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Implementation Completion Report (ICR) Review - Mindanao Rural Development Project (MRDP)

1. Project Data:   
ICR Review Date Posted:
Project Name:
Mindanao Rural Development Project (MRDP)
Project Costs(US $M)
 41.2  27.8
Loan/Credit (US $M)
 27.5  19.9
Sector, Major Sect.:
General agriculture fishing and forestry sector, Sub-national government administration, Micro- and SME finance, Roads and highways, Water supply,
Agriculture fishing and forestry; Law and justice and public administration; Finance; Transportation; Water sanitation and flood protection
Cofinancing (US $M)
L/C Number:
Board Approval (FY)
Partners involved
Closing Date
12/31/2003 12/31/2004
Evaluator: Panel Reviewer: Group Manager: Group:  
Ramachandra Jammi
Peter Nigel Freeman Alain A. Barbu OEDSG

2. Project Objectives and Components:

a. Objectives
In five selected provinces (North Cotabato, Sultan Kudarat, Agusan del Sur, Compostela Valley and Maguindanao) and 32 municipalities:

(i) implement and refine institutional, financial and community-based planning and management systems for supporting rural development;
(ii) improve Local Government Unit (LGU) capability for agricultural development planning, implementation and monitoring and evaluation (M&E), in partnership with National Government Agencies (NGAs) and local technical institutions; and
(iii) respond to community priorities for key rural infrastructure.

The project is the first of a planned series of three to four Adjustable Program Loans (APL), each of three to four years duration.

b. Components (or Key Conditions in the case of Adjustment Loans):
Project components and their shares of project cost at appraisal and at project completion respectively, were as below:
(a) Rural Infrastructure (US$27.4m; 66 percent and US18.9$m; 68 percent): roads rehabilitation; communal irrigation; rural water supply rehabilitation; and capacity building in infrastructure management.
(b) Community Fund for Agricultural Development or CFAD (US$6.5m; 16 percent and US$3.7m; 13 percent): strengthen decision-making capacity at the community level for the identification, design and implementation of sub-projects; ensure that sub-projects financed through the Department of Agriculture (DA)'s budget better reflect community needs; and ensure that resource allocation for development projects at the LGU-level better reflect community priorities.
(c) LGU Institutional Implementation Support (US$5.4m; 13 percent and and US$4.3m; 16 percent): support to microfinance institutions to enhance the access of small borrowers to financial services; support for enhancing rural development planning and resource allocation capacity of LGUs through technical assistance, training and closer links with regional offices of the DA; and support to local government capacity in procurement and contract supervision, financial management, sub-project preparation and implementation, monitoring and evaluation (M&E) and safeguards compliance and monitoring.
(d) Coastal/Marine Biodiversity Conservation (US$1.7m; 4 percent and and US$0.8m; 3 percent): promoting and mainstreaming coastal/marine biodiversity conservation in community development in two coastal areas as an integral part of the overall program and complementing the MRDP objectives (Global Environment Facility (GEF) provided a grant of US$1.25m to Government of Philippines (GOP) to finance the incremental costs of sites in Mindanao (one in Paril-Sangay Protected Seascapes, Sultan Kudarat Province and one in Bongo Island, Maguindanao Province).

Component (c) was renamed Rural Development Planning for Agricultural Development (RDPAP) after the Bank and GOP agreed to focus initiatives on supporting interventions for: (i) strengthening rural development planning and resource allocation; and (ii) enhancing agriculture and fisheries productivity. Also in component (c), the subcomponent for supporting microfinance institutions was dropped and funded separately through a grant from Japan. The grant covered 6 of the 32 municipalities covered by the project, but was eventually cancelled due to repeated infractions committed by the grant recipient of the grant agreement. However, these changes did not affect the overall objectives of the project.

c. Comments on Project Cost, Financing, Borrower Contribution, and Dates
Costs and Financing: Actual projects costs at US$27.8m were 67 percent of US$41.2m at appraisal. Actual Bank contribution at US$19.9m was 72 percent of US$27.5m at appraisal. Government of Philippines (GOP) contributed US$7.2m. There was considerable under-disbursement for the water supply sub-component due to insufficient demand, and the planned construction of 40 km of provincial roads was dropped in preference to Farm-to-Market Roads (FMRs). The resulting savings were re-allocated to FMRs. A total of US$6.9m of loan proceeds were cancelled as a result of foreign exchange savings that accrued with the devaluation of the peso.
Dates: The project closing date was extended for a year in order to allow full completion of the activities which had started to pick up after all the initial implementation constraints and the necessary preparation and gearing up of
participating institutions had been achieved.

3. Relevance of Objectives & Design:

Relevance: Project objectives were consistent with the Country Assistance Strategy (CAS) in terms of rural poverty alleviation; GOP’s strategy for poverty reduction as in its Medium-Term Philippine Development Plan (MTPDP); the Fisheries Modernization Act (AFMA); the recommendations of the report titled Rural Development Strategy Philippines : Promoting Equitable Rural Growth (1998). In the broader context, it was envisaged that long-term rural growth and benefits to disadvantaged communities and minorities would further reinforce Government efforts at consolidating the peace initiative in Mindanao.
Design: Project design was guided by intensive social assessments and stakeholder consultations during preparation, which reflected diverse community and LGU needs and priorities. The appraisal process considered possible risks and incorporated lessons from previous regional and country programs. It was also realistic in recognizing that the required processes and institutional changes were relatively complex and required sustained commitment over time as reflected both in design and the flexible, long-term loan instrument chosen, and a strong focus on learning-by-doing. The use of a Program Coordination Office or PCO that was part of the existing institutional setup, rather than the usual project management office or PMO underlined the importance given to institutionalization and the sustainability of initiatives under this program.

4. Achievement of Objectives (Efficacy) :

Implementing and refining institutional, financial and community-based planning and management systems for supporting rural development. Substantially Achieved. Progress in respect of several planned actions geared to this objective were as follows: community and LGU priorities, reflected in 1,416 BDPs covering all participating LGUs (5 provinces and 32 municipalities), were integrated with municipal plans and DA's agricultural and fisheries modernization plans (AFMPs). Some 17,000 people were organized under 1,500 peoples' organizations (POs) and at least 500 LGU staff have been trained on rural development planning, implementation and M&E. An external program evaluation showed that POs developed enhanced competencies and increased their confidence in sub-project prioritization, preparation, and implementation.
Improving LGU capability for agricultural development planning, implementation and M&E: Modestly Achieved. DA and other technical and research institutions supported LGUs in establishing a more responsive agriculture and fisheries support delivery mechanism. LGU capabilities have also benefited rural development planning, financial management, technical/engineering design, procurement and contract supervision, sub-project preparation and implementation, and social and environmental safeguards compliance monitoring. Annual Investment Plans (AIPs) of all five participating provinces now contain more favorable provisions for agricultural and fisheries-related development investments. Capacity for resource generation activities was enhanced in four out of the five participating provinces. The project emphasized and introduced O&M audit system for municipalities.
The planned community-based M&E system was not operationalized, and baseline data was not fully encoded until the last year of implementation, and the project Management Information System (MIS), in most cases, was not able to provide immediate and critical inputs for management decision-making.
Responding to community priorities for key rural infrastructure: Highly Achieved. Targets for FMR and communal sub-projects were exceeded (700 km vs 460 km; and 5,791 ha vs 5,000 ha respectively). Other achievements included funding of 1,583 microenterprise and small infrastructure subprojects (foot/motor trails, spillways, hanging bridges etc.) amounting to PhP198m, benefiting 37,000 households and 16,000 individuals respectively. The original targets for water supply and provincial roads were reduced/ eliminated due to insufficient demand, finally resulting in 28 potable water units and no new provincial roads.
Data on several socio-economic indicators generally corresponding to the project duration are provided but the degree of confidence with which they could be attributed to the project is not clear, given the low operationalization of the project-specific M&E system, and the slow pace of activities till the project mid-term review (see section 5). Data on indicators is as follows: A rapid rural appraisal indicated that 60 percent of CFAD beneficiaries reported an increase in income under a “with project” scenario; food security was improved (70 percent of beneficiaries were having three meals a day compared to one or two meals before the project); and progress was made in road and market access, availability of safe drinking water, crop productivity and income-generating initiatives. Other indicators include: increase in overall rice and corn cropping intensity from 198 percent to 214 percent; doubling of average production per farm through improved communal irrigation systems; increase in average farmland from 0.8 ha to 1.3 ha as a result of availability of irrigation water; increase in average production per farm by 86 percent (wet season) and by 76 percent (dry season); increase in volume of produce transported increased by 27 percent during the wet and dry seasons; reduction in travel time by 15 minutes; increased frequency of travel to market from three to four times a week; improvement in general health and decrease in waterborne diseases from better water supply.
The ICR states that the economic impact of the physical accomplishments will become clearer by the end of the follow-up APL

Activities are still on-going for the component on Coastal/Marine Biodiversity Conservation, due to a 10-month delay in grant effectiveness and the effect of the Mindanao conflict in the project areas in late 2000. The grant closing date was extended for two years (from December 2003 to December 2005), and a separate Implementation Completion Memorandum (ICM) will be prepared for this component by June 30, 2006

5. Efficiency:

On the positive side:
  • The economic rate of return (ERR) has been re-estimated at 17 percent for FMRs, 25 percent for communal irrigation and 16 percent for communal spring development. For the project as a whole, the ERR is estimated at 17 percent and the net present value (NPV) at PhP224.3m at a discount rate of 12 percent. This includes the cost of institutional support under RDPAP but excludes the CFAD component which accounts for 15 percent of project costs. The results are generally in line with PAD estimates.
  • A positive fiscal impact can be expected from the project as a result of improved rural development planning, increased community participation, and new and better ways of allocating fiscal resources by LGUs in supporting rural development priorities.
On the negative side:
  • Lack of clear operational linkage between RDPAP and CFAD created confusion and duplication in the beginning. There was delay in involving DA’s Regional Field Units (RFUs) in the integrated planning process. RDPAP was not adequately adapted to local circumstances, making it overly complex for communities.
  • Financial management was poor in the first half of implementation mainly due to poor quality of FM staff at the PCO level, exacerbated by the lack of program coordination oversight. As a result, only 19 percent of the loan was disbursed by mid term.
  • Conflict in Mindanao was a major impediment during the period 2000-2002, especially in introducing and establishing new institutional principles. This substantially affected the crucial early stages of the project, which required careful management and oversight.

However, through involvement of DA senior management and intensive Bank supervision, corrective measures were rapidly introduced after the mid-term review through greater involvement of senior management in the DA and the implementation of major changes and improvements in the staffing of the PCO.
6. M&E Design, Implementation, & Utilization:

Considerable attention was devoted to the design of the M&E system, but it could not be operationalized fully because financial constraints and poor quality of M&E staff, especially at the level of LGUs. The planned community-based M&E system was not operationalized, the baseline data was not fully encoded until the last year of implementation, and the project Management Information System (MIS) in most cases, was not able to provide immediate and critical inputs for management decision-making. Moreover, the mid-term review and terminal evaluation exercises were not adequately funded, despite the planned budgetary allocations, which resulted in a lower than expected quality of evaluations. The implementation of the M&E system was also affected in the early years of the project by the conflict in Mindanao.
7. Other (Safeguards, Fiduciary, Unintended Impacts--Positive & Negative):

8. Ratings:
OED Review
Reason for Disagreement/Comments
Institutional Dev.: 
LikelyNon-evaluableThe economic impact of the progress made towards most institutional and physical targets needs to be more firmly established, especially through a more robust implementation of M&E
Bank Perf.: 
SatisfactorySatisfactoryMore effort should have gone into ensuring focus on M&E systems, especially in the initial years of the project.
Borrower Perf.: 
SatisfactorySatisfactoryGreater attention should have been given to appropriate staffing of PCO, and clarifying the roles of agencies at different levels to put the institutional objectives on a stronger footing in the early stages of the project.
Quality of ICR: 

- When insufficient information is provided by the Bank for OED to arrive at a clear rating, OED will downgrade the relevant ratings as warranted beginning July 1, 2006.
- ICR rating values flagged with ' * ' don't comply with OP/BP 13.55, but are listed for completeness.

9. Lessons:

Where complex institutional change across many distributed entities is attempted, project design must provide for sufficient time for the changes to set in. This will improve the chances for realizing the expected benefits from decentralization.
  • A learning-by-doing approach is an effective way to operationalize and facilitate devolution of responsibilities, especially where a large number of units are involved.
  • Strengthening grass roots organizations, local governments and communities is vital to meaningful participatory and integrated development, and improves chances for better governance and accountability.
  • M&E activities are almost always given lesser priority compared with other more concrete project activities. It is not enough that attention is given to the design of the M&E system in project design and preparation. Full operationalization and usefulness of the M&E system and the MIS are directly linked with the level of priority, financial resources and good quality staff associated with the exercises.

10. Assessment Recommended?  Yes

          Why?  An assessment conducted for the completed series of APLs, of which this project is the first one, will help to better ascertain the sustainability of outcomes. The outcomes of the yet unfinished component on Coastal/Marine Biodiversity Conservation under this project could also be covered in the assessment

11. Comments on Quality of ICR:

The ICR is very informative, and considerably objective in its assessment of the project. It is rated Satisfactory.

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