## 1phlea2019001

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### Mission and assessment scope
- IMF Fiscal Affairs Department mission visited the Philippines during August 9-22, 2018 to conduct a public investment management assessment (PIMA).
- Mission leadership and core team included Mr. Sailendra Pattanayak (Mission Head), Mr. Rui Monteiro, Ms. Ha Vu, Mr. Dick Emery, Mr. Willie Du Preez, and Mr. Lewis Hawke (World Bank Country Office).
- Additional participants: Mr. Yongzheng Yang (IMF Resident Representative in Manila), Ms. Jhelum Thomas (ADB), Mr. Richard Allen (FAD).
- Meetings held with senior officials of NEDA, DBM, DOF, BLGF, BTr, GPPB, PPP Center, GCG, IFG, COA, and sector teams in Education, Energy, Health, Public Works and Highways, and Transportation.
- PIMA application:
  - Evaluates 15 key indicators across planning, allocation, and implementation phases.
  - Scores institutional strength and effectiveness for each indicator; reform priority assessed.
  - PIMA introduced in 2015 and revised in 2018; more than40 PIMAs conducted to date; six Asian countries previously assessed.

### Historical and recent public investment trends (key statistics)
- Budgetary allocation to public investment:
  - about 4 percent of GDP during the 1990s;
  - about 3 percent of GDP from 2000 to 2015.
- 2015 general government public investment: 3.3 percent of GDP.
- 2015 comparator averages:
  - ASEAN average: more than 7 percent of GDP;
  - EM Asia average: 6.7 percent of GDP.
- General government capital stock:
  - Philippines about 35 percent of GDP in 2015;
  - decline from approximately 50 percent of GDP in the 1990s.
- Comparative gaps:
  - Gap vs ASEAN average: more than 30 percent.
  - Average emerging market economies’ capital stock: 93 percent of GDP (almost 60 percentage points higher than the Philippines).
- Per capita public capital stock (2015):
  - Philippines: $2,200 per person.
- Private and total infrastructure investment:
  - Private investment in infrastructure in 2015: around18.0 percent of GDP;
  - Private investment in infrastructure at beginning of 1990s: 21.3 percent of GDP.
  - Total investment in infrastructure: decreased from 25.6 percent to 21.4 percent of GDP (1990s to 2015).
- Fiscal context:
  - Central government fiscal deficit averaged 1.7 percent of GDP from 2012 through 2016.
  - Government envisaged deficit to increase to 3.0 percent of GDP in 2017 and 2018.
  - Debt-to-GDP ratio: 76 percent in 1993; 33 percent in 2016.
  - President’s budget proposal: increase capital spending to 5.4 percent of GDP in 2018 (from 4.5 percent in 2017).
- Build, Build, Build agenda target:
  - Target infrastructure spending to reach PhP8.4 trillion (US$158.31 billion) or 7.3 percent of GDP by 2022, from 5.4 percent of GDP in 2017.

### Impact and efficiency of public investment
- Effectiveness finding:
  - Public investment improved infrastructure but did not fully deliver expected economic benefits; efficiency could be improved.
- IMF efficiency estimate:
  - Philippines is 66 percent efficient in translating public investment into infrastructure compared to best-performing emerging market peers.
  - Efficiency gap of about 23 percent in translating public investment into infrastructure based on perceived quality.
- Perceived infrastructure quality:
  - World Economic Forum perceived quality score for Philippines in 2015: 3.3 (7-point scale).
- Execution and volatility:
  - Average gap between planned and executed capital spending (2010–2015): 24.2 percent.
  - Investment volatility (2010–2015): average year-on-year public investment-to-GDP change was 31 percent.
- Composition (2015):
  - Economic infrastructure: 65.1 percent of total public investment.
  - Social infrastructure: 14.0 percent of total public investment.
  - EME averages: economic infrastructure 45.3 percent; social infrastructure 26.8 percent.

### PIMA diagnostic summary and selected indicator scores
- Framework: 15 institutions evaluated across Planning, Allocation, Implementation; each institution comprises three indicators scored for institutional strength and effectiveness (scores 0/5/10 mapped in report to lower/medium/high descriptors; Appendix II presents numeric scores).
- Selected institutional strength / effectiveness scores (Appendix II excerpt):
  - Planning (selected): 2.a: 3 2; 3.a: 3 2; 4.b: 3 2.
  - Allocation (selected): 6.a: 1 1; 7.a: 2 3; 8.c: 3 3; 9.a: 2 1.
  - Implementation (selected): 12.a: 3 3; 12.b: 3 2; 15.a: 3 2; 15.b: 3 2; 15.c: 3 2.
- Overall comparative findings:
  - Philippines’ institutional framework comparable to emerging market economies.
  - Strengths relative to peers: National and sectoral planning; Budget comprehensiveness and unity; Budgeting for investment; Availability of funding; Monitoring of assets (institutional design).
  - Weaker areas relative to peers: Project appraisal; Multiyear budgeting; Portfolio management and oversight; Procurement.
  - Common weaknesses: Project selection; Project management.

### Monitoring of public assets — institutional arrangements and data quality
- Accounting and reporting:
  - COA establishes accounting standards, policies, reporting systems and audits financial statements.
  - Accounting standards based on 31 of 41 IPSAS with modifications.
  - COA developed three charts of accounts and three accounting manuals for national government, LGUs, and GOCCs.
  - Nonfinancial asset registers required; nonfinancial asset values recorded based on acquisition cost.
  - Depreciation recorded in operating statements using straight-line method with asset lives (infrastructure assets: 20 to 50 years; watercrafts: 10 to 25 years).
- Systems and coverage:
  - Electronic New Government Accounting System (eNGAS) implemented by 533 national government agencies (~65 percent of agencies); 175 LGUs implemented eNGAS.
  - IPSAS implementation began in 2017 and is ongoing (three-year implementation period allowed).
- Data quality and usage issues:
  - Some GOCCs do not submit financial statements; budget tables present incomplete data.
  - Inconsistencies exist between government accounts and underlying records.
  - Asset registers appear not updated regularly.
  - No evidence financial statements are routinely used to support asset management (e.g., maintenance planning).
- PIMA findings on asset monitoring:
  - Asset accounting and reporting — Institutional Strength: High; Effectiveness: Medium.
  - Monitoring of assets (summary) — Institutional Strength: High; Effectiveness: Medium.

### Key weaknesses in planning, allocation, and implementation (summarized)
- Project readiness and appraisal:
  - Projects often budgeted and start implementation before completing land clearance or technical design, causing delays and cost overruns.
  - Prefeasibility study required only for major projects; quality of appraisals varies across line departments.
  - Common underestimates for land clearance, right-of-way, resettlement leading to delays and cost overruns.
- Multiyear budgeting:
  - TRIP and PIP provide projections but are prepared without financial constraints; no multiyear ceilings for total capital spending by department.
  - TRIPs not sent with proposed budget to Congress or published; lack of forward-year visibility reduces predictability.
- Budget comprehensiveness and unity:
  - Budget presents capital spending by source but does not integrate PPPs, all GOCCs, or future recurrent costs of capital projects comprehensively.
  - Subsidies to organizations in 2019 expected total: 187 billion pesos (largest: Philippines Health Institute 67 billion; National Irrigation Administration 37 billion; Land Bank 36 billion).
- Procurement and competition:
  - Procurement law framework exists but effective competition is limited; many procurements result in a single bidder.
  - Causes: project size, strict qualification criteria, unrealistic deadlines, poorly defined specifications, right-to-match for unsolicited proposals.
  - Procurement monitoring fragmented; access to procurement information restricted.
- Maintenance funding and asset stewardship:
  - Standard maintenance methodologies exist for some assets (e.g., DPWH manuals) but not for all asset types.
  - Budget does not separately identify routine maintenance vs major improvements; maintenance allocations often underutilized.
- Portfolio management and oversight:
  - Central monitoring focuses on ODA projects; NEDA monitoring of national government-funded major projects incomplete and often lagged (reports lagging up to six months).
  - Ex-post reviews not systematically conducted for all major projects; definition of major project: exceeds PHP 2.5 billion.
- Project adjustments and cost control:
  - Cost adjustments allowed: up to 10 percent without DBM approval; above 10 percent up to 20 percent require DBM approval.
  - Practice has been used to rectify poor planning and scope changes; guidance on permissible adjustments insufficient.

### Indicative action plan items (selected timing and responsible agencies)
- Strengthen Ex-Ante Fiscal Assessment of Infrastructure Projects
  - 2018 / 2019: Designate responsible unit (DOF, NEDA, or DBM). Responsible agency: DBCC.
  - 2020: Develop guidance for more rigorous review of fiscal risks. Responsible agency: Unit in charge of fiscal assessment.
  - 2021: Provide ICC fiscal assessment reports including risk mitigation strategy. Responsible agency: Unit in charge of fiscal assessment.
- Expand Multiyear Budgeting
  - 2018 / 2019: Disaggregate MTFP Capital Budget Estimate into Ongoing and New spending. Responsible agency: DBM.
  - 2020: Establish indicative ceilings for ongoing and new capital spending by departments. Responsible agency: DBM in consultation with NEDA.
  - 2018 / 2019 and ongoing: Provide original and updated total cost of projects in PIP. Responsible agencies: NEDA; Line agencies.
- Make Project Appraisal and Selection More Comprehensive
  - 2018 / 2019: Issue instructions requiring right-of-way and resettlement issues be resolved prior to implementation. Responsible agencies: NEDA; ICC; Line agencies.
  - 2019 onward: Require independent review by external experts for high-cost/complex projects. Responsible agencies: NEDA; Line agencies.
- Improve Infrastructure Maintenance
  - 2018 / 2019: Require all agencies to develop and implement standard maintenance requirements. Responsible agencies: DBM and/or NEDA; Line agencies.
  - 2019 onward: Use standard methodology to prepare maintenance cost estimates and revise Budget Call. Responsible agencies: DBM; NEDA; Line agencies.
- Strengthen Central Monitoring of Major Projects
  - 2018 / 2019: MES staff begin participation in monthly progress meetings and provide sample management status reports. Responsible agency: NEDA-MES.
  - 2019 onward: Update monitoring templates and introduce Alert Mechanism for non-ODA major projects. Responsible agency: NEDA-MES.

### Priority reform recommendations (summary of eight recommendations)
- Recommendation 1: Strengthen ex-ante fiscal assessment of infrastructure projects (designate dedicated unit; systematic long-term fiscal-risk assessments; mitigation strategies).
- Recommendation 2: Broaden the framework for private participation in infrastructure (revise BOT Law to cover all types of long-term contracts, apply to national and LGU levels; mandate PPP Center reporting).
- Recommendation 3: Expand multiyear budgeting (separate ongoing and new project ceilings; include out-year baselines; submit TRIP and PIP with proposed budget).
- Recommendation 4: Make project appraisal and selection more comprehensive (resolve right-of-way/resettlement/environmental issues prior to implementation; require independent review for mega projects).
- Recommendation 5: Improve infrastructure maintenance funding (standard methodologies for maintenance planning and costing; highlight maintenance costs in budget).
- Recommendation 6: Foster effective competition in infrastructure procurement (study competition constraints; eliminate right-to-match; strengthen sanctions; improve disclosure and complaint processes).
- Recommendation 7: Improve regulations for project cost adjustments and variation orders (restrict adjustments to unforeseen technical issues; require costing and internal-audit notification within 10 working days).
- Recommendation 8: Strengthen central monitoring of implementation of major projects (MES participation in monthly meetings; monthly reports to senior management; annual portfolio reviews including non-ODA projects).

### Examples of good practice and tools referenced
- Malaysia Project Monitoring System (SPP II):
  - Weekly, monthly, yearly monitoring outputs; uses California Expenditure Curve (S-curve) for early warning; GIS module for project location.
- Chile ex-post review example:
  - Samples 8–10 percent of projects completed in past two years; conducts in-depth ex-post evaluations after at least five years of operation.

*Source: PREFACE, EXECUTIVE SUMMARY, and chapters/extracts on Planning, Allocation, Implementation, Monitoring of Assets, and Recommendations from the IMF PIMA mission report (1phlea2019001).*

### PREFACE __________________________________________________________________________________________ 6

### PREFACE

### Mission details
- A mission from the IMF’s Fiscal Affairs Department (FAD) visited the Philippines during August 9-22, 2018, to conduct a public investment management assessment (PIMA).
- Mission leadership and core team:
  - Mr. Sailendra Pattanayak (Mission Head and Deputy Division Chief, FAD)
  - Mr. Rui Monteiro (Technical Assistance Advisor, FAD)
  - Ms. Ha Vu (Economist, FAD)
  - Mr. Dick Emery and Mr. Willie Du Preez (FAD experts)
  - Mr. Lewis Hawke (Lead Public Sector Specialist, World Bank Country Office)
- Additional participants and contributors:
  - Mr. Yongzheng Yang, IMF Resident Representative in Manila (participated in all meetings with senior government officials)
  - Ms. Jhelum Thomas (Asian Development Bank) joined several discussions
  - Mr. Richard Allen (FAD expert) and Mr. Lewis Hawke (World Bank Manila office) conducted a pre-mission PIMA workshop for officials
- Meetings were held with senior officials of NEDA, DBM, DOF, BLGF, BTr, GPPB, Public Private Partnership Center, GCG, IFG, COA, and operational/sector teams in Education, Energy, Health, Public Works and Highways, and Transportation.
- The mission concluded with a meeting presenting key findings and recommendations to Undersecretary Rolando G. Tungpalan (NEDA), Undersecretary Laura Pascua (DBM), Undersecretary and Chief Economist Gil Beltran (DOF), Assistant Secretary Maria Edita Z. Tan (DOF), Undersecretary Jesus Christino Posadas (Department of Energy), and other officials.

### Key findings from the Executive Summary
- Historical and recent public investment trends:
  - Budgetary allocation to public investment declined from about 4 percent of GDP during the 1990s to about 3 percent of GDP from 2000 to 2015.
  - Public investment has increased in the last few years (post-2015).
  - The Philippine general government capital stock has eroded steadily from the early 1990s.
- Comparative capital stock gaps:
  - The gap between the Philippines’ capital stock and the average of ASEAN countries is more than 30 percent.
  - The average emerging market economies’ capital stock is almost 60 percentage points higher than that in the Philippines.
- Planned scaling-up of investment:
  - The Philippine Development Plan (PDP) 2017–22 envisages nearly doubling the level of public investment during 2017–22, focusing on transport, water resources, energy, ICT, and social infrastructure guided by the National Spatial Strategy.
- Efficiency and impact:
  - While public investment has generally improved infrastructure, it has not fully delivered expected economic benefits; efficiency of public investment could be improved.
  - Compared to the best-performing countries among emerging market economies, the Philippines has an efficiency gap of about 23 percent in translating public investment into infrastructure.
  - The assessment suggests the Philippines could generate more and better infrastructure with similar public capital stock per capita by reducing the cost of producing infrastructure.
- Rationale for institutional strengthening:
  - Strengthening public investment management is critical to maximize returns from the planned investment scaling-up and to achieve infrastructure goals.

### Assessment using the PIMA methodology
- The report applies the IMF’s Public Investment Management Assessment (PIMA) methodology to evaluate public investment management in the Philippines.
- Scope of the PIMA application:
  - Evaluates 15 key indicators (“institutions”) across the planning, allocation, and implementation phases of the public investment management cycle.
  - Identifies strengths and weaknesses in the Philippines’ public investment management framework.
  - Discusses findings and recommendations and includes an operational priority action plan to improve public investment management in the short to medium term.
- Comparative institutional performance:
  - The Philippines’ institutional framework is generally comparable to emerging market economies and is stronger than the average of emerging market economies in areas including:
    - National and sectoral planning
    - Budget comprehensiveness and unity
    - Budgeting for investment
    - Availability of funding
    - Monitoring of assets (in terms of institutional design and effectiveness)
  - Areas where effectiveness is weaker relative to peers include:
    - Project appraisal
    - Multiyear budgeting
    - Portfolio management and oversight
    - Procurement
  - Common weaknesses (shared with peers) include:
    - Project selection
    - Project management
- The PIMA findings for each of the 15 indicators are summarized in Table 0.A (in the source report), and institutional strength and effectiveness are illustrated in Figures 0.A and 0.B (in the source report).

### Outputs and next steps referenced
- The report contains:
  - Detailed PIMA findings across the 15 indicators
  - Operational priority action plan for short- to medium-term improvements
- The mission discussed next steps and possible areas of follow-up assistance with NEDA officials.

*Source: PREFACE and EXECUTIVE SUMMARY from the IMF PIMA mission report (PREFACE section and Executive Summary content provided).*

### 15. Monitoring of Assets

### 15. Monitoring of Assets

### Summary of priority reform measures (related to asset monitoring and broader public investment management)
- Strengthen ex-ante fiscal assessment of infrastructure projects
  - Establish a dedicated unit within DOF, NEDA, or DBM responsible for thorough ex-ante assessment of projects focusing on long-term fiscal sustainability and fiscal risks, including contingent liabilities, and proposing mitigation measures for accepted risks.
- Broaden the framework for private participation in infrastructure
  - Revamp the legal framework (BOT law) to specify standard criteria for all types of private participation, including public-private partnerships (PPPs) and joint ventures, and to apply at both national and local government unit (LGU) levels.
- Expand medium-term budgeting
  - Introduce a multiyear perspective for public investment by line departments to complement the existing three-year Medium-Term Fiscal Program (MTFP); establish indicative ceilings for ongoing and new projects for the budget year and two subsequent years.
- Make project appraisal and selection more comprehensive
  - Ensure right-of-way readiness, resettlement, and other project-preparation elements are addressed before implementation; consider independent review of feasibility studies for mega projects.
- Improve infrastructure maintenance
  - Extend standard methodologies for maintenance planning and costing (currently for some assets such as roads and bridges) to other sectors and establish a central monitoring mechanism to ensure routine maintenance of major infrastructure assets.
- Foster effective competition in infrastructure procurement
  - Study factors causing low competition (many procurements result in a single bidder); train procuring agencies to address constraints (e.g., project size, strict qualification criteria, unrealistic deadlines, poorly defined specifications); strengthen sanctions for anticompetitive practices; revamp procurement website for better public access.
- Improve regulations for project cost adjustments
  - Replace the practice allowing total project cost increases of 10 percent during implementation with regulations that specify costed items and allow increases only for unforeseen technical issues; disallow cost adjustments for inadequate design, planning, or scope changes.
- Strengthen central monitoring of implementation of major projects
  - Extend central monitoring beyond Official Development Assistance (ODA)-funded projects; require Monitoring and Evaluation Staff (MES) participation in monthly progress meetings of major projects and preparation of reports to senior management flagging outstanding issues and proposing actions; include non-ODA major projects in annual portfolio review reports.

### Key findings on asset monitoring and reporting (from PIMA assessment)
- Public assets accounting and reporting
  - High: Public assets properly accounted for and reported in financial statements.
  - Medium: Some issues with comprehensiveness of reporting and frequency of updates.
- Monitoring and portfolio management (relevant items from Table 0.A)
  - Portfolio management and oversight
    - Institutional Strength: Medium — Certain major projects centrally monitored; cross-project reallocation allowed with DBM approval; no systematic ex-post review.
    - Effectiveness: Medium — Certain major projects monitored but with significant time lag; ex-post review not systematically conducted.
  - Monitoring of assets (summary line in Table 0.A)
    - Institutional Strength: High.
    - Effectiveness: Medium.

### Indicative action plan items related to monitoring of assets and implementation (selected entries from Table 0.B)
- Recommendation 1: Strengthen Ex-Ante Fiscal Assessment of Infrastructure Projects
  - 2018 / 2019: Designate responsible unit (in DOF, NEDA, or DBM). Responsible agency: DBCC.
  - 2020: Develop guidance for more rigorous review of fiscal risks. Responsible agency: Unit in charge of fiscal assessment.
  - 2021: Provide ICC fiscal assessment reports on projects including risk mitigation strategy. Responsible agency: Unit in charge of fiscal assessment.
- Recommendation 3: Expand Medium-Term Budgeting (actions that support monitoring)
  - 2018 / 2019: Disaggregate MTFP Capital Budget Estimate into Ongoing and New spending. Responsible agency: DBM.
  - 2020: Establish indicative ceilings for ongoing and new capital spending by departments. Responsible agency: DBM in consultation with NEDA.
  - 2018 / 2019 and ongoing: Provide information on both originally estimated total cost as well as updated total cost of projects in the PIP. Responsible agencies: NEDA; Line agencies.
- Recommendation 4: Make Project Appraisal and Selection More Comprehensive
  - 2018 / 2019: Issue instructions requiring that all right-of-way and resettlement issues as well as environmental issues are resolved prior to implementation of the project. Responsible agencies: NEDA; ICC; Line agencies.
  - 2019 onward: Require independent review (by external experts) for high cost and/or complex infrastructure projects. Responsible agencies: NEDA; Line agencies.
- Recommendation 5: Improve Infrastructure Maintenance (actions supporting asset stewardship)
  - 2018 / 2019: Require all agencies to develop and implement standard maintenance requirements for all types of infrastructure assets. Responsible agencies: DBM and/or NEDA; Line agencies.
  - 2019 onward: Use standard methodology to prepare maintenance cost estimates of existing and planned infrastructure assets; revise Budget Call to require submissions on maintenance estimates based on standards and cost methodology. Responsible agencies: DBM; NEDA; Line agencies.
- Recommendation 8: Strengthen Central Monitoring of Implementation of Major Projects
  - 2018 / 2019: MES staff begin participation on a limited basis with selected departments in monthly progress meetings; provide sample management status reports on problems with proposed actions. Responsible agency: NEDA-MES.
  - 2019 onward: Update monitoring template for monthly and annual reports to include critical and actionable information for senior management. Responsible agency: NEDA-MES.
  - 2019 onward: Introduce Alert Mechanism (currently for only ODA projects) for major non-ODA projects. Responsible agency: NEDA-MES.

### Contextual and supporting information (from the chapter introduction)
- Infrastructure target under the Build, Build, Build agenda:
  - Target infrastructure spending to reach PhP8.4 trillion (US$158.31 billion) or 7.3 percent of GDP by 2022, from 5.4 percent of GDP in 2017.
- PIMA framework background:
  - PIMA introduced in 2015 and revised in 2018 as a tool for assessing infrastructure governance over the full investment cycle.
  - More than40 PIMAs have been conducted to date.
  - Six countries in Asia with PIMAs include Malaysia, Maldives, Mongolia, Sri Lanka, Thailand, and Timor Leste.

*Source: 1phlea2019001 - 15. Monitoring of Assets*

### 5.      This section provides an overview of public investment

### 5.      This section provides an overview of public investment

### A. Trends in Public Investment and Capital Stock
- Data coverage for cross-country comparisons: 1990 to 2015 for 189 countries.
- Comparators: ASEAN and emerging market Asian economies with comparable economic development.
- General finding: Public investment in the Philippines increased significantly after 2015, but comparable peer data are not available beyond 2015 for analysis.

Key statistics and trends:
- Philippine share of budget allocated to public investment:
  - about 4 percent of GDP during the 1990s;
  - about 3 percent of GDP from 2000 to 2015.
- 2015 general government public investment: 3.3 percent of GDP.
- 2015 comparator averages:
  - ASEAN average: more than 7 percent of GDP;
  - EM Asia average: 6.7 percent of GDP.
- General government capital stock (definition: cumulative capital spending over time adjusted for a common depreciation rate by income group):
  - Philippines capital stock about 35 percent of GDP in 2015;
  - decline from approximately 50 percent of GDP in the 1990s.
- Gaps:
  - Gap between Philippines’ capital stock and ASEAN average: more than 30 percent.
  - Average emerging market economies’ capital stock: 93 percent of GDP (almost 60 percentage points higher than the Philippines).
- Per capita public capital stock (2015):
  - Philippines: $2,200 per person.
  - Philippines’ per capita capital stock higher only than Cambodia among listed comparators; significantly below Malaysia, Singapore, Thailand; about the same as Indonesia, Lao PDR, and Vietnam.
- Fiscal context:
  - Central government fiscal deficit averaged 1.7 percent of GDP from 2012 through 2016.
  - Government envisaged deficit to increase to 3.0 percent of GDP in 2017 and 2018.
  - Debt-to-GDP ratio: 76 percent in 1993; 33 percent in 2016.
  - President’s budget proposal: increase capital spending to 5.4 percent of GDP in 2018, with a deficit of 3 percent of GDP, while debt would continue to decline.
- Private and total infrastructure investment (percent of GDP):
  - Private investment in infrastructure in 2015: around18.0 percent of GDP;
  - Private investment in infrastructure at beginning of 1990s: 21.3 percent of GDP.
  - Total investment in infrastructure: decreased from 25.6 percent to 21.4 percent of GDP (1990s to 2015).
- Role of privatization: Series of privatization programs contributed to erosion of general government capital stock from early 1990s to 2015.

### B. Composition of Public Investment
- Share by broad function (2015):
  - Economic infrastructure: 65.1 percent of total public investment in the Philippines.
  - Social infrastructure: 14.0 percent of total public investment in the Philippines.
  - Comparison to EME averages (2015):
    - EME economic infrastructure average: 45.3 percent.
    - EME social infrastructure average: 26.8 percent.
- Interpretation:
  - Philippines allocates a relatively high share to economic infrastructure (roads, railways, sea transport, airports, flood management, irrigation).
  - Philippines allocates a relatively low share to social infrastructure compared to emerging market economies.
- Institutional actors:
  - Government Owned and Controlled Corporations (GOCCs) play significant roles in electricity, petroleum, water supply, ports, aviation, and airports.
- Level of government funding:
  - Central government capital spending and net lending averaged 4.8 percent of GDP between 2014 and 2016.
  - Local government units (LGUs) capital spending averaged 0.2 percent of GDP.
  - Foreign financing for LGU projects is arranged by the central government; LGUs often execute projects using central government line department funding.
- Public-Private Partnerships (PPPs):
  - Philippines expanded PPP use from late 1990s; lull mid-2000s; renewed growth from 2009.
  - PPP capital stock relative to GDP in Philippines: 10.1 percent of GDP in 2014.
  - Regional comparison: PPP stock in Philippines about one-tenth of that in Malaysia; about twice that of Indonesia.

### III. Impact and Efficiency of Public Investment
- Efficiency concept: amount of infrastructure produced for funds expended (more capital goods for same expenditure or same capital goods for smaller expenditure).
- Overall finding: Public investment improved infrastructure but did not fully deliver expected economic benefits; efficiency could be improved.
- Efficiency estimate based on IMF methodology:
  - Compared to best-performing countries among emerging market economies, the Philippines is 66 percent efficient in translating public investment into infrastructure (i.e., about one-third of potential impact lost).
  - Specific gap: efficiency gap of about 23 percent in translating public investment into infrastructure based on perceived quality.
- Perceived infrastructure quality:
  - World Economic Forum perceived quality score for Philippines in 2015: 3.3 (7-point scale).
  - Score is lower than the average for emerging market economies and emerging Asia but has been steadily rising and the gap is narrowing.
- Access to infrastructure per capita:
  - Philippines has less infrastructure per capita for public education, electricity, roads per capita, and public health infrastructure compared to other emerging market economies.
  - Treated water access is almost comparable to other ASEAN nations.
- Execution and volatility:
  - Average gap between planned and executed capital spending in the Philippines: 24.2 percent (2010–2015).
    - This gap is roughly the same as Indonesia, Myanmar, and Vietnam; dramatically better than Lao PDR; not as efficient as Cambodia, Malaysia, Singapore, and Thailand.
  - Investment volatility: scope of public investment in Philippines changed by an average of 31 percent from 2010 to 2015 (year-on-year public investment-to-GDP change).
  - More volatile and less predictable investment programs tend to reduce implementation efficiency.

### IV. Public Investment Management Assessment (PIMA)
- Purpose: Comprehensive assessment of quality of public investment management in the Philippines using the IMF PIMA framework.
- Framework overview:
  - Evaluates 15 key institutions across three stages of the public investment cycle:
    - Planning of investment levels for all public sector entities to ensure sustainable levels of public investment.
    - Allocation of investments to appropriate sectors and projects.
    - Implementation of investment projects to deliver productive and durable public assets.
  - For each institution: three indicators are analyzed; scores of 10, 5, and 0 indicate criterion met in full, in part, or not at all.
  - Each indicator is scored on institutional strength and effectiveness; reform priority is also assessed at the institution level.
  - Institutional strength: objective facts that organization, policies, rules, and procedures are in place (institution score corresponds to average of institutional strength scores for its three indicators).
  - Effectiveness: degree to which intended purpose is achieved (institution score corresponds to average of effectiveness scores for its three indicators).
  - Reform priority: whether issues related to the institution are important to address in Philippines’ context.
- Next steps in report: Detailed assessment according to this methodology for each public investment management institution in the Philippines (planning, allocation, implementation phases).

*Source: IMF staff chapter on public investment in the Philippines (content unit 1phlea2019001 — section 5).*

### 26.      Efficient investment planning requires institutions that ensure public investment is

### 26.      Efficient investment planning requires institutions that ensure public investment is 

### Fiscal Targets and Rules (Institutional Strength – Medium; Effectiveness – Medium; Reform Priority – Low)
- Legal and institutional framework:
  - Local governments’ debt servicing not allowed to exceed 20 percent of their annual estimated revenue (Section 324 of the Local Government Code of 1991, R.A. 7160).
  - Limit on foreign borrowing under the Foreign Borrowings Act (R.A. 4860) set at USD10 billion.
  - No legal debt limit for aggregate national government borrowing; no legislated fiscal rules (e.g., limits on fiscal deficits or total expenditures).
  - Medium-Term Fiscal Program (MTFP) is approved by the Development Budget Coordination Committee (DBCC); MTFP presented publicly in the Budget Expenditures and Sources of Financing volume.
  - Debt management practices are well developed; Bureau of the Treasury (BTr) conducts debt sustainability analysis.
- Fiscal aggregates and projections (from Table 4.A):
  - Revenues (in billions of Pesos): 2015: 2,109; 2016: 2,196; 2017: 2,473; 2018 Program: 2,846; 2019 Projection: 3,208; 2020 Projection: 3,676; 2021 Projection: 4,401.
  - Expenditures – Current (in billions of Pesos): 2015: 1,785; 2016: 1,909; 2017: 2,114; 2018 Program: 2,416; 2019 Projection: 2,824; 2020 Projection: 2,992; 2021 Projection: 3,204.
  - Expenditures – Capital (in billions of Pesos): 2015: 436; 2016: 625; 2017: 714; 2018 Program: 940; 2019 Projection: 995; 2020 Projection: 1,307; 2021 Projection: 1,586.
  - Debt Service (in billions of Pesos): 2016: 309; 2017: 305; 2018 Program: 310; 2019 Projection: 354; 2020 Projection: 400; 2021 Projection: 450; 2022 Projection: 501.
  - Deficit (in billions of Pesos): 2015: 122; 2016: 353; 2017: 351; 2018 Program: 524; 2019 Projection: 624; 2020 Projection: 638; 2021 Projection: 702.
  - Debt (in billions of Pesos): 2015: 5,968; 2016: 6,095; 2017: 6,652; 2018 Program: 7,661; 2019 Projection: 8,116; 2020 Projection: nana.
  - Nominal GDP (in billions of Pesos): 2015: 13,307; 2016: 14,480; 2017: 15,806; 2018 Program: 17,578; 2019 Projection: 19,474; 2020 Projection: 21,531; 2021 Projection: 23,694.
  - Revenues (% of GDP): 2015: 15.8; 2016: 15.2; 2017: 14.2; 2018 Program: 15.2; 2019 Projection: 15.5; 2020 Projection: 16.2; 2021 Projection: 16.5.
  - Expenditures – Current (% of GDP): 2015: 13.4; 2016: 13.2; 2017: 13.4; 2018 Program: 13.7; 2019 Projection: 14.5; 2020 Projection: 13.9; 2021 Projection: 13.5.
  - Expenditures – Capital (% of GDP): 2015: 3.3; 2016: 4.3; 2017: 4.5; 2018 Program: 5.4; 2019 Projection: 5.1; 2020 Projection: 6.1; 2021 Projection: 6.7.
  - Debt Service (% of GDP): 2016: 2.3; 2017: 2.1; 2018 Program: 2.0; 2019 Projection: 2.0; 2020 Projection: 2.1; 2021 Projection: 2.1; 2022 Projection: 2.1.
  - Deficit (% of GDP): 2015: 0.9; 2016: 2.4; 2017: 2.2; 2018 Program: 3.0; 2019 Projection: 3.2; 2020 Projection: 3.0; 2021 Projection: 3.0.
  - Debt (% of GDP): 2015: 44.8; 2016: 42.1; 2017: 38.5; 2018 Program: 37.8; 2019 Projection: 37.6; 2020 Projection: nana.
- Findings and implications:
  - Conservative fiscal policy reduced public debt from 76 percent of GDP in 1993 to a projected debt of 38 percent of GDP in 2019.
  - Bureau of Local Government Finance (BLGF) estimates actual local borrowing to be less than 5 percent of annual estimated revenues.
  - Budget proposes capital spending increase from 4.5 percent of GDP in 2017 to 6.7 percent of GDP by 2021.
  - Planned shift from obligation-based budget to cash-based budget will increase importance of MTFP for multiyear capital projects; multiyear obligation authority (MYOA) to be issued for contracts extending beyond a budget year.
- Recommendations:
  - Expand the MTFP to include outyear costs of infrastructure programs and projects.
  - Distinguish in the MTFP between capital investment for ongoing projects and new projects (increase visibility of Tier 1 and Tier 2 spending).
  - Expand multiyear budgeting for the infrastructure program and improve transparency to Congress and the public.

### National and Sectoral Planning (Institutional Strength — High; Effectiveness — Medium; Reform Priority — Low)
- Institutional arrangements and documents:
  - NEDA provides strategic guidance; government publishes PDPs, PIPs, and sectoral masterplans.
  - 2017–22 PDP anchored in the President’s “0 to 10-point Socioeconomic Agenda,” Ambisyon Natin 2040, and the 2030 Sustainable Development Goals.
  - PDP Results Matrices (RM) include measurable targets; 2017–22 Public Investment Program (PIP) lists programs, activities, and projects (PAPs) with financing estimates for national government, PPPs, and ODA.
  - PIP includes estimates of total cost with annual breakdowns of individual projects without an overall financial constraint.
- Effectiveness and gaps:
  - PDP and PIP planning cycle aligned with political cycle; Core Investment Programs and Projects (CIPs) subject to review by Investment Coordination Committee (ICC) or NEDA Board.
  - Three-Year Rolling Infrastructure Program (TRIP) used by DBM for budget inclusion.
  - PIP updating done via PIP Online (PIPOL) during the first quarter per NEDA guidance.
  - 2017–22 PIP approved in 2017 and updated in 2018 are not published.
  - PIP targets exceed absorptive capacity.
- Key numbers on PIP vs absorptive capacity (Table 4.B):
  - PIP 2017–22 (in billions of pesos by year): 2017: 575; 2018: 944; 2019: 905; 2020: 905; 2021: 735; 2022: 718; Average: 797.
  - GAA (in billions of pesos by year): 2011: 262; 2012: 326; 2013: 411; 2014: 519; 2015: 621; 2016: 872; Average: 497.
  - Disbursement (in billions of pesos by year): 2011: 250; 2012: 357; 2013: 344; 2014: 352; 2015: 439; 2016: 625; Average: 395.
  - According to the 2017–22 PIP approved July 25, 2017, national government-funded projects (LFPs) should amount to PHP 4780 trillion for 2017–22, with an annual average amount of PHP 797 billion, whereas absorptive capacity as shown in annual average disbursement on capital spending during the previous planning period was only 395 PHP billion.
- Recommendations:
  - Publish updated PIPs on the NEDA website in a timely manner.
  - For PIP revalidation, account for resource constraints and absorptive capacity to ensure realism.

### Coordination between Central and Other Government Entities (Institutional Strength — Medium; Effectiveness — Medium; Reform Priority — Medium)
- Current coordination and gaps:
  - Central co-funding of major infrastructure projects incentivizes coordination, but no systematic ex-ante assessment of fiscal risks from LGU and GOCC projects.
  - LGU budgets are not coordinated with the national budget despite central transfers being primary funding source; some major LGU projects are centrally assessed and budgeted.
  - PDP discussed with LGUs through regional consultations; NEDA regional offices coordinate Regional Development Plans (RDPs).
  - Capital transfers to LGUs largely rule-based via Local Budget Memorandum issued by DBM six months before fiscal year start; capital transfers to LGUs not fully known in advance.
  - Contingent liabilities and fiscal risks from LGU and public corporation investments not systematically assessed at planning stage; Bureau of the Treasury monitors GOCC fiscal risks during implementation.
  - Borrowings by LGUs require DOF approval; GOCC borrowings require Corporate Affairs Group (CAG) of DOF review. No comprehensive ex-ante assessment of fiscal risks in public investment.
- Operational problems:
  - LGUs lack advance information on conditional transfers and Local Government Support Fund (LGSF) before budget formulation, causing investment overlaps, project cancellations, and reallocations.
  - Challenges expected to increase with cash-based budgeting.
- Recommendations:
  - Strengthen ex-ante assessment of infrastructure projects for long-term fiscal sustainability and fiscal risks (explicit and implicit contingent liabilities).
  - Establish a dedicated unit to systematically evaluate major projects for long-term fiscal sustainability as part of ICC evaluation, including identification of mitigation measures for accepted fiscal risks.
  - Foster a culture of ex-ante fiscal-risk assessment and active management of fiscal risks in public investment.

### Project Appraisal (Institutional Strength — Medium; Effectiveness — Low; Reform Priority — High)
- Current appraisal practices:
  - Major capital projects subject to systematic appraisal: standardized cost-benefit analysis, financial analysis, economic analysis, environmental analysis, and technical analysis.
  - Centralized support exists for project appraisal, including PPP projects.
  - Risk assessments covering a range of potential risks are included, but mitigation plans are not systematically prepared and cost estimates/budgets do not include contingency reserves.
  - Project Evaluation Reports (results of NEDA appraisal submitted to ICC) are considered restricted and covered by Deliberative Process Privilege until the executive agency adopts a definite proposition.
- Quality and implementation issues:
  - Quality of appraisals varies among line departments.
  - Common underestimates of cost and time for land clearance, right-of-way, and resettlements; leads to delays and cost overruns.
  - Example accomplishments from DPWH status review: Region 1 accomplishment 98.2 percent; Region XI 97.45 percent; Region XII 49.75 percent (Region XII low due to right-of-way acquisition issues).
  - Weaknesses in technical design have led to significant changes in design and scope during implementation.
- Key components of project appraisal (Table 4.C):
  - Prefeasibility study (required for only major projects).
  - Feasibility study: data gathering (geographic, climate, socioeconomic, and technical); project alternatives and comparison; major risks (including institutional and budgetary); preliminary estimate of project costs and benefits; regulatory requirements; identifying information for social impact assessment; compilation of all relevant data.
  - Detailed feasibility elements: alternative technologies; detailed risk and sustainability assessment; detailed estimate of costs and benefits for selected alternative with preliminary design; assessment of social and environmental impact.
- Recommendations (high priority):
  - Strengthen quality of project appraisals to provide accurate information on project viability and readiness for planning and budgeting.
  - Require explicit presentation and use of historical data in analyses of costs and time associated with land clearance for new projects.
  - Publish appraisal analyses of major projects to elicit public comments and strengthen project preparation.
  - Address pre-implementation issues such as right-of-way and resettlement before implementation to avoid cost overruns and delays.
  - Include contingency reserves in project cost estimates and prepare systematic risk mitigation plans.

*Source: IMF staff assessment as presented in the PIMA chapter on public investment planning.*

### 5. Alternative Infrastructure Financing (Institutional Strength — Medium; Effectiveness —

### 5. Alternative Infrastructure Financing (Institutional Strength — Medium; Effectiveness — Medium; Reform Priority — High)

### Regulatory framework and private investment
- Private investors manage a broad range of public services, from ports to energy to water and telecommunications.
- Regulatory frameworks exist but are generally recognized as inadequate for promoting competition, resulting in high-cost services and inefficient delivery.
- A published PPP strategy exists for government-procured public-private partnerships.
- Solicited PPP projects: preparation and procurement processes are well defined and professionally managed.
- Unsolicited PPP projects: undergo a formally “competitive” process that generates no competition due to the first-mover advantage and the “right-to-match” (or “Swiss Challenge”).
- Availability of funds and expertise for preparing and procuring PPP projects:
  - Benefit: improves project preparation and procurement.
  - Risk: creates a bias in favor of PPPs, potentially distorting choice of procurement option.
- Legal framework is fragmented:
  - PPPs have a specific procurement framework not governed by the public procurement act and not monitored by the Procurement board.
- Governance of GOCCs:
  - Government reviews investment plans and financial performance of only 17 major GOCCs.
  - No consolidated report on financial performance of GOCCs.

### New government initiatives and institutional gaps
- PPP Center reviews and supports development and procurement of PPP projects, but its role creates a conflict of interest that needs management.
- DOF monitors PPP fiscal risks following contract award but has no formal role in filtering out or postponing projects that may jeopardize long-term fiscal sustainability.
- A consolidated report on investments by GOCCs is produced and disseminated within government, but it does not cover all GOCCs.
- National government management of GOCCs’ fiscal risks is largely reactive rather than preventive.
- Weak regulation and monitoring of joint ventures and other PPP modalities not covered by the BOT Law, amid growing LGU and GOCC interest in PPPs.

### Legal and institutional reform recommendations
- Broaden and improve the legal and institutional framework for private participation:
  - Expand the current BOT framework to encompass all types of long-term contracts for infrastructure and public service, including joint ventures and new LGU-created modalities.
- Reference: Box 4.B provides country examples of approaches to broadening infrastructure governance (e.g., expanding mandate of PPP units into broader infrastructure finance or technical advisory centers).

### Allocating investments to the right sectors and projects (C)
- Allocation requires:
  - A comprehensive, unified, medium-term approach to capital budgeting.
  - Objective criteria and competitive procedures for appraising and selecting projects.
- PIMA assesses institutions on:
  - Multiyear budgeting transparency and predictability.
  - Budget comprehensiveness and unity covering all public investment regardless of funding channel.
  - Budgeting for investment to protect continuing funding during implementation.
  - Maintenance funding adequacy for routine maintenance and major improvements.
  - Project selection based on systematic vetting, transparent criteria, and inclusion in a pipeline of approved projects.

### 6. Multiyear budgeting (Institutional Strength — Medium; Effectiveness — Low; Reform Priority — High)
- Progress:
  - Three-year rolling investment programs (TRIPs) include three-year projections of capital spending.
  - Projections identified by line departments via annual PIP updating during the first quarter using PIP Online (PIPOL).
- Limitations:
  - TRIP is an internal NEDA document prepared without financial constraints, approved by INFRA-COM, and used by DBM to prepare the annual budget.
  - Budget shows aggregate capital spending target in the MTFP supported by project listings in the PIP and TRIP, but listings are not fully consistent with the budget.
  - No multiyear ceilings for total capital spending by line department; budget documentation has only a budget year ceiling for ongoing projects published in the BPF.
  - Projections of total construction cost of major capital projects are published in PIP with annual breakdown over a six-year horizon.
- TRIPs and budget process:
  - TRIPs are not sent with the proposed budget to Congress and are not published for forward-year overviews.
  - Budget ceilings for ongoing projects are prepared by DBM in consultation with line departments and approved by DBCC.
  - Requests by line departments for new investment projects (Tier 2) remain far above available resources.
  - Since 2016, DBM asked departments with a prior year execution rate below 80 percent to avoid budget requests above 20 percent of their prior budget year.
  - In absence of Tier 2 ceilings, the global ceiling on new spending in the BPF is not perceived as a firm constraint by departments.
  - Updates of total project cost and annual breakdowns are done by implementing agencies; NEDA checks consistency with PIP and sectoral masterplans but lacks effective verification of cost projections.
- Reform priority:
  - Improving multiyear budgeting is high priority to link sectoral PDP, PIP, TRIP, and departmental multiyear/annual planning with budgetary ceilings.
  - DBM, with DFAT assistance, is developing a framework for multiyear budgeting at the department level.

### 7. Budget Comprehensiveness and Unity (Institutional Strength — Medium; Effectiveness — Medium; Reform Priority — Low)
- Current presentation:
  - Budget summary tables provide information on capital spending from national government, ODA grants and loans, LGUs, GOCCs, and PPPs.
  - Budget presents summary tables for ODA projects, LGU projects financed from the national government budget, national government-funded GOCC capital projects, and PPPs.
  - Departmental tables in the National Expenditure Program volumes show infrastructure spending from the national government budget and ODA-funded projects.
- Review and approval:
  - All major capital projects reviewed and approved through the budget process by the ICC; smaller infrastructure projects approved by DBM.
  - Capital project justifications require information on both capital expenditures and related recurrent costs, but the Budget document does not provide an integrated presentation of capital and recurrent costs.
- Integration gaps:
  - PPPs are not included in agency details (rationale: no current budget funds required), though PPPs may result in future government costs.
  - Not all GOCCs are included in budget details.
  - Section E of the BESF has 13 summary tables for GOCCs.
  - Subsidies are budgeted to be provided to 42 organizations for an expected total of 187 billion pesos in 2019.
    - Largest expected subsidies: Philippines Health Institute for 67 billion, National Irrigation Administration for 37 billion, and the Land Bank for 36 billion.
  - Balance sheets, income statements, and cash flow statements provided for 81 GOCCs; of the 81 GOCCs, 19 did not provide information; BESF tables have no data for these entities.
  - Budget information on capital projects from PPPs and GOCCs is reported but not integrated with other government spending.
  - Capital and recurrent budgets of line agencies are presented together using program classification, but the annual focus does not integrate capital and recurrent costs for projects (no information on total project costs or future year funding requirements).
- Recommendation:
  - DBM should continue improving budget documents to better integrate infrastructure spending from different financing sources.
  - Suggested additions:
    - Summary table showing aggregate spending by source of financing.
    - Table highlighting future recurrent costs of capital projects (e.g., staffing for schools to be completed over next three years, ongoing maintenance of roads/bridges/power plants).

### 8. Budgeting for Investment (Institutional Strength — Medium; Effectiveness — Medium; Reform Priority — Low)
- Legal and procedural framework:
  - General Provisions of GAA and its regulations provide a reasonable framework for protecting capital investment during budgeting.
  - Ongoing projects (Tier 1) are considered before new projects.
  - Annual budget estimates for Tier 1 prepared by line agencies, discussed with DBM during Tier 1 hearings, then approved by DBCC and included in the published BPF.
  - Allocation of new spending discussed during new projects (Tier 2) hearings.
  - Outlays appropriated on an annual basis, with multiyear obligation authority for new projects and multiyear commitments included in budget documentation.
  - Information on total project costs is not included in the budget documentation.
  - Virement from capital to current spending within a project or program is allowed with DBM approval.
- Implementation and protection:
  - Two-tier budgeting approach protects funding for ongoing projects in the annual budget and over the medium term.
  - Multiyear contracts are allowed and authorized by DBM.
  - For one-year projects, protecting investment on a cash basis may be difficult if early procurement is delayed.
  - Insignificant in-year transfers of appropriation from capital to current spending have occurred with DBM approval.
- Recommendation:
  - Given overall protection of capital investment, further improvement is marginal; however, include information on total project costs in budget documentation to provide comprehensive overview of funding required versus appropriations, obligations, and disbursements.

### 9. Maintenance Funding (Institutional Strength — Medium; Effectiveness — Low; Reform Priority – High)
- Current status:
  - Standard methodology for routine maintenance exists for some assets but not all.
  - Examples of good manuals: Bridge Management Manual of DPWH and Philippines Highway Maintenance Manuals for roads and bridges.
  - Some line departments lack standardized methodologies for routine maintenance costing.
  - No standard methodology for determining major capital improvements to existing assets, though such improvements are included in national or sectoral plans.
  - Budget includes an object of expenditure for maintenance and other costs but does not separately identify routine maintenance or major improvements.
  - DPWH has a program for maintenance presented in the budget.
- Problems:
  - Lack of standards leads to poor planning and budgeting for routine maintenance.
  - Without standards, assets will likely not reach expected lifespans or will require early, costly rehabilitation.
  - Different agencies estimate repair and renovation budgets differently and ad hoc.
  - Routine maintenance and major improvements are not separately identified in the budget.
  - Significant parts of allocated funds for routine maintenance and major improvements of large infrastructures are not utilized.
- Recommendation (high priority):
  - Develop a standard methodology for determining maintenance requirements for all infrastructure asset types and budget for them to ensure lifecycle cost savings.
  - NEDA and DBM should drive implementation and enforce requirements.
  - Update existing regulations where needed (example: DPWH risks from overloading of vehicles).
  - Costs developed using standard methodology should be highlighted in the budget to increase visibility and likelihood of provision.

- Box 4.C. Axle Load Control — Effective Flow and Law Enforcement Processes for Weigh Stations (source: Mission):
  - All heavy vehicles above 5000 kg, inclusive of passenger busses, should be processed through a dedicated, separate medium speed weigh in motion (WIM) lane.
  - All vehicles cleared by the WIM process may join normal traffic.
  - All vehicles not cleared by the WIM process must proceed to the weigh deck.
  - All vehicles cleared at the weigh deck may join the normal traffic again.
  - All overloaded vehicles should be directed to holding areas, where the access loads should be offloaded at the cost of the operator.
  - Operators must be fined, and the fines must be paid before vehicles may proceed to the weigh deck again.
  - Once the access loads have been off loaded, the vehicles may proceed to the weigh deck again for clearance.
  - Once the vehicles have been cleared at the weigh deck, they may join normal traffic again.
  - Vehicle may be scanned for road worthiness at the weigh station, if required.

### 10. Project Selection (Institutional Strength — Low; Effectiveness — Medium; Reform Priority – High)
- Current practice:
  - Major projects are scrutinized centrally but not systematically subject to independent review.
  - A project pipeline exists (TRIPs), but projects outside the pipeline may be included in the budget.
  - Project proposals from line departments processed through ICC Technical Committee, ICC Board, NEDA board for major projects (above PHP 2.5 billion), then sent to DBM for budget funding.
  - Selection criteria are published in guidelines on PIP and TRIP preparation and in the BPFs.
  - TRIPs provide a pipeline list responsive to government priorities, but other projects may also be financed via the annual budget.
  - Large projects are not required to be reviewed by a third party or external experts.
- Recommendation:
  - Consider institutionalizing third-party appraisal by independent external experts for large projects with high costs and long time frames to ensure due diligence and assessment of potential risks.

*Source: Mission (IMF country report excerpt).*

### 57.      Many projects are budgeted and start implementation before completing land

### Many projects are budgeted and start implementation before completing land clearance

### Project readiness and selection
- Finding: Projects are budgeted and start implementation before completing land clearance, leading to delays and cost overruns during construction.
- Finding: In some cases, technical designs are not completed before budgeting, rendering inaccurate estimates of cost for budgeting.
- Finding: More funding is available than projects ready for implementation, leading to inclusion of projects not yet ready for implementation in the budget.
- Finding: The Status Review Report of Region Implemented Projects (DPWH) as of May 2018 shows that projects are delayed by 47.7 percent as a result of right-of-way, material shortages and design chances, and selection of projects that were not ready for implementation.
- Shortcoming: Project pipeline does not explicitly show the appraisal status of projects that do not require ICC approval.

### Immediate selection and pre-implementation requirements (recommendations)
- Requirement: Complete land clearance before approval of project funding in the budget.
- Recommendation: All major projects should be subject to a review by a third party to ensure their quality and readiness.
- Expected outcome: These measures would help avoid selection of projects not ready for implementation, and thereby avoid delays and cost overruns during project implementation.

### Procurement (Institutional Strength — Medium; Effectiveness — Low; Reform Priority — High)
- Finding: Current procurement law and regulations generally provide a pro-competition and transparent framework but are not strict enough to induce effective competition.
- Finding: Measures such as “blacklisting” are weaker than in countries with effective pro-competition policies.
- Finding: Formally competitive procedures include provisions such as the right-to-match for unsolicited proposals that potentially prevent effective competition.
- Finding: Procurement monitoring is fragmented; GPPB addresses only tenders under the Public Procurement Act; there is no independent body to review complaints, and there are no fast-track judicial procedures.
- Finding: In practice, effective competition is limited; there are many instances of only one qualified bidder.
- Identified causes of weak competition: government control of entry and expansion of market players, protection of vested interests, poor contractual specifications, unnecessarily large tenders combining several projects, short deadlines, overly strict qualification criteria, and bidder cartelization.
- Transparency issue: Procurement information requires registration to access, and information on complex contracts is not fully available.
- Policy recommendations:
  - Conduct ex-post infrastructure procurement reviews to identify factors preventing effective competition.
  - Sensitize procurement officials to constraints to effective competition.
  - Introduce stringent sanctions for bidders involved in anti-competitive practices.
  - Identify and eliminate anti-competitive provisions (such as the right-to-match in unsolicited proposals for PPPs).
  - Revise administrative and judicial processes for bidders’ complaints to include independent review and fast-track procedures.
  - Make procurement information, including full proactive disclosure of contracts, easily accessible to the public with no barriers to full download of data and contracts.

### Availability of funding (Institutional Strength – High; Effectiveness – Medium; Reform Priority – Low)
- Process: Agencies prepare budget execution plans (estimated obligations by quarter, physical targets by quarter, projected monthly disbursements by month) and submit them to DBM using the Unified Reporting System; plans are reviewed and posted on the DBM website within five days.
- Legal framework: Appropriated funds are released by Section 3 of the General Appropriations Act (serves as an allotment order); Section 95 requires monthly financial report on obligations and expenditures; Section 96 requires quarterly reports on financial and physical progress.
- Finding: Cash for project outlays is normally released in a timely manner, based on the appropriation.
- Finding: ODA funding is generally integrated into the government bank account structure, unless development partners require otherwise.
- Shortcoming: A Treasury single account (TSA) system is not yet fully implemented; TSA reform is underway but has yet to consolidate all government cash flows.
- Finding: Some ODA project funding and some trust funds maintain special accounts outside the TSA.
- Practice: BTr monitors cash disbursements as they occur; BTr and DBM review the forecast twice a month to ensure cash availability.
- Recommendation: Continue efforts to broaden TSA coverage and improve the quality of cash forecasting and reporting; provide feedback to agencies when cash forecasts or execution reports are inaccurate.

### Portfolio management and oversight (Institutional Strength — Medium; Effectiveness — Medium; Reform Priority — High)
- Institutional design: Executive Order No. 230 requires NEDA to monitor and evaluate plan implementation; NEDA National Development Office monitors sectoral performances; NEDA Regional Development Offices monitor regional and interregional plan implementation.
- Reallocation rules: General Provisions allow reallocation of funds between projects during implementation within a program with approval of the department secretary, and between programs with approval of DBM; there is no systematic monitoring of reallocations.
- Ex-post review practice: Ex-post reviews are not systematically required for all major projects; they are often required by multilateral donors for ODA projects but not systematically for major LPFs.
- Definition: Major projects are defined as those that exceed PHP 2.5 billion.
- NEDA monitoring: NEDA monitors certain major projects, focusing mainly on ODA-funded projects; NEDA reviews annual project costs and physical progress quarterly and annually for ODA projects and regional projects, but only provides annual reviews for major LFPs.
- Timeliness and coverage issues:
  - Some reviews have time lags as long as six months.
  - LFP portfolio reviews may be incomplete due to lack of information submitted by line departments.
  - Example: The report on the status of LFP as of December 2016 dated July 5, 2017 covers 29 projects for which implementing agencies provided updates; NEDA could not report on other 12 major LFPs because it did not receive updates from line departments.
- Good practice reference: Chile’s ex-post review process samples 8–10 percent of projects completed during the past two years and conducts in-depth ex-post evaluations after projects have been operating for at least five years.
- Recommendation: Improve monitoring of implementation of major projects; monitoring should be more proactive, report issues promptly, propose actions to address them, and provide concise relevant information in clear format for senior management.
- Initiative: The Project Facilitation, Monitoring, and Innovation (PFMI) taskforce was established by NEDA, DBM, and DOF in September 2017 to recommend government-wide operational measures and facilitate deployment of resources to fast-track development and implementation of Infrastructure Flagship Projects (IFPs).

### Management of project implementation (Institutional Strength — Medium; Effectiveness — Medium; Reform Priority – High)
- Finding: Line departments systematically identify senior responsible officers for major investment projects; some agencies prepare implementation plans prior to budget approval (example: DPWH).
- Practice: DPWH has a well-defined and functional project management unit (PMU) with senior personnel involvement; DPWH holds monthly coordination meetings and prepares a comprehensive Status Review of Region Implemented Projects.
- Status report data: DPWH’s Status Review of Region Implemented Projects shows that 49.58 percent of projects have not yet started by May 2018, without providing reasons for the delays.
- Cost adjustment rules: Fixed upper limits for project cost adjustments in the Internal Rate of Return (IRR):
  - Cost adjustments up to 10 percent allowed without DBM approval.
  - Cost adjustments above 10 percent up to 20 percent require DBM approval.
- Finding: Project implementation plans are not compiled for all projects before project implementation; regional plans do not indicate implementation details.
- Finding: Some major capital projects are subject to ex-post external audit, but COA conducts these reviews on limited projects; ex-post audits are published.
- Identified problems:
  - Project management capacity and practices vary across departments.
  - Lack of specific qualifications for project adjustments creates potential for abuse.
  - Project adjustments have been used to rectify poor planning, inadequate design, and scope changes, not only unforeseen technical issues.
- Recommendations:
  - Financial regulations and procurement regulations should contain guidance on project cost adjustment, and explanations for delays should be provided in progress reports.
  - Status Review reports (such as DPWH’s) should include reasons for delays and identify drivers of cost adjustments (project execution, right-of-way, resettlement, design changes, foreign exchange fluctuation).
  - Cost adjustments should only be permitted for unforeseen technical issues during implementation; cost adjustments should not be permitted to rectify poor planning, inadequate design, or scope changes.
  - Lessons learned from ex-post audits should be fed back into the system.
  - Implementation plans should be available prior to implementation, indicating procurement option, finance options, senior personnel available to manage the project, and institutional readiness.
  - Issues related to right-of-way acquisition and resettlement should be addressed before project implementation to minimize project cost adjustments.
  - Consider a harmonized reporting tool for infrastructure projects implemented by departments; all line departments involved in capital infrastructure projects should consider using the DPWH Status Review Report as a reporting tool.
  - Regulations to guide the specific reasons permitted for cost adjustments should be improved.

*Source: IMF mission content.*

### Box 4.E. Project Cost Breakdown

### Box 4.E. Project Cost Breakdown

### Project cost components
- i. Initial project preparation
- ii. Land Acquisition
- iii. Utility relocation
- iv. Construction/establishment/demobilization/rehabilitation (with the breakdown of the activities)
- v. Annual cost
- vi. Consultancy—Local
- vii. Consultancy—Foreign
- viii. Maintenance and operation
- ix. Tax and duties
- x. Disaster risk reduction
- xi. Contingencies
- xii. Risk mitigation cost
- xiii. Other please specify
- Total

### Monitoring of Public Assets — institutional arrangements and accounting practices
- Accounting policies and procedures are in place to account for and report on public assets in financial statements.
- The COA is responsible for establishing accounting standards, policies, reporting systems and the chart of accounts and for auditing the financial statements.
- Accounting standards are based on 31 of 41 International Public Sector Accounting Standards (IPSAS), with some modifications to address the specific requirements of the Philippines.
- The COA has developed three charts of accounts and three accounting manuals, one each for the national government, LGUs, and GOCCs.
- Nonfinancial asset registers are required to be maintained by respective departments/agencies.
- The COA requires that nonfinancial assets be recorded in government financial accounts, based on COA guidelines; nonfinancial asset values are based on the acquisition cost of the assets.
- The depreciation of nonfinancial assets is recorded in operating statements, based on rules established by COA.
- Depreciation is straight-lined and based on the life of the specific asset, adjusted by agency criteria.
  - Infrastructure assets have a life range of 20 to 50 years.
  - Watercrafts have a life range of 10 to 25 years.
- These ranges are expected to be adjusted by agencies to reflect their experiences with similar assets.

### Implementation, coverage, and data quality issues
- IPSAS allows a three-year implementation period for revised standards.
- The current version began in 2017 and is still being implemented.
- COA developed the Electronic New Government Accounting System (eNGAS), which has been implemented by 533 national government agencies, representing approximately 65 percent of the total number of agencies.
- Only 175 LGUs have implemented the system, and COA provides training on the system to agencies and entities to facilitate its use.
- Implementation is incremental due to capacity constraints of several entities.
- The budget documents include summary tables showing the balance sheets, income statements, and cash flow statements of GOCCs, but a significant number of GOCCs does not submit financial statements; accordingly, the tables present incomplete data.
- Inconsistencies exist between the government accounts and financial reports and the underlying accounting records.
- Asset registers are required, but they appeared not to be updated on a regular basis.
- There was no evidence that financial statements were being used to support management of public assets, for example to ensure proper maintenance to maximize the life of infrastructure assets.

### Capacity building and implementation priorities
- Capacity building and implementation of asset management are incremental processes.
- The design of the Philippine asset reporting is good.
- COA and central agencies need to continue to develop the capacity to use these tools effectively, particularly in the LGUs and GOCCs, to facilitate the improved management of infrastructure.

*Box 4.E. Project Cost Breakdown — source document excerpt.*

### 75.      This section presents the mission’s recommendations on how to effectively address the

### 1phlea2019001 - 75.      This section presents the mission’s recommendations on how to effectively address the

### RECOMMENDATION 1: Strengthen Ex-Ante Fiscal Assessment of Infrastructure Projects
- Issue:
  - A systematic ex-ante assessment—including from the point of view of the long-term fiscal sustainability and the identification and mitigation of fiscal risks—is lacking, even though financial viability and fiscal implications are reviewed during the appraisal stage for projects subject to ICC approval.
- Recommendations:
  - As part of the evaluation of a project submitted to ICC, and prior to approval, designate a dedicated unit (for example, in DOF, NEDA or DBM) charged with evaluating and reporting on its fiscal implications.
  - The designated unit should conduct the evaluation from the viewpoint of long-term fiscal sustainability, systematically assessing the long-term liabilities and fiscal risks, including explicit and implicit contingent liabilities.
  - The assessment should include the identification of mitigation measures for accepted risks if the project is proposed for approval.
  - Foster a strong practice of ex-ante fiscal risk assessment, active management of fiscal risks in public investment and the creation of a summary report with warning indicators and mitigation strategies.
  - Consider revising ICC guidelines and procedures to institutionalize ex-ante fiscal assessment and possibly designate DOF as the responsible agency to systematically evaluate major projects.
- Outputs:
  - Fiscal assessment reports submitted by the dedicated unit for each large project prior to presentation to the ICC.
  - Systematic assessment of the long-term liabilities and fiscal risks of projects.
  - Mitigation strategies for accepted risks, recorded in regularly updated fiscal risk reports.
- Implementation measures:
  - Designate the responsible unit for fiscal assessment of infrastructure projects, irrespective of their proposed mode of financing.
  - Update guidance for more rigorous review of the fiscal risks associated with investment projects.
  - Provide ICC fiscal assessment reports on projects, including risk mitigation strategy for accepted risks.
- Actors involved: NEDA, DOF, DBM, and respective line departments and agencies.
- Difficulties and risks:
  - Establishing methodologies for assessing the long-term fiscal affordability of projects and the impact of the explicit and implicit fiscal risks.
  - Adding the long-term fiscal affordability assessment without disturbing the established and well-functioning NEDA project assessment.
  - Capacity-building needs for conducting thorough ex-ante assessments focusing on long-term fiscal sustainability and contingent liabilities.

### RECOMMENDATION 2: Broaden the Framework for Private Participation in Infrastructure
- Issue:
  - The current BOT framework law does not cover all types of private participation in infrastructure. GOCCs and LGUs may resort to non-BOT projects with private participation not covered by the current legal framework. Capacity is also a major concern for LGUs.
- Recommendations:
  - Broaden the legal and institutional framework covering PPPs to encompass all types of long-term contracts with the private sector for infrastructure provision and public service delivery, such as joint ventures, concessions, long-term service contracts.
  - The revised legal framework should be applicable to both national government and LGUs.
- Outputs:
  - Revised PPP framework law that covers BOT and other types of private participation for infrastructure provision.
  - Regulations that cover the PPP Center, mandating it to collect information and review all types of PPP projects undertaken by the national government and LGUs.
  - Regulations for monitoring and managing fiscal risks from all PPP-type projects procured by national government, public corporations, and LGUs.
  - Review of the provisions of the Government Procurement Reform Act (GPRA) that limit the participation of foreign bidders may need to be undertaken.
- Implementation measures:
  - Revise the BOT Law to: (1) apply standard criteria, (2) cover all types of private participation in infrastructure projects, and (3) apply it to at all government levels.
- Actors involved: NEDA, PPP Center, and BTr.
- Difficulties and risks:
  - Creating legislation broad enough to submit subnational governments to a national framework while allowing them freedom to create their own legal frameworks in accordance with national rules.
  - Creating protocols that allow timely flow of information to the PPP Center and fiscal risk managers.
  - Managing conflict of interest in the PPP Center between project structuring and PPP promotion.

### RECOMMENDATION 3: Expand Multiyear Budgeting
- Issue:
  - Annual budgeting obscures future implications of multiyear capital projects and the impact of infrastructure spending on future recurrent budgets. Future year obligations are not included in department or sector presentations. Ceilings for capital spending for only Tier 1 projects over three years are prepared by DBM; BPF includes multiyear ceilings.
- Recommendation:
  - Expand medium-term budgeting for infrastructure programs in parallel with the new cash-based budget to identify and present the out-year implications of infrastructure programs and projects. Include three-year baseline forecasts for ongoing projects (bottom-up) and three-year estimated ceilings for both ongoing and new projects (top-down).
- Outputs:
  - MTFP separately identifying funding for ongoing and new capital projects.
  - Improved budget decisions on infrastructure highlighting completion of ongoing works and initiation of new projects.
  - Budget documentation, by program, showing the baseline for infrastructure programs for two forward years in addition to the budget year.
  - Both TRIP and PIP updated according to the proposed budget and submitted with the proposed budget to the Parliament.
  - PIP showing both the originally estimated total cost and the updated total cost of projects.
- Implementation measures:
  - Divide MTFP Capital Budget Estimate into ongoing and new spending.
  - Establish indicative ceilings for ongoing and new projects by department.
  - Revise agency budget submissions to show baseline capital spending for two out-years by program.
  - Update TRIP and PIP according to the proposed budget and submit them together with the proposed budget to the Parliament.
  - Provide information on both the originally estimated total cost and the updated total cost of projects in the PIP.
- Actors involved: DBM, NEDA, and line agencies.
- Difficulties and risks:
  - Establishing ceilings for Tier 2 capital budgets could constrain line agencies with respect to the number of new projects.
  - Including out-year baselines could add to information overload; presenting baseline information by program, except for major projects, could reduce burden.

### RECOMMENDATION 4: Make Project Appraisal and Selection More Comprehensive
- Issue:
  - The PIM framework does not always facilitate proper preparation, evaluation, or prioritization of major projects. Implementing major projects without detailed appraisal results in delays, cost escalation, and implementation/budgeting complications. Failure to complete right-of-way and resettlement issues prior to submission impedes implementation and results in delays and cost overruns.
- Recommendation:
  - Resolve all right-of-way and resettlement issues, as well as other environmental and social safeguards issues, prior to project implementation and preferably before completion of project appraisal.
- Outputs:
  - Inclusion of the total cost for land and resettlement issues resulting in a credible and accurate feasibility study.
  - A prioritized major project pipeline containing only projects that have met criteria for financial viability and readiness.
  - Potential major projects subject to scrutiny and value-for-money and fiscal risk analysis by NEDA before entering the PIP.
  - Comprehensive and up-to-date cost estimates.
  - Consideration of total costs before approval, including taxes, exchange rate fluctuation projections, and risk mitigation measures.
  - Protection of funding that supports major projects selected from the national pipeline.
  - Reduction of project delays during implementation with large cost implications.
- Implementation measures:
  - Issue instructions requiring that all right-of-way and resettlement, as well as environmental, issues are resolved prior to project implementation.
  - Require independent review by external experts for high cost or complex projects where possible, and improve implementing agencies' capacity for appraisal and selection.
- Actors involved: Line departments involved in capital projects, DBM, and NEDA.

### RECOMMENDATION 5: Improve Infrastructure Maintenance Funding
- Issue:
  - Lack of application of a standard methodology for maintenance planning and costing, including asset impairment due to natural calamity.
- Recommendations:
  - Require agencies to develop detailed standard methodologies for determining maintenance planning required for capital projects.
  - Involve technical officials of line agencies in methodology preparation, and have methodologies checked by an independent reviewer.
  - Include costing principles in standard methodology to ensure financial integrity of data and results.
- Outputs:
  - Standard methodology for determining maintenance requirements harmonized among line agencies.
  - More uniform, accurate, and reliable costing of maintenance for budgeting purposes.
  - More realistic lifecycle cost of capital projects.
  - Maintenance costs taken into consideration in the project planning stage.
  - Better maintained facilities benefiting the population.
- Implementation measures:
  - Require all agencies to develop and implement standard maintenance requirements for all types of infrastructure assets.
  - Use standard methodology to prepare maintenance cost estimates of existing and planned infrastructure assets.
- Actors involved: Line departments involved in capital projects, DBM, and NEDA.

### RECOMMENDATION 6: Foster Effective Competition in Infrastructure Procurement
- Issue:
  - Although a legal and institutional framework for transparent and competitive public procurement exists, competition is not effective in practice; several instances of a single qualified bidder occur.
- Recommendations:
  - Procurement plans should include measures to promote competition; ex-post reviews should identify factors preventing effective competition.
  - Sensitize procurement officials to potential constraints to effective competition.
  - Enforce stringent sanctions for bidders involved in anti-competitive practices to create effective deterrence.
  - Review and eliminate anti-competitive provisions such as the right-to-match in unsolicited PPP proposals.
  - Revise administrative and judicial processes for addressing bidders’ complaints, including independent review and fast-track procedures.
  - Make procurement information (including full proactive disclosure of contracts) easily accessible to the public, with no barriers to full download of data and contracts.
- Outputs:
  - Revised regulations requiring procurement plans to include measures to promote competition.
  - Study/review of infrastructure procurements undertaken during the past 5-7 years to identify factors preventing effective competition.
  - Training for procurement staff regarding potential constraints to effective competition.
  - Provisions for stringent sanctions for bidders involved in anti-competitive practices.
  - Streamlined administrative and judicial processes for addressing bidders’ complaints, including fast-track procedures.
  - Revamped website with comprehensive procurement information, including full proactive disclosure of contracts and easy accessibility.
- Implementation measures:
  - Conduct review of factors preventing effective competition.
  - Sensitize procurement officials on potential constraints.
  - Introduce stringent sanctions for anti-competitive bidder practices.
  - Modify revised BOT legislation to prohibit anticompetitive practices, such as the right to match.
  - Revise administrative and judicial practices for addressing bidders’ complaints, including independent review and fast-track procedures.
  - Make procurement information easily accessible to the public.
- Actors involved: GPPB, Philippine Competition Commission, PPP Center, line departments, project steering committees, and project managers.
- Difficulties and risks:
  - Establishing pro-competition practices focusing on results rather than procedures.
  - Establishing an effective proactive information disclosure culture related to tender processes and contracts.

### RECOMMENDATION 7: Improve Regulations for Project Cost Adjustments and Variation Orders
- Issue:
  - The practice of increasing total project cost by 10 percent during implementation increases fiscal costs, discourages careful planning, and incentivizes unnecessary additional spending.
- Recommendations:
  - Improve regulations to provide guidance for project cost adjustments.
  - Require justification and costing of variation orders.
  - Require variation orders to be submitted to internal auditors and DBM within 10 working days.
- Outputs:
  - Contract price adjustments only allowed for real unforeseen events/externalities that could not have been envisaged during planning, technical evaluation, and design phases.
  - Project managers involved from project inception to guide appraisal, selection, procurement, and implementation.
  - Control over final project costs.
- Implementation measures:
  - Audit/review current practices to identify major reasons for frequent use of provisions designed for unforeseen events.
  - Change/tighten guidelines, as necessary, in the IRR to specify in detail the reasons allowed for contract price adjustments.
  - Ensure the following for variation orders:
    - Variation order less than 10 percent.
    - Motivation and costing of variation order.
    - Approval of variation order: information on variation forwarded to internal auditors, as well as DBM, within 10 working days.
- Actors involved: GPPB, DBM, NEDA, and ICC.

### RECOMMENDATION 8: Strengthen Central Monitoring of Implementation of Major Projects
- Issue:
  - Current central monitoring focuses on ODA projects and has incomplete information on national government-funded major projects. Project reports are prepared only quarterly, often lag six months or have incomplete information due to lack of submissions by line departments.
- Recommendations:
  - NEDA Monitoring and Evaluation Staff (MES) should monitor all major projects in a more timely manner, covering both ODA and locally funded major projects.
  - Prepare monitoring reports on a monthly basis with additional relevant information useful for senior management to address project problems effectively.
  - Collect information first-hand from project managers and monthly progress meetings instead of relying solely on reports submitted by line departments.
- Outputs:
  - Monthly progress reports to senior management on problems and proposed actions for all major projects, including ODA and national government-funded projects.
  - Annual portfolio review reports to provide the Congress and public an overview of status of all major projects including ODA and national government funded projects.
- Implementation measures:
  - Ensure MES staff participate in monthly progress meetings of line departments and report to senior management on status, problems, and proposed actions in a timely manner.
  - Update monitoring template for monthly and annual reports to include critical and actionable information for senior management.
  - Encourage DBCC to act on project-specific reports on implementation problems.
  - Introduce the Alert Mechanism (currently used for only ODA projects) for major non-ODA projects.
  - Consider replicating the DPWH monitoring practices in other departments as relevant.
- Actors involved: NEDA, line departments having major projects, and PPP Center.
- Difficulties and risks:
  - NEDA-MES may not have enough staff for the proposed monitoring mechanism; consider increasing staff capacity.
  - A monitoring system could be introduced to allow project managers to update project status on a timely basis.

*Source: https://www.imf.org/-/media/files/publications/cr/2019/1phlea2019001.pdf*

### Box 5.A. Malaysia Project Monitoring System

### Box 5.A. Malaysia Project Monitoring System

### Overview
- The Malaysia Project Monitoring System called SPP II assists the government in the effective monitoring of all projects.
- The system is an award-winning tool that generates monitoring reports for weekly monitoring by ministries and agencies, monthly monitoring reports for senior management, and yearly reports to provide a condensed view of the status and progress of all projects.
- Source: IMF mission.

### Objectives
- Monitor the financial and physical progress and status of all projects, overall and in terms of the execution of government funding.
- Identify project risks on a monthly basis to empower project managers and central agencies to act quickly when problems are identified.

### Measurement approach
- The system measures projects through the California Expenditure Curve (S-curve) principal, which indicates percent time lapsed versus percent money spent, and generates an early warning on project issues and risks.

### Key features and modules
- Contains vital project information, such as the Geographic Information System (GIS) Module that enable system users to have a clear view of the physical location of the project.
- GIS information enhances the ability to monitor progress by region.

### Reporting and outputs
- Generates a Problem Identification Report that identifies all categories of issues that were not well-managed during the year and that resulted in cost and time overruns.
- The purpose of the Problem Identification Report is to compile a lessons learned matrix.
- Reports are simple to understand and can be interpreted by technical, financial, and political personnel.

### Intended use and users
- Weekly monitoring by ministries and agencies.
- Monthly monitoring reports for senior management.
- Yearly condensed overviews for government officials.

*Source: IMF mission.*

### 14. Management of Project Impleme

### 14. Management of Project Implementation: Are capital projects well managed and controlled during the execution stage?

### 14.a. Do ministries/agencies have effective project management arrangements in place?
- Findings (three-tier descriptors):
  - "Ministries/agencies do not systematically identify senior responsible officers for major investment projects, and implementation plans are not prepared prior to budget approval."
  - "Ministries/agencies systematically identify senior responsible officers for major investment projects, but implementation plans are not prepared prior to budget approval."
  - "Ministries/agencies systematically identify senior responsible officers for major investment projects, and implementation plans are prepared prior to budget approval."

### 14.b. Has the government issued rules, procedures, and guidelines for project adjustments that are applied systematically across all major projects?
- Findings (three-tier descriptors):
  - "There are no standardized rules and procedures for project adjustments."
  - "For major projects, there are standardized rules and procedures for project adjustments, but do not include, if required, a fundamental review and reappraisal of a project’s rationale, costs, and expected outputs."
  - "For all projects, there are standardized rules and procedures for project adjustments and, if required, include a fundamental review of the project’s rationale, costs, and expected outputs."

### 14.c. Are ex-post audits of capital projects routinely undertaken?
- Findings (three-tier descriptors):
  - "Major capital projects are usually not subject to ex-post external audits."
  - "Some major capital projects are subject to ex-post external audit, information on which is published by the external auditor."
  - "Most major capital projects are subject to ex-post external audit, information on which is regularly published and scrutinized by the legislature."

### 15. Monitoring of Public Assets: Is the value of assets properly accounted for and reported in financial statements?

### 15.a. Are asset registers updated by surveys of the stocks, values, and conditions of public assets regularly?
- Findings (three-tier descriptors):
  - "Asset registers are neither comprehensive nor updated regularly."
  - "Asset registers are either comprehensive or updated regularly at reasonable intervals."
  - "Asset registers are comprehensive and updated regularly at reasonable intervals."

### 15.b. Are nonfinancial asset values recorded in the government financial accounts?
- Findings (three-tier descriptors):
  - "Government financial accounts do not include the value of non-financial assets."
  - "Government financial accounts include the value of some non-financial assets, which are revalued irregularly."
  - "Government financial accounts include the value of most nonfinancial assets, which are revalued regularly."

### 15.c. Is the depreciation of fixed assets captured in the government’s operating statements?
- Findings (three-tier descriptors):
  - "The depreciation of fixed assets is not recorded in operating statements."
  - "The depreciation of fixed assets is recorded in operating statements, based on statistical estimates."
  - "The depreciation of fixed assets is recorded in operating expenditures, based on asset-specific assumptions."

### Cross-cutting issues
- A IT support.
  - "Is there a comprehensive computerized information system for public investment projects to support decision making and monitoring?"
- B Legal Framework.
  - "Is there a legal and regulatory framework that supports institutional arrangements, mandates, coverage, procedures, standards, and accountability for effective PIM?"
- C Staff capacity.
  - "Does staff capacity (number of staff and/or their knowledge, skills, and experience) and clarity of roles and responsibilities support effective PIM institutions?"

### Appendix II. PIMA Detailed Scores for the Philippines
- Color coding note: "The following color coding is used in presenting the scores."
- Scores table (Institutional strength / Effectiveness) — selected entries as presented:
  - A. Planning
    - 1.a: 2 3
    - 1.b: 1 2
    - 1.c: 2 2
    - 2.a: 3 2
    - 2.b: 2 2
    - 2.c: 3 3
    - 3.a: 3 2
    - 3.b: 2 2
    - 3.c: 1 1
    - 4.a: 2 1
    - 4.b: 3 2
    - 4.c: 2 1
    - 5.a: 2 2
    - 5.b: 2 2
    - 5.c: 2 1
  - B. Allocation
    - 6.a: 1 1
    - 6.b: 1 1
    - 6.c: 3 2
    - 7.a: 2 3
    - 7.b: 3 2
    - 7.c: 2 2
    - 8.a: 1 2
    - 8.b: 2 3
    - 8.c: 3 3
    - 9.a: 2 1
    - 9.b: 2 1
    - 9.c: 2 1
    - 10.a: 2 1
    - 10.b: 2 2
    - 10.c: 2 1
  - C. Implementation
    - 11.a: 2 1
    - 11.b: 3 2
    - 11.c: 1 1
    - 12.a: 3 3
    - 12.b: 3 2
    - 12.c: 2 2
    - 13.a: 2 2
    - 13.b: 2 2
    - 13.c: 2 1
    - 14.a: 2 2
    - 14.b: 3 2
    - 14.c: 2 1
    - 15.a: 3 2
    - 15.b: 3 2
    - 15.c: 3 2

*Source: 1phlea2019001 - 14. Management of Project Impleme (IMF PIMA chapter content).*

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_Source: https://www.imf.org/-/media/files/publications/cr/2019/1phlea2019001.pdf_