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Report No. 3545-PH FILLECOPY The Philippines: IrrigationProgram Review Public Disclosure Authorized December15, 1982 Country ProjectsDepartment EastAsia and Pacific RegionalOffice FOR OFFICIAL USEONLY Public Disclosure Authorized U Public Disclosure Authorized Public Disclosure Authorized Document of the World Bank 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 disclosedwithout World Bank authorization FOR OFFICIAL USE ONLY PHILIPPINES IRRIGATION PROGRAM REVIEW Preface i. This report originated in a mission /1 to the Philippines in 1980, and Chapters 1 through 4 are essentiallyas that mission's yellow cover draft, issued in June 1981. That version drew attention to the likelihood of dramatic rice surpluses and led to a more detailed examinationof the poten- tial rice balance. The results were incorporatedin the green cover draft, issued in January 1982. Based on the data available, very large rice surpluses were projected through the 1990s, leading to questions on the advisabilityof the Governmentcontinuing with a major program of investment in new irrigation capacity. ii. The draft report was discussedwith the Government in February and May 1982, and, as a result, discrepanciesbetween data on irrigated areas and cropping intensity produced by the National IrrigationAdministration and the Ministry of Agriculturebecame apparent. The data proved to be reconcilable,however, and in this light a new set of projectionswere made. These are included in Chapters 5 and Annex 2 of this report. They suggest that while the Philippine rice supply is still likely to be considerablyin excess of domestic demand through the 1990s, provided real prices to farmers are maintained, this will be by a smaller amount than earlier projected. The broad conclusion remains- that unless the Philippines can establish itself in the rice export market on a regular basis (a possibilitywhich should be studied urgently), generate greater domestic demand, or manage a large-scaleconversion of land use from rice to more profitable crops, the current plans for irrigation developmentshould be scaled down - but with the proviso that the need for further new investment in the late 1990s should be carefullymonitored. /1 The mission, which visited the Philippines in December 1980, comprised Mr. M. Cox (Bank) and Sir Kenelm Guiness and Mr. A. Yambao (consultants). Messrs. W.T. Smith and E.G. Giglioli assisted with the report, and Messrs. J. H. Cleave and J. Macgregor undertook later discussionsand drafting. 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. PHILIPPINES IRRIGATION PROGRAM REVIEW Table of Contents Page No. SUMMARY AND CONCLUSIONS . i - iv 1. BACKGROUND .... 1 Regions and River Basins . 1 Scale of Irrigation Expenditures by the Philippine Government 2 External Assistance for Irrigation Development . 3 Purpose and Objectives of the Irrigation Program Review . 4 2. IRRIGATED AGRICULTURE IN THE PHILIPPINES. 5 Background. 5 Farm Size, Land Tenure and Land Reform. 5 Topography, Climate and Soils. 8 Crop Production. 8 Prospects for Irrigation of Crops other than Rice . 12 Agricultural Supporting Services . 13 3. INSTITUTIONAL ORGANIZATION OF THE IRRIGATION SECTOR . 17 National Irrigation Administration . 17 Other Institutions Involved in Irrigation . 23 4. IRRIGATION DEVELOPMENT: PRESENT SITUATION AND POTENTIALS . 25 Background . 25 Present Situation and Potential by Regions . 28 5. A PROGRAM FOR THE FUTURE . 33 Government Objectives .33 Rice Production and Consumption Projections . 33 Supporting Policies .39 Alternatives to New Investments in Surface Irrigation . 41 Implications for Future Irrigation Development. 44 -2- Page No. ANNEXES 1. External Financing for Irrigation Development ... 48 A. World Bank ......................... 48 B. Asian Development Bank ... 53 C. Other Financing Agencies .................. 56 2. Rice Demand and Supply Projections . .. 57 Table 1 - Supply and Disappearance, Crop Years 1970-82 .60 Table 2 - Harvested Areas, Yield and Production of Paddy for Selected Years .61 Table 3 - Rice: Supply and Demand Projections. 62 Table 4 - Sensitivity Analysis of Rice Supply-Demand Balance. 63 Table 5 - Rice Yield Growth Assumptions .64 Table 6 - Irrigated Rice Cropped Area Growth .65 Table 7 - Rice Demand Projection Assumptions. 66 FIGURES 1 Past and Projected Palay Yields . 67 MAP - Location of Projects (IBRD 15720 R) Tables in Text 2.1 - Distribution of Rice Farm Holdings in the Philippines . 6 2.2 - Targets of Agrarian Reform Program. 7 2.3 - Climatic Characteristics by Region. 9 2.4 - Area, Yield and Production of Three Major Crops .10 3.1 - Collection of Water Charges on National Irrigation Systems . 20 4.1 - Areas Served by Irrigation Systems, 1980 . 27 5.1 - Summary of Rice Supply and Demand Projections . 36 5.2 - Sensitivity Analysis of Rice Supply-Demand Projections . 38 PHILIPPINES IRRIGATION PROGRAM REVIEW SUMMARY AND CONCLUSIONS 1. In 1981 about 950,000 ha of crops in a service area/l of 1,230,000 ha benefited from irrigation in the Philippines. About 480,000 ha of service area are served by national systems under the control of the National Irrigation Administration (NIA), while some 600,000 ha are communal systems owned and operated by the communities they serve. About 150,000 ha are served by miscellaneous other schemes, of which many are pump irrigation projects originally built by the Bureau of Public Works but now under the general control of NIA. The service area has grown to its present level from about 80,000 ha in 1950. 2. Virtually all of the irrigated land in the Philippines is devoted to rice cultivation; this is due to a combination of climate, topography, soils and prices. Annual rainfall varies considerably from place to place in the thousands of islands forming the Philippines but is seldom less than 1,800 mm and in some places exceeds 4,000 mm. Thus, most crops other than rice can be grown without irrigation. Topography and soils favor rice irrigation because the rivers flow through the broad flat flood plains where rainfed rice has been grown for centuries and the soils are generally ill-suited for other crops. Irrigated cropping accounted for about 44% of the 3.6 million ha of rice harvested in 1979/80. 3. The creation of NIA in 1964 presaged a major government program, which began in 1968 and is still in progress, to improve the standard of existing projects and to extend irrigation to large areas of rainfed lowlands. Government support for NIA-s program was stimulated by the Philippines failure to meet its own rice requirements. Imports of milled rice reached a peak of over 600,000 tons in 1972 following a series of poor harvests caused by typhoons and droughts. In parallel with the irrigation program, the Government also launched a major credit program, Masagana 99, to help rice farmers finance the inputs needed to exploit the new high yielding varieties (HYVs) which had become available. As a result of NIA's irrigation program and the technology ushered in by Masagana 99, the Philippines has had a surplus of rice in five of the six years since 1976. Gains in production will continue through the 1980s and 19 90s as benefits are realized from the /1 Service area includes service roads canals, farmhouses and land not receiving irrigation water but within the intended irrigated area of a project, as well as actual irrigated cropped area. - ii - strengthening of agricultural support services and from the many large irrigation projects now under construction with assistance from the Bank and the Asian Development Bank. 4. Only about 40% of the technically irrigable area of the Philippines has been developed. The potential exists for developing a further 1.0-1.2 million ha of service area mainly in Central Luzon, already the most developed area and the "rice bowl" of the Philippines, and Mindanao, where a major impediment to smooth development is the security problem present in much of the island. NIA has prepared a corporate plan which in its latest (September 1982) version envisages the development of some 800,000 ha of new irrigation and rehabilitation of a further 400,000 ha over the period 1982-2000. These figures include some 350,000 ha on which design or implementation of schemes has already started. The planned development, although less than earlier envisaged, is on a scale which will produce rice considerably in excess of domestic demand. On the basis of an anticipated continuing decline in population growth and a moderate growth in average per capita income, the domesic effective demand for Philippine rice is pro- jected to increase by about 70% over 1980 levels by the year 2000. On the supply side, assuming only completion of schemes on which a start had already been made by 1982 but no starts on new irrigation other than three multipurpose projects, and allowing for moderate yield increases on rainfed and irrigated rice and a modest growth in cropping intensity in irrigated areas, milled rice production is projected to increase by about 65% in the same period. On this basis, the rice surplus over the domestic market demand would rise from nearly 600,000 tons a year in 1985 to nearly 800,000 tons by 1990 as projects currently under implementation come on stream, and would still be somewhat more than 300,000 tons a year by the year 2000. These