The World'Bank 1818 H Street N.W. (202) 477-1234 INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Washington, D.C. 20433 Cable Address: INTBAFRAD INTERNATIONAL DEVELOPMENT ASSOCIATION U.S.A. C bi A dress: INDEVAS OFFICD. DOCUMENTS August 11, 2016 Honorable Carlos Dominguez Secretary of Finance Department of Finance 6/F Department of Finance Building Bangko Sentral ng Pilipinas Complex Roxas Boulevard, Manila Republic of the Philippines Dear Secretary Dominguez: Re: Republic of the Philippines: Learning, Equity and Accountability Support Project Loan No. 8344-PH Amendment to the Loan Agreement We refer to the Loan Agreement between the Republic of the Philippines (the "Borrower") and the International Bank for Reconstruction and Development (the "Bank"), dated April 10, 2014 (the "Loan Agreement") for the above-referred project (the "Project"). We also refer to the letter from Undersecretary Tan dated 29 April 2016, regarding amendment of the Loan Agreement and requesting restructuring of the Project. In view of the foregoing, the Loan Agreement is amended as follows: 1. The table at Section IVA.2 of Schedule 2 to the Loan Agreement is amended as follows: Percentage of Amount of the Loan eentre ob Cateory lloctedExpenditures to be Category Allocated fnne (expressed in USD) fnne (Inclusive of Taxes) (1) Payments under the Eligible Expenditures 100% Programs as follows: a) First scheduled disbursement (on or after the 4,650,000 Effective date) (pro memoria) b) Second scheduled disbursement (on or after Secretary Carlos Dominguez - 2 - August 11, 2016 October 1, 2014) (pro memoria) c) Third scheduled disbursement (on or after April 1, 2015) (pro memoria) d) Fourth scheduled disbursement (on or after October 1, 2015) 2015)18,600,000 (pro memoria) e) Fifth scheduled disbursement (on or after April 1, 2016) (pro memoria) (2) Front-end Fee Amount payable 750,000 pursuant to Section 2.03 of this Agreement in accordance with Section 2.07 (b) of the General Conditions (3) Interest Rate Cap or Amount due pursuant to Interest Rate Collar 0 Section 2.07(c) of this premium Agreement 4) Payments under Eligible Expenditure 100% Program under Parts 1, 2 271,000,000 and 3 of the project TOTAL AMOUNT 300,000,000 2. Section IVB1 to Schedule 2 of the Loan Agreement is amended as follows: "1. Notwithstanding the provisions of Part A of this Section, no withdrawal shall be made: (a) for payments made prior to the date of this Agreement, except that withdrawals up to an aggregate amount not to exceed $20,650,000 equivalent may be made under Category 1(a) for the reimbursement of Eligible Expenditures under the Eligible Expenditure Programs paid prior to this date but on or after July 1, 2013, subject to fulfillment of the relevant withdrawal conditions specified in sub-paragraph (c) of this paragraph; or (b) for payments under Category (1) made after the date of this Letter Agreement; or Secretary Carlos Dominguez - 3 - August 11, 2016 (c) for payments under Category (4), unless and until the Borrower has: (i) furnished evidence satisfactory to the Bank, in accordance with the DLI Verification Protocol, that the Borrower has achieved the relevant DLI(s) within the respective DLI Achievement Date set forth in the Schedule 4 to this Agreement against which withdrawal is requested; (ii) complied with the additional instructions referred to in Section IV.Al of this Schedule, including furnished to the Bank the interim unaudited financial reports evidencing the Minimum EEPs for the respective DLIs from the date of this Agreement up to the date of the applicable withdrawal application; and (iii) that such Minimum EEPs have not formed the basis for authorizing the withdrawal of an amount of the Loan for any other DLL" 3. Section IV B2(a) to Schedule 2 of the Loan Agreement is amended as follows: "(a) If the Bank has been satisfied that any of the DLIs have been achieved prior to the DLI Achievement Date for purposes of disbursement of Loan proceeds under any of the Categories, then the Bank may, for each DLI that has been so achieved, authorize the withdrawal of an amount of the Loan equivalent to the DLI Value of such DLI following the verified achievement of such DLI; provided that the Borrower has furnished to the Bank evidence showing (i) the incurrence of Minimum EEPs corresponding to the DLI Value of such DLI from the date of this Agreement to the date of the applicable withdrawal application; and (ii) that such Minimum EEPs have not formed the basis for authorizing the withdrawal of an amount of the Loan for any other DLI;" 4. Section IV B2(d) to Schedule 2 of the Loan Agreement is amended as follows: "(d) If, at any time after the Mid-Term Review, the Bank has not been satisfied that any particular DLI has been achieved within twelve (12) months after the DLI Achievement Date or by the Closing Date, whichever is earlier, the Bank, may by notice to the Borrower, after cancel the amount of the Loan corresponding to the relevant DLI Value" 5. Schedule 4 of the Loan Agreement is amended as indicated in Attachment 1 to this Letter Agreement. 6. The definition of "Eligible Expenditures Programs" set out in the Appendix to the Loan Agreement is amended as follows: "13. "Eligible Expenditures Programs" and "EEP" mean the set of defined expenditures under the following Department of Education budget lines: "School Maintenance and Other Operating Expenses (MOOE)", "Human Resource Training and Development (HRTD)", "In-Service Training (INSET)", "Abot Alam Program (AAP)" and "Alternative Learning System (ALS)." 7. The definition of "Minimum EEPs" set out in the Appendix to the Loan Agreement is amended as follows: "22. "Minimum EEPs" means the minimum amount of expenditures to be incurred under each of the EEP budget lines set out in this Agreement against a DLI targets specified in Schedule 4 to this Agreement, as such amount may be pro-rated in the case of Scalable DLIs on the basis of the level of achievement of such Scalable DLIs." Secretary Carlos Dominguez - 4 - August 11, 2016 8. The definition of "Minimum EEPs Period" in paragraph 23 of the Appendix to the Loan Agreement is deleted and the subsequent paragraphs accordingly renumbered. All other terms and conditions remain unchanged. Please confirm your agreement to the foregoing on behalf of the Recipient by countersigning and dating the corresponding form of confirmation set forth below, and returning one fully countersigned original of this letter to us. Upon receipt of duly countersigned original of this letter by the authorized representative of the Recipient, this amendment letter shall become effective as of the date of the countersignature. Sincerely, Mara K. Warwick Country Director, Philippines East Asia and Pacific Region CONFIRMED: REPUBLIC OF THE PHILIPPINES By: _ _ _ _ _ _ _ _ _ _ _ _ Name: Carlos C._ Damingu_ez Title: Secretary of Finance Date: 23 August 2016 Secretary Carlos Dominguez - 5 - August 11, 2016 ATTACHMENT 1 - SCHEDULE 4 Disbursement Linked Indicators Period I Period 2 Period 3 Period 4 (July 1, 2013 - December (January 1 - December 31, (January 1 - December (January 1 - December 31,2014) 2015) 31,2016) 31,2017) DLI 1: Target: 5 EGRA tools and 5 EGMA 40 EGRA and EGMA tools Versions of tools (1 version of each tool (4 additional versions of EGRA and per each Selected Mother each tool per each Selected EGMA tools Tongue in each Target Mother Tongue in each developed for Region) Target Region) each Selected Allocated US$4,650,000 US$18,600,000 Mother Tongue amount: in each Target Disbursement rule: (i) US$465,000 per each EGRA and EGMA tool finalized on or before the last day of the relevant period; (ii) Region Minimum 1 tool per Selected Mother Tongue in Period 1 (non-scalable); and (iii) 40 tools in Period 2 (scalable: minimum of 3 additional versions per mother tongue and maximum of 4 versions, for a total of 40 additional versions). DLI achievement measure: Periods 1-2: DepEd has developed 25 EGRA tools and 25 EGMA tools (five comparable versions per Selected Mother Tongue) that meet standards set forth in the DLI Verification Protocol. DLI verification process: Periods 1-2: (i) DepEd submits EGRA and EGMA tools; and (ii) the Bank reviews the tools against the standards specified in the DLI Verification Protocol. Minimum EEPs: Minimum expenditure level: DLI target for Period 1: US$4,650,000; DLI target Period 2: US$18,650,000. Period I Period 2 Period 3 Period 4 July 1, 2013 - December January 1 - December 31, January 1 - December January 1 - December 31,2014 2015 31,2016 31,2017 DLI 2: Target: 11,998 grade 1-3 teachers 11,998 grade 1-3 teachers 11,998 grade 1-3 teachers Teachers from trained trained trained identified Allocated US$30,000,000 US$30,000,000 US$30,000,000 schools trained amount: to improve their capability to Disbursement rule: Periods 2-4: (i) percent of achievement of target on or before the last day per period equal to the percent of total effectively allocated amount for the relevant period to be disbursed; (ii) scalable: minimum of 51% achievement to be eligible for disbursement. teach grades 1 - DLI achievement measure: Periods 2-4: Training per period carried out in accordance with the DLI Verification Protocol. Secretary Carlos Dominguez - 6 - August 11, 2016 3 reading and DLI verification process: Periods 2-4: (i) DLI Verification Agent conducts training spot checks and post-training assessment in math accordance with the DLI Verification Protocol; and (ii) the Bank reviews the verification report during the semi-annual Bank implementation support missions. Minimum EEPs: Minimum expenditure level: DLI targets for Periods 2-4: US$30,000,000 per DLI target. Period 1 Period 2 Period 3 Period 4 July 1, 2013 - December January 1 - December 31, January 1 - December January 1 - December 31,2014 2015 31,2016 31,2017 DLI 3: Target: 5,051 principals/ head Additional 5,051 School teachers trained on effective principals/ head teachers principals/head early grade reading and math trained on effective early teachers from teaching strategies grade reading and math identified teaching strategies schools trained Allocated US$15,000,000 US$15,000,000 to strengthen amount: I field-level Disbursement rule: Periods 2-3: (i) percent of achievement of target on or before the last day of the relevant period equal to the support system percent of total allocated amount to be disbursed per period; (ii) scalable: minimum of 51% achievement to be eligible for for improved disbursement. early grade DLI achievement measure: Periods 2-3: Training per period carried out in accordance with the DLI Verification Protocol. reading and DLI verification process: Periods 2-3: (i) DLI Verification Agent conducts training spot-checks and post-training assessment in math teaching accordance with the DLI Verification Protocol; and (ii) the Bank reviews the verification report during the semi-annual Bank implementation support missions. Minimum EEPs: Minimum expenditure level: DLI target for Periods 2-3: US$15,000,000 per DLI target. Period 1 Period 2 Period 3 Period 4 July 1, 2013 - December January 1 - December 31, January 1 - December January 1 - December 31, 2014 2015 31, 2016 31, 2017 DLI 4: Target: Policy on the utilization of Policy on the inclusion of s Development of the EGRA and EGMA tools early literacy and an enabling adopted numeracy course in policy DepEd's teacher environment for induction program the effective adopted implementation Allocated US$6,000,000 US$6,000,000 of the grades 1 - amount: 3 reading and Disbursement rule: (i) Period 1: Policy on EGRA and EGMA tools (non-scalable); (ii) Period 3: Policy on inclusion of early literacy math program and numeracy course (non-scalable). Secretary Carlos Dominguez -7- August 11, 2016 in the Target DLI achievement measure: (i) Period 1: Policy on EGRA and EGMA utilization and application in classrooms has been formulated Regions according to standards specified in the DLI Verification Protocol, and approved, issued and disseminated to all DepEd levels through a DepEd order on or before the last day of the relevant period; (ii) Period 3: Policy on including an early literacy and numeracy course as appropriate in the DepEd teacher induction program has been formulated according to standards specified in the DLI Verification Protocol, and approved, issued and disseminated to all DepEd levels through a DepEd order on or before the last day of the relevant period. DLI verification process: Periods I and 3: (i) DepEd submits the policy on EGRA and EGMA utilization and application in classrooms, and the policy on inclusion of early literacy and numeracy course; and (ii) Bank reviews the policies against the standards specified in the DLI Verification Protocol, during the semi-annual Bank implementation support missions. Minimum EEPs: Minimum Expenditure Level: DLI targets for Period 1: US$6,000,000; DLI target for Period 3: US$6,000,000. Period 1 Period 2 Period 3 Period 4 July 1, 2013 - December January 1 - December 31, January 1 - December January 1 - December 31, 2014 2015 31, 2016 31, 2017 DLI 5: Target: Policy on the dissemination Linguistic map covering Linguistic map covering Linguistic maps covering Linguistic map and utilization of linguistic another Target Region another Target Region another 2 Target Regions for each Target maps adopted, and linguistic developed developed developed Region map covering 1 Target developed for Region developed improved Allocated US$5,000,000 US$5,000,000 US$5,000,000 US$10,000,000 targeting and amount: implementation Disbursement rule: (i) Period 1: Policy on linguistic maps and completion of a linguistic map covering one Target Region (non- of the grades 1 - scalable); (ii) Periods 2-4: US$5,000,000 per linguistic map completed for each Target Region on or before the last day of the relevant 3 reading and period (non-scalable). math program DLI achievement measure: (i) Period 1: Policy on dissemination and utilization of linguistic maps has been formulated according to standards specified in the DLI Verification Protocol, and approved and issued through a DepEd order, and DepEd has developed and approved a linguistic map covering 1 Target Region in accordance with the policy; (ii) Periods 2-4: DepEd has developed and approved linguistic maps for each of the remaining Target Regions in accordance with the policy. DLI verification process: Periods 1-4: (i) DepEd submits policy on the dissemination and utilization of linguistic maps, and the linguistic maps for each Target Region; and (iii) the Bank reviews the policy and the maps against the standards specified in the DLI Verification Protocol during the semi-annual Bank implementation support missions. Minimum EEPs: Minimum expenditure level: DLI targets for Periods 1-3 is US$5,000,000 per DLI target; and DLI target for Period 4 is US$10,000,000 Secretary Carlos Dominguez - 8 - August 11, 2016 Period 1 Period 2 Period 3 Period 4 July 1, 2013 - December January 1 - December 31, January 1 - December January 1 - December 31, 2014 2015 31, 2016 31, 2017 DLI 6: Target: Performance monitoring 5 DepEd regional offices, 47 Capability of system developed that will DepEd division offices and DepEd to be used in the 14,121 Target Schools in all implement its implementation of DepEd's Target Regions oriented on Performance Performance Incentive DepEd's Performance Incentive Scheme Incentive Scheme and Scheme performance monitoring improved system Allocated US$5,000,000 US$25,000,000 amount: Disbursement rule: Period 1: (i) Performance monitoring system developed (non-scalable); Period 2: (ii) percent of achievement of target (i.e. 5 regions + 47 division and 14,121 schools = 100% of target) on or before the last day of the period equal to the percent of total allocated amount to be disbursed; (iii) scalable: minimum of 5 1% orientation of offices and schools is required to be eligible for disbursement. DLI achievement measure: Period 1: Performance monitoring system meeting standards specified in the DLI Verification Protocol in place and operational; Period 2: Field offices and Target Schools oriented on the incentive scheme and the performance monitoring system according to standards specified in the DLI Verification Protocol. DLI verification process: (i) Period 1: DepEd reports on the development of the performance monitoring system developed for the performance incentive scheme; (ii) the Bank reviews the report against the standards specified in the DLI Verification Protocol during the semi-annual Bank implementation support missions;(iii) Period 2: DLI Verification Agent conducts spot checks and post- orientation assessment against the standards specified in the DLI Verification Protocol; and (iv) the Bank reviews the verification report for Period 2 during the semi-annual Bank implementation support missions. Minimum EEPs: Minimum expenditure level: DLI target for Period 1: US$5,000,000; DLI target for Period 2: US$25,000,000. Period 1 Period 2 Period 3 Period 4 July 1, 2013 - December January 1 - December 31, January 1 - December January - December 31, 2014 2015 31, 2016 31, 2017 DLI 7: Target: Policy on the use of school 8,473 Target Schools in the 13,415 Target Schools in Development of report cards (including Target Regions use refined the Target Regions use an enabling guide-lines, procedures and school report card refined school report card policy syteacorin templates) adopted in_the_DL1_Verification_Protocol. Secretary Carlos Dominguez -9- August 11, 2016 environment for Allocated US$5,000,000 US$10,000,000 US$ 15,000,000 the use of amount: school report Disbursement rule: (i) Period 1: Adoption of policy on the use of school report cards (non-scalable); (ii) Period 2: percent of cards in the achievement of target (i.e. 8,473 schools, whether elementary or high schools = 100% of target) on or before the last day of the period Target Regions equal to the percent of total allocated amount to be disbursed; (iii) minimum of 51% of schools is required to be eligible for disbursement (scalable); (iv) Period 3: percent of achievement of target (i.e. 13,415 schools = 100% of target) on or before the last day of the period equal to the percent of total allocated amount to be disbursed; and (v) minimum of 51% of schools (i.e. 6,842 schools) is required to be eligible for disbursement (scalable). DLI achievement measure: Period 1: School report card policy adopted (through a DepEd order or memorandum) on or before the last day of the relevant period meeting the standards specified in the DLI Verification Protocol; Period 2: 8,473 Target Schools in the Target Regions use refined school report card in accordance with the school report card policy on or before the last day of the relevant period; Period 3: 13,415 Target Schools in the Target Regions use refined school report card in accordance with the school report card policy on or before the last day of the relevant period. DLI verification process: Period 1: (i) DepEd reports on the adoption of the policy on the use of updated school report cards; (ii) the Bank reviews the report against the standards specified in the DLI Verification Protocol during the semi-annual Bank implementation support missions; Periods 2-3: (i) DepEd reports on the list of Target Schools using refined school report cards per Target Region; (ii) DLI Verification Agent spot-checks that listed schools are indeed using the refined school report card and for the purposes specified in the DLI Verification Protocol; and (iii) Bank reviews the verification reports during the semi-annual Bank implementation support missions. Minimum EEPs: Minimum expenditure level: DLI target for Period 1: US$ 5,000,000; DLI target for Period 2: US$ 10,000,000; DLI target for Period 3: US$ 15,000,000 Period 1 Period 2 Period 3 Period 4 July 1, 2013 - December January 1 - December 31, January 1 - December January 1 - December 31, 2014 2015 31, 2016 31, 2017 DLI 8: Target: Financial management Trainers' training on the Financial manual for all DepEd financial management management finance and administrative manual of at least I capacity of staff developed and adopted finance and DepEd central, administrative staff each regional and from the central office, division offices the 17 regional offices improved and the 215 division offices of DepEd Allocated US$7,500,000 US$15,000,000 amount: Secretary Carlos Dominguez - 10 - August 11, 2016 Disbursement rule: (i) Period 2: non-scalable for the financial management manual; (ii) Period 3: non-scalable for completed training at central, regional and division levels. DLI achievement measure: (i) Period 2: Financial management manual adopted through a DepEd order or memorandum, meeting the standards specified in the DLI Verification Protocol; (ii) Period 3: Trainers training on the financial management manual in form and substance specified in the DLI Verification Protocol of at least I finance and administrative staff each from the central office, the 17 regional offices and the 215 division offices of DepEd on or before the last day of the relevant period. DLI verification process: Period 2: (i) DepEd submits the financial management manual; ; (ii) the Bank reviews the manual against the standards specified in the DLI Verification Protocol during the semi-annual Bank implementation support missions; Period 3: (i) DepEd conducts training on the manual and provides post-training reports which will include proof of conduct of the activities and other information that will be useful in DLI verification; (ii) the DLI Verification Agent conducts training spot-checks against the standards specified in the DLI Verification Protocol; and (iii) the Bank reviews the verification reports during the semi-annual Bank implementation support missions. Minimum EEPs: Minimum expenditure level: DLI target for Period 2: US$7,500,000; DLI target for Period 3: US$15,000,000 Period 1 Period 2 Period 3 Period 4 July 1, 2013 - December January 1 - December 31, January 1 - December January 1 - December 31, 2014 2015 31, 2016 31, 2017 DLI 9: Target: Information strategy for Information system for Improvement of educational programs educational programs data serving the Target serving the Target management for Disadvantaged Groups Disadvantaged Groups educational developed and adopted developed in accordance programs with the information serving the strategy Target Allocated US$6,250,000 US$6,250,000 Disadvantaged amount: Groups in the Disbursement rule: (i) Period 2: Information strategy for programs serving the Target Disadvantaged Groups (non-scalable); (ii) Target Regions Period 4: Information system for programs serving the Target Disadvantaged Groups (non-scalable). DLI achievement measure: (i) Period 1: Information strategy for programs serving the Target Disadvantaged Groups developed and adopted by DepEd according to standards specified in the DLI Verification Protocol; (ii) Period 4: DepEd has developed an information system for programs serving the Target Disadvantaged Groups in accordance with the strategy. DLI verification process: Periods 2 and 4: (i) DepEd submits the information strategy and reports on the development of the information system; (ii) the Bank reviews the strategy and information system against the standards specified in the DLI Verification Protocol during the semi-annual Bank implementation support missions. Minimum EEPs : Minimum expenditure level: DLI targets for Periods 2 and 4: US$6,250,000 per DLI target. Secretary Carlos Dominguez - 11 - August 11, 2016 Period 1 Period 2 Period 3 Period 4 July 1, 2013 - December January 1 - December 31, January 1 - December January 1 - December 31,2014 2015 31,2016 31,2017 DLI 10: Target: Review of Iprogram Review of another program Review of another Review of another Comprehensive program program review completed on selected DepEd Allocated US$ 6,000,000 US$ 6,000,000 US$ 6,000,000 US$ 6,000,000 educational amount: programs Disbursement rule: Review by DepEd per program: US$6 million each, non-scalable. serving the DLI achievement measure: Periods 1-4: Review of program serving Targeted Disadvantaged Groups completed on or before the last Target day of the relevant period in accordance with standards specified in the DLI Verification Protocol. Disadvantaged DLI verification process: Periods 1-4: (i) DepEd reports on the conduct of the program reviews; and (ii) the Bank reviews the reports Groups in the against the standards specified in the DLI Verification Protocol during the semi-annual Bank implementation support missions. Target Regions Minimum EEPs: Minimum expenditure level: DLI targets for Periods 1,2, 3 and 4 US$6,000,000 per DLI target. ' Secretary Carlos Dominguez ' 12 August 11, 2016 cc Hon. Ernesto Pernia, Secretary for Socioeconomic Planning and Director-General, National Economic and Development Authority Hon. Benjamin Diokno, Secretary, Department of Budget and Management Hon. Leonor Briones, Secretary, Department of Education Ms. Maria Edita Tan, Undersecretary, Department of Finance Ms. Margarita Songco, Deputy Director-General, National Economic and Development Authority Mr. Rolando Tungpalan, Deputy Director-General, National Economic and Development Authority Ms. Laura Pascua, Undersecretary, Department of Budget and Management Dr. Dina Ocampo, Undersecretary, Department of Education Ms. Victoria Catibog, Undersecretary, Department of Education Ms. Annalyn Sevilla, Undersecretary, Department of Education Mr. Alain Del Pascua, Undersecretary, Department of Education Atty. Albert Muyot, Undersecretary, Department of Education Mr. Jesus Mateo, Undersecretary, Department of Education Atty. Revsee Escobedo, Assistant Secretary, Department of Education Ms. Stella Laureano, Director, Department of Finance Ms. Erlinda Capones, Director, National Economic and Development Authority Ms. Violeta Corpus, Director, National Economic and Development Authority Ms. Cristina Clasara, Director, Department of Budget and Management Mr. Otaviano Canuto, Executive Director for the Philippines, World Bank Group Ms. Rosalia De Leon, Alternate Executive Director for the Philippines, World Bank Group