projects (on-going and pipeline)
II. ALLOCATION TO LGUs (where applicable)
A. LGEF
Foreign-assisted Projects (on-going andpipeline)Locally-funded Projects (on-going and pipeline)
B. MDF
Foreign-assisted Projects (on-going andpipeline)
Locally-funded Projects (on-going and pipeline)
TOTAL
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PROGRAMS/ACTIVITIES/PROJECTS
CY 2005 TOTAL CY 2003-2005
SCOREGOP
LOANPROCEEDS
GRANT TOTAL GOPLOAN
PROCEEDSGRANT TOTAL
I.
Regular
A. General Administration and Support Services
B. Operations
C. Support to Operations
II.
AFMP
A. OSEC + Attached Agencies & Corporations
Foreign-assisted Projects (on-going and pipeline)
Locally-funded Projects (on-going and pipeline)
III. ALLOCATION TO LGUs (where applicable)
A. LGEF
Foreign-assisted Projects (on-going and pipeline)
Locally-funded Projects (on-going and pipeline)
B. MDF
Foreign-assisted Projects (on-going and pipeline)
Locally-funded Projects (on-going and pipeline)
TOTAL
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DA AFPIP Format
The AFPIP format is prescribed by the NEDA. It has a three-year programming
period. The first column contains the PAPs. They are categorized first by major source,
which is either Regular or AFMA.
This categorization has been a source of contention. The DA contends that
since the two major categories are separated, it should be given twenty billion pesos in
the first year of the AFMA implementation and seventeen billion pesos annually up to
2005, over and above the 1998 budget. The DBM interprets differently. It contends that
the regular funds should form part of the suppose allocation for the AFMA. For
example, instead of the DA receiving thirty-five billion plus (P20 billion AFMA fund plus
the 1998 budget of P15.7 billion) for CY 1999, it would be receiving about twenty-four
billion only (P20 billion AFMA fund plus the regular funds of about P4 billion).
The second column contains the type of Major Functional Outputs (MFOs) for
each PAP. These MFOs are described in Category II of the NEDA Enhanced
Prioritization Criteria. The other columns are self-explanatory.
It should be noted that the DA has attempted to show disaggregation by
functional grouping (e.g., irrigation, R & D, etc.) using this AFPIP format. However, the
attribution process still has to be refined.
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Annex 2
ENHANCED PRIORITIZATION CRITERIA OF THE AARNR SECTOR
CATEGORY I Responsiveness to desired/agreed sector outcomes (total 40 pts)
RAW SCORESRANGE SECTOR OUTCOMES
10
7
5
3-42
1
A. Increased Rural Incomes and Employment
1. Significantdecline of under/unemployment2. Increased diversification of production and income sources3. Increased proportion of high value commodities to total production4. Enhanced marketable surplus production
10
6
3
5-6
3-4
1-2
B. Equitable Access to Productive Resources
1. Improved security of tenure of fisherfolk/ farmers/IPs to land and useof natural resources through the immediate issuance of permits, land
titles, licenses or agreements
2. Increased access to timely, relevant and efficient information inproduction, markets and prices, management and technologies
3. Increased access and application of Research and Development (R&D)outputs/appropriate and environmentally sound technologies e.g.
organic farming, integrated-nutrient management, integrated pest
management and agro-forestry
4. Increased access to credit resources5. Increased access to rural infrastructure (farm to market roads,
irrigation, post-harvest facilities, water systems, telecommunications,
electricity)
6. Increased local and private resource flow for rural development andnatural resource management (RD/NRM) activities
10
7
5
3
2
1
C. Enhanced Ecological Integrity and Sustainable Development of
Natural Resources
1.Increased biodiversity protection and conservation2.Reversal/Abatement of soil degradation as well as air and water
pollution
3.Increased carrying capacity of ecology and environment fordevelopment (i.e. sustainable use of critical resources as land, air,
water and energy.
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CATEGORY I (continued)
RAW SCORESRANGE SECTOR OUTCOMES
107
5
3-42
1
D. Empowerment of Rural Communities/Human Capital
1. Increased/enhanced representation and meaningful participation of all
stakeholders (i.e. farmers, fisherfolks and miners associations andcooperatives, etc.) RD/NRM activities especially in decision-making
bodies at different levels of governance
2. Improved/strengthened capacities of stakeholders in RD/NRMactivities Such as multi-stakeholder negotiations and consensusbuilding mechanisms, building partnership/strategic alliance withthe private sector on various productive enterprises
3. Improved/enhanced technical and entrepreneurial skills for off farmemployment
4. Upheld indigenous rights and preserved indigenous culture,traditions and technologies
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CATEGORY II Alignment with committed/agreed agency output (total 50 points)
(Perfect Score will depend on the number of MFOs identified and sub-MFOs Per Agency)
RAW
SCORE
RANGE
SCORE
COMMITTED MFOs
Department of Agriculture8
4
4
1. Policy, Advocacy, Planning, Monitoring, Evaluation and Information
Preparation of plans and programs and projects as well as implementation,monitoring evaluation and advocacy activities
Information Support Services-installation of information data based systemon soil, land and water resources, as well as maps, statistical reports, pricesknowledge products and services to make them accessible to farmers,
fisherfolks, and LGUs
16
6
5
5
2. Production support, marketing and credit facilitation services
Market development servicesmarket promotion and other market-relatedactivities such as market matching, trade fairs, market dialogues, etc.
conducted to serve as venue for market negotiations/transactions betweenproducers (farmers/fisherfolk) and buyers
Production support services- such as laboratory services, seeds, seedlings,fingerlings, etc provided to LGUs, farmers and fisherfolk
Credit facilitation servicesLoan, insurance and guarantee provided tofarmers and fisherfolk through GFIs and other lending institutions
11
6
5
3. Irrigation and Other Infrastructure
Irrigation development services, construction, rehabilitation and managementof irrigation systems (NIS, CIS and SIS)
Other infrastructure and/or post-harvest development service-post harvestfacilities such as threshers, dryers, shellers, cold storage facilities, coldchain projects, fish ports and other infrastructure projects including farm-to-
market roads provided to farmers, fisherfolk and LGUs
11
5
6
4. Research and Development & Extension (RD &E)
Extension support, education and training servicesextension support,education and training provided to LGUs, farmers, fisherfolk, SUCs, AFCs
and rural-based organizations
Research and development servicesnew technologies and genetically-improved varieties/breeds developed and disseminated to farmers,
fisherfolks and LGUs
4
4
5. Regulatory Services
Regulatory servicessuch as the issuance of licenses, import/exportpermits, certificates of standards and quality control, etc., to clients
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CATEGORY III: Consistency with the Recommendations of the Sector Effectiveness
and Efficiency Review (SEER) (60pts.)
RAW SCORES RANGE SEER RECOMMENDATIONS
10 1. Increase intervention/allocation to High value commodities
Demand side strategies (i.e. marketing, information, credit,postharvest)
Private land distribution
Public land distribution
10 2.Activities that encourage private sector participation, e.g.
Production: farm-firm linkage
Equity investments for Rural Development/NaturalResources Management (RD/NRM) programs/projects
Environmental and natural resources management
10 3.Increase NG-LGU collaboration in RD/NRM interventions,e.g.
LGU involvement as the focal point for priority-setting andprovision of localized services and development assistance
in their respective areas
NG interventions consistent with local priorities
Institutional reforms to deepen devolution of RD/NRMprograms to LGUs, with corresponding resource allocation
10 4.Prioritize allocation to productivity increasing interventions,e.g.
Irrigation
R & D
Extension
ENR management/rehabilitation of degraded naturalresources
10 5. Give emphasis to convergence strategies
Complementation of interventions among RD agencies to
avoid duplication/overlaps in the delivery arrangementsand waste of funds
10 6. Commodity-neutral/functional/integrated developmentinterventions/watershed and ecosystems approach
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Annex 3
Proposed DA Budget Allocation (CY2003 Presidents Budget)Using GVA Methodology
I. The Total BudgetCY2003 PRESIDENT'S BUDGET
Total DA Budget (in pesos) 18,946,032,000.00
PS 2,364,720,000.00
Regular MOE 163,210,000.00
Balance for Allocation 16,418,102,000.00
- By Congruence (75%) 12,313,576,500.00
- Adjustment based on
Prospects/Opportunities
(25%) 4,104,525,500.00
II. The Process
Sector/SubsectorAverage
Share in GVA(%)
1
ByCongruence
(75%)
Proposed Budget President' s Budget
Based on Congruence CY 20032
(a) (b)
Agriculture 80.05 60.04 9,857,172,075.79 10,937,813,200.00
Palay and Corn 24.19 18.14 2,978,204,451.20 8,773,903,600.00
- Palay 18.23 13.67 2,244,565,141.00
- Corn 5.96 4.47 733,639,310.20
HVCC 30.83 23.12 3,796,154,530.33 1,277,651,350.00
- Coconut including copra 3.53 2.64 434,256,968.53
- Sugarcane 2.73 2.05 335,909,473.73
- Banana 2.18 1.64 268,799,909.94- Other Crops 22.39 16.79 2,757,188,178.13
Livestock and Poultry 25.04 18.78 3,082,813,094.26 886,258,250.00
- Livestock 13.66 10.24 1,681,559,073.33
- Poultry 11.38 8.53 1,401,254,020.93
Agricultural activities and
Services3, 4
Fishery 19.95 14.96 2,456,404,424.21 2,391,293,800.00
Agriculture and Fishery 100.00 75.00 12,313,576,500.00 13,329,107,000.005
OTHER ITEMS (MOOE and/or CO, all held at OSEC)
- Regular CO 45,000,000.00
- Unallocable balance of RFU budget 184,076,000.00
- Basic Infrastructure (FMR) 700,000,000.00- Unallocable budget on support services
- locally-funded projects 438,556,000.00
- foreign-assisted projects (counterpart + LP) 1,703,776,000.00
- NNC 17,587,000.00
SUB-TOTAL (OTHER ITEMS) 3,088,995,000.00
TOTAL ACTUAL ALLOCATION 16,418,102,000.00
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1 Based on three-year average (from 1999-2001).2 Weighs to distribute budget of several DA agencies have been assumed.3 GVA value on agricultural activities and services refer to agricultural services on fee
or contract basis such as operation of irrigation systems, pest and disease control,harvesting, grading and packing crops, artificial insemination services, and the
provision of agricultural equipment together with operators. It also includesprocessing in the farm like copra and cassava drying and shelling of copra nuts, andprocessing of milk into butter and cheese, and fruits into wine are classified as part ofagricultural activities. Further, it includes horticulture and landscape gardening.
4 For simplicity, the corresponding GVA value for agricultural activities and serviceshas been distributed/allocated to the four major sub-sectors using the same (i.e.,corresponding GVA share to total GVA in Agriculture and Fishery.
5 Includes 2003 DA NEP Budget allocated for MOE (except regular) and CO of allGMA programs, agencies/bureaus and RFUs (only those specified as regionalactivities to support the sub-sector).
Applying the GVA analysis to the 2003 DA Budget from the National ExpenditureProgram, we get these results:
We have an over-allocation for the Rice and Corn Sector. Instead of P8.77 Billion, weshould only be allocating P2.97 Billion for this sector.
On the other hand, we have under-allocation for the following sectors:
HVCC instead of only P1.27 Billion, we should allocate P3.79 Billion;
Livestock and Poultry instead of only P.88 Billion, we should allocate P3.08 Billion;
and
Fisheries instead of only P2.39 Billion, we should allocate P2.45 Billion.
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Annex 4
Financial Analysis for a Communal Irrigation System:(Rehabilitation vs. Construction)
Rehabilitation
UnitWithoutProject With Project With - Without
Area hectares 100.00 100.00 -
Unit Cost pesos/ha - 60,000.00 60,000.00
Total Cost pesos/ha - 6,000,000.00 6,000,000.00
Farmers persons 50.00 50.00 -
Hectares/Farmer ha/farmer 2.00 2.00 -
Yield, Paddy MT/ha 3.00 4.00 1.00
Price pesos/MT 8,500.00 8,500.00 -
Cropping Intensity Index times/year 1.00 1.50 0.50
Gross Value of Production pesos 2,550,000.00 5,100,000.00 2,550,000.00
Cost of Production pesos 1,428,000.00 2,856,000.00 1,428,000.00
Net Value of Production pesos/year 1,122,000.00 2,244,000.00 1,122,000.00
O&M Cost pesos/year - 180,000.00 180,000.00Incremental NVP pesos/year 942,000.00
Project Life years 30.00 30.00Capital Cost/Annual Net
NVP 6.37
EIRR 15.5%Discount Factor at 15% 6.57NPV at 15% pesos 185,152.82
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Construction
UnitWithoutProject With Project With - Without
Area hectares 100.00 100.00 -
Unit Cost pesos/ha - 125,000.00 125,000.00
Total Cost pesos/ha - 12,500,000.00 12,500,000.00
Farmers persons 50.00 50.00 -
Hectares/Farmer ha/farmer 2.00 2.00 -
Yield, Paddy MT/ha 3.00 5.00 2.00
Price pesos/MT 8,500.00 8,500.00 -
Cropping Intensity Index times/year 1.00 2.00 1.00
Gross Value of Production pesos 2,550,000.00 8,500,000.00 5,950,000.00
Cost of Production pesos 1,428,000.00 4,760,000.00 3,332,000.00
Net Value of Production pesos/year 1,122,000.00 3,740,000.00 2,618,000.00
O&M Cost pesos/year - 250,000.00 250,000.00
Incremental NVP pesos/year 2,368,000.00
Project Life years 30.00 30.00Capital Cost/Annual NetNVP 5.28EIRR 18.8%Discount Factor at 15% 6.57
NPV at 15% pesos 3,048,239.78
Assumptions:1. Average area planted/harvested per farmer is 2 has; 50 farmers form an association.2. Increase in paddy yield is 1.0 MT/ha for rehabilitation, 2.0 MT/ha for construction.3. Increase in cropping intensity index is 0.5 for rehabilitation, 1.0 for construction.4. Cost of production is 56% of gross value of production, with and without the project.
5. Operation and maintenance cost is 3% of capital cost for rehabilitation, 2% forconstruction.
6. For simplicity, full development is assumed at year 1.
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Annex 5
Financial Analysis for a Road Project: Rehabilitation vs. Regravelling
Unit Road Rehabilitation Road RegravellingLength km 3.00 3.00Unit cost pesos/km 1,000,000.00 450,000.00Total Cost pesos 3,000,000.00 1,350,000.00Influence Area hectares 500.00 500.00Yield, paddy MT/hectare 3.00 3.00Cropping Intensity Index times/year 1.30 1.30Unit Saving in Transport Cost pesos/MT 1,000.00 750.00Total Benefits pesos/year 1,950,000.00 1,462,500.00O&M Cost pesos/year 75,000.00 60,750.00Annual Net Benefits pesos/year 1,875,000.00 1,401,750.00
Project Life years 10.00 10.00Capital Cost/Annual Net NVP 1.60 0.96EIRR 62.0% 103.7%Discount Factor at 15% 5.02 5.02NPV at 15% pesos 6,410,191.17 5,685,058.92
Assumptions:1. Length of road project is 3.0 km.2. Influence area is two km on either side, divided by two for average distance.
I.e., 500 hectares = (4 km x 2.5 km)x(100 hectares/km)/2
3. For conservatism, yield & CII are assumed to be the same with and without project.4. Saving in transport cost is P1.00/kg for rehabilitation, P0.75/kg for regravelling.5. O&M cost is 2.5% of capital cost for rehabilitation and 4.5% for regravelling.6. For simplicity, full development is assumed at year 1.