World Bank Document

Document of The World Bank FOR OFFICIAL USE ONLY FILE COPY Public Disclosure Authorized Report No. 2449 PROJECT PERFORMANCE AUDIT REPORT PHILIPPINES FIRST HIGHWAY PROJECT (LOAN 731-PH) Public Disclosure Authorized April 2, 1979 Public Disclosure Authorized Public Disclosure Authorized Operations Evaluation Department This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. - i - FOR OFFICIAL USE ONLY PROJECT PERFORMANCE AUDIT REPORT PHILIPPINES FIRST HIGHWAY PROJECT (LOAN 731-PH) Table of Contents Page No. PREFACE 11 PROJECT PERFORMANCE AUDIT BASIC DATA SHEET 111 HIGHLIGHTS iv PROJECT PERFORMANCE AUDIT MEMORANDUM 1 I. Introduction 1 II. The Project 1 III. Points of Interest 2 IV. Conclusions 6 ATTACHMENT I: PROJECT COMPLETION REPORT I. Introduction 7 II. Project Preparation and Appraisal 7 III. Project Implementation and Cost 9 IV. Performance and Organization of Borrower 17 V. Economic Reevaluation 21 Tables 1. Cotabato-Digos Road - Government Funds Requested, Released and Disbursed for 1976 23 2. Cotabato-Digos Road - Contract Costs 24 3. Description of Roads and Construction Costs 25 4. Consulting Services 26 5. Project Components of Costs 27 6. Schedule of Disbursements 28 7. Traffic Volumes on Cotabato-Digos Road 29 8. Traffic Growth, Road Sections Open to Traffic by Year, and Savings in Vehicle Operating Cost 30 ATTACHMENT II: GOVERNMENT'S COMMENTS 31-34 Map This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. - 11 - PROJECT PERFORMANCE AUDIT REPORT PHILIPPINES FIRST HIGHWAY PROJECT (LOAN 731-PH) Preface This is a Project Performance Audit Report on the Philippines First Highway Project, for which Loan 731-PH for US$8.0 million was closed, fully disbursed, in June 1976. The report consists of a Project Performance Audit Memorandum prepared by the Operations Evaluation Depart- ment (OED) and a Project Completion Report (PCR) prepared by the East Asia and Pacific Regional Office. The memorandum is based on the PCR and discussions with Bank staff members familiar with the project; the transcript of the Executive Directors' meeting of April 6, 1971 has been read and project documents and files have been reviewed. The project was visited during an OED mission to the Philippines in March 1977 in connection with the Consul- tants' Services Study.l/ The audit has been delayed because extensive revisions in the PCR were required. The Government's comments on the draft PPAR have mostly been reflected and a copy of the comments has been included as Attachment II. The audit memorandum agrees with the main conclusions of the revised PCR but presents a more critical review of some aspects of the project and amplifies on others which appear to be of particular significance. 1/ Study of the Role and Use of Consultants in Bank Group Projects, Report No. SecM77-865, dated December 8, 1977. - iii - PROJECT PERFORMANCE AUDIT BASIC DATA SHEET PHILIPPINES FIRST HIGHWAY PROJECT (LOAN 731-PH) KEY PROJECT DATA Original Actual or Item Plan Current Estimate Total Project Cost (US$ Million) 15.8 192 1.4l/ Overrun (2) Loan Amount (US$ Million) 8.0 8.0 Disbursed ) 8.0 8.0 Caneld ) 1/31/79 0.7 Repaid to0,8 0.8 Borrower's Obligation )7.3 8.4 2/ Date Physical Components Completed 9/74 8/75 3/ 80 3/ Proportion Completed by Above Date ()- 20 3/ Proportion of Time Overrun (%) - Economic Rate of Return (W) 18 15 Institutional Performance Average Average Cumulative Estimated aid Actual Disbursements (USs Million) 1972 1973 1974 1975 1976 (i) Estimated 2.6 6.0 7.5 8.0 8.0 (ii) Actual 1.3 3.6 4.9 5.9 8.0 % of (ii) to (i) 50.0 60.0 65.3 73.8 100.0 OTHER PROJECT DATA Original Actual or Item Plan Revisions Current Estimate First Mention in Files - - 1/28/63 Government's Application - - 4/25/63 Negotiations - - 2/ -/71 Board Approval - - 4/06/71 Loan Agreement Date - - 4/14/71 Effectiveness Date - - 7/23/71 Closing Date 5/15/75 6/30/76 6/30/76 Borrower Republic of the Philippines Executing Agency Bureau of Public Highways Fiscal Year of Borrower July 1 - June 30 Follow-on Project Name Second and Third Highway Projects Loan Number Loans 950-PH and 1353-PH Amount (US$ Million) 68.0; 95.0 Loan Agreement Date 12/12/73; 1/12/77 MISSION DATA Date Month/ No. of No. of of Full Item Year Weeks Persons Man-weeks Report Identification n.a. n.a. n.a. n.a. 11/62 Preparation 9/63 2 1 2 10/63 Preappraisal 8/69 2 1 2 9/69 Appraisal 7/70 2 1/2 3 7 1/2 10/70 Supervision I 12/71 2 2 4 2/72 Supervision II 4/72 2 2 4 5/72 Supervision III 8/72 1 1 1 9/72 Supervision IV 12/72 2 2 4 1/73 Supervision V 6/73 1 2 2 7/73 Supervision VI 5/74 2 1 2 6/74 Supervision VII 12/74 2 1 2 1/75 Supervision VIII 5/75 1 1 1 7/75 Completion 3/76 1 1 1 4/76 COUNTRY EXCHANGE RATES Name of Currency (Abbreviation) Peso (P) Appraisal Year Average Exchange Rate: US$1 = P 6.12 Intervening Years Average US$1 - P 6.56 Completion Year Average US$1 = P 7.35 1/ Depending on whether outstanding claims will be settled. 2/ Includes US$1.2 million for exchange adjustments. 3/ Does not refer to the entire project. About 20% of the highway construction work was delayed by civil disturbances. - IV - PROJECT PERFORMANCE AUDIT REPORT PHILIPPINES FIRST HIGHWAY PROJECT (LOAN 731-PH) Highlights The main purposes of the project were the reconstruction of 160 km of road in the southern part of the Philippines and the provision of technical assistance to strengthen the Department of Public Highways. The project was supported by a Bank loan for US$8.0 million. Most of the road has been constructed as planned, but completion of some sections was delayed due to civil disturbances in the project area. The technical assistance has been successfully implemented. The project had a cost overrun of about 30% and a time overrun of some 20% (the latter excluding the works which had to be deleted from the original construction contract and are now being completed by the Government). Civil disturbances in the project area have contributed to a lower than anticipated traffic growth, but the road still makes a use- ful contribution to the economic development of the area it traverses. The reestimated economic return is 15% against 18% estimated at the time of appraisal. Points of particular interest are: - apparent weaknesses in the Bank's communications with the Government have led to less than optimal use of foreign assistance for road improvements (paras 6, 17); - the need for continued Bank supervision until the project has been fully completed (paras 8, 16); - the successful introduction of local consultants (paras 9, 10, 11); - progress on the introduction of adequate road maintenance and axle load control has been slower than expected (PCR, paras 4.07-4.13). - 1 - PROJECT PERFORMANCE AUDIT MEMORANDUM PHILIPPINES FIRST HIGHWAY PROJECT (LOAN 731-PH) I. Introduction 1. Transport in the Philippines, which has a land area roughly the size of Italy, is complex, because the country consists of some 7,000 islands. A transport survey carried out in 1968, financed by the UNDP with the World Bank as executing agency found that of the primary transport flows for goods 57% went by road transport, 41% by maritime transport and 2% by railway, while 82% of passenger transport went by road. Difficult terrain and poor soil conditions for road buil ding have imposed constraints on the development of road transport. 2. To date the Bank's assistance in financing the transport sector has involved six loans: two port projects (Loan 290-PH for US$8.5 million in 1961 and Loan 939-PH for US$6.1 million in 1973); one inter- island shipping project (Loan 1048-PH for US$20 million in 1974); and three highway projects (Loan 731-PH for US$8.0 million in 1971, Loan 950-PH for US$68.0 million in 1973 and Loan 1353-PH for US$95.0 million in 1977). Performance on the First Port Project, which included procure- ment of dredging equipment, was unsatisfactory, due to inadequate opera- tion and maintenance of the dredges, and some US$1.1 million of the loan was cancelled. The subject of this audit is the second transport project in the Philippines. The other projects are still being implemented. II. The Project 3. The purpose of the project was to assist the Department of Public Highways (DPH)1/ with the implementation of a highway construction and improvement program and to strengthen their organization. The project comprised construction of a 160 km long highway on the southern island, Mindanao, linking Cotabato with Digos, at an estimated appraisal cost of US$5.9 million, and consultants' services totalling US$6.9 million for construction design and supervision, technical assistance to DPH and preparation of a next project. Including interest during construction and contingencies, the estimated project cost was US$15.8 million (for de- tails, see PCR, Table 5). The Bank loan which was signed in April 1971 financed US$8.0 million, while the UNDP was to contribute US$1.9 million towards technical assistance.

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