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World Bank Document Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No. 4535-PH Public Disclosure Authorized STAFF APPRAISAL REPORT PHILIPPINES FIFTH HIGHWAY PROJECT Public Disclosure Authorized May 1, 1984 Public Disclosure Authorized Transportation Division 2 Projects Department East Asia & Pacific Regional Office 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 Currency Unit = Pesos (P) US$1.00 = P 14.00 P 1.00 = US$0.07 FISCAL YEAR January 1 to December 31 ABBREVIATIONS AA - Advise of Allotment ADT - Average Daily Traffic AASHTO - American Association of State Highway Officials ADB - Asian Development Bank BAT - Bureau of Air Transport of MOTC BLT - Bureau of Land Transport of MOTC BOM - Bureau of Maintenance of MPWH BP - Batasang Pambansa CDC - Cash Disbursement Ceiling; CIAP - Construction Industry Authority of the Philippines CO - City Office of MPWH COA - Commission on Audit DBCC - Development Budget Coordinating Committee DO - District Office of MPWH EMK - Equivalent Maintenance Kilometer ERR - Economic Rate of Return GRT - Gross Registered Tonnage MARINA - Maritime Industry Authority MDS - Manpower Development Service of MPWH MLG - Ministry of Local Government MOB - Ministry of Budget MOTC - Ministry of Transport and Communications MPH - Ministry of Public Highways MPW - Ministry of Public Works MPWH - Ministry of Public Works and Highways NEDA - National Economic and Development Authority NTPP - National Transportation Planning Project PCA - Philippine Contractors Association PMO - Projects Management Office of MPWH PNR - Philippine National Railways PPA - Philippine Ports Authority PTS - Philippine Transport Survey RO - Regional Office of MPWH SOE - Statements of Expenditure TOR - Terms of Reference USAID - United States Agency for International Development vpd - vehicles per day FOR OFFICIALUSE ONLY PHILIPPINES: FIFTH HIGHWAY PROJECT STAFF APPRAISAL REPORT Table of Contents Page No. I. TRANiSPORT SECTOR . 1 A. The Transport System ... .. 1 B. Policy, Planning and Coordination . 3 C. Sector Issues . 4 D. Bank Involvement in the Transport Sector . 5 II. HIGIIWAYS . 8 A. The Network . ... 8 B. Traffic . 10 C. Road Transport Industry . 11 D. Road User Charges and Highway Expenditures. 12 E. Administration, Staff and Training . 13 F. Planning . 15 G. Design . 16 H. Construction . 16 I. Maintenance . .18 J. Financing, Budgeting and Accounting. 23 III. THE PROJECT . .C . 24 A. Background . 24 B. Objectives . 24 C. Main Features .... ...... 25 D. Detailed Description . 25 E. Status of Preparation . .32 F. Cost Estimates . 33 G. Financing . 35 H. Implementation . 36 I. Procurement . 37 J. Disbursements . 40 K. Environmental Aspects .... ...... 40 L. Role of Women . I . 40 The report is based on the findings of an appraisal mission consisting of Messrs. G. Trnka (engineer), M.S. Parthasarathi (economist), P. Jensen (engineer) and W. Hoehenwarter (financial analyst) which visited the Philippines in February/March 1983. This documenthas a restricteddistribution and may be used by recipientsonly in the performanceof Itheir official duties. Its contents may not otherwisebe disclosed without WorldBank authorization. - l~i - Page No. IV. ECONOMICEVALUATION ..... .. 41 A. General ...... .. .. .. .. .. 41 B. Reconstruction Program for Bridges . 41 C. Improvement of National Highway Ba.guio-Mt. Data . 42 D. Restoration Program ..... .. 43 E. Economic Return on Whole Project . 43 F. Risks .......................... 43 G. Beneficiaries . 44 V. AGREEMENTS REACHED AND RECOMMENDATIONS . 45 TABLE IN THE TEXT 2.1 Expenditures on National Highways . 20 3.1 Summary of Project Costs . 34 3.2 Procurement Summary . 38 ANNEXES 1. Action Program for Project Implementation . 46 2. Ministry of Public Works and Highways: Organizational Set-Up. 50 3. Government Budget Process . .. 51 4. Project-related Documents and Data Available in the Project File 53 SUPPORTING TABLES 1. Government Investments in Transport Sector Infrastructure . 55 2. Public Road Network .56 3. Vehicle Fleet by Type .57 4. Road User Revenues and Expenditures, 1970-81 . 58 5. Motor Vehicle Fuel Consumption, 1970-81 .59 6. Design Standards for National Highways . 60 7. Expenditures on Highway Maintenance by Road System, 1972-81 . 61 8. Ministry of Public Works and Highways: Medium-term Financial Plan, 1984-89 .... 62 9. Reconstruction Program for Bridges on National Highways: 1985 Program . 63 10. Restoration Program on National Highways: Summary Table . 64 11. Restoration Program on National Highways: 1985 Program . 65 12. Consulting and Technical Assistance Services . 66 13. Proposed List of Future National Highway Projects . 67 14. Summary of Project Costs . 68 15. Schedule of Estimated Disbursements . 69 16. Basic Vehicle Operating Costs ... 70 17. Restoration Program of National Highways: Vehicle Operating Costs 71 18 Cost and Benefit Streams for Improvement of National Highway Baguio-Mt. Data .... 72 19. Economic Return Sensitivity Analysis . 73 - iii - Page No. CHARTS 1. Ministry of Public Works and Highways - OrganizationChart 74 2. Ministry of Public Works and Highways, Regional Office - OrganizationChart . 75 3. ImplementationSchedule ...... ............. 76 MAPS 1. IBRD 17013 - Previous Highway Project Components . 77 2. IBRD 17014R - Project Components . 78 I. TRANSPORT SECTOR A. The Transport System General 1.01 The Philippine economy has been growing at 6.0% a year between 1970 and 1980, thereby generating a strong and growing demand for transport services,which grew during the same period at 9% a year. To meet this demand, the Government undertook investmentstotalling around P 20 billion (US$1.4 billion), principally in highways, but also in other transport modes. As a result, the public road network grew from 65,000 km in 1970 to 155,000 km in 1982. With the majority of the national highways either already improved or under improvement,the Government has now turned its attention to improvinghighway maintenanceand to upgrading rural roads, while limiting highway investmentsto strengtheningweak bridges and highway sections in the generalLy satisfactorynetwork (para. 3.05). 1.02 Due to its geography, the Philippines depends to a great extent on interisland shipping and ferry services to link the main island of Luzon with the other islands. Nevertheless,road transporthandles 80% of the country's passengermovements and 60% of freight movements compared with water transport (8% of passenger and 40% of freight traffic). The railways and air transporthandle the remaining of 12% of passenger traffic and a small volume of freight (less than 1%). Basically, therefore, the Philippine transport system is a predominantlybimodal system, with road and water transport generally complementing,rather than competingwith, each other. 1.03 During the 1980s, the transport sector is expected to continue to grow but at a somewhat reduced pace of around 6-7% p.a., in line with the slowdown of the economy's growth caused by worldwide recession and structural problems of the Philippine economy. Highways 1.04 Highways and highway transportare discussed in detail in Chapter II. Ports and Domestic Shipping 1.05 There are 18 major and 73 minor national ports, some 400 smaller municipal ports, and 230 private piers and wharves in the Philippines. Together these handle yearly about 75 million tons of cargo, about half in domestic trade and half in foreign traffic, and some 16 million passengers, - 2 - almost all domestic. The public ports handle about 45% of the total cargo and all passengers;about 75% of the cargo is domestic traffic. Of the public ports, Manila is by far the most important,with over 10 million tons of cargo in 1979. Private port traffic comprises mainly bulk cargo (oil, iron ore, sugar, etc.), 60% of it in foreign trade. 1.06 The interislandshipping fleet which handles the domestic traffic consists of some 3,200 vessels, with over 60% under 100 GRT each. Only some 250 are liner ships with an average GRT of 1,000. A majority of the small ships are owned and operated by some 200 small companies. 1.07 In the past decade, the main investmentsin port infrastructure have been in the country's major ports - Manila, Davao, Cotabato, Iligan, Cagayan de Oro, General Santos, Cebu, Zamboanga and Iloilo. Improvement works at many of these ports are still under implementation. Future investmentsare expected to shift substantiallyto the smaller ports which serve almost exclusivelydomestic traffic. Railways 1.08 There are two railway systems in the Philippines: the Philippine National Railways (PNR) operating on the main island of Luzon and the Panay Railways on Panay Island. The Government-ownedPNR has 807 km of route in operation and carried in 1980 some 365,000 tons of freight and 1.28 million passengers. A project for the rehabilitationof the Main Line South, with the Asian Development Bank (ADB) financing, is nearing completion. However, PNR incurs substantialdeficits in its operations which have so far been met by Government contributions,and the Panay Railways receive favored treatment in carrying sugar mill traffic, and even so barely manages to cover operating expenses. The railways' role in internal transport is thus marginal, and there is no prospect of its becoming a major factor in the near future. The Government has recently initiated constructionof a 10 km elevated light railway transit
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