Document of {sb p

The World Bank f1Lr iuFOR OFFICIAL USE ONLY

Report No. P-2714-PH

REPORT AND RECOMMENDATION

OF THE

PRESIDENT OF THE

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

TO THE

EXECUTIVE DIRECTORS

ON A

PROPOSED LOAN

TO THE

REPUBLIC OF THE PHILIPPINES

FOR A

MEDIUM-SCALE IRRIGATION PROJECT

February 25, 1980

%lhs ioeuomt ha a restrced dWtlbon and may be used by recipients only in the perfoanmce oftheir official des. Its etents may not otherwise be disclosed withut World Dank aNgrztison.

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CURRENCY EQUIVALENTS

Currency Unit - Philippine Pesos (E )

P1 = US$0.135US$1 = P 7.4

WEIGHTS AND MEASURES

I ha = 2.47 acres1 km = 0.62 miles1 sq km = 0.386 sq mile1 m = 3.28 ft1 sq m 10.76 sq ftI cu m = 35.31 cu ftI M cu m = 810.7 ac ft1 mm 0.039 in1 kg = 2.2 lb1 cavan = 50 kg

20 cavans = 1 m ton

ABBREVIATIONS

MAR - Ministry of Agrarian ReformMOH - Ministry of HealthNEDA - National Economic and Development AuthorityNIA - National Irrigation Administration

GOVERNMENT OF THE PHILIPPINESFISCAL YEAR

January 1 - December 31

FOR OFFICIAL USE ONLY

PHILIPPINES

MEDIUM-SCALE IRRIGATION PROJECT

Loan and Prolect Summary

Borrower: Republic of the Philippines

Beneficiary: National Irrigation Administration (NIA)

Amount: $71 million

Terms: The loan would be for a term of 20 years, including 5 yearsof grace, with interest at 8.25%.

Project The proposed project seeks to increase yields and croppingDescription: intensities on the islands of Mindoro and Palawan on about

37,800 ha which are currently rainfed or have only limitedirrigation. It provides for the construction of diversiondams, irrigation and drainage facilities and related roadsand offices, provision of consulting services to assistNIA in design engineering and training; procurement ofvehicles and equipment; and strengthening of the malariacontrol unit in Palawan. Approximately 11,600 farmfamilies and 900 landless laborers' families, or a totalof 74,000 people, would benefit directly from increasedproduction and consequent employment. The project wouldalso create a demand for some 12,500 full-time farm-laborerjobs. A total of about 12,000 people would be reachedunder the malaria control component. No implementationproblems are anticipated, as NIA is a well managed, com-petent organization, and has had considerable experiencein projects of similar scope.

Estimated Cost: /1Local Foreign Total…-- ($ million) ------

Irrigation systems 30.8 35.2 66.0Input-output monitoring 0.6 0.4 1.0O&M study and training 0.5 0.7 1.2Strengthening of malaria unitin Palawan 0.2 0.2 0.4

Engineering, administrationand supervision 7.0 - 7.0

Base cost estimate 39.1 36.5 75.6

Physical contingencies 4.9 4.9 9.8Expected price increase 19.2 13.9 33.1

Total project cost 63.2 55.3 118.5

/1 Excludes customs duties and taxes, from which the project is exempt.

I This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contenst may not otherwise be disclosed without World Bank authorization.

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Financing Plan: Local Foreign Total------ ($ million) ------

Bank 15.7 55.3 71.0Government 47.5 - 47.5

Total 63.2 55.3 118.5

EstimatedDisbursements: Bank FY FY81 FY82 FY83 FY84 FY85 FY86 FY87

--------------- ($ million) ----------

Annual 0.2 7.8 13.0 18.0 16.0 11.0 5.0Cumulative 0.2 8.0 21.0 39.0 55.0 66.0 71.0

Rate of Return: 18%.

Staff AppraisalReport: No. 2811-PH dated February 25, 1980.

REPORT AND RECOMMENDATION OF THE PRESIDENTOF THE INTERNATIONAL BANK FORRECONSTRUCTION AID DEVELOPMENT

TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOANTO THE REPUBLIC OF THE PHILIPPINES

FOR A MEDIUM-SCALE IRRIGATION PROJECT

1. I submit the following report and recommendation on a proposedloan to the Republic of the Philippines for the equivalent of $71 millionto help finance a Medium-Scale Irrigation Project. The loan would have aterm of 20 years, including 5 years of grace, with interest at 8.25% perannum.

PART I - THE ECONOMY /1

2. An economic mission visited the Philippines in July/August 1977and its report, "The Philippines: Country Economic Memorandum" (No. 1765-PHof October 26, 1977), was distributed to the Executive Directors underPHL-77-2, dated October 27, 1977. An updating economic mission visited thePhilippines in May/June 1979, and its report, entitled "The Philippines -Domestic and External Resources for Development" (No. 2674-PH), wasdistributed to the Executive Directors under Sec M79-822 dated November 16,1979.

Macroeconomic Performance

3. During the 1960s, the Philippine economy grew in real terms at anannual rate of about 5-1/2%, but with more effective economic management therate of growth could have been higher. The pattern of growth was alsostructurally unsatisfactory in a number of respects. The benefits of devel-opment were distributed relatively unevenly, with respect to both regionsand income classes. While overall agricultural growth was reasonablysatisfactory, repeated foodgrain deficits were experienced. The growth ofproductive employment opportunities failed to keep pace with the expansionof the labor force. Low levels of taxation resulted in inadequate publicexpenditure for necessary infrastructure and social services. Finally, poorexport performance combined with heavy import-dependence of domesticindustry led to chronic weakness in the balance of payments.

4. During the 1970s there have been significant improvements ineconomic management. Public revenues have been increased substantially,

/1 This section of the report is substantially the same as that of thePresident's Report for the Fishery Training Project, distributed underR79-290 and approved by the Board on December 18, 1979.

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public sector implementation capacity has been strengthened, and the ratioof public investment to GNP raised from 2% in the early 1970s to 5.5% in1976-78. Private investment also increased, and the ratio of total fixedinvestment to GNP rose from 16% in the early 1970s to 25% in 1976-78. As aconsequence of higher levels of investment, the construction industry boomed.Agriculture has performed well in response to the spread of irrigation andhigher yielding rice varieties, more favorable price policies, and someimprovements in supporting services. Selective steps were taken to promotenontraditional manufactured exports, which have grown rapidly. On the otherhand, the performance of that part of the manufacturing sector oriented tothe domestic market has remained only "fair" in a comparative sense and hasbeen inadequate in relation to the Philippines' need to generate productiveemployment opportunities. The net effect of the above developments has beenacceleration in the trend GNP growth rate by one percentage point to 6-1/2%.

5. An important constraint has been placed on Philippine developmentoptions by the sharp deterioration of its terms of trade since 1975,stemming from the increase in oil prices, acceleration of internationalinflation and depressed prices for some major Philippine commodity exports.As a result, real national income has been growing more slowly than realnational product, and, with the higher level of investment, the dependenceof the economy on foreign savings has increased. Although the terms oftrade have recently stabilized, the current account deficit is still about5.5% of GNP.

Development Strategy

6. The Government's development objectives and policies, which wereset out in a Five-Year Development Plan for the period 1978-82, call forfurther acceleration of economic growth, first to 7% and then to 8%. Thedevelopment strategy focuses on an expansion of productive employmentopportunities at a rate of 3.6% per annum, reduction of income disparities,greater self-sufficiency in food and energy, a strengthening of the balanceof payments and increased development of rural areas. In addition, the Planincludes growth strategies for each of the country's thirteen regions. Ingeneral, the Plan is an elaboration of the policy directions pursued by theGovernment in recent years. It is also broadly consistent with the Bank'sassessment of priorities, although Plan projections for investment, manu-facturing output, and exports are somewhat higher than Bank staff estimates.In due course, it should, however, be feasible to accelerate the overallgrowth rate to 7%, but more rapid expansion of manufacturing is necessary todo so, and the efficiency of investment also needs to be improved.

Agriculture and Rural Development

7. In recent years the trend growth rate of the agricultural sectorhas been about 5%, which by international standards is quite good. However,variations among subsectors have been considerable. Due to the spread of

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irrigation and high yielding varieties, irrigated rice production hasincreased rapidly. The Philippines, once a chronic importer of rice,actually exported 100,000 tons of rice in 1978. With the completion oflarge irrigation projects now under implementation, continueA riceself-sufficiency appears assured for the 1980s. On the other hand, locallyadapted technologies for improving yields of rainfed grains, particularlycorn, are still under development, and rainfed agricultural areas have ahigh incidence of poverty. Productivity in the coconut sector is relativelylow because of a large number of overaged trees, but a major replantingprogram is scheduled for the early 1980s when a sufficient number of highyielding variety seedlings will become available. Increasing pressure ofpopulation on the land and inadequately controlled logging have led to soilerosion and deterioration of some forest areas. The Plan calls for a majorreforestation effort, but this will require substantial upgrading ofGovernment administrative capabilities in this area, development of new hillcropping technologies, and resolution of difficult land tenure problems.

8. As well as providing greater support for agricultural production,the Government has substantially expanded programs such as water supply,electrification, and health in rural areas. An agrarian reform was alsoinstituted in 1972 which provides for transfer of tenanted holdings of riceand corn land in excess of seven hectares and enforcement of leaseholdinstead of sharecropping on remaining tenanted holdings. As of July 1979,about 75% of land transfer beneficiaries had received Certificates of LandTransfer (the initial step in the process establishing their claim to theland), but only about 18% had completed all steps necessary to beginamortization payments. About 67% of leasehold beneficiaries cultivatingrice and corn land had established written contracts with their landlords.

Industry

9. Manufacturing has grown at an average rate of about 6-1/2% duringthe 1970s. The greater part of the sector, oriented to the domestic market,has been promoted by high tariff protection and an incentive system which hasfavored the use of relatively capital-intensive production techniques.Relatively little employment has been generated in relation to Philippinefactor endowments. Macro statistics such as the incremental capital-outputratio suggest that the efficiency of investment has been low, and most manu-facturing plants have located in the Greater Manila area. Reforms of tariffsand other industrial incentives to bring these into line with developmentobjectives are presently being considered by the Government.

10. Beginning in 1970, selective measures have been introduced topromote nontraditional manufactured exports, including various arrangementsto permit firms in selected export industries to import needed goods free ofduty. Entrepreneurs have responded to these opportunities, and receiptsfrom nontraditional manufactured exports increased from just over $100million in 1972 to an estimated $1.3 billion in 1979.

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Population Growth, Employment and Income Distribution

11. The 1979 population is estimated at 46.7 million. The populationgrowth rate fell from 3.0% in the intercensal period 1960-70 to 2.8% in theintercensal period 1970-75. The Philippines has an active family planningprogram registering approximately 650,000 new acceptors per year. Althoughthe number of new acceptors has reached a plateau as the program has facedthe increasingly difficult problem of reaching rural areas, the estimatedproportion of married women of reproductive age practicing family planningincreased from 15% in 1973 to 27% in 1978. However, by East Asian

standards, this index is still relatively low.

12. Employment increased by about 4.6% anually during 1973-78, a con-siderable improvement over the historical growth rate of 2.4%, and in

recent years has kept pace with the rapid growth of the labor force. Withthe exhaustion of most new land resources suitable for cultivation and theexploitation of the most easily irrigable areas, industry will have toprovide employment for about one half of the new entrants to the labor forcein the next decade. Employment in manufacturing essentially stagnatedduring 1970-74, but grew by 7% annually during 1975-77, resulting in partfrom the growth of labor-intensive production for export. However, becausemanufacturing's share of total employment is small, agriculture and servicesstill continue to function as residual sources of employment and accountedfor most of the increase in total employment.

13. For historical reasons, income distribution has been highly skewedin the Philippines, and there is a small elite which is conspicuouslywealthy. Owing to a structural improvement in agriculture's terms of trade,the growth of agricultural production, the decline in urban real wagesfollowing the devaluation in 1970, and subsequent acceleration of interna-tional inflation and the stagnation of industrial employment until 1975, theratio of the average rural income to the average urban income rose from 0.48in 1971 to 0.57 in 1975. Real per capita consumption has increased by about2% annually. Hence, real incomes in rural areas, where most of the poorlive, have probably increased somewhat, while real urban incomes have notimproved substantially. Although accurate statistics are not available, theshare of family income received by the poorest 40% of families appears tohave increased somewhat; the income share of the top 20% has remained aboutthe same; and that of the middle-income families has declined correspondingly.Nevertheless, the incidence of poverty remains high, at 40-45%, in both ruraland urban areas, and malnutrition is widespread.

Public Finance

14. The public sector has historically claimed a much smaller shareof national resources in the Philippines than in many other developingcountries. In the early 1970s, general government expenditure averaged only

12% of GNP; public investment was strikingly low at about 2% of GNP; and taxrevenues stood at 11% of GNP. Government expenditures were dominated bygeneral administration and social services, particularly education. Thissituation had resulted from a variety of factors including difficulties inraising tax revenue and weak implementation capacity in the public sector.Since the early 1970s, the Government has taken steps to correct thissituation and has raised both the overall level of expenditures and theshares going to economic services and public investment. By 1978, governmentexpenditures reached an estimated 16% of GNP, and public investment equaledabout 5.5% of GNP. This expansion of public expenditures has brought aboutbadly needed improvement in basic infrastructure particularly in transpor-tation, power and irrigation, as well as the development of more effectiveprograms in the field of urban development, health and family planning.

15. Recognizing that a large increase in tax revenues would be requiredto finance expansion of the public investment program, the Government hasundertaken a program of tax reform to raise the needed revenues equitablyand efficiently. The overall tax ratio was raised by more than two percent-age points between 1975 and 1978 through a series of new tax measures andvigorous efforts to improve taxpayer compliance and collection performance.However, the recent rapid growth of the public investment program has madethe Government's budget position quite tight in 1978-79. Continuation of astrong revenue effort, both by the Government and the government corporations,is necessary to allow for further expansion in infrastructure and socialservices.

Private Savings and the Financial Sector

16. Aggregate savings performance has improved during the last decadeand is comparable to that of other countries at a similar stage of economicdevelopment. Gross domestic savings now finance about 85% of total invest-ment, with the balance coming from foreign savings. In order to increasethe efficiency of financial markets in intermediating between savers andinvestors, the Government has made significant improvements in financialpolicy. Organized banking institutions have been strengthened. Interestrates were realigned in 1976 and, again, in 1977 to encourage a greater flowof financial savings into time and savings deposits relative to short-termdeposit substitutes and to reduce the spread between borrowing and lendingrates. Further reforms are required to increase the availability oflong-term domestic currency resources. Special credit programs have beenadopted to expand lending to the credit-short agricultural sector and ruralareas and to serve the needs of medium- and small-scale industries. Adeterioration of loan recovery rates was initially experienced by allgovernment financial institutions and credit programs. The Government hastaken a number of steps to improve collections; continued efforts in thisdirection are necessary to improve financial discipline and ensure anadequate flow of credit to the productive sectors without burdening thepublic finances.

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External Trade and Capital Flows

17. In response to the large balance of payments deficit in 1975 (see

para. 5 above), the Government adopted a strategy of accelerating export

growth both to hold the current account deficit about constant in absolute

terms, while letting it decline gradually relative to GNP, and to meet the

debt service payments on the higher level of external borrowing.

18. The current account initially behaved as anticipated - averaging

$1.0 billion per year but declining from 6.2% of GNP in 1976 to 4.1% of GNP

in 1977. However, since then actual developments have deviated from the

original scenario. First, the volume of commodity exports, particularly

sugar, has increased less rapidly than expected. Second, real import growthhas, on the other hand, been more rapid than anticipated, partly as a resultof a recovery of private investment and partly because of speculativeimporting in 1979. Third, although prices for some commodity exports(coconut products, copper) have increased substantially, the terms of tradein 1979 were only marginally better than in 1976-77 due to the increasedprice of petroleum imports and the acceleration of inflation in the OECDcountries which supply most of the Philippines non-oil imports. Thecombined effect has been a widening of the current account deficit to an

estimated $1.6 billion (5.7% of GNP) in 1979.

19. In order to maintain growth and investment rates in the face of

the worsened external environment, major structural adjustment is necessaryto improve the balance of payments position. Initial steps have alreadybeen taken with respect to export promotion, and major changes in trade,industrial and financial policies are currently under consideration.However, such adjustments will require a number of years to effect theneeded structural improvement in the balance of payments. The medium-termoutlook, therefore, is for high current account deficits although falling as a

percentage of GNP from 5.8% in 1980 to 4.7% in 1982.

20. Net capital inflows doubled from the 1975 level of $580 million to

an estimated $1.2 billion in 1979, leaving an overall deficit of about $500million. Most of the capital inflows came from medium- and long-term loans,with about 40% from official sources. In 1980, a net capital inflow of at

least $1.8 billion will be required, increasing to $2.2 billion per year in1981 and 1982. The ratio of debt service payments to exports of goods andnonfactor services is expected to rise from an estimated 22% in 1979 to anaverage level of 23% during the 1980-82 period, and to decline thereafter.

21. In order to ensure that debt service obligations remain withinreasonable limits, the Government sought commitments of official assistanceof at least $1.0 billion in 1980 at the last meeting of the ConsultativeGroup for the Philippines, held in Washington, D. C. in December 1979. Thisamount is likely to be available. In view of the tight budget situation andthe fact that many of the projects planned for financing from externalsources have low foreign exchange requirements, some local cost financing,either through increased cost-sharing arrangements or, alternatively,through non-project lending, is necessary to meet the Philippines' externalfinancing requirements.

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PART II - WORLD BANK OPERATIONS L1

22. As of December 31, 1979, the Philippines had rer ived 63 Bankloans (of which two were on Third Window terms) amounting to $1,977.9million and six IDA credits amounting to $122.2 million. At that date, IFCinvestments totalled $93.8 million. The share of the Bank Group in totaldebt disbursed and outstanding is about 13% and its share in total debtservice is about 6%. These ratios are expected to be about 23% and 16%,respectively, by 1985. Annex II contains a summary of IDA credits, Bankloans and IFC investments as of December 31, 1979, as well as notes on theexecution of ongoing projects.

23. The Bank Group has financed projects in virtually all sectors ofthe economy with particular emphasis on agriculture and basicinfrastructure, which have each accounted for about one third of total BankGroup lending. In agriculture, emphasis has been given to expanding theirrigation system to increase food production and to credit programs tosupport foodgrain production and processing and livestock, fisheries andtree farming production. Support has also been provided for integratedrural development projects in low income areas. The Bank Group has alsoprovided large amounts of assistance in developing power and transportationto provide the basis for future growth of the productive sectors.Substantial improvement in basic infrastructure has been needed tocompensate for many years of past neglect due to low levels of publicexpenditure. In the industrial sector, the Bank's main thrust has been onstrengthening the capacity of public and private development financeinstitutions with increasing attention given to meeting the needs of smalland medium industries.

24. There has been a marked improvement in the execution of Bank-financed projects in the last five years compared with the experience in thelate 1960s, when there were serious problems caused by a shortage of pesocounterpart funds and weak administration. Almost all ongoing projects arenow being implemented reasonably well and the supervision and project com-pletion reports indicate that the economic benefits for most projects arelikely to be in line with appraisal estimates.

25. As noted in Part I of this report, the Government's Five-YearDevelopment Plan highlights a strategy which focuses on the expansion ofproduction and employment in agriculture and industry, reduction in incomedisparities, greater self-sufficiency in food and energy, and increaseddevelopment in rural areas. The Bank's future lending program has beendesigned to assist the Government in achieving these objectives. Agricul-tural and rural development will account for the largest part of future

/1 This section is substantially the same as that contained in thePresident's Report for the Fishery Training Project (R79-290) which wasapproved by the Board on December 18, 1979.

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lending with continued emphasis on food production and programs to increasethe productivity and incomes of small farmers. However, the program providesfor several needed new initiatives, including support for strengthening thenational agricultural extension service through Loan 1626-PH (December 1978)and an upcoming first loan for developing multiple cropping systems in rainfedareas, where there is substantial rural poverty. Increased assistance willalso be provided for integrated rural development projects which will supportthe Government's objectives of redressing regional imbalances in income.Substantial assistance will also continue to be given to industry with con-siderable attention given to policy reform and to expanding the development oflabor-intensive, small and medium industries outside of the MetropolitanManila area. A program loan to support major adjustments in industrial andtrade policies is currently being appraised. The share of lending for socialsector projects is expected to continue to increase primarily as a result ofgreater emphasis on construction of urban water supply and sewerage systemsand further assistance for slum upgrading and low-cost sites and servicesprojects. The Bank Group will continue to provide support for improving thequality of education and for expanding the Government's population program inrural areas. While the Bank Group will continue to provide support fortransportation and power infrastructure needed to support the Philippinedevelopment effort, the share of Bank lending for these sectors will declinesomewhat in the years ahead primarily because alternative sources of financingare available to finance a large part of the power generation program.

26. This is the third loan to be presented to the Executive Directorsthis fiscal year. Loans for rainfed agriculture, urban and sewerage projectsare in preparation, and are scheduled for Board presentation in the comingweeks. Loans for livestock/fisheries credit, watershed management, ruralroads and ports projects have been appraised and are expected to be presentedto the Executive Directors in the next several months.

PART III - THE AGRICULTURAL SECTOR

General

27. Agriculture is the predominant sector in the Philippine economy,accounting for about one-third of net domestic product, over one-half oftotal employment, and more than half of export earnings. Over 70% ofthe 9 million ha of land under cultivation is used for the production ofcereals, of which rice and corn are the most important. About 1.2 millionha are irrigated. The remaining land is taken up by the major export crops:sugar, coconuts, abaca, pineapples, and tobacco.

28. The performance of the agricultural sector is crucial in deter-mining whether the Philippines can increase incomes both rapidly andequitably. At present, the domestic market for industrial products islimited by relatively low rural incomes. Although in recent years therehas been a substantial change in the terms of trade in favor of agriculture,the problems of poverty and income distribution continue to be acute inrural areas; of the 15 million people in the lowest 40% of the income scale,12 million live in rural areas. To deal with this problem, the Governmenthas initiated a number of programs designed to assist the rural poor.

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Government Obiectives and Strategy

29. A major government objective has been to increase rice and cornproductior as a means of raising the incomes of small farmers and ofattaining national self-sufficiency in food grains. After experiencingsubstantial deficits in the early 1970s, rice production grew by 5% p.a.during crop years 1974-77 and the Philippines was able to provide forconsumption solely from domestic production during the crop years 1975-77.In 1978, the Government exported 270,000 tons and built up about a four-monthsupply. The major factors contributing to the recent sharp rise in produc-tion appear to be the continued expansion of irrigated area and high yield-ing varieties on both irrigated and rainfed land and, more significantly, arun of particularly favorable weather. With the continued growth in popula-tion and incomes, the demand for rice is expected to rise by about 3.0%annually over the period 1978-90. Based on a projected annual growth of3.7% in production under average weather conditions, the Philippines isexpected, by 1985, to be in a position to export between 100,000 and 125,000tons annually. By 1990, the Philippines could export from 350,000 to 375,000tons. Exports of this magnitude (about 3% of projected world rice trade in1990) could be accommodated without adversely affecting prices. This wouldrequire an increase in irrigated harvested area of about 425,000 ha between1977 and 1985 and an increase of about 200,000 ha between 1985 and 1990.World Bank-assisted projects for which financing has been arranged or iscontemplated would provide about 240,000 ha of irrigated harvested area.

30. The Government recognizes that in order to increase production inboth irrigated and nonirrigated areas further improvements in the quality ofsupporting services will be necessary beyond those initiated in recentyears. In 1973, the Government instituted a national program for supervisedcredit for rice production - Masagana 99 - which greatly increased the pro-vision of production credit and technical assistance, mainly to smallerfarmers. However, the levels of arrears under the program have been veryhigh in the last several years and, as a result, the credit coverage of theprogram has declined sharply. The Government is aware of this problem andis presently reviewing a study of the causes of the high arrears, undertakenby the Technical Board for Agricultural Credit under the provisions of Loan1399-PH (Fourth Rural Credit Project). In the meantime, efforts are contin-uing to enable farmers to make the most effective use of the lower level ofinputs they are able to afford using their own cash and noninstitutionalcredit sources.

31. The Government is also considering the steps necessary to bringabout needed improvements in the national extension service. A Banktechnical assistance mission visited the Philippines in April 1977, and areport was given to the Government suggesting a number of organizationalimprovements and better logistical support in the form of training, vehiclesand other facilities. The report provided the framework for the recentlyinitiated National Extension Project to which the Bank is providing assist-ance (Loan 1626-PH). The Bank is presently helping the Government to

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prepare a project to provide assistance to the agencies dealing withagricultural research, crop protection, soils and agricultural economics.

Experience with Past Lending

32. Since 1969, the Bank Group has financed 11 irrigation projectsdesigned to increase rice production in the country. These projects - threein Central Luzon, four in the Cagayan Valley of Northern Luzon, one onMindoro Island, one in the Visayas and two for smaller systems throughoutNorthern Luzon, the Visayas and Mindanao /1 - have set the pattern for thetype of irrigation rehabilitation, new construction, and operations neededfor increasing rice production. The projects are providing improved irriga-tion and drainage facilities, better road systems for efficiency of operationsand maintenance and for the marketing of farm products, stronger supportingservices to assist farmers in adopting the new irrigation techniques needed toincrease production, and technical assistance and training to help theNational Irrigation Administration (NIA) expand and improve its irrigationprogram. These projects would bring about substantial increases in rice pro-duction on about 400,000 ha and would benefit over 200,000 farm families,most of whom are smallholders.

33. Work on the first Bank-assisted project, the Upper Pampanga RiverProject (Loan 637-PH), is completed. Results to date have been favorable:of a targeted yield of 3.8 ton/ha/crop, estimated to be achieved 13 yearsafter completion of construction, 90% was in fact achieved in the first yearafter completion of construction. Progress on all the irrigation projectshas been generally satisfactory, and NIA has proved itself to be a well-managed and technically competent organization. The total cost of the firsttwo projects was about 70% over appraisal estimates in the case of thePampanga Project (Loan 637-PH) and 55% in the case of the Aurora-PenarandaIrrigation Project (Loan 984-PH/Credit 472-PH) largely because of rapidinflation following the oil price increase in 1973. However, as a result ofconsiderable increases in the projected world market price of rice andearlier than anticipated irrigation benefits, the estimated rates of returnon both projects have not changed significantly. After initial delays dueto contracting and mobilization problems, the irrigation component of theMindoro Rural Development Project (Loan 1102-PH) is progressing satisfactorilyand implementation is about 60% of the appraisal schedule.

/1 The Upper Pampanga River Irrigation Project (Loan 637-PH), Aurora-Penaranda Irrigation Project (Loan 984-PH, Credit 472-PH), Tarlac Irri-gation Systems Improvement Project (Loan 1080-PH), Mindoro Rural Devel-opment Project (Loan 1102-PH), Magat River Multipurpose Project Stage I(Loan 1154-PH), Chico River Irrigation Project Stage I (Loan 1227-PH),Jalaur Irrigation Project (Loan 1367-PH), National Irrigation SystemsImprovement Project I (Loan 1414-PH), National Irrigation SystemsImprovement Project II (Loan 1526-PH), Magat River Multipurpose ProjectStage II (Loan 1567-PH) and Magat River Multipurpose Project, Stage IIIrrigation (Loan 1639-PH).

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PART IV - THE PROJECT

BackRround

34. The development of Mindoro and Palawan has lagged behind that of

the more populous and larger Luzon island. Mindoro is well endowed with

land and water resources and both islands have favorable climates being

largely free from typhoons. They are also relatively underpopulated and

are areas of active immigration from Central Luzon and the neighboringVisayas where population pressures on land are intense. 'While NIA has had

plans for the development of the irrigation potential in Mindoro and

Palawan for many years, implementation has been delayed because of the needto give priority to the traditional rice bowls in Central Luzon, Cagayan

Valley and Mindanao. Irrigation development in Mindoro and Palawan has

been limited in the past to private and/or communal schemes of 50 to 300 ha

located on small streams. The Mindoro Rural Development Project, initiated

in 1975 with Bank assistance (Loan 1102-PH), included provisions for the

improvement and expansion of two national irrigation systems of about 12,000

ha in Mindoro Oriental and helped to focus attention on the island'sirrigation potential. By 1978, the Mindoro Project Office had identified an

irrigable potential of about 70,000 ha spread over the two island provinces.At the same time the Region IV Office of the National Economic DevelopmentAuthority (NEDA) proposed a project for the development of infrastructure inPalawan, including irrigation development. As both islands are in the same

administrative region, NIA decided to combine the two sets of proposals into

a Medium-Scale Irrigation Project.

35. The proposed project was appraised in September 1979. Negotiations

were held in February 1980. A Staff Appraisal Report, entitled "Philippines -Medium-Scale Irrigation Project" (No. 2811-PH, dated February 25, 1980), is

being distributed separately. Supplementary project data are provided inAnnex III.

The Project Area

36. The project is located in the islands of Mindoro and Palawan,which are southwest of the main Philippine island of Luzon. Mindoro isseparated from Luzon by a sea crossing of about 45 km, and Palawan is some

300 km southwest of Mindoro. Mindoro is divided administratively into twoprovinces - Mindoro Oriental and Mindoro Occidental. The population livesmainly in the rural areas, but there are a number of small towns around theperiphery of both islands. In Mindoro the most important town is Calapan inMindoro Oriental, where there is an important port and where banking,storage and processing facilities as well as supplies of agriculturalinputs are to be found. In Mindoro Occidental similar facilities areavailable in the town of San Jose. In Palawan the towns are generallysmaller and the services are less developed. Puerto Princesa is the mostimportant urban center. An existing gravel road along the eastern coast is

- 12 -

being improved and transformed into an asphalt-surfaced national highway inMindoro Oriental. The coastal gravel road along the western coast inMindoro Occidental is in a poor state and impassable during the rainyseason. There are plans for improvement of this road under a proposedBank-financed rural roads project. A network of provincial roads in Mindoroconnects various towns and villages to the main coastal roads. The situationin Palawan is similar to that in Mindoro, with a coastal road on the easternside passing through the project area and connecting it to the provincialcapital of Puerto Princesa.

37. The climate in the project area is tropical and monsoonal. Therainfall, together with river flows in the wet season, is generally adequatefor a single rice crop. Dry-season cropping, however, entails considerablymore risk, and irrigation is essential for a second crop. The soils of theproject area are well suited to rice which has been grown on them for manyyears without problems.

38. Some 11,600 farm families live in the project area. While theaverage farm unit is 3.3 ha, there are substantial differences betweensubproject areas. In Palawan, the average farm size is 5.2 ha, in OrientalMindoro, 2.8 ha, and in Occidental Mindoro, 3.1 ha. More than half the farmswith 55% of the area are between 4 and 7 ha, and 15% of the farms with 34%of the area are bigger than 7 ha. However, nowhere in the project area doesthe average size of the farms bigger than 7 ha surpass 12 ha.

39. Since 1972, the Government has pursued a program of agrarian reformaimed at the transfer of land ownership to tenant farmers on rice and cornlands. Presidential Decree No. 27 (PD 27), the basic legislation of the newprogram, provides for the transfer to the tenant, whether sharecropper orleaseholder, of up to 3 ha in an irrigated area and 5 ha in a rainfed area.According to PD 27, the landlord may retain up to 7 ha if he cultivates theland himself. Since there are some 2 million rice and corn farmers on about4 million ha, of which less than 1 million ha are irrigated, there is littleprospect of achieving the 5 ha rainfed and 3 ha irrigated family farmsnationwide. The Ministry of Agrarian Reform (MAR) completed the issue ofland transfer certificates to tenants for all land in holdings 6ver 24 hain 1975. In November 1974, the Government decided to proceed with thetransfer of land in holdings between 24 and 7 ha. In October 1976, theGovernment extended the provision of PD 27 to holdings of less than 7 ha,belonging to landowners with more than 7 ha of other agricultural land, orbelonging to landowners with residential, commercial or urban land fromwhich they derive adequate incomes to support themselves.

40. Some 9,500 people own the 37,800 ha in the project area. Atpresent, almost 45% of the farmers own the land they are farming and accountfor 55% of the area; the rest are tenant farmers. After completion of landreform, expected to occur by the end of project construction in 1985, some23,600 ha, or 63% of the project area, will be cultivated by 6,100owner-operators equivalent to 53% of the farmers. The remaining 5,500 wouldoperate under a written lease agreement.

- 13 -

Principal Prolect Features

41. The proposed project would consist of:

(a) construction of six diversion dams;

(b) construction of irrigation and drainage facilities andservice roads on a total area of about 38,000 ha ofcurrently rainfed lands;

(c) construction of three new division offices and three new fieldoffices and extension of two existing division offices and twofield offices;

(d) provision of consulting services to assist NIA indesign of the diversion dams and major structures andin the training of personnel for detailed topographicmaps based on up-to-date aerial photography;

(e) procurement of vehicles and equipment for project implementationand operation and maintenance; and

(f) strengthening of the malaria control unit of the Ministry ofHealth in Palawan.

The project would also make provision for strengthening the existing NIAinput-ouput monitoring organization and for its expansion to cover theproject area, and consulting services to evaluate the operation andmaintenance aspects of all national irrigation systems and to develop a planfor their improvement.

42. Diversion Structures. New diversion structures would beconstructed for six of the seven irrigation systems, which would be ungatedconcrete weirs of ogee type, 140-600 m long, 1-2 m high with intakestructures and sluice-ways. An operations bridge would be provided acrossthe diversion dam of the Mag-asawang Tubig system in the Mindoro Orientalsubproject. Existing diversion works of communal systems within the projectarea would be improved and integrated with the project works.

43. Irrigation and Drainage Works. The main irrigation networkswithin the seven systems would consist of about 145 km of main canals and415 km of laterals. Because of steep topography, 3 or 4 drops of 15 to 20 mhigh would be built on the right main canal of the Mag-asawang Tubig systemin Mindoro Oriental and a drop 21 m high on the main canal of BatangBatang system in Palawan. These drops may be used in the future to producehydro-electricity. Canals and laterals would be unlined except for shortlengths where the soils are erosive. Gravel-surfaced operation andmaintenance roads would be constructed on the canal banks. About 70 km of3.5 m wide access roads would also be provided as links between the existingmajor roads of the area and the canal operation and maintenance roads.

- 14 -

These roads would also serve as farm-to-market roads. Gravel surfacingwould be provided on some of the major existing farm-to-market roads. The

design of on-farm distribution and drainage works would be similar to that

in other Bank-assisted projects in the Philippines. The land in the project

area is reasonably level and well laid out, with little fragmentation of

land holdings; no land leveling or boundary realignment would therefore be

provided, except for brush clearing and some land leveling on about 3,200 ha

in Palawan.

44. Input-Output Monitoring. A program of input-output monitoring was

established under the Chico River Irrigation Project (Loan 1227-PH) and

extended under the National Irrigation Systems Improvement Project II

(Loan 1526-PH) to cover all other Bank-assisted irrigation projects. The

objectives of the program are to monitor the flow and build-up of farm

inputs in each project area before and during each crop season and monitor

the size and the recipients of benefit flows. The program would be extended

to the systems of the Mindoro Rural Development Project (Loan 1102-PH) and

the proposed project.

45. Operation and Maintenance Study and Training. NIA is currently

building and rehabilitating about 320,000 ha with Bank Group assistance and

another 96,000 ha with assistance from the Asian Development Bank. It is

expected that by 1985, NIA will have about 800,000 ha of upgraded national

irrigation systems under operation. With the completion of major irrigation

development, the emphasis in NIA will change from construction to operation

and maintenance. The proposed study would evaluate the present situation

and develop a plan of action for the operation and maintenance aspects of

all national irrigation systems. Assurances were obtained that NIA would

prepare terms of reference and an outline of the study to be financed under

the present loan and, after review by the Bank, that it would carry out the

study with the assistance of consultants, under terms and conditions

acceptable to the Bank (Section 3.02 of the draft Loan Agreement). Provision

would be made for fellowships and study tours for NIA staff working on

design, construction, operation and maintenance, input-output monitoring and

the agricultural aspects of irrigation projects.

46. Strengthening of Malaria Control Unit in Palawan. Malaria is the

leading disease in Palawan and is a major factor in reducing farm labor

productivity. The ongoing Ministry of Health (MOH) program suffers because

of lack of financial resources and trained personnel. Provision would be

made for a concentrated effort by the malaria unit in Palawan in the two

project municipalities of Narra and Aborlan. The major emphasis of control

would be on residual house spraying, weekly larvicide applications in

selected breeding places, expansion of biological control measures and

reinforcement of surveillance operations through information campaigns. The

project would provide field laboratories, equipment, vehicles and increased

personnel. Assurances were obtained that NIA and MOH would enter an agree-

ment acceptable to the Bank before December 31, 1980 for the implementation

of this component (Section 3.01(b) of the draft Loan Agreement).

- 15 -

Organization and Management

47. NIA would be responsible for all components of the project, except

for the public health aspects in Palawan, which would be executed by theMinistry of Health (MOH) through the Malaria Eradication Service.

48. NIA was created in 1964 and given responsibility for developing,operating and maintaining all national irrigation systems in the

Philippines. The agency is governed by a board of directors and managed by

an Administrator appointed by the President of the Philippines. NIA hasrecently been reorganized in order to improve its capacity to deal with the

requirements of the Government's policy of irrigation development. The

major foreign-assisted projects were previously administered under a Special

Projects Organization headed by an Assistant Administrator who handled all

project aspects such as implementation, operation and maintenance andfinances. These aspects are now handled by four Assistant Administrators.The most crucial aspects of project implementation - design, procurement and

construction - would be handled by the Assistant Administrator forDevelopment and Implementation. NIA is currently responsible for 20 majorforeign-assisted projects and has built up a structure of staff which, with

specialist consultant input where necessary, is competent to implementlarge-scale projects.

49. NIA intends to use the Director of the Mindoro Rural DevelopmentProject (Loan 1102-PH) as Project Manager of the proposed project. TheDirector is a senior NIA employee who was closely involved in theformulation and preparation of the proposed project. The Rural DevelopmentProject is approaching completion and will therefore make fewer demands on

his time. The project area would be divided into five constructiondivisions; each division would be headed by a project engineer who would

assist the Project Manager in day-to-day activities.

50. The project provides for consulting services to assist in thepreparation of topographic maps and to train NIA survey personnel in new andadvanced survey procedures and photogrammetry. A provision of 25 man-months

for such services would be made at an overall rate of $8,000 per man-month.consisting of a billing rate of $6,000 per man-month, international travelexpenses of $800 per man-month, and local expenses of $1,200 per man-month.The project would also provide for consulting services to assist NIA in the

design of all diversion dams and other major structures estimated at 45 man-months at an overall rate of $10,000 per man-month, consisting of a billing

rate of $8,000 per man-month (including home-office overhead), internationaltravel expenses of $800 per man-month, and local expenses of $1,200 perman-month. Consulting services would also be required for the operationand maintenance study, for which a provision of 45 man-months at an overallrate of $10,000 per man-month has been made. The project would also providefor 30 man-months of local consultants at an average cost of $3,000 perman-month to assist NIA in setting up the input-output monitoring system.

- 16 -

51. For operation and maintenance purposes, the entire project area of37,800 ha would be administered by a single Project Manager. There would besix support divisions dealing with administration, accounting, equipment,engineering, operations and agricultural aspects. The project area would bedivided into five Irrigation Districts; each district would be divided into50 ha irrigation units. A ditchtender would supervise two such units (100ha), while a Water Management Technician would control five ditchtenders(500 ha). A supervisor would be responsible for a water managementdivision, which includes five Water Management Technicians (2,500 ha).

52. There are several Ministry of Agriculture research substations inthe project area engaged mainly in rice variety and fertilizer trials andseed multiplication. The Ministry is currently in the process ofreorganizing the extension service and improving its efficiency throughoutthe Philippines with Bank Group assistance (Loan 1626-PH). In addition, theproject would provide for the recruitment of 76 Water Management Technicianswho would be incremental to the existing support personnel provided by thevarious Government agencies. All subproject areas are served by a goodnetwork of dealers of fertilizer and agrochemicals which would have thecapacity to handle the additional demand generated by the project withoutdifficulty.

Project Cost and Financing

53. The total project cost is estimated at $118.5 million, of which$55.3 million or 47% is foreign exchange. Since NIA does not pay taxes orduties on imported equipment, materials and supplies, all these costsexclude such taxes. Costs include a physical contingency factor of 15% forci-vil works. Expected price increases over the implementation period amountto about 39% of the base cost plus physical contingencies. The followingannual inflation rates were assumed for the equipment and civil works: localcosts 16% in 1980, 10% in 1981 and 7% in 1982-86; foreign exchange costs10.5% in 1980, 9% in 1981, 8% in 1982 and 7% in 1983-85. The proposed Bankloan of $71.0 million would finance the full foreign exchange costs and$15.7 million of the local project costs. Justification for local costfinancing is contained in para. 21 of this report. The Government wouldprovide the remaining $47.5 million to NIA and MOH through annual budgetappropriations.

Procurement

54. Equipment, vehicles, spare parts and supplies for force accountconstruction, operation and maintenance for the project area, strengtheningof the malaria unit in Palawan, input-output monitoring and the operationand maintenance study, costing about $10.0 million, would be procuredthrough international competitive bidding in accordance with Bank Groupguidelines. A preference limited to 15% of the c.i.f. price of importedgoods or the customs duty, whichever is lower, would be extended to local

- 1 7 -

manufacturers in the evaluation of bids. Off-the-shelf items costing lessthan $20,000 each would be procured through normal government procedureswhich are acceptable to the Bank; the total cost for such items would notexceed $400 000.

55. Construction of the diversion dams, intake works and main canalsfor the two irrigation systems in Mindoro Oriental ($15.0 million) would belet on contracts and awarded through international competitive bidding inaccordance with Bank Group guidelines. The remaining civil works in theproject service area ($45 million) would be scattered over seven separatelocations in three different provinces and two islands. These works wouldbe split into a number of contracts and would not be suitable for inter-national competitive bidding. In the past, NIA has experienced considerabledifficulty in attracting bids for the works of the Mindoro Rural DevelopmentProject (Loan lluo-PH). About 70% of the total works in that project arebeing implemented by force account. It is doubtful that all civil workscould be done by contract and some of them would therefore be carried out byforce account. In previous Bank-assisted irrigation projects, the amount ofcivil works to be done by force account was limited to 40% of the total cost,as lower limits were found to be unrealistic. An assurance was obtainedthat the amount of civil works carried out by force account would not exceed40% of the total cost of civil works excluding those subject to internationalcompetitive bidding (Schedule 4.C.2 of the draft Loan Agreement). Thebalance of civil works would be carried out on the basis of competitivebidding in accordance with local procedures which have been reviewed by Bankstaff and found to be acceptable. There is adequate competition and foreignfirms would be eligible to participate.

Disbursements

56. Disbursements would be made at the rate of 100% of the foreignexchange cost of directly imported equipment, 100% of the ex-factoryprice of locally manufactured equipment and 65% for imported equipmentprocured locally. Disbursements for civil works would be 55% of certifiedmonthly progress payments or expenditures. Disbursement for force accountworks would be made against certificates of expenditure; the documentationfor works would show the quantities of major items of works accomplished andthe expenditure would be based on agreed unit rates. NIA would submit adetailed unit rate analysis with supporting documents for Bank review beforeDecember 31, 1980 and whenever any change in the unit rates is desired.Disbursement for minor contracts (less than P 1 million) would also bemade against certificates of expenditure based on actual payments made tocontractors. The borrower would make available all documents related to theforce account and minor contract expenditures for inspection by the Bank'ssupervision mission. The project offices of NIA have the staffing andinstitutional capability to provide such documentation in a satisfactorymanner. For civil works contractors' mobilization and equipment, disburse-ment would be at the rate of 100% of foreign expenditure. For consultingservices and technical assistance, disbursements would be at the rate of100% of total costs. It is expected that disbursements would be completedby December 31, 1986, approximately one year after the end of construction.

- 18 -

Environmental Effects

57. The proposed drainage works for the Mag-asawang Tubig system inthe Mindoro Oriental subproject would have a beneficial effect on theschistosomiasis-infected areas of the system. The area is also covered bythe schistosomiasis control program under the Mindoro Rural DevelopmentProject (Loan 1102-PH). Malaria is prevalent in Palawan and parts ofMindoro. The government program of house spraying with residual insecti-cides is effective in Mindoro, and in Palawan the proposed provision tostrengthen the malaria control unit would have a beneficial effect. Theother main health problems in all three areas are protein deficiencies insmall children, enteric diseases and tuberculosis. The proposed projectwould have little impact on these.

Farm Incomes

58. For 2.5 ha farms, the average farm size in the Mindoro subproject,the present per capita incomes range from $35 for an amortizing owner L1 on arice farm to $80 for an owner-operator on a coconut farm. These incomes arewell below the per capita absolute poverty level of $200 and vary from 6% to13% of the estimated 1980 per capita GNP of $600 for the Philippines. Withthe project, the per capita incomes of these farms would range from about$195 for a leaseholder to $295 for an owner-operator. These leaseholderswould almost reach the absolute poverty level while owner-operators wouldsurpass it by almost 50%. These incomes would still range from 20% to 30%of the 1990 projected per capita GNP of $975.

59. In Palawan, where the average farm size is 5 ha, present percapita incomes vary between $35 for an amortizing owner to $80 for anowner-operator, also substantially below the absolute poverty level. Withthe project, per capita incomes would increase to $295 for leaseholders and$510 for owner-operators. Incomes of these farmers would, therefore, riseabove the 1980 absolute poverty level and range between 30% and 50% of theprojected 1990 per capita GNP.

60. These comparisons indicate that the project would increase incomesof about 11,600 farm families as well as 900 landless families in theproject area and would help narrow the income gap between the project areaand other parts of the country, and between urban and rural areas.

Cost and Rent Recovery

61. NIA has the authority to collect fees from users of irrigationsystems to finance operations and to reimburse construction costs.Irrigation charges on national systems other than those which are assistedby the Bank are 2.0 cavans (100 kg) of paddy/ha in the wet season and

/1 Ex-tenant farmer in the process of purchasing holding under AgrarianReform provisions.

- 19 -

3.0 cavans/ha (150 kg) in the dry season. On Bank-assisted projects, thecharge of 3.5 cavans (175 kg) of paddy/ha in the wet season and 4.4 cavans(220 kg) in the dry season, is to be achieved gradually over five years fromcompletion of construction. Assurances were obtained that the same rateswould apply to the irrigation facilities financed under the proposed project

(Section 4.04(b)(ii) of the draft Loan Agreement).

62. Based on the above water charges, the rent recovery index wasexamined for different farm tenures, types and locations. Indices have beenpresented for owner-operated and leaseholder-operated 2.5 ha farms inMindoro currently under rainfed rice or coconuts and for 5 ha rainfed ricefarms in Palawan. The incremental rent recovery index for the projectbeneficiaries ranges from 15% for an owner-operator on a Mindoro rice farmto 40% for a leaseholder on a Palawan farm. The high index in Palawan wouldbe due to the lower level of yields expected at full development. Theaverage incremental rent recovery index is 20%. While these indices showthat there would be scope for further cost recovery, even at full development,more than half the farmers in the project area would be below the absolutepoverty level, which in the Philippines is a reasonable approximate value ofthe critical consumption level. Taking the present value of the incrementalwater charges, project costs, and annual operation and maintenance costs,the cost recovery index is 16%. The index is smaller than those in otherBank-assisted projects in the Philippines. This is due to the fact that theproposed project consists primarily of construction of new irrigation faci-lities while previous projects have had large components aimed at rehabili-tation of existing facilities. Under the provisions of Loan 1367-PH, NIA ispreparing for Bank review by June 30, 1980, a plan of action to improve therates and methods of fee collection on the national irrigation systems, theeffectiveness of which has varied widely in the past. Assurances were

obtained that the Government would take all necessary actions to ensure fulland prompt collection of the irrigation fees, and that the Government andthe Bank would consult annually on the adequacy of the charges and thecollection thereof (Section 4.04(b)(ii) of the draft Loan Agreement).

Project Benefits and Justification

63. The proposed project would increase yields and cropping intensitieson about 37,800 ha which are currently rainfed or have only limited irriga-tion. The incremental annual production due to the project would be 175,000tons of paddy. Approximately 11,600 farm families and 900 landless laborers'families, a total of 74,000 people, would benefit directly from the processof increased production and consequent employment. The project would createa demand for an additional 3 million man-days of farm labor per year, equiva-lent to some 12,500 full-time jobs. About 98% of the project beneficiarieslive in the target group. The project's cost per ha of $2,185, excludingcosts due to expected price inceases, is in line with the costs of previousBank-assisted irrigation projects. The project would meet the Government'sobjectives of increased food production and more balanced regional distribu-tion of development at a capital cost of about $7,170 per benefited farm

- 20 -

family. The malaria component would benefit approximately 12,000 people,at a cost of about $200 per family in the endemic area. At fullagricultural development the project would result in an incremental riceproduction with an export value of about $61 million per year at forecastworld market prices. After deducting the incremental cost of importedfertilizer, chemicals, and fuel, the net export value would amount to about$50 million.

64. Discounting incremental project costs including operation andmaintenance costs after the fifth year and benefits expressed in borderprices over a 40-year evaluation period, the economic rate of return for theproject is 18%. At a discount rate of 10%, the economic net present valueof the project in mid-1980 is $58 million. The economic rates of returnfor the different subprojects are 17% for Mindoro Oriental, 20% for MindoroOccidental and 19% for Palawan.

65. Sensitivity analysis was used to determine which variables wouldbe most crucial to the success of the project. These variables include fulldevelopment yields, world market price of rice, cropping intensity,construction costs, yield development period, and the economic wage rate.The success of the project is mildly sensitive to future yields of paddy andto cropping intensity. Failure to reach the anticipated yield levels or torealize the projected cropping intensity at full development would pose thehighest potential risk to the project. Since progressive farmers in thearea are already reaching the projected yields, the likelihood of ashortfall in expected yield levels is small. Cropping intensities, on theother hand, are presently at the crossover value in the existing, mostlyrainfed, rice lands. Therefore it is unlikely that they would drop belowthis level.

Risks

66. No major problems of implementation are anticipated since thiswould be the twelfth Bank-assisted irrigation project in the Philippines andNIA has developed considerable experience over the period of association.However, a six-year implementation period has been adopted to allow for thegeographic dispersion of the project over three provinces.

PART V - LEGAL INSTRUMENTS AND AUTHORITY

67. The draft Loan Agreement between the Republic of the Philippinesand the Bank and the Report of the Committee provided for in Article III,Section 4 (iii) of the Articles of Agreement of the Bank are being distri-buted to the Executive Directors separately. Special conditions of theproject are listed in Section III of Annex III.

- 21 -

68. I am satisfied that the proposed loan would comply with theArticles of Agreement of the Bank.

PART VI - RECOMMENDATION

69. I recommend that the Executive Directors approve the proposed loan

Robert S. McNamaraPresident

AttachmentsWashington, D.C.February 25, 1980

-22 - ANNEX IPage 1 of 5

flLL EINB - SOCIAL INDICATORS DATA SHEET

MLIPPIN&S UYUNCE GROUPS (ADJIUSTED 3AuGPLAND AREA (THOUSAND SO. Di.) -OLIPPINS -RNCT RECENT AST DAITE) E

TOTAL 300.0 5 SMI hrICT HICACRICULTURAl 86. 7 If D3T RECENT GEOGRAPHIC nICOlE INCOME

1960 lb 1970 A ESTIATE /b REGION LI GOUP M GROUP a

GNP PER CAPITA (USS) 140.0 230.0 510.0 528.9 467.5 1097.7

ENERGY CONSUMPTION PER CAPITA(KLOGRAMS O COAL EQUIVALENT) 147.0 301.0 329.0 371.1 262.1 730.7

POPULATION AND VITAL STATISTICSPOPULATION. HI-YEAR (MILLIONS) 27.4 36.9 44.5UlAN POPULATION (PERCENT 0 TOTAL) 30.1 31.8 34.0 27.4 24.6 49.0

POPULATION PROJECTIONSPOPULATION IN TEAR 2000 (bMLLIONS) 76.0STATIONARY POPULATION (MILLIONS) 128.0YEAR STATIONARY POPULATION IS ZACGUD 2075

POPULATION DENSITYPER SQ. kt. 91.0 123.0 148.0 154.8 45.3 44.6PER SQ. 1I. AGRICULTURAL LAND 360.0 472.0 513.0 566.7 149.0 140.7

POPULATION AGE STRUCTUE (PERCENT)0-L4 TRS. 44.7 45.5 46.0 41.3 45.2 41.3

15-64 YRS. 52.3 53.6 51.0 54.9 51.9 55.365 Ys. AND ABOVE 3.0 2.9 3.0 3.3 2.8 3.5

POPULATION GROWTH RATE (PEDCDNT)TOTAL 2.7 3.0 2.7 2.4 2.7 2.4UIUAN 4.0 3. 8 3.5 4.3 4.3 4.5

CRUDE SIRTH RATE (PER TS3USAND) 45.0 43.0 35.0 30.2 39.4 31.1CRUDE DEATH RATE (PER THOUSAND) 15.0 11.0 9.0 8.3 11.7 9.2GROSS REPRODUCTION RATE 3.5sf 3.3 2.4 2.1 2.7 2.2FAMILY PLANNING

ACCEPTORS, ANNUAL (THOUSADS) .. 191.7 643.0USERS (PElCENT OP MJRRIED WOEN) .. 2.0 22.0 34.1 3.2 34.7

FOOD AND NUTRITIONINDEX OF FOOD PRODUCTION

PER CAPITA (1969-71-LOO) 100.1 101.0 111.0 106.2 99.6 104.4

PER CAPITA SUPPLY OFCALORIES (PERCENT OF

REQUIREMENTS) 83.0 86.0 87.0 104.1 94.7 105.0PROTEINS (GRAKS PER DAY) 44.0 45.0 50.0 57.4 54.3 64.4

OF WHICH ANIMAL AND PULSE 19.0L 22.0 19.2 16.9 17.4 23.5

CHILD (AGES 1-4) MORTALITY RATE 16.0 10.0 7.0 4.8 11.4 8.6

HEALT3LIFE EXPEC-ANCY AT BIRTH (YEARS) 51.0 57.0 60.0 61.1 54.7 60.2INFANT NORTALITY RATE (PEUT8OUSAND) 98.0 80.0 65.0 46.6 68.1 46.7

ACCESS TO SAFE WATER (PERCENT OFPOPULATION)

TOTAL .. .. 39.0 21.9 34.4 60.5URBAN .. .. 51.0 46.2 57.9 75.7,RURAL .. .. 33.0 12.8 21.2 40.0

ACCESS TO EXCRETA DISPOSAL (PERCENTOF POPUIATION)

TOTAL .. .. 56.0 28.4 40.8 46.0URBAN .. .. 76.0 65.0 71.3 46.0RU'RAL .. .. 44.0 14.7 27.7 22.5

POPULATION PER PHYSICLAN *- *- 3150.0 3790.3 6799.4 2262.4POPt'LATION PER NURSING PERSON .. 3840.0 4990.0 1107.4 1522.1 1195.4POPULATION PER ROSPITAL BED

TOTAL 1180.0 850.0 880.0 613.3 726.5 453.4URAN .. .. .. 203.6 272.7 253.1RURAL .. .. .. 1110.3 1404.4 2732.4

ADMISSIONS PER HOSPITAL BED .. .. .. 23.9 27.5 22.1

HOUSINGAVERAGE SIZE OF HOUSEHOLD

TOTAL i.8 5.9 .. 5.2 5.4 5.3URBAN .. 6.' .. .. 5.1 5.2RURAL .. 5.8 .. .. 5.5 5.4

AVERAGE NUMBER OF PERSONS PER ROOMTDTAL 2.3 1.9ERBAN .. 2.1 .. .. .. 1.6RURAL .. 2.4 .. .. .. 2.5

ACCESS :0 ELECTRICITY (PERCENTOF DWELL:NGS)

TOTAL 16.5 22.9/h 31.0 .. 28.1 50.0LUBAN .. 62.8jh .. .. 45. 71. 7REURAL .. 5.8jh 10.0 .. 9.9 17.3

-23- ANNEX IPage 2 of 5

TABULE3P8L!W!W8- socw. INDICATORS DATA Sun

p i REFERENCE OUPS (ADJUSUD AJ S- MOST RCN SIAE

1D08 flOT OSAPRIC INGN INCOME1960 lb 1970 Lb UTIATZE L REGION L SOUP d UP j

DOUCATION

FRIM"Tt TOTAL 95.0 114.0 105.0 97.9 82.7 102.5MALE 98.0 115.0 102.0 98.7 87.3 108.6rmua 9n.0 113.0 109.0 97.4 75.8 97.1

SODSEU : TOTAL 26.0 50.0 56.0 42.2 21.4 33.5MAZ 28.0 59.0 65.0 46.7 33.0 38.4FMW.Z 25.0 42.0 47.0 40.9 15.5 30.7

VOCIONAL EOWL. (Z OF SE )NDARY) 15.0 6.0 .. 12.5 9.8 11.5

PIWIL-TEACHER SATTOPRMARY 36.0 29.0 29.0 32.5 34.1 35.8

ECONDARY 27.0 33.0 31.0 25.8 23.4 22.9

ADULT IJY RACY RATE (PEY:SNT) 71.9 82.6 87.0 84.1 54.0 64.0

CoNSUMlPIoNPASSENOk CARS PER DWSAND

POPULATION 3.0 8.0 8.9 6.1 9.3 13.5RADIO RECEIVERS PER TBUSAND

POPULATION 22.0 39.0 44.0 84.4 76.9 122.7TV RECEIVERS PER THOUSAND

POPUIATION 1.4 10.0 17.0 22.4 13.5 38.3INSPAPER ("DAJUU GZEZRALDTEREST") CICULATION PERTIOUSAND POPULATION 17.0 14.0 18.0 24.2 18.3 40.0CIIMA ANNUAL ATTDANUCE PER CAPITA 0.6 .. 7.6 3.6 - 2.5 3.7

LABOR FORCETOTAL LABOR FORCE (TaIUSADS) 10100.0 12400.0 16244.0

FEMALE (PERCENT) 34.4 33.1 35.3 36.7 29.2 25.0AiRICULTu (PERCENT) 61.0 55.0 50.9 54.6 62.7 43.5INDUSTsr (PERCENT) 15.2 15.8 14.8 16.3 11.9 21.5

PARTICIPATION RATE (PERCENT)TOTAL 39.8 36.6 35.3 40.7 37.1 33.5MALE 52.1- 48.6 47.1 49.9 48.8 48.0FEMALE 27.4 24.4 23.3 31.0 20.4 11.8

ECOMOIIC DEPENDENCY RATIO 1.3 1.4 1.3 1.1 1.1 1.4

INCO1fE DISTRIBUTIONPERCENT OF PRIVATE INCOMERECEIVED BY

RICHESr 5 PERaT OF HOUSEOWS 28.8 .. .. 14.9 15.2 20.8HIGHEST 20 PERCENT OF EOUSE8OLDS 56.2 53.9 53.3 46.8 48.2 52.1LOWEST 20 PERCENT OF HOUSEHOLDS 4.2 3.7 5.5 6.2 6.3 3.9LOWEST 40 PERCENT OF HOUSEOLDS 11.9 11.9 14.7 16.8 16.3 12.6

POVERTY TARGET GROUPSESTIMATED ABSOLUTE POVERTY INCOKELEVEL (US$ PER CAPITA)

URBAN .. .. 250.0 193.1 241.3 270.0RURAL .. .. 190.0 128.7 136.6 183.3

ESTIXATED RELATIVE POVERTY INCOMELEVEL (US$ PER CAPITA)

LA .. . 132.0 136.8 179.7 282.5RURAL .. .. 87.0 96.8 103.7 248.9

ESTIMATED POPULATION BELOW ABSOWTEPOVERTY INCOME LEVEL (PERCENT)

URBAN .. .. 39.0 32.C 24.8 20.5RURAL .. .. 44.0 52.5 37.5 35.3

. t .ILI.*Ac -atubl .

/u ed9ad semp averages for each isiaLAtor are papulatioce lght*d geamtric means, *zeluding the extrmevlesee of the Idicator an the met pepuJated coutry in each Sroup. Cowrage of countries among theindiCatrs depend an evaliabity of data nd le not unifom.

/b Ukess otherwie noted, data for 19f0 refer to any year between 1959 and 1961; for 1970, between 1969nd 1971; and for %ost ecent&tit. betwen 1974 and 1977.

/c East hAle A Pacific; /d Lor Middle Ircom ($281-550 per capita, 1976); /I IntermadiaL. Middle Income(5551-1135 per capita. 1976); /f 1950-55; L. Av. 1960-62; /b 1967, hou;eholds.

Most Recent EstLae of OW per capita is for 1978.

August. 1979

- 24 - ANNEX I

WINIT= Of _______CAT Page 3 of 5otes:iAlthoghthe data ar dram tri scone gaIIrelly Judged the meat anthoritative and ralisble, it shnald, a1n be ants that they onme hatb intern.-

tioaal om .ral bota-z of the Lack of standrdised deflaitio ms d esmeeta 'ad by dirffrme countri.s it collecting the data. Th data ars, toamtheia,,oseful to deacribe ord-r of aguitude, indiate areeda *ad charmntrie mcata,L maJor differsrs bsteaa countrie..

ma ajoied goutavrgesf-r each indicator an popl.tion-esibtad gastric mat, eme-Ind the extra -I..e. of the indicator an the meat popaatadcoutryin achgrop. ton to c of data, grop avrage of ti]. jadicator far Capit.i harpis Oil aportar and of indicator of Acce- to Watr an E-reta

Disposal, anoaLag, 1oost Distribution and Poverty for other coutry poape ar pfislatiho-aehtad gsatrc means vithout excluniw of the extra vas.adthe at poalatd coutry. Since thcveag of "ontIs ntte iatr meds,naaiaiit fdaaed is not uniform. eation -t bo eaerised

iniaoraI tin sng the coutry sod referean grops.

LAND EAM (thousad sqh.C cest lreaDsoa pevo fpoltin oa rbn n uaTotal - Total surac ara1opito ad are and inland -tters. Mase of peol ttl urban, an ruralMaervd by enrta dis-poaaaAgricultural - Mtat recet vitiate of agiculturs. ta used t.vr*-ily p-rcetages of their -epetive ppalation. dacrtt disposal may -lor .d

or permsetly for crops, pstursa, sakat and kithm garde or to the -o1etian and disposal1, vith or citheut treatmet, *f laes s-rrtelie fallo. and nate-eater by at-horse eysti or the -s of pit prvesad soaiso

lI P CPn S.a - rprcaiaetansa uretmre prcs P.Eet4ap= .ey~ Icd - Poplatiom dividad by cambe of practicing phyaioisnsamedbd, conversio method as World hank Atlas (1976-78 basis); qCifitid'? iti6a ahi a. t univerity I.vaI.

ipo 97,ad1978 dta. PpoLatiat on m-iais Person - Popaltia divided by este of praticing male

2EF!ITY c 0ttasi PEP CAPITA - Ocoa-i ocasomtion of ovarviaL enrg ad teals. grad,ate oas.,pr-tie-I -use, and ssiatuntorss(col ad igoir, etelso oaurl ga sd lyd--, malaur sad ge- Peulnpe o1ti e oa. carhn and rura - Ppulation total, urban,

therma.-l ericity)j in lograsa= of co.al eqai-aet per capita; 190,6 an a )dvddb hi epective ase 'f bsca esaalbe1970 and i976 data. pablic and private genral and aadalte htpita1 and -eaiiitatioo center.

toepitala ar eatablilestoi peraetly staffed by at Isast one phyacist-.PORUOATION Alit VTTAL STATISTICS Establishments providing prioipaly custodial car ar ot i-cldad R- Hr

TotaPootitMdtr .ei.oon) - As of July 1; 1960, 1970, and hospitals, howve lonlde health n nadical centers vot permnetiy stafed1977data,by_. pyian(but by a medical asistnt, ore, m1idefe, etc.) ehiob offer

Urbam Ppation (ervet of -totl) - Ratic of urban to total poclatic is-pattent acoedation and proide a Iiitdec rage of medical acilitie..dfeotdefItoitiov of urba areo may affect coep-bility of data Admiasiooe0pr Hospital Sd- Total cobar of dia sto or discharges facusin coocarcs; 960. 1970, and 197 data. hospita1 divided by the cater of hod..

byp~94onc5ypac~M - torret popuitio pr ciooa ac tuned on U0I0G195toa =ppltion bYC`age and e aod'their-etality and fertility Average Si.e of H-ooshlid (persova per bouehod) - total, urban .adrua -

vote- Projectior parantera for mertaity rates comrise of thre A hoa-hbod -onists of a grop of iodiidaal.s to star li~iog q-tr-r sodlevel -- uen lifo oPeotanry no bitoh Iahoae -iog cbh coutoy, thire man meaI.. A boud.r or lodger may or wt tot be isoloded co tieper capita icco level sad f.-Ie life expectany oteilinig at loose. hold for statistical porposes.77.5 fenra. The paotetrs for f-rtulity rate ala have thre le-el OeAge camberfpErson per reo -toal rbn and rural - OeA...ge contraosusogdclcec fertility ccrdIng to Incmela and past of .. -ee e oo naluban andtrurl occpied dcvotu -lIeliogofamily -loing pefrmne.- -hcutry inthnaagsed one oftibea repectively. DPecuiAgs ealde ca-permnet otrutore and -ovpied part..

cOoscatnetins f Mertlity and fertility trends for p-j,ttiot Access to Electricity (peroet of dtel1iing) - totl, urban and rura - lo-porpov.-otiona ivItga coth livenricity in li-ct qcartvrs Ia percetag f!

Statoay ootiico -a tti-onr population there is no g-oth total urban n ualdeoorepcieybcetieiit raei eo t the death rate, and also the agestrucur ven osat. This ic ahieved onl after fertility mica EDLXATION1

decline to tic replacnet eei of unit .ev reproduction rats, o.n AdJunted Eorolimet Rationeach geertinofcae relcsctefe tly. The stationr poe-rmayoh7 - tota. l sod femle-drs total-, -ale td resal -11ol-Istoeieoo ftmted ontbe luc,iaff the projected oharaterttics seto llae t the primay ecl aspecetae of r-protiv- pr:nsryof the popootiocitthe year 2000, too the rote of decline of fvrtility ochsoi-ge popo"isoc .. m. .i includes childre aged 6-11 year butrateto replocemet I-r'. adjusted for diffe-et leogtbe of prinacy edoatioc; for o-ctrirs ith

tear stati-cr poclatioo is reactd - The year che otatto...y popuatiot unvrsat bctc onoletmy ecceod 100 pert e i-oov oc copil

Per so. yin. -KOd-y-a population per qtar kilomter (100 heetare) of edac.atio requ-ro at rat four year of pyr-od prcecoy i.totroto ,.total araproide. genera coctio...l, or teacher traitiog iatroti-c for pcpcio

Per ,oi0. sgioluri ed - Cmpeted - above for WgicuIt-rl land usully of 1 to 17 year of age; cr-epondenecure-r oer-olyotly. e-olded.

bP4pl.tpq Ag2 tChtr oroc)-lild-e 0-li year), -ortig-ag Vocaticol orlset(perceot of -voodsr) - Voostioal lostituti-c eld(7130164y-t,tdretire i -er sodovr napeovtag- of mid-year teohoical, odustrial, o r other progrem ouch operte iodepeoentlyort

pouaio l970. 1970, sod 1977 data. deyn -teet of -eond_ry iaeloto

PooninGoth. Rat peroen) -total - Actualgrowh rates of totn1 mid- Popii-te-h-rr tdc P- aY. sd, eodary .Tta1lstodeoto -er11d ivyear opultiov fcr 950-C, 170-7, and 1910 77. primay and -ecodr Ie.-Ia dIvided by tooer of teaher bo the z.rr--

PoptoltnCtt G: stet 'e teot -uban - ocAl1 growth rate f urban opodi leel.populations or 1950-cd,1970-70, an 1970-. Adalt literar ae(eco;-lieaeaot Oetorn n ri a

Rate orihousand -A-.u.l lice births Per thocad of mid- I p-rtetge of total adult popolatlt aged It year nod rrfear pop.iatiot 9,-ad 1977 data.

Crude Death Rtat per thoonand) - A.-sa Omatha per thousad i mid-yea TiESUOPTIOMpouaio;170 9,ad1-977 dat. Pasenge Core (per thcanad pptlatiooC - Passeoger tor cm.priae utor or

Irosa Peorodootit O97t -Ire-. cate of da.hbteren. ota cill hea cetlo IrsI tia right person; ecld.n ambl .ce, .ea .e and ilitnoyin-rtomlrpr-oo-i- period if h od"cPreoc Pra .. prot age- vehicle..

opetific fertility rates; -ooaly fiv-yea uerages endiog to 1960, tadloRcevr.(ertooad p,c±tion) - All type of receivr for 17 radioi970 sod 1975. "raoat t oorl uli e thouan of PpopInto; rldva ulivoe

Family 'looing -A-optorc, cccA-. 'th-uradaC - oA-I ota- of recivrs i, coutries sod it Year obe regitrati of radio cot 00 Ioocceptoro of birth-cotro de-i-e uder ... pices of caticoal family effect; data for recent years coy ct be -op-loble clov -. t v-coirteP"Itor proam abolished licenig.

Pomily Pnoc - doer vervet of -oied Ptr) -Per.etge of maried TV R-ovlvrs (cry thoutnt ouplati-o - TV reciver for or-do-t tc geie-lcoe f child-teain lge (1-4o Y.ao ob bcirth-v-ttri devices public per th-u-n popcIntit; eclodr- oni-vensed TV rev .. elr -ootr-rtoo mriedoe ics g grop, and it year abet rgittrtivn of TI' orts on i ffect.

FOOD An NUTRITILY p- dib.1 p-miaerCiiua-toCcr hosndpouitio)- boati oergrcivootoI.d7 f15 5170112 of itailyO~t,~dI697-1X -L1- generlpittrest edi p per', dete aprldia olvto

toecoffod roovtc oyCnlt (by-7-0 -ioeofprcpindevoted primaily to eodn geea-ee. I ovnid-rd to be daily'covual poductio of all ood oceitiv. Poototorovese o if it pRpnr. oc leant four times o-v.-

Tee so,)onclndryar hca -aits ~ocu prar od Cioema Aoo-i Atte-d-o cer Cac- ae ber - nd oc the -cber of tivie-(.. ognro- iv-t-d of soga)oibredbl ..d ctttio btativots told ucgteya,iocignmcot odteiot ssdtte..vffe sod ten ar 1ecided). Aggregnte predotico of each ocutry ocid.d-gt~y

Pe aiaopvlIfoiois(e te of veouren-ts; - Compted from LABOR FORCEenegy equivalent of -et food supplies ovilable In country per capOtt Total Labor For- ~ttboostdt - EOv.ccaivaLly active ver -ce -ov.co errdper day. vAlnile. co pplie- coprise domestic production, imports I.oo forte sod uneployed lot coolodig tosio-, otodents, etc. lvficit--

Moprto, und olsohges in otoot. Oct coRplies ettod slnl feed, croO, iv vaIus -otrio ar t-t oceprble.qatities oed cvfood proooiog, tod losoe ic distribotico. Require- 4sernt -fmleabrotenprvvgofvalaoroc.

aet ueeetimae by FObI tasdot plbyoiol.ioccIl -eds for .o.,-Icptr~jvet Lbor frte ic f-rd, for-ty, looti endsotLouty sd beatV cottidring .. ovirotmetl teapertor, body -eighta, flohiog Ic pere..tage of total Labor forte.age and -v ditriboti-oo of population, sod c1.ioig It pe-tet for 1eduatgiy (peovt) - oner forc - mining, ontr-cclor, entfactuie sodosute so totneholo level, elcrcty, eater sod gao o percetage of total laborfote

Per -pitn cpply of Rrteco '-- per day) - P'rcteic -ot-t of per Participtaio .tat (pr-et) -total, male, sod fe-1 - Prtcoip.tiot or.sPitace.t opply of food per day let coppip f food is oefioed as ectoity rates ar c-mtd us total, mae,od f-a itlbor fort -s per-sbo.- Reqoireneots ftr all ootri.o -atatliohed bp USDA proide for a ceciges of total, asic sod femal poa.iaLtiot of nil gos repectively,micini ai1cso- of 60 gram of total protein per day and it gram of 1960. 1977, and 1975 data. Thes ar li, partocipatio t.ris reflectinganimal and pulse protei, of obich 10 gr-o ohoald be animal protit. -c-I atrutore of the population, and long time treod, A fes estimat-nThes standards r oe than te- of 75grmso total protein and are fro tionl oroa23 gram of sl. prtel as notrrge for the strd, proposed by fAt EcnoicPOsOd"cy Santo - Rntic f popoti- under it and 65 sod ovr t.

it to tTir .Wrld PodSv ,the labor fore On agge rop cf 1q61 peara.Pe-cpita cp i coppId, from na sod roa- - Protein supply of fond nCO DSRV C

Thl ae -)lrniyit Rvtrond cna tssprtosn P-retag cf Prvteicm (both in cah sod bind) - Raceired by richesticaegoP iyar,t cIde it this soc grop; for mst devl- 5 ecn,rcbs tpret, pooveet P etc,adpoet1 eco

otin cotrire data dorived fro life toilet of households.

dEALTo POVERTY TARGET GROUPSlife oettc ccBirth (year) - hocrge omeof y-r of life Eotlated Aslt phverty Iboon Lavel (U$ per capits ~ - ra and rural-

reeaicing i -bith190197sd177dta Absolute poverty ltme leve Is thatI-on lvlbeo h a oioiea.loat s rtalit RaeAe tosn) - IAra d-tho of ofata under .. e otritionally Ide-Ite dIet pl ene....tial coo-fund roquti-.ts i5 oct

yea o ae pr bosad lcetiti. afodalecoes t Ofeenervecet f ov"aIo)-ttlubnsorua - ttmneOlaieovryIomlve.ttoecpt)-ubnadrrl-HotrofpoL 'oa,o- o o nvlCsltrusdbeacest Rrlrlaiepvet-ooslcbi0cetbr favrg ercpt

oafena.t-r-pyl C olue d retdsrae sescr untreted bot p-orso1 income of the counry. trbnn leve is do-l-d from the rura Ir-eutoimvtd otterocon bthi Iron protected hbrbov, pind ec o.atet for higher cotoflmn inubnaes

sod c-nttryesilo) so pe--etages f their repective populations. Is Estimated Ppltion Se.n Absolute Povetylboo Level (werovettl.-guba andano naraspbli fountol cv stadpcat loted not mor tiat rua otn f population turba and rurl) ho r. bou pe"

aces o accos. n aalara rasnbleacos 1sad Implyclot the osaf or mmtrv of the hoo-etld do not have to spend E-ionet sod Sbuial Data os

dlpo toaepnrt of the day Ic fetching the fnllys cater needs Economic Aoa.le and Prtjeti..s iepartmetAagmat 1979

- 25 -P.g*4 of 5

eco011Ic DEVYnoSp9w Diu 81125

Amnl average 1979Actual got. Proced arovtb rat. (I) share

1972 1975 1976 1977 1978 1979 1980 1981 1985 1972-78 1978-40 1980-85 of CDP

National Accouats (U5d .of U8$ at 1975 erices andexchatne ratee)

GDP 12,929 15,769 16,822 17,865 18,928 20,077 21,298 22,594 29.392 6.5 6.1 6.6 100.0Terms of trade adjustmnt 168 0 -456 -613 -70 -70 -387 -685 -262 - - -CD! 13,097 15,769 16,366 17,251 18,695 20,006 20.910 22,129 29,129 6.1 5.8 6.9 99.6Imports - conitant prices 3,304 4,116 4,460 4,799 5,489 5,865 6,068 6,484 8,271 8.8 5.2 6.4 29.2Exportm - constant prices 3.020 3,000 3,784 4,644 4,592 4,425 4,852 5,362 8,022 7.2 2.8 10.6 22.0Exports - adjusted for tars

of trade 3,189 3,000 3.327 4,030 4,359 4,355 4,464 4,897 7,760 5.4 1.2 11.6 21.1Resource gap 115 1,116 1,133 768 1,129 1,510 1.604 1,586 511 - - - 7.5Consumption 10,221 11,977 12,270 12,756 13,861 15,646 16,393 17,262 21,421 5.2 8.8 5.5 77.9Investmnt (incl. stocks) 2,991 4,907 5,228 5,264 5,963 5,822 6,176 6,552 8,524 12.2 1.8 6.6 29.0National savings 3.016 3,983 4.098 4.435 4,743 4.718 4.948 5,360 8.410 7.9 2.1 11.2 23.5Dometic savings 2.876 3,791 4,095 4,495 4,833 4,537 4,807 5,227 7,328 9.0 -0.3 8.8 22.6

Sector Output (millions of-5U at 1975 prices)

Agriculture 3,993 4,535 4,897 5,140 5,385 5,417 5,688 5.972 7,259 5.1 2.7 5.0 27.0Industry /a 4,087 5,314 5,836 6,285 6,690 7,043 7,536 8,064 11,061 8.6 6.2 8.0 35.1Servicee 4,849 5.920 6,089 6,440 6,853 7,617 8,074 8,558 11,072 6.0 8.5 6.5 37.9

Prices (1975 - 100)

Export price index 47.4 100.0 86.2 86.6 99.2 117.6 123.2 131.6 180.3 13.1 11.4 7.9Import price index 44.9 100.0 98.0 99.8 104.5 119.5 133.9 144.1 186.4 15.1 13.2 6.8 -Terms of trade index 105.6 100.0 87.9 86.8 94.9 98.4 92.0 91.3 96.7 -1.7 -1.6 1.0 -

Selected Indicators

ICOR jt 4.5 3.4 3.4 3.6 3.6 4.4 4.0 3.9 3.3Import elasticlty 0.93 0.59 1.24 1.22 2.32 1.13 1.12 1.12 2.08Average savings rate 19.5 24.7 24.4 25.0 25.3 23.1 22.9 23.4 26.8Imports/GDP 25.5 26.1 26.5 26.9 29.0 29.2 28.5 28.7 28.1Investment (incl. stocks)/GDP 23.1 31.1 31.1 29.5 31.5 29.0 29.0 29.0 29.0Resource gap/GDP 0.9 7.1 6.7 4.3 6.0 7.5 7.5 7.0 1.7

Public Finance 1972 1975 1976 1977 1978(Central Government) - (Z of CDP in current prices) - Labor Force in 1978 Ic lIflions ()

Current revenue 12.2 15.0 13.9 13.2 14.0 Agriculture 7.4 44.4Tax revenue 9.7 12.0 11.6 11.2 11.9 tudustry 2.7 16.2Current expenditure 13.0 13.2 12.3 11.6 11.3 Services 5.6 33.0Current surplus 0.8 1.8 1.6 1.6 2.7 Unemployed 1.1 6.4Capital expenditures 1.9 3.0 3.5 3.4 4.1

Total Labor Force 16.8 100.0

/a Includes sining. manufacturing, construction, and utilities.

/b The C08. is defined as the ratio of fixed capital formation in the previousperiod to the current increase in GDP over the previous period.

/c etisate based on second qurter, 1978.

Fest Asia d Pacific UeionNovember 1979

-26 - ARI

8A1A1Cl OF PATOWTO A"1 OXErr AL ASSISTANCE1(US$ tOllion)

AotgeI Oct. Prol.cted1972 1975 1976 1977 1970 1979 1980 1981 1985

SoeMry of Beloaoe of Peboents

teport. (08FS) 1.432 3.000 3,330 4,021 4.555 5.230 6.040 7.030 14.475OsPoeg. (0875) 1.484 4,116 4,383 4.788 3,735 6,960 80.60 9,245 15.82011.0-roc Watt0. -52 -1,116 -1,053 -767 -1,180 -1.730 -2,020 -2.215 -1,345

Nat factor -- I.. fe-1,00 . -125 -126 -323 -320 -406 -190 -280 -365 -655t,o.re.t Is.:) ~~~~~-93 -65 -105 -240 -261 -515 -405 -475 -723Dir et I- let _t ',0.. _et) -32 -61 -138 -00 -145 125 105 110 70

"Iet..o - goedo & --rvc., -177 -1,242 -1,376 -1,087 .1.586 ..1,920 -2.300 -2.580 -2,000

Sreeef... (set) 188 318 269 260 312 340 370 400 600

C.rre.t A .... t Bel5. 11 -924 -1.107 -827 -1.274 -1.580 -1.930 -2.180 -1.400

Dbr..t 1--t-Oc (.at) -22 125 144 216 163 130 150 170 250

Pebilo KIIT 1-. dl.bo..r--te 233 349 869 903 1.035 1.175 1,549 1.782 2,224Rep*ys C.t -78 -118 -145 -163 -419 -465 -53L -507 -1.'30set dlsboree..st* 157 231 704 740 016 710 1,018 1.275 1,094

Other M61. It.c dl.bor-ecats 137 331 538 326 740 349 685 778 1.156lt:pOyScta -154 -205 -202 -381 -522 -295 -333 -363 -8708ct di.boo..--t. -17 126 536 -55 210 54 352 415 286

Total M1T 10.0 dlsb.receet. 372 480 1,407 1.229 1,775 1.524 2,234 2.560 3,380le.7.eote. -232 -323 -369 -544 -941 -760 -864 -870 -2,000Net disb.r--t.et 140 357 1.040 685 834 764 1.370 1,690 1,380

Nct troleoe IMF Lb 7 110 214 79 24 98 - - -

Short-t.r. copit.1 (ocr) 56 102 -96 312 146 100 110 120 170

C.$it.I tra-ti..to., .e.1..i -99 292 -33 -300 53 -32 - - -

Ch.oge it ocr re (ve - - Ioc r.....) -94 321 160 -164 54 500 300 200 -400

ltot-retoei..I roger,.. (..d-y..rl L 551 1.358 1,640 1.505 1,903 1.383 1.083 883 2,153

Gr.et. sod L,.- C.-it.ot.

Offlefl.i Srot.t 5.0 0.0 0.0 0.0 0.0Total poblilc I.... 422.0 769.4 1,577.4 1,372.7 2,417.0

0082R 29.5 114.0 226.0 317.5 532.0ID" 10.0 0.0 0.0 0.0 18.0O.-e -1ti0.r*1e 43.2 106.0 64.2 207.3 199.2G_*er t.ct 275.5 182.3 391.6 122.3 370.4of hiloh OPE 0.0 13.2 5.9 0.0 0.0

SePppiere 2. .0 52.5 32.0 194.2 76.7-TOoctall loetl(4tloee 61.7 314.6 476.4 341.7 2,006.5Ued. 0.0 00 367.2 129.5 219.2

Otherd01.7 1.... 130.0 283.:0 603.6 134.8 914.0

Orget eLmcor of romft.e.te 28.0 16.4 8.8 14.7 16.8A-erage fst.reet (25 5-.8 7.4 8.3 7.9, 7.4A-eree -t.rity (yeere) 17.0 16.7 13.1 15.3 15.9

Kedl.a 4 t4ne-Tee Debt (dleb-reed -I,)l

Total debt oset.tadleg (cod ofpartod) 1.8166.0 2,965.0 4,383.0 5,554.0 6,839.0

tsel1.Sie eWd0gbcocd , 2,638.0 4.520.0 6,817.0 8,155.0 10,856.0-Poblio debt servItce -1491.6 -215.3 -- 239.2~ -44) 4 -468.1

of elbci. lot.r...t -51.6 -73.0 -97.9 -213.2 -187.1Other 161. debt c-erv. -167.6 -232.7 -203.5 -337.1 -441.9T.t.1 debt cer-l.. -317.2 -458.0 -522.7 -799.0 -910.0

Debt Bord..D.bt -- le. rati. Ot~~~~~~~~~~~~~~~~~~~~~~~~sot.0004 lg

Debt cerolce retlo 0~~~2.1 14.0 13.7 18.0 20.0 Dercmb.r 31. 1978Debt cerlc. ratio d22.7 15.6 16.4 19.5 20.6 Aeount P.-rettDebt eer,,Lo-l0P 3.8 3.0 2.9 3.7 4.0 Et .e.. 1 Debt (111 alt)Poblic debt e.vc/oeser(dlebora.d so1y)

r- - -e 17.0 5.1 9.9 12.0 20.1 10R0 546 13.0T.~~~~~~~~~ 31-k~~~~~~~~~~~00 Grop 576 13.8

leterectOs totelDOD/tota 00 .1 5.4 4.1 6,4 4.0 ovr_- eot. 1,039 24.87,t.1 debt DODtette 0 17.7 16.9 10.5 13.8 13.3 Suppller- 271 6.3

Deo".ddmo atitlo 1oetitOt1Ooa 1.254 09.9Gro" ~~~~~ ~ ~~~~~~~~~~~~~Betod 771 18.4

get trcfr1p .(08F0) 12.7 7.7 6.1 3.4 5.4 561. debt 6.180 100.0Net trao.ftr/Oreec di.bur--t.et 41.9 36.2 16.2 18.9 23.2 Other 661T debt 2,651 63.3

Up ~~~~~~~~~~~~~~~~~~~~~~~Other 50.7 debt

ID&D dlsb./gm.s ~ ~~~~~~~~~~~~~~dimbor.ed) 3,293 78.61080 lcb.froeetot.1 di.b. 4.7 9.8 5.5 7.4 8.3 Tot.1 publio0.ek Iro5p dleb./gro.- tot.1 dleb. 4.8 10.7 6.2 7. 8.:3 debt lIed.188t0 DO2/t.1. IDOD 7. 8.0 7.2 7.3 80 -sdi b.rod) 7.563 100.6Bank G-pw 00D/total DOD 7.8 8.6 7.0 7.0 8.4 Tot.1 MfLT debt1880 debt -- rl../tot.1 debt ee--1e. 4.4 5.5 6.6 5.6 6.9 (10-1. 00-3eek Group debt .- rv/t.t.1 debt. eerv. 4.4 3.6 6.7 5.6 7.0 dOe.orced) 10,856 259.2

LA teett.o-. of PSllp-o c.pl.ycd ebroed ore ioloded for 1970-78 is Trsf.e sd 1979-85 i0 Stiret Osveeteet I-abo.'./b For projectioo purpo.ec 'lOt drevl.ge 0o 087" cod 'C.pItalteeet1..001 r0 ...... ed to cOnel 000 each othe.,OroG- r- -re of the C.stro1 0.06 1"I.t.tral ... 1 rI e " I1S.

Id Isciodee ne direct lovect-et jocos.

toot A.1. 00d Paclfjc lk.gl.N-veeb.r 1979

- 27 - ANNEX II

Page 1 of 17

THE STATUS OF BANK GROUP OPERATIONS IN THE PHILIPPINES

A. STATEMENT OF BANK LOANS AND IDA CREDITSAs of December 31, 1979

Loan orCredit Amounts ($ million)Number FY Borrower Purpose Bank IDA Undisbursed

Seventeen Loans and two credits fully disbursed 271.0 19.5720-PH 1971 Rep. of the Philip. Rice Processing & Storage 14.3 1.4809-PH 1972 National Power Corp. Power 22.0 0.9349-PH 1973 Rep. of the Philip. Education II 12.7 0.3939-PH 1973 " Ports 6.1 0.1950-PH 1973 Second Highways 68.0 1.7984-PH 1974 " Aurora-Penaranda Irrigation 9.5 2.7998-PH 1974 " DFC-DBP I 50.0 4.01034-PH 1974 National Power Corp. Power 61.0 3.91035-PH 1974 Rep. of the Philip. Population 25.0 12.91048-PH 1974 " Shipping 20.0 10.11052-PH 1974 Philip. National Bank DFC 30.0 5.4

1080-PH 1975 Rep. of the Philip. Tarlac Irrigation 17.0 6.91102-PH 1975 " Rural Development 25.0 13.71120-PH 1975 " Small & Medium Industries 30.0 1.31154-PH 1976 Magat Irrigation 42.0 21.41190-PH 1976 DFC-DPB II 75.0 11.51224-T-PH 1976 " Education III 25.0 14.51225-PH 1976 Livestock II 20.5 7.21227-PH 1976 " Chico Irrigation 50.0 37.71272-T-PH 1976 " Manila Urban 10.0 6.31282-PH 1976 " Manila Urban 22.0 14.01269-PH 1976 Second Grain Processing 11.5 10.11270-PH 1976 " Second Fisheries 12.0 6.11353-PH 1977 " Third Highways 95.0 74.61367-PH 1977 Jalaur Irrigation 15.0 9.71374-PH 1977 Fourth Education 25.0 16.81399-PH 1977 Central Bank of the Fourth Rural Credit

Philippines 36.5 22.61414-PH 1977 Rep. of the Philip. National Irrg. Sys. Improv. 50.0 40.81415-PH 1977 " Provincial Cities Water Sup. 23.0 18.21421-PH 1977 " 2nd Rural Dev. Land Stlmt. 15.0 13.61460-PH 1977 National Power Corp. Seventh Power 58.0 56.51506-PH 1978 Rep. of the Philip. Smallholder Tree Farming 8.0 7.91514-PH 1978 Philip. National Bank DFC (PDCP) 30.0 25.01526-PH 1978 Rep. of the Philip. 2nd Natnl. Irrg. Sys. Improv. 65.0 55.4790-PH 1978 " Rural Infrastructure 28.0 27.7S.8-PH 1978 " Education 2.0 1.91547-PH 1978 Nat. Electrif. Admin. Rural Electrification 60.0 48.11555-PH 1978 Philip- National Bank DFC-PISO 15.0 5.41567-PH 1978 Rep. of the Philip. Magat II 150.0 103.71572-PH 1978 Industrial Investment III 80.0 62.61615-PH 1978 Manila Water Supply II 88.0 87.91626-PH 1979 " National Extension 35.0 35.01639-PH 1979 " Magat River Multipurpose 21.0 20.91646-PH 1979 Small Farmer Dev. Land Bank 16.5 15.81647-PH 1979 " Second Urban Development 32.0 30.51661-PH 1979 Highways IV 100.0 99.81710-PH 1979 Water Supply II 16.0 16.0920-PH 1979 " Water Supply II 22.0 22.01727-PH 1979 " Small & Medium Industry II 25.0 25.0923-PH 1979 Population II 40.0 40.0

Total 1.977.9 122.2 1,195.2of which has been repaid(Bank and third parties) 152.2

Total now outstanding 1,825.7 122.2Amount sold 24.3of which has been repaid(third parties) 15.2 9.1 -

Total now held by Bank and IDA(prior to exchange rate adjustments) 1,816.6 122.2

Total undisbursed 1j087.5 90.0 1,177.5

- 28 - ANNEX IIPage 2 of 17 pages

B. STATEMENT OF IFC INVESTMENTSAs of December 31, 1979

Fiscal Amounts ($ million)

Year Company Loan Equity Total

1963 & 1973 Private Development Corporation of the 15.0 4.4 19.4

Philippines

1967 Manila Electric Company 8.0 - 8.0

1967 Meralco Securities Corporation - 4.0 4.0

1970 Philippine Long Distance Telephone 4.5 - 4.5

Company

1970 & 1972 Mariwasa Manufacturing, Inc. 0.8 0.4 1.2

1970 Paper Industries Corporation of the - 2.2 2.2Philippines

1971 & 1977 Philippine Petroleum Corporation 6.2 2.1 8.3

1972 Marinduque Mining and Industrial 15.0 - 15.0

Corporation

1973 Victorias Chemical Corporation 1.9 0.3 2.2

1974 Filipinas Synthetic Fiber Corporation 1.5 - 1.5

1974/1979 Maria Christina Chemical Industries, Inc. 1.5 0.7 2.2

1974 Republic Flour Mills Corporation 1.2 - 1.2

1975 Philippine Polyamide Industrial 7.0 - 7.0Corporation

1976 Philagro Edible Oils, Inc. 2.6 0.2 2.8

1977 Acoje Mining Company, Inc. 2.3 1.2 3.5

1977 Sarmiento Industries, Inc. 3.5 - 3.5

1978 Cebu Shipyard and Engineering Works, Inc. 2.1 - 2.1

1979 General Milling Corporation 4.0 1.1 5.1

1980 PISO Leasing Corporation - 0.1 0.1

Total gross commitments 77.1 16.7 93.8

Less sold, acquired by others, 33.0 12.1 45.1repaid or cancelled

Total commitments now held by IFC 44.1 4.6 48.7

Undisbursed 7.6 1.1 8.7

- 29 - ANNEX II

Page 3 of 17

C. PROJECTS IN EXECUTION /1

Agricultural Sector

Loan No. 720 Rice Processing and Storage; $14.3 Million Loan ofFebruary 4, 1971; Date of Effectiveness: May 10, 1971;Closing Date: September 30, 1980

The original project concept of constructing integrated largecapacity rice mills was amended in 1972 and the emphasis shifted to rehabili-tation of existing rice milling facilities. A further amendment in 1974included corn in addition to rice, authorized local gorernments and theNational Grains Authority to borrow funds under the project, and streamlinedprocurement procedures. The project is now progressing satisfactorily andmost mills are working to near capacity. Arrears are still a cause forconcern, and DBP has been asked to step up its supervision and technical andmanagement assistance to help deal with this problem. Bank funds have beenfully committed; however, because of the long construction period for someof the larger subprojects, the Closing Date has been postponed to September30, 1980.

Credit No. 472 Aurora-Penaranda Irrigation; $9.5 Million Credit andLoan No. 984 $9.5 Million Loan of May 14, 1974; Date of Effectiveness:

August 22, 1974; Closing Date: June 30, 1980

Overall progress of the project is satisfactory. Work on the damsand transbasin diversion channels has been completed. Diversion from oneof the two dams started in July 1975, about one year ahead of schedule.There were initial delays in the award of contracts for the service areaimprovement works and, following award, some additional delays wereexperienced due to an extended period for irrigation water delivery in 1977.These setbacks have caused a two-year delay in project completion which isnow scheduled for June 30, 1980.

/1 These notes are designed to inform the Executive Directors regarding theprogress of projects in execution, and in particular to report anyproblems which are being encountered, and the action being taken toremedy them. They should be read in this sense, and with theunderstanding that they do not purport to present a balanced evaluationof strengths and weaknesses in project execution.

- 30 - ANNEX IIPage 4 of 17

Loan No. 1080 Tarlac Irrigation; $17.0 M4illion Loan of January 27, 1975;Date of Effectiveness: April 27, 1975; Closing Date:December 31. 1980

All major civil works contracts are in progress and the remainingwork is under way. Progress continues to be slow, with about 60% of projectworks completed against the appraisal target of 75%. Due to initial delaysand recent shortages of fuel and cement, the project is likely to be com-pleted in June 1981. The total project area is likely to be reduced byabout 3,500 ha due to flooding from the Chico, Camiling and Agno rivers.Project cost has increased from $34 million at appraisal to about $36.5million, with the result that the economic rate of return will be reducedfrom 15% at appraisal to about 12%.

Loan No. 1102 Rural Development: $25.0 Million Loan of April 16, 1975;Date of Effectiveness: July 28, 1975;Closing Date: June 30, 1981

As of March 1979, physical implementation of the irrigation anddrainage components was about 62% of the appraisal estimate. Due to delaysin contract award and recent shortages of fuel and construction supplies,construction has slowed down. However, now that the Pula river irrigationsystem contract has been awarded, progress is expected to improve. Theroad subproject is about 66% complete. Disbursements are slow, with only25% of the loan amount allocated for road works so far disbursed. Physicalprogress has been slow, and shortages in fuel and cement have prevented anyimprovement in the construction rate.

Loan No. 1154 Magat Multipurpose Project; $42.0 Million Loan ofAugust 7, 1975; Date of Effectiveness: November 4, 1975;Closing Date: June 30, 1982

Consultants' work on engineering and economic evaluation studiesof the proposed Magat dam and reservoir has been completed. Civil works bylocal contract and force acount for rehabilitation and new construction ofcanals, drains and access roads are progressing well. The water managementtraining is continuing satisfactorily. A delay in the contract award forimprovements to the project diversion dam will mean about a year's delay inthe completion of the project.

- 31 -ANNEX IIPage 5 of 17

Loan No. 1225 Second Livestock; $20.5 Million Loan of April 8, 1976;Date of Effectiveness: September 13, 1976;Closing Date: June 30, 1982

Investments in pig and poultry subloans continue to exceed appraisalestimates, with subloans for beef production development lagging behind.The project's list of goods has been amended to allow for this fact. Fundsfor the project's nutrition research funds are unlikely to be used, due todifficulties in recruitment of consultants. A revised component will beincluded in the next project. The establishment of the monitoring andevaluation system is proceeding satisfactorily, and procurement of laboratoryequipment for the Peed Quality Control Program is complete. Project fundshave been fully committed, and the loan should be fully disbursed bymid-1980. Repayments of many of DBP's borrowers under the project are stillunder grace, but a build-up of interest arrears is beginning to emerge. Asof June 30, 1979, principal and interest arrears under this project hadreached about 12.7% of the portfolio. The Bank has assisted DBP with thedevelopment of an intensive action-oriented collection program which will befurther reinforced under the proposed Third Livestock and Fisheries CreditProject. Thanks to government approval of increased salary scales, DBP hassignificantly improved its staffing position. Various improvements to DBP'sorganizational structure have been instituted and other organizationaldevelopments are under consideration.

Loan No. 1227 Chico River Irrigation Project; $50.0 Million Loanof April 8, 1976; Date of Effectiveness: July 19. 1976;Closing Date: June 30, 1981

The project had a slow start due to delays in procuring construc-tion equipment for force account works. Changes in the design of the Chicodiversion weir, the main diversion dam and the main canal siphon resulted incontracts being awarded behind schedule. Since the contracts were awarded,however, progress has improved and work is now proceeding satisfactorily.

Loan No. 1269 Second Grain Processing Project; $11.5 Million Loanof July 2. 1976; Date of Effectiveness: October 4,1976; Closing Date: June 30, 1981

Due to delays in implementing the first phase project, handling ofapplications for the project only started about 2 years after effectiveness.After three years of bumper rice crops, medium and large millers continue tomake reasonable profits, but Government controls have affected the invest-ment climate. DBP has undertaken to intensify its technical assistance tothe smaller millers, and this should result in better repayments. Demandfor subloans has also been slowed down by what is perceived byprospective applicants as slow processing of subloans by DBP. The Bank has,

- 32 - ANNEX II

Page 6 of 17

in consultation with DBP, developed a list of detailed recommendations onactions to be taken. In the meantime, DBP has forwarded to the Bankvarious suggestions concerning the broadening of the project to promotebetter and faster utilization of the funds. The proposals are curentlybeing examined.

Loan No. 1270 Second Fisheries Prolect; $12.0 Million Loan ofJuly 2, 1976; Date of Effectiveness: November 12, 1976;Closing Date: June 30, 1981

Due to problems related to procurement procedures for fishingvessels and increased deployment of staff on loan recovery work, theDevelopment Bank of the Philippines slowed down the processing of subloanapprovals in the second half of 1977. However, loan approvals had picked upconsiderably during 1978 and the loan was fully committed in August 1979.

Loan No. 1367 Jalaur Irrigation Project; $15.0 Million Loan ofFebruary 14, 1977; Date of Effectiveness: May 12, 1977;Closing Date: December 31, 1982

Overall progress of the project is about 28% compared with appraisalestimates of 34% as of August 1979. Force account work is proceeding satis-factorily. Nine of the 24 contracts for civil works have failed, and NIA hastaken over eight of them for completion by force account. With the equipmentnow on hand, NIA is capable of completing this work satisfactorily.

Loan No. 1399 Fourth Rural Credit Project; $36.5 Million Loan ofApril 11, 1977; Date of Effectiveness: June 2, 1977;Closing Date: December 31, 1980

Investments under the project are generally performing well,although the commitment rate is slow and will decline even further with therecent termination of large tractor financing. To help accelerate commit-ments, recommendations made by the Central Bank, supported by the Bank, arebeing implemented, including: the expansion of lending categories to includeadditional agricultural investments; assignment of authority to the CentralBank to evaluate and finance agricultural projects not specifically identifiedin the Rules and Regulations; the addition of private development banks to theeligible financial intermediaries; expansion of training provisions to includefunds for domestic and foreign training of Central Bank staff; more flexiblereporting procedures; improved collection procedures; delegation of responsi-bility for lending for power tillers to the rural banks; and revised methodsfor calculating equity contributions. Repayment performance continues to beunsatisfactory; however, causes are of a long-term sectoral nature and will beaddressed in that context. Vehicles for Central Bank field staff have beenprocured, and contracts awarded for the construction of the AgriculturalMachinery Testing and Evaluation Center and for the Farm Mechanization Study.Completion of the project is now expected to be delayed by about 18 months.

- 33- ANNEX IIPage 7 of 17

Loan No. 1414 National Irrigation Systems Improvement Project;

$50 Million Loan of May 13, 1977; Date of Effectiveness:

August 9, 1977; Closing Date: December 31- 1981

Progress in project implementation has been slow due to staffing

and design problems. Contracts for drainage works in Leyte are to be

awarded shortly, and those for the Abulog works have already been awarded.

Progress is now expected to proceed satisfactorily.

Loan No. 1421 Second Rural Development (Land Settlement) Project;

$15.0 Million Loan of June 10, 1977; Date of Effectiveness:

October 27, 1977; Closing Date: December 31, 1982

Satisfactory overall progress is being maintained with infra-

structure and in work towards appropriate technical packages in agriculture.

Problems associated with legitimatizing land holdings are now better

understood by concerned authorities. Some initial steps toward resolving them

have now been taken. Feasibility studies towards a forward program is well

underway, and have been expanded to include policy studies on the future use

of, or developments within, unalienated lands in general.

Loan No. 1506 Smallholder Tree Farming and Forestry Project; $8.0 Million

Loan of January 23, 1978; Date of Effectiveness: May 11,

1978; Closing Date: December 31, 19813

Operations have started in all project components except research,

which is expected to begin early in 1980. However, progress has been lagging

behind schedule. In order to stimulate the slow smallholder enrollment rate

in the treefarming component, DBP has recently eased the collateral terms and

application procedures for treefarm subloans. Insufficiency of government

funds has delayed the other components to varying degrees, particularly the

Abra pine plantation component for which vehicles have still not been been

acquired. A gradual improvement of this situation is expected, although

funding could continue to be a problem in 1980. Disbursements have started at

a moderate rate.

Loan No. 1526 Second National Irrigation Systems Improvement Project:

$65 Million Loan of March 15. 1978; Date of Effectiveness:

June 20, 1978; Closing Date: December 31, 1984

Project equipment has been procured ahead of schedule and has

started to arrive at the project sites. Topographic surveys and mapping have

been completed for about 80% of the project area and design of project works

is under way. Construction work has started and is primarily devoted to

service roads and structures along main and secondary canals. A new Project

Manager and his Assistant are providing excellent leadership in getting the

project moving. Overall progress of the project is satisfactory.

- 34 -

ANNEX IIPage 8 of 17

Credit No. 790 Rural Infrastructure; $28 Million Credit of April 21,1978; Date of Effectiveness: July 21, 1978; Closing Date:December 31, 1983

Construction work on communal irrigation systems, village watersupply, health stations and ports is proceeding well. Design of about 70 kmof village roads has been completed, and the balance is expected to becompleted by April 1980. Overall progress of the project is satisfactory.

Loan No. 1567-PH The Magat River Multipurpose Project - Stage II;$150 Million Loan of May 23, 1978; Date of Effectiveness;August 24, 1978; Closing Date: December 31, 1983

Progress is generally satisfactory. Work on the diversion tunnelsand the main dam and spillway has accelerated due to a marked improvement inthe management, planning and execution of the contractor's operations.Diversion through tunnel 2 was completed in December 1979, and tunnel 1 willbe ready for diversion at the end of March 1980. Excavation on the maincontract is ahead of schedule, but there has been some delay with thebatching plant and in the trial embankment.

Loan No. 1626-PH National Extension Project; $32.0 Million Loan ofDecember 21, 1978; Date of Effectiveness: March 27, 1979;Closing Date: December 31, 1982

The project will be applied first in four pilot areas which havealready been designated, to be followed by a further 12 areas by April 1980.MOA Regional Directors have not yet been appointed; however, the names ofproposed candidates are with the President of the Philippines and a decisionis expected in early 1980. Additional staff appointments are being made butvehicle purchases are delayed because of the current concern at the highestlevel with the energy crisis. All purchases of gasoline-consuming equipmentand vehicles (except for motorcycles) are at present held in abeyance.However, it is anticipated that the vehicles will be purchased within thenext 2 to 3 months. Funds for this purpose have been allocated in the 1980budget and vehicle suppliers have been pre-qualified.

Loan No. 1639-PH Magat River Multipurpose Project; Stage II Irrigation;$21.0 Million Loan of January 26, 1979;Date of Effectiveness: April 25, 1979;Closing Date: December 31, 1983

The design for the Baligatan diversion dam and main canals hasbeen completed, and NIA expects to start construction work soon. Overallprogress is satisfactory.

- 35- ANNEX IIPage 9 of 17

Loan No. 1646-PH Small Farmer Development Project through the Land Bank of

the Philippines; $16.5 Million Loan of January 26, 1979;

Date of Effectiveness: April 25, 1979;Closing Date: June 30, 1982

Since the loan became effective, the Land Bank has improved internal

procedures and strengthened field operations, although staffing is still below

required strength. Lending under the project for agricultural term credit

has commenced in most subcomponents, although loan disbursement has been very

slow. No disbursements have been made for infrastructure improvements due to

difficulties with the Government's budgetary procedures. The trend in imple-

mentation is improving, although progress will be slower than expected in the

foreseeable future.

Loan No. 1772-PH Samar Island Rural Development Project; $27.0 million

Loan of February 1, 1980; proposed Date of Effectiveness:

May 1, 1980; Closing Date: June 30, 1985

This loan was signed on February 1, 1980, and is expected to be

declared effective on May 1, 1980.

Transportation Sector

Loan No. 939 Second Ports Proiect; $6.1 Million Loan of October 24,1973; Date of Effectiveness: December 19, 1973;

Closing Date: July 15, 1980

Project civil works at General Santos were completed and turned

over to the Philippine Ports Authority (PPA) on December 7, 1978. At

Cagayan de Oro, 99% of the project is complete, and PPA is already using the

new quay extension. The Closing Date of the loan has recently been extended

to July 15, 1980 to cover civil works contract guarantee retention monies

and the costs of the next ports project feasibility study. The latest

project cost estimate is $20.2 million compared to $12 million at appraisal.

Loan No. 950 Second Highway; $68.0 Million Loan of December 12, 1973;

Date of Effectiveness: February 27, 1974;

Closing Date: June 30, 1980

Overall, the project is about 99% complete. Difficulties have been

encountered by contractors at various times in the execution of the works

which, together with inflation, have resulted in cost increases and time

delays. These problems have now been largely overcome. Further major

problems are not anticipated, and the project is expected to be completed by

March 1980, except for one bridge reconstruction, which is scheduled for

completion around August 1980. This represents a delay of about 3 years,

- 36 - ANNEX II

Page 10 of 17

with a new Closing Date of June 30, 1980. Total project cost is now estimatedat about '189 million, an increase of about 47% over the original appraisalastimate, due primarily to inflation and the serious time delays that havebeen experienced throughout the project.

Loan No. 1048 Inter-Island Shipping; $20 Million Loan of October 29,1974; Date of Effectiveness: January 15, 1975;Closing Date: June 30, 1981

The Closing Date was extended recently to June 30, 1981 to allowfor the completion of training programs and for ship construction guaranteepayments. About 50% of the loan has been disbursed and a further 25%committed. Loan applications covering the balance of uncommitted fundsare under consideration by DBP.

Loan No. 1353 Third Highway Project; $95.0 Million Loan of January 12,1977; Date of Effectiveness: March 30, 1977;Closing Date: June 30, 1981

Overall, the project is about 27% complete. Major problems havebeen encountered in the implementation of the national roads contracts, with7 out of 14 contracts terminated due to unsatisfactory performance by thecontractors. Two new contracts have been awarded and bidding is underwayfor the remainder. As a consequence, delays and costs higher than theoriginal bids are expected. Contracts for the improvement of minor roadshave been awarded but Presidential approval is being awaited for some ofthem before work can begin. After substantial initial delays, the roadmaintenance and restoration programs are now making satisfactory progress.All 28 workshop contracts have been awarded but work has only begun on 8 ofthem, awaiting release of budgetary funds for the rest. Procurement of roadmaintenance equipment, tools and other machinery is virtually complete.Consultants for supervision of construction of roads and workshops are inplace and the road and ferry feasibility studies have been completed. Thetechnical assistance advisers to MPH completed their assignment in November1979. Training advisers to MPH will complete their work by M4arch 1980.Overall project costs are expected to remain close to appraisal estimates,but project completion is likely to be delayed until late 1982, more than 24months later than the appraisal schedule. This delay is due to the latestart of some critical activities and to the serious delays in the executionof some of the road construction contracts.

ANNEX IIPage 11 of 17

Loan No. 1661 Fourth Highway Pro-ject; $100 Million Loan of March 9,1979 ; Date of Effectiveness: June 15, 1979;Closing Date: December 31, 1983

Prequalification of contractors for the road construction works isunderway, utilizing new procedures agreed during loan negotiations.Proposals for the technical assistance to MPH and MLGCD have been receivedfrom the short-listed consulting firms and evaluation is in process. Ashort-list of prospective consulting firms for the design and constructionsupervision of workshops is being prepared. Preparatory work for thecontinuation of the road maintenance and road restoration programs begununder the Third Highway Project (Loan 1353-PH) is scheduled to begin withinthree months. Selection of technical assistance and consultants to MPWTCfor the continuation of the transport planning advisory services, begununder a previous project (Loan 1272-T/1282-PH) is in process. Land acqui-sition for road construction and workshops is under way. Prequalificationfor equipment suppliers has begun.

Education Sector

Loan No. 1224 Third Education Project; $25 Million Loan of April 8,1976; Date of Effectiveness: July 29, 1976;Closing Date: June 30, 1981

The project has established an autonomous textbook agency tomanage book development, production, and distribution for public elementaryand secondary schools. It includes the writing of 75 textbook titles andproduction of 27 million textbooks. Good progress has been made towardsachieving the key institution-building feature of the project. Implementationis proceeding well with only minimal (four month) delays, and 15 milliontextbooks have been produced and distributed. Project costs are close toappraisal estimates, and disbursements are about 66% of appraisal estimates.

Loan No. 1374 Fourth Education Project; $25.0 Million Loan of March 25,1977; Date of Effectiveness: June 9, 1977;Closing Date: December 31, 1981

Implementation of the project is generally about nine months behindschedule because of delayed contract awards, shortages of building materialsand rapid price escalation. Remedial measures are being taken by the Govern-ment. Enrollment projections and staff development programs show that theproject is making steady progress towards its development impact targets.Project costs are close to appraisal estimates, but disbursements are about41% of appraisal estimates, reflecting the implementation delays.

- 38 - ANNEX IIPage 12 of 17

Loan No. S-8-PH Educational Radio Technical Assistance: $2 Million Loanof April 21. 1978; Date of Effectiveness: August 22, 1978;Closing Date: December 31, 1981

The project is being implemented by an Educational CommunicationsOffice (ECO), established for this purpose within EDPITAF. ECO is function-ing smoothly and is successfully preparing and distributing radio programsand printed materials for the two major project subcomponents - RadioAssisted Teaching in Elementary Schools (RATES), and Continuing Educationfor Teachers (CET). These programs have reached the two selected pilot areason schedule (Pangasinan and Leyte Provinces). CET will most likely beginanother experimental utilization in Mindanao in early 1980. In order toprovide information on the desirability of nationwide project implementa-tion, the pilot project includes a substantial evaluation component which isproceeding smoothly.

Loan No. 1786-PH Fisheries Training Project; $38.0 Million Loanof February 1, 1980; Proposed Date of Effectiveness:May 1, 1980; Closing Date: June 30, 1985

This loan was signed on February 1, 1980, and is expected to bedeclared effective on May 1, 1980.

Urban Sector

Loan No. 1272T M4anila Urban Development Project; $10.0 Million andLoan No. 1282 $22.0 Million Loans of June 9, 1976; Date of Effectiveness:

December 9, 1976; Closing Date: September 30, 1981

Overall construction on the Tondo project is about 57% complete.The 65-classroom high school is now occupied, and final designs for theremaining four schools are nearing completion. 95% of the infrastructureand 1,480 of the 2,000 units in the Dagat-Dagatan sites and services com-ponent are complete. Both packages for the Radial Road (R-10) have beendesigned and contracts tendered with Package I amended and Package II await-ing Presidential approval. The project is generally progressing satisfac-torily with many initial difficulties overcome and lessons learned whichshould hasten implementation of the remainder of the project.

Loan 1415-PH Provincial Cities Water Supply Project; $23 Million Loan ofMay 13, 1977; Date of Effectiveness: September 9, 1977;Closing Date: March 31, 1982.

Well drilling activities are in progress in five Water Districts,and bids are being evaluated for distribution networks, pumping stations andreservoirs. The scope of subprojects was revised by LWUA and approved by

- 39 -ANNEX IIPage 13 of 17

communities in public hearings. Difficulties in contracting local firms fordrilling have resulted in delays in the preparation of feasibility studiesin remote areas. LWUA has been requested to present a plan for assistanceto Water Districts in institution-building, and proposing solutions to thescarcity of local well drilling contractors, including the possibility ofinternational bidding.

Loan 1615-PH Second Manila Water Supply Project; $88 Million Loan ofJuly 26, 1978; Date of Effectiveness: December 21, 1978;Closing Date: December 31, 1983.

Delays in ADB-financed components of the project have resulted

in similar delays in IBRD-financed parts of the project. Nevertheless,according to new re-scheduling prepared by consultants, it is expected thatthe original target of completing the project by June 1983 will be met. Atariff increase of 60% was implemented in October, 1978, and MWSS met the 2%rate of return required for 1979. However, it apepars that they will not beable to meet the 5% rate of return covenanted for 1980 since theimplementation of an additional tariff increase of 25 centavos, scheduledfor October 1979, has been postponed (because of the overall impact ofinflationary pressures resulting from recent oil price increases) and thecompletion of the treatment plant is behind schedule.

Loan No. 1647-PH Second Urban Development Project; $32.0 Million Loanof January 26, 1979; Date of Effectiveness: April 26,1979: Closing Date: June 30, 1984

Implementation has begun on earthworks, sewage and drainagecontracts in Manila and the three regional cities of Cebu, Davao, and Cagayande Oro. Designs for community facilities in Dagat-Dagatan are complete, andthose for the elementary and high school are in various stages ofproduction.

Credit 920-PH Second Provincial Cities Water Supply Project; $22 MillionLoan 1710-PH Credit and $16 Million Loan of June 27, 1979; Date of

Effectiveness: November 30, 1979; Closing Date: December31, 1985.

Consultants to assist LWUA in the preparation of feasibilitystudies for the first group of 20 cities have been hired. A new projectmanager was appointed and LWUA is actively promoting the creation of newWater Districts. Work has started on the development of a financialplanning and control system.

- 40 -ANNEX IIPage 14 of 17

Power Sector

Loan No. 809 Fifth Power: $22.0 Million Loan and $10.0 Million CreditCredit No. 296 of April 3. 1972; Date of Effectiveness: July 1, 1972;

Closing Date: June 30, 1980

The project was completed in mid-1977, two years behind schedule.Due to cost overruns, a part of the transmission project was transferred tothe Sixth Power Project, and the actual project cost as finally constructedwas about $59.3 million, an increase of about $11.0 million over the originalestimate. The Closing Date of the loan has been postponed from December 31,1979 to June 30, 1980 to allow full disbursement of committed funds. As ofthe end of December 1979, the undisbursed funds amounted to $1.0 million.Credit 296-PH was fully disbursed in April 1975.

Loan No. 1034 Sixth Power: $61.0 Million Loan of July 31, 1974:Date of Effectiveness: November 15. 1974;Closing Date: June 30. 1981

The project consists of a 100 MW hydropower plant at Pantabangan,Luzon, transmission lines for the expansion of the Luzon grid and consul-tants' services. The generating plant was commissioned in April 1977, andthe transmission facilities will now be completed late in 1980, more thantwo years behind schedule. The revised cost of the project is estimated at$114.1 million, an increase of about 24% over the original estimate($92 million). The cost overrun for the foreign exchange component is$5.2 million (9%). The Closing Date of the loan has been postponed fromDecember 31, 1978 to June 30, 1981 to allow additional time for completionof the transmission systems and payment of the retention money.

Loan No. 1460 Seventh Power Project: $58.0 Million Loan of August 9,1977; Date of Effectiveness: January 6, 1978;Closing Date: June 30, 1982

Procurement has been slow, with the result that disbursements havebeen behind schedule. Although the Bank waived the 8% rate of returnrequirement for 1978, NPC achieved a rate of return of 7% and expected toachieve 8% in 1979 after taking over plant previously owned and operated byMeralco. It is unlikely that NPC achieved an 8% rate of return in 1979since costs, especially of fuel, were higher than forecast. Plans forestablishing a training center, which was to be financed by the Bank, havebeen deferred.

- 41 -ANNEX IIPage 15 of 17

Loan No. 1547 Rural Electrification; $60.0 Million Loan of April 4,1978: Date of Effectiveness: August 17, 1978;Closing Date: December 31, 1981

The project is behind schedule due to the initial slow pace oftender document preparation and delays in procurement. However, followingreorganization of NEA's management, the first contracts for purchase of Bankproject materials were awarded in April 1979. Construction started in late1979 following receipt of project materials, and first disbursements areexpected before June 1980. NEA's financial performance and position in 1977and 1978 was good, and steps are being taken by NEA to strengthen itsmonitoring of the financial performance of the cooperatives, especiallytheir compliance with the Government's financial performance guidelines.

Industrial Sector

Loan No. 998 Industrial Investment and Smallholder Tree-Farming;$50.0 Million Loan of June 12, 1974; Date of Effectiveness:September 9. 1974; Closing Date: December 31, 1981

The industrial portion of the Loan ($48 million) has been used byDBP to finance direct imports for medium and relatively large industrialprojects. DBP is using the balance ($2 million) to finance about 1,300smallholders in a pilot tree-farming project in Mindanao; this part of theloan is almost fully disbursed.

Loan No. 1052 Private Development Corporation of the Philippines;$30 Million Loan of November 12, 1974; Date ofEffectiveness: February 7, 1975; Closing Date: June 30,1980

The loan is for on-lending by PDCP to financially and economicallyviable industrial subprojects. After some slowdown in commitments and dis-bursements experienced in 1976 and 1977 the loan has now been fully committed.Overall progress is satisfactory.

Loan No. 1120 Small and Medium Industries Development: $30.0 MillionLoan of June 5. 1975; Date of Effectiveness: August 20,1975: Closing Date: December 31, 1980

The original DBP ($15 million) and IGLF ($12 million) portions of the loanhave been fully disbursed. However, the Rural Industrial Cooperative Program($2.3 million) which is being implemented by the National ElectrificationAdministration is facing management and staffing problems because of itsexperimental nature. Disbursements on this component have been slow and,therefore, $1.7 million out of the original allocation of $2.3 million hasbeen reallocated to DBP, who can utilize this amount quickly. The SmallBusiness Advisory Centers program ($0.7 million) of the Ministry of Industryhas been implemented and is working satisfactorily. Overall progress of theproject is satisfactory.

-42 -

ANNEX IIPage 16 of 17

Loan No. 1190 Industrial Investment; $75.0 Million Loan of January 28,1975; Date of Effectiveness: April 6, 1976;Closing Date: March 31, 1980

In February, 1977, the Executive Directors approved a proposal toallocate $25 million of the funds from this loan for small and mediumindustries, and an amendment to the Loan Agreement to this effect was signedon March 16, 1977. Commitments of funds, which were initially much slowerthan expected due to a slowdown of investment in the industrial sector as awhole, improved in 1978 and 1979. The loan has since been fully committedby DBP for subprojects. Disbursement is now proceeding satisfactorily.

Loan No. 1514 Private Development Corporation of the Philippines (PDCP);$30 Million Loan of February 9, 1978;Date of Effectiveness: June 23,1978; Closing Date:March 31, 1982

The proceeds of the loan are being on-lent by PDCP for financingviable private industrial enterprises. As of January 31, 1980 commitmentsunder the loan amounted to $12.6 million. The project progress is satis-factory.

Loan No. 1555 Philippines Investments Systems Organization (PISO);$15 Million Loan of May 8, 1978; Date of Effectiveness:May 12, 1978; Closing Date: December 31, 1982

The actual pace of commitment of the loan was much faster thananticipated during loan appraisal, and the loan has since been fully committedby PISO. As of January 31, 1980, disbursements amounted to $10.2 million.Overall progress of the project is satisfactory.

Loan No. 1572 Third Industrial Investment Credit Project through theDevelopment Bank of the Philippines: $80 Million Loanof June 6, 1978; Date of Effectiveness: September 15,1978; Closing Date: June 30, 1982

Commitments for subprojects under the large industry componentamounted to $45.8 million as of January 31, 1980. In addition, as of thesame date the small and medium industry component had been disbursed to theextent of $7.6 million. The overall progress of the project is satisfactory.

- 43 - ANNEX II

Page 17 of 17

Loan No. 1727 Second Small and Medium Industries Development Project;$25 Million Loan of June 29. 1979: Date of Effectiveness:November 9. 1979: Closing Date: June 30, 1983

In the last quarter of 1979, the Government and the Central Bankworked on the introduction of policy changes in IGLF, for which purpose$24.5 million was provided under the loan. Loan utilization is expected tobegin soon. Overall progress of the project is satisfactory.

Population Sector

Loan No. 1035 Population: $25.0 Million Loan of July 31, 1974:Date of Effectiveness: November 13, 1974; ClosingDate: June 30. 1980

As of October 1979, 186 of the 219 project facilities had beencompleted, 28 were under construction and 5 had not been started.Contractors have completed about 90% of all construction work. During theperiod January to October 1979, many project components experiencedimplementation delays due to non-availability of Government counterpartfunds. While this problem was partially solved by internal transfer andreallocation of funds it is likely that there will be a six-to twelve-month delay in project completion. Following the disbanding on December 31,1979, of the administration unit for this project, a Project Coordinator wasappointed for both this and the second project. This action is expected tospeed up significantly the completion of this first project. In January1979 the project was amended to include financing of additional vehicles andequipment for service delivery; training; information, education andcommunication campaigns; and studies in preparation for the secondpopulation project. The amended total project cost is $40 million. Thetotal cost estimate had decreased from the estimate at appraisal, due mainlyto price increases not materializing as forecast. The management situationin the Commission on Population (POPCOM) is improving and a functionalanalysis of the Ministry of Health is under way. The recommendations ofthis study, if implemented, should considerably strengthen the health caredelivery system.

Credit No. 923 Second Population Project: $40.0 Million Credit ofJune 29 . 1979; Date of Effectiveness: October 15, 1979;Closing Date: June 30, 1985

This credit was declared effective on October 15, 1979. Implemen-tation started on January 1, 1980 when funds were made available from MOH andPOPCOM. Preparatory arrangements for training components of the project areproceeding satisfactorily, and information, education and communicationsactivities are being developed successfully at POPCOM and MOH. The 1980work plan has been reviewed and found satisfactory. Generally, overallprogress is satisfactory.

- 44 -

ANNEX III

PHILIPPINES

MEDIUM-SCALE IRRIGATION PROJECT

Supplementary Project Data Sheet

Section I - Timetable of Key Events

(a) Time taken by the country to prepare the project: 20 months

(b) The agency which prepared the project: National IrrigationAdministration

(c) First presentation to the Bank, and firstBank mission to consider the project: August 1978 and May 1979

(d) Departure of Appraisal Mission: September 1979

(e) Completion of Negotiations: February 1980

(f) Planned Date of Effectiveness: July 1980

Section II - Special Bank Implementation Actions

None

Section III - Special Conditions

The Borrower agreed that:

(a) NIA would prepare terms of reference and an outline of an operationand maintenance study to be financed under the project, and, afterreview by the Bank, carry out the study with the assistance ofconsultants (para. 45);

(b) NIA and MOH would enter into an agreement, acceptable to the Bank,before December 31, 1980, for the implementation of the malariacontrol component (para. 46).

(c) NIA would gradually increase irrigation fees over a period of fiveyears from completion of construction to a level equivalent toabout 3.5 cavans of paddy per ha in the wet season and 4.4 cavansin the dry season (para. 61);

(d) NIA would take all necessary action to ensure full and prompt col-lection of irrigation fees, and consult with the Bank annually onthe adequacy of the charges and the collection thereof (para. 62);

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