Final report : evaluation of the Philippines support for development program II

Final evaluation covers the period 1991-8/95. By choosing export promotion and emphasizing foreign exchange liberalization, USAID/Manila has made an important contribution to the Ramos administration's reform program. By concentrating on a few objectives united under the common theme of export competitiveness, the Mission has created a program that is clearly defined and, at least in concept, simple to implement and monitor. Because the program has created new institutions as the tool for reaching its objectives, its results are likely to be permanent. The creation of a market for foreign exchange that is responsive to supply and demand is shaping the behavior of the banks, the Central Bank, and exporters and importers. It has established a set of interests that reinforced the market's continued operation. On a smaller scale, the new One-Stop Shop (OSS) refund center has made duty drawbacks and value-added tax refunds effective aids to exporting by shortening the length of time required for claims to be processed. Previously, delays in payment had nullified the incentive value of the program. Although the reorganization of the foreign exchange market did have some negative consequences for export competitiveness in 1992-94 (as the peso rose in value in response to significant increases in the supply of foreign exchange), the policy achieved the ultimate goal to allow rapid growth of output and employment to occur without balance-of-payments problems. Finally, the new market will produce a more realistic exchange rate and greater export competitiveness over time as the import needs that flow from economic growth temporarily draw down the accumulated supply of foreign exchange. The following lessons were learned. (1) The creation of new institutions gave the policy reforms a support and momentum they would otherwise not have possessed. The creation of the OSS, now part of the permanent government establishment to accelerate refunds, has accomplished much more than an executive order to existing bureaucracies to do the same thing. On a larger scale, the new exchange market, operating in the framework of foreign exchange liberalization, has made trading more responsive to supply and demand and basically modified the behavior of traders, exporters, importers, investors, and especially the Central Bank. (2) Concentrating on a small number of objectives united under a single theme is more effective than a multiple-goal program, which implies a bureaucratic proliferation on the part of both recipient and donor. In this case, the Philippine authorities and USAID/Manila have designated small groups that have been able to concentrate on real problems. Finally, the single theme allows the results to be more easily evaluated.