PUBLIC WORKS EMPLOYMENT AND RURAL

POVERTY ALLEVIATION IN THE PHILIPPINES

Country Report

Prepared for the

International Food Policy Research Institute
May 10, 2001

Roehlano M. Briones
Assistant Professor
Economics Department
School of Social Sciences
Ateneo de Manila University
Katipunan Avenue, 1108 Loyola Heights, Q.C.
Tel/fax: 63-2-426-56-61
Trunk: 63-2-426-6001 L5220,5221
e-mail: rbriones@admu.edu.ph
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Chapter One.
INTRODUCTION

1.1. Overview of the study

Alleviation of rural poverty is accorded the highest priority in the country's

development agenda. As the capacity to work is the primary asset of the poor,
one common strategy to alleviate poverty is to generate employment. A direct
way to do this is through public works employment (PWE) schemes. The degree
to which poverty can be alleviated through such schemes depends on the
accuracy in which benefits are targeted to the poor.

In many developing countries, PWE in its various forms is a longstanding and

well-recognized strategy for rural poverty alleviation. However, Philippine policy
does not accord such a status to PWE schemes. Information on wage
employment creation through rural works is also thin: Subbarao, Ahmed, and
Teklu (1996), in their study on safety nets, observe that available evidence is
“fragmentary”, and that “the experiences of various public works projects are
poorly documented. Despite the country’s long experience in labor-based
projects, no synthesis yet exists to distill its past experiences (p. 34).”

The promotion of PWE is therefore hobbled by inadequate knowledge as to what

works and what doesn’t. In view of the IFAD’s desire to promote rural nonfarm
employment in the country, this study has been commissioned to partially
remedy this inadequacy. Our study undertakes two tasks. First, we review the
country’s experience to consolidate existing knowledge about PWE in the
Philippines. Second, we shall conduct case studies intended to illustrate “best
practice” for PWE. Guidelines for PWE policy and implementation shall then be
drawn from the review and casework.

1.2. Poverty and employment trends in the Philippines

Table 1.1 provides official figures for urban and rural poverty (see however Box
1). Nearly 40 percent of the country’s population in 1997 was deemed poor.
Poverty is unevenly spread throughout the country, with rural poverty consistently
higher than urban poverty. Poverty incidence hardly budged over the period
1985-1997, whereas poverty in urban areas has fallen substantially over the
same period.1 Rural poverty remains a massive and recalcitrant problem for the
country.

Poverty trends move closely with trends in aggregate income. Poverty fell
perceptibly during the growth episodes of ’85-’88 (average of 4.8% growth) and

1
These figure in Table 1.1 for a developing country with levels of per capita income and other
welfare indicators similar to that of the Philippines. Box 1 offers
 2

’95-’96 (average of 5.3% growth), with a greater decline in urban than in rural
areas. The period of least poverty reduction (’88-’91) was also a period of
stagnation (below 3% annual growth).

The employment picture in 1998 seemed bright: only 6.7 % of the labor force was
jobless in 1998, with rural areas apparently being far better off than urban areas.
However underemployment statistics restore the gloom: persons working less

Table 1.1
Urban-rural comparison of poverty and employment, Philippines

Rural Urban National

Poverty:

1985 56.4 37.9 49.3

1988 52.3 34.3 45.5

1991 55.1 35.6 45.3

1994 53.1 28.0 40.6

1997 51.2 22.5 37.5

Employment (1998)

Unemployment rate 5.4 10.7 6.7

Underemployment
(percentage of the employed)

Worked below 40 hours/wk 34.8 22.4 45.3

Worked below 20 hours/wk 11.4 6.8 14.8

SOURCE: National Statistical Coordination Board

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Box 1. Calculation of poverty lines

Poverty and household income and expenditure statistics for the Philippines is
calculated on the basis of a Family Income and Expenditure Survey, conducted once
every three years (results are available only up to 1997). Regional subsistence
thresholds are calculated based on a food menu reflecting the average dietary
composition of that region. The menu is then valued using prices differentiated by
urban and rural areas; urban and rural food lines are therefore separately for each
region. Poverty lines (urban and rural by region) are then calculated by adding a
nonfood component, using the nonfood expenditure shares of households whose
incomes fall within a predetermined band around the subsistence threshold.

This method has generated poverty lines consistently and significantly above the
international standards, if we are to compare the poverty figures with other
indicators of development of the country. Consider the following:

Poverty incidence GDP per HDI rank

Year Official line International capita, $US (1999)
line (1998)

Philippines 1997 37.1 26.9 1050 98

Bangladesh 1996 35.6 - 350 144
India 1994 35.0 47.0 440 138
Cambodia 1997 36.1 - 260 153

SOURCE: World Bank, UNDP.

The International Line column reports the poverty incidence using a PPP-adjusted
$US 1.00 a day as the poverty threshold. The official line is too high; it is incredible
that the Philippines, with its per capita income and HDI rank, would have higher
poverty incidence than Bangladesh, India, and Cambodia. In 1997, the national per
capita poverty line was 31.63 Php per day, which is $US 2.44 using the World Bank
PPP-adjusted exchange rate.

The reason for the overestimation is that the food menu is not sufficiently
representative of actual preferences from the lower-income groups. Philippine
poverty lines also tend to co-move with living standards, biasing interregional and
intertemporal comparisons to the conservative side. The reason is that the food
composition for calculating the subsistence line itself depends on living standards.
Balisacan (1997) corrects for these problem. (Incidentally, he calculates regional
poverty lines that are 48% lower on the average than the official lines.)
 4

than full-time accounted for 45.3% of the rural employed, more than double the
proportion in urban areas. As many as 14% of the rural employed are in fact
working on a half-time basis or less. This is consistent with established trends
pointing to the intermittent nature of rural occupations, and may well be linked to
the low and stagnant productivity in agriculture (Balisacan and Babila, 1994).

The geographic distribution of poverty can be described in terms of the country’s

16 administrative regions (Table 1.2). Outside the capital, poverty incidence
ranged from a low of 20% to a high of 64% in 1997. The least poor regions are in
the northern island group of Luzon, near the capital; the poorest are in the
southern island group of Mindanao. The middle island group in the Visayas
however has experienced some worsening of poverty from 1994 to 1997.

Table 1.2.
Recent estimates of poverty by administrative region, Philippines

Region* Poverty incidence Population share

1994 1997 1997

NORTH (LUZON)
National Capital 10.5 9.6 14.1
Cordillera Autonomous 56.4 49.6 1.7
Ilocos 53.6 44.7 5.5
Cagayan Valley 42.1 38.0 3.9
Central Luzon 29.2 20.1 10.3
Southern Luzon 34.9 30.1 13.4
Bicol 60.8 57.5 7.1
CENTRAL (VISAYAS)
Western Visayas 49.9 48.2 8.6
Central Visayas 37.5 39.5 7.2
Eastern Visayas 44.8 49.0 5.1
SOUTH (MINDANAO)
Western Mindanao 50.6 45.5 4.0
Central Mindanao 54.1 53.2 5.9
Southern Mindanao 45.6 44.6 7.1
Eastern Mindanao 58.7 55.4 3.3
Autonomous Muslim Mindanao 65.3 63.8 2.9

SOURCE: National Statistics Office.

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Rural households are usually associated with agricultural employment. Estimates

by Balisacan (1997, 2000) identify agriculture to be the greatest contibutor to
poverty among the employment sectors (Table 1.3). More importantly, its
contribution is much larger than its population share. All the other sectors of
employment contribute less to poverty than its respective population share.

Table 1.3.
Contribution to total poverty by economic sector over time

1985 1994 1997

Sector Population Contribution Population Contribution Population Contribution

share to poverty share to poverty share to poverty

Agriculture 52.9 75.8 49.8 77.7 40.1 67.8

Manufacturing 9.6 6.2 9.4 3.9 8.1 4.8
Construction 5.9 4.7 7.6 6.5 7.7 7.1
Trade 9.0 4.6 9.3 3.9 8.8 4.7
Transport 6.9 3.3 8.1 4.0 8.0 4.4
Finance 2.2 0.3 1.9 0.2 1.9 0.2
Services 13.6 5.1 13.9 3.8 12.5 4.9

NOTE: Agriculture – agriculture, fishery, and forestry; Manufacturing – mining

and quarrying, electricity, gas, and water, manufacturing; trade – wholesale and retail
trade; transport – transportation, storage, and communication; finance – finance,
insurance, real estate, and business; services – community, personal, and social
services.

SOURCE: Balisacan, 1997, 2000

Agriculture is of course not the only source of income and employment of rural
households. Data throughout the developing world have revealed the substantial
role played by nonagricultural activities in the rural economy. For the Philippines
however, little work has been done to characterize the rural nonfarm sector2 on a
nationwide basis.

The few efforts at obtaining data are limited to scattered household-village

surveys. Leones and Feldman (1999) find that nonfarm income accounts for 24%
of household income, based on microdata from a Philippine village. Panel data
survey for villages in the Philippines' "rice bowl" (Region 3) finds that nonfarm

2
Here "rural nonfarm" is identical to "rural nonagricultural".
 6

income as a proportion of total income has climbed from 27% in the 1960s to
51% in the mid-1990s (Estudillo and Otsuka, 1999). Studies of land reform
beneficiaries nationwide in 1997 indicate a similar share (Institute of Agrarian and
Rurban Development Studies, 1999).These figures suggest that nonfarm
incomes are a substantial and growing component of economic activity in the
rural areas of the Philippines. These trends suggest a strong potential for
boosting nonfarm wage employment as an antipoverty strategy.

1.3. Direct poverty alleviation and wage employment creation

It has been rightly pointed out that the eradication of poverty in the Philippines
ultimately rests on rapid and sustained overall growth. Nevertheless, direct
poverty alleviation remains at the core of development strategy. First, precisely
when indirect poverty reduction is sluggish, direct means (that do not weaken
nascent growth) are crucial to making any headway at all against poverty.
Second, when some of the poor may be left out or even harmed by the growth
process, direct programs can be rationalized as "safety nets”.

Thus many developing countries have adopted PWE creation as a direct strategy
to alleviate poverty. South Asian countries such as India and Bangladesh are
well known for a poverty alleviation strategy involving PWE. Other countries that
have undertaken PWE programs on a massive scale are China and Indonesia
(Esmara, 1987). In Africa meanwhile, Botswana and Zimbabwe have been
relatively successful in generating employment through public works (von Braun,
Teklu, and Webb, 1992). Public works schemes in Latin America, such as in
Bolivia, Chile, and Peru, were used to counter temporary drops in employment
due to structural adjustment or macro shortages (Deolalikar, 1995).

An important merit of the PWE approach is a built-in targeting feature: if wages

are sufficiently low and work is arduous (but not excessively so) then workers
who opt to join the program would tend to be poor. This is referred to as self-
targeting. Other forms of assistance may offer incentives to both poor and
nonpoor (e.g. food price subsidies), making exclusion of the nonpoor difficult.

Moreover, labor markets, particularly in developing countries, are subject to

numerous market failures. Wages do not adjust to eliminate unemployment and
underemployment, for reasons such as wage legislation, costly search, incentive
problems, and so forth. Unemployment can also be a short-term phenomenon,
arising from environmental disturbance, macroeconomic downturns, and
seasonal requirements of agriculture. Such shocks should not be dismissed
outright as mere short-term phenomena, as these episodes can push affected
households into a "poverty trap" and cause their long-term ruin.

In response to these market failures, PWE schemes can stoke labor demand,
particularly for the unskilled labor of the poor. Projections made by the
government estimate that incorporation of labor-intensive methods in public
 7

works could have generated up to 260,000 jobs for 1999; this is nearly 10% of
the total number of unemployed (DAP, 1998).

1.4. Types of public works employment projects

There are various ways to classify PWE schemes. One classification is based on
the assets provided: productive or economic infrastructure directly improves
productivity (e.g. irrigation, roads, bridges), while social infrastructure addresses
basic needs of households (e.g. potable water systems, school buildings, health
clinics). The third category is agroforestry projects (tree planting, upland flood
and erosion control).

Clay (1986) suggests the following classification based on the type of

unemployment problem addressed. Relief works provide temporary employment
to address emergencies arising from civil or natural calamity. Income augmenting
programs aim to supplement below subsistence incomes of the very poor, and
are often seasonal. Long term employment programs provide livelihood for the
unemployed. Finally, low cost infrastructure programs incorporate a labor
component although are aimed mainly at asset formation. A major type of low
cost infrastructure is community works, which are undertaken "in response to
demand by, and for the benefit of, specific local groups; and they usually include
elements of self-help" (Gaude and Watzlawick, 1992).

Public works are often narrowly defined as encompassing only the first three
types; e.g. Basu (1996). If this restriction is accepted however, virtually no
significant initiatives in recent years can observed for the Philippines. In fact the
World Bank (1996) has remarked: “However, as now structured, Philippine
programs do not serve as an employer of last resort, address the problem of
seasonal unemployment, create assets that benefit the poor (such as schools),
nor provide disaster relief." For our purposes then the infrastructure projects with
an intentional employment-generation component (reflected in the choice of
technology) is classified as a PWE project.

The rest of the report is organized as follows: we review country’s policy

framework for PWE (Chapter 2), and its experience in PWE schemes (Chapter
3). The case studies are then introduced with a discussion of the research
method, a brief background of the cases, and the issues covered (Chapter 4). An
in-depth analysis of the case studies follows (Chapter 5). Wage benefits and
targeting performance are treated separately (Chapter 6). We conclude with a
final assessment of lessons learned, and a set of recommendations based on
“best practices” for the implementation of PWE schemes in the Philippines
(Chapter 7).
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Chapter Two

INSTITUTIONAL AND POLICY FRAMEWORK

FOR PUBLIC WORKS EMPLOYMENT SCHEMES

2.1. Institutional setting

Traditional framework

Traditionally the national government has been in charge of public works in the
country. Executive line agencies (called Departments), work independently or in
tandem for public works provision. The agency most directly involved is the
Department of Public Works and Highways (DPWH). The Department of Agrarian
Reform (DAR) also initiates rural works, though the actual implementation of
agrarian reform infrastructure projects is handed over to the DPWH. The
Department of Agriculture (DA) meanwhile finances the construction of farm-to-
market roads and postharvest facilities. An agency attached to the DA is the
National Irrigation Administration (NIA), which implements irrigation projects,
including the establishment of communal irrigation facilities.

Meanwhile the Department of Interior and Local Government (DILG), as well as

the Department of Labor and Employment (DOLE), collaborate with the local
government for rural works provision. Most line agencies have regional offices,
which in turn used to coordinate provincial and sub-provincial offices. With no
direct involvement in project implementation, but still influential in terms of broad
policy thrusts, is the economic planning agency called the National Economic
Development Authority (NEDA).

Box 2. Calamity response

Special mention must be made of the Department of Social Welfare and

Development, which supports disaster relief operations through reconstruction of
damaged facilities and houses by members of the affected community. Workers are
"paid" with daily rations, including 2 kg. of rice, and canned food (currently the
ration value is Php 90.) The assistance lasts from from 5-10 days. However
working does not seem to be the condition for receiving rations. That is, this type
of relief program does not seem to aim at generating employment.
 9

Local government units (LGUs) are stratified into the provincial, municipal, and
village (barangay) levels. Barangays may be further divided into sitios or puroks.
Leaders at each level (purok leader, barangay captain, municipal mayor, and
provincial governor) are elected by popular vote. Local government elections are
held every three years.

The traditional set-up entailed a highly centralized concentration of authority, not

only in public works, but in the entire gamut of social services. Running a huge
bureaucracy however proved cumbersome. Major decisions had to await
approval from some high authority in the distant (both geographically and
politically) regional or central office. Regulations and policies were typically
standardized, with no flexibility for local conditions. Finances were first pooled
nationally, then disbursed according to a budget approved by Congress, finally
reaching the field in trickles, delaying implementation.

Decentralization and rural works

The most innovative development in the public institutional framework has been
the shift to decentralization (Cabanilla, 1999). Initial moves would be the
formation of Regional Development Councils (RDCs), composed of regional
heads of line agencies, provincial governors, city mayors, legislative
representatives, and, NGO representatives. The RDCs are involved in regional
planning, inter-agency coordination, coordination of budgetary and project
allocation from the central offices to regional offices and LGUs, and assist LGUs
in formulating plans and securing funds. Lower level versions of the RDCs are
the Provincial Development Councils (PDCs) and Municipal Development
Councils (MDCs).

The most radical break with tradition was however initiated by the Local
Government Code of 1991, which bestowed autonomy on LGUs. The Code
devolves responsibility for road and bridge maintenance, as well as water
resources infrastructure. Also devolved are other basic government services,
such health care, agricultural extension, and welfare services. The authority of
LGUs to collect taxes and fees is widened, while their share in the national
government’s internal revenues is increased.

The principle behind decentralization is that decision-making and implementation

will be improved because of, first, the familiarity of LGU officials with local
conditions, and second, because of greater accountability to their constituents.
Evidence suggests that the more economically developed countries do tend to
have less centralized bureaucracies (Garnier and Majeres, 1992).

Local governments are supposed to be better placed to provide local public

goods. Alonzo (1999) explains that observing the principle of subsidiarity implies
better choice of projects, and a more efficient choice of techniques. Unit costs for
 10

construction and maintenance of public works may decline as LGUs favor the
use of labor and indigenous materials in locations where these are cheaper. A
national government agency, in contrast, may be less sensitive to relative price
differences across locations, or may be compelled to adhere to a national design
standard. LGUs are reportedly constructing barangay roads at one-third less the
cost of the same roads provided by the DPWH. A similar cost savings is heard
for classroom construction. Other improvements due to decentralization have
been documented over the past decade (Abesamis, 1995).

Decentralization though is plagued by its own share of problems. The distribution

of devolved personnel across locations appears to have been flawed: for
example, in the case of agricultural staff, Southern Tagalog and Southern
Mindanao have approximately the same farm size, but the latter’s devolved
personnel is only half that of the former. Conflict between devolved and LGU
personnel and have also been noted, exacerbated by duplication of functions
(Elazegui and de Guzman, 1999). Moreover, whereas successful
decentralization requires devolution of control over resources, a mismatch
between incremental revenue allotment and devolved functions has been
observed (Capuno and Solon, 1996). Evidence suggests inequity in the
mismatch: the poorer provinces have a larger fiscal gap compared to the
wealthier provinces (Quitazol, 1996). LGUs could possibly raise their own funds,
but so far enthusiasm in doing so is weak, owing to the political sensitivity of their
fund-raising instruments (such as property taxes).

Fiscal problems at the local level is an impediment to development project

implementation. A recent evaluation conducted by the national government of on-
going ODA programs identifies insufficient provision of local counterpart funds as
a major bottleneck in public works programs.

Contributing to this may be the lackadaisical commitment to development

projects on the part of some LGUs. The pool of capable individuals from which to
choose being shallower; moreover, local elections may be prone to selecting
officials not on the basis of merit but on economic influence and clan-name
recall. Fears have been raised regarding the increased influence of the local elite
and intensification of government corruption under a decentralized regime.

Proponents of decentralization counter that the depredations of a corrupt central

bureaucracy, in connivance with a national elite, are worse. Decentralization
should be viewed as one means to curtail rent-seeking and official corruption, as
local governments are more directly observable and accountable to their
immediate constituencies. The a priori predictions regarding the relationship
between corruption and decentralization are therefore ambiguous.

The issue can only be settled empirically. Huther and Shah (1998) finds a
negative association between corruption and poverty. Fisman and Gatti (2000)
base their study on a pooled cross-country time series regression. Their model
 11

controls for the endogeneity associated with the correlation between

decentralization and development. It also checks for robustness by using
alternative measures of corruption. They conclude persuasively that
decentralization is a significant check on corruption.

Both the national government and the local government have important roles to
play in development of communities. Serafica (1999) notes that there is an
asymmetry of information and capabilities between national and local
governments; that is, while “central government does not know what to do… the
local government does not know how to do it.” (Bird, 1994, p. 28). Local
infrastructure should be provided in such a way as to utilize the comparative
advantage of each level. Projects must be selected and implemented by local
governments, with some supervision and technical assistance from the national
government. Unfortunately, few if any success stories of national-local
government collaboration have been documented. Perhaps over time LGUs will
gradually acquire the capacity to undertake more complex projects (the
incrementalist view); for now, the national government may have to be selective
as to which provinces and municipalities to collaborate with (the selective
approach), and what types of activities and projects to delegate to LGUs
(stratification approach).

To summarize: gains from decentralization can be further increased with stronger

commitment from the national government in terms of financing and operational
skills transfer. With this, and gradual maturation of grassroots democracy, the
shift to local governance should lead to a more inclusive development process.

2.2. Rural development

We now move to the policy framework for rural PWE schemes, which first
discussion of rural development strategy. The framework for rural development is
set by the Comprehensive Agrarian Reform Program (CARP), implemented since
1988.3 The Program mandates a comprehensive redistribution of land, as well as
the provision of support services to agrarian reform beneficiaries. To transform
Philippine agriculture, massive interventions in the provision of infrastructure,
credit, and technical assistance are deemed essential. The DAR spearheads
implementation of the Program, while the rural works component is undertaken
by the DPWH.

In terms of actual accomplishment though, data on funding CARP infrastructure

(coursed through the DPWH) is dispiriting: Over a ten-year period from 1988 to
1998, of the Php 12.165 billion allocation, only Php 2.8 billion was actually
disbursed. The bulk of this was done in the first five years, with an average

3
There have been numerous land reform programs in the country. The Marcos land reform
immediately preceding CARP covered rice and corn and, in some regions at least (notably
Central and Southern Luzon), succeeded in its redistribution objectives.
 12

annual allocation of Php 352.6 million; in the last five years, the average annual
allocation was only Php 208.4 million or 30% lower than in the previous period.
This decreasing level of commitment is ominous. Financing is hobbled by weak
political support from Congress, which includes a representative body elected by
according to geographic district (hence the co-opting of numerous elective
positions by landed interests).

Doubts have been raised as to whether CARP has been properly targeted.
Deininger, et.al. 1999) suggest that the DAR's drive to "finish the unfinished
business of land reform" has reduced the antipoverty targeting of the Program in
rice lands, compared to the previous land reform efforts. However, a nationwide
survey of land awardees (IARDS, 2000) has estimated poverty incidence in this
group (using official poverty lines) at 62.5%, which is higher than the rural
poverty figure, but is consistent with overall poverty in agriculture. Without
downplaying valid targeting concerns, agrarian reform nevertheless provides a
workable framework for credit and infrastructure programs aimed at alleviating
mass poverty in the countryside.

Box 2. CARP and land reform (Briones, 2000)

Officially, the CARP covers 83% of the Philippines’ agricultural lands. It follows
the traditional approach to land reform. Lands are redistributed with
compensation, while restrictions are imposed on land rental arrangements.
Persons prioritized to receive land awards are tenants, followed by regular
farmworkers, seasonal farmworkers, other farmworkers, tillers of public land,
and other cultivators. Land awardees are entitled to no more than 3 ha. of land,
and must amortize their lands either to the landowner (under a negotiated
settlement) or the national Land Bank.

So far, land redistribution is most successful for government-owned and public

lands, as well as lands under voluntary sale or transfer. Least successful are
private lands under compulsory redistribution, - only 3% of such lands have
been transferred to cultivators. This can be readily attributed to landowners’
resistance, particularly aimed against the below market values used by the
government
2.3. in determining
Infrastructure policy land compensation.

To focus the support services of CARP, the DAR has identified Agrarian Reform
Communities (ARCs). An ARC is a barangay or cluster of barangays in which
CARP accomplishment is significant and on which support service efforts may be
concentrated and packaged. The emphasis is on community-based
 13

development, under which local governments and grassroots organizations can

be mainstreamed into rural development programs under CARP. This is in line
with the participatory approach advocated in development projects, as stated in
the country’s Medium Term Development Plan: “the most vulnerable sectors of
society shall be economically empowered by expanding their capabilities and
opportunities to generate sustainable sources of income, propagating awareness
for positive collective action, and increasing their participation in decision-
making.”

2.3. Infrastructure policy

The Plan also sets down the public works policy of the national government.
Compared to its fast growing neighbors, the Philippines has mustered a far lower
allocation for infrastructure spending. From 1990 to 1992 for example, the
country had an average annual allocation of 2.6 percent of GDP for
infrastructure, in contrast to 4.0 percent for Thailand, and 5.8 percent for
Malaysia (Kohli, 1994). The situation has hardly improved in the rest of the 1990s
- the public sector share in construction value added has been mostly on the
decline since 1993 (Table 2.1.). The comparison with East Asian frontrunners is
even less favorable: 6 – 8 percent for Japan in its years of growth, 8 percent or
more for Korea in the 1980s, and similar magnitudes for Taiwan (China), Hong,
Kong, and Singapore (Mody, 1998).

Table 2.1.
Percentage share of construction in income and employment, 1991 – 1997

Year Construction Construction Public sector Public sector

share in GDP share in share in construction
employment construction share in GDP

1991 4.9 4.6 39.4 1.9

1992 5.0 4.3 42.7 2.1
1993 5.2 4.6 44.6 2.3
1994 5.5 4.7 40.1 2.2
1995 6.2 4.8 40.5 2.5
1996 5.8 5.7 36.1 2.1
1997 6.4 5.9 38.1 2.4

SOURCE: National Statistics Office.

The Plan also makes explicit the preference for basic infrastructure in rural areas,
namely, “farm-to-market and feeder roads, feeder ports, irrigation, rural water
supply, and missionary electrification.” For roads, the Medium-Term Plan
 14

mandates the construction of an additional 6,000 kilometers of barangay (village)

feeder roads, as well as the rehabilitation of an additional 26,800 kilometers, over
a 5 year period. The total cost is Php 88 billion ($US 1.96 billion at an exchange
rate of $US 45:Php 1).

Irrigation meanwhile covers only 43% of the potential area; the Plan requires
irrigation of 45% of this potential area (amounting to 766,000 ha.). River drainage
and management should also be improved as as present coverage reaches only
60%. Finally, although 87% of the rural population have access to water for
household use, the predominant form of access is the rudimentary first level
system, which consists of a protected well or developed spring, for a small
number of households (around 15) found in remote areas. The Plan evisages
expansion of piped-in areas.

While the benefit of infrastructure provision is often viewed in terms of the

consequent productivity improvement, it can also be pointed out (e.g. Lanjouw,
1999) that infrastructure provision in poor rural areas can do double-duty by
providing wage employment. The infrastructure gap may therefore be seen as an
opportunity for massive and sustained implementation rural PWE programs.

In this vein, the Plan does mention a preference for labor-based methods, where
feasible. The emphasis nevertheless remains on the provision of assets, due to
the infrastructure gap and a “catch-up” mindset among policymakers. Public
works officials note that LBES methods require more time for preparation and
construction, compared to equipment-based methods. The former entail a
recruitment stage, and deployment of workers whose pace of work is affected by
wide variety of factors, such as quality of supervision, degree of motivation, skill
level, remuneration, etc. Human work is also subject to physical limitations. In
contrast, capital-intensive methods rely on equipment already at-hand, which is
specifically engineered for rapid work, and is subject to a smaller set of human
human influences. At a certain point therefore a tradeoff between work pace and
labor intensity can be observed. Such a tradeoff is not unique to the Philippines:
in Cameroon for example, donor agencies and line ministries have usually
sought the fastest technical solutions to infrastructure needs, without regard to
the employment dimensions (von Braun, Teklu, and Webb, 1991).

2.4. Implementation framework

The conventional approach towards public works in general involves contracting

with private enterprises. The conventional contractors are subject to equipment
regulations (fixed by law) that stipulate the types of machinery the firm is required
to own. This is a significant disincentive to adopting labor-intensive technology4

4
What engineers refer to as different types of “technology” (labor-based versus equipment-
based) are, from the viewpoint of the neoclassical production function, merely varieties of capital-
labor ratios for the same technology. However we shall adopt the engineers’ usage here.
 15

(DAP, 1998). Similar regulations that discourage labor-based methods have

been observed in other countries, e.g. Nigeria (von Braun, Teklu, and Webb,
1991). In addition, labor market regulation entails increasing remuneration for
labor as firm size increases, favoring substitution of capital for labor. Hence, the
conventional approach has been referred to as equipment-based.

In the absence of these distortions, it can be argued that adoption of labor-

intensive methods is more efficient. A rough estimate of the wage at which labor-
intensive methods just match the costs of equipment-intensive methods is $US
4.00 (Stock and de Veen, 1996). This level is far above above market rates,
especially in agricultural areas. (It is in fact higher than the minimum wage set
outside the capital.)

Labor-based equipment supported technology

In contrast to the conventional approach, the official policy on employment

generation in public works is to apply "labor-based equipment supported" (LBES)
methods.5 These methods pertain to a technology in which labor, supported
by light equipment, is used as a cost-effective method of providing or
maintaining infrastructure to specific standards.

The policy mandate for PWE in the country was made official only in 1988, by an
executive order under the Aquino administration. The order required the effective
and efficient adoption of labor-based methods throughout the country. Public
works agencies are to incorporate such methods within their regular programs on
a nationwide scale, particularly for rural-based projects. Later implementing
regulations required projects under force account to draw labor from the
barangay hosting the project. For rural works undertaken by a private contractor,
50% of the unskilled labor must be drawn from the host barangay.

In 1999, an executive order of the Estrada administration recognized the need “to
strengthen the implementation of LBES methods through institutionalization of a
more focused policy direction and operational framework that will ensure the
success of this strategy in alleviating unemployment.” The order mandated the
creation of a special inter-agency committee to formulate and oversee a National
Program on LBES.

These efforts point to the special thrust in the Philippines regarding PWE
schemes. Instead of devoting resources to specific employment programs, the
government has adopted an integrative approach. Employment generation is to
be incorporated in the regular public investment programs for rural areas. In all
cases technical soundness is to be maintained. This is far from the “make-work”
thrust typically associated with PWE schemes. Again, this may hark back to the

5
Incidentally, this reflects the major advocacy role played by the International Labour
Organisation in promoting PWE schemes in the country.
 16

“catch-up” mindset which views rural works as primarily as suppliers of much-

needed assets, rather than of jobs.

Programming of labor intensity is deliberate, but moderate. Specific standards for

a project to be classified as a PWE scheme have not been imposed, at least
recently. Rather, project implementers are given suggestive, elaborate guidelines
(in the form of manuals) to effectively substitute labor for equipment.

The most prominent omission is a requirement on labor content. It is noteworthy

that the definition of “labor-based equipment supported” refers only to the value
added component of construction and is silent about the materials component.
Thus if labor accounts for the bulk of value added, then a project can be “labor-
based” even though total project cost is accounted for mostly by materials.

Contracting system

For the DPWH, the type of small contractors accepted in LBES works are labor-
only contractors, typically informally organized. These labor gangs are hired on
the basis of pakyaw contracts, which are derived from traditional construction
arrangements. The principal to the contract is the public works agency, while the
agent is a pakyaw team represented by a leader. A pakyaw contract engages the
team to provide labor for the completion of a specific task, within a specific time
period and for a stipulated amount. Equipment and tools are all provided by the
principal. As the principal recognizes no employer-employee relationship with the
pakyaw, legally the project is still undertaken under force account.

According to DPWH guidelines, the pakyaw contract begins with formation of

pakyaw groups, under the leadership of a project facilitator (from the DPWH) with
the involvement of barangay leaders. Workers should belong to the various
barangay associations near the project site. Unskilled labor should be drawn
from the host barangay, while semi-skilled labor may be recruited from the
municipality; skilled labor may be obtained from within the province. In any case
qualified workers nearer the barangay are given priority. The teams are
composed of groups of twenty workers. As many groups of workers as possible
should be formed.

The contract price is limited to 50,000 pesos. The contract ordinarily stipulates
completion within one month and should conform to normal productivity
standards. While payment is normally made once a month, more frequent cases
may be arranged; some retention (say 10%) is to be withheld until completion. To
promote transparency with communities, invitations to bid, contracts approved,
and payments to contractors are all posted in public facilities of the barangay.

One obvious advantage of the pakyaw is that it lightens the recruitment and
supervision load on government personnel. Another is that it transfers the burden
of avoiding minimum wage legislation from a national government agency to the
 17

pakyaw leaders, in a rural setting where statutory wage enforcement is usually

trivial. We shall be discussing the pakyaw system in greater detail in one of the
case studies. Having presented the implementation framework, we may now
readily discuss the country’s experience in rural PWE schemes.

Box 3. The task work system

An alternative approach to pakyaw is the takay, a task work system in which

a worker is paid for completion of a particular task within a specific time
period (usually a day). The takay however is highly unpopular with DPWH
engineers as it is very time-consuming, both in terms of preparing task
assignments, and measuring performance upon completion of tasks.
 18

Chapter Three.

Public Works Employment Schemes in the Philippines

2.1. Overview

PWE schemes for rural areas is said to have started in the early 1970s, following
the devastating floods in Central Luzon. Some roads in the calamity-stricken
areas were built using LBES methods. Meanwhile, for irrigation facilities, the
National Irrigation Administration (NIA) applied labor-based methods in the late
1970s for communal irrigation projects. In the 1980s, foreign donors extended
support for pilot PWE schemes, mostly for rural road construction, pathways, and
erosion control. The pilot schemes include the following (DAP, 1998):

− The Philippine Rural Infrastructure Project constructed 55 km of barangay

roads from 1981 to 1995 under World Bank funding. It was implemented by
the DPWH with technical assistance from the ILO.

− The Rural Roads Project meanwhile constructed 15 km of roads in three

provinces in 1985. A detailed study by the ILO showed that labor-based
methods offered a technically and financially viable alternative technology to
conventional methods for building small scale rural infrastructure. The project
was implemented by DILG with funding from the USAID.

− The Upland Access Project was larger scale the preceding ones; 300 km of
minor roads and trails in 15 provinces were constructed beginning from 1984.
The project was likewise implemented by the DILG with USAID funding. The
Agency discontinued funding of the project in 1990, citing its relatively high
management requirement cost.

Unfortunately further details about these projects is unavailable due to loss of

project documents6 and movements of project personnel.

The foregoing were localized programs. It was only in 1986, under the Aquino
administration, that PWE schemes were implemented on a nationwide scale in
the Community Employment and Development Program (CEDP). Another
major initiative for PWE was the Second Rural Road Improvement Project
(SRRIP), a foreign-funded project with an explicit employment generation feature
located in southern Philippines. The Local Infrastructure Development
Program (LIDP) under the Kabuhayan 2000 (1994-1996) under the Ramos
administration included an employment component focused on reforestation,

6
A major problem facing a country program review is the absence of an archiving policy on
project documents. On the contrary there is a standing order to destroy files over five years old,
which fortunately spares personal copies of government staff, and is itself poorly implemented.
 19

land development, and infrastructure. Meanwhile, a Food-for-Work Program

was undertaken in the country’s major sugar-producing province from 1986-1987
and from 1989-1995, in response to economic dislocation. The most recent
employment generation scheme is the Rural Works Program, initiated by the
DOLE, in response to the Asian crisis and the El Niño phenomenon, which
ravaged the agricultural sector in 1997.

The foregoing are distinct and completed programs with explicit employment
objectives. These shall be discussed in detail in the rest of the chapter. Special
mention though should be made of the various CARP infrastructure projects,
composed of numerous individual programs, which from the late 1980s became
a major impetus towards PWE generation. Rural works undertaken a support
service of the CARP are administered by the DPWH and officially falls under
LBES implementation. Even agrarian reform projects implemented by LGUs were
influenced by the employment emphasis. The on-going Agrarian Reform
Communities Development Project (ARCDP), begun in 1996 with funding from
-the World Bank, identifies as an objective the creation of wage employment
through labor-based rural works, under the administration of LGUs.

2.2. The Community Employment and Development Program

The CEDP was aimed as a pump-priming measure to counter the employment

stagnation from the 1983-1985 economic crisis. Financed by the Philippine
government, the CEDP aimed to generate 48.4 million person-days of
employment. Over its implementation period from 1986-1987, it attained 76% of
its employment target at a cost of 7.65 billion pesos.

Project composition, selection, and monitoring

The CEDP involved all the major agencies. It emphasized small-scale

infrastructure projects such as barangay roads, communal irrigation systems,
and schoolbuildings. The DPWH (roads) were allocated 56.6% of the CEDP
budget of 9 billion; DILG-LGUs were allotted 18.5%, while the NIA was given
4.4%. Minor program components included agricultural production (DA),
reforestation (DENR), and livelihood creation (DSWD). Funds for the project all
came from the national government, with no cost-recovery measures imposed.

Actual disbursement and person-days generation is shown in Table 3.1.

Employment generation was mostly accounted for by the DPWH, which was able
to meet more than three-fourths of its employment target, using 78% of its fund
support. Relatively weak in fund utilization and even employment generation was
the NIA.
 20

Table 3.1.
Indicators of agency performance in the CEDP

Agency Share in total Percent of fund Share in total Percent of

disbursement support generated employment
employment target

DPWH 67.6 78.0 64.3 76.9

NIA 4.8 66.9 2.1 52.1
DILG-LGUs 10.0 56.5 6.9 60.9
Others 17.6 57.2 26.7 100.0

SOURCE: NEDA

Rural works projects under the CEDP were required to allocate at least 30% of
project cost to labor. Each project was given a one-month completion deadline.
Projects should also be consistent with municipal, provincial, regional, and
national development plans. Approved proposals should be found
implementable, efficient, and technically ready.

In selecting specific projects, the CEDP adopted a bottom-up approach.

Identification began at the barangay level, which is then taken up by the
Municipal Development Council. The proposal is passed onto the higher
Development Councils (municipal and regional), as well as District and Regional
Offices of the DPWH. Final evaluation and approval was centralized at NEDA.

The specific design of the project (embodied in the Program of Work) is

supposed to involve LGUs. Implementation of works was undertaken through
either by force account or through private contractors. Under the former, labor
was obtained through pakyaw contracts.

A distinctive feature of the CEDP was the involvement of NGOs in monitoring.

Participation of NGOs was elicited by the Regional Development Councils, who
monitor and inspect the projects. A special monitoring committee consisting of
NGO representatives submits a status report (distinct from the implementer’s
status report) on particular works.

Implementation problems encountered

The CEDP was the first nationwide attempt at employment generation through
public works. At the same time, initial plans proved to be too ambitious: it was
first intended for completion by the end of 1986, but agencies took time to issue
 21

implementing guidelines. The administrative demands on the DPWH was

particular heavy, as its procedures and practices were built on the conventional
approach using equipment-based methods. Even upon issuance of guidelines,
many engineers resorted to the conventional approach due to lack of familiarity
with labor-based methods (DAP, 1998).

Another reason for delay was erratic funding and disbursement. Moreover,
contract procedures were cumbersome; in some cases, the absence of official
guidelines led to confusion over bidding requirements. This caused late
approvals, failure of contractors, and delays in payments. It was in response to
these criticisms that the DPWH formalized guidelines for the pakyaw contract
(see p. 17) to ensure adoption of LBES technology.

CEDP funds were not entirely used for direct hiring of workers, whether for public
works or for self-employment. Some of the funds were reportedly used by line
agencies for personnel expenses; these included the DILG, DA, DOTC, and the
even the Department of Justice. The CEDP fund allocation tended to be arbitrary
and spread out across the line agencies, without thorough examination as to
whether each agency could be actively involved in meeting CEDP objectives.

The choice of projects was also prey to local politics. The foregoing selection
process was not strictly followed as many fund allocations were realigned under
pressure of local politicians. The bottom-up approach was therefore frustrated in
some instances.

NGO participation in monitoring was supposed to check for some of these

implementation problems. The NGOs exposed bottlenecks, and even
irregularities involving government personnel. At least 107 cases of alleged
anomalies have been reported by NGOs and private individuals to the NEDA and
DPWH. Complaints cover rigged bidding, the use of dummy contractors, payroll
padding, fraudulent deliveries, materials overpricing, and use of substandard
materials. However, the NGOs could have been more influential had they more
actively participated in the CEDP. On the contrary, many NGOs initially invited to
the CEDP dropped out due to lack of motivation, busy schedules, confusion over
weakly coordinated monitoring activities, and inadequate logistic support from the
government.

Labor intensity was supposed to have been enforced by the 30% labor content
requirement. The DPWH in fact had initially set the requirement to 40%.
Subsequent experience in the field compelled adjustment. Even this was often
not satisfied. Water supply and schoolbuilding projects could not comply due to
the nature of the work and the need for relatively expensive construction
materials. Moreover, some private contractors did not follow the labor content
rule due to unavailability of manpower, peace and order problems, and time
pressure. Monitoring and enforcement of the labor content rule was also impeded
by confusion and unfamiliarity with implementation guidelines of the CEDP. In the
 22

opinion of one DPWH official, not even a tenth of total CEDP expenditures were
for labor, so serious were the departures from labor-intensive methods.7

After implementation, no provisions for maintenance were undertaken specifically

for CEDP projects. Rather, the completed works were simply treated within the
pool of infrastructure to be maintained by the national government (which had not
yet devolved rural works at the time.) Communities were not organized to provide
maintenance and assure sustainability. In general, community involvement in the
project was limited to the provision of labor.

Wages and targeting

Remuneration for labor was on a cash-for-work basis. There was a modest

attempt at food-for-work using US rations, but this was immediately terminated
due to problems with distribution, storage and handling, and unacceptably poor
quality of the rations. Average daily wage for the CEDP was 85.30 pesos (around
$US 4.00), according to Mangahas (1986). This was higher than the prevailing
agricultural wage.

Information about CEDP workers is available from the Worker’s Profile Survey
covering the period of July to August 1987. Interviews were conducted by
implementing agencies, headed by the NEDA, through interviews of workers. We
discuss this survey in some detail, as it is the only data set available on workers
hired by a large-scale PWE scheme for the Philippines.

The survey covers 11,086 respondents. It found the following:

• A large minority of workers (36%) hired under the CEDP were females. In
one region (Central Luzon) the proportion of males was only 27.3%.

• Most of the workers (40.7%) were young adults (21-30 years old.)

• Persons with only primary schooling accounted for 37.5% of CEDP

workers. Persons with up to high school attainment accounted for another
35.8%. As many as 26.6% had reached college, with 15.1% being college
graduates.

• The CEDP intended to use local labor. Indeed, 78% of workers were
residents of the barangay in which a project is located.

• The CEDP aimed to increase employment. Before CEDP, 54.4% were

indeed unemployed.

7
In terms of number of projects, a majority did comply with the labor cost requirement, as there
were a large number of small projects in which the labor content requirement was realistic.
 23

• Of those employed before the CEDP, 86% were earning below the legal
minimum wage.

• In terms of poverty, before the CEDP, 82% of the workers hired were
below the poverty line, while 54% of CEDP workers were below the food
threshold. Compare this with national poverty incidence of 40% in 1985.
The CEDP therefore appears to be well-targeted.

The regional profile of workers status before CEDP is shown in Table 2.3.

Table 3.2
Employment and income characteristics of CEDP workers by region, in percent

Region Emloyed before Below the Below the

CEDP subsistence poverty
threshold threshold

Philippines 45.6 53.7 81.9

Metro Manila 64.9 39.7 75.8
Ilocos 47.1 62.3 87.5
Cagayan 36.3 49.5 76.2
Central Luzon 41.1 40.5 83.0
Southern Tagalog 40.0 46.3 35.5
Bicol 44.0 55.9 84.2
Western Visayas 38.8 64.0 88.2
Central Visayas 37.7 69.1 83.1
Eastern Visayas 44.8 73.9 84.2
Western Mindanao 49.6 49.8 68.7
Northern Mindanao 32.8 58.5 85.4
Southern Mindanao 42.7 53.0 78.1
Central Mindanao 41.6 67.3 90.0

Source: NEDA

However, there are very strong reasons to be skeptical of the foregoing figures.
The purpose of the survey was to evaluate whether program direction had been
properly followed; the survey does not intend to measure the impact of the CEDP
on incomes and livelihoods of the workers. Though the survey provides some
interesting information about wage benefits, in the end we remain ignorant as to
 24

the targeting performance of the CEDP. Box 4 highlights some observations

regarding interpretation of the survey.

Box 4. Observations on the CEDP Worker Profile Survey

• The survey covers all types of workers of the CEDP. DPWH project
workers accounted for 41.5%, while DSWD project workers accounted
for 35.7%. The survey report does not disaggregate workers by agency,
hence we have no idea whether the foregoing figures apply to rural
works laborers. It almost certainly does not in the case of male-female
ratios, as the DSWD livelihood component probably reached out to
females.

• The survey question on state of employment prior to the CEDP provides

no time frame (hours worked in last two weeks, last month, last six
months, etc.). In the case of rural workers with intermittent work
(farmers, farm workers, etc.) this could be very important.

• Moreover, there is no distinction between the unemployed and non-

participants in the labor force; given the large number of female
homemakers in the survey, it is likely that most of them would indicate
that they were unemployed.

• Questions on monthly income pertained to workers; no effort was made

to measure household incomes, let alone per capita household incomes.

• There was only one question in the survey form eliciting monthly income.
The entry for this question consisted of ticking off one of several income
brackets. This procedure is well-known to result in a serious downward
bias in the measurement of income.

2.3. The Local Infrastructure Development Program (Kabuhayan 2000)

As the CEDP ceased in 1987, the government attempted to adopt and

institutionalize its elements in regular projects of the line agencies (Orbeta and
Sanchez, 1996). One such attempt was the Local Infrastructure Development
Program (LIDP) under the Kabuhayan 2000. The Kabuhayan 2000 is an umbrella
interagency program involving various employment-generating thrusts, with LIPD
being the PWE scheme.
 25

Overall, the Kabuhayan targets the creation of 2 million jobs. Projects under the
Kabuhayan were targeted to priority areas, which were the poorest 19 provinces
and the fifth and sixth class municipalities. Within provinces, identified projects
would employ fishers, small farmers, landless workers, upland subsistence
farmers, indigenous peoples, and underemployed urban dwellers.

The LIDP sought to identify projects within the regular infrastructure programs of
the DPWH and LGUs in which LBES methods were deemed feasible. True to the
integrative approach of the government towards PWE schemes, no new funds
were infused into PWE schemes, nor was there any transfer or pooling of funds
across departments or agencies. The specific targets under the LIDP were as
follows:

• The DPWH would enroll 14% of its projects under LBES methods. Its
own rules and procedures (particularly the pakyaw system) would be
followed in meeting this target. An additional guideline is that 35% of
project cost is to consist of labor. An estimated 36.5 million person-days
is to be generated at a total cost of 9.5 billion.

• The LGUs would enroll road maintenance projects under LBES. The
maintenance approach to be adopted by LGUs is the length man system
in which individual workers assigned to maintain particular portions of a
road project through a set of pakyaw contracts. The targets are itemized
in Table 3.3.

Table 3.3
Targets for LGU road maintenance under the LIDP

Target road Length (km) Estimated cost Jobs

(‘000 pesos) generated

30% of provincial roads 8,679 624,888 26,037*

30% of city roads 1,195 107,550 3,585*

100% of municipal roads 12,874 463,464 25,748**

100% of barangay roads 85,940 2,062,560 85,940***

Totals 3,258,462 141,310

*
-3 jobs per km. per year.
** -
2 jobs per km. per year
***- 1 job per km. per year

SOURCE: DILG
 26

Strategies to meet these targets include the introduction and transfer of LBES
technology to all LGUs, as well as national government assistance in the form of
training, supervision, technical, and financial support. These will serve as a
transition mechanism to full decentralization of LBES methods. In contrast with
the CEDP, we may note a strong emphasis on local governments in the
Kabuhayan 2000. This is a direct consequence of decentralization reforms of the
early 1990s. In fact, the DILG was selected as the lead agency precisely due to
its specialization in LGU concerns, as well as the fact that its offices down to the
municipal level remained under the national government. Nevertheless, no
matching grant scheme was implemented vis-à-vis the local governments, as
funding was sourced entirely from within the regular budgets of the agencies and
units themselves.

The Kabuhayan mentions the necessity of involving NGOs; in practice however,

NGOs were not included in any aspect of the LIDP, but were confined to the
agroforestry component of the Kabuhayan. Participation of communities is limited
to supplying labor LBES works.

As the LIDP monitoring system was limited to employment generation, figures

generated for the project are meager. The LGUs generated 417,329 jobs, nearly
triple the target. The DPWH however generated only 9.3% of its target of person-
days.

Based on interviews of officials, the DPWH part was more properly implemented
compared to the CEDP, as the guidelines were already in place and personnel
were already becoming familiarized with LBES methods. The projects enrolled
under the LIDP were CARP projects. The DPWH was selective in identifying the
enrolled projects, making sure that the 35% labor content rule was followed.
However, employment targets were not met partly because of slippage from
expected CARP funding (see p. 11).

The DPWH identified a few other remaining problems with the LBES approach.
Policy inconsistencies at the donor and national level continue to undermine
employment-generation. Funding agencies sometimes restrict the number of
projects to be implemented on force account, thus favoring the contractor system
that is biased towards equipment-based methods. The civil service commission
has also tried to impose strict requirements regarding the hiring of common
laborers for rural works. National government agencies also seem to disagree
about the appropriate policies towards contracting. The revenue agency has
attempted to tax pakyaw transactions, making them less attractive to contractors.
(DAP, 1998). These problems have cropped up persistently since the time of the
CEDP, the Kabuhayan, and the other infrastructure programs, but no progress
has been made as of now in resolving these policy inconsistencies.
 27

Finally, it is not clear whether roads are still being maintained under the length
man system (or any system for that matter); after the lapse of the program,
monitoring is no longer undertaken. The DPWH components were also turned
over to LGUs upon completion, as is customary; however the state of the
infrastructure after the turnover was not monitored.

2.3. The Second Rural Roads Improvement Project

The SRRIP was a project on rural roads which began in 1986 and was
completed in 1995. It covered 23 provinces in Visayas and Mindanao. The
project was based mostly on feasibility studies conducted in 1982 under the First
Rural Roads Improvement Project. The two major components were the
rehabilitation and improvement of provincial roads

There were two major components. The first was the rehabilitation and
improvement of provincial roads, implemented by the DILG and provincial
governments. The second was the improvement of barangay roads, implemented
by the DPWH. The latter component was located in agrarian reform settlement
areas and was conducted using LBES methods. The second component lasted
only until 1993 and generated around 1 million person-days of employment in the
course of constructing 261.8 km. of dirt roads.

Before implementation, roads in two of the project areas were impassable during
the rainy season, with vehicle access possible for only 60 to 125 days per year.
Some of the “roads” were not much more than trails accessible only with
packhorses and buffalo carts. Thus, the poor and mostly Muslim communities in
the remote settlement areas were denied easy access to trade and interaction
with the lowlands.

Once completed though, the impacts of the SRRIP could be easily discerned.
The settlement areas have become accessible all year round; travel time to the
nearest major center was cut by 30 to 70 percent, and transport costs were cut
by 60 to 80 percent. All the barangays enjoyed regular public transport service
after the project.

In constructing the roads, the DPWH implemented labor-based methods mostly

with pakyaw contracts, based on the usual DPWH guidelines. In determining the
task size for each pakyaw contract, a benchmark of 70.40 pesos/day (US$ 3.40)
was used (based on the prevailing statutory agricultural wage) throughout the
duration of the project.

The actual amount received by workers is however not known, as this is purely
an internal arrangement between the pakyaw contractor and the workers. Given
the estimate of agricultural wages to be around 50-56 pesos at the start of the
project (Subbarao, Ahmed, and Teklu, 1996), both contractor and workers could
have shared in the 20-30% margin.
 28

On average, over half of construction cost was spent for labor (Table 3.4).
According to the SRRIP implementers, as the projects consisted of dirt roads,
material costs were brought down by obtaining them on site. There were no
problems in generating a relatively high labor content for the road works.
Variations in materials cost roads were due to varying proximity to sediment
areas (riverbeds) which provided road materials. Where no suitable “as dug”
materials were available, small rock crushers were used upon boulders collected
by workers. Thus environmental factors largely explained variations in labor days
per kilometer.

The implementation of LBES methods realized cost savings: expenditures per

kilometer were 12 % lower than projected. Additional benefits include the training
of workers in concreting, masonry, and even the repair and maintenance of
vehicles and light equipment.
Table 3.4
Selected statistics for the SRRIP Barangay Roads Component 1987-1993

Year Km. of roads Labor days Labor cost

constructed per km. ratio

1987 26.4 4,229 54.1

1988 55.4 3,719 54.4
1989 66.4 4,050 54.3
1990 63.3 4,230 54.8
1991 5.1 4,269 55.0
1992 29.3 4,438 55.0
1993 4.3 5,329 55.0
Total 250.1 4,114 54.6

SOURCE: Subbarao, Ahmed, and Teklu (1996).

Local governments were involved to the extent of identifying projects, and

providing inputs to the Program of Works. Actual construction work was handled
entirely by the DPWH. No pattern of matching grants was required. Communities
were involved to the extent of assisting in labor recruitment for pakyaw group; no
cost-sharing arrangement was reached with communities. Implementers though
noted that the labor-based scheme was widely approved among the villagers due
to its employment benefits.

Upon completion, the roads were turned over to barangay officials for
maintenance. It is though that community involvement in maintenance was
 29

encouraged by taking a labor-based approach. There is however no information

as to whether communities did go about conducting maintenance works, nor
about the current status of these roads.

2.3. The Food-for-Work Program

The FFW Program was implemented in the province of Negros Occidental

(Eastern Visayas Region), the major sugarcane province of the country. Over
70% of the province’s agricultural area is devoted to the crop. In 1986, sugarcane
output of the province had fallen by 40% from its peak in 1976. As an estimated
300,000 workers faced unemployment; alarms were being raised on the prospect
of mass starvation.

Description of the scheme

That year a food-for-work scheme was implemented in the province. Officially

known as “Special Employment Program for Displaced Rural Workers,” it was
supported by food aid from the United Nations World Food Program (WFP). The
special program lasted only one year under the leadership of the DOLE. The
food–for-work scheme was continued and expanded in the “Assistance to the
Rehabilitation of Displaced Sugar Workers and Rural Development in Negros
Occidental”, from 1989 to 1995. The lead agency was identified as the DILG,
which was to work in collaboration with the Negros Occidental LGUs. The
components of the FFW Program were agricultural assistance to CARP
beneficiaries, agro-forestry, self-employment promotion, and rural works. The
following is devoted to the rural works component of the expanded phase.

Planning for the infrastructure components took note of the fact that only 6.2% of
the province's cultivated area was irrigated, compared to the potential area of
19%; furthermore, that the share of community works in the province in
proportion to the total stock were lower than its population share (around 3%).
The project selection process is typically initiated at the barangay level. Each
barangay had an “implementation group” which was made part of the
organization structure of the projects. Members of farmer associations and
cooperatives identified plans and programs and discussed these with barangay
and LGU officials. Upon identification, the barangay sends its project proposal to
the municipal office. This is then endorsed by the mayor to the DILG provincial
office, which then conducts an evaluation; approved proposals are then sent to
the an interagency task for final review and approval.

Construction of the infrastructure was supposed to be labor-intensive. Each

projects lasts around 5-6 months, and was scheduled to avoid planting and
harvesting seasons. Community works were undertaken by provincial LGUs,
while irrigation projects were administered by the NIA. The former targeted
 30

790,000 person-days of employment, while the latter targeted 500,000 person-

days.

Payment was partly in the form of rice, which was obtained from the World Food
Program. The rice was shipped from Australia and replaced with local rice at a
fixed conversion rate (1 ton foreign : 1.3 ton local) from the government-owned
grains trader. The Philippine government meanwhile shouldered the cash
component of wages as well as the capital outlay for the rural works.

Actual distribution started in 1991 and lasted until 1995. Releases of rice to the
province occurred monthly, while implementers disbursed cash and wages
weekly. The daily ration for all beneficiaries was 2 kg. of rice, for which Php 10.00
was deducted from the daily wage of Php 100.00.

Accomplishments

The WFP provided a total of 8,269.2 mt of rice, costing US$ 3.15 million. Total
government expenditure for the FFW project (all components) was US$ 22.9
million (using a conversion of US$ 1:Php 22, the average exchange rate from
1989-1995.) Of this amount, 23% consisted of capital outlay, while 31.5% was
contributed by the LGUs.

The infrastructure works employed 14,257 workers and 402,035 person-days of

employment, for an average of 28.2 days per person. Meanwhile irrigation works
accounted for another 101,492 person-days. The infrastructure and irrigation
works reached 51% and 20% of their employment targets, respectively.

Irrigation eventually covered 6647 ha, exceeding the target. In all, there were
3,693 farmers benefited from the new irrigation facilities (98% of target). Targets
and accomplishment for the other rural works items are listed in Table 3.5.

Problems encountered

The project completion report observed that the majority of the target outputs in
infrastructure could not be realized due to slow disbursement of the national
government, and slow liquidation of advances of the provincial government.
Bidding procedures even at the local level, particularly for construction materials,
were also cited as a problem.

Late delivery of rice to the project site by the government trader was often
observed, with the lag dragging on for months in some instances. This slowed
down project implementation. Such delays have been encountered in other food-
for-work programs; in Bangladesh, for one, workers were often paid cash wages
due to the late delivery of wheat (Hossain and Akash, 1993).
 31

Table 3.5.
Targets and accomplishments of the rural works component, FFW Program

Item Taget Accomplishment

roads 258 km. 324 km rehabilitation

18.8 km. concreting
bridges 56 m. 468 m.

SWIMs* 250 ha. coverage

artesian wells 167 137

school buildings 145 units 34 units

home economics buildings 25 units 17 units
community centers 140 128 units
health stations 64 28 units

warehouses/ solar dryers 30

fishing port 1

toilets 47 units 40 units

potable water systems. 2 4

riprapping/erosion protection 3.01 km.

*
Small Water Impounding Systems for irrigation
SOURCE: DILG

Upon completion, maintenance was to be undertaken by the concerned LGUs;

the irrigation facilities though were to be maintained by the users associations.
There is however no information available on the status of the infrastructure.
Nevertheless, the provincial LGU has signified its intention to continue similar
schemes.

The program itself has won over the provincial government. It continues to
advocate continuation of the program approaches and procedures, despite its
termination in 1996. In 1996 it earmarked some funds to purchase rice in support
of a similar scheme, making use of the rules, procedures, and standards of the
FFW program.

Labor policies and targeting

The rural works component made no use of labor content requirements, nor did
they follow the same guidelines adopted in other agencies such as the DPWH.
The NIA component of the rural works is guided by its internal procedures.
(Further details on NIA procedures are provided in Chapter 5.) As for the local
government component, implementation was by force account. The LGUs
 32

directly undertook supervision of workers and management of payroll (including

distribution of food). However, the procedures in hiring labor and ensuring
adoption of labor-based technology for the LGUs are not clear. Perhaps labor-
intensity was not pushed to the optimum, hence the observed slippage from
employment generation targets.

Wage payments were generous compared to market wages. In the first place,
the food subsidy to rice (under the Php 5.00/kg pricing of rice) is around 44%
subsidy on rice, as the market price is roughly Php 9.00 per kilo. By 1994, the
wage paid (including food) was around 104 to 108 pesos, compared to the
market wage of less than 90 pesos. According to project officials, many workers
are willing to work for as low as 60 pesos. A baseline study (David,1993) shows
that there were no significant differences in socioeconomic characteristics
between participating and nonparticipating households. These suggest that the
program has suffered considerable leakage (Subbarao, Ahmed, and Teklu,
1996).

The rural works component did have a high proportion of women participants
relative to other PWE schemes in the country. Of the total number of female
participants in all the FFW schemes (including the microenterprise and farm
development projects), 20% participated in the various infrastructure activities,
while close to 50% participated in road rehabilitation. Often they would serve as
effective alternates to their husbands who worked in sugarcane plantations.

3.4. The Rural Works Program

In 1997, the Asian financial crisis struck simultaneously with the El Niño-induced
drought, wreaking havoc on the Philippine economy and the agricultural sector.
The RWP consists of local government projects aimed at assisting displaced
workers in the aftermath of these crises. Torres (2000) is the basis of the
following description.

Features

The RWP is a cost-sharing scheme between national and local governments.

The DOLE shoulders 60% of the total wage bill, while the LGU absorbs other
project expenses. The scheme was limited to LGUs with a Provincial
Employment Services Office (PESO), an office dedicated to providing
employment assistance, employment referral, vocational guidance, and other
support to workers in the province. Workers were selected based on the
recommendations of the PESO.

Project areas in turn were selected based on the size of the displaced worker in
the area. The "displaced worker" category includes "workers who suffered from
diminution or loss of income as a result of their being displaced from work and/or
 33

less working hours available." Prior to the project approval, the LGU must
demonstrate its capacity to shoulder its cost share.

In order to ensure the attainment of program objectives, regular monitoring is

undertaken on a monthly basis, involving field staff of the regional DOLE offices.
In addition to monthly progress reports, at a project’s end, the LGU proponent is
required to submit a project completion report that attest to the sustainability of
the project. The project was deemed successful, mainly due to the close
partnership between DOLE and LGU proponents.

The projects selected were mostly brief, small-scale efforts (Table 2.6). A total of
14,921 workers have been given work, with an average of 16 person-days each.
Economic infrastructure accounted for around 35% of project cost (shouldered by
DOLE), while social infrastructure took up 28.3%; the remainder consisted of
agroforestry and other projects. Most of the economic infrastructure (76%) was in
the form of farm-to-market roads.

Table 2.6.
Status of the Rural Works Program, August 2000

Region DOLE Average no. Average Mandated

expenditure, of workers duration of minimum wage,
(Php millions) per project employment 1999 (Php/day)

Philippines 24.1 43 16 -
CAR 2.6 38 12 147
NCR 0.1 55 1 198
Ilocos 1.5 29 45 166
Cagayan 1.1 49 15 160
Central Luzon 0.9 39 10 175
Southern Tagalog 2.1 26 27 188
Bicol 1.0 31 2 163
Western Visayas 2.0 44 4 146
Central Visayas 1.8 46 27 160
Eastern Visayas 0.9 57 4 153
Western Mindanao 2.4 38 54 142
Northern Mindanao 2.5 60 9 149
Southern Mindanao 1.4 60 28 145
Central Mindanao 1.2 32 32 141
ARRM 2.6 47 10 141

SOURCE: DOLE.
 34

Problems identified

Several problems have been noted. One is environmental: in some areas

(particularly in Mindanao), frequent heavy rains delay implementation. Second,
the works seemed to have not been scheduled to take into account agricultural
seasonality, as the works reportedly interfere at times activities such as planting,
cultivation, and harvesting. Third, the DOLE expects LGUs to implement projects
by force account; in fact, LGUs at times resort to private contractors which,
according to the DOLE’s, adversely affects the placement of displaced workers.
Finally, the DOLE observes that all the workers employed in the RWP were
males. To accommodate female workers, the RWP should begin to prioritize
projects that do not involve physically intense work, such as beautification drives,
eco-tourism, reforestation, tree planting, and similar projects.

Labor intensity, wages, and targeting

We have reviewed some of the other data for the project and have come up with
our own set of observations. The labor cost ratio of a typical RWP project
averages 45%. Aggregating over all projects however, the total wage bill is only
34% of total cost. Average labor cost as a ratio of project cost varies from 14% (a
farm to market road) to 100% (canal drainage and desilting). The road projects
taken up in the RWP tend to have the lowest labor intensity among the projects
undertaken; in light of the large share of rural roads in RWP project, this seems
to have impeded its job-generating objectives. However rather than allocating
resources away from roads, perhaps the type of roads, the technology adopted
for road construction, and the use of on-site materials should be carefully
evaluated to see of LGUs are optimizing labor intensity. The DPWH labor-based
units have extensive experience in this regard, but no linkages, support, or
training with the DPWH have been attempted in the RWP.

Wages are set at the legal minimum for the region. This alone makes the
targeting of the poor in under the approach adopted by the DOLE is highly
suspect. Statutory wages are set far above farm and informal sector wages and
are certain to attract many of the nonpoor to participate in RWP projects. Another
reason Second, the focus on “displaced” does not automatically lead to targeting
of the poor; most displaced workers do not come from the ranks of the poorest,
and are not necessarily heading there for good in the absence of government
intervention. Third, the reliance on PESO referrals may limit selection of workers
to better-educated, well-informed individuals who are not poor; the PESO may
also have referred workers with skills in construction works, which may not be the
least well-off. This is in fact noted by Torres (2000), who observed that the
PESO recommendees included masons, carpenters, farm laborers, and
unemployed persons, most of whom indicated familiarity with infrastructure work.
 35

3.5. General assessment

Subbarao, Ahmed, and Teklu (1996) find PWE schemes in the Philippines to be
in general poorly guided by clear objectives. That is,

If the objective is to stabilize seasonal consumption, public works should be

timed to counter seasonal fluctuations. If the programs are intended to offer
insurance, employment should be guaranteed on demand, as in India’s
Maharashtra Employment Guarantee Scheme. If programs are targeted to
the poor, employment should be targeted to the poor, employment should
be restricted with poverty targeting indicators, means-tests, or self-targeting
measures such as low wages. None of these measures are explicitly
embodied in current Philippine programs despite the close association
between poverty and seasonal underemployment in rural areas (p.35).

In addition, they point to the poor attention accorded to maintenance strategies:

The long term employment and income creation effects of public works
programs is largely contingent on the sustainability of assets. To prevent
asset loss, a mainenance strategy needs to be designed in the project
formulation stage. (p.35).

The quotations refer to the issues of seasonality, employment guarantee,

targeting, and sustainability. We conclude our review of Philippine experience by
way of discussing these issues.

PWE and seasonality. Rural-based PWE schemes in the Philippines are often
scheduled so as to avoid competing with agricultural activities. This is true of
DPWH programs (which make the timing consideration explicit in their labor
recruitment guidelines), NIA programs (see Chapter 5), and some LGUs (e.g the
Food-for-Work Program). Competition with seasonal activities was cited only for
the RWP. While this decision is administratively convenient, it also inadvertently
achieves seasonal targeting, at least in part. Hence strident criticisms on the
absence of seasonal targeting have failed to take into account this basic design
feature in PWE schemes.

Employment guarantee. A large-scale employment guarantee scheme would

run counter to the standard Philippine approach to PWE, which is integrative.
That is, its major PWE thrust is to incorporate labor-intensive methods in small-
scale rural works. The last time a national make-work program was attempted
(the CEDP), significant deviation from employment objectives was observed.
This is attributed to a desire to preserve asset quality, combined with inadequate
operational familiarity and commitment to labor-based methods. Future
incarnations (i.e. the LIDP) achieved employment objectives by deliberate
selection of the appropriate projects with inherently high labor intensity.
 36

Current schemes (i.e. labor-based CARP projects) are clearly integrative, with
employment generation strictly a secondary consideration in project design. Even
this moderate approach is fraught with problems due to policy inconsistency,
which need to be immediately resolved at the national government level.

Whether employment guarantee programs are appropriate will depend on the

cost-effectiveness of alleviating poverty and providing social protection through a
make-work scheme, compared to other instruments (e.g. food stamps,
microcredit, education, etc.). This in turn would partly depend on targeting
performance of PWE.

Targeting. While poverty alleviation is a general intention for all PWE schemes,
there has been no project with specific measures towards targeting of the poor.
Rather, target groups are identified, and it is assumed that hiring from these
groups is equivalent to assisting the poor. The problem is that these groups are
usually too broadly defined. The DPWH policy for rural works is to hire unskilled
local residents, with the assumption the poor are thereby assisted with wage
employment. This boils down to geographic targeting of the poor; it is not clear
however, whether the provinces and villages were appropriately targeted in terms
of contribution to poverty. Likewise, LGUs implementing rural works are assumed
to assist their constituents who are needy of employment, but this criterion is
prone to political (rather than welfare) considerations.

Self-targeting, an consideration in PWE schemes, is missing in all the programs

reviewed. The basis for remunerating labor is the statutory wage, which is always
higher than prevailing agricultural wage. A reassessment of this policy should be
conducted, with a view of exempting public works schemes with clear
employment objectives from wage legislation.

Another important targeting indicator is gender, which is ignored in nearly all

PWE schemes reviewed. With construction being a male-dominated industry,
and in the absence of deliberate hiring policies directed to women, this should
not be surprising. As the FFW demonstrates however, meaningful participation of
women, perhaps in lighter tasks, can (and should) be accommodated in such
schemes.

Sustainability and replicability. Asset maintenance is essential for ensuring

long-term productivity improvement from public works; a labor-intensive
approach to maintenance also ensures a long term employment effect. The
absence of a maintenance strategy is another serious gap in PWE schemes. For
most assets created by PWE schemes, no funds for maintenance are designated
(DAP, 1998). The above suggestion by Subbarao, Ahmed, and Teklu is well-
taken.

A widespread and sustained strategy of employment-generating public works

requires implementation down to the level of LGUs. National government officials
 37

admit that LBES methods have encountered stiff resistance from some local
executives, mostly due to misconceptions regarding the inability of such methods
to match costs, quality, and duration of conventional methods, or even perhaps
due to lobbying by construction firms. In general however, local governments
may in fact furnish a strong constituency for rural works aimed at promoting local
employment, given the popularity of such schemes at the grassroots (as
observed for the SRRIP).

A final element in maintenance and sustainability that is typically ignored is the

participation of communities. In most projects they may have been involved in
project identification; in the pakyaw system they were responsible for providing
labor and other inputs to public works; however there has been little progress in
incorporating communities in actual design, implementation, and maintenance.
These two themes – decentralization and community participation – shall be the
focus of our case studies.
 38

Chapter Four

THE CASE STUDIES: INTRODUCTION

The review of experience provided some broad generalizations that are useful in
making policy and program recommendations. However to obtain insights on
best practices, more substantive primary data gathering would be needed. This is
the purpose of the case studies. This chapter introduces these studies by
presenting the methodology, providing a brief backgroun, and discussing the
issues framing the analysis.

4.1. Methodology

The selected projects should be exemplars of “best practice”, so as to inform the

formulation of guidelines for project implementation. That is, we have chosen the
relatively more successful projects that adopt approaches that are innovative in
the Philippine context. Government officials helped identify the cases as “models
of the LBES approach to public works.

Funding for the projects all originate from foreign assistance. For one project,
funding was provided by the IFAD, to allow comparisons between IFAD and non-
IFAD projects. To compare the different modes of administering a project, we
have chosen one project administered by an LGU, and two administered by the
national government. We have also factored in CARP in the selection of the
projects (two of the projects are CARP-related and one is non-CARP) due to the
strategic role of CARP in rural development policy. The projects all fall under the
community works classification. Officials are unanimous in attributing project
success to the active participation of the beneficiary communities. The element of
community participation is novel from the viewpoint of traditional rural works
policy.

The first case studies an intensive-participation project implemented by a

national government agency. The second case (also under a national
government agency) studies a participatory approach implemented by pakyaw
contract. The third case studies how a community works project is implemented
by an LGU. The labor-only contract and decentralization have been identified in
the preceding review as major considerations in the conduct of PWE schemes in
the Philippines.

In addition to project documents, we gather information directly through personal

and group interviews of government officials, field staff, community leaders, and
project beneficiaries. Structured interviews of household heads were undertaken
in the villages hosting the selected projects. Households are classified as
working if at least one member was employed in the project. We interviewed
heads of 20 working and 20 non-working households. The respondents were
 39

selected randomly based on a roster of workers (for the working households) or

of villagers (for the non-working households.)

4.2. Background of the selected projects

Based on the foregoing selection criteria, the following projects have been
chosen for the case studies. In particular, these projects have been cited by
government officials as illustrative of best practice within their agencies (the
DPWH, the DAR, and NIA), owing to excellent community performance, high
asset quality, and successful employment generation.

The Tumbaga Access Road Project (ARP). The Tumbaga ARP is a CARP-
related administered by the national government under the Agrarian Reform
Infrastructure Support Project (with funds from the Japanese Bank for
International Cooperation). It exemplifies the labor-only contract or pakyaw, the
mechanism adopted by the public works agency of the country for implementing
PWE schemes. The community recognizes the road as well-built, and has
maintained it consistently.

The Ciabu Water Supply Project (WSP). The Ciabu WSP is a local government
project exemplifying the implementation of PWE under a decentralized regime.
Funding originated from the World Bank through the ARCDP. The municipal
government in the area constructed a potable water system for the remote
upland village of Ciabu. The project made use of local labor, and upon
completion was operated entirely by the beneficiaries organized in a water users
association. The system remains well maintained.

The Palanas Communal Irrigation Project (CIP). The Palanas CIP involved the
construction of a small (50-ha.) irrigation facility in the rice lands of eastern
Philippines. The Palanas CIP was undertaken by the NIA, a national government
agency, under funding from the IFAD. It exemplifies intensive participation of
beneficiaries in project implementation, beginning from the proposal and design
stage, to actual construction and maintenance. The reason why participation is
characterized as “intensive” is the unusually large share of the beneficiaries in
project cost: the farm community managed to shoulder a 30% share, compared
to the 10% share ordinarily shouldered by beneficiaires in similar projects.

4.3. Issues

Provision refers to project resources, services, and assets. This concern covers
mechanisms to ensure appropriate quantity and quality of materials and
equipment. Total and itemized expenditures of the project are to be measured.
Timeliness of fund disbursement has consistently turned up as an issue in
Philippine projects; David and Innocencio (2000) compute the average unused
funds ratio to be 20% in the late 1990s for the agricultural and natural resources
agencies of the government.
 40

The actual production of public works is closely related to that of provision as

labor-based projects are typically undertaken by force account. Here we look at
the role of government units and that of private sector entities in the works,
including pakyaw groups. Furthermore, the role of government units can be
observed at both national and local levels. We are interested in understanding
determinants of the relative effectiveness of each level of governance for public
works provision, particularly with the firm policy commitment in the Philippines
towards decentralization.

Community associations play a prominent role in "participatory projects". In

Philippine nomenclature, such associations are called People’s Organizations
(POs) to distinguish them from Nongovernmental Organizations (NGOs) which
are private volunteer associations. Presumably when beneficiaries organized into
POs participate in all aspects of the project (from inception to maintenance),
delays are shorter, project cost is lower, cost recovery is greater, and the asset is
better maintained (Alonzo, 1999). Evidence from South Africa suggests that
community participation in decision-making increases the labor intensity of
projects that provide community buildings, roads or sewers; it also reduces the
cost of transfers to poor individuals (Hodinott, 2001). We shall check whether
these findings hold true for the case studies.

Employment practices relate to the recruitment, supervision, and remuneration

of labor. Relevant concerns would then be: procedures for ensuring that the
project uses labor-intensive methods, monitoring of quality of work, basis for
remuneration (time rate, task rate, or piece rate) as well as form of remuneration.

Sustainability refers to persistence of project benefits over time. We shall

examine whether provision was made for maintenance of the asset constructed
in the couse of the rural works, and whether maintenance was designed with
employment generation in mind. Sustainability of the project approach is related
to replicability. That is, the usefulness of identifying best practices for any one
project depends on the degree to which these practices demonstrate innovative
approaches that can be tried elsewhere. Thus in the case studies we shall
identify idiosyncrasies that may hinder replicability.

We include rough measures of the benefits from the asset constructed by

selected projects. Where applicable, we shall also note any skill transfer and
worker training attributed to the project. The major focus of the case studies
however is wage benefits. How important was the project in terms of individual
household welfare? The Philippine RWP for example averaged only 16 days of
employment per worker. Similarly, in the major PWE program of Thailand, the
average number of work-days for each participating household was only 12 days;
the contribution of the program to the income of participating households
averaged only 4.6% (Krongkaew, 1987). On the other hand, the longer the
duration of employment, the fewer the workers that can be hired (holding labor
cost constant). This tradeoff should be examined in greater detail.
 41

The transfer benefits need to be stated in terms of incremental income change.

Studies of PWE in Bangladesh and India estimated displaced earnings to cost
around 50% to 60% of wages received; Datt and Ravallion (1994) though found
that incremental benefits are actually larger due to the overestimation of
displaced wages.

Targeting meanwhile examines the way wage benefits were directed towards
alleviating poverty. Large-scale PWE programs in India and Bangladesh have
been found to be well targeted (Ravallion, 1991). In Chile and Bolivia, 71% - 77%
of participants were from the bottom 40% of households (Grosh, 1991). In rural
Botswana and Kenya, the poor were found to be overrepresented in PWE
schemes (Teklu and Arifa, 1999). For the Philippines, quantification of inclusion
of the poor in PWE schemes is prevented by flawed or missing data. On a
microlevel our case studies will try to generate data on targeting performance.

Specific measures taken by the case projects to ensure selection of the poor
shall be identified, in addition to the outreach of the project to the poorest in the
vicinity. Features of the works that repel, crowd out, or draw the poor should also
be identified. Location of the project site, arduousness of the work, timeliness of
wage payments, are some determinants of acceptability to the poor. The wage
rate is a critical feature in self-targeting; in the Philippines wages in PWE
schemes have been set near the legislated minimum, thus encouraging the
nonpoor to take the available jobs. Targeting moreover means not only selection
of poor workers, but also whether among workers, greater wage benefits have
paid out to poor individuals.

The cases are discussed in-depth in Chapter 5, on the basis of the issues
enumerated in the foreoing. The targeting dimension of the cases however
requires a detailed analysis, which is relegated to Chapter 6.
 42

Chapter Five.

THE CASE STUDIES: IN-DEPTH ANALYSIS

5.1. The Tumbaga Access Road Project

The rationale for selecting the Tumbaga ARP is its implementation of the labor-
only contract (pakyaw). The novelty of this arrangement lies in its intermediate
status between traditional modes of production, i.e. the traditional straight
contract, and the strict force account (entailing direct management of workers).

Barangay Tumbaga 1 is an ARC located in Southern Luzon, around 140 km

southwest of the national capital. It is a small village with 201 ha. of rice land, 121
of which are irrigated. Over 150 ha of rice land have been redistributed to 118
agrarian reform beneficiaries, giving the CARP a 97% accomplishment rate in the
village.

Provision and the role of government units

The Tumbaga ARP consists of two gravel roads that connect a wide swathe of
rice fields to a national road. Each road is 750 meters long, , with two short
bridges, accompanying culverts, and ripraps. Both roads were completed within
three months starting from September 1998. The specification and general layout
of the road project was undertaken by the DAR, while road construction was
undertaken by the DPWH.

Project cost was Php 5.8 million. Financing of the foreign assisted component
was generally prompt; however, the GOP counterpart, covering 9% of the project
cost, was severely delayed - more than a year after the project, the GOP
remained in arrears with suppliers.

Overall, labor accounts for only 14.5% of the total cost. The project is
nevertheless regarded as labor-based, as equipment rental contributes only 5%
of the cost. Materials accounted for most of the project expenses (73%). The
embankment, bridge work, and culverts probably explain the high cost of the
road (running to Php 3.9 million per kilometer).8 Project documents report
generating 5,131 mandays of labor (87% of which was unskilled).

The project completion reports attest to the high quality of the road and to its
usefulness to the community. This was also the conclusion of the assessment
reports made by foreign consultants. The study also found no evidence or even
suspicion of corruption.

8
The rule of thumb is that the typical gravel-type barangay road should cost Php 1.8 million/km.
 43

Table 5.1
Cost breakdown of the Tumbaga Access Road Project, by road

Item Road 1 cost Road 2 cost Total % of total

Unskilled labor
clearing and excavation 45,079 45,292 90,371
embankment 184,381 157,536 341,917
stone masonry 76,659.9 85,876 162,535.9
other activities 53,376.3 60,680 114,056.3

Sub-total 359,496.2 349,384 708,880.2 12.2

Skilled labor (all activities) 78,200 52,600 130,800 2.3

Equipment rental 152,110 131,300 283,410 4.9

Hand tools 10,000 10,000 20,000 0.3

Materials 2,158,145.5 2,069,630 4,227,775.5 72.7

Supervision 102,900 97,440 200,340 3.4

Administrative costs 141,488 133,980 275,486 4.7

TOTAL 3,002,339.7 2,809,542 5,811,881.7 100

NOTE: The 1998 nominal exchange rate was Php 40.9:US$1.

SOURCE: DPWH

Production and employment practices

In the Tumbaga ARP, there were four pakyaw contracts under different team
leaders. The pakyaw groups were selected by the District Office of the DPWH.
Two pakyaw leaders were from the municipality and the other two were from the
 44

provincial capital. No barangay residents were taken as pakyaw leaders. The

DPWH attributed this to the absence of skilled workers in the vicinity.

Separate contracts were drawn up for construction materials and for equipment
rental. According to the DPWH, the multiplicity of contracts makes raises
transaction costs and makes monitoring more difficult. On the plus side, the
subdivision of one project into different contracts increases transparency of the
transaction, hence reducing the likelihood of anomaly.

Supervision of the entire works was undertaken by the DPWH Engineer and
project-in-charge. Labor supervision was mostly undertaken by the pakyaw
leaders. The pakyaw leaders brought with them their own gangs of skilled
workers, none of whom were from the area. At the time of this study, these
pakyaw leaders and their gangs were unavailable for interview, as they had
moved to other areas. Meanwhile for tasks done in conjunction with equipment
operations, supervision of workers was also undertaken by the construction
companies who leased out their equipment for the project.

While pakyaw leaders received lumpsum tranches of their payment, workers

from the community were paid cash wages on a weekly basis. Payments for
pakyaw contracts are however made only monthly. It turns out that the
construction and material supply companies served as sources of liquidity for
funding wage payments. The construction and material supply companies were
thus highly visible in terms of task supervision and wage disbursement, hence
most of the villagers had the mistaken notion that these were straight contractors.

The financing role of the construction firms is of course not a formal

arrangement. Rather, the pakyaw leaders, the construction firm, and the field
staff reached this arrangement informally under the exigencies of project
operations. Pakyaw leaders, who were just workers themselves, could not
finance wage payments, hence capital-endowed entities, such as material
suppliers or equipment lessors, would bridge the gap. The latters’ interest in
providing this service is to allow the project to proceed thus providing them profit
from leasing equipment and providing materials. (One naturally suspects that
their profit calculations had already incorporated the costs of extending this
financial service). DPWH officials noted that similar financing had to be informally
arranged in the implementation of some other LBES projects.

We hesitate to characterize this de facto arrangement as "best practice". If cash

problems afflict the pakyaw contractor, then possibly some other avenue of
financing can be explicitly opened. This may range from creation of a special
liquid account specifically for pakyaw contracts, to brokering arrangements with
banks or other financial intermediaries.

The provincial LGU and municipal LGUs involvement in the project is limited to
endorsing village resolutions requesting national government assistance for
 45

previously identified projects. Occasionally the municipal LGUs sent inspectors to

examine the projects in progress. Overall though, the LGUs remained largely a
spectator to the proceedings.

Community associations

The Tumbaga ARC is well known throughout the country for the successful
implementation of CARP projects in cooperation with dynamic community
associations. These associations are: the Irrigators’ Association (IA), a farmers’
cooperative, and a womens’ association. The IA is the users association of the
communal irrigation facility and is composed entirely of farmers (i.e. cultivators;
absentee landowners are not included). The latter two organizations are newly
formed; the women's association started only in 1993, and is composed mainly of
wives of IA and coop members.

The main community association involved in the Tumbaga ARP was the IA. The
IA is the oldest community association in the area and in general initiates
proposals for needed projects in the community. Consultation of the community
was mainly undertaken by the DAR and was limited to general design and
implementation features of the access road.

The village leaders (both in the barangay government and in the IA) helped
identify the road layout, with access of IA members as well as easement of right-
of-way as the primary considerations. In negotiating for right-of-way, village
leaders had to exert moral suasion on the absentee landowners. 9

Selection of workers was directly the responsibility of the pakyaw leaders, usually
upon recommendation of the IA members or the purok leader. All unskilled labor
was hired from within the village; a few skilled carpenters and masons were
taken in as well.

The DPWH did not organize residents (whether skilled or unskilled) into pakyaw
groups, contrary to pakyaw contract guidelines, as it was apparently pressed for
time in completing the project. Barangay residents complained that some of the
equipment inputs could easily have been substituted by their labor, thus
increasing labor income. (In fact, one respondent claimed that the photographs
taken as evidence that residents were working on the project were sham, as they
were asked to artificially pose for these shots. This however is an extreme
opinion not shared by other workers.)

The other public works in Tumbaga were NIA projects under a cost-sharing
scheme. The DPWH though has no cost-recovery scheme in any its projects,

9
Opposition of landowners was muted by the fact that under CARP, rental payments can only
take the form of fixed lease, and that the current occupants were endowed with security of tenure.
Donation of small boundary portions of their lands could hardly have worsened their position.
 46

and intended to implement none for the Tumbaga ARP. Interestingly, the the IA
did attempt to collect cost-sharing contributions from workers (Php 10-20 daily
each worker), to fund the cost-sharing requirements in the other public works.
The justification was that the projects came as a package to benefit the IA
members. Such charges were however hardly collected as the DPWH did not
recognize the equity scheme, and was barely aware that there was one.
Moreover, as observed by the IA members themselves, their justification was
weakened by the fact that the road project funds were outright grants, not loans,
unlike the NIA projects.

Sustainability

The barangay, being the recipient of the road, is immediately responsible for
these maintenance activities. Field staff observed that only minimal maintenance
effort is required, such as grass clearing, at least for at least the next ten years,
because of the investment in road quality and durability. From the time the road
was completed, monthly clearing was undertaken, as part of the barangay's
routine general cleaning drive. This work is usually done by women in the
community, and recently was subsumed as a regular activity of the womens
association.

The project illustrates a well-replicated approach of force account implementation

under the pakyaw system. Communities have typically welcomed this system
and the notion of labor-based public works; Tumbaga is no exception. The one
specific feature of the road project that cannot be replicated widely is the large
investment in asset quality (unusual for a gravel road). For example had on-site
materials been used, it is likely that durability would have suffered, and
maintenance requirement would be greater. It is unclear whether the community
associations would be capable of sustained maintenance works under this
scenario.

Asset benefits

The access road had been in operation for over a year at the time the interviews
were conducted. No benefit-cost analysis of the project had been done on the
either the feasibility or the evaluation stage. We undertake the following rought
analysis: The first source of savings would be the savings in paddy rice transport
cost due to the road. The charge for transporting from the field to the national
road is now Php 5 per sack, whereas before, the cost of hiring a laborer to haul a
sack was Php 10-20. This amounts to around 2.5% savings in the cost of rice
farming. (On the other hand, income to off-farm workers may have fallen.)

However, because of low yields and a small coverage area, the benefit from
transport cost savings is quite modest: a reasonable estimate would be Php
225,000 per year. This would be the lower bound benefit from the access road.
From this source alone the rate of return of the project would only be around
 47

1.1%. However the access roads were beneficial to the purok residents, who
previously they had to cross the paddy fields in order to reach the national road.
Moreover there are dynamic gains in terms of new activities in the sitio made
possible by road access. As the task is too difficult, we make no effort to
quantifying these important sources of benefit.

5.2. The Ciabu Water Supply Project

The next case study is the Ciabu Water Supply Project (WSP), a case study in
decentralized implementation of a PWE project. Barangay Ciabu is another
agrarian reform community in the town of Baybay, Eastern Philippines.

Baybay (1995 pop. 85,306) is a coastal town whose economy is based on

farming and fishery. It is well known throughout the country for its mountain
spring water, as well as the success of the water distribution program of the
municipal LGU. In 1994, the municipality received the Gawad Pook (local
government award) for successfully constructing a water system for all of the
central districts in its 69 barangays. Nevertheless, there remain remote sitios
where only few faucets serve numerous residents, who sometimes have to resort
to rudimentary wells.

Among the underserved communities were three citios in Ciabu. The village is
composed mostly of coconut farmers, although small amounts of other crops
(rice, roots, and bananas) are grown. The Ciabu central citio is around 3.7
kilometers from the national highway. The village is accessible only through a
hilly gravel road, considerably upgraded by a project also of the ARCDP.

Given the record of accomplishment of the municipality and the ARC status of
Ciabu, the DAR decided to fund a pilot communal water system project in the
barangay. The implementation of the project was however completely
undertaken by the municipal LGU. The first phase was the Spring Development
Project, to identify a water source and construct water tanks, a reservoir, and
main distribution pipes. This phase lasted from 1994 to 1995 using national
government funds coursed through DAR. The second phase involves the
construction of a distribution network and is the subject of the case study.

Provision and the role of the local government

The Ciabu WSP began in 1997 and was finished in just two months. It involved
the construction of distribution pipes, and communal faucets or hydrants. The
local government was wholly responsible for implementation of the Ciabu WSP.
The national government confined itself only with channeling project finance, and
occasional monitoring of work in progress. The mayor himself is a young old
engineer on his first term who is currently oversees other ARC projects within the
municipality.
 48

The ARCDP follows a matching grant policy, where the LGU was required to
shoulder a local counterpart amounting to 30%. Payment of the cost-share could
be in-cash or in-kind. Direct project cost was estimated at Php 246,518 (Table
3.2). Total estimated project cost (including contingency) is Php 345,00.

The project was well within the administrative and financial capability of the
municipal LGU, precisely because of its small scale. Total project expenditure is
not however unusually small compared to the typical labor-based LGU project; in
the LGU-implemented RWP, 59% of projects had a total cost less than or equal
to that of the project. For large-scale community projects, however competence
of municipal LGUs will have to be scrutinized on a case-to-case basis.

Based on project estimates (using a wage of Php 100/day), the project is

expected to generate only 437 person-days. Because of its small scale, no
special equipment is necessary, as the work requires only digging pipelines,
burying pipes, and masonry work on the communal faucets. Only 3 skilled
workers are called for (foreman, plumber, mason), to be hired for a total of 73
person-days. Materials accounted for 64% of direct project cost. The labor cost
ratio meanwhile is 19%. Incidentally, the labor cost ratio of LGU-implemented
water supply projects in the RWP averages 25%.

The completion report noted a major drawback, in that the budget fell short of
providing quality pipes appropriate for the pressure conditions of the reservoir.
Project expenses hit the mandated ceiling then in place for this type of ARCDP
project. Because of this experience of the Ciabu pilot project, the cost cap was
removed for subsequent projects undertaken by the LGU for the other ARCs in
the municipality.

Table 5.2. Breakdown of costs, Ciabu WSP, in Php

Item ARCDP LGU Total % of total

cost

Indirect cost - 49,372 49,372 16.8

Direct cost
materials 190,040 - 190,040 64.2
labor 17,081 39,394 56,475 19.0

Total cost 207,121 88,766 295,887 100

SOURCE: Municipality of Baybay

 49

No problems in financing were encountered. The only delay experienced was the
lengthy processing of the LGU's project proposal. The waiting period was one
year. Once the program was approved, funding from the ARCDP proceeded
smoothly. The municipal office was also prompt in providing funds and procuring
materials. There was however one incident in which the local politician attempted
to block funding for the ARCDP in Ciabu; this lobby was successfully thwarted
(see Box 5).

Employment policies and the role of the community

As early as 1995 (three years before commencement of the works), the

municipal LGU was already consulting with barangay officials and community
residents regarding the needs of the barangay. Thus the potable water system
was conceptualized; during project construction, the municipal engineer was
assisted by the barangay captain in locating the water hydrants (who in turn
consulted residents informally). However, the final project design (as codified in
the program of work) was drawn up by the engineer with few (if any) specific
inputs from the community. Decisions about the ratio of labor cost in total cost,
material procurement, etc. were made by the municipal engineer. He explained
that specific details could easily be planned at his level without need for further
consultations. (The barangay captain did have the option of rejecting poor quality
materials. This option however never had to be exercised this case).

The municipal LGU was subject to a cost-sharing scheme with the ARCDP.
Likewise, it engaged the barangay government in a cost-sharing scheme, with
the community counterpart consisting solely of labor. Labor provision was
mobilized through a traditional community effort locally known as pintakasi, which
involves community work by groups, typically on a rotating basis. On any given
day, a group of 20 to 40 villagers was at work under the supervision of a
municipal engineer.

In the earlier spring development phase, the labor contribution format had
already been implemented with great success. No payment for wages was made,
which was acceptable to the community as the amount of work required was
modest. Each worker contributed only a few days of work. Their only "incentive"
was free lunch and snacks during the workday, prepared by the women of the
community. Interestingly, such meals served in community self-help efforts have
been referred to as a type of "food-for-work" scheme (Tajgman and de Veen,
1998).

The water supply phase however required greater labor outlay; the payment of
wages was therefore warranted. The daily wage was disbursed on-site by the
municipal project officials in the form of cash during Saturdays. The barangay
and municipal governments set a one-day weekly contribution (usually taken on
Saturdays). According to the workers, the importance of community ties and a
sense of solidarity motivated them in part to donate the extra day.
 50

For each week during the duration of construction, one citio would be assigned to
provide labor on a rotating basis. The sitio leaders recruited residents within their
jurisdiction and set work assignments for individuals. The project engineer
though had some leeway in keeping some productive laborers for a longer
interval. No problems in availability of manpower were reported.

The farmer's cooperative in Ciabu, in addition to the barangay government, was

active in preparation and social mobilization for the project. It should be
understood that in this case the elected village leaders could hardly be
distinguished from the community association leaders. The Ciabu farmer's
cooperative was founded by the current barangay captain; while the WSP was
being undertaken, he was also then serving as the cooperative chairman.
Moreover, some of the barangay councilors and officials also served as leaders
in the cooperative. Given the bias of the DAR towards extending assistance
towards organized farmer groups in ARCs, it was natural that the barangay
officials would also carry their identity as cooperative leaders in transacting with
both national and municipal governments.

Maintenance

Upon completion, the water system was turned over to users, consisting of 220
households. The cooperative permitted water users to access the system using
pipes directly extending into their homes. There are 60 piped-in users. The rest
of the users gain access through communal faucets (20 in all).

Initially the system was managed by the same farmer’s cooperative mentioned
earlier. However, with a change in leadership in the cooperative, many water
users raised complaints against the new management. Inasmuch as many users
were not members of the coop, the barangay officials convened a general
assembly of water users, where they decided to constitute a new user
association, the Ciabu Potable Water System. The association membership fee
is a Php 50, while the monthly fee is Php 10 for households with piped-in water,
and Php 3 for households using communal faucets.

Some members of the farmer cooperative though object to the new arrangement
and refuse to pay their user fees. The vast majority of villagers though have
ceased in their complaints about the water system management. The Ciabu
Potable Water System is performing its maintenance tasks well in terms of
collecting water fees, repairing damages, and regulating the use of the
communal faucets. These regulations include prohibitions against bathing and
laundry washing. In the absence of a piped-in connection, households
undertaking such activities must resort to a nearby river

In the medium term, facility maintenance is assured by through the activity of the
water association. (However see the discussion in Box 3, on threats to the
 51

project.) The reason given by field staff and barangay leaders is the fact that,
under cost-sharing scheme, the villagers were compelled to contribute towards
project provision. The end-users, having invested their time in construction,
would therefore not waste their earlier efforts by allowing the system to
deteriorate.

Box 5. Communities against internal and external threats

External threat to the works. The following illustrates the role of communities in
resisting arbitrary moves of local politicians. The ARCDP projects in Ciabu were
earlier threatened by the machinations of the congressional representative, who
requested the national authorities to realign the projects to benefit her favored
municipalities. In response, LGUs at the village and municipal levels sent
petitions to the agrarian reform secretary to thwart the representative's
request. The realignment in request was turned down. In numerous other cases
however the representatives are not as frustrated in their abuse of power (as in
some instances reported in the CEDP). They can only be countervailed by
communities who remain united and vocal in their stand.

Internal threat to maintenance. Communities of course are not themselves free

from activities of its members Some time after the completion of the
construction phase management problems arose. After a rash of complaints
from the community regarding the lack of transparency in the use of the water
fees, the move to constitute a Ciabu Potable Water System was approved in a
Project benefits and targeting
general assembly. The decision remains an acrimonious affair within the village.
Interestingly, the farmer cooperative management who were against the
Potable Water Supply management were hoping to credit the monetary value of
the water system in their balance sheet in order to secure a large loan from a
Manila-based NGO. Some POs are obviously not above naked displays of
opportunism.

The dispute reached a high point when the cooperative filed a case with the
municipal council, where the matter remains unsettled. It is expected though
that the authorities would rule in favor of the larger majority of water users
represented in the current water system management.

An alternative explanation would be the selection effect: under an equity scheme,

only communities with a long term interest in and capability for sustaining project
benefits would accept a cost-sharing arrangement. From the viewpoint of
economic rationality, this alternative explanation would be the more likely one, as
 52

earlier efforts are after all “sunk cost”, which would therefore not be a factor in
their decisions to maintain or not maintain the water system.

In the long term a serious problem will inevitably confront the Ciabu water users.
The rate of Php 10 per month for piped-in water users is too low, given their
consumption levels as well as depreciation of the facility. A major breakdown of
the water system may require extensive rehabilitation, which may once more
require external assistance. To make the system completely self-reliant within the
reasonable life-span of the facility, higher rates need to be collected, especially
from the piped-in users. The most sustainable arrangement would be to meter
the water usage and water fees the piped-in users should charged metered
rates.

Asset benefits

The asset provided was of satisfactory quality, according to Ciabu residents.

Currently the system shows signs only of ordinary wear on the pipes and faucets.
At the source however, upon ocular inspection one can observe that some pipes
used have indeed been substandard PVC pipes. According to the project
engineer this was a result of the abovementioned cost cap.

Among the households whose water source shifted from spring-wells to the
communal faucet, the daily time savings was 31.5 minutes. This however
conceals many other benefits. Previously, large household reserves of water
were needed, which was very inconvenient. The presence of a water system has
greater benefits in periods of drought, where water flow may weaken to a trickle,
and queues could be long and time-consuming. For example, in a nearby village
households suffered from endless queing at a well during the El Niño drought .
The Ciabu citios were then savoring the first few months of their new water
system and avoided this problem entirely.

5.3. The Palanas Communal Irrigation Project

The third case study treats an IFAD project in irrigation that highlights an
intensive participatory approach of farmer-beneficiaries. This approach is
anchored on an innovative cost-sharing scheme.

The NIA participatory approach: a backgrounder

The participatory approach has been a standard format followed by the NIA since
the 1980s. Communities are organized into Irrigator's Associations (IAs), which
are formal association of cultivators who operate a communal irrigation facility.
The principle behind the IA is the necessity of cooperation among water users.
Irrigation facilities are common pool resources: whereas persons outside the
coverage area may be easily barred from accessing water, abusers within the
 53

area cannot be as easily excluded. For example, one type of problem is the the
“tail-end syndrome”: in the absence of an enforced rotation system, downstream
users typically get the least water supply (Cruz and Cruz, 1984).

The participatory approach consists of the active involvement of an IA in all

phases of a project (planning, construction, and maintenance) as well as in
shouldering project cost. The NIA’s approach was developed over years of
experience in community-based irrigation works. The IFAD has had a lengthy
experience funding the institutional aspects of communal irrigation facilities in the
Philippines.

There are admittedly cases in which the approach was merely prescriptive; “It is
not uncommon, for example, to find communal irrigation systems constructucted
by the NIA (the National Irrigation Administration) which, at turnover time, are
rejected by the community (p. 219)” (Alonzo, 1999). Nevertheless instances of
successful compliance with participation guidelines can also be found. In any
case, few other government agencies conducting public works schemes have as
thoroughly ingrained the participatory approach as their norm for provision.

The NIA requires organization of the IA prior to construction of facilities, with at

membership including at least 80% of farmers in the coverage area. The
inclusion of the IA in the planning and construction phase might be seen as
facilitating the flow of information between end-users and implementers, as well
as checking agency problems (i.e. incompetence or negligence of the NIA in
construction).

Supervision over project construction is still exercised by NIA staff, composed of

a supervising engineer and an Irrigation Development Officer or IDO. While the
supervising engineer oversees the technical side of the irrigation works, the IDO
focuses on community organizing, and plays the key role in coordinating and
even initiating the participation of communities in the irrigation system.

IA participation in irrigation works is anchored on cost sharing. The cost share of

the user association is called equity, which (as in the Ciabu WSP) can take the
form of labor contribution. There are two kinds of equity schemes. In the 10:90
scheme, the IA shoulders 10% of project cost by the time of completion, while the
IA amortizes the remaining 90% for a period not exceeding 50 years. Meanwhile
in the 30:70 scheme, the IA shoulders 30% of project cost by the time of
completion, while 70% is shouldered by the NIA.

The NIA offers these two schemes as a menu of options – itself an innovative
feature in public works programs. In practice, the 30:70 option is seldom chosen.
The reason is that this scheme would require large contributions from the IA
members during the construction phase, as well as a high degree of cooperation
between them. Few communities are optimistic enough to take this option.
 54

Box 6. Communal irrigation in the Philippines

An irrigation facility with a coverage area of 1,000 ha. or less is classified as a

communal system. Rivers with small catchment areas can been controlled with
simple brush dams (which need to be rehabilitated after a significant flood). For
centuries, local communities have built such dams to irrigate up to a few hundred
hectares, with little assistance from any central authority. (NIA, 2000). Most
notable among these traditional associations are the zanjeras, which survive in
northern Philippines and is based on apportioning each farmer a parcel both at
the upstream and downstream portions of the water source (Cruz and Cruz,
1984). These and other traditional associations are prototypes of the modern IA.

Provision and financing

The Palanas CIP consists of an extensive upgrade of an existing facility. The

previous system consisted of a small dam and earthen canals. This was
constructed in 1975, the year the Palanas IA was organized. The IA was able to
complete amortization of the facility, which was well-maintained until 1991. That
year the dam was washed out by massive flooding brought about by a massive
typhoon. Much later (June 1999) the Palanas CIP began construction of a larger
dam better suited to local weather conditions. The main canal was also widened
and cemented. The works were completed on January 2000. During the data-
gathering period communal irrigation system was only partly operational;
nevertheless the beneficiaries interviewed consistently attested to the sufficiency
of construction materials and adequacy of workmanship of the current system.

The computed direct project cost is Php 4.18 million, whose breakdown is shown
in Table 5.3. Of the direct project cost in Phase 2 (Php 3.37 million), one-third is
in the form of labor. (The indirect cost is the amount charged by the NIA for
administrative overhead. It excludes the salaries of the on-site staff for the project
duration.)

Financing of the project is generally adequate. No delays were reported with

respect to securing approval and release of funding from the funding agency. For
this particular project, NIA was also timely in disbursing funds. This contrasts with
findings of other studies that highlights the slow fund utilization characteristic of
NIA operations (e.g. David and Innocencio, 2000).
 55

Table 5.3.
Programmed and actual expenditures for the Palanas CIP, in Php (as of 31 December 1999)

Item Programmed % of Actual % of direct

direct cost cost

Direct cost 3,371,518 3,173,877

Indirect cost 428,571 428,571
Total cost 3,800,089 3,602,448
Equity 1,011,455 30.5 1,011,519 32.0
Labor 589,663 17.5 424,745 13.4
Materials 437,010 13.0 586,773 18.4

NOTE: The 1999 nominal exchange rate was Php 39.1: $US 1.

SOURCE: NIA Region 8 Office.

Community participation

The project IDO noted that organizational work was limited to reconstituting the
previous association, facilitating processing of papers (especially the IA’s rights
to the water source), and coordinating with the NIA. The IDO observed that the
members were highly motivated in the irrigation works, met often to make group
decisions, and collectively enforced these decisions. No major organizational or
managerial problems were encountered.

In the design stage, the Palanas IA insisted upon a strong and durable facility,
even at some added cost (given their experience with typhoons). One of the
major changes they insisted upon was a canal width that was wider than that
specified in the original NIA plan. The project plan and schedule, which is
detailed in a program of work, was made upon consultation with the IA. The IA
officers agreed that the program of work was generally followed throughout the
course of the construction, with delays attributed only to occasional typhoons.

To arrive at the program estimates, the NIA project staff and the IA met in a
series of equity programming sessions. The IA was able within technical limits to
design the largest possible labor and material contribution that could be
mustered to meet the 30% requirement. This type of discretion is absent from the
cost-sharing arrangements in the previous projects in Ciabu and Tumbaga. It is
consistent with evidence that greater labor intensity accompanies community
works characterized by intensive participation (Hoddinott, et.al. 2001).
 56

Table 5.4 breaks down the equity by type of work. Based on the equity
programming, the IA will freely contribute around 53% of labor cost; donated
materials make up the remainder of the equity.

What happened in fact was a shortfall in labor contribution, but a significant

overshooting in materials contribution. The latter is mostly composed of sand,
gravel, and boulder. Materials were costed at their market value, i.e. Php
526.41/m3 for sand, Php 507.14/m3 for gravel, and Php 824.00/m3 for boulder.
During the data-gathering period, the IA was about to complete its equity
requirement.

Table 5.4.
Breakdown of equity contribution for the Palanas CIP, in Php

Item of work Direct Labor Materials equity

cost equity

sand gravel boulder lumber

Diversion works 1,792,498 304,470 34,526 58,012 168,253 10,576

Canal system 1,258,689 285,196 111,696 45,993 0 7,954
Others 320,331 0 0 0 0 0
Total 3,371,518 589,666 146,222 104,005 168,253 18,530

SOURCE: NIA Region 8 Office.

The involvement of the IA extends to such details as project finances, and

material procurement, all according to NIA's guidelines on beneficiary
participation. A process called "cost reconciliation" permits the IA (through its
financial committee) to audit project financial records. Another committee joins
the NIA canvassing and procurement personnel.

The extensive participation of the IA is understandable given their interest in

obtaining quality material, and properly accounting for the equity contribution.
Moreover, these steps ensure that transactions are above board, avoiding the
rumors of corruption tainting many public works projects. No delays were
reported because of the involvement of the IA in these procedures.

There were some problems associated with adoption of the intensive

participation format. First, the remarkable equity contribution of the farmers relies
greatly on accounting sleight-of-hand. In the case of materials, the farmer-
beneficiaries did not actually finance any material purchases out-of-pocket;
instead, these materials were dredged from the river bottom close to the facility's
water source. Procurement and hauling of these materials relied mostly on the
 57

labor provided by the IA members, hence the crediting of these items to the
beneficiaries' equity. However, the valuation of these materials was not based on
dredging and hauling (actual) cost, but rather was imputed a value based on the
market price. This certainly overestimates the cost of materials.

Second, it turn out that the "community" which participated in this project is only a
small portion of the total number of farmers covered by the Palanas communal
irrigation system. Out of the 72 water-users expected to benefit from the facility,
only 23 are members of the IA (of whom 5 were recruited after the project
started). This is contrary to the implementing guidelines on IA membership. (At
the field level such deviations are allowed as long as the IA voices an intention to
expand membership.)

This smallness is viewed by the NIA as a weakness in project implementation.

Both the IA members and the NIA staff agree that the narrow membership base
is due to the selectivity of the leadership. According to the IA leaders, the IA has
excluded farmers who may be a source of dissent within the IA. Most particularly,
farmers who are “beholden” to their landlords, and might therefore introduce the
influence of the elite within their group, are barred from membership. Moreover,
the members are well screened so as to recruit only the reliable and cooperative
individuals. The small size of the IA is itself conducive to cohesion, thus avoiding
transaction costs of coordinating large groups, as well as the vulnerability of large
groups to the free rider problem.

Labor policies

Responsibility for providing construction labor, both skilled and unskilled, was
vested on the IA. Work slots were assigned to each individual IA members, who
must fill it personally or recommend a substitute. Prioritization in recruiting non-IA
members, as outlined in the standard procedures of the NIA, is as follows: the
member's relatives, residing in the coverage area, followed by other residents in
the same area, and finally, residents in the barangay. The NIA for its part hired
only two skilled personnel (a machine operator and foreman) and no unskilled
workers.

Wages are paid in cash twice a month on a 15-30 schedule by the NIA. There is
no evidence of underpayment. Despite the overall timeliness in project funding,
there were occasional delays (up to one week) in the payment of the wages,
which dissatisfied some of the workers.

Role of government units

According to NIA officials, its participatory approach is made possible because

projects are implemented on force account. Except for the IA, there is no other
private entity involved in the project. (NIA staff mentioned that irrigation works
under straight contract typically deviate from their participatory guidelines. Such
 58

contracts normally occur when funds originate from congressional

representatives.)

The local government had no direct hand in the project. The municipal and
barangay governments did however make two important contributions: first, in
providing equipment support; and second, in resolving right-of-way problems.
LGU support was greatly facilitated by the fact that the IA president is also the
barangay captain and heads the association of barangay captains in the
municipality. The IA president was therefore able to coordinate easily with the
town mayor and other local officials.

With regard to equipment support, the mayor lent municipal dump (rent-free)
upon request of the barangay captain. She also assisted the IA in borrowing
(rent-free) bulldozers and trucks from a nearby LPG factory. This equipment
support was not trivial: while NIA equipment rental ran to Php 66,370, private
equipment costs in terms of fuel and parts alone amounted to Php 52,544. As for
right-of-way, objections from landowners initially threatened to halt the project.10
Serious opposition was however forestalled through efforts of moral suasion, first
by the barangay captain, and by the town mayor.

Sustainability and replicability

The IA is in charge of managing and maintaining the facility. Maintenance funds

would be generated by charging a user's fee, which may be collected even from
non-members.11 Prospects for maintenance of the facility appear favorable,
barring severe calamities, based on the cooperativeness within the current IA,
and the organization's track record in maintaining the previous facility.

Furthermore, the burden of paying water fees is smaller as the cost of

amortization has been eliminated. This raises the question of free-riding by users
who did not make equity contributions upon users who did make equity
contributions. First of all, the wage payments were satisfactory enough to the
members (see Chapter 6); second, the contributors reason argue that free-riding
is irrelevant; in the end, what mattered to them was that they personally stand to
benefit from the facility even accounting for the cost of their contributions.

10
Interstingly, the reason for their opposition lay in the land reform history of the area. In the
1970s, land reform covered only rice and corn lands. Landowners were then rumored to be
planning conversion of the rice land into sugar land, as well as eviction of the tenants. To forestall
this a group of tenants requested an irrigation facility under the government irrigation program,
thus establishing that rice was the major crop in the area. Henceforth the irrigation facility was a
source of animosity between landlords and some of the tenants.
11
The right to charge for use is given by the government's Water Board
 59

The characteristics of this group are quite idiosyncratic, which raises some
doubts about the sustainability and replicability of the intensive participation
format. Their situation contrasts with that of other areas in which no IA exists,
and the IDO must undertake protracted community organizing efforts. In other
areas in which IAs exist, farmers typically settle for the easier 10:70 scheme;
moreover, frequently members are apathetic, or whether active, factious. Region
8 staff have voiced some disappointment with the overall performance of IAs in
the region, with cultural or social "values" as the culprit behind the belligerency
within some groups.

It is indeed unrealistic to expect this approach to be disseminated widely in

community irrigation works. The point however is not to replicate this approach
widely, but to adopt it systematically in locations cohesive and capable groups
exist or can potentially be organized. The merit of a equity scheme menu is very
clear, as the menu allows such groups to self-identify in an incentive compatible
manner.

Benefits from the asset

We rely on the NIA feasibility study to estimate ex ante benefits from the
irrigation facility. The estimated total project cost is Php 5.24 million (higher than
actual because of additional overhead items and contingencies). Project benefit
is expected to take the form of increased rice yield. The current rice yield at 2.4
mt/ha; with the project, the yield should increase by 92% to 4.6 mt/ha, a 92%
increase. This corresponds to an increase a 112% increase in net farm income
per hectare, reaching a total of Php 11,616. The IRR is estimated at 13.9%.

Our own estimate of the NPV is Php 0.96 million using a discount rate of 15%.
The assumptions on project impact made in the feasibility study seem to be well-
founded (e.g. our own estimate of farm yield in 1999 is 2.9 mt/ha.) It is likely
moreover that variability of yield from season to season (and from year to year)
would decline as a consequence of the facility. For the poor farmer such
stabilization of income would be invaluable.
 60

Chapter Six

CASE STUDIES: WAGE BENEFITS AND TARGETING

So far little has been said about wage benefits and none at all about targeting in
the case studies. The analysis of these issues in this chapter should make clear
the relevance of the studies to poverty alleviation.

6.1. The Tumbaga ARP

The average wage paid for the Tumbaga ARP is Php 143 daily, as determined by
the pakyaw leaders. This is approximately 5% below the farm wage of Php 150
prevailing in the area. The prevailing farm wage is the highest among the project
sites, and may reflect the relative progressiveness or high cost of living in the
Southern Luzon region, just 120 km. from the national capital. The margin
between actual and market wage may be expected to lead to some degree of
self-targeting. Intertemporal targeting could have also been promoted by the
timing of the works during the months of September to December season, are
mostly lean months for rice farming (except September, which is harvest
season).

Table 6.1 presents a profile of workers and nonworkers. The two groups are
demographically similar, except that the control group is on average less
educated than the worker group. Farm size is greater in the nonworker group.
Though there were about the same number of landless workers among in both
groups, duration of off-farm employment is greater among the workers.

Worker income is slightly lower than nonworker income. Farm income share is
lower for workers (consistent with their greater reliance on off-farm income and
employment). Even for the nonworker group, farm income accounts for only a
quarter of total income; rather, nearly half of income arises from nonfarm
sources. Most of the farmers in the sample do not report any nonfarm or off-farm
occupations.

Of persons who were engaged in off-farm employment, nonfarm work accounted

for 100 days of employment in both worker and nonworker category over the
previous year. The rest of off-farm employment is largely taken up in hunus, an
informal agrarian contract in which the landless worker supplies labor to a farmer
in exchange for a share of the harvest. The type of work provided for hunus is
mostly light except during harvest season. The table suggests that workers tend
to earn relatively less of their income from farming and more from off-farm work
compared to nonworkers.
 61

Table 6.1
Characteristics of workers and nonworkers in the Tumbaga ARP

Characteristic Average

Worker Nonworker
Age of household head (years) 47.1 48.2
Schooling of household head (years) 6.6 4.9
Household size 4.8 4.6
Number of landless 12 13
Number of landowners 3 4
Farm size (ha) 1.1 2.0
Days off-farm work per year 98 68

Annual income (Php) 40,604 43,025

Sources (%)
Farming 14.9 26.9
Off-farm employment 41.1 35.4
Project employment 14.5 -
Other nonfarm employment 26.9 33.3
Other nonfarm sources 2.6 4.4

SOURCE: Author's data.

The duration of project employment averages only two weeks. The reason is the
rapid turnover of workers, which led to an implicit rotation of work. Once reason
for the rapid turnover is that there were four different pakyaw leaders and teams;
this implied discontinuity in worker selection. The rotation system reflected both
the desire of the pakyaw leaders to appear accommodating to all the members of
the community, as well as rationing of work.

Table 6.2 examines the distribution of household per capita incomes within
worker and nonworker category. We focus on per capita figures as this is a better
measure of the living standard of the household. For the worker group, both with-
and without-project incomes of the worker group are shown.
 62

Table 6.2
Comparison of average per capita income and project employment in the Tumbaga ARP

Control Worker group

group
without with project Days of
project project work

Per capita income

bottom 10 4,200 2,991 3,574 15
bottom 15 6,558 5,083 5,729 25
whole group 9,126 9,258 9,926 22

correlation coefficient
with duration of project
- 0.12 0.13 1.0
work

number of the poor

international line 7 9 8
official line 12 15 15

SOURCE: Author's data.

To calculate the without-project income, we first note that project wage earnings
accounts only for a small proportion of the incomes of workers. Seven of the
workers worked for two weeks or less, while eight worked between three weeks
and one month. For the eight, we imputed foregone earnings of the few workers
who insisted that some employment opportunities were indeed missed due to the
project. The adjustment results in without-project per capita income of workers
only 7.2% lower than the with-project income.

On a per capita basis, the without-project incomes of workers are surprisingly

higher than the incomes of nonworkers. On first glance this indicates imprecise
targeting. However, without-project per capita incomes of workers are much
lower than those of nonworkers if the top five per capita incomes are removed.
This is confirmed in the poverty headcount: 7 workers are classified as poor by
an international poverty line (see Box 1), while 9 of the workers would be
classified as poor on a without-project basis. The disparity in the poverty
headcount is larger going by official poverty lines. The top five without-project per
capita incomes of workers turn out to be mostly persons with high nonfarm
incomes, who were hired because of their carpentry skills.

To a limited extent project employment to the unskilled seems to have been well-
targeted. This could be explained by the self-targeting effect of the below-market
 63

wage. However, one should not discount the possibility that recruitment
recommendations by IA members to pakyaw leaders were directed to
underemployed persons in the community.

The project could be said to have reduced the poverty headcount by just one.
This need not be held strongly against the project if the wage benefits were
biased towards the poorer workers. However, the correlation coefficient between
without-project income of workers and days of work in the project is positive
though insignificant. The same characterizes the correlation coefficient of with-
project income of workers with days of work. Apparently, the rotation system
adopted in the project essentially randomized the selection of the workers,
removing any bias towards the poorest.

With rotation, the profile of workers would begin to reflect the profile of residents
in the village, many of whom are not poor. The nonpoor still suffer from
underemployment, and therefore might desire a stint in the project despite its
lower-than-market wage as long as its schedule is flexible. The rotation is not
entirely disadvantageous; while the "leakage" problem in targeting may have
been worsened, the "undercoverage" problem may have been reduced. The
poorest village residents, particularly the landless, did manage to join the project.
Their work stints however were all too brief.

6.2. The Ciabu WSP

The modal wage among the sample workers of the Ciabu WSP is Php 75. This is
lower than the planned daily wage of Php 83 (adjusted for equity). There were
however seven skilled workers were paid between Php 90 and Php 150 daily
wages. These persons pushed up the sample average wage to Php 103. These
wage benefits arrived at a most auspicious time, when the El Nino drought was
then wreaking havoc on the countryside.

The worker-nonworker profile is shown in Table 6.3. Workers and nonworkers

are demographically similar, except for average age (which is much lower for the
workers). Several young persons managed to enter the Ciabu WSP, including
some non-household heads. Tenurial status is similar across categories, except
for smaller average farm size for the workers. The farm sizes in Ciabu are
apparently much greater than those of other case study sites, but the quality of
these lands is much poorer, because of the hilly terrain.

The annual incomes for Ciabu are low as a whole compared to other case
studies. Several facts should be noted: the year is 1997, hence the purchasing
power is somewhat lower than in the other projects which came later. There is
also the phenomenon of the El Niño, which reduced coconut and rice yields.
 64

Table 6.3
Characteristics of workers and nonworkers in the Ciabu WSP

Characteristic Average

Worker Nonworker

Age of household head (years) 38.4 45.1

Schooling of household head (years) 6.5 6.3
Household size 6.3 5.0

Number of landless 4 4
Number of landowners 9 8
Farm size (ha) 2.1 3.5

Days off-farm work per year 81 73

Annual income (Php) 39,307 19,850

Sources (%)
Farming 45.1 53.1
Off-farm employment 26.4 17.1
Project employment 7.7 -
Other nonfarm employment 15.0 21.0
Other nonfarm sources 5.9 8.8

SOURCE: Author's data

Nevertheless, it is safe to conclude that the Ciabu residents are poorer than
those of the other project sites, consistent with the fact that Ciabu is a
marginalized upland village devoted to coconut growing.

Farming is the biggest income source for either category. For workers off-farm
employment is the next biggest source of income, while for nonworkers it is
nonfarm employment. Project employment has only a small contribution to
worker income. The very low nonworker incomes suggest that the poorest
members of the community have not been covered by the project.

The tabulation of per capita incomes is shown in Table 6.4. Using a method
similar to that in the Tumbaga case study, wages and employment for the
counterfactual without-project situation are estimated. The incremental
 65

contribution of project wages to income is only 3.2%, implying that nearly 60% of
project wage earnings simply replaced alternative earnings. This is mainly
because the skilled workers earned a greater part of the project’s wage benefits,
and claim that they could have found employment elsewhere.

Table 6.4
Comparison of per capita incomes, Ciabu WSP

Control Worker group

group
without with Days of work
project project on the project

Per capita income

bottom 10 2,285 2,196 2,367 13
bottom 15 2,772 3,262 3,420 12
whole group 4,310 6,768 6,986 14

correlation coefficient
with duration of work - 0.49 0.50

Number of poor
International line 14 9 9
Official line 18 17 17

Coefficient of variation 0.87 1.19 1.16

SOURCE: Author's data

Average per capita incomes of the workers (with or without the project) are much
higher than those of nonworkers. Most of the nonworkers are poor on the basis
of the international line; this same line classifies only a minority of workers as
poor. (The official line fails to distinguish significantly between the poverty
headcount of the two categories.) The superiority of workers’ incomes originates
from the top half of sample workers. The bottom half of households are quite
similar (in fact for these households the workers are slightly worse off.) The
difference becomes increasingly pronounced as the higher income households
are added. The coefficient of variation of worker income is large relative to that of
the control group, confirming the relatively larger dispersion of per capita
incomes in the former category.
 66

Furthermore, within the worker category, the distribution of wage benefits does
not favor the poorer individuals; there is in fact a mild tendency for project
employment to rise with rising household income. This is seen in the fewer days
worked by the bottom half of the workers, and more clearly, the positive value of
the correlation coefficient for with-project or without-project incomes.

As in the Tumbaga ARP case, the mistargeting arises from accommodating

skilled workers, and rotating of work assignments in compliance with the
pintakasi tradition. Of the three workers with the highest per capita incomes, one
is a record-keeper and a high school graduate, coming from a family with one
overseas worker remitting foreign earnings, while two are skilled carpenters.
(When these workers are excluded, the correlation coefficient of per capita
income without-project is -0.15). Furthermore, excluding the poorest worker (who
worked continuously on the project for two months), the poor workers contributed
only 7 days of labor on average. While work rotation did allow many of the poor
to be included in the project, it also ensured that wage benefits could not be
adjusted to provide greater assistance to the most needy.

6.3. The Palanas CIP

For the Palanas CIP the wage was set at Php 200, which is the lowest salary in
the government pay scale but way above the minimum wage. Effectively though
the wage is 100, as 50% is collected as equity. This is obviously another case of
overvaluation (just as with the materials component of equity; see Chapter 5.3).
We estimate the daily farm wage in the locality to range from Php 60 (slack) to
Php 75 (peak). Thus, the effective wage (equity excluded) remains significantly
higher than the alternative wage. Targeting therefore might be a problem unless
there is effectual means to ration out the nonpoor.

Based on the standard NIA procedures, the program of work was scheduled to
avoid conflict with the peak agricultural season around November to December,
and June to July. In reality though delays in the project led to conflict with farm
occupations. The farmers who worked actively on the project claimed that their
role in farming over the project year was confined to overseeing the farm work of
his wife and children, and occasional fieldwork on Sundays.12

A comparison of workers and nonworkers (Table 6.5) shows noticeably different

characteristics between the two categories. Workers are younger than
nonworkers and are somewhat better schooled. Only a few workers are landless,
while none in the control group are landless.

12
The project in Palanas (as in the other case studies) adopted a six-day work week..
 67

Table 6.5
Characteristics of workers and nonworkers in the Palanas CIP projects

Characteristic Average

Worker Nonworker
Age of household head (years) 47.1 56.5
Schooling of household head (years) 6.6 5.9
Household size 4.8 4.2

Number of landless 3 0
Number of landowners 6 6
Farm size (ha) 0.8 1.1

Days off-farm work per year 24 59

Annual income (Php) 52,258 37,622

Sources (%)
Farming 26.6 55.2
Off-farm employment 6.3 3.2
Project employment 44.8 -
Other nonfarm employment 21.0 30.5
Other nonfarm sources 0.9 14.2

SOURCE: Author's data.

Income of workers is much higher than that of nonworkers. The biggest chunk of
earnings of the workers came from the project, in contrast to the earlier case
studies in which project work hardly made a dent in worker incomes. Meanwhile
the bulk of earnings of the control group came from farming. Off-farm work
frequently takes the form of angkon, a local version of the hunus.

As for nonfarm employment, the project had only two workers with nonfarm
occupations. The first had a non-regular job which was not affected by the
irrigation works, and the second suffered some income loss due to his
participation in the works (owing to the moral suasion of his brother, who
happens to be the IA president). Other worker households with large nonfarm
incomes actually earned them through household members not working in the
irrigation project.
 68

Per capita income figures are summarized in Table 6.6. Calculation of without-
project incomes requires some care, given the substantial amount of time that
individual workers have devoted to the project. We impute the number of days
employed and wage as follows:

for the landless worker: average off-farm wage*150 days

for the farmer: average off-farm wage*20 days

Table 6.6.
Comparison of per capita incomes for the Palanas CIP

Control group Worker group

without with Days of

project project employment

Per capita income

bottom 10 4,018 2,211 5,688 177
bottom 15 5,757 3,905 7,893 167
whole group 9,615 9,340 13,690 155

correlation coefficient
with duration of work - -0.44 -0.04 1.00

number of poor
International line 7 10 5
Official line 13 14 13

SOURCE: Author's data.

Angkon work accounts for the remainder of the man-year of the landless worker.
The imputation of 150 days for landless workers is based on their own estimates,
while for the farmers the off-farm work estimate is based on the off-farm
employment of the control group.

On the aggregate, the increase in per capita income due to the project was 47%.
The ratio of incremental contribution to project income is 84%, meaning only 16%
of project wage earnings replaced incomes that would have been earned in the
absence of the project. Averaging incremental incomes over workers, the
proportion shoots up to 142%. That is, per capita incomes of workers increased
 69

by nearly two-and-a-half times on average. This follows from the prolonged

employment duration, the relatively high wage offered by the project, and the
limited off-farm and nonfarm opportunities in the area.

Without-project incomes of workers are much lower than those of the control
group. The disparity is larger for the bottom half of workers. The are only 6 poor
persons in the worker category compared to 13 without the project, representing
a poverty incidence reduction from 65% to 30% (at least during for the duration of
the works). Meanwhile only 35% of the control group are poor - higher than the
without-project poverty incidence of the worker group, but lower than the with-
project poverty incidence. The project appears to have been well-targeted to the
poor as well as to the poorer workers.

It is noteworthy that targeting performed well despite the high wage and the
absence of a deliberate policy to hire the poor. Hence the most important factor
in the targeting performance of the project must have been the characteristics
and hiring decisions of the IA members. If the IA member or his son worked, he
tended to be poor; if another, then the designate tended to be poor, e.g. a
landless relative. Targeting happened to coincide with the fact that the project
had to be located in a very poor area with highly fragmented landholdings and
limited nonfarm opportunities.

Within the worker group, there seems to have been some exercise of targeting,
i.e. the poorer workers get to work more days in the project. The correlation
coefficients confirm this pattern: the without-incomes of the workers are
negatively correlated with days of project employment; the with-project incomes
however are very weakly correlated with the employment duration, suggesting
that the project contributed to equalizing worker incomes. The correlation
coefficient between days of project work and share of nonfarm income in total
income is –0.75. Clearly, the better-off workers were less willing to devote more
man-days to the project. The targeting of wage benefits towards the poorer
workers was not seen in the other two cases as these implemented a rotation
system.

6.4. Overall evaluation of targeting

Earlier we had stated that no explicit antipoverty targeting methods had been
adopted in the projects. However, specific practices in each project inadvertently
determined targeting performance. the Palanas CIP, the fact that the IA members
and their relatives were among the poorest in the community led to a superior
targeting of wage benefits. Targeting was weaker in the Ciabu WSP, and more
so in the Tumbaga ARP, first due to adoption of rotating work assignments, and
secondly due to the premium placed on hiring skilled labor.

However the recruitment practice is not the only location-specific variable; other
variables such as income, demographic characteristics, tenure, etc. vary with
 70

location. To bolster our contention we must be able to control for these other
variables. We do this through ordinary least analysis.

The left hand side variable is the days of project employment. Correlates on the
right hand side are worker characteristics, household per capita income, and the
location dummies (The Palanas dummy appears only as an interaction term with
household per capita income, making it a “slope shifter”; the Ciabu and Tumbaga
dummies are represented as “intercept shifters”.) We take the log transformation
of the variables (except for the dummy variables) to capture nonlinearities in the
correlations.

The terms "correlation" and "correlate" are chosen carefully; we are not
attempting here to construct a causal model, particularly because worker
characteristics and incomes are related, and the sample collection was more
purposive than random. Hence, the coefficients should be interpreted as
indicators of correlation; the t-values likewise should be interpreted in terms of
correlations, rather than statistical values for testing hypotheses. The results of
the OLS correlation are reported in Table 6.7.

Table 6.7
Results of correlation analysis

Pooled workers Pooled workers

(Palanas dropped)

Worker characteristic Coefficient t-value Coefficient t-value

Distance from project (km) -0.512 -1.427 0.029 0.051

Age (years) -0.281 -0.623 -0.348 -0.677
Schooling (years) 0.129 0.451 0.041 0.124
Household size -0.369 -1.283 0.112 0.318
Size of landholding (ha) 0.296 0.940 0.062 0.175
Is a landowner (landowner = 1) -0.416 -1.318 -0.511 -1.329
Income (w/o project, in Php) -0.020 -0.150 0.056 0.405
Palanas income (interaction term) -0.455 -2.173 --- ---
Tumbaga sample -5.928 -3.090 0.286 0.634
Ciabu sample -6.526 -3.632 --
Constant 10.550 4.379 3.122 0.212
2
adj-R
0.62 -0.06

SOURCE: Author's calculations

 71

Chapter Seven.

FINAL EVALUATION: LESSONS LEARNED AND BEST PRACTICES

In this concluding chapter we synthesize and consolidate lessons learned based

on the review of PWE experience and specific observations from the case
studies. Some recommendations for project design have been incorporated.

7.1. On employment generation.

The Philippines has pursued an integrative approach to PWE schemes: instead

of providing make-work schemes that happen to generate productive assets, it
has tried to incorporate labor-intensive methods in its general infrastructure
program. The country does not adopt as a matter of policy explicit quantitative
indicators of labor intensity to set apart PWE schemes from other infrastructure
projects. While laudable in intent, such an approach has blurred the
distinctiveness of PWE schemes.

The CEDP experience met instances of tradeoffs with technical adequacy.

However other experiences (i.e. the LIDP) have shown that labor content rules
are not inconsistent with technical adequacy as long as the implementer is
selective about the types and locations of the projects to be enrolled under PWE
objectives. Despite this, hard and fast labor content rules have not been adopted
since the LIDP. Instead, policy embraces LBES technology; in practice though
the vagueness of the LBES rubric has permitted numerous departures from
optimum labor content in public works.

We recommend the imposition of strict guidelines on labor content for priority

PWE schemes, in order to highlight the distinctiveness of such schemes. A
benchmark figure of 50% project cost paid to labor is reasonable. To preserve
asset quality, the enrolled priority projects must be chosen carefully for technical
soundness and suitability for labor-based construction. Box 7 presents a
checklist of the types of works that may be suitable for LBES technology.
Meanwhile, other PWE schemes can follow the usual integrative approach
advocated in government policy.

7.2. Remuneration systems

PWE schemes currently hire on a cash-for-work basis. Earlier projects under a

food-for-work format were bogged down by the high cost of food distribution. As
for basis of remuneration, the experience with piece rate payment and task-
based payment has generally been negative from the implementers’ viewpoint.

Rural works engineers find the daily metering of output (as well as setting
individual assignments under the task-based payment) too time-consuming.
 72

Box 5. Projects suitable for labor-based methods

Item Typical labor content Potential labor content

Low cost housing 25-35 30-40

Social buildings 20-30 25-35
Water reticulation 5-15 25-35
Stormwater 5-15 40-50
Sanitation 5-15 25-35
Secondary roads 5-15 30-70
Dams 10-20 50-70
Railways 5-15 20-30
Electrication 10-15 35-45
Irrigation 15-25 30-70
Forestry 25-35 35-45

SOURCE: DPWH

We recommend this policy be continued, i.e. payment should typically take the
form of cash, except for special food-for-work schemes to support specific
emergency or relief operations within a particular time frame. Payment should
also take the form of daily or weekly wages. This runs counter to some authors’
advocacy of piece or task rating (e.g. Ravallion, 1996). In terms of Philippine
experience such remuneration schemes are too difficult to administer.

7.3. The pakyaw system.

From the viewpoint of the public provider, intermediate to daily wage payment
and task-based payment is the pakyaw contract. The pakyaw system works
because the provider saves on supervision effort, while the agent faces
incentives to produce specific outputs within a reasonable time frame.
Unfortunately DPWH expertise and experience with the pakyaw system is not
widely disseminated, particularly among LGUs. Within the national government,
policy inconsistencies related to hiring policies, wage setting, and taxation of
pakyaw contractors need to be resolved.
 73

We recommend that the pakyaw system be widely disseminated through

collaborative PWE schemes implemented by the DPWH and LGUs. The national
government should immediately establish a uniform policy exempting pakyaw
contracts from tax and pakyaw workers from the usual labor market regulations.

Further advantages from the pakyaw system can be realized if greater emphasis
were placed on preparatory organization of communities. Organizational work
could also solidify the pakyaw groups from loose associations to active coalitions
of workers. While DPWH guidelines provide for such preliminaries, in practice
time pressure and absence of resources (especially personnel) make prior
community organizing unrealistic. This attitude is to be contrasted with the NIA,
which provides a specialist community organizer for each irrigation project.
In our case study, the DPWH implementer left community organizing to the DAR.
But the DAR’s organizing work extended only to community associations not
directly involved with road maintenance (e.g. farmer cooperative, IA).

Therefore, special guidelines should be drawn up directing additional personnel

and generous time allocation (say, 1 to 3 months) for community organizing prior
to pakyaw contracts. To ease the administrative burden, the special guidelines
could be applied only to priority PWE schemes identified in 7.1. Finally, if a
project is interagency (as for CARP infrastructure projects), community
organization should be elevated to the status of an interagency activity as well.

7.4. Timeliness of wages

Adequate preparation should be made to ensure frequent and timely payment of

wages, which is critical to workers’ welfare in PWE schemes. However, the
inflexible schedule of pakyaw payment, as well as the generic viscosity of cash
flow afflicting government operations, makes this requirement a problem. The
pakyaw contractor has no capacity to fill in the liquidity gap. Implementers should
anticipate financing problems and make preparations to ensure that at least the
wage payments do not suffer from the general liquidity malaise. In the case of the
Tumbaga ARP, a material supplier bridged the financing gap. Such improvisation
cannot be expected to yield consistently adequate results in rural PWE schemes.

We recommend instituting a special revolving fund large enough to finance three

months worth of pakyaw contracts. The possibility of creating a new contracting
system for small and medium companies owning light equipment should be
carefully studied, so as to provide an alternative to cash-strapped pakyaw
contractors. Guidelines for formulating such a contracting system are
enumerated in Box 6.
 74

Box 6. Guidelines for an alternative contracting system

(Edmonds and de Veen, 1996)

There are several requisites for this widespread adoption:

• A training period is needed to pass on the organizational and
management skills
• Contract procedures should be streamlined, that is:
o design specifications should be more flexible, to allow application
of labor-based methods utilizing on-site construction materials.
o contract documents need to be simple and straightforward.
o government agencies need to decentralize approval and
monitoring of contracts
o large contracts can be broken down into smaller contracts of
manageable size.
• General constraints on credit need to be removed or mitigated.
Government agency may have to back up contractors in their relations to
banks.
• It is essential to ensure an adequate cash flow in paying contractors.
One system may be to introduce government certificates that can serve
as overdraft facilities. Contracts must include penalties for late payment.

7.5. Local governments

Our case project had the ingredients that are supposed to make decentralized
implementation work: an LGU sensitive to the basic needs of its local
communities, with the means to obtain funds, and the know-how to conduct
community works. We note however our case study pertains to a small-scale
project which placed few administrative demands on the municipal LGU.

However the national government appears technically more capable of -

mplementing the larger-scale projects. As local governments are now vested the
major responsibility for rural infrastructure, undersupply of larger works within
localities has become a problem. Part of the reason though why capacities of the
LGUs are stunted is weak financing from the national government. Successful
cases such as the one recounted here could help generate financial and other
support from the national to the local units.

At the village level, elected barangay officials play a crucial role in implementing
development projects. Often these officials are simultaneously leaders of the
major village associations. We saw the importance of village officials not only in
the case of the LGU project, but in our other cases as well; they were part of
 75

project preparation and design, essential in negotiating access rights, as well as

part-organizers of labor recruitment efforts. For the communal irrigation facility,
not only was the village head active in the works, he also obtained support from
the municipal LGU in terms of equipment support, as well as ensuring
acceptability of the facility to landowners.

Doubts may be raised as to how reliable these leaders are in representing the
wishes of the villagers. However, the question can be raised at any level of
leadership or of government; the question is at which level leaders are most
sensitive to the wishes of their constituency with regard to local rural works.

We recommend orienting project administration towards local governments.

Admittedly, at the outset there will be some difficulties finding LGUs with proven
capacity and experience, and receiving their appropriate share in the national
government revenue. One way to deal with this difficulty is to engage national
agencies in collaborative ventures with LGUs, at least initially and for larger
projects with village-specific benefits. If a project is small enough and not
technically demanding, then LGUs may implement it in its entirety. At the village
level, barangay officials should take a lead role in mobilizing and coordinating
with villagers.

7.6. Cost sharing or equity

Participation of communities from inception, planning, design, to construction and

maintenance of rural works, is integral to project success. IFAD involvement in
Philippine irrigation projects is characterized by a laudable emphasis on
community organizing and participation. The concrete mechanism for generating
and shaping this participation is however often overlooked.

The self-help format, involving equity contribution from communities, is one such
mechanism (Alonzo, 1999). Cost sharing should be motivated by more than just
stretching a tight government budget. It should serve as an incentive mechanism
for galvanizing communities to supply inputs in which they have comparative
advantage, namely information, labor, and monitoring effort. Collective effort
should be seen as more than a by-product of communal ethos, or of traditions of
mutual help (e.g. pintakasi), but rather of incentive design. Of course, the
prerequisite to all these is that the community must clearly understand that equity
contributions are compulsory for recipients of public assistance.

One often hears the argument that cost sharing encourages communities to take
responsibility for infrastructure maintenance. A better explanation would be that
cost sharing is also a screening device: only those communities ready to ensure
the enjoyment of long term benefits from an asset would be willing to accept an
equity scheme. As a corollary, we may reason out that the accuracy of self-
selection is improved by a wider menu of equity schemes available to
communities. This is precisely what was observed for the case of the Palanas IA.
 76

While we have applied the foregoing arguments about cost-sharing to

communities, practically the same reasoning applies to local governments. This
justifies the requirement of matching grants for specific development projects. In
turn, LGUs can extend equity schemes to beneficiary villages.

We recommend a policy of equity schemes and matching grants to reinforce

participatory and decentralized approaches to development projects. The policy
may extend a menu of options to be voluntary selected by the barangay
government, the community association, or the LGU. Further study is needed
regarding the optimum structure of these cost sharing arrangements.

7.7. Labor contribution and self-targeting

In providing equity contributions, communities should be given the option of

contributing labor (rather than cash), a factor they possess in relative abundance.
Effectively, this entails paying workers a lower wage compared to a no-equity
arrangement. Thus, in our case studies, quoted wages were set at or near the
statutory minimum; however, effective wages were set nearer to farm work
wages because of the equity contribution. This is an important tactic for achieving
self-targeting wage rates, particularly if there are political and regulatory
problems in evading statutory wages. Ideally workers under this arrangement are
paid approximately their reservation wage, because of prevailing under-
employment. Incidentally, the fact that the poor “contributors” are adequately
compensated at the margin renders moot the problem of nonworkers “free riding”
on the equity “contributions” of the workers.

We recommend the equity scheme allow contributions in the form of labor. The
equity labor contribution effectively becomes a wage reduction device that can
also serve to self-target the poor.

7.8. Location and targeting

Geographic targeting is widely practiced in Philippine PWE schemes. Despite the

broad intention of alleviating poverty, selection of workers is merely “targeted” to
the unskilled members of the community. Thus targeting of the poor depends in a
significant way on prior selection of a poor village.

We recommend a rigorous procedure of geographic targeting be adopted in

identifying the beneficiary communities for rural PWE. That is, the poorer areas
may be selected in succeeding order: poor provinces, then poor municipalities of
the poor provinces, and poor villages of the poor municipalities. Funds may not
be sufficient to cover all such villages; hence, those which are ARCs should be
given priority.

7.9. Rotating work and targeting

 77

In two of the case studies, work assignments were rationed to numerous villages
explicitly to encourage community participation. Thus many of the poor workers’
stints were cut short, whereas some of nonpoor were able to join the works
during their idle days. While coverage of the poor may have increased
commensurate with an increased number of workers, it remains likely that wage
payments were less efficiently allocated towards alleviating poverty.

We recommend the adoption of guidelines discouraging communities in self-help

schemes from adopting rotating work assignments. Instead, persons paid below-
market wages should be allowed to work for the duration of a project.

7.10. Maintenance

That assets characterized as common pool resources be managed and

maintained by users’ associations is hardly debatable. However other assets
benefit more than a narrow group of users, e.g. feeder roads, flood control
structures, etc. Thus a user association may not be held solely responsible for
upkeep; some joint maintenance between “frequent users” and the government,
particularly the LGU, may be required. However the absence of maintenance
provision is endemic to public works projects. The general tendency is to
approach asset provision in a piecemeal manner; the effort of producing an asset
differs from the effort of maintaining it. Unfortunately this may lead to wastage as
there are economies of scope in coordinating both projects into one sustained
effort.

We recommend PWE project to adopt a clear procedure that appropriates funds,

sets up a monitoring system, and identifies lines of responsibility, with respect to
maintenance. The procedure should be adopted simultaneously with the program
of work for constructing the asset. Hopefully, such moves would help eliminate
an implementation mentality that is too project-oriented but not welfare-oriented.

7.11. Final remarks

In the Philippines rural works is only weakly linked with employment generation
directed at poverty alleviation. This link can be strengthened considerably. This
report finds that production of rural infrastructure and other community works can
be feasibly undertaken with a high employment content oriented to the poor.
Funding agencies can aid in strengthening these links, by devoting funds for rural
works programs that have a high employment content, and are directed towards
hiring the poor, without compromising asset quality. The findings and conclusions
of this report can perhaps serve as a preliminary basis for formulating projects
along these lines.
 78

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