rfa-492-12-000031 paunlad project.pdf

U.S. Agency for International Development

8/F PNB Financial Center Tel: +632-552-9800

Pres. Diosdado Macapagal Boulevard Fax:+632-551-9897

Pasay City, Philippines 1308 www.philippines.usaid.gov

RFA Issuance Date: August 31, 2012 Deadline for Receipt of Questions: September 11, 2012

Deadline for Receipt of Applications: October 15, 2012, 12noon, Manila local time

Subject: Request for Applications (RFA-492-12-000031): Philippine-American Fund for Entrepreneurship and Local Assistance for Development (PAUNLAD) Project

Dear Prospective Applicant:

The United States Agency for International Development Mission in the Philippines (USAID/Philippines) is seeking applications from eligible local Philippine organizations for a cooperative agreement in support of a five‐year project entitled, “Philippine-American Fund for Entrepreneurship and Local Assistance for Development (PAUNLAD)”, as fully described in this Request for Applications (RFA).

The PAUNLAD Project looks to establish a grant-making facility that provides seed grants to support business start-ups, promote innovation through entrepreneurship, and advance citizen advocacy for greater public accountability, transparency and integrity. The PAUNLAD Project, also referred to as the PAUNLAD Grant Facility, will oversee and manage the fund on behalf of USAID/Philippines. This grant administration entails issuing solicitations to local organizations, reviewing and pre-screening applications, awarding grants, monitoring and evaluating grant performance, closing out grants, and reporting to USAID. Qualifying sub-grantees of this seed funding must be chosen through local competitive processes. Individual sub-grants are expected to be at least ₱10,000,000. Sub-grants of smaller amounts may also be considered for innovative proposals that meet USAID objectives.

The PAUNLAD Project carries a total estimated budget of US$15,000,000 over a five-year grant-making and disbursement period. Approximately 80% of the PAUNLAD budget should be allocated towards sub-grants.

This funding opportunity is posted in Grants.gov, the U.S. government‐wide portal for grant and cooperative agreement opportunities. This RFA, complete with the application package, can be downloaded by interested applicants from www.grants.gov. The RFA package consists of this cover letter and the following:

Section I – Funding Opportunity Description;

Section II – Award Information;

Section III – Eligibility Information;

Section IV – Application and Submission Information;

Section V – Application Review Information;

Section VI – Award and Administration Information;

Section VII – Agency Contacts; and Section VIII – Annexes.

http://www.philippines.usaid.gov/ http://www.grants.gov/

It is the Applicant’s responsibility to ensure that the RFA is downloaded in its entirety, including any future amendments. USAID bears no responsibility for data errors resulting from transmission or conversion processes.

Subject to the availability of funds, USAID intends to award a cooperative agreement to the successful applicant. USAID reserves the right to fund any or none of the applications received.

An applicant being considered for award who has never had a USAID grant, cooperative agreement, or contract, or has not received an award from any other U.S. agency within the last five years, will be subject to a pre‐award survey to determine whether it has the necessary organization, experience, accounting and operational controls, and technical skills in order to achieve the objectives of the program.

All applications must be in the English language and must be received by the Regional Office of Acquisition and Assistance, USAID/Philippines, 8th Floor PNB Financial Center, Pres. Diosdado Macapagal Boulevard, Pasay City no later than the deadline date and time indicated at the top of this cover letter and in accordance to the instructions contained in this RFA.

Applicants must submit one (1) original and three (3) copies of the technical application, and one (1) original and one (1) copy of the cost application. Technical and cost applications must be kept separate and identified as such, with the name and address of the applicant, and the title and number of the RFA inscribed thereon. Late or incomplete applications will not be considered in the review process.

In addition to hard copies, the applications must be submitted in electronic form via email to manilapaunlad@usaid.gov with a copy to orpmailbox@usaid.gov. Receipt of applications via email will be confirmed. Note however that applications received only in electronic form will not be considered.

Any questions on the information contained in this RFA must be sent to Ma. Belinda de la Torre, Senior Acquisition and Assistance Specialist, at manilapaunlad@usaid.gov with subject line: “Questions on PAUNLAD RFA from *Name of Organization+” by the specified due date above. If it is determined that the answers to any questions are of sufficient importance to warrant notification to all applicants, a Questions and Answers document, and/or if needed, an amendment to the RFA will be posted at www.grants.gov.

A pre‐application conference will be held on September 14, 2012, 2:00 pm at the Main Conference Room, USAID/Philippines, 8th Floor, PNB Financial Center, Pres. Diosdado Macapagal Boulevard, Pasay City. Interested applicants who wish to attend the pre-application conference must send an email with the names of representatives and their position titles to manilapaunlad@usaid.gov with the subject line:

“Interested Applicant – *Name of Organization+”. Since space is limited, only two representatives from each organization will be allowed.

The issuance of this RFA does not constitute an award commitment on the part of USAID, nor does it commit USAID to pay for costs incurred in the preparation and submission of an application. In addition, final award of any resultant agreement cannot be made until funds have been fully appropriated, allocated and committed through internal USAID procedures. While it is anticipated that these procedures will be successfully completed, potential applicants are hereby notified of these requirements and conditions for award.

mailto:paunlad@usaid.gov mailto:orpmailbox@usaid.gov mailto:paunlad@usaid.gov http://www.grants.gov/ mailto:manilapaunlad@usaid.gov

Applications are submitted at the risk of the Applicant. Should circumstances prevent award of a cooperative agreement, all preparation and submission costs are at the Applicant’s expense.

Thank you for your consideration of this USAID initiative. We look forward to your organization’s participation.

Sincerely, /s/ Sallie H. McElrath Agreement Officer

TABLE OF CONTENTS

LIST OF ACRONYMS

SECTION I – FUNDING OPPORTUNITY DESCRIPTION

A. PROGRAM DESCRIPTION FOR PAUNLAD PROJECT

1. Introduction

1(a) Background 1(b) The Partnership for Growth and the USAID/Philippines Country Strategy 1(c) Relationship to Development Priorities of the Government of the Philippines

2. Problem Analysis and Overview 2(a) Unmet Socio-economic Promise 2(b) Philippine Citizenship in the Face of Economic and Power Asymmetries

3. Goal and Objectives

4. Program of Work

4(a) Component Activities 4(b) Sub-Grants 4(c) Critical Issues and Considerations

5. Anticipated Results and Recommended Indicators 5(a) Sub-Grants for Governance Themes 5(b) Sub-Grants for Economic Growth Themes

6. Relationship with Other USAID Activities in Support of the PFG 6(a) Trade-Related Assistance for Development (TRADE) Project 6(b) Investment Enabling Environment (INVEST) Project 6(c) Advancing Philippine Competitiveness (COMPETE) Project 6(d) Development Credit Authority (DCA) Loan Portfolio Guarantee (LPG) 6(e) Integrity for Investments Initiative (I3) Project 6(f) Judicial Strengthening to Improve Court Effectiveness (JUSTICE) Project 6(g) Strengthening the Capacities of Civil Society Organizations (CSO) in the Philippines Project24 6(h) Facilitating Public Investment (FPI) Project

7. Counterparts and Partner Agencies

8. Performance Management Plan

9. Environmental Compliance

10. References

B. AUTHORIZING LEGISLATION

C. PROJECT ELIGIBILITY REQUIREMENTS

D. AWARD ADMINISTRATION

SECTION II – AWARD INFORMATION

A. ESTIMATED FUNDING AND NUMBER OF AWARDS

B. PERIOD OF PERFORMANCE

C. AWARD TYPE

SECTION III – ELIGIBILITY INFORMATION

A. APPLICANTS

B. COST SHARING

C. NEW PARTNERS

SECTION IV – APPLICATION AND SUBMISSION INFORMATION

A. POINT OF CONTACT (POC)

B. REQUESTS FOR CLARIFICATIONS

C. PRE-APPLICATION CONFERENCE

D. ELIGIBILITY DOCUMENTS

E. REQUIRED FORMS

F. PRE-AWARD CERTIFICATIONS, ASSURANCES, AND OTHER STATEMENTS OF THE RECIPIENT

G. DATA UNIVERSAL NUMBERING SYSTEM (DUNS) NUMBER

H. EVIDENCE OF CENTRAL CONTRACTOR REGISTRATION

I. APPLICATION AND SUBMISSION INSTRUCTIONS

1. Preparation Guidelines

2. Technical Application

3. Cost Application

4. Electronic Payment

SECTION V – APPLICATION REVIEW INFORMATION

A. TECHNICAL EVALUATION CRITERIA

1. Management Structure (65 points)

2. Technical Approach and Implementation Schedule (15 points)

2(a) Overall Technical Quality – 10 points 2(b) Implementation Schedule – 5 points

3. Institutional Capability and Past Performance (10 points)

4. Monitoring and Evaluation Plan (10 points)

B. COST EFFECTIVESS AND COST REALISM

C. PRE-AWARD RESPONSIBILITY DETERMINATION

D. AWARD CONSIDERATIONS

SECTION VI – AWARD AND ADMINISTRATION INFORMATION

A. NOTIFICATION TO APPLICANTS

B. STANDARD PROVISIONS AND DEVIATIONS

C. BRANDING STRATEGY AND MARKING PLAN

D. REPORTING REQUIREMENTS

1. Financial Reporting

2. Program Reporting

2(a) Annual Implementation Plan 2(b) Monitoring and Evaluation Plan 2(c) Program Performance Reports 2(d) Annual Performance Reports 2(e) Final Report

SECTION VII – AGENCY CONTACTS

SECTION VIII – ANNEXES

Philippine-American Fund for Entrepreneurship and Local Assistance for Development – PAUNLAD Project RFA-492-12-000031 Page 6 of 57

LIST OF ACRONYMS

ADS USAID’s Automated Directives System AO Agreement Officer

AOR Agreement Officer’s Representative ADB Asian Development Bank BIP Branding Implementation Plan CCR Central Contractor Registration CDI Cities Development Initiative COMPETE Advancing Philippine Competitiveness Project COP Chief of Party CFR U.S. Code of Federal Regulation CSO Civil Society Organization D&B Dun and Bradstreet, Inc.

DCA Development Credit Authority DOF Philippine Department of Finance DUNS Data Universal Numbering System FPI Facilitating Public Investment GCI Global Competitiveness Index GDP Gross Domestic Product GPH Government of the Philippines I3 Integrity for Investments Initiative Project IPR USAID Forward’s Implementation and Procurement Reform INVEST Investment Enabling Environment Project JUSTICE Judicial Strengthening to Improve Court Effectiveness Project LPG Loan Portfolio Guarantee M&E Monitoring and Evaluation MCC Millennium Challenge Corporation NICRA Negotiated Indirect Cost Rate Agreement NGO Non-Governmental Organization OMB U.S. Office of Budget and Management PAUNLAD Philippine-American Fund for Entrepreneurship and Local Assistance for Development Project PDP Philippine Development Plan PFG Partnership for Growth PGRB PAUNLAD Grants Review Board PHP Philippine Peso PMP Performance Monitoring Plan POC Point of Contact PWD People with Disabilities RFA Request for Application SEC Philippine Securities and Exchange Commission SME Small and Medium Enterprise TRADE Trade-Related Assistance for Development Project USAID United States Agency for International Development USD United States Dollar USG United States Government VC Venture Capital

RFA-492-12-000031 Page 7 of 57

SECTION I – FUNDING OPPORTUNITY DESCRIPTION

A. PROGRAM DESCRIPTION FOR PAUNLAD PROJECT

1. Introduction

1(a) Background

The United States Agency for International Development, Philippines (USAID/Philippines) looks to establish the Philippine-American Fund for Entrepreneurship and Local Assistance for Development (PAUNLAD) to finance local partnerships that support the economic growth and good governance objectives of the Partnership for Growth (PFG) Initiative. The PFG seeks to address the most serious constraints to economic growth and development in the Philippines. The PAUNLAD Project will provide seed grants that support business start-ups, promote innovation through entrepreneurship, and advance citizen advocacy for greater public accountability, transparency and integrity. The PAUNLAD Project, also referred to as the PAUNLAD Grant Facility, will oversee and manage the fund. PAUNLAD will complement other support being given by the United States Government (USG) to the Government of the Philippines (GPH) in advancing the goals of the PFG. By working through a local implementing organization, and providing sub-grants to local organizations, PAUNLAD also contributes to USAID’s goals for working more with host country systems in line with the agency’s USAID Forward reform agenda.

The PAUNLAD Project will establish a grant-making facility to provide seed funding to qualifying sub-grantees through a local, competitive process. USAID/Philippines seeks proposals from Applicants to manage and administer this grant facility on behalf of USAID through a cooperative agreement. This grant administration entails issuing solicitations, reviewing and pre-screening proposals, awarding grants, monitoring and evaluating grant performance, closing out grants, and reporting to USAID. By issuing sub-grants that support inclusive growth, the PAUNLAD Project will contribute to two broad components contemplated under the PFG: governance and enterprise development. Subject to USAID approval, awards made under the facility will fund local, non-sovereign entities (private enterprises and civil society organizations) in efforts to reduce levels of corruption, accelerate employment generation, and contribute to a more competitive, market-driven economy.

1(b) The Partnership for Growth and the USAID/Philippines Country Strategy

The PAUNLAD grant mechanism, along with PFG planned technical assistance across areas of economic growth and governance, will assist the Philippines achieve the goal of moving from a low growth path to a higher, sustained and more inclusive growth trajectory on par with other high-performing emerging economies. PAUNLAD will contribute to Development Objective 1 (“broad based and inclusive growth accelerated and sustained”) of USAID/Philippines’ draft Country Development Cooperation Strategy.

Partnership for Growth (PFG)

USAID will play a leading role in implementing the USG-GPH PFG in the Philippines. An inter-agency effort under the US Presidential Policy Directive on Global Development, the PFG advances economic growth in countries committed to good governance.1 The goal of the PFG bilateral engagement is to shift the Philippines from a low growth path to a higher, sustained and more inclusive growth on par with other high-performing emerging economies. The GPH and USG plan to work together to accomplish this goal through the following objectives:

For more information on the PFG, visit http://www.state.gov/r/pa/prs/ps/2011/11/177225.htm.

http://www.state.gov/r/pa/prs/ps/2011/11/177225.htm

RFA-492-12-000031 Page 8 of 57

Create a more transparent, predictable, and consistent legal and regulatory regime in the Philippines, one that is less encumbered by corruption;

Foster a more open and competitive business environment with lower barriers to entry;

Strengthen the rule of law that is grounded in an efficient court system capable of delivering timely justice; and

Support fiscal stability through better revenue administration and expenditure management.2

The PFG will provide USG assistance and non-assistance resources over the next five years to assist the Philippines overcome binding constraints to investment expansion and capital formation for increased employment and higher incomes.3 The implementing partner for the PAUNLAD Project will have considerable interaction and coordination with implementers of other parts of the PFG, including implementers of the other USAID-managed projects and other USG agencies participating in the PFG.

Cities Development Initiative (CDI)

Some PAUNLAD sub-grants will support activities that complement other USAID project objectives in specific geographical areas where USAID/Philippines is implementing the Cities Development Initiative (CDI). This Initiative begins with the assumption that growth trajectories of nations are closely linked to the urban environment, where cities act as engines of economic growth. In line with the PFG, CDI seeks to assist the Philippines to promote higher, sustained and more inclusive growth by providing a range of development interventions in targeted cities. Activities aim to:

Improve the investment climate by fostering a more open and competitive business environment less encumbered by corruption and regulatory burdens;

Support investments in high-value industry clusters;

Facilitate infrastructure improvements and public service delivery; and

Enhance human capacity resources to take advantage of emerging economic opportunities.

This initiative embodies a cross-cutting development intervention that takes a whole-of-Mission approach to work strategically in targeted cities. To maximize USAID’s contribution and impact, USAID/Philippines’ resources will be leveraged and (re)directed to support economic development in priority cities ripe for higher growth. Designed in collaboration with local partners, a development assistance package will be launched, comprising a series of mutually re-enforcing development interventions cutting across all the technical offices.4 These development interventions derive from existing projects (reprogrammed to prioritize targeted cities) and future interventions currently in the design phase. Criteria for city selection includes: an enabling environment for growth; credible city government commitment to economic reforms and good governance; committed local partners;

engaged private sector community; and likelihood of producing impact. Pilot cities (Batangas, Cagayan de Oro, Iloilo) have been chosen to test this innovative approach to USAID programming in support of

Informed by current research and field assessments, a USG and GPH economic team conducted an analysis of the binding constraints to growth in the Philippines to prioritize key interventions to be undertaken by the PfG. The growth diagnostics and constraints analysis study provided a guide in developing a focused strategy intended to maximize the impact of development efforts. This assessment identified weak governance and narrow fiscal space as the two binding constraints to growth. Joint USG-GPH Technical Team, Constraints Analysis (Manila: Partnership for Growth: Philippines, 2011).

The Joint Country Action Plan for Implementing the PFG is a public document available on the USAID website:

http://philippines.usaid.gov/sites/all/themes/sample/docs/Philippines-PFG-JCAP_public-final_11-29-11.pdf.

These technical offices include: the Office of Economic Development and Governance, Office of Education, Office of Energy, Environment, and Climate Change, and Office of Health.

http://philippines.usaid.gov/sites/all/themes/sample/docs/Philippines-PFG-JCAP_public-final_11-29-11.pdf

RFA-492-12-000031 Page 9 of 57 inclusive growth and development. The initiative will be scaled and expanded to additional cities in subsequent years.

USAID Forward – Implementation and Procurement Reform (IPR)

USAID has embarked on an ambitious reform effort, USAID Forward, to change the way the Agency does business. USAID Forward aims to modernize and strengthen USAID so that it can meet the most pressing development challenges and work more efficiently towards its ultimate goal—creating the conditions where USAID involvement is no longer needed.

As part of the reform efforts under USAID Forward, the Agency is committed to changing its business processes by contracting with, and providing grants to, more and varied local partners through Implementation and Procurement Reform (IPR). Integral to USAID’s IPR, the PAUNLAD Project seeks to build more local capacity, while also streamlining Agency procedures so that USAID can work with a broader range of partners and increase procurement competition. As a leading implementer of IPR for the agency, USAID/Philippines aims to establish true partnerships to create the conditions where aid is no longer necessary in the country. As envisioned by the PAUNLAD Grant Facility, this important USAID Forward reform initiative seeks to reestablish implementation mechanisms that permit USAID to engage directly with local partner entities (enterprises and organizations). The undertaking is crucial to achieving the permanent and transformational development results that the USG seeks to advance. This approach ensures that a greater share of development dollars are directed to the Philippine economy and that local institutions will have a stronger capability for contributing to and sustaining the country’s development. Specifically, the PAUNLAD Project will support IPR Objective 2: strengthen local civil society and private sector capacity to improve aid effectiveness.

1(c) Relationship to Development Priorities of the Government of the Philippines

The PAUNLAD Project seeks to fulfill the goals of the 2011-2016 Philippine Development Plan (PDP) of improving the country’s national competitiveness by, among others, catalyzing entrepreneurship in priority, high-growth sectors of the economy. The Project also aims to promote the PDP’s normative standards of good governance by fostering participation, ensuring transparency, demanding accountability, promoting efficiency, and upholding the rule of law in economic, political, and administrative institutions and processes.5

2. Problem Analysis and Overview

2(a) Unmet Socio-economic Promise

In the early years following World War II, the Philippines seemed poised for long-term economic success. Within Asia, only Japan had a higher standard of living. By the early 1990s, the country was routinely dismissed as being behind other economies in a fast-growing region. Over the years, economic gains have proven relatively modest, short-lived, and unevenly distributed. As some suggest, the Philippines contains all the ingredients for developmental success: a rich endowment of natural resources; entrepreneurial talents; an educated and Anglophone workforce; a community of economists and development specialists; and abundant overseas assistance. Yet, the country has been unable to convert its substantial developmental assets into economic success.

Poverty continues to be a problem, especially in the rural countryside,6 despite moderate economic growth in recent years. Hindering the positive impact of growth on poverty reduction, inequality

Government of the Philippines, Philippine Development Plan 2011-2016 (Manila, 2011).

As of 2009, poverty headcount ratio at national poverty line (% of population) stood at 26.5%. World Bank, World

Bank Database, data.worldbank.org/country/philippines. For a recent discussion of poverty in the Philippines, see

RFA-492-12-000031 Page 10 of 57 remains stubbornly high, limiting sustained growth and the country’s overall development. In short, growth has not been inclusive.7 As a result, the Philippines continues to suffer from a dualistic economic structure marked by a small industrial base, on the one hand, and the relatively unproductive agricultural and services sector, on the other.8 The country’s stagnant industrial sector translates into a chronic deficit in productivity growth, high unemployment, slow poverty reduction, and low investments in comparison to its regional neighbors.9

Structural dualism in the economy has severe consequences, particularly on job creation in the formal sector. Despite the need for highly skilled workers in the urban industrial sector, for example, the unemployment rate for college-educated persons is higher than less educated workers.10 Ironically, the country faces an emerging skills gap, particularly in the service and manufacturing sectors.11 Over the past decade, an average of 846,000 Filipinos enter the workforce each year; but the economy lacks the capacity to create quality jobs to absorb this labor market. Recent projections also paint a gloomy outlook for the labor force, which is projected to increase by over 50% from 34 million (in 2005) to 52 million (in 2030). In the Philippines, unemployment has been characterized as a ‘time bomb.’12 Even with access to overseas job market, the Philippines will need to attract major investments to create employment domestically. Local business leaders stress that creating new jobs and training workers with skills needed in existing and emerging industries are the two most serious challenges for the Philippine economy in the coming decades.13

In the view of some, the close overlap between politics and big business has created roadblocks for outsiders and new market entrants in their efforts to gain access and influence, resulting in a political economy that impedes Philippine development.14 As a result, high income-inequality thwarts the aspirations of a narrow middle-class whose response to economic incentives often leads to out-migration.

Asian Development Bank, Poverty in the Philippines: Causes, Constraints, and Opportunities. (Mandaluyong City:

Asian Development Bank, 2009).

As measured by the Gini coefficient, income distribution in the Philippines is highly uneven. The country’s Gini coefficient of 43.0 is among the highest in Asia. World Bank, World Bank Database, data.worldbank.org/country/philippines. A Gini index of 0 denotes perfect equality, while an index of 100 implies perfect inequality.

See Paul Krugman, J. Alms and E. Remolona, Transforming the Philippine Economy (Quezon City: APO Production

Unit, 1992); and John V.C. Nye, Taking Institutions Seriously: Rethinking the Political Economy of Development in the Philippines, Vol. 28, 1 vols. (Asian Development Review).

Nori Usui, Transforming the Philippine Economy: “Walking on Two Legs”, Asian Development Bank (Mandaluyang

City: ADB Economics Working Paper Series No. 252, March 2011).

Nye, Taking Institutions Seriously.

Human Development Department, East Asia and Pacific Region, Philippines Skills Report: Skills for the Labor Market in the Philippines (World Bank, March 2010).

Jesus Felipe, Growth, Full Employment, and Structural Change: Implications and Policies for Developing Asia (Mandaluyang: Asian Development Bank, 2010).

Joint Foreign Chambers of Commerce of the Philippines, Arangkada Philippines 2010: a Business Perspective (Makati City: American Chamber of Commerce of the Philippines, Inc., 2010).

Paul D. Hutchcroft, Booty Capitalism: The Politics of Banking in the Philippines (Ithaca, NY: Cornell UP, 1998).

Through an examination of interactions between the state and the major families of the oligarchy in the banking sector since 1960, the book highlights the Philippines as an archetypal relationship between political and economic development in the modern Third World.

RFA-492-12-000031 Page 11 of 57

2(b) Philippine Citizenship in the Face of Economic and Power Asymmetries

The Philippines boasts one of Asia’s oldest and liveliest democracies, in terms of public interest and participation in the electoral process. Framed in 1987 following the ousting of dictator Ferdinand Marcos, the current constitution guarantees ‘life, liberty, and property’ in a US-style bill of rights. The success of the Philippines first automated polls in the 2010 contributed to greater trust in the electoral process and in the credibility of the Commission on Elections.15 By some estimates, the Philippines benefits from a vast community of civil society, think tank, media, academic, and private sector organizations.

Despite a long tradition of democracy, the Philippines experiences weak governance, inconsistent rule of law, and widespread corruption. Deep social and political divisions continue to persist alongside problems of inefficiency and corruption in government. Governance issues present binding constraints to broad-based economic growth in the Philippines. In 2011, the Philippines ranked 129th, below 70 percent of all countries surveyed in the Corruption Perceptions Index, which measures the perceived level of public corruption in 178 countries.16 According to the World Governance Indicators, the Philippines has consistently ranked in the lower half of six dimensions of governance.17 Corruption continues to undermine the faith of its citizens in local and national government institutions and hampers the ability of these institutions to deliver public services, improve people’s welfare, and protect their rights. In effect, weak governance poisons the implicit social contract of citizenship. Moreover, political instability, corruption, and weak rule of law have severe negative effects on investments.

Corruption increases the cost of doing business, deters both foreign and domestic investment and pre-empts competition. The Global Competitiveness Index (GCI) ranked the country 75th out of 142 economies in 2011-2012. The GCI Report listed corruption and inefficient government bureaucracy as the two most damaging factors to doing business in the Philippines.18

While economic gains in early 2012 are encouraging (with GDP growth of 6.4% in the first quarter of 2012), 19 more sustained efforts are needed to produce inclusive, broad-based growth in the Philippines.

Over 10% of the population live and work abroad.20 According to surveys, a staggering one in five Filipinos wants to migrate.21 In such an environment of limited economic opportunity, the vibrant Philippine democracy settles into an uneasy and unstable truce in a clan-patronage system lacking meaningful countervailing forces and interest groups to balance competing claims upon the state.

Nonetheless, the political outlook for the country points to improving governance, with multiple signs of improved accountability and much needed reforms.22 The Aquino administration has made a point of placing the fight against corruption at the top of his agenda, and this commitment is also reflected in the Good Governance and Rule of Law Chapter of the PDP. In this Plan, the GPH lays out its commitment to

Social Weather Stations, June 28, 2010. Second Quarter 2010 Social Weather Survey: 75% of Filipinos satisfied with the conduct of the May 2010 Elections.

See www.transparency.org

See info.worldbank.org/governance/wgi/sc_country.asp

GCI defines competitiveness as the set of institutions, policies, and factors that determine the level of productivity of a country. A copy of the report is available at http://reports.weforum.org/global-competitiveness- 2011-2012/ http://www.nscb.gov.ph/

Oxford Business Group, 2009. The report: The Philippines 2009.

Walden Bello, Herbert Docena, Marissa de Guzman and Marylou Malig, The Anti-Development State: the Political Economy of Permanent Crisis in the Philippines (New York: Focus on the Global South, 2004).

Business Monitor International, Philippines Business Forecast Report Q1 2012 (London: Business Monitor International).

http://www.transparency.org/ file:///C:/Documents%20and%20Settings/jsoukamneuth/Local%20Settings/Temporary%20Internet%20Files/Content.Outlook/YGOYHSEN/info.worldbank.org/governance/wgi/sc_country.asp http://reports.weforum.org/global-competitiveness-2011-2012/ http://reports.weforum.org/global-competitiveness-2011-2012/

RFA-492-12-000031 Page 12 of 57 decisively curb corruption by ensuring the speedy resolution of large-scale corruption cases, strictly enforcing anticorruption laws and policies, intensifying corruption prevention efforts, and strengthening integrity mechanisms. The PDP outlines a legislative and policy agenda intended to improve the legal framework for anticorruption, and pledges to expand and harness private sector initiatives that promote good corporate governance. Efforts already underway indicate a commitment to greater transparency and accountability in government, and recognition of good governance practices, at the local and national levels. Furthermore, the judiciary has demonstrated a continued commitment to implementing reforms to promote efficiency and reduce delay, fill-up court vacancies, develop the capacities of judges and court personnel, reward good performance, and enforce discipline on erring personnel.

Efforts to support and empower civil society organizations (CSOs) need to be deepened, strengthened, and strategically directed in reform areas that redress the dualist nature of country’s political economy.

As a manifestation of political and economic competition in the market-place for ideas, these interest groups provide key tools to check the integrity of public offices and a fundamental counterbalance to bolster reforms in the public sector and the wider political economy.

Capacity is robust in the civil society sector of the Philippines. Filipino CSOs are among the most vibrant and diverse in the region and have made great strides in pushing reform over the last two decades, including in the areas of procurement, corruption, elections and local governance. The business sector likewise participates in policy-making; many foreign and local businesses make their views known through the trade and industry associations around the country. In the Philippines, CSOs have become involved in monitoring public budgeting and expenditures, analysis of public perceptions on corruption, online reporting of corruption, and monitoring of compliance on regulations such as public disclosure and third party oversight of government contracting processes. In terms of procurement, civil society oversight is required by law.23 Media freedom is guaranteed in the Philippine Constitution, and there are no licensing restrictions and few legal limitations for journalists, at local and national levels, who freely cover even controversial governance issues, including corruption. These CSO efforts need to be deepened and strengthened, as they are key tools to check the integrity of offices and a fundamental counterbalance to public sector reform efforts. They can promote greater transparency, and sunshine policies that improve society’s access to information.

3. Goal and Objectives

The ultimate goal of PFG is to shift the Philippines from a low growth path to a higher, sustained and more inclusive growth trajectory on par with other high-performing emerging economies. The PAUNLAD Grant Facility will support non-State actors in activities that contribute to this overarching goal of the PFG. PAUNLAD sub-grants seek to improve government accountability and transparency, strengthen the trade and investment environment, catalyze entrepreneurship, support business start-ups, and fortify the underutilized potential of the Philippines’ human, economic and natural resources. PAUNLAD sub-grants aim to engage citizen participation and advocacy, and unfetter the country’s entrepreneurial spirit for economic empowerment that eventually leads to a broader middle class able to advance more enforceable claims of citizenship.

The Philippines’ primary statute on public procurement is Republic Act (RA) No. 9184, called the “Government Procurement Reform Act of 2003.” Section 13 of the GPRA indicates that at all stages of procurement, the Bids and Awards Committee (BAC) is required to invite observers, those being from a duly recognized professional organization in a sector or discipline relevant to the procurement at hand, or from a non-governmental organization.

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4. Program of Work

4(a) Component Activities

As a part of its commitment under the PFG, USAID will award a cooperative agreement that establishes a grant-making facility that funds local, non-sovereign entities (enterprises and organizations) in efforts to advance citizen advocacy for greater accountability and integrity and at the same time promote enterprise development through such initiatives as supporting business start-ups. The PAUNLAD Project will entail creating a grant-making facility and subsequently, administering sub-grants that provide seed funding to qualifying recipients through a local, competitive process.

The Applicant will be responsible for ensuring that sub-grants issued within the PAUNLAD Project are selected and directed such that they contribute to PFG governance and economic growth objectives through achieving desired results such as those detailed below. Furthermore, the eventual implementer of PAUNLAD will be required to strategically focus the sub granting activities such that the sub-grants are proportionate to and substantively reflect the categories of funding allowed for this USAID Project, anticipated to be divided roughly in half between and governance/rule of law and economic growth objectives.

In order to facilitate monitoring and for consistency in the evaluation of applications to manage the PAUNLAD Grants Facility, USAID requests Applicants to use these components in their application:

Component #1: Governance Sub-Grants to Advance Integrity and Transparency

USAID supports more legitimate, inclusive and effective governments that are responsive to the needs of their people. In line with other efforts to strengthen rule of law and improved governance within the Partnership for Growth, the “governance” sub-grants within this component of the PAUNLAD Project will promote effectiveness as well as transparency, accountability, and citizen participation in government institutions and public policy reform processes. The existence of diverse and competing interests forms the basis for stronger checks and balances to the benefit of an efficient market economy. Greater integrity and accountability on the part of government institutions will reduce room for corrupt practices and their consequences, thereby resulting in more efficient delivery of public services, a better perception of government, and consequently, improved confidence by citizens and investors in the Philippine economy and state.

This component of the grant-making facility will focus on supporting civil society efforts to combat corruption, promote rule of law, promote market-enabling institutions, bolster corporate integrity, and contribute to a more vibrant, broadly participatory Philippine democratic political culture.

Governance grants will be used to strengthen and deepen the transparency and integrity initiatives of civil society (including private sector business organizations, media associations and academic institutions) for advancing key economic and anticorruption reforms, corporate integrity measures, , and citizen oversight of public institutions. By mobilizing private sector and public support, these organizations help to insulate reforms from political interference, leaving them more likely to succeed in passage and implementation.

To improve oversight and advocacy throughout the economy, the PAUNLAD Project, in close cooperation with the CSO Project, aims to increase the breadth and latitude of civil society groups for pushing reforms, promoting integrity and accountability, and discouraging corrupt practices. Activities supported through sub-grants should directly contribute to indicators of governance and economic growth within PFG such as reducing corruption and expanding establishment of new businesses.

Sub-grants for governance themes could take the following forms:

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Advocating for government accountability, effectiveness and transparency. Civil society efforts to promote improved government performance and accountability, such as CSO initiatives to:

perform budget monitoring of individual government agencies including local government units (LGUs); monitor financial flows from tax collection to disbursement; help to establish public accountability tools such as government agency performance scorecards; engage local government on development planning and execution, in areas such as infrastructure development and disaster mitigation; strengthen the oversight of public procurement reforms already underway and help set-up of a monitoring system to publicly track budget items considered to be high-risk in terms of corruption and wastage. Other CSO efforts that can be supported include those which perform citizen oversight and advocacy for greater accountability in the courts, and more effective and efficient delivery of justice; CSOs may monitor (and report

on) progress of specific corruption cases or of judicial issuances (e.g. temporary restraining orders & rulings on commercial disputes); and they may also perform watchdog type actions over controls for quality and performance in the courts such as selection, appointment, and performance evaluation of judges.

Strengthening efforts to improve integrity and transparency. Relevant activities include innovative initiatives by private sector, research, academic, and other non-governmental organizations that build public support and strengthen measures that raise the cost of corruption. Examples of activities in this area are: bolster enforcement efforts by monitoring/reporting corrupt practices and by voicing outcry about stalled high profile corruption cases; support business and professional associations and chambers of commerce to champion professional standards and good corporate governance practices; create more opportunity for individual action by innovating social media, cell phone or other technology that broaden public participation in the fight against corruption; and support campaigns that highlight the link between corruption and poorer public services, lower investment, slower growth rates, and social/economic inequity, while also articulating procedures for reporting corrupt practices.

Mobilizing constituencies for reform. Because political and economic reform generally occurs in response to civic action and engagement with government, activities that can be supported by USAID in this thematic area include efforts of civil society and advocacy organizations that give voice to citizens and increase their influence on political processes and market reforms. These organizations may include rights and pro-democracy groups, professional associations, business associations, consumer advocacy groups, and informal groups such as student movements.

Applicants may propose other activities that address the objectives as well. For this component, the Project expects to make several multi-year grants to Philippine nongovernmental organizations to promote greater transparency and mitigate corruption in areas relevant to creating a stable investment climate. Award preference will be given to proposals that complement USAID’s governance portfolio.

Close to half of all funds awarded under the PAUNLAD Grant Facility is expected to support this sub-component.

Component #2: Economic Growth Sub-grants to Promote New Business and Entrepreneurship

In Philippine industry, micro-enterprises account for 92% of all firms, large-scale firms 0.3%, and SMEs less than 8%. The massive expansion of SMEs, also referred to as the “missing middle,” will play a vital role in the country’s efforts to promote broad-based economic growth. This PAUNLAD component focuses on sub-grants to promote competitiveness, innovation, and development of entrepreneurial spirit in the economy as key drivers of economic growth. The strategic focus of sub-grants under this component could take the following forms:

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Support Business Start-ups and Incubators. In this grant category, USAID encourages business start-ups, particularly SMEs, with the potential to generate lasting employment. PAUNLAD grants will provide a direct funding source for SMEs to support economic growth. USAID is keen to provide opportunities to those with the skills and burning desire to turn their bright ideas into viable businesses. PAUNLAD grants may also fund business incubators to assist the development of entrepreneurial companies through an array of business support services and resources. The following activities are eligible for sub-grant awards: provision of seed capital to support local enterprises with innovative ideas for commercial success; establishment of business incubator programs; facilitation of start-up businesses from ideas to investment readiness through intensive mentoring from industry experts and access to markets and investors; promotion of vocational training and internship programs for youth (or young adults) including apprenticeship and job placement schemes.

Expand the availability of venture capital (VC) funds and other non-bank financing for SMEs. A sub-set of private equity, VC refers to financial capital provided to early-stage, high-potential, high risk, growth startup companies. In developed capital markets, VC generally appeals to new companies with limited operating history (and thus unable to secure bank loans or complete a debt offering) and too small to raise capital in the public markets. In developing countries, fully developed market institutions remain lacking; and problems of corruption, transaction costs, and secure property rights for investors and venture capitalists increase the overall risk premium. The VC industry in the Philippines remains small, where investments typically target family-run businesses. Such family-run businesses may lack technological proficiency, financial transparency, and business planning skills required by venture capitalists for their own due diligence.24 The following VC activities are eligible for sub-grant awards: promote an enabling policy and regulatory environment to encourage the operations of VC funds; review and establish rules that facilitate equity financing in SMEs in tourism and agri-related businesses;

leverage resources of existing VC arrangements through public-private alliances; support and expand VC networking and co-investing arrangements; promote greater SME awareness of equity financing and conduct dialogue with stakeholders to better understand constraints to industry development; review exit mechanisms available to venture capitalists, including constraints to the development of the small board exchange for listing of small businesses; and improve financial transparency of investee companies.

Enhance business networks and public-private alliances. Expected to bring significant new resources, ideas, technologies and/or partners to confront development problems, private sector alliances leverage limited USG funds with private sector resources to co-invest in a public good. In addition, such partnerships will harness private sector capabilities to address key economic development issues in the Philippines. The following activities are eligible for sub-grant awards: strengthen business networks; support for corporate integrity, business advisory services, access to markets, and industry mentoring; facilitate international and domestic linkages to promote investment and trade; promote agribusiness though value adding services and markets development; link research and development institutions (such as universities) with the private sector; strengthen business roles in development; promote shaping successful corporate/private business development strategies aligned with the PFG development goal;

provide matching grants (leveraging of resources where possible) to support private-public alliances that prioritize issues of concern, develop potential solutions and enter into dialogues with government counterparts to implement joint reforms.

Scheela, William, and Ronald Chua. Venture Capital in a Development Country: the Case of the Philippines.

Unknown, n.d.

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4(b) Sub-Grants

The Applicant will conceptualize and develop a grant-making facility that will provide the seed funding necessary to qualified PAUNLAD sub-grantees for activities that lead to the desired results of PFG, as described above. Individual sub-grants are expected to be at least ₱10,000,000 (10 million PHP) . Sub-grants of smaller amounts may also be considered for innovative proposals that meet USAID objectives.

The PAUNLAD Project carries a total estimated budget of US$15,000,000 (15 million USD) – subject to the availability of funds – over a five-year grant-making and disbursement period. USAID anticipates that approximately 80% of the PAUNLAD award budget will be allocated towards sub-grants. Applications will be evaluated in part, on the efficiency and value proposed for the management structure, such that the Project will ensure a strong grants management team and system, but will also maximize the opportunities for grant-making as the primary use of the Project funding. Support will be provided primarily for projects that address the illustrative activities and results as described in this RFA.

The Applicant should be familiar with the rules and regulations governing USAID grant-making mechanisms, particularly as they apply to the solicitation and administration of sub-grants. The Applicant is not limited to the procurement mechanisms used by USAID, but may take into consideration the types of solicitation and procurement processes the agency employs (e.g. Requests for Application, Annual Program Statements (APS’s), Fixed Obligation Grants (FOG’s).25 The implementing partner of the PAUNLAD Project is responsible for ensuring that all USG guidelines and regulations related to the issuances of grants are followed and strictly adhered to. Applicants must familiarize themselves with these regulations, which flow down to the awarding of sub-grantees under the PAUNLAD grant mechanism. PAUNLAD sub-awards will be locally competed and will be subject to USAID approval.

The grant-making facility will use a local, competitive process for award of sub-grants. Occasional, sole source sub-granting opportunities that satisfy the requirement of meeting PFG objectives may be considered on an exception basis.