Document of The World Bank

For Official Use Only

Public Disclosure Authorized Report No: ICR0000723

IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-42990)

ON

A LOAN

Public Disclosure Authorized IN THE AMOUNT OF US$50 MILLION EQUIVALENT

TO

THE REPUBLIC OF THE PHILIPPINES

FOR

THE COMMUNITY-BASED RESOURCES MANAGEMENT PROJECT

Public Disclosure Authorized

April 15, 2008

Rural Development, Natural Resources and Environment Sector Unit Sustainable Development Department East Asia and Pacific Region

Public Disclosure Authorized 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.

CURRENCY EQUIVALENTS

(Exchange Rate Effective January 14, 2008)

Currency Unit: Philippine Peso (PhP) PhP 1.00 = US$0.0246 US$1.00 = PhP 40.65

FISCAL YEAR

January 1 – December 31

ABBREVIATIONS AND ACRONYMS

BFAR Bureau of Fisheries and Aquatic Resources BLGF Bureau of Local Government Finance CBFMA Community-based Forest Management Agreement CBRMO Community Based Resource Management Office CDD Community-Driven Development DA Department of Agriculture DENR Department of Environment and Natural Resources DoF Department of Finance EIRR Economic Internal Rate of Return FIRR Financial Internal Rate of Return GAD Gender and Development IE Impact Evaluation ICR Implementation Completion and Results Report KPI Key Performance Indicators LGC Local Government Code LGU Local Government Unit (provinces and municipalities) MAENRO Municipal Agriculture, Environment and Natural Resources Office MAO Municipal Agriculture Office MENRO Municipal Environment and Natural Resources Management Office MDF Municipal Development Fund MDFO Municipal Development Fund Office M&E Monitoring and Evaluation MTR Mid-Term Review NPV Net Present Value NRM Natural Resource Management PAD Project Appraisal Document PDO Project Development Objective PO People’s Organization SECAL Philippines Environment and Natural Resource Sector Adjustment Program (SECAL) Project QAG Quality Assurance Group

Vice President: James W. Adams, EAPVP Country Director: Bert Hofman, EACPF Sector Manager: Rahul Raturi, EASRE Task Team Leader: Idah Pswarayi-Riddihough, EASRE

Republic of the Philippines

The Community-Based Resources Management Project

Implementation Completion and Results Report

Contents Page No.

Data Sheet i

Section 1. Project Context, Development Objectives and Design ...... 1 2. Key Factors Affecting Implementation and Outcomes...... 5 3. Assessment of Outcomes ...... 9 4. Assessment of Risk to Development Outcome...... 16 5. Assessment of Bank and Borrower Performance...... 16 6. Lessons Learned...... 19 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners...... 20

Annex 1. Project Costs and Financing...... 22 Annex 2. Outputs by Component...... 23 Annex 3. Economic and Financial Analysis ...... 27 Annex 4. Beneficiary Survey Results ...... 31 Annex 5. Bank Lending and Implementation Support/Supervision Processes...... 32 Annex 6. Stakeholder Workshop Report and Results...... 35 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR ...... 37 Annex 8. Comments of Co-financiers and Other Partners/Stakeholders...... 39 Annex 9. List of Supporting Documents...... 40

Map : IBRD # 29354

DATA SHEET

A. Basic Information The Community-Based Country Philippines Project Name Resources Management Project Project ID P004595 Loan Number IBRD-42990 ICR Date 04/15/2008 ICR Type Core ICR Lending Instrument SIL Borrower Government of the Philippines Original Total Disbursed US$50.0 million US$34.7 million Commitment Amount Environmental Category B Implementing Agency Department of Finance Co-financiers & Other External Partners None

B. Key Dates Process Date Process Original Dates Actual Dates Concept Review August 27, 1993 Effectiveness October 6, 1998 October 6, 1998 June 6, 2001 Appraisal January 26, 1998 Restructurings - June 6, 2002 Approval March 24, 1998 Mid-term Review - April 11, 2001 Closing June 30, 2004 June 30, 2007

C. Ratings Summary C.1 Performance Rating by ICR Outcome Satisfactory Risk to Development Outcome Moderate Bank Performance Satisfactory Borrower Performance Satisfactory

C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry MS Government S Quality of Supervision S Implementing Agency S Overall Bank Performance S Overall Borrower Performance S

i C.3 Quality at Entry and Implementation Performance Indicators Implementation Performance Indicators QAG Assessments (if any) Rating Potential Problem Project at Yes Quality at Entry (QEA) None any time? Problem Project at any time? Yes Quality of Supervision (QSA) Satisfactory

DO rating before Closing Satisfactory

D. Sector and Theme Codes Original Actual Sector Code (as percentage of total Bank financing) General agriculture, fishing and forestry sector 45 35 Other social services 7 12 Roads and highways 20 24 Sub-national government administration 8 17 Water supply 20 12

Theme Code (Primary/Secondary) Decentralization Secondary Secondary Environmental policies and institutions Primary Secondary Land administration and management Primary Primary Rural services and infrastructure Secondary Primary

E. Bank Staff Positions At ICR At Approval Vice President James W. Adams Jean-Michel Severino Country Director Bert Hofman Vinay Bhargava Sector Manager Rahul Raturi Geoffrey Fox Project Team Leader Idah Z. Pswarayi-Riddihough Frank Fulgence K. Byamugisha ICR Team Leader Felizardo K. Virtucio - ICR Primary Author Dorothy Lucks -

ii

F. Results Framework Analysis

Project Development Objective

The main project development objective (PDO) was to reduce rural poverty and environmental degradation through support for locally generated and implemented natural resource management sub-projects. The project aimed at: (a) enhancing the capacity of low-income rural local government units (LGUs) and communities to plan, implement and sustain priority natural resource management projects; (b) strengthening central government systems to transfer finance (as financial intermediaries) and environmental technology, and improve the implementation of environmental policies; and (c) providing resources to local government units to finance natural resource management projects.

Revised Project Development Objective

The PDO remained unchanged throughout the life of the project.

Project Development Objective Indicators

Baseline Original Target Formally Actual Values Value Values Revised Achieved (from approval (from approval Target at Completion or documents) documents) Values Target Years PDO Indicator 1 Household incomes are increased. Value None stated Incomes of 25 percent - Incomes of 65 percent of beneficiary of households have households are been increased. increased. Date achieved - - - December 2006 Comments The project exceeded the PDO target. A higher proportion of households were able to achieve an increase in income as a result of the active participation of People’s Organizations (POs) through a community-driven development (CDD) process. The extent to which incomes were increased varied widely across the households from short-term labor opportunities to sustained and substantial income increases. PDO Indicator 2 Management of natural resources is improved. Value None stated To be measured in - All Key Indicators were terms of the outcome achieved. indicators (below). Date achieved - - - December 2006 Comments The management of natural resources was improved in 100 percent of the sites, apart from the 30 sites that were dropped during the initial restructuring where implementation had not commenced. An additional 18 sites were included later in the project and reached comparable levels of performance. Varying degrees of improvement were seen depending on the nature of the local resources, the capacity of the LGU and the community, and the level of support available through the partner agencies.

iii

Intermediate Outcome (IO) Indicators

Baseline Value Original Target Formally Actual Values (from approval Values Revised Achieved documents) (from approval Target at Completion or documents) Values Target Years IO Indicator 1 Upland and forestry practices are improved. Value None stated • Increase in - 1,825 ha reforestation • Increase in vegetation - 16,013 ha (agro- cover forestry) • Area with other soil - 1,517 ha (micro- erosion control watersheds) measures increased 822 ha (river bank stabilization) • Increase in perennial - 7,171ha crops Date achieved - - - December 2006 Comments Targets for upland and forestry practices were established at the operational level, based on site plans per municipality. Overall interventions for natural resource management upland and forestry activities are assessed at 96 percent achievement of the 2003 interim targets. Achievements were close to targets because works were contracted to community members and the final payment was not approved until all the agreed works were completed. IO Indicator 2 Coastal and near-shore fisheries are improved Value None stated • Artificial reefs are - 738 units increased • Fish sanctuaries are - 11,585 ha increased • Mangrove areas are - 7,327 ha reforested • Beaches are protected - 130 ha Date achieved - - - December 2006 Comments Overall interventions for coastal and near-shore fisheries activities are assessed at 91 percent of the 2003 interim targets based on the individual site plans. IO Indicator 3 Supporting rural infrastructure is rehabilitated and improved Value None stated • New roads constructed - 0 • Roads are rehabilitated - 143 km farm-to-market roads 29 km graded trails & foot paths 1,48l m foot bridges & • Potable water supply river crossings systems are increased - 131 Units • Irrigation systems are improved - 0

Date achieved - - - December 2006 Comments The achievements for rural infrastructure were generated through a community-driven development (CDD) approach that was “demand-driven”. An operational policy was approved in 2000 which removed new roads and irrigation from the sub-project menu due to potential for negative environmental impact.

iv Baseline Value Original Target Formally Actual Values (from approval Values Revised Achieved documents) (from approval Target at Completion or documents) Values Target Years IO Indicator 4 LGU capacity to improve livelihood and manage natural resources is strengthened Value None stated • number of LGUs - 99 LGUs requesting sub- projects • 75 percent of sub- - 90 percent project proposals are approved • number of LGUs - receiving training in: - project management 114 percent - financial management 61 percent - technical skills 115 percent • 90 percent of loans are - 95 percent repaid on time Date achieved - - - December 2006 Comments The improvement of LGU capacity was close to or exceeded the interim targets except for financial management which, despite significant improvements in some LGUs, still remained weaker than targeted. This was partly because of the limited availability of staff with detailed knowledge of the Municipal Development Fund Office (MDFO) financial processes. IO Indicator 5 Barangay capacity to implement livelihood and natural resources management improvement activities is strengthened. Value None stated • number of barangays - 601 (81 percent of total requesting sub- target barangays) projects • 75 percent of sub- - 88 percent project proposals at barangays are implemented • groups receive - training in: - project management 732 (99 percent) - financial management 741 (100 percent) - technical skills 708 (96 percent) • 90 percent of loans are - 33 percent to date repaid on time Date achieved - - - December 2006 Comments Of the 741 barangays covered, all received training. Most received several formal training sessions and also technical support from the project, LGU and partner agency staff. The proportion of loans repaid on time is below the target partly as a result of the late commencement of income-generating activities and also LGUs amending payment schedules in collaboration with the groups (which was not recorded in the project data- base system). IO Indicator 6 Municipal Development Fund “rural window” for financing livelihood and natural resource management improvement is viable. Value Zero base (no loans • number of loans made - 89 loans existed prior to the • repayment rate of - 95 percent project) 90 percent • delinquency rate of - 5 percent

v Baseline Value Original Target Formally Actual Values (from approval Values Revised Achieved documents) (from approval Target at Completion or documents) Values Target Years less than 10 percent Date achieved - - - December 2006 Comments Loans made to LGUs were issued through the newly-created “rural window" that was a key achievement of the project. The establishment of the loan approval process required streamlining, but once approval processes were simplified the rate of loans increased. Repayments are collected by capture of government revenue funds for the respective LGU prior to their disbursement. The five percent “delinquency rate” was mainly the result of LGUs that requested and were granted a deferral of loan repayment deduction because of difficulties experienced with typhoons or similar calamities.

G. Ratings of Project Performance in Implementation Supervision Reports

Date ISR Actual Disbursements No. DO IP Archived (US$ million) 1 04/24/1998 Satisfactory Satisfactory 0.00 2 12/23/1998 Satisfactory Satisfactory 1.50 3 06/28/1999 Satisfactory Unsatisfactory 1.50 4 12/28/1999 Satisfactory Unsatisfactory 1.81 5 01/21/2000 Satisfactory Satisfactory 1.91 6 06/01/2000 Satisfactory Satisfactory 2.21 7 12/21/2000 Satisfactory Satisfactory 2.92 8 05/31/2001 Unsatisfactory Unsatisfactory 4.63 9 12/21/2001 Unsatisfactory Unsatisfactory 5.93 10 06/24/2002 Satisfactory Satisfactory 8.21 11 06/27/2002 Satisfactory Satisfactory 8.21 12 07/12/2002 Satisfactory Satisfactory 8.21 13 12/19/2002 Satisfactory Satisfactory 12.26 14 01/21/2003 Satisfactory Satisfactory 13.07 15 06/25/2003 Satisfactory Satisfactory 15.58 16 12/23/2003 Satisfactory Satisfactory 20.22 17 12/24/2003 Satisfactory Satisfactory 20.22 18 05/31/2004 Satisfactory Satisfactory 22.06 19 11/09/2004 Satisfactory Satisfactory 23.74 20 05/19/2005 Satisfactory Satisfactory 25.22 21 12/21/2005 Satisfactory Satisfactory 28.03 22 01/22/2007 Satisfactory Satisfactory 33.92

vi

H. Restructuring

Board- ISR Ratings at Amount Disbursed Restructuring Reason for Restructuring Approved PDO Restructuring at Restructuring Dates and Key Changes Made Change DO IP (US$ million) US$10 million was cancelled because of initial slow implementation progress and exchange rate differences. The 06/01/2001 S S 4.63 restructuring corrected basic project processes and decentralized project implementation. Performance had reached satisfactory levels but exchange rate differences had 06/01/2002 S S 8.05 generated a higher-than- projected domestic currency (PhP) amount that was surplus to the required funds.

I. Disbursement Profile

vii 1. Project Context, Development Objectives and Design

1.1 Context at Appraisal

1.1.1 In accordance with the Country Assistance Strategy in effect at the time of appraisal (Report No. 15362-PH, 1996) and the Government of the Philippines Medium-Term Development Plan, priority was given during identification to addressing two major related challenges to rural development: rural poverty and environmental degradation. Agricultural growth had declined from 5.8 percent per annum in 1970-1979 to 2.1 percent per annum in 1980- 1989 and had risen slightly to 2.2 percent per annum in the period prior to project design (1990- 1994). The incidence of poverty in the Philippines at the time of appraisal was 50 percent in rural areas and 34 percent for the country as a whole1.

1.1.2 The highest poverty incidence was identified in areas of degraded natural resources, particularly upland and coastal areas. Fishermen and forestry workers 2 were amongst the poorest in the country. Logging activities and destructive land-use practices 3 had reduced the original 17 million ha of forest cover in the country to 5.5 million ha. Steadily growing population pressures, displacement of marginal and indigenous peoples with traditional stewardship patterns in resource management, and the lack of legal and practical mechanisms for resource protection were all leading to the conversion of forest land into marginal upland farming. Over-fishing; soil, coastal and reef erosion; pollution; destruction of mangrove forest; and unsustainable fishing practices had led to a steadily-reduced fish catch and increasing subsistence farming in fragile coastal zones.

1.1.3 At the same time, the Bank and the government were supporting decentralization and improved local governance in poverty reduction and sustainable development activities. Two key challenges were identified in the decentralization processes and the resultant greater responsibility of LGUs in improved environmental management. These were: (a) the difficulty in channeling funds from the national government to LGUs for investment programs; and (b) the low involvement of LGUs in long-term natural resource improvement programs aimed at sustainable economic growth.

1.1.4 The rationale for Bank assistance was three-fold: (a) its experience in investment in the rural sector to stimulate economic growth and reduce poverty; (b) its commitment to support the government in improved environmental management measures; and (c) its interest and experience in providing assistance to the government and participating LGUs in improved decentralization financing mechanisms.

1.2 Original Project Development Objective and Key Indicators

1.2.1 The main objective of the project was to reduce rural poverty and environmental degradation through support for locally generated and implemented natural resource management (NRM) sub-projects. This was to be achieved through: (a) enhancing the capacity of low-income LGUs and communities to plan, implement and sustain priority NRM projects; (b) strengthening central government systems to transfer finance (as financial intermediaries) and environmental

1 The PAD referred to 1994 poverty data. The population at that time was estimated at 67.5 million. 2 Fishermen and forest workers accounted for 76.7 percent and 82.6 percent, respectively, of the rural population. 3 There were almost 800 legal and illegal Timber License Agreements during its peak in the 1960s and 1970s.

1 technology, and improve the implementation of environmental policies; and (c) providing resources to LGUs to finance NRM sub-projects. The main indicator of reduced rural poverty was defined as an increase in the incomes of 25 percent of beneficiary households.

1.2.2 The main indicators of reduced environmental degradation were more complex, and were defined in terms of the project outcomes (described somewhat confusingly as “specific development objectives” in the PAD text and as “project outputs” in the PAD Project Design Summary). These were expected to be:

(a) the improved management of upland and forestry resources, the indicators for which would be: (i) a reduction in deforestation; (ii) an increase in vegetation cover; (iii) a reduction in soil erosion; and (iv) an increase in the area of perennial crops.

(b) an improvement in coastal and near-shore fisheries resources, the indicators for which would be: (i) an expansion in the area under mangrove forest; (ii) a reversal in the decline of fish catches; and (iii) an increase in the area of artificial reefs and fish sanctuaries.

(c) an improvement in infrastructure in support of the management of upland, coastal and near- shore natural resources, the indicators for which would be improvements in rural roads (through new construction and rehabilitation of existing roads), water supply, sanitation facilities, irrigation systems and other small-scale infrastructure.

(d) an improvement in the capacity of LGUs to improve livelihoods and manage natural resources, the indicators for which would be: (i) the number of LGUs requesting eligible sub- projects; (ii) the proportion of sub-project proposals approved (which would reach 75 percent); (iii) the number of LGUs receiving training; and (iv) the proportion of loans repaid on time (which would reach 90 percent).

(e) a strengthened capacity of barangays (villages) to implement improved livelihood and NRM practices, the indicators for which would be: (i) the number of barangays requesting sub-projects; (ii) the proportion of approved sub-projects being implemented (which would reach 75 percent); (iii) the number of barangays receiving training; and (iv) the proportion of loans being repaid on time (which would reach 90 percent).

(f) the Municipal Development Fund (MDF) rural window would be shown to be viable, the indicators for which would be: (i) the number of loans made; and (ii) the achievement of an improved repayment rate (of ≥ 90 percent) and an improved delinquency rate (of ≤ 10 percent).

1.3 Revised PDO and Key Performance Indicators

1.3.1 There was no revision of the PDO during project implementation. The project was first restructured during the Mid-Term Review (MTR) in 2000; the changes made were related mainly to corrective measures in implementation processes and capacity development needs within the implementing agency. The second restructuring, in June 2002, was largely focused on adapting the project design to a more decentralized approach and introducing the CDD procurement mechanisms. Both restructurings included the generation of specific targets in relation to the intermediate outcome indicators and in response to the specific planning occurring through the community-led planning processes. However, no formally recorded change in Intermediate Outcome Indicators or targets was registered in the Bank’s system. One operational amendment to the original indicators occurred as the result of an internal project policy decision not to approve sub-project proposals for new road construction or irrigation because of the potential

2 negative environmental impacts. As a result, these were not retained as key indicators during implementation.

1.3.2 Overall, the Key Performance Indicators were biased downwards being “output” indicators. Outcome indicators where included were difficult to assess in the absence of the necessary base-line. It is important to emphasize that the project was among the first in the Bank’s portfolio at a time that it was beginning a substantive engagement in supporting different aspects of decentralization and the Local Government Code (LGC) of 1992, and in that respect was breaking new ground.

1.4 Main Beneficiaries

1.4.1 The main beneficiaries were those LGUs with a high proportion of small farmers, fishermen and people generating income from forest products. Fishermen and forestry workers were identified at appraisal to be amongst the poorest in rural Philippines, with a poverty incidence of 76.7 percent and 82.6 percent, respectively, of the rural poor. Likewise, poverty incidence in the uplands was recorded at 61 percent at the time of project design, which was considerably higher than the rural average of 54 percent4. The beneficiaries relied heavily on natural resources for their livelihood. Project sites were approved on the basis of two broad criteria: (a) the identification of four focus regions with a high proportion of environmental concerns and high poverty incidence; and (b) a demand-driven approach where LGUs expressed interest in participating in the project and had sufficient commitment to provide the necessary counterpart funds. The four selected regions (Regions 5, 7, 8 and 13) include provinces such as Masbate that were, and still are, amongst the poorest in the country.

1.5 Original Components

1.5.1 The project had four components. The costs estimated at appraisal included price but not physical contingency provisions.

Component 1: Sub-projects in Natural Resource Management (appraisal cost US$46.9 million, 69.5 percent of total project cost). This component was designed to finance investments in NRM via grants and loans to LGUs made through a new rural window of the MDF. Investment sub-projects were grouped into three categories: (a) upland agriculture and forestry; (b) coastal resource and near-shore fisheries; and (c) small rural infrastructure and livelihood activities related to NRM.

Component 2: Planning and Implementation Support to LGUs (appraisal cost US$6.7 million, 9.9 percent of total project cost). This component was designed to support LGUs and their barangays, through training and equipment supply, in the planning and implementation of sub-projects.

Component 3: Initiating a Municipal Development Fund Rural Window and Project Management (appraisal cost US$7.4 million, 11.0 percent of total project cost). This component was designed to support a project management office that would be incorporated into the structure of the MDF after a period of three years.

4 "Philippines Rural Growth and Poverty Alleviation: The Next Steps", World Bank, 1996.

3 Component 4: Environmental Technology Transfer and Policy Implementation (appraisal cost US$6.5 million, 9.6 percent of the total project cost). The Department of Environment and Natural Resources (DENR) and the Department of Agriculture (DA) were to be supported to transfer natural resource management technology to the LGUs and to improve the management of environmental policies.

1.5.2 Component One directly contributed to the Intermediate Outcome Indicators 1, 2 & 3 related to both NRM and income generation. Components Two, Three and Four had an institutional development focus at national, regional, provincial and local levels. Component Two, although designed to result in the sub-projects supported in Component One, sought to improve the capacity of the LGUs to access and manage financing for natural resource management sub-projects provided through Component Three. Component Three was the crux of the project – the establishment of a Rural Window for LGUs that would be sustained beyond the project period. Component Four was an institutional support component to create a more enabling environment for both the MDFO financing window and for the LGUs to implement sub- projects, and repay the loan amortization. The four components combined to develop a viable financing mechanism for natural resource management initiatives that would reduce both rural poverty and environmental degradation.

1.6 Revised Components

1.6.1 The components were not revised during project implementation.

1.7 Other significant changes

1.7.1. Design. Project corrective restructuring occurred after the MTR when the project was rated as “unsatisfactory” in terms of progress towards achievement of the development objective. Key criticisms were raised in the MTR regarding the design, particularly that some features were unrealistic and that the procedures in the LGU financing window were cumbersome. Although the overall design remained the same as at appraisal, the changes to the design included a simplified and more flexible process for the LGU financing window. This was also a period when the MDF was undergoing institutional change, driven by discussions in government on the parameters that should be guiding the additional transfer of funds to LGUs through the MDF and on the transformation of the MDF into the MDFO. In 2002, an adaptation of project procedures was carried out to include a CDD approach in planning, procurement and implementation.

1.7.2 Implementation arrangements. In line with the design changes, decision-making was devolved to regional levels; processes and review procedures were simplified; an expanded menu for infrastructure sub-projects provided greater flexibility in implementation and multi-agency efforts were enhanced. A specific focus was placed on the formation and strengthening of POs as a key implementation modality. These changes were approved through formal supervision missions, and with reference to specific thematic technical missions fielded by the Bank to assist in the restructure.

1.7.3 Implementation schedule. There were two extensions to the project time-frame. The first extension of the Loan Closing Date of two years was made largely to overcome early delays in implementation. A further one-year extension of the Closing Date was approved because implementation momentum had been achieved and additional funds (the result of exchange rate shifts) were available to allow completion of works in progress.

4 1.7.4 Scope and Scale. The scope of the project was reduced from 120 LGUs to 90 LGUs during the MTR. A further eight LGUs were removed because of non-compliance in performance in 2002. New LGUs were allowed to enter the project at that time, leading to a final coverage of 102 LGUs (85 percent of projected scope). The change in scope resulted in a reduction in the target number of families benefiting, from 27,300 households and 300,000 indirect beneficiaries (including non-participating household members and indirect beneficiaries of infrastructure sub-projects) to 23,205 households and 255,000 indirect beneficiaries5.

1.7.5 Project Financing. The Philippine Peso (PhP) was devalued substantially during the project period in relation to the US$, from US$1 = PhP34.05 in 1997 to US$1 = PhP51.00 in 2001. Consequently, a partial loan cancellation of US$10 million was made in July 2001. A further cancellation of US$2 million was made during September 2002, mainly as a result of savings through further exchange rate shifts (US$1 = PhP51.60 in 2002). Figure 1 shows how, by project closing, the actual disbursement exceeded the original projected loan amount in PhP terms even with the two partial Loan cancellations.

Figure 1. Projected cf. Actual Disbursements (in PhP million)

2,000 1,800 1,600 PAD Cumulative 1,400 Disbursement 1,200 Projections PhP @ US$1: PhP34.05 1,000 Actual Cumulative 800 Releases in PhP 600 400 200 - 1998 1999 2000 2001 2002 2003 2004 2005 2006

2. Key Factors Affecting Implementation and Outcomes

2.1 Project Preparation, Design and Quality at Entry

2.1.1 Soundness of Background Analysis. The project’s core design was sound and based on adequately reasoned analysis. The main premise of the project was institutional development to provide a mechanism for financing to LGUs for natural resource management subprojects. Targeting mechanisms were appropriate to the identified beneficiaries. In terms of technical implementation, the project may have been better placed within DENR; however, given the focus on institutional development, the mechanisms proposed were realistic. The analysis identified that MDFO was a relatively new institution with limited capacity, and proposed capacity building support. Similarly, the lack of experience of the LGUs was identified and addressed in the analysis. Linking natural resource management initiatives and income generation was an

5 There had been a rough revised target of 20,000 households generated during the restructuring, but this was further refined during more detailed technical assistance on M&E following the restructuring.

5 innovation that had been trialed in the previous SECAL6 project. The project design acknowledged the lessons learned and integrated learning in the project design.

2.1.2 Key factors and issues on the Quality at Entry: The key factor affecting quality at entry was the limited capability and experience of MDFO to establish the necessary implementation processes. A lack of project management experience, delays in recruiting and hiring staff, the high turn-over of key staff and overly bureaucratic procedures were barriers to smooth project establishment and early implementation (see also Section 5.1 (a)). The absence of base-line data was also a serious impediment to the establishment of project monitoring.

2.1.3 Assessment of project design: The significant income and environmental impact of the project has borne out the basic appropriateness of the planned interventions (see the PDO Indicators in the Data Sheet). The components were relevant to the needs of the project partners. Issues arose in execution of the design during the early stages. The issues were not due to design gaps or technical difficulties, rather due to the capability of the implementers to move the design from concept to operations (see also paragraph 3.1.2).

2.1.4 Government commitment: The government was committed to the project from commencement and remained committed throughout the project period, demonstrating substantial efforts to address the project requirements. The project design did recommend a focus on the institutional development of the MDFO but there was insufficient preparation on the part of the MDFO to fulfill the required role in the early stages of the project. The lack of implementation experience of the Department of Finance (DoF) MDFO contributed to a slow project start-up and initial implementation bottlenecks. The intensified focus by the Bank and implementing partners on institutional arrangements and project management after the MTR redressed the capacity gaps as shown by the improved performance later in the project.

2.1.5 Risks: The PAD identified five modest risks to project performance. These were: (a) the potential for adverse weather conditions; (b) a potential lack of commitment to operation and maintenance; (c) a low level of demand from LGUs for investment in non-revenue-raising sub- projects; (d) possible inadequate or untimely provision of counterpart funds; and (e) possible changes in LGU leadership reducing the commitment and/or implementation capacity. Risks (a) and (e) both materialized and had an impact on the project, particularly in relation to the infrastructure sub-projects, but risks (b), (c) and (d) did not occur. The ICR mission found that the quality of infrastructure construction and maintenance was moderately good.

2.2 Implementation

2.2.1 Major Factors Affecting Implementation: Project implementation was slow in the early stages. Initial establishment was delayed by four months because of the change in national administration after the November 1998 national elections. Undue complexities in the proposed project policies and procedures further delayed implementation processes. These included over- centralized clearance processes, fund flow problems and cumbersome procurement procedures that created delays in operation and disbursements. The centralization of project processes partially arose from the unfamiliarity of partners with the design, to which was added the lack of experience of MDFO as an implementing agency and in technical aspects of NRM. As a result, by 2001 a gap had emerged between targeted and actual performance (see Figure 2).

6 Philippines Environment and Natural Resource Sector Adjustment Program (SECAL) Implementation Completion Report, May 2000.

6

2.2.2 After the project was restructured, the gap narrowed and, by project completion, implementation performance had recovered. The decentralization of project processes in 2002 was a major step in accelerating implementation. Engaging the regional and local offices of the implementing partners increased commitment to project outcomes and allowed more autonomy in decision-making. With the added step of incorporating CDD processes into the project, implementation accelerated rapidly.

Figure 2. Percentage Performance during the Project Period 7

120

100

80

Wtd Target 60 Wtd Accomplishment

40

20

0 1998 1999 2000 2001 2002 2003 2004 2005 2006 Wtd Target 0 9 12 31 64 83 87 99 100 Wtd Accomplishment 0 5 9 16 41 70 86 93 96

2.2.3 Quality of Supervision: Supervision missions were conducted regularly and with an appropriate mix of technical expertise. Additional technical supervision missions were conducted during the restructuring process to assist with correcting initial procedural barriers and to install adapted procedures following CDD principles. (See also 5.1.3 (b))

2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization

2.3.1 Design of M&E: At the design stage, the monitoring of the project was to be carried out by the Community Based Resource Management Office (CBRMO) and by the MDFO after three years. This process was designed to provide the Bank with semi-annual progress reports and to contribute to an integrated M&E system within the MDFO for continuing LGU financing. In the initial stages of the project, there was no baseline study conducted to provide a basis for performance measurement of intermediate outcome indicators. The second restructuring led to a clearer focus on the demand-driven nature of the project. Operational targets were established, based on the community planning processes, and provided a basis for measuring the implementation performance of the project towards the expected intermediate outcomes8.

2.3.2 Implementation of M&E: The M&E system installed was operational in terms of measuring inputs and outputs, but had weak linkages to the Intermediate Outcome and

7 The weighted target is generated internally by the project as a progressive interim target. Measurement of progress in relation to the targets did have some data gaps and errors but the overall trends are consistent across all project areas. 8 However, these targets were never formally recorded as a design/target change.

7 Development Objective Indicators. During the restructurings, additional M&E technical assistance was provided by the Bank. This led to the formulation of a retrospective base-line in an endeavor to gain a more accurate assessment of progress. However, assistance provided did not translate into a comprehensive, operational M&E system and the focus on input-output monitoring continued. Despite twelve Management Information Training sessions, some data and cross verification gaps remain: for example, there is insufficient data on infrastructure operation to assess its usage, survival rates of rehabilitation planting are not sufficiently verified, and the reported changes in fish catches are based mainly on anecdotal evidence.

2.3.3 Utilization of M&E: The lack of measurable indicators in the project development framework and the limited base-line data collection was a barrier to assessing the project’s performance. Systematic data collection and management analysis was weak and only occurred in the later years of the project when there was increasing emphasis on the importance of M&E. There has recently been a major initiative by the MDFO to draw the lessons learned from the project about M&E into improved, standardized operational procedures for the MDFO.

2.4 Safeguard and Fiduciary Compliance

2.4.1 The project consistently complied with safeguard requirements. Sub-projects were small in size and did not trigger any requirement for resettlement procedures or major environmental assessment. All road sub-projects were for rehabilitation, as a result of which right-of-way and land ownership issues were not applicable or applied only to marginal road widening. The CDD process supported social development activities and the project assisted marginalized communities to gain greater asset security. The government complied with counterpart funding requirements throughout the project. Fiduciary concerns were raised at times. These were related to the rapid turn-over and insufficient numberof financial management staff; incomplete and late documentation submissions from LGUs that resulted from unfamiliarity with requirements; and un-reconciled amounts between the Bank and the MDFO. The MDFO has been cooperative in addressing all concerns raised, although the time taken for resolution has not always been within the agreed time-frame.

2.5 Post-completion Operation/Next Phase

2.5.1 There are no specific plans for a follow-on project as most of the project’s processes have been absorbed into the partner agencies or the LGUs. In many respects, the project represented a transition arrangement to help both the national government and LGUs to adapt to the new framework necessary to support decentralization as enacted under the LGC of 1992. In this regard, the project has been successful. Sustainability plans were generated by each LGU detailing specific actions such as the retention of field staff recruited for the project; the establishment of a Municipal Environment and Resources Office (MENRO); the expansion of the Municipal Agriculture Office (MAO) into the Municipal Agriculture, Environment and Natural Resources Office (MAENRO); additional investment in the sites; the continued repayment of sub-loans to allow for future reflow financing; and continuous liaison between community groups, LGUs and partner agencies. In this way, the project’s initiatives have a high degree of follow-up. The MDFO is continuing to lend to LGUs for NRM activities from project reflows. However, at present, there is no mechanism for replicating the “grant-loan-counterpart” mix of the project. The level of demand by LGUs for reflows on 100 percent loan terms remains to be seen. Several applications have already been received, but it is not clear if this will be a consistent trend.

8 2.5.2 New MDFO projects are incorporating the project’s processes and lessons learned. The MDFO is also currently developing an operational manual for lending to LGUs and for MDFO project management. The experiences of the project, along with other Bank-financed projects, have provided major input to the process. The DENR is involving LGUs more strongly in local NRM initiatives as a result of the project. The DENR has confirmed that incomplete processes for land certification will be supported by DENR field staff in collaboration with the communities and the LGUs. As with the MDFO, subsequent DENR projects are replicating the project’s processes (e.g., the Global Environment Fund component of the current Environment and Natural Resource Management Project).

3. Assessment of Outcomes

3.1 Relevance of Objectives, Design and Implementation

Rating: Satisfactory

3.1.1 Relevance of Objectives. The dual objectives of rural poverty and environmental degradation reduction have been, and continue to be, priority development concerns of the government as reflected in the development planning, programming and budgeting documents (e.g., the Medium-Term Philippine Development Plan and the Medium-Term Philippine Investment Program). At the local level, their relevance can be seen in the high level of demand by the target LGUs and communities for the services and interventions provided by the project: the interest of 68 percent of the LGUs in continuing with the project prevailed despite the substantial initial delays. The additional level of counterpart funding provided by the communities, LGUs and partner agencies, beyond the required contribution (including investment of personal funds and time in rehabilitation works, assignment of contracted staff to assist in implementation, and allocation of regular budget to continue sub-projects) also reinforces the relevance of the objectives to the target group. Furthermore, expressions of interest to participate in the project were received from additional LGUs (around 30) were received after project commencement but the demand could not all be accommodated.

3.1.2 Relevance of Design. The project’s design placed LGUs and communities in control of site-specific initiatives, with technical and financial backing from government agencies. This approach is consistent with the country’s sustainable development and decentralization and devolution processes and the Bank’s Strategic Directions. The design clearly responded to lessons learned in the preceding project. The targeting of lower-income LGUs was generally deemed proper; however, because of the demand-driven approach, sites tended to be fragmented rather than forming the basis for strategic action in most environmentally-degraded areas. Specific site selection was occasionally subject to political influence9. The development of links between investment in NRM and income generation were valid. The components reflected the specific objectives and, in the main, provided a suitable framework for operations. The choice of the MDFO as the implementing agency may be perceived as being sub-optimal because of: (a) its role and capacity as a financing institution rather than as an implementing agency; (b) the need to draw many of the staff from outside the implementing agency (mainly DENR); and (c) the slow initial rate of implementation. Nevertheless, the design recognized that much of the project focus would be on developing institutional linkages. The institutional gains of the MDFO, the implementing partners and the LGUs would have been unlikely to occur without the MDFO’s direct involvement in implementation. Moreover, the investment in the opening of the LGU

9 CBRMP Impact Assessment Section 3.1.5.3, page 59.

9 Financing Window, the absorption of some key project staff into the MDFO, and the improved MDFO processes are an investment in future financing of poverty reduction and NRM initiatives.

3.1.3 Relevance of Implementation. The project ultimately achieved effective implementation through a complex combination of interventions, but effectiveness evolved and emerged towards the middle of the initial project period. The project’s life was extended by three years because implementation was not fully effective in the first years of operation. Regional and local offices of implementing partners and the respective communities were not initially involved in local planning; and national-level decision-making was neither appropriate nor effective. For instance, after the adoption of the CDD approach the “ownership” of the LGUs and communities in the potential outcomes of the project increased and resulted in more appropriate site selection10. There were delays in tackling critical implementation issues, such as the process for the issuance of tenure instruments for project areas and the strengthening of market assessments before the commencement of income-generating activities. These did not receive sufficient project implementation focus until after 2002. In due course, implementation issues were effectively redressed so that, by the time of project completion, satisfactory ratings for each component had been achieved and nearly all targets for key performance indicators had been attained.

3.1.7 Program Performance. The PAD did not make specific targets, only aiming for an increase in relation to specified indicators because a major goal of the project was institution- building rather than extensive physical accomplishment and because of the demand-driven approach. Intermediate targets were devised after the MTR, although they were not formally registered in the Bank’s system as revised targets. Based on those informal targets, an overall physical accomplishment of 96 percent overall for the project has been achieved. Details of performance are provided in Annex 2. In summary, the results are:

Component 1: Sub-projects in Natural Resource Management (47 percent of project cost compared to 69.5 percent at appraisal). Investment in sub-projects resulted in 16,967 ha of land with improved NRM protection, 16,013 ha of agro-forestry and 11,585 ha of fish sanctuaries. Some 590 barangays have commenced or expanded 51 types of income-generating activities. The overall physical performance is assessed as 96 percent. The allocation differential relates to the funds for forestry which were channeled through the DENR under Component 4 rather than through the LGU sub-project mechanism.

Component 2: Planning and Implementation Support to LGUs (1 percent of project cost compared to 9.9 percent at appraisal). This component achieved 95 percent physical accomplishment in the provision of training and equipment supply to LGUs and their barangays. Costs were lower than projected because of the decentralized planning and implementation support that was covered through Components 3 and 4.

Component 3: Initiating an MDF Rural Window and Project Management (11 percent of project cost compared to 11 percent at appraisal). The project management office was operational not only for the original project period but also for an additional three years and yet kept costs within the originally-proposed allocation. The Rural Financing Window was established and is operational. The overall physical accomplishment is assessed as 98 percent.

10 San Remigio LGU experienced issues concerning the boundary of forest lands in the area. The LGU financed a survey and discovered that the land re-forested was actually classified as farm land and could not be classified as protected forest. The already planted area was classified as agro-forestry and an alternative sites was found for reforestation. The LGU actually achieved more planting than had originally been planned and local documentation has improved.

10

Component 4: Environmental Technology Transfer and Policy Implementation (41 per cent of project cost compared to 9.6 percent at appraisal). The DENR and the DA were supported to transfer NRM technology to the LGUs and improve the management of environmental policies. Overall, accomplishment for the component reached 100 percent.

3.2 Achievement of the Project Development Objective

3.2.1 The project clearly demonstrated an increase of capacity in low-income rural LGUs and communities to plan, implement and sustain priority NRM initiatives. The original design framework and indicators were weak in terms of quantifying the level of expected achievement, merely specifying an increase in performance of LGUs without any base-line measures. The low level of capacity of LGUs at the commencement of the project can be inferred by the initial challenges in implementation. Positive improvement in LGU performance was progressively documented and capacity-building initiatives led to accelerated and successful project implementation. Tangible outputs have been achieved by LGUs and communities that demonstrate a level of capacity for planning and implementation. It is noteworthy that three LGUs have been recipients of national/international environmental awards for work carried out with the support of the project.

3.2.2 The capacity of central government systems to transfer finance (as financial intermediaries) to LGUs has improved. Procedures have been stream-lined, and policies and procedures within the MDFO have been amended in line with the lessons learned from the project. The DoF reports that the policies and procedures developed in the project are now being replicated in other development projects. For instance, CDD procurement methods and age- analysis of LGU liquidations are already being used in other projects.

3.2.3 The project contributed to the discussion of environmental policies, particularly in relation to community-based NRM and tenure instruments. There have been few identified improvements in environmental technology through the project. The process has involved more transfer of existing technologies to LGUs and communities. At the national level, there has been progress in policy in improving processes for land tenure security related to community-based NRM and also support for LGUs in environmental conservation activities. At the local level, there are numerous examples of improved local policies, ordinances and practices in environmental protection and management.

3.2.4 The provision of resources to LGUs to finance NRM sub-projects has been largely achieved, despite initial and continuing challenges with the financing mechanisms. Current loan repayment rates from LGUs to the MDFO (at the time of project closure) are 99 percent, mainly because of the mechanism within MDFO of capturing loan repayments directly from the LGU Government Internal Revenue Allotment which is channeled through MDFO. There are opportunities to continue financing through project reflows; however, discussions regarding the potential for allocating further government resources to replicate the loan-equity-grant mix of the project are still continuing within the government.

3.3 Efficiency

3.3.1 The cancellation of US$12 million, the 74 percent disbursement of the original Loan amount, and the two Loan Closing Date extensions suggest that the project was less efficient than

11 expected. Nevertheless, by project completion, the overall performance attained 96 percent and the economic returns outweighed the project costs with an overall Economic Internal Rate of Return (EIRR) of 27 percent. The Net Present Value (NPV) is calculated as PhP 2 billion, based on recomputed appraisal estimates11. Based on up-dated projections of benefit flows, agro- forestry and social forestry will generate an EIRR of 24 percent; however, these benefits have not yet matured. Coastal fisheries indicate a 44 percent rate of return based on actual estimates of incremental fish catches12 13. For rural roads and water supply, rates of return were not re- computed because of the lack of usage data. However, the rural infrastructure activities were judged as efficient in relation to investment cost, level of maintenance and reported use by target communities.

3.3.2 The project’s ICR Study of 2007 confirmed the appraisal estimates that investing in local enterprises would generate sustainable sources of income and wider economic benefits. Re- calculated financial internal rates of return (FIRRs) of vegetable modules range from 194 percent in a two-crop module to 285 percent in a three-crop module, considerably higher than the appraisal estimates. Bamboo-based river-bank stabilization has a 17 percent rate of return and sale of propagules from mangrove plantations will generate an FIRR of 23 percent. The long- term environmental benefits accruing to the targeted communities through improved soils, reduced soil erosion, stabilized aquatic breeding grounds, etc., have not been valued in dollar terms but were consistently confirmed by respondents during the ICR Study. Other non- quantified benefits include the increased efficiency in institutional operations. Evidence from the ICR Income Study shows that community organizations have been established that are generating income, savings and re-investment in the local economy.

3.3.3 The incorporation of the financial rates of return on sampled diverse enterprises and economic returns from NRM and institutional development activities into the overall project EIRR would result in a higher rate of return than estimated at appraisal. Hence, the estimated economic return is at least consistent with, and is likely to exceed, appraisal estimates, albeit over a longer-than-anticipated project period. The EIRR compares favorably with other rural development projects supported by the Bank. Detailed sensitivity analysis of project EIRR was not performed, as the estimates of project benefits are considered to be conservative.

3.4 Justification of Overall Outcome Rating

Rating: Moderately Satisfactory

3.4.1 The importance of the project's achievements and the eventual attainment of all key aims, albeit delayed by three years, outweigh the early unsatisfactory ratings for the project. Even though the impact assessment of the project has been weakened somewhat by the absence of base-line data, positive economic benefits from the combined investment in resource conservation, enhancement, income-generating activities and improved governance have been demonstrated and are highly relevant to sustainable development in the Philippines. The

11 The re-computation considered all component costs, including project management, training costs, overhead costs and the cost of the LGU equity in the sub-loans. 12 Anecdotal community information and assessment by the Bureau of Fisheries and Aquatic Resources. 13 For example: Siganid (a fish delicacy) is caught in the wild. Demand is high but there were concerns that wild stocks could be depleted by over-fishing. With assistance from the project, the local PO built a fish pen and started to breed Siganid. The culture has been successful. Harvesting is done every two days, providing a regular income stream, and sales are brisk. In 2006, each involved member of the organization earned a real net income of PhP32,644 (almost doubling household incomes).

12 extensive physical accomplishments are positive outcomes, but of greater importance are the long-term outcomes, such as improved land tenure status in environmentally-sensitive areas, improved knowledge and practices in NRM, and improved local ordinances for protection of critical resources.

3.4.2 It is, however, acknowledged that the early short-comings in project implementation created delays in execution; US$12 million of the original loan funds were cancelled; and there are moderate risks to sustainability and replicability. Whilst the project has established a loan window for LGU sub-projects, the government has not committed further funds to expand and further develop the potential of linked environmental and economic development initiatives. In this respect, the satisfactory impact of the project has been limited to participating LGUs, with little scope for replication in other LGUs. Considering both positive and negative factors, an overall rating of "moderately satisfactory" for the project is deemed to be warranted.

3.5 Over-arching Themes, Other Outcomes and Impacts

(a) Poverty Impacts, Gender Aspects, and Social Development

3.5.1 The physical accomplishment for NRM activities demonstrates the impact for environmental protection. The poverty reduction impact was more difficult to assess. The PAD target was that at least 25 percent of households should have an increase in income. The intermediate outcome targets developed during the MTR were more specific, aiming for a ten percent increase in household incomes for at least thirty percent of households from the 2000 level. Those targets, although not officially recorded in the Bank system, became the operational targets for implementation.

3.5.2 By the time the Impact Evaluation (IE) was conducted in 2005, insufficient progress had been made adequately to confirm the poverty reduction impact. At that time, 81 percent of project participants reported an estimated income increase of 10 percent from the 2000 income level. However, most income generated was attributed to the payment of labor contracts to communities engaged in community-based rehabilitation and construction works, resulting in a cumulative real income per household of PhP 7,398 for male household members and PhP 1,955 for female household members14. This was income generated only during the project period and it was not sustained after planting had ceased.

3.5.3 The supplementary work carried out for the Borrower’s Report and the ICR focused on the income-generating activities supported by the project. The study assessed 13 types of enterprises that had at least three years of operation, plus several more recent enterprises that had demonstrated innovation. The study clearly demonstrates that the average income of project participants has already risen by PhP2,853 per annum15 in real terms and that there are signs of rising income levels as the enterprises mature. In particular, a more substantial increase in income is expected when harvesting begins on agro-forestry sites. Even at the current level of operation there was a real increase of 7 percent from the base average income for all project sites of PhP38,885 16. (NB The incomes generated range from PhP203 for a communal egg- production enterprise to PhP30,401 for a women’s weaving cooperative and PhP24,664 for individual vegetable production enterprises.)

14 CBRMP Impact Assessment, page 218 15 CBRMP Implementation Completion Report Income Study, 2007. 16 Based on CY 2000 Family Income & Expenditures Survey: NSO - Rural Category

13 3.5.4 The study found that 65 percent of PO members benefited from involvement in income- generation activities, substantially above the 25 percent targeted at appraisal. Of those activities, individual activities generated a higher net income per household but group enterprises benefited a greater number of participants. The final estimate for directly benefiting households was based on the PO membership of 23,992 members. The impact assessment, project internal assessment and the ICR Income Study all confirmed that PO membership was active and could be used to establish the number of households directly benefiting from the project.

3.5.5 Gender Aspects. Some 528 out of 741 POs (71 percent) are recorded as participating in training sessions on gender sensitivity. The impact assessment noted that female respondents’ adoption rate of social and institutional development and upland resources management knowledge is higher than male respondents. The reverse was found in coastal resource management, but no explanation of the results was suggested. A Review of Gender and Development (GAD) in the Philippines, 2006 included a review of the project. The report applauded the project for including GAD aspects in planning but concluded that the lack of monitoring of GAD aspects was a weakness in the project. The Income Study found that both men and women were involved in income-generating activities: women were more engaged in livestock and craft activities, while men were more involved in marine activities, processing and marketing. Planting activities were shared between men and women, but with men working in the more isolated locations.

3.5.6 Social Development. Social development aspects such as PO membership, an increase in savings, and greater involvement of community members in activities were more pronounced after the MTR as the increased focus on PO strengthening led to substantial community empowerment in terms of working towards self-generated economic development and environmental conservation and protection goals17. The CDD processes as implemented after the MTR greatly increased the opportunities for community members in the 741 POs to participate in planning, implementation and operation of their own activities. Implementation strengthened the links between the communities and the LGUs. Project-led and demand-driven training and skills development contributed to an increased capability of LGUs and POs concerning sub-project implementation and knowledge that will be used in continuing operations.

(b) Institutional Change/Strengthening

3.5.7 The project contributed to improved working relationships between government agencies with different mandates. The MDFO acted as a lead agency in drawing together technical agencies such as the DENR and the DA in relation to project implementation, particularly on resource management and tenure policy issues. The MDFO exhibited substantial internal changes during the years of project implementation (see section 3.2). These were not all directly attributable to the project as the MDFO is now also implementing other projects. However, the lessons learned through the project greatly contributed to institutional learning and capacity.

3.5.8 Another major institutional change was seen at the LGU and provincial/regional levels. All LGUs whose staffs were interviewed during the IA and ICR processes were able to articulate aspects of improved governance in relation to NRM, stronger relationships with implementing

17 The ICR Mission visited St Josefa where the LGU officials and community members affirmed that it was only during the project that they first sat together to discuss environmental and development issues. The relationship strengthened during the project to the extent that the PO Chairman is now a LGU Counselor. The LGU and the community are now actively working together on a range of projects.

14 partners and positive economic outcomes. The planning processes in project barangays were being replicated by the LGUs across the whole municipality. For the implementing partners, there was a stronger realization of the potential for involving LGUs more in NRM and poverty- reduction initiatives. LGUs were independently reviewing policies and processes related to resource protection that will have a long-term benefit not only in the targeted sites but across other key sites in the municipality. Similarly, lessons learned by the regional offices of participating agencies (such as processes to expedite community-based forestry and the establishment of sanctuaries) have been replicated across other municipalities.

(c) Other Unintended Outcomes and Impacts

3.5.9 The intended outcomes for the project were broad, and most impact can be accounted for under the headings of the Development Framework. However, there was considerable evolution of processes over time that led to local initiatives that were highly relevant18. For instance, the definition of small-scale infrastructure was expanded in line with local demand. This resulted in the construction of around 50 facilities that were classified as social infrastructure but which in practice were in support of identified income-generating activities (such as ice factories and meat- processing centers). LGUs report broader economic gains from such activities (such as an increase in traders visiting the area and improved tax collection).

3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops

3.6.1 The IA results show that 86 percent of the LGUs covered by the study provided sufficient support to sub-projects and acted in a participatory manner. Some 79 percent of respondents felt that the LGU administrative and political leaders participated in and supported various sub- projects, but only 69 percent of the LGUs were considered to have competent implementation committees. Law enforcement teams were created by participating LGUs to implement municipal ordinances related to environmental protection.

3.6.2 Although the M&E system does not capture the repayment rate from POs to LGUs, the ICR preparation led to indicative information in this regard. Some LGUs consider the entire amount borrowed by the PO as a loan which has to be repaid by the PO in full. Some LGUs proportionally classify such funds to loan, grant and equity in the same way that project funds are classified and expect the POs to repay only an amount equivalent to the loan portion. Loan repayments to date have been made by 60 percent of POs. However, the total amount repaid to date has reached only 33 percent of targeted installments because: (a) some activities have not yet reached maturity; and (b) some LGUs are not being rigorous in asking for repayment as they see the benefits to the communities of not doing so.

3.6.3 IA results recorded that village respondents were very positive regarding the impact of the project. Access to a development fund for local priority sub-projects was welcomed, particularly by the low-income municipalities. Respondents reported that the project opened up new resource-generation opportunities and improved skills in project management, financial management and inter-agency collaboration that can be used in future to attract private investors and non-governmental organization/government support.

18 CBRMP An Evolutionary Process. Nihal Amerasinghe, Ph.D and Edith Pimentel, Asian Institute of Management, June 2003

15 3.6.4 Specific impacts recorded by respondents were: (a) more than 40 percent of the respondents in Regions 5, 7 and 8, and 77 percent in Region 13, perceived that the number of visitors to their eco-tourism projects has increased; and (b) about 56 percent of the 28 project- funded access infrastructure facilities were assessed as having had a satisfactory impact and 40 percent were assessed as very satisfactory; only 4 percent were rated as having had a poor impact on the community.

4. Assessment of Risk to Development Outcome

Rating: Moderate

4.1.1 The Risk to Development Outcome is considered to be “moderate”. Operation and Maintenance agreements for infrastructure have been developed and are being implemented. Policies and procedures for the operation of protected areas are in force and are backed by local legislation in most cases. Nevertheless, there are two significant risks to the gains achieved.

4.1.2 First, of the originally-targeted 406 land tenure instruments issued only 262 (65 percent) have been completed; the remainder are still in various stages of processing. The issuance of a tenure instrument to POs formalizes authority over the development, protection and management of land and forest resources by the POs and provides rights over the use of land and plantations as long as these are consistent with environmental protection and natural resources conservation principles. Tenure instruments are the key in the sustainability of the NRM interventions, but project experience shows that complicating policies, such as the “Free and Prior Informed Consent” process required by the Indigenous Peoples Republic Act and changes in leadership and policy directives in the DENR, make the approval processes for tenure instruments beyond the capability and resources of most POs and further technical assistance in required. Thus, the issuance of tenure instruments (such as the Community-Based Forest Management Agreement - CBFMA) still requires DENR support to streamline and accelerate the process and to ensure security for the protected areas and the processes.

4.1.3 Second, according to the last supervision mission, as of September 2006 only about 60 percent of the respondent LGUs said that sub-project sustainability mechanisms have been institutionalized and incorporated in the Annual Investment Programs.

5. Assessment of Bank and Borrower Performance

5.1 Bank Performance

(a) Bank Performance in Ensuring Quality at Entry

Rating: Moderately Satisfactory

5.1.1 The lending preparation process underwent thorough concept development, incorporating agreed key issues within the project design. The relevance of the project design is substantiated by the context at the time and the continuing relevance of design. Mission members were of appropriate disciplines. The Task Manager at that time and some team members had been involved in an earlier Bank-supported project (Loan 3607-PH) of a similar nature, thus providing valuable inputs, project lessons and experience that helped address sector issues. Yet there were substantial issues with the implementation modalities in the design that contributed to a lack of

16 effectiveness and efficiency in the early stages of the project. The agreement for the DoF to be the implementing agency had disadvantages, given its lack of a project implementation mandate and capacity. However, gains have been achieved in the internal lessons learned by DoF in the requirements for a successful LGU financing window.

5.1.2. No review by the Quality Assurance Group (QAG) of the project’s “Quality at Entry” was carried out, but a QAG Review was held in 2006. A Quality at Entry assessment might have identified the issues with implementation capacity gaps within the MDFO and might have led to a more pro-active approach to addressing the early implementation bottlenecks. Earlier and more comprehensive assistance with M&E would have addressed one of the weakest aspects of project management. It is notable that a key recommendation from the SECAL project ICR was that “Substantial delays in project start-up and implementation can be avoided if institutional capabilities are thoroughly assessed as early as project preparation stage and a corresponding agreed action plan formulated with involved institutions for focused capacity.”. The Bank’s performance could have been improved if this recommendation had been applied.

5.1.3 The slow performance in the early stages of the project, the result of working with an implementing agency with little implementation experience, the complexity of establishing a working relationship between the multiple stakeholders and the over-centralized processes marred an overall satisfactory performance by the Bank. Nevertheless, strong cooperation between the Bank and the implementing agency during and after the restructurings overcame the initial unsatisfactory performance.

(b) Quality of Supervision

Rating: Satisfactory

5.1.4 The Bank carried out 15 supervision missions at six-month intervals. The early missions highlighted the problems experienced by the MDFO but initially over-estimated its capacity to respond to the agreed actions. During the major project restructuring, interim thematic missions were conducted to address specific project weaknesses. Each mission usually comprised members of appropriate disciplines. “Key findings” and “agreed next steps” were promptly provided to the Borrower for follow-up action. As a result of the progressive depreciation of the domestic currency against the US$ after the South-East Asian financial crisis, the Bank urged the Borrower promptly to cancel the excess loan amount to avoid commitment charges. Bank supervision missions also carried out reviews on safeguards compliance. There was continuity of task managers and some team members during supervision from the MTR onwards. This has proved to be valuable to the implementing agencies.

(c) Justification of Rating for Overall Bank Performance

Rating: Moderately Satisfactory

5.1.5 The Bank responded promptly to the Borrower’s request to help prepare the project, and provided key technical inputs and guidance into the project concept and design based on experience from other Bank-supported NRM projects. It provided effective supervision and maintained close interaction and a collaborative relationship with all the implementing agencies. The initial two-year extension of the Loan Closing Date was allowed in order to overcome early delays in implementation that might have been prevented by a stronger “quality at entry” focus by the Bank. The further one-year extension of the Closing Date was approved: (a) in recognition of

17 the implementation momentum achieved and the availability of additional funds resulting from exchange rate shifts; and (b) to allow completion of the remaining activities, and does not reflect any performance gaps by the Bank.

5.2 Borrower Performance

5.2.1 The initial supervision missions (between December 1998 and April 2001) recorded “unsatisfactory” performance. However, once the project was restructured there was a consistently satisfactory performance. The ex post Procurement Review in 2006 indicated “unsatisfactory” performance in procurement based on 2005 procurement processes. However, these issues were largely matters of incomplete compliance/procedural errors in eight percent of sub-projects reviewed rather than a systemic issue in transparency or accountability. The issues raised were satisfactorily addressed. Latterly, there have also been some delays in the submission of financial requirements, such as audit reports, as a result of organizational restructurings and other internal issues.

(a) Government Performance

Rating: Satisfactory

5.2.2 The initial issues were related largely to the lack of implementation experience of the implementing agency. The government made the necessary counterpart funds available and actively supported the project restructurings. The government remained committed to the Development Framework and in supporting sustainability of project investments.

(b) Implementing Agency or Agencies Performance

Rating: Satisfactory

5.2.3 The performance of individual entities is summarized as follows:

Implementing Agency Performance MDFO, the main implementing agency, initially struggled to establish effective Satisfactory procedures but invested heavily in building internal capacity and responding to the recommendations of supervision processes. The exponential and sustained increase in performance after the restructuring demonstrates a good institutional response to the needs of the project and subsequent satisfactory physical performance. Implementing Partners DENR played a major role in supporting NRM rehabilitation, reforestation and Satisfactory in tenure security. The Department of Interior and Local Government played only a minor role Marginally in supporting LGUs and in supervising accountability processes. Moreover, the Satisfactory DOF revised the provision of financial support to DILG/LGA downwards, mainly because of the low LGU demand for their services. DA had a limited role in supporting agriculture-based enterprise activities. The Satisfactory strongest link in the project was through the local Municipal Agriculture Officer who is funded and managed by the LGU but supported by the DA. The Bureau of Fisheries and Aquatic Resources (BFAR) had an active role in Satisfactory coastal NRM. It assisted in establishing marine sanctuaries and provided technical advice to POs.

18 The Bureau of Local Government Finance (BLGF) had a major role in Satisfactory training for LGUs. Initially the feed-back on training was that it was too theoretical. Adjustments were made during restructuring and the revised training programs were well received.

(c) Justification of Rating for Overall Borrower Performance

Rating: Satisfactory

5.2.4 The project implementation experienced major challenges in the initial stages. It was a complex project established with an inexperienced implementing agency, yet the difficulties were overcome, government institutional capacity has been substantially strengthened and there are signs that implementation processes are being effectively main-streamed within government at national, regional and local levels. The final achievement of almost all Key Performance Indicators demonstrates a satisfactory performance on the part of the Borrower.

6. Lessons Learned

6.1.1 The main lesson learned from the project was that an appropriate package of support for NRM, enterprise development and infrastructure sub-projects can stimulate latent interest and related investment in viable resource management, conservation and economic initiatives that lead to poverty reduction. Specific lessons learned include:

6.1.2 Increasing the capacity of LGUs and communities in NRM initiatives:

(a) Communities are well aware of environmental concerns and are willing to invest time in environmental activities if it is viable for them to do so without jeopardizing their daily livelihood and if seed/working capital is available.

(b) Projects relying on communities for implementation must, during preparation: (i) prepare good targeting mechanisms; (ii) build consensus, understanding and ownership with the communities; and (iii) generate support for the project and communities to turn ideas into action.

(c) Sub-projects that undergo on-site characterization survey, mapping, planning and actual field-based appraisal have the least problems in identifying the best areas suited for the species, in meeting establishment targets and in generating sustainable results.

(d) LGUs and communities that have experienced economic loss caused by environmental issues (e.g., illegal logging, fishing, land-slides) were most pro-active in implementation because they were more aware of the direct link between the environment and the local economy.

(e) The assessment of market potential and the development of marketing strategies is required at an early stage of the project for all NRM/income-generating activities. Agriculture- related business and marketing support increases the success of income-generating activities.

(f) Security of land tenure is important to ensure ownership and sustainability. The process for issuance of CBFMA and PACBRMA is too slow and needs to be further stream-lined. Project sites with incomplete tenure processes still require support to complete the process. DENR has committed to facilitating the process.

19 (f) A blend between demand-driven and interventionist approaches is most appropriate to allow community self-management and a demand-driven approach but also to provide effective technical and strategic guidance.

6.1.3 Improved capacity of central government systems to transfer finance to LGUs:

(a) A loan-equity-grant package, appropriate to the economic and social conditions of the municipalities, is an effective way to attract institutional investment in NRM.

(b) Development of a physical mechanism for the transfer of finances to LGUs is insufficient to achieve the development objectives. A stronger link between financing mechanisms and the practical requirements for implementation must be established for successful investment of the finances transferred.

(c) In a complex project, with multiple implementing partners, a common understanding of the project concepts and processes needs to be achieved early in the project. Good coordination processes must be embedded in the normal processes of partner agencies at municipal, provincial and regional levels.

6.1.4 Provision of resources to LGUs to finance natural resource management projects:

(a) The focusing on a dual strategy of LGU and PO strengthening was a turning point in accelerating project implementation. Well-organized, technically-empowered LGUs and POs with financing for their priority activities independently drove implementation activities so that the project was facilitating locally-generated and sustainable initiatives and not introducing externally-set initiatives.

(b) LGUs’ capability to implement NRM projects can be fostered in a way that rises above political interest. The development of Municipal Ordinances to support specific NRM priorities is an effective mechanism to develop local ownership and sustain the protection of resources.

(c) A CDD approach to community-based projects is important to build local ownership and contribute to ensuring sustainability, commitment and long-term capacity building, but requires several years to introduce effectively.

7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners

(a) Borrower/implementing agencies:

7.1.1 The implementing partners struggled with the centralized procedures of the project. These issues were addressed in the restructurings. Thereafter, no major issues were identified other than the limited budget to be able effectively to address all identified needs.

(b) Co-financiers:

7.1.2 There were no co-financiers of the project.

(c) Other partners and stakeholders:

7.1.3 The increased participation by POs after the restructuring was a turning point in the achievements of the project. The ICR mission found that the POs were highly appreciative of the

20 opportunity provided by the project and, in particular, the flexibility to respond to local needs. The increased link between POs, LGUs and other implementing partners was particularly appreciated by the POs. Similarly with the implementing agencies, the main concern was the limited resources within the project to address all identified priorities.

21 Annex 1. Project Costs and Financing

Project Cost by Component

Appraisal Revised Actual Components Estimate Actual/Appraisal (US$ million) (US$ million) (US$ million) as percentage Sub-projects in Natural 42.90 34.30 31.43 73.3 Resource Management Planning and Implementation 6.10 1.00 1.13 18.5 Support to LGUs Initiating an MDF Rural Window and Project 7.00 9.52 7.52 107.4 Management Environmental Technology Transfer and Policy 6.20 2.10 2.04 32.9 Implementation

Total Baseline Cost 62.30 46.92 42.13 67.6 Physical Contingencies - - - - Price Contingencies 5.20 - 0.00 - Total Project Costs 67.50 46.92 42.13 62.4 Front-end fee PPF 0.00 - 0.00 - Front-end fee IBRD 0.00 - 0.00 - Total Financing Required 67.50 46.92 42.13 62.4

Financing

Type of Appraisal Actual Actual/Estimate Source of Funds Co-financing Estimate * as a percentage (US$ million) (US$ million) Borrower (Central Government) 4.20 2.58 61.4 Local Government 7.70 4.03 52.3 Beneficiaries 5.70 - - International Bank for 50.00 35.52 71.0 Reconstruction and Development Total 67.50 42.13 62.4

* A rounding error appears in the PAD Summary, and there is insufficient detail in the project costs and financing data presented in the PAD to correct it.

22 Annex 2. Outputs by Component

(a) Project Performance by Component

Project Components Accomplishment (percent) 1. MDF Rural Window/Project Management 98 2. Environment Technology Transfer and Policy Support 100 3. Planning and Implementation Support 95 4. Sub-loans for sub-projects Implementation 96 Total 96

1. MDFO Rural Window/Project Management

Activity Target Accomplishment Accomplishment (percent) PMO Establishment and Management 90 90 100 Staff Hired 95 95 100 Guidelines Manuals prepared 15 15 100 Sub-project Appraisal 92 92 100 Sub-project Approval 92 92 100 Sub-project Mid Term Review and Sub- 92 89 98 projects Assessment, Review and Evaluation Sub-project Terminal Reviews and 82 82 100 Evaluation/Impact Assessment GoP-WB Supervision Missions 17 17 100 CBRMP Assessment & Planning 5 5 100 Average Accomplishment 98

2. Environmental Technology Transfer/Policy Support

Activity Target Accomplishment Accomplishment (percent) Conduct of Technical Training 100 100 100 Technology packages Dissemination 72,355 84,500 117 Provision of Technical Assistance 74 74 100 Policy Study 1 1 100 Survey and Mapping 113,996 136,158 119 Tenure Instrument Awarded 406 262 65 Average Accomplishment 100

23 3. Planning and Implementation Support

Activity Target Accomplishment Accomplishment (percent) Goal Oriented Project Planning 82 82 100 Project Development Workshop 82 82 100 Community Organizing 82 82 100 Implementation Plan Workshop 82 82 100 Advanced community organizing 82 82 100 Project Management Workshop 82 82 100

SSI Orientation 29 29 100 SSI Implementation 29 29 100 Procurement Orientation 89 89 100 Procurement Packaging 89 89 100 CDD Procurement 79 79 100 CBRMP Concept Planning and 7 7 100 Development Training for community based resource 31 31 100 management teams Municipal Community Based Planning 69 69 100 Competency training for Community 8 8 100 Organizing Ancestral Domain Sustainable Development 11 11 100 and Planning Workshop Information and Education Training 19 19 100 MIS Modules and Users Training 4 4 100 MIS Modules and Users Training 4 4 100 Workshop on MIS completion requirements 4 4 100 Workshop on Support Fund Facility 1 1 100 Trainers Training on Entrepreneurship 1 1 100 Livelihood Assessment and Planning 1 1 100 Community Organizing forum 1 1 100 Sub-project monitoring and reporting 2 42 42 100 Total Average 96

Sub-Loans for Sub-project Implementation

Batch 1 81 79 97 Batch 2 19 17 91 96

24 (b) Project Outcomes Outcomes Target by end Actual Comment of project Accomplishment 1. 120 LGUs applying for 100 percent 102 Coverage in terms of LGUs is 85 sub-projects percent but the number of communities far exceeds that expected outcomes (741 compared to 100 communities targeted) 2. Local environmental 50 percent of 656 (89 percent) Of the 741 communities actively conditions are improved communities engaged in the project, 89 percent through: adopt have demonstrated active progress technologies in in environmental projects their local area (a) additional forestry and 100 percent of 100 percent Comprising: upland areas placed under targeted • 16,013 ha of agro-forestry sustainable management additional established amount • 1,517 micro-watershed area established • 7,171 ha of trees planted (b) additional coastal areas 100 percent of 100 percent • 5,220 ha of mangrove are placed under targeted rehabilitation, with a further 2,107 community management additional ha of mangrove protection area amount established • 130 ha of beach rehabilitation • 11,585 ha of fish sanctuary • 738 units of artificial reef established Additional outcomes: • 822 ha of riverbank stabilization • 500 ha of community based ecotourism. 3. Interventions improve 50 percent 79 percent The CBRMP Income Study livelihood of communities/ computed that 21 percent of beneficiaries enterprises commenced lapsed or failed, mainly due to force majeure. Infrastructure sub-projects reduce travel time and costs, as well as facilitate economic activities • 143 km of roads rehabilitated • 29 km of trails/foot paths • 148 linear meters of foot bridge/river crossing • 131 water supply systems • 63 community buildings and post-harvest/income generating related facilities (a) no. of communities 100 656 High involvement of communities adopting sustainable communities possible partly as a result of the practices CDD approach. (b) no. of communities that 100 518 Based on the assessed success rate have increased communities of enterprises. productivity. 4. Percentage of people 25 percent • Between 32 and 100 percent of reporting increased income PO members participated in income

25 Outcomes Target by end Actual Comment of project Accomplishment generating activities depending on whether the enterprises were individual or group managed. • Average annual real net income for CBRMP-supported enterprises was PhP12,141 ranging from PhP 6- 35,000. • The overall average annual person days per activity are 111 days. Average labor value annually over all enterprises is estimated at PhP6,525: • Communally-managed IGAs have an average of 139 person-days per year for hired labor while the individually managed ones have a much lower level of 15 person days. • The average overall labor paid by CBRMP supported IGAs per day is PhP103 which is comparable to market rates within the rural areas.

26 Annex 3. Economic and Financial Analysis

Cost - Benefit Analysis

3.1 This section presents an ex post analysis of the economic viability of the project using actual costs, benefits and physical accomplishments obtained from the project’s M&E database, the draft PCR, the Impact Assessment Study of August 2006, data from the supplemental survey requested by the ICR team in August 2007, and information gathered from project staff and authorities and from key informants in the field. The analysis followed the assessment methodologies used at appraisal. Assumptions in the projected units costs and benefits at appraisal were adjusted using actual data. The latest project performance reports submitted to the Bank were used as the basis of estimates in the absence of actual data. These were verified during the ICR team’s site validation visits. Incremental cost-benefit analysis comparing the “without-project” and the “with-project” scenarios was performed for the project as a whole and separately for the upland and coastal resources management sub-projects that were the main sources of directly-measurable economic benefits. Prices are in constant 2005 terms, consistent with the period in which the impact study was conducted and where most of the project accomplishment data were obtained. Project Costs

3.2 The appraisal estimate of project cost was revised in 2001 with the cancellation of US$10 million in loan proceeds and in 2002 with a further US$2 million loan cancellation. The appraisal estimate of loan proceeds was US$50 million while the revised loan amount was US$38 million. The structure of the project’s actual costs is generally consistent with appraisal estimates where Sub-Loans for LGU Sub-Projects made up the bulk (75 percent) of the financing. In terms of the volume of financing, however, the allocation for the MDF Rural Window was increased from 11 percent at appraisal to 20 percent in the revised cost. The components on Environmental Technology Transfer and Planning and Implementation Support, meanwhile, were both cut by about 50 percent of their appraisal levels. The budget revision was a remedial measure which the Bank and the Borrower undertook to address the substantial delays in project implementation and fund disbursement. At the Mid-Term Review of the project in 2002, the time elapsed in project implementation was 70 percent while the loan disbursement rate was only 20 percent. 3.3 Notwithstanding the cuts, the project has 17 percent remaining unutilized budget based on revised cost. The overall utilization rate is 83 percent of the revised estimates. In terms of financing sources, utilization rates are 89 percent from loan proceeds, 30 percent from GOP counterpart and 101 percent from LGU equity. LGU equity in the sub-loans formed part of the investment costs in the sub-projects and was included in the economic analysis. 3.4 In relation to component activities, the project was efficient in meeting its physical targets in the Sub-Loans to LGU Sub-Projects (87 percent of all financing sources; 93 percent of loan proceeds). It was less efficient in the institutional building components (69 percent cf. 78 percent of all financing sources; 77 percent cf. 80 percent of loan proceeds). Project Benefits

3.5 Economic benefits were derived from the investments funded under the sub-loans for LGU sub-projects. As determined at appraisal, the LGU sub-projects were made up of investments in NRM, small-scale infrastructure support and livelihood enterprises.

27 3.6 Upland Resources Management. The analysis combined the benefits derived from agro-forestry and from community forestry (as was done at appraisal). A total of 28,000 ha was developed as agro-forestry and community forestry areas. The areas were planted to perennial crops with a medium- to long-term gestation period. Timber species used in the tree plantations comprised 80 percent fast-growing species that can be harvested in as early as ten years from planting. The other 20 percent consist of hardwood species that are expected to become harvestable in 20 to 30 years from the date of establishment. The re-assessed benefits considered mainly the projected harvest of timber from the fast-growing species consisting of falcata, gmelina, eucalyptus and mangium. Full maturity of these trees for timber production will be realized in the fifteenth year from planting date but, based on field interviews, farmers plan to harvest starting in the tenth year as part of the routine thinning of the plantations. Plantation establishment and reforestation commenced in 2001. The first timber harvest is expected in 2010. The re-calculation of benefits estimated that twenty percent of the tree plantations will be harvested in the tenth year and the remaining eighty percent will be harvested in the fifteenth year. Estimates of stumpage volume were based on reported estimates in the Impact Study that calculated an average output of 40 m³ per ha. Market value is estimated at PhP3,800/m³ at 2005 price levels.

3.7 In addition to timber products, the other major economic benefit considered in the analysis is the value of output from the fruit-bearing trees inter-cropped with timber species. Among twenty-four reported fruit tree species used by the project, the major contributors to value of output are mango, cacao, mangosteen, durian, lanzones, rambutan and calamansi. Based on verified survey reports, the project established around 12,000 ha of fruit trees that will produce marketable output in the sixth year after establishment. Fruiting started in 2006 in 10 percent of the agro-forestry areas. Succeeding cropping potential is projected at 60 percent in the seventh year. Full productivity of the fruit trees will be realized in the eighth year.

3.8 Non-quantified products from the agro-forestry and plantation areas include abaca, rattan, salago, root crops and other fruit-bearing trees. These are, however, grown on a limited area and are deemed to make a minor contribution to the project’s economic output.

3.9 Coastal Resources Management. Project accomplishments in coastal resources management included the establishment of artificial reefs, the rehabilitation of fish sanctuaries and mangroves, and the stabilization of river banks. Based on the impact study and as verified during the ICR supplemental survey, the improvements in coastal and marine resources management resulted in an increase in fish catch of an average of 4.5 kg per hour. The analysis considered 354 coastal barangays covered by the project. Each barangay consists of about 50 households, 60 percent of which are engaged in fishing as a primary means of livelihood. The estimates of total incremental fish catch further assumed five hours per day and three days per week of fishing effort by each household.

3.10 Non-quantified incremental outputs from the project include the catch from fish traps and fish cages, miracle holes, and various other methods such as lift nets, gill nets and ring nets. These are considered minor sources of project benefits and have not been included in the analysis.

3.11 Non-quantified benefits of NRM. Other economically important benefits of the project noted in the PAD are the environmental improvements that are expected to be realized over the long term. These include an increase in bio-diversity, an increase in carbon sequestration, a reduction in topsoil loss as a result of erosion control measures, and other intangible enhancements in environmental quality. The increase in bio-diversity has been documented by

28 the project in areas where forest cover had been significantly improved, thereby restoring the habitat of forest plants and animals with significant value in the human food chain. Carbon sequestration was estimated in the Impact Study at a volume of 68 tons per ha of forest. Current estimates of sequestration costs are in the range of US$100 – 300 per ton of carbon emissions avoided19. The erosion control measures and the increase in vegetation cover were, likewise, estimated to result in the avoidance of soil fertility loss. Generally, the avoidance cost of environmental/natural resources rehabilitation will constitute significant savings in economic cost. No direct quantification of these economically-important environmental benefits is attempted in this analysis. The PAD does not contain ex ante quantification of such benefits to enable comparison.

3.12 Small-Scale Infrastructure constituted 22 percent (PhP 251 million) of the project’s sub-loans to the LGUs, net of LGU equity. Utilization was 50 percent for access infrastructure, 25 percent for potable water supply and 25 percent for other social infrastructure (such as street lighting and sheds/marine watch-out towers). Access infrastructure consisted of 143 kms of farm-to-market roads, 29.67 kms of foot trails and 148 linear meters of foot bridges/minor river crossings. The standard estimates of benefits from the development of roads, such as vehicle operating cost savings and time savings, do not yield a significant outcome in the ex post economic analysis of the project’s roads because of the very limited number of road users and vehicles. As noted at appraisal, the access infrastructure facilities were primarily meant as support to NRM activities, to facilitate entry to the forest plantation areas. These are not regular traffic routes or agricultural production areas as in the case of the Agrarian Reform Communities Development Project and the Mindanao Rural Development Project. The projected growth in traffic in the project NRM areas is not known as no assessment processes were established.

3.13 Potable water supply facilities have improved sanitation, as reported by project beneficiaries in perception surveys during the Impact Study and verified during field validation visits. Quantified data on time savings and water revenues (user fees) obtained during the ICR supplemental survey did not generate significant results in the calculation of economic internal rate of return for potable water supply facilities. Economic benefit indicators have not been monitored in the project’s M&E data-base.

3.14 Livelihood Enterprises. There were about 64 types of land- and marine-based income- generating projects undertaken by PO beneficiaries of the project involving a range of production, processing, marketing and other value-adding activities. Overall, the activities provided positive net income to the Pos and PO members, ranging from PhP 3,500 to PhP 11,700 per year. Based on the supplemental survey conducted by the ICR team, 95 percent of the respondent IGP participants have, to date, sustained their livelihood enterprises as a source of income.

Economic and Financial Rates of Return

3.15 Re-computed economic data show that the project’s benefits generally outweigh the costs as indicated by an overall EIRR of 27 percent and a NPV of PhP 2 billion. This is consistent with the appraisal estimate, indicating that the project is generally viable as originally assessed. The overall analysis considered the cost of all components of the project, including project management, training, overhead costs and the cost of the LGU equity in the sub-loans. By component activities, agro-forestry and social forestry will generate a 24 percent EIRR based on up-dated projections of benefit flows. Coastal fisheries indicate a 44 percent rate of return based on actual estimates of incremental fish catch. For rural roads and water supply, rates of return

19 US DOE estimate.

29 were not re-computed because of insufficient data. The valuation of the non-quantified benefits, including the economic output of livelihood enterprises and the economic value of the environmental improvements, would result in much higher rates of return. A re-calculation of the financial rates of return on selected IGP modules confirmed the appraisal estimates of the high viability of these livelihood enterprises as sustainable sources of income. Re-calculated FIRRs of vegetable modules range from 194 percent in a two-crop module to 285 percent in a three-crop module. Bamboo-based river bank stabilization has a 17 percent rate of return, while the sale of propagules from mangrove plantations will generate a 23 percent FIRR.

30 Annex 4. Beneficiary Survey Results

4.1 An Impact Evaluation (IE) was conducted in 2005 that involved field work in 16 sample LGUs. The sample sites were selected based on areas with a large area of resource rehabilitation. Although many results were still in the formative stage, the IE was able to draw out responses from a total of 1,700 informants, including PO members.

4.2 In 2007, a further study was conducted jointly by the ICR team and the project office. This focused specifically on addressing the gap in data regarding income generation as a result of project activities. This study also covered 16 LGUs (different from the IE), and 37 POs with a membership of 2,273 which had been in the project for at least three years, and in-depth interviews with over 200 respondents. The results of both studies have elicited a positive response from respondents in terms of their perceptions of the benefits that have arisen from the project. The Income Study provided a greater degree of quantified assessment of financial benefits from the project.

4.3 The IE results recorded that barangay respondents were very positive regarding the impact of the project. Access to a development fund for local priority sub-projects was welcomed, particularly by the low-income municipalities. Respondents reported that the project opened up new resource generation opportunities and improved skills in project management, financial management and inter-agency collaboration that can be used in future to attract private investors and non-governmental organization support. Conversely, respondents expressed that the time period for the project (three years) was too short to build local capacity and to plan, establish and operate sub-projects.

4.4 Other feedback from the IE includes that 86 percent of the LGUs covered by the study provided sufficient support to sub-projects and acted in a participatory manner. Some 79 percent of respondents felt that the LGU administrative and political leaders participated in and supported various sub-projects, but only 69 percent of the LGUs were considered to have competent implementation committees. Law enforcement teams were created by participating LGUs to implement municipal ordinances related to environmental protection.

4.5 Specific impacts recorded by respondents were: (a) more than 40 percent of the respondents in Regions 5, 7 and 8 and 77 percent in Region 13 perceived that the number of visitors to their eco-tourism projects had increased; and (b) about 56 percent of the 28 project- funded access infrastructure facilities were assessed to have satisfactory impact (and 40 percent were very satisfactory). Only 4 percent were rated to have had a poor impact on the community. As a result of the construction/rehabilitation of the project-funded water supply systems, the respondents reported satisfaction in the constant and adequate potable water supply.

4.6 The ICR Income Study confirmed the interest that the project beneficiaries have in the integrated components of the project. There was strong support for the NRM focus of the project, but more willingness and opportunity to engage in NRM activities if they are linked directly to improving income generation. Time investment in activities was a prime consideration. Limited volunteer time is available for rehabilitation work; however, when a direct economic benefit was perceived from the environmental works, there was a stronger response and commitment from the communities. POs also confirmed the delays and difficulties with the project in the early stages and would have preferred a stronger focus on income-generating activities, with marketing support, earlier in the project.

31 Annex 5. Bank Lending and Implementation Support/Supervision Processes

Task Team members Responsibility/ Names Title Unit Specialty Lending Task Team Leader Frank Fulgence K. Byamugisha Principal Operations Officer AFTAR (1996-1998) Herman Cesar Consultant Economic Analysis Environmental Rob Crooks Consultant Guidelines Community Hans Elshort Consultant Organization and Participation Issues Community Mary Judd Senior Anthropologist EACMF Organization and Participation Issues Albert Kennefick Consultant Financial Management Natural Resources William Magrath Lead Natural Resource Economist EASOP Management Community Maria Theresa G. Quinones Operations Officer EASRE Organization and Participation Issues Noel Sta. Ines Procurement Specialist EAPCO Procurement Wael Zakout Lead Operations Officer ECSSD Rural Infrastructure

Supervision/ICR Livelihood and Orlando S. Abelgas Consultant Enterprise Development Specialist Task Team Leader Richard Anson Senior Rural Development Specialist EASRE (1998-2003) Natural Resources Augustine Arcenas Consultant Management Dominic Reyes Aumentado Procurement Specialist EAPCO Procurement Officer Community Lanfranco Blanchett-Revelli Senior Social Sector Specialist Organization and Participation Issues Task Team Leader Gilbert Magno Braganza Operations Officer EASRE (2003- 2006) Community and Gemma Cunanan Consultant Enterprise Development Edward Daoud Senior Finance Officer LOAFC Finance Officer C. Dalusung Consultant Environmentalist Ernesto Diaz Senior FM Specialist EAPCO Financial Management Carolina V. Figueroa-Geron Senior Operations Officer EASRE Operations Officer Jo Ann Galimpin Finance Analyst LOADM Finance Analyst Environmental and Rowena Garcia Consultant Social Safeguards Natural Resources Robert Guzman Consultant Management

32 Salvador Jiao Consultant Engineer Asmeen M. Khan Senior Rural Development Specialist DELWB Team Member Enterprise Flora Leocadio Consultant Development Specialist Implementation Dorothy Lucks Consultant Completion Rene SD Manuel Procurement Specialist EAPCO Procurement Senior Natural Resources Natural Resources Robin Mearns EASRE Management Specialist Management Marlo Mendoza Consultant Governance Quan Anh Nguyen Finance Analyst LOADM Finance Analyst Loan Accounting Van Vu Nichols Portfolio Officer ACTCF Officer Jose Tiburcio Nicolas Operations Officer Task Team Leader Keith Robert A. Oblitas Lead Operations Officer IEGSG (2002-2003) Small Scale Wilfredo Pizarro Consultant Infrastructure Engineer Lead Natural Resources Management Task Team Leader Idah Z. Pswarayi-Riddihough EASRE Specialist (2006-2007) Environmental and Mary Ann Pollisco-Botengan Consultant Social Safeguards Maria Theresa G. Quinones Operations Officer EASRE Participation Officer Joseph G. Reyes Senior FM Specialist EAPCO Financial Management Natural Resources Luzon Salvador Consultant Management Joel Syquia Consultant Procurement Noel Sta. Ines Procurement Specialist EAPCO Procurement Officer Environmental Josefo Tuyor Operations Officer EASRE Specialist Environmental Maya Gabriela Q. Villaluz Operations Officer EASRE Specialist Irene L. Villapando Consultant M&E Specialist Implementation Felizardo K. Virtucio E T Consultant EASRE Completion

33 Staff Time and Cost

Staff Time and Cost (Bank Budget Only) Stage of Project Cycle (US$ thousand including No. of staff weeks travel and consultant costs) Lending: FY92 5.25 FY93 11.14 FY94 102.30 FY95 121.43 FY96 99.46 FY97 139.04 FY98 105.94 FY99 9.97 FY00 0.00 FY01 0.00 FY02 0.00 FY03 0.00 FY04 0.00 FY05 0.00 FY06 0.00 FY07 0.00 FY08 0.00

594.53 Total

Supervision/ICR: FY92 0.00 FY93 0.00 FY94 0.00 FY95 0.00 FY96 0.00 FY97 0.00 FY98 21.20 FY99 66.05 FY00 31 60.99 FY01 41 67.19 FY02 24 67.49 FY03 16 66.66 FY04 21 65.06 FY05 14 35.23 FY06 11 16.95 FY07 13 53.09 FY08 5 21.20

Total 176 541.11

34 Annex 6. Stakeholder Workshop Report and Results

A multi-agency Sustainability Meeting with the project’s government partners was held on June 15, 2007. Prior to the workshop, a range of individual interviews was conducted with key stakeholders at national, regional and local community level, including DENR, DA and DILG, as well as regional, provincial, municipal and barangay officials. Participants at the workshop included representatives from DoF, MDFO, National Economic and Development Authority and DENR as well as project staff. The workshop included a presentation on the performance of the project and identified several key issues for discussion at both the operational and policy levels. The overall feedback from government stakeholders in the participating partners was that the project has largely been effective. There were substantial difficulties experienced in the early stages in the project as a result of an overly-centralized management structure but the results are considered to be impressive. Lessons learned are being incorporated into other programs and activities of partner organizations.

A summary of responses is shown below:

Operational Project Level

Workshop Question Summary of Stakeholder Response 1. The project was a complex project The design was appropriate. As implementing partners with multiple players. Was the they had all been involved in project preparation and design appropriate? realized that there was a need to develop a more sustainable financing mechanism for NRM. The project design was the result. 2. Were the coordination Coordination should have been more intensive in the mechanisms effective? early stages of the project. It was difficult for partners to meet, but there should have been more effort to do so. 3. Did the financial resources go to Resources were tight for all activities. Improved the right activities in the right mix? planning at an earlier stage might have resulted in different deployment of resources, particularly for training and support to income generating activities. 4. Were the results attained There were no targets for the project as it was demand- sufficient? driven so performance was difficult to benchmark. Better M&E processes would have helped to gauge the progress better. 5. Can the gains be sustained? Yes. Most of the activities are continuing at the LGU level. Partner agencies are still in place and have some resources to continue support to the project sites. 6. What aspects of the project should The loan/grant/equity mix was successful and should be be replicated, and how? replicated. There are limited government funds available for such a scheme, but the expansion of MDFO reflows should be considered.

35 Policy Considerations

The project created a balance between With the project model it is possible to do both NRM short-term economic imperatives for and economic development. It is critical that there poverty reduction and long-term should be continued investment by the government in economic gains of NRM. However, the environmental conservation because that is the future demand shows that this cannot be for the country’s production. NRM must be a key replicated without government subsidy focus. All agencies are applying the principles of the for the long term NRM investment. Philippines Strategy for Sustainable Development. Should the government give more focus The project provides a mechanism for that to occur. on NRM or continue focus on The difficulty is the lack of resources to replicate the employment and income generation? project across other LGUs, particularly those areas of highest environmental degradation. Decision-making at all levels for NRM Environmental concerns such as coastal areas are is complex, involving policy and covered by BFAR (Fisheries Marine Code, Municipal operation level issues concerning land Fishing Ground)/DA and there are already strong tenure, watershed protection, links with the LGU. Greater decentralization has infrastructure development vs. recently been legislated for DENR. LGUs have no conservation, amongst others. The specific mandate for upland NRM and so do not have project showed that involving the LGUs the resources for the often-costly measures required strongly in NRM was an effective for improved protection and management. LGUs do strategy at the operational level. Was not have the financing for a municipal environmental there enough intervention/support for (MENRO) office, hence there needs to be a sustainability at the policy level? Is continuous lobby for more support to LGUs with a devolution of all NRM functions view to greater devolution of responsibility and feasible and effective? If not, by how resources. much? The project demonstrated that LGUs There should be recognition that lower-income have the capacity to borrow for the municipalities are often the ones with degraded project package and to repay MDFO. natural resources. It is an investment for the country The current grant/equity mix for other to improve local productive resources. NEDA has projects is 50:50, although the 50 already amended cost-sharing arrangement for poorer percent equity can include contributions LGUs in the recognition that more needs to be done “in kind” from the LGU and to stimulate local economies. community. Should the support to The link between income-generating activities and LGUs for NRM and poverty-reduction NRM needs to be further researched and promoted so projects be a grant/equity mix or loan- that the lessons learned can be incorporated into based? Should lower class LGUs be existing and new programs. This is partly the reason given greater concession? Should for Volume 3 of the Borrower’s PCR, which is a LGUs engaging in social infrastructure, synopsis of key lessons learned for a wide audience. economic activities or NRM be given a higher grant portion or should the standard be the same regardless of activity?

36 Annex 7. Summary of the Borrower's Project Completion Report (PCR) and Comments on Draft ICR

The Borrower’s PCR is a fair reflection of the project performance. It is also an expression of the enthusiasm that the Borrower has for the project. The level of ownership of the project has been very high despite the challenges in implementation.

The PCR explicitly lists a number of the challenges and weaknesses of project implementation, recognizing that the introduction of an operational project into a financial agency was not an easy matter. The PCR highlights difficulties with coordination between partners.

The PCR is large, covering two volumes. The report contains both performance data and anecdotal information regarding success factors and key challenges. The PCR identified six main factors affecting implementation:

• Weak NRM Policy Framework • Weak Operationalization of the LGU Financing Framework • Weak Institutional Framework • Weak project management controls over monitoring variables • Absence of well-tested operational mechanisms at project start-up • Weak readiness of implementing partners

The PCR also highlights facilitating factors:

• Good project management structure and process after restructuring (FM and CDD- based procurement) • Improved policy framework as a result of coordinated discussions on issues related to land tenure and decentralization. • Signing of Memorandums of Agreements with the communities (POs) assisted in defining roles and responsibilities and improved coordination. • The presence of the BLGF Offices at the regional levels facilitated fund releases. • The provision of project funds to partner agencies facilitated achievement of project targets, such as the issuance of land tenure instruments which were funded based on the target set.

Key Challenges have been identified and recommendations made for addressing those challenges.

The Borrower had no major objections with the findings and recommendations of the ICR. Nevertheless, it forwarded the following comments and recommendations for the Bank’s consideration:

1. On page iv, comment # 1 line 5, to change the expression "full payment" to "final payment"

2. On page v. comment 1, we strongly disagree that financial management remained a weak aspect. It should be noted that (a) a major contribution of the project is the strengthening of financial capability not only at the LGU level but also at the PO level which is very significant in the implementation of the project; and (b) one strength of the MDFO is on the financial management of foreign-assisted projects which is its distinct responsibility under DOF.

37 3. On page 4, item 1.7.4, to include in the second line, second sentence "because of the non- compliance in performance in 2002 as a result of the Sub-Project Appraisal, Review and Evaluation (SPARE) initiated by the DOF Management to accelerate sub-project implementation in all covered regions”.

4. On page 5, item 2.1.1, to include in the seventh line, "MDFO was a relatively new institution with limited technical capacity to implement natural resource related projects.”.

5. On page 6, item 2.1.2, to include in line 3, “implementation processes including support mechanisms necessary to implement natural resources related projects”..

6. On 7, footnote # 8, to include “....never formally recorded as a design/target change as maybe attributed to fast turn over of M&E staffs”.

7. On page 7, item 2.3.2, line 3, to remove the word "second".

8. On page 8, item 2.5.1, line 4, to edit and include Municipal Environment and Natural Resource Office and expansion of the Municipal Agriculture Office.

9. On page 36, to include in second paragraph, last sentence, “… between partners, but the convergence and complementation by these partners later on were put to good use and resulted to achieving the targeted project outputs.”.

38 Annex 8. Comments of Co-financiers and Other Partners/Stakeholders

See Stakeholders workshop.

39

Annex 9. List of Supporting Documents

1. Project Appraisal Document, February 1998 2. Environment and Natural Resources Sector Adjustment Program Implementation Completion Report, May 2000 3. Safeguards Thematic Review of Decentralized Projects in Philippines, July 2004 4. Department of Finance, MDFO, CBRMP Impact Evaluation Final Report August 2006 5. CBRMP Project Completion Report Volume 1, June 2007 6. CBRMP Project Completion Report Volume 2 June 2007 7. CBRMP Income Study, October 2007

40 ° ° ° 100° 110° 120° 118 120 122 NORTH PACIFIC CHINA Batan OCEAN PHILIPPINES Islands 20° LAO MACAO, PORT. 20°° Basco P.D.R. Philippine 11 THAILAND Manila COMMUNITY BASED RESOURCES VIETNAM Sea CAMBODIA 20° PHILIPPINES MANAGEMENT PROJECT (CBRM) Luzon Strait 10° 10°

PALAU PROJECT AREA BRUNEI PAN-PHILIPPINE HIGHWAY MALAYSIA SINGAPORE OTHER MAIN ROADS 0° 0° Babuyan FERRIES Islands P.N.G. INTERNATIONAL AIRPORTS Java Sea Babuyan Channel INDONESIA MAJOR PORTS INDIAN Arafura Sea S. Vicente 10° 10° OCEAN RIVERS Aparri Timor Sea 100° 110° 120° AUSTRALIA 140° PROVINCE CAPITALS Laoag City 1 Dugo 6 REGION CAPITALS 12 18° Kabugao 124° 126° 18° PROVINCE BOUNDARIES Piat This map was produced by the Map Design Unit of The World Bank. REGION BOUNDARIES Bangued Tuguegarao The boundaries, colors, denominations and any other information shown Vigan CAR 5 9 on this map do not imply, on the part of The World Bank Group, any Santiago Labuagan judgment on the legal status of any territory, or any endorsement or Regions and Provinces R. Tabuk 2 II acceptance of such boundaries. Bontoc Chico I Ilocandia I 10 Ilagan 1. Ilocos Norte R. 2. Ilocos Sur 13 3. La Union Lagawe 4. Pangasinan 8 San Fernando 3 7 Cagayan CAR Cordillera Administrative Region Bauang La Trinidad Cabarroguis 5. Abraa Bayombong 6. Apayao Baguio City14 7. Benguet 15 8. Ifugao Dagupan 9. Kalinga Sta. Barbara ° 10. Mountain Province ° 16 Lingayen 22 16 II Cagayan Valley 4 Luzon San Jose Baler 11. Batanes 12. Cagayan 18 Palayan City 13. Isabela 20 R. 14. Nueva Vizcaya Tarlac Cabanatuan 15. Quirino Iba III 21 Gapan III Central Luzon Angeles IX Western Mindanao Agusan Polillo 16. Bataan San Fernando 17. Bulacan 55. Basilian Islands 56. Zamboanga del Norte 19 18. Nueva Ecija Malolos 19. Pampanga 57. Zamboanga del Sur Olongapo 16 Balanga17 20. Tarlac Quezon City 21. Zambales X Northern Mindanao Moron 58. Bukidnon MANILA Pasig NCR National Capital Region 59. Camiguin 31 IV 60. Misamis Occidental Los Jose Panganiban Philippine IV Southern Tagalog 61. Misamis Oriental Trece Martires Banos Santa Cruz 22. Aurora 24 XI Southern Mindanao 25 Daet 23. Batangas Nasugbu 30 34 14° 24. Cavite 62. Davao del Norte Lipa 14° 25. Laguna 63. Davao del Sur 26. Marinduque 64. Davao Oriental 23 Lucena Sea 27. Mindoro Occidental 65. Sarangani City 35 Sabang Catanduanes Lubang Batangas City 28. Mindoro Oriental 66. South Cotabato Catananuan Naga 36 67. Sultan Kudarat Islands 29. Palawan Pili 30. Quezon Boac Tiwi Virac Calapan Pasacao 31. Rizal XII Central Mindanao 26 Tabaco 32. Romblon 68. Lanao del Norte Mamburao Marinduque 69. North Cotabato Ligao Legaspi City V Bicolandia IV Sibuyan 33 33. Albay XIII Caraga 28 Sorsogon 34. Camarines Norte Mindoro 70. Agusan del Norte Sea Burias 38 35. Camarines Sur 71. Agusan del Sur 27 V 36. Catanduanes 72. Surigao del Norte Mindoro Strait Bongabon Bulen 37. Masbate 73. Surigao del Sur Matnog 38. Sorsogon Calintaan Romblon 52 Palapag ARMM Autonomous Region of Aroroy Ticao Tablas Catarman VI Western Visayas Muslim Mindanao 32 Sibuyan Masbate 74. Lanao del Sur Busuanga San 39. Aklan Isidro 40. Antique 75. Maguindanao Santa Teresa Milagros 37 41. Capiz 76. Sulu Masbate Calbayog Oras 12° 52. Guimaras 77. Tawi-Tawi 12° 43. Iloilo Semirara Samar Nabas Taft 44. Negros Occidental Culion Islands Placer 53 Kalibo Visayan Catbalogan VIII Roxas City VII Central Visayas Sea Borongan 39 Naval 50 45. Bohol Linapacah Sigma 41 Estancia 49 46. Cebu Dao 47. Negros Oriental Dumalag Carigara 48. Siquijor Panay Villaba Tacloban City Cuyo Calinog Passi 51 VIII Eastern Visayas S. Remigio Palo Islands 40 Duenas Barotac Lawaan Ormoc Guiuan 49. Biliran Januay Dingle Cadiz Leyte 50. Eastern Samar IV San Jose de Pototan Barotac Nuevo Isabel 51. Leyte 43 Silay Gulf Buenavista Jaro Zarraga Abuyog 52. Northern Samar Bacolod City Iloilo City Jordan Baybay 53. Western Samar 42 San Cebu Carmen 54. Southern Leyte Bago Sumag Silago Carlos Lahug Danao Leyte La Carlota Dumaran VI Canloan Toledo Liloan VII Pontevedra Lutopan Mandaue 54 Roxas Naga Cebu City Dinagat Maasin Liloan 44 Talisay Talibon Kabaukalan San Ubay ° 10° Fernando Buena- 10 46 vista 45 Pintuyan Siargao Negros Bohol Surigao Puerto Princesa City Tagbilaran City 72 Palawan29 Bais Basay 47 Santander Mindanao Sulu Sea Dumaguete Siquijor Mambajao City Siquijor 59 Tandag Aboaba 48 Camiguin 73 Sea Butuan XIII City 70 Agusan Brooks Point Dapitan X Prosperidao Dipolog City Oroquieta City61 Agusan R. 60 Cagayan de Oro City 71 Hinatuan Sindangan Bugsuk Liloy Iligan City Malaybalay IX Tangub 68 58 56 Marawi City 8° Valencia 8° Pagadian 74 Balabac City XII Maramag Lumbatan 57 Dangcagan 62 Malabang Kibawe Mindanao Tagum Midsayap Cotabato Kabacon City XIIDavao City 64 Cagayan Datu Piang Mati Sulu 69 Kidapawan Moro 75 Maganoy Isabella Zamboanga de Basilan Gulf Digos XI Isulan 55 Koronodal Davao Basilan ARMM 67 63 Gulf 66 Sulu Alabel Jolo Gen. Santos 6° 65 6° 76 Celebes Sea MALAYSIA Tawi-Tawi Sarangani 77

Bongao FEBRUARY 1998 IBRD 29354 0 100 200 300 KILOMETERS

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