FBO_Presolicitation_Attachment_-_SOW.docx

SECTION C – DESCRIPTION/SPECIFICATIONS/STATEMENT OF WORK

C.1 TITLE

The contract will be entitled “Philippine American (Phil-Am) Fund” Project.

C.2 SUMMARY OF THE PROJECT

The United States Agency for International Development, Philippines (USAID/Philippines) looks to establish the Philippine-American Fund to finance local activities that support broad-based, inclusive and sustainable growth in the Philippines. To a large extent, activities supported will help to address constraints to growth as identified in the Partnership for Growth (PFG) Initiative: the Philippine-American Fund will provide grants that support business start-ups, promote innovation through entrepreneurship, and advance citizen advocacy for greater public accountability, transparency and integrity. In addition, grants will be provided to support other key priorities for USAID to support the Philippines to achieve a more inclusive, broad-based and sustainable growth, including efforts in combatting human trafficking, technology-based solutions to child and adult illiteracy; and improved management of natural resources and biodiversity. The Philippine-American Fund project, also referred to as the PAF Grant Facility, will oversee and manage the fund. Grants issued by the Philippine-American Fund 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 and in support of other key goals of USAID in helping the Philippines to achieve a stable, prosperous and well-governed status. By working through a local organization to implement the Philippine-American Fund project, and providing grants to local organizations, USAID Philippines will be contributing to achieving the agency's goals of working more with local organizations in line with the USAID Forward reform agenda.

The Philippine-American Fund will be a grant-making facility that provides funding to qualifying recipients (here, referred to as grantees) through local competitive processes.

USAID/Philippines seeks proposals from Offerors to establish, manage and administer this grant facility on behalf of USAID. Grant administration entails preparing and issuing solicitations, reviewing and pre-screening proposals, awarding grants, monitoring and evaluating grant performance, monitoring and auditing grantees’ financial reports, ensuring due diligence and compliance of USAID rules and regulations, closing out grants, and reporting to USAID. The Philippine-American Fund project will also provide some organizational capacity-building to grantees to ensure proper stewardship of donor funding through improved organizational and financial management. The Philippine-American Fund project carries a total estimated budget of $24 million, subject to the availability of funds, over a five-year project period.

As envisioned by this contract, the Philippine-American Fund will issue grants that support inclusive, sustainable growth by contributing to five broad categories: 1) enterprise development, 2) governance, 3) counter trafficking in persons, 4) education innovation challenge grants, and 5) biodiversity conservation. Subject to USAID approval, grants made under the facility will fund local, non-sovereign entities (private enterprises and civil society organizations).

C.2.a. GOALS AND OBJECTIVES

The Philippine-American Fund, along with planned technical assistance across areas of economic growth, governance, education, and environment, 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 Asia-Pacific economies. The Philippine-American Fund will support non-State actors in activities that contribute to overarching strategic goals of USAID Philippines, by seeking to improve government accountability and transparency, engage citizen participation and advocacy, strengthening the trade and investment environment, catalyzing entrepreneurship, supporting business start-ups, and fortifying the underutilized potential of the Philippines’ human, economic and natural resources. The Philippine-American Fund will also support local initiatives that combat human trafficking; provide innovative, technology-based solutions to address 'last-mile' challenges in the path to improved child and adult literacy in the Philippines; and support biodiversity conservation initiatives that contribute to more sustainable growth.

C.2.b. BASIS

USAID/Philippines looks to establish the Philippine-American Fund (PAF) to provide grants that contribute to USAID's goal of sustainable, more inclusive and broad-based growth in the Philippines. The activities herein will accomplish this goal by bolstering local initiatives and solutions that support the economic growth, good governance, and environmental resilience objectives of USAID in the Philippines. Grants provided under the Philippine-American Fund will support activities such as: business start-ups; promoting innovation through entrepreneurship; widening citizen advocacy for public accountability, transparency and integrity; strengthening efforts to combat human trafficking; innovating technology-based solutions to child and adult illiteracy; and improving sustainable management of natural resources and conservation of biodiversity. By working through a local implementing organization, and providing grants to local organizations, Philippine-American Fund also contributes to USAID’s goals for working more with and empowering local organizations in line with the agency’s USAID Forward reform agenda.

USAID has embarked on an ambitious reform effort called 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 Philippine-American Fund seeks to build more local capacity, while also streamlining Agency procedures so that USAID can work with a broader range of local partners and increase procurement local competition. As a leading implementer of IPR for the agency, USAID/Philippines aims to establish new partnerships to help create the conditions where aid is no longer necessary in the Philippines. As envisioned by the Philippine-American Fund, this important USAID Forward reform initiative seeks to reestablish implementation mechanisms that permit USAID to engage directly with local entities (enterprises, institutions, and civil society 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 Philippine-American Fund will support IPR Objective 2: strengthen local civil society and private sector capacity to improve aid effectiveness.

The Philippine-American Fund also 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.[footnoteRef:1] [1: Government of the Philippines, Philippine Development Plan 2011-2016 (Manila, 2011).]

The Philippine-American Fund will contribute to Development Objective 1 (“broad based and inclusive growth accelerated and sustained”) of USAID/Philippines’ draft Country Development Cooperation Strategy through grants in economic growth, education and governance areas. In addition, the Philippine-American Fund will contribute to USAID's objective of strengthening Philippines environmental resilience through grants aimed at protecting biodiversity resources. In line with USAID Forward procurement reform, this solicitation is targeted only to Filipino organizations in the spirit of advancing local capacity for aid effectiveness by strengthening local institutions to do development.[footnoteRef:2] [2: For the purposes of local procurement, USAID defines a local organization according to the following four criteria: (i) organized under the laws of the Philippines; (ii) located in the Philippines as its principal place of business; (iii) majority-owned by individuals who are citizens or lawful permanent residents of the Philippines or managed by a governing body, the majority of whom are Philippine citizens or lawful permanent residents of the Philippines; and (iv) not controlled by a foreign entity or by an individual or individuals who are not citizens or permanent residents of the Philippines.

Eligible offerors to administer this contract must be legally registered, non-sovereign Filipino entities (including private sector entities such as auditing firms, civil society organizations, think tanks, foundations, educational and business development institutions). Offerors are encouraged to partner with non-Filipino entities that have experience managing large, foreign-funded USAID development projects.

C.3 PROBLEM ANALYSIS AND OVERVIEW

The development challenges which underpin the grants of the Philippine-American Fund are multiple. The problem analyses below outline, one by one, the constraints in each of the targeted sectors that the grants will aim to address.

C.3.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 at that time. But by the early 1990s, the Philippines 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,[footnoteRef:3] despite moderate economic growth in recent years. Hindering the positive impact of growth on poverty reduction, inequality remains stubbornly high, limiting sustained growth and the country’s overall development. In short, growth has not been inclusive.[footnoteRef:4] 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.[footnoteRef:5] 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.[footnoteRef:6] [3: 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 Asian Development Bank, Poverty in the Philippines: Causes, Constraints, and Opportunities. (Mandaluyong City: Asian Development Bank, 2009).] [4: 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.] [5: 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).] [6: Nori Usui, Transforming the Philippine Economy: “Walking on Two Legs”, Asian Development Bank (Mandaluyang City: ADB Economics Working Paper Series No. 252, March 2011).]

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.[footnoteRef:7] Ironically, the country faces an emerging skills gap, particularly in the service and manufacturing sectors.[footnoteRef:8] 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.’[footnoteRef:9] 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.[footnoteRef:10] [7: Nye, Taking Institutions Seriously. ] [8: Human Development Department, East Asia and Pacific Region, Philippines Skills Report: Skills for the Labor Market in the Philippines (World Bank, March 2010).] [9: Jesus Felipe, Growth, Full Employment, and Structural Change: Implications and Policies for Developing Asia (Mandaluyang: Asian Development Bank, 2010).] [10: 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).]

The close overlap between politics and big business has created roadblocks for outsiders and new-comers in their efforts to gain access and influence, resulting in a political economy that impedes Philippine development.[footnoteRef:11] As a result, high income inequality thwarts the aspirations of a narrow middle-class whose response to economic incentives often leads to an out-migration. [11: 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. ]

C.3.b. Philippine Citizenship and Advocacy for Better Governance

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.[footnoteRef:12] By some estimates, the Philippines benefits from a vast community of civil society, think tank, media, academic, and private sector organizations. [12: Social Weather Stations, June 28, 2010. Second Quarter 2010 Social Weather Survey: 75% of Filipinos satisfied with the conduct of the May 2010 Elections.]

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.[footnoteRef:13] According to the World Governance Indicators, the Philippines has consistently ranked in the lower half of six dimensions of governance.[footnoteRef:14] 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.[footnoteRef:15] [13: See www.transparency.org ] [14: See info.worldbank.org/governance/wgi/sc_country.asp] [15: 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/]

While economic gains in early 2012 are encouraging (with GDP growth of 6.5% in the first nine months of 2012), [footnoteRef:16] more sustained efforts are needed to produce inclusive, broad-based growth in the Philippines. Over 10% of the population live and work abroad.[footnoteRef:17] According to surveys, a staggering one in five Filipinos wants to migrate.[footnoteRef:18] [16: http://www.nscb.gov.ph/] [17: Oxford Business Group, 2009. The report: The Philippines 2009.] [18: 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).]

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.[footnoteRef:19] 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 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. [19: Business Monitor International, Philippines Business Forecast Report Q1 2012 (London: Business Monitor International).]

Efforts to support and empower 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, providing a citizen check on political activities such as campaign practices and spending, 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.[footnoteRef:20] 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. [20: 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.]

C.3.c. Trafficking in Persons in the Philippines

The 2012 U.S. Department of State Trafficking in Persons Report states that “The Philippines is a source country and, to a much lesser extent, a destination and transit country for men, women, and children subjected to sex trafficking and forced labor. With over nine million Filipinos working or living in about 220 countries, a significant number of Filipino men and women who migrate abroad for work are subsequently subjected to conditions of involuntary servitude worldwide. Men, women, and children are subjected to conditions of forced labor in factories, at construction sites, on fishing vessels, on agricultural plantations, and as domestic workers in Asia and increasingly throughout the Middle East. There is also a significant number of Filipino women working in domestic service in foreign countries who face rape, physical violence, and sexual abuse.

The same report also mentioned that while the Government of the Philippines does not fully comply with the minimum standards for the elimination of trafficking, it is making significant efforts to do so. The government significantly increased funding of the Inter-Agency Council against Trafficking (IACAT) from the equivalent of approximately $230,000 in 2010 to the equivalent of $1.5 million in 2011. The government continued to prosecute and convict trafficking offenders and implemented a new program to protect and rehabilitate victims. Additionally, authorities continued to make efforts to address trafficking related corruption, filing criminal cases against 18 officials during the year. The government made notable efforts to prevent trafficking, including through training public officials, strengthening and expanding structures to screen for trafficking indicators before Filipino migrant workers’ departure overseas, and negotiating bilateral agreements to protect its workers employed in foreign countries.

Various push and pull factors contribute to the victimization of Filipinos to trafficking and illegal recruitment. Foremost of which is the propensity of Filipinos to look for work and other sources of income overseas with or without appropriate working visas or permits, driven by desire to get out of poverty, unemployment, conflicts and limited accesses to basic services such as health and education in the Philippines. Their irregular immigration status overseas increases their vulnerabilities to labor and sexual exploitation in other countries.

For the past two years, special attention has been provided by the Philippine Government to the trafficking situation in Mindanao where the population, especially women, struggle in visceral ways with poverty, unemployment and underemployment, along with lack of access to basic social services. On top of these basic difficulties, they must contend with violence, especially in the politically unstable parts of Mindanao. Women and children are particularly vulnerable to exploitation in Mindanao and to domestic and cross-border TIP, in addition to suffering the dangers of violence in the form of physical abuse, rape, incest, illegal recruitment, and involuntary prostitution. In the ongoing repatriation of approximately 1,900 Filipinos working in Syria as of July 2012[footnoteRef:21], 60% of them are from Mindanao and 90% of them are women engaged in household service work. More than half of these were considered victims of TIP, mostly by labor exploitation, coming from Maguindanao, Surigao Del Norte, Basilan and other areas in Mindanao.[footnoteRef:22] Many prospective emigrants come from or transit through Mindanao, and of these, many end up in exploitative situations. Gender analyses reveal the disparities in income and workforce participation by women, suggesting a need for improved women’s economic participation. [21: See http://globalnation.inquirer.net/45929/ph-cuts-deal-with-syria-140-ofws-to-come-home ] [22: See http://trafficking-monitor.blogspot.com/2012/09/rampant-trafficking-of-ofws-in-syria.html ]

All of these challenges set a context for USAID concerns about helping the Philippines to improve its capacity to combat trafficking by helping its citizens be less vulnerable and strengthening its institutions to offer greater enforcement, awareness and even economic alternatives so that Filipinos are less likely to be drawn into the hands of nefarious traffickers.

C.3.d. Child and Adult Illiteracy in the Philippines Inadequately trained teachers, classroom shortages, high student-teacher ratios, and lack of access to high quality reading materials have combined with external social pressures to contribute to decade of under performance in the Philippine basic education sector. The most serious impact of this has been the consistent shortfall of early grade reading outcomes, especially among the nation’s most disadvantaged and at risk children (such as boys and children with disabilities). Another result of this underperformance has been high dropout rates (especially among students in the first three years of school) which, together with poor early grade reading outcomes, has contributed to what the 2010 Education for All Global Monitoring Report called a basic education delivery system that “provides a particularly striking example of underperformance”.

Reading skills are the greatest determinant of education quality, the foundation for other learning activities, and a major determinant if a child continues to learn and stay in school. Research in the sector has shown that “[t]he point of reading is comprehension, and the point of comprehension is learning. Children who fail to learn to read in the first few grades of school are handicapped because they must absorb increasing amounts of instructional content in print form” (Gove and Cvelich, 2011).[footnoteRef:23] Additionally, the 2005 Education for All Global Monitoring Report states that “literacy is a critical tool for the mastery of other subjects and one of the best predictors of longer-term learning achievement. Reading must be considered a priority area in efforts to improve the quality of basic education” (UNESCO 2005). Children who fail to become literate in early grades “are on a lifetime trajectory of limited education progress and therefore limited economic and developmental opportunity” (USAID, 2011). [23: Gove, A. and P. Cvelich. 2011. Early Grade Reading: Igniting Education For All. A report by the Early Grade Learning Community of Practice. Revised Edition. Research Triangle, NC: Research Triangle Institute (citing Piper, B. 2010. Ethiopia Early Grade Reading Assessment: Data Analysis Report: Language and Early Learning, available at <https://www.eddataglobal.org>website.)]

Beyond the impact on the individual are the negative effects on human capital development. The growth of higher level cognitive skills—which has as its foundation the attainment of functional literacy—directly contributes to broad-based and inclusive economic growth. In fact, it has been demonstrated that a “10 percent increase in the share of students reaching basic literacy translates into a 0.3 percentage point higher annual growth rate of that country” (Gove and Cvelich, 2011).

For these reasons, USAID will use the Philippine-American Fund to support innovative interventions that help address some of these critical, "last-mile" challenges to literacy.

C.3.e. Unsustainable Management of Natural Resources and Biodiversity

The quality of natural and environmental resource management strongly and directly affects the resilience of the environment. Human activities that diminish biodiversity, over-exploit resources, increase pollution, misuse land, or augment climate change substantially reduce the capacity of the environment to resist damage and recover from stress. But managing natural resources in a way that builds ecological resilience can contribute substantially to the goal of a more stable, prosperous and well-governed Philippines.

In 2011, USAID conducted a series of participatory assessments aimed at understanding why negative environmental trends have persisted, assessing the implications of climate change, and developing innovative and transformative interventions.[footnoteRef:24] Based on those studies, USAID will work with the GPH through an integrated strategy that addresses key cross-cutting issues in forest, marine, water, and energy resource management. USAID’s activities complement and support the implementation of the environmental policies and programs articulated in the Philippine Development Plan (2011-2016), National Greening Program (NGP), National Biodiversity Strategy and Action Plan (NBSAP), National Climate Change Action Plan (NCCAP), Philippine National REDD-Plus Strategy (PNRPS), as well as the Mindanao Development Authorities Nurturing Our Waters Program (MindaNOW). [24: Conserving Tropical Forests and Biodiversity for Human Development and Inclusive Growth: 2011 FAA 118/119 Report, Philippines Biodiversity and Tropical Forestry Analysis.]

The shared objectives of GPH and USAID are to strengthen environmental resilience and sustain inclusive economic growth by improving the conservation and management of natural resources, increasing water supply and sanitation services, and enhancing climate change adaptation and mitigation. USAID’s package of technical assistance contributes to the GPH’s vision of “an environment that is healthy, ecologically balanced, sustainably productive, climate change resilient, and one that provides for present and future generations of Filipinos,” articulated in the 2011-2016 Philippine Development Plan (PDP).

Through grants issued under the Philippine-American Fund, USAID will be able to support local initiatives that improve capacity of local institutions to protect natural resources, enhance environmental resilience, and ensure that development investments will be sustained in the long-term.

C.4. LINKS TO USAID ASSISTANCE IN SUPPORT OF GROWTH

The Philippine-American Fund will directly support USAID’s efforts to achieve the goal of broad-based, inclusive, and more sustainable growth by supporting local partnerships that complement the larger goals of USAID in the Philippines. In the draft Country Development Cooperation Strategy (CDCS), USAID Philippines aims to support the country to be a more stable, prosperous and well-governed nation by achieving more broad-based, inclusive growth and improving environmental resilience that makes that growth sustainable in the long-term. The Philippine-American Fund will support innovations and activities that tackle human and natural resource constraints such as literacy and biodiversity protection, in addition to supporting local efforts to combat human trafficking, a priority concern for the US Government in the Philippines and a glaring symptom of the constraints that impede the nation's growth projection: weak rule of law, unequal economic opportunity, and systemic corruption.

To outline more clearly how the Philippine-American Fund complements other USAID activities focused on growth, below is more background about the Partnership for Growth, and information about the localized, city-focused interventions USAID is carrying out in key growth areas in the Cities Development Initiative (CDI).

C.4.a. Partnership for Growth (PFG)

An inter-agency effort under the US Presidential Policy Directive on Global Development, the PFG advances economic growth in countries committed to good governance.[footnoteRef:25] USAID plays a leading role in implementing the USG-GPH PFG in the Philippines. The goal of the PFG bilateral engagement is to shift the Philippines to a higher, sustained and more inclusive growth on par with other high-performing emerging economies in the Asia-Pacific region. The GPH and USG plan to work together to accomplish this goal through the following objectives: [25: For more information on the PFG, visit http://www.state.gov/r/pa/prs/ps/2011/11/177225.htm. ]

· 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.[footnoteRef:26] [26: 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 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.[footnoteRef:27] The successful offeror for the Philippine-American Fund project will have considerable interaction and coordination with implementers of other parts of the PFG, including implementers of the other USAID-managed projects, other USG agencies participating in the PFG, GPH institutions and joint USG-GPH technical Working Groups of the PFG. [27: 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.]

Within the context of the PFG, the Philippine-American Fund will provide grants that complement other PFG projects. Where other PFG projects address the larger macro issues, business climate, policy reforms, and GPH capacity needed to address the goal of the PFG, the Philippine-American Fund will complement these efforts by addressing more micro-level concerns such as citizen engagement, job creation, and entrepreneurship.

C.4.b. Cities Development Initiative (CDI)

It is envisioned that some PAF 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 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;

· Bolster and expand local efforts to combat human trafficking; 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, Mission 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.[footnoteRef:28] These development interventions derive from existing projects (reprogrammed to prioritize targeted cities) and future interventions currently in the design phase. Criteria for city selection include: 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. The cities of Batangas, Cagayan de Oro and Iloilo have been chosen to pilot this innovative approach to USAID programming in support of inclusive growth and development. The initiative will be scaled up and expanded to additional cities in subsequent years. [28: 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. ]

C.4.c. Other USAID Projects

What follows is a brief description of the various projects that comprise the core of USAID's efforts in the PFG and other projects that will contribute to the Philippine-American Fund. Understanding the range of interventions envisioned within PFG will be helpful for Offerors on the Philippine-American Fund project for understanding the aims of USAID's growth-focused assistance, to which the Philippine-American Fund sub-grants will contribute.

C.4.c.1. Investment Enabling Environment (INVEST) Project

The project seeks to address the key constraints underlying the low level of private investment in the Philippines. Currently working in the cities of Batangas, Cagayan de Oro, and Iloilo, the project will focus on the following activities:

· Streamline business registration for new and renewals;

· Standardize business inspections;

· Build capacity of the local investment planning and promotions office;

· Review the city's investment code;

· Assist in investment promotion and planning; and

· Support feasibility studies for targeted sectors.

INVEST aims to improve the investment and business climate by: (i) lowering the transaction costs and reducing the cost of doing business involving both national and local level regulations and processes; and (ii) increasing the flow of private investment and number of business start-ups in the Philippines.

C.4.c.2. Strengthening the Capacities of Civil Society Organizations (CSO) in the Philippines Project

The CSO Project currently provides a range of capacity building services[footnoteRef:29] to strengthen at least 120 CSOs, including systems and policies, in core organizational management competencies. Activities will concentrate on building the knowledge and skills required to run an efficient, cost-effective, accountable, transparent, and technically proficient organization, targeting both the capabilities of the institution as well as the individuals within the institution. In addition, the project will also be implemented by a consortium of CSO networks and academe consisting of the Association of Foundations, the Philippine Business for Social Progress, the Caucus of Development NGO Networks, the Philippine Council for NGO Certification, and the National College of Public Administration and Governance of the University of the Philippines. Members of the Consortium are leading CSO networks in the country. [29: E.g., assessment of capacity needs, the design of organizational development plans, training, consultancy, mentoring, and internships, among others. ]

C.4.c.3. Judicial Strengthening to Improve Court Effectiveness (JUSTICE) Project

The project will help decrease the cost of doing business and increase investor confidence in the Philippines through the more efficient and predictable adjudication of court cases, particularly those involving corruption, commercial disputes, intellectual property rights violations and contract enforcement. A large portion of project resources will address the need to improve judicial efficiency, particularly: (a) reducing docket congestion, and (b) reducing court delays. USAID has supported programs that have worked successfully toward this end with pilot Philippine courts over the past several years. Through this project, USAID seeks to support greatly expanded coverage of such tested judicial efficiency improvements.

In addition, USAID seeks to support related components that address the Rule of Law objectives of (c) strengthening contract enforcement, (d) strengthening the enforcement of intellectual property rights, and (e) supporting integrity and confidence-building measures for the justice system.

C.4.c.4. Development Credit Authority (DCA) Loan Portfolio Guarantee (LPG)

The DCA LPG is structured to encourage lending to businesses (predominantly SMEs) in strategically selected, first-class cities in the Philippines as part of USAID’s Cities CDI (Batangas, Iloilo, and Cagayan de Oro). The guarantee will serve to stimulate targeted domestic, commercial investment to support the expansion of near-bankable Small and Medium-sized Enterprises (SMEs) and increase the number of start-up businesses in these cities and surrounding regions. This DCA LPG will support inclusive growth and employment across the priority sectors of manufacturing, healthcare, energy, construction, tourism, or post-harvest agricultural processing/agribusiness.

C.4.c.5. Integrity for Investments Initiative (i3) Project

The project is intended to contribute to inclusive growth by reducing the costs of corruption to investments and trade, thereby promoting open and fair competition. I3 comprises three components:

1) Increasing the enforcement effectiveness of GPH anticorruption institutions;

2) Reducing opportunities for public sector corruption; and

3) Strengthening corporate governance in both the private and public sector.

Activities for the first component are expected to include the following:

· identify and support legal/policy changes that are necessary in effectively detecting and prosecuting corruption, and reduce opportunities for corruption, in line with the anticorruption agenda of the PDP and the priority thrusts of the Ombudsman’s Office, the Commission on Audit, and other anticorruption offices;

· work to enhance internal systems necessary in effectively managing corruption cases and ensuring greater transparency and accountability in enforcement operations;

· develop some of the specialized detection, investigation, and prosecution skills needed to bring about effective anticorruption enforcement in priority sectors; and

· strengthen cooperation and coordination among the various anticorruption agencies.

For the second component, i3 will support the Civil Service Commission in monitoring compliance by local governments and GPH agencies with the Anti-Red Tape Law, as well as the corruption prevention program of anticorruption offices, primarily the Ombudsman’s Office. In the third component, I3 will assist institutions that oversee both private sector businesses and corporations, and public sector corporations.

Through the i3 Project, USAID will provide tailored assistance to curb corruption and thus contribute to investment climate improvements. These activities to improve anticorruption enforcement are intended to make corruption a high-risk, low-reward activity and reduce the costs of corruption to trade and investment. While the major focus of the project will be on the enforcement institutions to heighten the disincentives for engaging in public sector corruption, the three project components are intended to be mutually reinforcing.

C.4.c.6. Trade-Related Assistance for Development (TRADE) Project

The project seeks to promote greater integration of the domestic economy with the global economy and ensure that national trade regimes conform to international standards. Technical assistance provided under the TRADE Project will focus on identifying and addressing:

· Policy reform to implement binding commitments under the ASEAN Economic Community Blueprint, advance the country’s eligibility in Trans-Pacific Partnership, and meet its World Trade Organization obligations;

· Trade analysis and strategy formulation of proposed adjustment measures and reforms; and

· Gaps in institutional and administrative capacity of the government and other major stakeholders in undertaking trade-enabling measures.

The project will support regulatory, legal and policy reforms that enable the Philippines to meet and implement its obligations under these various trade arrangements. It will seek to strengthen the government’s capacity and institutional environment to meet internationally accepted standards. TRADE will seek improvements in areas such as trade in goods, services trade, investment, intellectual property rights, standards conformance, government procurement, competition policy, and other such relevant features of a free trade arrangement.

C.4.c.7. Advancing Philippine Competitiveness (COMPETE) Project

The goal of the COMPETE Project is to assist the Philippines improve its competitiveness to attain higher levels of trade and investment. To this end, the Project will provide technical assistance to enhance the regime for infrastructure provision, improve productivity in key industries, and increase access to credit. Activities will promote efforts to:

(1) Strengthen the institutional framework and regulatory capacity governing infrastructure (transport, logistics, energy) development by the Government of the Philippines (GPH) and promote regulatory reforms in the infrastructure sectors;

(2) Support productivity improvements in priority sectors (specifically, tourism and agribusiness), and

(3) Facilitate the deployment of domestic credit to commercially viable economic activities.

In the infrastructure sectors, technical assistance will (i) enhance the viability of the GPH’s public-private partnership infrastructure program, (ii) advance a reform agenda to lower transport, logistics, and energy costs, and (iii) improve regulatory capacity and oversight of infrastructure development. For the priority tourism sector, activities will support the effective implementation of the 2011-2016 National Tourism Plan, particularly in efforts to develop strategic destination areas and tourism clusters. In agriculture, the COMPETE Project will advance a policy agenda to promote agri-food export competitiveness and provide technical assistance to boost productivity. To promote the use of productive capital, the Project will expand access to credit for small and medium enterprises (SMEs) – particularly with an improved system of credit information for SME lending, wider exploitation of credit guarantees, and overall stronger borrowing capacity for entrepreneurs.

By contributing to improved access to infrastructure, increased growth and productivity in key priority sectors, and better use of productive capital, project activities are expected to improve the country’s competitiveness, leading to higher levels of trade, investment, and employment.

C.4.c.8. Facilitating Public Investment (FPI) Project

The Facilitating Public Investment (FPI) project seeks to work with the GPH in addressing the tax inefficiencies and public spending limitations that greatly reduce the Philippines’ fiscal space and strongly limit the provision of public goods and services necessary to complement…