The Policy Development Process and the Agenda for Effective Institutions: the Philippines Gilberto M. Llanto The Micro Foundations of East Asian Economic Integration Hotel Okura, Tokyo, Japan February 26, 2007

G M LLANTO- The Policy Development Process and the Agenda for Effective Institutions2 Institutions and the policy development process Implementing institutions Supporting institutions: (a) coordinating body and (b) independent policy review institution

G M LLANTO- The Policy Development Process and the Agenda for Effective Institutions3 The paper discusses role of supporting institutions in the policy development process and offers suggestions on how to make them more effective.

G M LLANTO- The Policy Development Process and the Agenda for Effective Institutions4 Current economic situation Modest economic performance (GDP growth Q1 to Q3 at 5.4%; fiscal deficit, 2.7% of GDP in 2005; expected to decline to 0.9% in Low level of productivity Huge public debt BUT growth potential is considerable

G M LLANTO- The Policy Development Process and the Agenda for Effective Institutions5 What to do? Need to accelerate economic policy reform efforts As economies evolve, so should structures and institutions Economic reform has to be continuous.

G M LLANTO- The Policy Development Process and the Agenda for Effective Institutions6 Supporting institutions Coordinating institutions: National Economic and Development Authority (NEDA) and the Department of Budget and Management (DBM) Independent policy review institution: Philippine Institute for Development Studies

G M LLANTO- The Policy Development Process and the Agenda for Effective Institutions7 Recent reform effort by DBM Public expenditure management reform: (a) medium term expenditure framework (MTEF), (b) organizational performance indicator framework (OPIF), and (c) accountability, monitoring and evaluation framework.

G M LLANTO- The Policy Development Process and the Agenda for Effective Institutions8 OPIF Outcomes and outputs framework: (a) support policy development process, (b) strengthen departments’ internal management and (c) strengthen external reporting for accountability purposes

G M LLANTO- The Policy Development Process and the Agenda for Effective Institutions9 Logical frameworks done for 20 departments OPIF document to accompany the budget documents to be submitted to Congress (national expenditure program, President’s budget message)

G M LLANTO- The Policy Development Process and the Agenda for Effective Institutions10 Main challenge to OPIF, MTEF Congress acceptance of three year MTEF framework and OPIF which fosters accountability Convincing congress that good economics is good politics; coordinating bodies (DBM, NEDA) need to improve technical and political skills

G M LLANTO- The Policy Development Process and the Agenda for Effective Institutions11 Independent policy review institution Philippine Institute for Development Studies has statutory independence and capable research staff, but it is financially weak and dependent on government subsidy for operations.

G M LLANTO- The Policy Development Process and the Agenda for Effective Institutions12 Need to improve capacity of policy review institution Australian experience shows benefits of good evaluation: (a) pinpoints accountability, (b) reduces cost, and (c) leads to good policy choices.

G M LLANTO- The Policy Development Process and the Agenda for Effective Institutions13 Concluding remarks The policy development process needs supporting institutions: (coordination tasks as well as independent review) Policy development process is not a disembodied phenomenon. The message (content) of the reform is important but the medium (effective institutions, both implementing and supporting) is also critical.

G M LLANTO- The Policy Development Process and the Agenda for Effective Institutions14 Thank you!