The World Bank Philippines Civil Service Modernization Project (P180649) @#&OPS~Doctype~OPS^blank@pidconcoverpage#doctemplate Project Information Document (PID) Concept Stage | Date Prepared/Updated: 19-Oct-2023 | Report No: PID206 Oct 24, 2023 Page 1 of 9 The World Bank Philippines Civil Service Modernization Project (P180649) @#&OPS~Doctype~OPS^dynamics@pidbasicinformation#doctemplate BASIC INFORMATION A. Basic Project Data Project Beneficiary(ies) Operation ID Operation Name Philippines P180649 Philippines Civil Service Modernization Project Region Estimated Appraisal Date Estimated Approval Date Practice Area (Lead) EAST ASIA AND PACIFIC 01-Apr-2024 17-Jul-2024 Governance Financing Instrument Borrower(s) Implementing Agency Investment Project Republic of the Philippines Civil Service Commission Financing (IPF) Proposed Development Objective(s) To improve the efficiency and the quality of human resource management in selected national government agencies in the Philippines civil service. @#&OPS~Doctype~OPS^dynamics@pidprojectfinancing#doctemplate PROJECT FINANCING DATA (US$, Millions) Maximizing Finance for Development Is this an MFD-Enabling Project (MFD-EP)? No Is this project Private Capital Enabling (PCE)? No SUMMARY Total Operation Cost 69.00 Total Financing 69.00 of which IBRD/IDA 69.00 Financing Gap 0.00 DETAILS World Bank Group Financing International Bank for Reconstruction and Development (IBRD) 69.00 @#&OPS~Doctype~OPS^dynamics@envsocriskclassification#doctemplate Environmental and Social Risk Classification Concept Review Decision Oct 24, 2023 Page 2 of 9 The World Bank Philippines Civil Service Modernization Project (P180649) Low The review did authorize the preparation to continue B. Introduction and Context Country Context 1. Since the 1990s, the Philippines has put its economic house in order with a combination of structural reforms and institutional stability. The reforms initiated in the late 1980s and the 1990s played a key role in the country’s growth recovery and subsequent acceleration two decades later. The growth recovery in the late 1990s was driven by trade openness, gradual financial sector opening and deepening, and infrastructure development that boosted the country’s external competitiveness. The cumulative effect of past reforms coupled with prudent fiscal and macroeconomic policies resulted in an impressive acceleration of economic growth to an annual average of 6.4 percent in 2010-19. 2. GDP growth slowed to 4.3 percent year-on-year in Q2 2023 (7.5 percent in Q2 2022) as elevated inflation (6.8 percent in the first seven months of 2023) and weak external demand weighed on services and industry. The inflation remains elevated in 2023, resulting in continued monetary policy tightening. The fiscal deficit narrowed to 4.8 percent of GDP in Q2 2023 (6.6 percent in Q2 2022) driven by the decline in public spending. The reduction in the deficit was in part driven by the increase in tax revenues by 0.2 percentage points (ppt) of GDP, as the government exceeded its collection target for the quarter. Meanwhile, public spending fell by 1.6 ppt of GDP in Q2 2023 from a year ago, led by the reduction in recurrent spending due to ongoing fiscal consolidation, the temporary reduction in transfers to LGUs in FY23, and delays in budget execution. 3. Although growth will moderate over the medium term, it will remain robust, averaging 5.9 percent in 2023-26. Public consumption growth is expected to moderate in line with fiscal consolidation, although the public investment program will remain supportive of the economic recovery. The reforms supported by this operation that contribute to a better performing public sector, will be crucial in strengthening resilience from shocks, mitigating macroeconomic risk, and protecting long term growth. 4. Building on the achievements of the past two decades, the GoP has adopted a long-term national vision, the AmBisyon Natin 2040 (NEDA 2016). This national vision outlines the collective ambition of the Filipino people to build a prosperous, predominantly middle-class society where no one is poor and where “competitive enterprises offering quality goods and services at affordable prices� are the norm.1 The Ambisyon Natin targets a three-fold increase in per capita incomes by 2040 and envisages the end of poverty in the Philippines in the context of long, healthy lives for all Filipinos and a smarter, more innovative population. The vision guides the medium-term Philippines Development Plan (PDP), 2023-2028, approved by President Ferdinand R. Marcos Jr. in December 2022, which aims to “bring back the country to a high-growth trajectory and more importantly, enable economic and social transformation for a prosperous, inclusive and resilient society�2. The underlying theme of PDP 2023 – 2028 is transformation including the digital transformation of government to deliver more efficient and faster service delivery to the people, more transparency and fewer opportunities for corruption. The PDP also recognizes the importance of good governance and improved bureaucratic efficiency as cross- cutting strategies, noting that “government must pursue bureaucratic efficiency to maximize the benefits from public spending. Doing so involves … a whole-of-government approach in reengineering systems and procedures, accelerating digital transformation in government and raising the productivity performance of agencies as well as the competency of 1 Based on national consultations, the Ambisyon Natin 2040 collective vision is for all Filipinos to “enjoy a stable and comfortable lifestyle, secure in the knowledge that they have enough for daily needs and unexpected expenses, that they can plan and prepare for their own and their children’s future. Families live together in a place of their own, and have the freedom to go where they desire, protected and enabled by a clean, efficient and fair government.� 2 Executive Order No.14, https://www.officialgazette.gov.ph/2023/01/27/executive-order-no-14-s-2023/ Oct 24, 2023 Page 3 of 9 The World Bank Philippines Civil Service Modernization Project (P180649) public servants�3). B. Sectoral and Institutional Context 5. The recent developments described above have strengthened the rationale and motivation for stronger performing government. Despite the generally good pre-COVID-19 economic performance described above, the GoP faces challenges in terms of the civil service, or the bureaucracy’s, ability to attract sufficient talent and effectively perform its functions, reinforced by disruptions experienced during the pandemic (e.g. business continuity, slow manual business processes) which have exposed underlying structural weaknesses in the bureaucracy. 6. During the COVID-19 pandemic, the bureaucracy faced a significant challenge in maintaining the delivery of essential services while dealing with communication and resource constraints. Civil servants were required to coordinate rapidly across various departments, levels of government, and private and social sectors in a context where isolation, social distancing, and remote work became mandatory. This new working environment underscored the inadequacy of existing policies and technologies to facilitate the seamless operation of fundamental government functions, including work reporting schedules and performance management. 7. The Philippines bureaucracy has a major role to play in facilitating the transition to upper-middle income status. As policy makers seek to build an increasingly affluent, middle-class society, they face increasing demands for more and better-quality services. Enhancing the effectiveness of public institutions involves improving the capacity of government to set and attain objectives and priorities and is an integral part of successfully transitioning to upper-middle income status and the “middle class society� that the Philippines aspires to. There is a well-established connection between institutional quality, including also the merit-based civil service4, and economic growth. 8. A review carried out by the World Bank in 2018 found that the civil service suffers from challenges including institutional fragmentation, politicization, low digital penetration and administrative risks . The main conclusion was that the civil service needs to be modernized if it is to play the role expected of it in a country that aspires to be an upper- middle/high-income economy in the next two decades. Action was recommended in several key areas: (a) modernizing the legal framework for the civil service through the introduction of a modern civil service law; (b) strengthening the executive leadership and improving management practices to boost productivity, morale and motivation; (c) professionalization of the human resources management (HRM) function, including strengthening the Civil Service Commission (CSC) to provide leadership and good practice in HRM; (d) rationalizing and improving training and development, taking a consistent, evidence-based approach to training needs assessment; and (e) deepening the penetration of information and communications technology (ICT) in the bureaucracy and building stronger foundations for digitalization of government services for efficient and effective delivery of administrative and other services, functions and processes. 9. The CSC is the main constitutional body responsible for HRM and is the central personnel agency of the Government with responsibility for overseeing public personnel administration. The CSC has a broad jurisdiction which includes all agencies of the national government, local government, state-owned universities and colleges as well as government-owned or controlled corporations (GOCCs). According to the most recent Inventory of Government Human 3PDP 2023 – 2028, Chapter 1 A Plan for Economic and Social Transformation. 4 See,for instance, Evans, Peter and James E. Rauch. 1999. Bureaucracy and Growth: A Cross-National Analysis of the Effects of “Weberian� State Structures on Economic Growth. American Sociological Review, Vol. 64/5, 748-65; Cornell, Agness, Carl Henrik Knutsen and Jan Teorell. 2018. Bureaucracy and Growth. Unpublished Paper, Lund University; and Meyer-Sahling, Jan-Hinrik, Christian Schuster and Kim Sass Mikkelsen. 2018. ‘Civil service management in developing countries: what works? Evidence from a survey with 23,000 civil servants in Africa, Asia, Eastern Europe and Latin America’. UK Department for International Development. London: DFID. Oct 24, 2023 Page 4 of 9 The World Bank Philippines Civil Service Modernization Project (P180649) Resources (IGHR) published by the CSC, there were approximately 1.75 million career public employees across the entire bureaucracy as of June 30, 2023, 74 percent (1.26 million) of whom are in National Government Agencies (NGAs).5 10. There is no single, comprehensive Human Resources Management Information System (HRMIS) covering the whole Philippines civil service. While DBM maintains the establishment records of authorized positions for each department and agency - referred to as the Personnel Services Itemization and Plantilla of Personnel (PSIPOP)6 - the departments and agencies maintain their own personnel management systems with the personal information of incumbents of all authorized positions. A 2019 survey of 20 agencies found that the majority (8 NGAs and 3 LGUs) had adopted either web-based or client-server HRMIS solution for internal use while those without any automated systems tended to use spreadsheets to manage HR data.7 11. The absence of a centralized HRMIS has implications for the government’s public sector payroll. A 2018 assessment of the integration of the payroll system with the Integrated Financial Management Information System (IFMIS) found that there is no national standard for human resource management and payroll systems, with each agency having its own solution for payroll, including diverse automated and manual systems. Fragmented and incomplete overall personnel and payroll management leads to a high level of inefficiency. There are multiple payroll systems being used by over 4,000 Implementing Units (IUs) (out of 11,804 lower-level operating units listed under the organizational classification) involving duplication of work and investments, requiring manual transfers of data to reconcile and share information because they are not connected. Potential savings to the government of moving to a centralized payroll could be significant but past attempts to develop a Comprehensive Human Resource Information System (CHRIS) and National Payroll System (NPS) foundered. 12. Related to the absence of an automated HRMIS is the fact that the government’s personnel records are largely paper based. CSC maintains paper records for all active employees across the bureaucracy plus those of past employees. Every civil servant has a file held at both the employing agency as well as in the CSC that is paper based, requiring manual retrieval and updating of records which is a very arduous task. The result is that simple processes can take a long time, causing delays in appointments, promotions and other personnel actions. Many of the challenges that civil servants experience during the transition between departments, such as delays in receiving salary payments, transfer of salary levels/increments, training records, leave credits and other benefits, can be avoided following the successful roll-out of a government-wide HRMIS with capacity for Payroll modules. These challenges place an increased administrative and personal burden on civil servants and also reduce the public sector’s value proposition as an employer of choice, which has implications for attracting and retaining a talented workforce. 13. Preparation for a national HRM system could be a catalyst for a much-needed, fundamental reengineering of personnel system. The GOP is embarking on a massive digital government transformation that will change the way it operates and delivers public services. It will build on the foundations set through introduction of national ID system (PhilSys), centralized datacenter and cloud solutions, interoperability of systems, and whole of the government approach to digitalization. The centralized government HRMIS is among the envisaged priority core government system, and will cover the automation of a large proportion of financial and administrative actions. It would provide a new source for powerful data analytics on the nature and evolution of administrative capability across government. This has the potential to dramatically reduce the volume of transactional administration and increase the accessibility and usefulness of data for HRM and planning. 5 Apart from NGAs, the Philippine bureaucracy includes Local Government Units (LGUs), State Universities and Colleges (SUCs) and Government- owned and Controlled Corporations (GOCCs). 6 Plantilla is the word used in the Philippines to refer to the Establishment. 7 Of the 20 agencies, thirteen (13) were executive departments, three (3) were constitutional and legislative commissions, two (2) were provincial governments, one (1) was a city government and one (1) was a municipal government. Oct 24, 2023 Page 5 of 9 The World Bank Philippines Civil Service Modernization Project (P180649) C. Relationship to CPF 14. The proposed project is well-aligned with the GoP’s long-term strategic goals and medium-term operational objectives. The current administration recognizes the need for a significant improvement in the bureaucracy if the goals of the AmBisyon Natin and the PDP are to be achieved. The PDP 2023-28 acknowledges the role of governance in the achievement of the national goals and aspirations as set out in both the AmBisyon Natin 2040 and the development plan. As the central HR institution and adviser to the President on personnel management of the Philippine government, CSC defines its core purpose as “Gawing lingkod-bayani ang bawat kawani� (“Turning every government employee into a hero�). The CSC has also developed a Digital Transformation Framework and Roadmap (2024-2029) which outlines the digital transformation that will be necessary for the CSC systems and processes to “convert the workplace into digital, leveraging new and existing technologies to drive significant change and deliver better value to their clients and stakeholders�. The proposed project will support this roadmap through the development of a centralized HRMIS and with possible capacity for payroll after further consultation with government. 15. Governance as well as digital transformation are treated as cross-cutting themes in the 2020-25 Country Partnership Framework (CPF) approved by the World Bank’s Board of Executive Directors in December 2019. The proposed project is also consistent with the findings of the World Bank’s 2019 Systematic Country Diagnostic (SCD) for the Philippines which highlights the weak capability of the civil service pointing to the shortcomings in HRM. The SCD identifies seven policy priorities for achieving the AmBisyon Natin 2040 and the World Bank’s global twin goals of reducing poverty and boosting shared prosperity. Of these seven priorities, “upgrading public administration to be fit for purpose� to meet the objectives and challenges posed by the AmBisyon Natin 2040 is tagged as an overarching priority. C. Proposed Development Objective(s) To improve the efficiency and the quality of human resource management in selected national government agencies in the Philippines civil service. Key Results (From PCN) • Enhanced organizational effectiveness and efficiency of the CSC through better information systems and capacity to apply its whole-of-bureaucracy mandate; • A centralized, integrated HRM and Payroll system developed and rolled-out across the national government departments; • Reduction in time to process key HRM actions such as attestation and promotional appointments; • Reduction in the number of payroll-processing units; • Progress of government departments and agencies under the PRIME-HRM framework. D. Concept Description 16. The following focus areas are identified as project components to improve the functioning of the civil service: 1. Component 1: Strengthening HRM capabilities i. Building Capacities of Human Resource Management Officers (HRMOs): • Develop an HR Competency Framework to identify competency gaps, development of assessment tools, training needs analysis and process review to define the standard and required HR competencies. • Establish an HR Certification System to standardize and improve the HRMO’s competency level in strategic HRM including a third-party independent audit to administer the certification. Oct 24, 2023 Page 6 of 9 The World Bank Philippines Civil Service Modernization Project (P180649) • Conduct planning workshops, outreach, networking, specialized executive courses and learning events for HRMOs including an annual HR Symposium. ii. Enhancing Agency level HR maturity • Review and redesign PRIME-HRM assessment framework through benchmarking, process review workshops and validation with agency HRMOs from different sectors • Technical support, advisory services and implementation guidance for participating agencies under action plans for advancing under the PRIME-HRM framework. • Institutionalize an award system and engagement of a third-party to elevate the verification process for robust quality assurance. iii. Strengthening CSC as Reform Leader: • Conduct a functional review for the restructuring/reorganization of the CSC to strengthen its internal HRM policies and practices to advance under the PRIME-HRM framework. • Build capacity and learning opportunities for CSC staff and other partner agencies on global practices including through study tours, scholarships, twinning, conferences or short-term secondments. • Assist CSC to improve its knowledge and information management capacity for integrating, organizing and sharing policy updates rulings on cases, innovative HR practices and studies of important sectoral trends. iv. Employee engagement and Career Executive Service Officers (CESO) assessment of HR practices: • Conduct whole-of-government Employee Engagement Surveys and support the development of agency- level employee engagement plans to address the concerns of civil servants. • Prepare a comprehensive report on the state of the civil service using the survey results. v. Content Development for e-Learning/Microlearning modules and knowledge management: • Develop and redesign of HR-related learning and development programs and modules to build skills and capacities and to conform with the new PRIME-HRM requirements. • Support the establishment of process flow, content, learning materials, research, publications, forums and training and certification of knowledge management professionals. 2. Component 2: Digital transformation of HRM in the civil service i. Systems and technologies including HRMIS for Government (HR4GOV): • Develop and implement an integrated HRMIS (HR4GOV) which will include an employee self-service portal, web-based learning management system and data analytics function. Priority modules are expected to include an employee database; time, attendance and leave management; payroll; and appointments processing. The functional solutions framework is expected to include: o Secure Frontline and Transactional Services. This will serve as an interface to transactional services for data capture, viewing and monitoring. It will include (not an exhaustive list) an employee dashboard, employee recruitment, attendance management, talent management, standard personnel forms, regulatory compliance. o Secure Enterprise Applications Services. These are the back-end services that process data and information captured by the Frontline and Transactional Services. This will allow CSC and HRMOs to access and analyze data, generate reports, monitor cases and process requests. The HR4GOV system will include (not an exhaustive list) the following applications: enterprise portal, benefits administration and processing, payroll administration and processing, testing and certification management, case management, compliance monitoring and documents and records management. o Secure Administrative Services. This is for the automation of systems security, deployment, administration, lifecycle management and data management functions. Oct 24, 2023 Page 7 of 9 The World Bank Philippines Civil Service Modernization Project (P180649) ii. Streamlining/simplification of HR framework, policies and procedures • Conduct business process reviews and revisions of HR framework/policies and procedures. This will include key HR processes such as employee information management (personal data sheet, certifications), HR planning (plantilla, contracts, job-orders), eligibility examination, recruitment and selection, appointments, onboarding, learning management, compensation and benefits, leave management, time and attendance management, compensation, case management, data analytics, career and succession planning and post-employment. 3. Component 3: Change management and communication to support HRM transformation i. Change Management and Communications Strategies: • Develop and articulate an effective change management program, both within the CSC and across the wider bureaucracy, to support the transformation and rebranding of the civil service. This will include employee engagement surveys to enable the CSC to monitor the effectiveness and impact of the reforms. • The change management program will be support with a complementary and comprehensive strategic communications plan to support efforts to transform and rebrand the civil service as well as to communicate more broadly to key stakeholders and the public on the move towards a smart and future- ready civil service. The plan will utilize a variety of communication channels including radio and television, face-to-face, social media and written communications. • The creation of a network of change agents and champions at all participating government agencies to achieve a significant behavioral change as a result of project activities. ii. Project Management Unit • Support the establishment and operation of a dedicated and capable project management unit to oversee and coordinate project implementation up to the time the project closes. @#&OPS~Doctype~OPS^dynamics@legalpolicyandscreeningrisk#doctemplate Legal Operational Policies Triggered? Projects on International Waterways OP 7.50 No Projects in Disputed Area OP 7.60 No Summary of Screening of Environmental and Social Risks and Impacts The environmental risks and impacts of the Project is assessed to be low. The Project will not finance activities that will involve civil works nor prepare an infrastructure investment plan that will generate any potential environmental impacts. It will not involve project activities that will expose project beneficiaries or stakeholders to be exposed to potential environmental risks and impacts. Post-use or end-of-life disposal of waste electronic equipment to be procured and installed as part of Component 2 activities could be of environmental concern. Although not expected during the project period, the potential impact from the improper disposal of e-waste will be mitigated by preparing an Environmental Codes of Practice (ECOP) and integrating it into the Project Operations Manual (POM) and the standard procurement documents of relevant project activities. @#&OPS~Doctype~OPS^dynamics@contactpoint#doctemplate Oct 24, 2023 Page 8 of 9 The World Bank Philippines Civil Service Modernization Project (P180649) CONTACT POINT World Bank Davit Melikyan Senior Public Sector Specialist Donna Louise Andrews Lead Governance Specialist Borrower/Client/Recipient Republic of the Philippines Implementing Agencies Civil Service Commission Karlo Nograles, Chair, och-nograles@csc.gov.ph FOR MORE INFORMATION CONTACT The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 473-1000 Web: http://www.worldbank.org/projects @#&OPS~Doctype~OPS^dynamics@approval#doctemplate APPROVAL Task Team Leader(s): Davit Melikyan, Donna Louise Andrews Approved By Practice Manager/Manager: Country Director: Ndiame Diop 24-Oct-2023 Oct 24, 2023 Page 9 of 9