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Metro Manila Inf Rastructureutilities and Engineering Program (MMINUTE) 3Rdfl"T

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Metro Manila Inf Rastructureutilities and Engineering Program (MMINUTE) 3Rdfl Documentof The World Bank r FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No. 7897 PROJECT COMPLETION REPORT PHILIPPINES Public Disclosure Authorized THIRD URBAN DEVELOPMENT PROJECT (LOAN 1821-PH) JUNE 30, 1989 Public Disclosure Authorized Infrastructure Division Country Department II Public Disclosure Authorized Asia Region This documenthas 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. ABBREVIATIONS AND ACRONYMS CURRENCYEQUIVALENTS Currenc, Unit - Peso *P) US$: - P21.0 (comnletion) US$1 P7.4 (apn)raisal) WEIGHTSAND MEASURES 1 meter (m) - 39.37 inches (in) 1 square meter (sq m) - 10.8 square feet (sq ft) 1 cubic meter (cu m) - 35.3 cubic feet (cu ft) 1 kilometer (km) - 0.62 mile (mi) 1 square kilometer (sq km) m 0.386 square mile (sq mi) I hectare (ha) - 10,000 square meters (sq m or 2.47 acres (ac) ABBREVIATIONSAND ACRONYMS BLISS - Bagong Lipunan Improvementof Sites and Services CIF - Capital ImprovementFolio COA - Commission on Audit DBP - Development Bank of the Philippines ESC - EnvironmentalSanitation Center LOI - Letters of Instruction MCB - Management CoordinationBoard NHS - Ministry of Human Settlements MMINUTE- - Metro-Manila Infrastructure,Utilities and EngineeringProgram MMA - Metro Manila Area MMBIDP - Metro-Manila Barangay IndustriesDevelopment Program MKC - Metro Manila Commission NMTA - Metro Manila Transport Authority MOB - Ministry of Budget MOF - Ministry of Finance MPH - Ministry of Public Highways MPW - Ministry of Public Works MWSS - MetropolitanWater and Sewerage System NACIDA - National Cottage Industry Dev4Iopment Authority NEDA - National Economic and Development Authority NHA - National Housing Authority NHMFC - National Home Mortgage Finance Corporation NMYC - National Manpower and Youth Council PBSP - Philippine Business for Social Progress PD - Presidential Decree PROGRESS - Program for Removing Se,age from Streets RAD - Research and Analysis Division SIR - Slum Improvement and Resettlement Program SSE - Small Scale Enterprise TRC - Technology Resource Center TUVD - Technology Utilization Ventures Division UNDP - United Nations Development Program UPISSI - University of the Philippines Institute for Small Scale Industry ZIP - Zonal Improvement Program FISCAL YEAR January 1 to December 31 FOR OMCIAL USE ONLY THEWORLD BANK Washtngton.DC. 20433 U.S.A. OMiced4 DOwectt(.ClhI -, Operatmm EvoakiatKi June 30, 1989 MEMORANDUMTO THE EXECUTIVEDIRECTORS AND THE PRESIDENT STThJECT: Project Completion Report _n Philippines - Third Urban Development Project (Loan 1821-PH) Attached, for information, is a copy of a report entitled "Project Completion Report on Philippines - Third Urban Developmrat Project (Loan 1821-PH)' prepared by the Asia Regional Office with Part II of the report contributed by the Borrower. No audit of this project has been made by the Operations Evaluation Department at this time. Attachment I This documenthas a restricteddistribution and may be usedby recipientsonly in the performance of their officialduties. Its contentsmay not otherwisebe disclosed without World Bankauthorization. FOROMCIAL USE ONLY PROJECT COMPLETIONREPORT PHILIPPINES THIRD URBAN DEVELOPMENTPROJECT (LOAN 1821-PH) Table of Contents Preface.................................................... i EvaluationSummary ......................................... ii I. Part I Project Identity................................... 1 Background......................................... 1 Project Objectives and Description................. 1 Project Highlights................................. 1 Lessons............................................ 4 Remaining Issues................................... 8 Attachment 1: Table of Key Indicies................ 12 Attachment 2: Inflation............................ 14 II. Pa ftII The Borrower'sProject CompletionReport ..... 15-74 III. Part III Summary of StatisticalData Table 1: Related Bank Loans.76 Table 2: Project Timetable.76 Table 3: Loan Disbursements.77 Table 4: Project Implementation(Key Indices) 78 Table 5: Project Costs and Financing.78 Table 6B: Economic Benefits...................... 78 Table 6D: Studies................................ 80 Table 7: Compliancewith Loan Covenants......... 81 Table 8: Use of Bank Resources.................. 82 ATTACHMENT- Comments from the Borrower ..... ...............84 This document has a restricteddistribution and may beused by recipientsonly in the performance of their officialduties. Its contents may not otherwisebe disclosedwithout WorldBank authorization. PROJECT COMPLETIONREPORT PHIL'PPINES THIRD URBAN DEVELOPMENTPROJECT (LOAN 1821-PH) PREFACE This is the Project CompletionReport (PCR) for the Third Urban DevelopmentProject in Philippines,for wh!.chLoan 1821-PH in the amount of US$72 million was approved on March 23, 1980. The loan was closed on December 31, 1987, three years behind schedule. During implementation, US$1.0 million was cancelled in November 1985. The last disbursementwas made on July 11, 1988 and the undisbursedloan balance of US$3,895,100.12 was cancelled effectiveJuly 12, 1988. The PCR was jointly prepared by the InfrastructureDivision, Country Department II of the Asia Region (Preface,Evaluation Sulmmary, Parts I and III) and the Borrower (Part II). Borrower provided comments on the PCR (Attacbment). Preparationof this PCR was started during the Bank's final super- vision mission of the project in July 1988, and is based, inter alia, on the Staff Appraisal Report; the Loan, Guarantee,and Project Agreements; supervisionreports; correspondencebetween the Bank and the Borrower; and internal Bank memoranda. - ii - PROJECT COMPLETIONREPORT PHILIPPINES THIRD URBAN DEVELOPMENTPROJECT (LOAN 1821-PH) EVALUATION SUMMARY Introduction 1. The project was the third Bank urban developmentoperation in the Philippines.It representedthe continuationof Bank assistaAce to the urbaa sector initiated in 1976 with the purpose of providing basic shelter improvementsto the urban poor, primarily through slum upgrading and sites and services.The Bank loan of US$72 million to the Government of the Republic of the Philippineswas approved on March 23, 1980 and was closed on December 31, 1987, three years after the original closing date. Obiectives 2. The objective of the operationwas to continue assistanceto the PhilippineGovernment in developing affordable solutions to the problems of poverty, shelter and environmentalsanitation in the Manila MetropolitanArea (Part II, para. 1.03). Implementation Experience 3. Project implementation encountered severe economic and political turbulenceresulting in three one year extensicas (Part I, para. 4). Total project costs were estimatedat appraisal to be US$120, and while the final dollar equivalent was only marginally above this figure, project costs in pesos rose from the P800 million expected at appraisal to P1,804.7 million at closing. This increasewas due to a combinationof domestic inflation and the significant devaluation of the peso relative to the dollar during the implementation period. The near equivalence of dollar costs reflects the programmaticnature of the operation, as the quantity of physical works was expanded to maximize utilizatiouiof the dollar value of the loan (Part I, para. 5). Out of the original Bank loan, nevertheless, US$1.0 million was cancelled in November 1985 and another US$3.9 million was cancelled at the time of last disbursementin July 1988. Results 4. Despite implementation delays, project physical achievementsfor slum upgrading and sites and services subprojectseventually reached targeted levels and, in the case of several components, significantlyexceeded them (Part I, Attachment 1). The small business component was also largely successful,while the level of up front subsidies implicit in the below cost pricing of project-generated shelter solutionswas significantlydecreased vis-a-vis the experienceunder the two previous projects (Part I, paras. 6- 11). On the negative side, however, serious problems with lot sales and - iii - mortgage and home improvementloan collections persisted (Part I, paras. 38- 40). Furthermore, the project proved to be too complex in design, having eight distinct components involving five different agencies, and overly ambitious in its technical assistance and institutional strengthening objectives (Part I, paras. 12-19). Sustainability 5. While benefits deriving from improved shelter and access to urban services on the part of many low-incomefamilies as a result of the project are likely to be sustatned, the poor cost recovery performance under this and the two previous uroan projects calls into question the ability of the National Housing Authority to replicatesites and services and, especially, squatter upgrading efforts on a broad scale. Findings and Lessons 6. This project, as one of a series of very ambitiousurban shelterand service improvementoperations financed by the Bank in the Philippinesover the past decade and a half was prepared at a time when the institutionally demanding,multi-component approach to urban development was still in vogue and before the Bank had become fully aware of the institutionaland financial -- especially cost recovery -- difficulties experienced by Urban I and II. As a result many of the problems observed in the two earlier operationsalso occurred in the present project. Urban III, nevertheless,made several notable contributions,including the consolidation of the relatively
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