World Bank Document

Report No. 1017a-PH Transport Planning in the Philippines FILE COPY Public Disclosure Authorized

May 4, 1976 Transportation Division East Asia and Pacific Region FOR OFFICIAL USE ONLY Public Disclosure Authorized 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 disclosed without World Bank authorization. CURRENCY EQUIVALENTS

US$1.00 = P 7 (June 1975)

The Peso was devalued to US$1.00 = 7.6 in July 1975 but the old conversion was used in this report as the Investment Program was prepared when this rate was in effect. The estimated peso costs in the Program will probably rise following the devaluation.

ABBREVIATIONS AND ACRONYMS

ADB - Asian Development Bank BOT - Board of Transporb BPH - Bureau of Public Highways CAA - Civil Aviation Administration CAB - Civil'Aeronautic Board DBCC - Development Budget Coordinating Committee DOT - Proposed Department of Transport DPH - Department of Public Highways DPWH - Proposed Department of Public Works and Highways DPWTC - Department of Public Works, Transport and Communications FRG - Federal Republic of Germany HSF - Highway Special Fund MARINA - Maritime Industry Authority IvrrC - Metropolitan Transit Commission NEDA - National Economic and Development Authority OSCOPA - Office of the Special Commissioner on Port Administration PDPA - Provincial Development Assistance Program PNR - Philippine National Railways PPA - Philippine Ports Authority PPDO - Planning and Project Development Office PTS - Philippine Transport Survey of 1969-70 RDC - Regional Development Councils FOR OFFICIAL USE ONLY

FOREWORD

This report was based on the findings of the Bank's Trans- port Planning Mission which visited the Philippines in June 1975. The mission was composed of:

Sei-Young Park Chief of Mission Inai Bradfield Transport Economist Alain F. Ballereau Land Transport Expert Peter Bowden Planning Expert Jack McCunniff Marine Transport Expert Yu-Li Sun Research Assistant

The report was written by Mr. Park and Mrs. Bradfield.

This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwisp he dis,oeI-d without World Bank authoriation.

TRANSPORT PLANNING IN THE PHILIPPINES

TABLE OF ONTENMTS

Page No.

QI1MMAW~ AW 1DVflP ) M'U%MArPT"JQ

'JItt%. L.LJa. .'L ...... i-v f'UADMPD TT DTYO't1TP TTVTnVr MjW.rP-, V SLMAl.j L .LL LLLA%JL'.L J .v"LLVAfL...'... aJ.. * ... .*.... . *. .*.. . C

CuT A DE'D TTT qntA mQNSDrT TW'1CVES PPuGDDflfTA IN POLICY AND PLANNING ...... 8

A. Outline of the Transport T_- &.L Cn7 1( 7A o UIVestdmletL rraUml-d1ul ±7 fU-7 ...... u

B. Transportolicyaannin..gn d .. .9

I.. InvestmenbStrategies .10

II. Operational Strategies ... 14

C. Proposed Technical Assistance for Planning ...... 15

CHAPTER IV PROGRAM, PLANNING AND OPERATION OF TRANSPru± MODES ...... 16

A. Highways and Road Transport . . . 16

B. Railways: The Philippine National Railways ... 27

C. Ports and Shipping . .31

D. Airports and Civil Aviation . 34

E. Urban Transport ...... 35

CHAPTER V TRANSPORT ORGANIZATION: PLANNNING AND COORDINATION.. 4o

ANNEX.A Descriptive Information on Transport Sector

ANNEX B Presidential Decrees and Transport Policy Directives

TABLES 1-8

MAP IBRD-11794

SU-ITAR17 AN-D REuCOMW-kLATIlONS

i. Developments in the transport sector during the past decade have been encouraging. There was a considerable expansion of transport facilities based on improved planning and administration. In terms of target achievement of public infrastructure investment during this period, the transport sector, particularly highways, led all other economic sectors, such as agriculture, power, and industry. There were also some improvements in operational efficiency in various transport modes, such as highways and railways. Moreover, the organization for transport administration and planning was strengthened by the creation of the Inter-Agency Technical Committee for Transport Planning in the National Economic and Development Authority and the Planning and Project Development Office in the Department of Public Works, Transport and Com- munications, the Maritime Industry Authority, and the establishment of the Philippine Port Authority.

ii. While these achievements are noteworthy and commendable, much still remains to be done. The mission identified many areas in the planning practices and organizations where improvements are required. The main purpose of this report is to bring out clearly these problem areas and make suggestions for improvements. The mission's review of the proposed investment program for 1976-79 revealed that part of the program was not supported by investigation of traffic demand and by economic analysis. In this regard, there is an insufficient rationale for the program as a whole. The investment program is in need of major revisions. iii. In view of the above, the mission recommends a technical assistance program for the preparation of a national transportation system study and an investment program for 1977-80, and for providing resident advisory services to various transport agencies. (For details, see Chapter III, Section C). The mission also recommends that a Department of Transport (DOT) should be created to coordinate the operational and investment planning activities of individual transport agencies (see Chapter V). iv. This report also includes other detailed recommendations and suggestions for the improvement of transport operation and investment programming under the headings for individual transport modes. The underlying theme of the discussions leading to these recommendations is that efficiency in transport activities can best be achieved by creating an environment which is conducive to free and effective competition among transport modes and individual transport operators. A hiMh degree of r(nvPrnment regulation bevond the limits of nrofitable competition, and attempts to "allocate" traffic among modes through inequitahbl rtae1i1,atnrv and -nrinin l onenliiq_ iq nsnallv proven to be counterproductive. This is so because, in the final analysis, the user himqelf' ia +.ha hpat. iiidia nf hiq npepd. annd thP.rPfnro ashnildl ho lpft. tn choose the transport service which serves his purpose best. This will give correct signals for demand fonr transor+ services and aid in achieving a rational allocation of resources. - ii -

v. The Government's transport investment program for 1976579 is composed of (1) a number of large projects which were identified by the Philippine Transport Survey (PTS) carried out in 1969-70 and which are being financed or under consideration for outside assistance, and (2) a large number of small projects for local financing. While the projects for outside financing are supported by feasibility studies, those for local financing require more careful programming. Moreover, many hlgh priority projects identified by the PTS are already under execution; the remaining projects in the PTS list are those considered to be of relatively low priority at the time of the Survey. Also, because the priorities determired five years ago may not be relevant today, it is necessary to update the investment needs to reflect the current situation. The Government recognizes this need and has taken positive steps to revise the investment program. vi. Because investment programs must be reviewed on a frequent, periodic basis, an occasional transport survey cannot substitute for continuous review by the Government's own planners. There is thus an urgent need to strengthen the Government's own planning capacity. The core personnel for planning can be recruited from the Department of Public Works, Transport and Gommunications (DPWTC) to establish a full- fledged technical agency for transport planning and become the technical arm of the DOT. The existing Inter-Agency Technical Gommittee for Transport Planning under the National Economic and Development Au- thority (NEDA) may continue to function as a forum for exchange of views and ideas by various Government agencies and transport interests to support the planning efforts of the DOT. Moreover, there is also a need to build up the planning capacity of the transport operating agencies such as the Department of Public Highways (DPH), the Philippine Port Authority (PPA), and the Maritime Industry Authority (I$ARINA); for in order for the central planning by the DOT to be effective and relevant, it is essential that the planning capability of the line agencies must be improved. vii. The Philippines obviously needs a large amount of further capital investments in transport. However, trar,sport efficiency is realized not by oll.al investment alone. It also reauires an improvement of operation of the existing facilities. It is therefore important that, before investment projects are considered, it should be ascertained that the existing facilities are operated in an optimal fashion; opera- tAinal imp-rrove3ents crn reoduce investtment renuirenments. Moresver; an efficient operation is a :ondition for realizing the full potential of new invest.nents i'nriinting nrelicies and mneasures to nslurp effiGipnt opoerntior of transpoQ-t is an important function of the DOT as well as thP ot rav tiin ' avpn c s- W-.hil ompnnet.ition is the nrim8rv vphircle thrriih w0;lCi transport efi cieicy is achieved, there are cases where certain F q o~f' (Cnernmenitff Tinrve-tionmayv licpssary Bht before inter- g in theoin- the (Wvc nment should make certain that traffic r-ati3n, suqh a licieg of overloadcing of trucks and -safety in- .ior,of verh -e-, i; strictly enforced, and the pricing policy is

'" ly r al] moes of t-.nsrtnqi±. c that i r >;ive ccr>,-..Ce ; tions are not distorted. These are some

<-a -:l j u' i, , -I: - ld obviate the need for many regulatory viii. The highway investment program which accounts for about 80% of total transport investment program is on the whole adequate DU-t tne projects planned for local financing require better justification with supporting data. However, the greater empnasis now Deing given to developmental and feeder road construction in the highway investment program is a move in the right direction. Since information needed to evaluate projects for lower class roads is not as readily available as in the case of main highways, the preparation of developmental road projects requires more active participation of the regional and local staff. Also, because developmental roads cannot always be evaluated by analysis of existing traffic alone, their justification is usually sought in anticipated development of agricultural and other productive activities. This calls for close collaboration among planners in various economic sectors and among various disciplines. In order to achieve this, it is desirable that the existing Regional Development Councils in the regions should be put in a position to play a greater role in developmental road programming. ix. The collection of road user charges at present appears to cover more than the marginal cost of the highway infrastructure; indeed, although data are not adequate to make a firm judgment, it appears that the user charges contribute substantially toward the annual capital investment costs. From this, it appears that the users are adequately paying for the cost of roads. However, from the viewpoint of mobilizing resources for financing development programs, there appears to be room for an increase in user charges. In determining an increase in the user charge rates, consideration should be given to the simplicity of collection, income redistribution effects, effects on highway utilization, tariff policies of other transport modes and the availability of alternative sources of revenues. The Government should also review the relationship between prices of gasoline and diesel oil with a view to devising measures to encourage the use of the latter fuel which would contribute to energy economy. x. Due to the tax advantages accorded to private trucks for non- general haulage purposes, a disproportionate portion of the total trucking fleet in the Philippines is accounted for by the private trucks owned by enterprises for transport of their own freight. This appears to contribute to a low utilization of the total trucking fleet in the country. Measures should be taken to eliminate these tax loopholes and increase the utilization of the trucking fleet. The Government's published trucking tariff rates seem to be too low and they also tend to discourage development of general haulage business. The Government should also consider measures to encourage the patronage of buses through a more economical division of labor between buses and smaller vehicles such as jeepneys in order to realize economy in the use of road space. xi.- Road maintenance had been neglected in the past resulting in laree exDenditures for reDair and reconstruction. Following the recommendations of a recent maintenance study by outside consultants, the Government has increased the budgetary allocation for maintenance and planned to provide adequate staff to carry it out. Due to the old formulae which restric-ted the use of maintenance funds in favor of reconstruction, the DPH has tended to build highways with relatively low - iv -

traffic to standards higher than warranted in order to reduce maintenance needs. This obviously has resulted in an uneconomic use of resources. The revised formulae are intended to correct these shortcomings. In addition, maintenance requirements would be substantially reduced if overloading of vehicles, which is prevalent now, is strictly policed. xii. The first rehabilitation plan (1971-75) for the Philippine National Railroads (PNR) has been substantially completed and the second plan (1975-79) is expected to begin shortly with the modernization of the southern line. Whether or not to rehabilitate a railway is an important decision which, once made, would more or less irrevocably commit the public resources to this form of transportation. The present position of the Government is that the railway is an economic means of transport for long distance, bulk transport and therefore this form of transport should be maintained. It goes without saying that the railway investment program should be based on careful investigation of the traffic potential for the railway and all possible alternatives. It is particularly important that the present expansionary policy for the PNR be carefully reexamined before funds are committed to the execution of the contemplated long-term projects. Improved operation of the railway is not only dependent on its physical conditions but also on its management. Some external assistance is desirable to strengthen the management and improve operations. xiii. Other than the projects which would be financed partly by outside agencies, the port investment program appears to be largely a maintenance oDeration in which the Government Dlans to improve some 300 small ports. In view of the recent expansion of the road system throughout the country, a reorientation of the port develo-pment policy appears necessary. The improved overland transport facilities in some areas render it unnecessary to maintain all the small ports which were built at the time when each small area served by these ports was isolated without. land transnort. The two-vear National Port Svstem Study being carried out by Government personnel appears -o recognize the need for con- solidating the port fanilieas in the long run. Thp results of the st.udv should provide the basis for a new port development strategy. xiv. At present, the operation of the ports is the responsibility of the Customs Aimrnnistration. Since its r3 n concern is collection of import taxes and control of vessel movements to and from the por'ts of entry, thLCustom ArmnUnLSi La i .Jn io ill-equipjpedtoA dl l .if. the1 r= blems of port operation. In recognition of this need, the Government ha.d agreed with Lthem TPLn in connLectiJn w. Lit t ASeco^nd Ij LioaT. n 1974, to establish a Philippine Port Authority (PPA) which will have opera,t-iona.l and .-4nnanc nia autonoy.h n T r.lssion onsiders lt u-rgent to make the PPA fully operational as soon as possible. xv. The Maritime Industry Authority (MARINA) appears to have an dablUi tiousUi) p'ari 'Lor U:V±U,uL D.LJJU sc UUU IyJUY-0 JI1.± UJAOIJ 1, JJJC%.L..L115 Iil)vUgl a shipbuilding program using domestic shipyards. While the need for mor_~ and better ships for inter-island transport clearly exists in the P'n JLp- pine archipelago, it appears prudent to start a modest, but solid begi'- nfing in shipbuildLg in the form of ex-panding facilities for repai7- al maint-nance of ships. The. _J,..e_di_ate_ need f0or ships outlt' have toe ha met largely by procurement abroad. The IBRD has already financed a ship procurement project and is currently engaged in preparation of a second project which is expected to be appraised in the fall of 1976. xvi. The airport development program follows generally a strategy

4oLJo l,.it4.LJJI1J U .1.1YUV IU1 LA U t4vstenUVJ selected _ u%'VvL~..~j~. -4-rV~ U1=. ,",rl4_ _V'.JA'.voi-nd 4-ves,.ents. V _ IA-AI UU in less urgent projects. However, in planning airports, the split responsib 4-Ly bLw 4.W he- C1ivilJv.Lonautic. Aer UU.L ItLAkI1.LI1JAinistratJion anAu the Department of Public Highways results in an unsatisfactory state of aaiL.L.dL TLhe respoosibLO. 'i- forLU pVlJIAAi.LnJ shIVU.Ld b-Me entrusted to tel LA4 while some of the actual construction can be carried out by the DPH wIL-ler Ulet1 LCUU,.X-DWXJC W.&DPUI_U. OtU LO L U DVU OULkk WBU ' ZU_ULI L-dOAO x-v,. Urban transport problerns are an urgent task confronting the Government as the congestion and pollution of the capital city have now reached the poLnt where any further deterLoration cannot reasonably be tolerated. Unfortunately, studies so far carried out to base the for- mulation_s _. nof _ policies_L n S _ _ aju_ S mueauurtas_-_ _ wo- uealA - n_ wibh_ v L u,he-L _ proulemuL-- _ are inaue-- quate in some respects. These studies recommended very large expenditure for construction of new circumferential and radial roads, mass transit rail line extension and construction of busways. The mission believes that even if these investments may prove to be required in tne future, the proper sequence for dealing with the problem is not to concentrate efforts in heavy capital investment without first exploring the possibility of reducing congestion and pollution through less costly means. The Government is now in the process of preparing to implement various low cost solutions including traffic amelioration through proper traffic engineering. At the same time, the Government plans to prepare a long-term overall plan for metropolitan Manila development, in which the transport projects would form a part. Preparation of such a plan requires a coordinated approach between transport and land use planning, within which plans are made for spatial arrangements designed to minimize transport requirements and to provide transport to assist in the creation of combined new population-industrial centers outside the concentrated area.

OVA PTP~M.PT T1: . TM-MT-D P1nnfTTPrPTAvW TION

The Bank's Transport Planning Mission visited the Philippines 1 i n T,.-n 975 o re r

(1) The organizat on and practices of transport planning; and

(2) the proposed transport investment program for .L7 IL) f7

±I1emJII±0.LUiI' 0 1J.LA6 ULJ± .LVL. L41UW ICI LU4t ULAIUiLA L tional framework and the planning practices in the transport sector are not fully adequate to assure efficient operation of existvng transport facilities and preparation of sound investment programs. The mission also found that the Governmenr's investment program proposed fior the four-year period, 1976-79, is in need of revision to make it a more coherent program based on a more comprehensive factual foundation and analysis. Many of the large projects in the program, which are proposed for outside financing, do have a high priority. However, the program viewed as a whole does not appear to represent an allocation of resources based on an evaluation of current and future priority needs and to reflect the changing economic conditions. Program preparation was based largely on tne priorities determined more than iive years ago by the Philippine Transport Survey carried out in 1969-70 and by the claims on the national resources by various regional interests. The part of the program which is proposed for domestic financing is largely a collection of many small projects which are not adequately supported by economic analysis.

This report analyzes in some depth the problems of transport planning in the Philippines which the mission identified and proposes a number of major remedial actions. The mission's analysis of the problems of transport planning and the formulation of its recommendations have been based on the view that the task of transport planning in the Philippine setting is not to prescribe detailed production and price directives but only to indicate the overall direction toward which development should take place and to create an environment conducive to sound competition which is a condition for an efficient utilization of resources. This approach is appropriate in a mixed economy, such as that of the Philippines, where both public and private sectors play important roles in the disposition of economic resources.

The proposals of the mission were discussed with senior officials of the Government before its departure from the Philippines and there was general agreement on important issues. Indeed, it is with much satisfaction that the mission notes that many of the views discussed had been incorporated in the Government's working paper entitled Transport Development in the Philippines, which was published in Sep- tember 1975. This, of course, does not mean that there is a complete agreement on every issue with the Government. The mission chose to present its own views in this report, some of which may not necessarily be shared by the Government. These issues should be the subjects for continued dialogues between the Bank and the Government to seek a common ground of understanding. -2-

Chapter II provides an overview of transport development during the past decade: Chapter III presents the outlines of the Government's proposed investment program for 1976-79 and highlights the major problems in planning which are generally common among all modes of transport. This is followed by Chapter IV which makes a detailed review of planning problems in each mode of transport with suggestions for improvement. This Chapter also proposes technical assistance programs. Chapter V deals with the organizational problems of transport planning leading to the recommendations for reorganization. A description of Philippine transport facilities and a detailed discussion of the problems of Manila urban trans-port are annexed to the report.

CHAPTER II: RECENT DEVELOPMENTS

Tn +-he last dreca thp Philippines has made significant ad- vances in the transport field. In terms of both funds expended and physical resul t.s ahieved- the nast. 10 years far exneed any previous 10-year period. The annual level of public transport expenditures increased rapidly duringr this period. The manor focus of transnort. work has been on highways which absorbed 80% of total public transport ex- pendi4 t e The 1ength of pai - ndatiornl highways nrnnc boa bout+ 65% from about 5,300 km in 1965 to 8,800, kin in 1974. Equally important, in, ,addtio-n to- in,crase +ransport rpendl4itures and~ system.n expaonsion, a number of major steps have been initiated to improve maintenance, or- 4 4 an 1; z'+itnnl C+ lnn+l Q Dec Trll De nl nnn ne nn Vlrlr ;+ mlon,onD-;rn 60144.0 0.1414 0C 1..5 1 VAGOIA 0 1.4 fkUl1. 440 p..LOSIAA.411 4 -'6 sv Vu .&IjJ.0II& vS 14.1.1.;4v v- 6 '" capabilities. The UNDP-financed Philippine Transport Survey (PTS), thle coun-r4-ry, flrst-tP4 4- n-e.- tr ansport std, was udrtaken in 1969-70 with the IBRD acting as executing agency. The Survey has pro- -videA the- ba-sl for tran-port Jes-ment programs since 1070 V,L.. L `.. UlIC- 48040 ulJ. VJ.n QU1 IJi. V 1V10 fhO VJ L U6-E 1180 IJ.L4V 4.'514

Ur9 L.1theperiod FY677 I - 4, public expend'AQuLres0 fo0 h1gW4a amounted to P 2.1 billion, which accounted for almost half of the ex- penUditures f or t1ihe entire publLic L1i4.fra±UtAucuiie prJogra,mi. HiLghw1ays sULJ- itantially out-performed other economic sectors, including other transport modes, in meetuig tlrgets measured by actual expenditures (see the table below). Highway expendiutures were intended to account for less than a third of approved total infrastructure programs during this period, but due to the relative superiority of the preparation and implementation of projects in this sector, it has absorbed the iarge proportion of total expenditures. TMVVA>P1T.rrPTTm. PPDIPAM. 7Vr7-7C (In Percent) 1/

Programmed Performance Distribution of SeC4-orIJ L JLJ Unviv~e4et^ng U.LLJ , A c4ua~JaLM~A, £K&JVLIA.L44 4iWreLIUL Sector Allocation Targets by Sector

P At a9

Highways 32 94 47

Other Transport 11 01 9

Irrigation 12 66 11 water Supply Sewage 9 57 6

FLood Control 3 64 3

Power and Electricity 16 47 9

Schools 5 98 6

Telecommunications 4 37 2

Misc. Public Works 8 54 7

TOTAL 100 70 100

Source: FY67-73: Government of the Philippines, Infrastructure Opera- tions Center, "Implementation of the Infrastructure Program", various years, unpublished Government document; FY74: estimates provided by National Economic and Development Authority's Project Monitoring Service (PMS); FY75: mission estimates based on data provided by NEDA of first three quarters of FY75.

1/ Percentages are averages of annual percentages and not percentages of cumulative programmed releases for the period. -4

By comparison, the power and rural electrification sector was programmed to account for 16% but was able to absorb only 9% of the total expenditures and, as a result, attained less than one half of its target.

The sizeable amount of public funds spent for highway construction and rehabilitation has brought about a significant expansion and improvement in the highway network. Since the mid-sixties, the. total (national and provincial) highway network has expanded from 56,000 km to over 80,000 km with the bulk of its increase taking place in the past five years. The asphalt and concrete paved network increased by nearlY 8,000 km from less than 10,000 km to nearly 18,000 km during the same period. These accomplishments were carried out with local resources supplemented, in recent years, by financial assistance from the IBRD, ADB, USAID and Japan. The annual level of highway expenditures had grown from about P 180 million in 1967 to P 611 million in 1974.

The longest arterv, the Pan Philinnine Highwav. extending over 2,000 km, is under construction/rehabilitation following the recommenda- tion of the PTS. This highwav is scheduled for completion in 1970 at an estimated cost of P 1.5 billion, part of which is being financed by a loan (US$30 million) from Japan. This hiahwav is intended to connect the major islands of the Philippines from Apari in Northern Luzon to Davao in Southern Mindanano and to serve as a "backbone" of the cunntrv1's highway network (see map). In addition, important progress has been made with completion of the TBhD-financed Digos-rotabato Rnad in Min- danao (160 km) and improvement of some 690 km of national roads and about 700 km of minor and feeder roads under the Second TBRI Righway Project are more than half completed. The ADB has similarly provided financial assist-nce fnr the reonnstrnction of the rn-t.ahato-nr-nern1 Sannto.n Road (209 km), the -nigan-Cagayan de Oro-Butuan Road (300 km), both in Min- ranao,n and thearlcSv .Pnqn Pnmai (Ll km.) in TLuzorn

Available data for 1971 sho%w that the Philippine highwTay system compares favorably with other countries in the region. For ex- ale,a how in-the following ble, -- ra in te-s P pines was about four times higher than that in Indonesia and five times the level of Thailand whl;e the density per capi+ta basis Was over two- and-a-half times those of Indonesia and Thailand. DPH data show that 'b- 107)4.+ ronA-. de-nty was further crae fr 0.25 1,-/.-/ 1,., in 1971 to 0.33 km/sq km and from 1.94 km/l,000 population in 1971 to 2.32 /1 000 ---pul ation.+ Thera loeeh a Ias b-nk9 1 5 Jmnrvnnin the q1ualit+y ZlSIJ4/ .. ---CIj'J JjJL4..L V43jfA. .L15~A. 5. C5J a.J53 LJ.39A CI E CVS,r5S*U .LA WUC 5455.j.. of the network as the proportion of the network that is paved increased9 frIor,, 1 in 1061 4- 2)3 in -1°714. Comparative Road Network Ratios: 1971

Km of Roads/sq km Km of Roads/l,000 Area Population

Philippines 0.25 1.94

Indonesia 0.06 0.72

Malaysia 0.14 1.87

Korea 0.35 1.09 Thailand 0.05 0.71

Japan 2.74 9.66

Source: United Nations, Economic Commission for Asia and the Pacific, "Statistical Yearbook for Asia and the Pacific. 1973" United Nations Publication No.. E/F.74.II.F.11, 1974

Ports and Shipping

Ports and shipping, which are estimated to handle about 40% of the nation's total freight transport, had received less than 11 of total public infrastructure expenditures in the past. This was largely due to the fact that shinning services are operated nrivatelv and over two-thirds of imports and exports are loaded and unloaded through private nnrts. Mnronver_ the nrnoect nrpnaration and imnlpment-tion c-nap- city of the port sector has been relatively weak. Consequently, port works absorbed onlv about 601 of the expenditure nlanned for this sector.

Following the rAonmmAndations of the PTSj the Government em- barked on a port expansion program with assistance from foreign lenders. The port e-xpansion program is underwayv in General Sanntos and agayqan de Oro in Mindanao with partial financing by IBRD as well as in Cotabato in Mindanao, with ADR participation. Port facilitie9 were also exypndir in Manila, Tligan and Davao (the latter two in Mindanao) with assistance from the Federal Renihlih of flermanv.

Tn receont. vynars much of +.he foreign-.ted port deeopment activities has been concentrated on Mindanao to improve the region's pre-World War !I public port facilitiesQ which came~uinder sevre trann with a doubling of outside trade within a decade. This reflects the Governent'srecognlition eof' t.he imner+-nnno of- exayndnriiyng and morniz7inrr ports on this large island of considerable development potential.

In addition to the public ports which are generally inadequate, numerous private ports haveU benA and-sAuc expan . Piers adA -6 -

cargo hanidling equipment have often been built and installed as part of private firms' producti.on line in areas convenien' to their work and storage areas. Logs, which represent about 40% of export volume,.are normally loaded off-shore. However, for sugar centrals, copra crushing mills, mining plants, pineapples and bananas, private deep water piers equipped with conveyor belts and nipelines for bulk shipments provide efficient services for export traffic.

Ports and shipping continue to provide an essential means of transnort And communication between the islands of the archinelago '.t more than 65% of the inter-island fleet and 41% of the ocean-going f'eel-t were 20 or mnore years old in 1971. The develonment of inter- island shipping is getting greater attention in the past several years as large population Genters of agricunltural deficit areas such as Manila and Cebu become increasingly dependent on Mindanao. Notable developments include the purchase of' seven new cargo/passenger vessels of 7,000 dead- weight ton class in 1968, with aid from the Federal Republic of Germany, for inter-island services, and a few tankers and cargo vessels through private financing. The IBRD's First Shipping Project in 1974 involved aUS$20 million loan tcnassist in the arquisition, conversion and major repair of inter-island vessels and to provide technizal assistance for the formulation ofa m.aritie industry development program.

The Pkilinnina N-onanl .T;lwaTs (PNR)

The Government-owned PNR, long characterized hyunderinvest= ment, declining services and deficit operations, has been given a new

-,Ptu ude - the-- _ First Pnh!aMiln+4-nU.. 4A. SXPlan, -L -~~~~.LL.* , .4"'I1971-75, 1~1 fo- r whchlh' US$19.3QJL~ L million in foreign exchange and P 86.4 million of local funds were pro- ..4AA so;- o l0'71 I-, +1h., r----4A; IThes ".m e;1-e t.|he purchae V G G G G V .L -' aOL . J ,Li 4 V S V ± .L XUJCV' .t u'A- IlG-1 LA I of locomotives and rolling stock and a minor improvement in signalling fa ciliti4.es. a result-1 of improve srices wl th addlti-o'a cap'"lt, i_LCI L-L L I'sI ~ ~ _ Li IJ JJIAIJI UVlv uu .L I±~ Wi Qli ~UU..L LUIA<%.L t-3JaXU± L.Y , passenger-kn and ton-Ia increased 14% and 9% respectively between 1971 and 197diAU I _. * .1-7 Its.1 Li £±ifi_nanciLal JLiL'~L UJAcondl'l~on -±vL±I I1dhas also-dioI..ov 4mproveJ111 LU VUU CIOas14 ai reut1 ZI Li ViL 4l-Lii- creased traffic, fare hikes and contained operating costs. An operating 14 - Li r .) AU- 4 1 _4 - -SW74L - n _ L . . _ .. _2._ :_ .j_±L. UeC;1 U U U. Z' (J 111.1-1. -ULU ll | 1 L 7 f L wa;s Uturned ilt-0 dlal Opte-d atlg 0-U-1pluAS of P 6.5 million in 1974 with the result that an operating ratio of 157 in 19'72' w _t -I.-. to 2..ln 1-974 e the PNR re.uains _L1 £7_ 1 t- WAL redU-Uk:UUUI A IU _L1) _L7i4L4.V~IJtU ~LAIUJ UIIV rit UIfdJJni lii- efficient transport enterprise w.ich requires substantial improvement

_ _ ~~ - - ~- - _ _--

The past Lfive years have produced much improvement in the Philippine Governmen :t.s ability to plan and manage the country's devel- upmnent programs. Tint- e has been a strengthened commitment oI national leadership to the cc- .ry's economiic and social development and the .rncreased effective, i;; with whic.h that commitment can be translated i lto policies and actK,.s. In this spirit, the planning and administra- ive units responsib-l r'or the transport industry nave been substantially :estructtired since tL - mr.jor Government reorganization which was initiated -7-

in 1972- This nroceps is continuing. Tn general, thA crFation and reorganization of various transport agencies have led to a streng- the.ning of their nlannina and impn1PmntqtiAn nap1abilitAeq and operational efficiency, as well as better coordination of fragmented planning' nrespnqihlitie Thm- m^a+ n^+nlh1qa t0oinnf:>a hnnvrc ho%,nn +h oo|ol4 o+x z es- . s hv h e -f-enV

*LAU I..AflLA. a..-Jq a * *J - -'..l J~'V -JAJJALA V % ~UJ L t ~l A >UL.J~ / - i. "AL..J the Departxoent of Public Works, Transport and Communications (DPWTC) to -with ttundertakeULJ.4CJASZL% com.prehensiveAl IAVAACI4JJ.V' regonaU~aA1JLA~1 plann.JLlUJAA1.ng stuieItUdieS .L'~IW.LIII J.V-UtP----- VLAon infraLLI4J.LCA structure investments; to formulate major infrastructure projects on the baQsiss Of regiWonal pla-nn-ingr- stu,die S3and establish~ -4-4ec prioritie9 and to maintain liaison with the central planning agency". This unit, in cooeratio with the National V-o.-. and Developruent Aut>hority (""D has provided the bulk of technical input to transport planning.

(ii) The Inter-Agency Technical Committee on Transport Planning kA.ICIF) uLJUt Ul Bie NALJ A)' W IU -ld U, dLJU £XUUIflJU I OJU'lUW1WV5 WAU integrated long-range transport plans; to formulate standards and guide- .Lines Jordi e preparation o agericy pliai or 'rausport development; to coordinate transport programs and projects; and to serve as a forum for the resolution of operational problems of transport agencies'. This Committee has made a start on providing some coordination of the planning effort; it has identified a number of planning studies, including a National Transportation System Study, that need to be carried out and has assigned responsibility for undertaking these studies to a number of difIerent groups concerned with transport planning, construction and operations.

(iii) The Maritime Industry Authority (MARINA) to integrate and supervise the development of the maritime industry, which was hitherto allocated among many departments and other organizations. MARINA was given a mandate to develop a 10-year haritime Industry Development Pro- gram as well as tariff policies, but it is not yet fully operational. It has commenced data collection for a cargo origin-destination study Dased on ship manifests.

In addition, the Government has engaged outside consultants to determine the organizational structure and procedures for a Philippine Port Authority (PPA). The purposes of the PPA are to develop a national policy for ports and to improve port management, administration, operations and planning with jurisdiction over all important national ports. A skeleton staff of the PPA has already commenced the task of staffing and data collection, but it is not yet operational. In order to fill the gap, the NEDA's Inter-Agency Committee established a Ports Study Group (PSG) in early 1975 headed by a member of the Division of Ports and Har- bors of the DPWTC and comprised of the staffs of the Bureau of Public Works (BPW), PPA and NEDA. The objective of the PSG is to produce a long-term program for port consolidation, investment and operational improvement for all 93 national ports. The group, at present, is only gathering shipping data (in conjunction with PPDO) and has not yet determined the analytical approach that should be adopted for the remaining phases of the study. - 8 -

CHAPTER III: TRANSPORT INVESTMENT PROGRAM, POLICY AND PLANNING

A. Outline of the Transport Investment Program, 1976-79

The proposed Four-Year Investment Program, 1976-79, for the transport sector envisages an expenditure of P 11.2 billion (us.$1.6 billion) (see Table 1) which represents somewhat less than one-third of the Government's total infrastructure investment program for the period. This amount represents a decline in the share of transport which has accounted for approximately half the total Government infrastructure investment between 1962 and 1975. The power and agriculture sectors received much greater increases in investment allocations, re- flecting the Government's attempt to reduce dependence on petroleum and agricultural imports in the coming years by exploring alternative sources of energy production and increasing agricultural outputs.

Of the total for transport, about 80% is allocated for highways, with the balance about evenly divided among railways, ports and airports. About P 4 billion represents the expenditure to complete the work carried over from the previous period and the remaining P 7.3 billion is for new projects to be initiated during the program period (see Table 2). About three quarters of the ongoing projects are partly financed by outside agencies 1/ such as IBRD, ADB and Japan, with the locally-funded projects comprising about one quarter. Of the total estimated expenditure of P 7.3 billion for new projects, about half is proposed for local funding. (This breakdown is shown in Table 2 and similar breakdowns for each transport mode are shown in Tables 3 to 6). While the total investment is projected to grow at nearly 10% a year, the foreign-financed part of the investment program is shown to decline from about P 1.7 billion in 1976 to P 1.3 billion in 1979. This, however, does not a-pnear to mean a decreasing need for foreign assistance. but merely reflects the relative lack of project preparation.

The Government has assigned a high priority to the completion of the ongonng project-s which are generally supported hy feasibility studies. Approximately half of the new project expenditures is for the projectsntder conns4dePration fror TBRT) andi ADB finanncing, ann herfes ibility is being investigated by consultants. The remaining half of the newine roetrojects cossnj-nvJq+qq -son?f numerousrn1miri1qm1 sm41a 1 -nniPe-f..rjctluritelyloa i1-nvi-A-0A 1vfi 1vIr-nl~ wi_u thorities throughout the country. There was little evidence of engineering or economic analyrsmis of these 1n-l 1 i funded projects,no r thy a- companied by traffic and other pertinent data with which to carry out a tion can be left to feasibility studies, identification of high priori-ty pAvjctsfvor inclusion J1- the GuovernMent's -Jnvestvment program. requires cost estimates based at least on reconnais3ance surveys, information on

-44 A_ - A ------4 A 4s 4A-A4- AA AATtAASs+AA_-4_ I A A A 44- jJ1u lu.L v VLA C%JU VkVA1III4V1a., C, Uv V L i 0 AJvW VC; QUI VC;' LJj 4I p ] UJUvGU ± i4Vt., v- ments, traffic data, and some quantitative indication of benefits to be expect-ed.

1/ Foreign-assisted projects generally require 60% of the total cost 4 - Inb l5oa cousln F_.^.'r flAV5A'VV4--JJvV.s4 -9-

B. Transport Policy and Planning

In recognition of the need to improve efficiency in trans- p^-ari T Anp r iln .- ! n, rIln nl n, fn-r ar_nt.-r wel fanr nrf t.he .n t.v _f f.rt..q are being made by key transport planners in the Government to relate transport policy objectives more closelyv to the nasion's development goals and to the needs of other sectors of the economy, such as agriculture and inustry. Several dec-ees 1./ issued in connection with the establishment of the MARILA andi the Metropolitan Transit Commission (iTVC), and' republJlc Cacts pio--vidi.n> P-I the and-4a4,tto mdriaonfPNR implicitly state a nwnber of broad transport policy objectives. Tne foi- lowingv underlying riir rns thrcugh these staenment-s

(i) To meet the dermand fors transpor-t so as to induce a maximum growth of the national economy while en- su,rin-ign an, equltable dit ribution of' incomea amnvn income classes as well as among different regions; andi (il)t, provide and or.-nize tr--sFrt -ervcesin such a way that the transport need of the economy is metF at leas-t expense to the nation's resuources.

',i'lthin th.is genral policy fram.ework, b1road gudldelines have been prepared by the PPDO for dissemination among transport modal agen-

Ws.±c..U . * i'|j ,u* U1C± c JCLi CJI;ll.js |a£'i I,ll= ihijJJui U. i c uC 0 .

(i) Pr-rovidiiU-. j,: a tUrans port syv-s tutm th'ld t is resziponsIiz- ve to the requirements of the projected growtvh of the econom,ry;

(ii) exploiting the inhlerenr, and partizular advantages of each transport mode so as to maximize returns on investment;

(iii) bL) Ui-nJ low-cost and extenslve sy-stems of farm- to-market roads to support the Government's agricultural developrment and agra rian reform programs;

(iv) pdY[J6 UlosUr adUUOiribori to UL)ain trans5pDort needs in the face of massive urban in-migration and the rapid development of economic activities in cities and towis;

(v) preparing the framework of a plan for an integrated develiopnenr- oi various transportc modes; anu

(vi) improving operational policies and measures, including traffic management and pricing mechanism "to influence traffic distribution to the most

1/ Presidential Decrees 474. 50. 101. 492 and RepubliC Acts 77(- and 6366 (see Annex B). - 10 -

efficient modes and facilities of the existing and proposed transport net.work in term "'ofcosts and serviceability".

An expeditious implementation of these guidelines is the task of planning and operation-al and, inrn amm.ina- Amnng, othe-r things, this task should include an analysis of the least cost solutions fobr t-he achievement of the deie dAevelomentL. mh; obe+tis- Nedl to*' *v Vsi CiAL S -V - - _x U V V&1 0P vv V}VtM say, the latter task, which encompasses both operational efficiency and opti-,.11al choices of' inves,+_e_+ -A-+ats isa co^m"1lev non and it will '-kep deliberate and persistent efforts on the part of the Government planners t'o achieve result's. To .but-tress this endeavor , outsideasssnei needed.

As already mentioned, the present transport investment program is characterized b,y the pre-eminence of the foreign=sponsored ,,rojecnc, most of which were identified as priority projects by the 1969-70 Philip- pine Transport .Survey. The feasibility studies undertake; subsequently by consultants to review the justification of various project proposals .et t,hreu. .r.ents1 of Int.. .a-"onal lend;ng .-*.P*Ct.l HoUever, there is a need to strengthen the local staff capacity for preparation 1 4-In-T and periodi±*4t.44.Ll .1reie ;V.LUVW *44of .LAinetrnIV _Vs~LIZ'1IU prora.s * 4.-11I orderWJI -A*-3 toW* *3.3.assist 3 U 4n.A . theA1Uf efforts to overcome deficiencies in the present planning system, the mission identified the areas in which significant i,,.prove m ents can be made.

.L. i.11vestrlA1ttJ Sitrlat,dlegies

(i3) .ector PrlanL.Jig and Prograri,- Review

* LiransUpur seut Ur .iDve;dn LIIIU1JL i1 iLiiLLL Uliue____L _ rLL.L±JJ4JIeJl Lida,'_ _ _.L___L___LL______in the past, suffered from both a weak link between the macro planning and project planning units within the central planning- gn-y- and from- the lack of adequate planning personnel in the various operating agencies. As a result, projects have not been grouped into sound transoport programs and the central planning authority has not had a significant infLuenrce onr -the tranisport projecus. The Government has recognized thne shortcomings and NEDA has begun sector planning exercises, including transport as part of the infrastructure/utilities sector 1/.

As this is the first effort of its type to be undertaken in the Philippines, there is obviously considerable room to improve the sector plans. NEDiA is aware of the fact that the treatment of the transport subsectors is sketchy and overall financial planning is largely neglected and intends to remedy them in the future. It intends to review and evaluate agency proposals for their general consistency with (i) sectoral and overall development objectives, (ii) financial resource

1/ Other sector planning exercises have included industry, tourism, agriculture, housing, health, social welfare, and foreign trade. - 11 -

availability 1/, and (iii) agency implementation capabilities. On the Uasi of WI.Lh rrVew, adraftUu.r-yeU ±UL-dYUeveoprntfo p.J.lan WoulU Ue formulated for approval by the President.

However, the absence of a central transport planning agency has mitigated the NEDA:s effective review of agency proposais. Although the Inter-Agency Technical Committee on Transport Planning has played an important role in the interim, the mission beiieves that there is an urgent need for a central technical agency for transport planning and coordination (as against a committee) which would screen the operating agency proposals on the basis of examination of inter-modal efficiency, user demand and requirements of other economic sectors, such as agriculture and industry. The mission believes that a promising opportunity exists to overcome some of these weaknesses with a limited program of technical assistance to the proposed new agency. This agency would:

(a) Formulate detailed investment and operational strategies for each mode providing a clearly defined analytical framework for project selection to be undertaken by operating agencies based on technical, economic and engineering criteria. These strategies should be disse- minated to the planners, engineers and concerned Government officials at all levels of the bureaucracy in Manila as well as in all regions with specific directives for implementation of strategies in project analyses;

(b) promulgate guidelines for organization and execution of techno-economic investment studies by the responsible transport agencies, including adequate staffing of the study teams to ensure full consideration of all issues which the agency deems relevant to its effective review function;

(c) carry out a careful scrutiny of feasible alternatives (e.g., a greater utilization of existing facilities in lieu of new investments), inter-modal trade-offs, and socio-economic effects of major investment projects in terms of costs and benefits in order to bring about coordinated investment programming;

(d) prepare a work program of data collection and analysis covering the ensuing two years for each planning unit of all operating agencies. This task is essential not only for operating agencies to carry out project planning and preparation but also for the central

1/ The Development Budget Coordinating Committee (DBCC) determines the sectoral allocation of resources and the level of Government borrowings on the basis of its estimated revenues from various Government sources. - 12 -

technical agency to monitor and review the inter-modal and other broader aspects of investment decisions by transport agencies 1/; and

(e) revlew investment programs on a continuing basis. in a rapidly changing economy, the requirement and priority for development expenditure change, necessitating a continuous review and adjustment of investment programs. When the PTS was undertaken, the country's transport development program was in its initial stage. Therefore, it focussed, for example, on the development of trunk roads and less attention was given to exploration of the potential of inter-island and coastal shipping. In recognition of this past deficiency, the IATCTP has commenced data collection in order to update the PTS. Such occasional surveys are useful, but they are no substitute for the periodic review and revision of investment programs through continuous planning efforts both by operating agencies and the central technical agency for Transport Planning and Coordination.

(ii) Strengthening the Planning Capabilities of all Operating Agencies

Areas where improvements are needed in the planning and operational functions of each modal agency are identified and discussed in Chapter IV. Suffice it to say here that, in addition to improving the transport and economic planning capabilities, there would have to be a vast strengthening of the planning capacity of the individual modal agencies and their field offices. This is important because only through strengthening of the analytical capacity on the local and agency levels would the planning at the center (NEDA and transport planning agency) become effective and relevant. At present, the local agencies are not strictly required to demonsturate relative priorities of their proposals, nor make rigorous analyses of costs and benefits of the individual projects 2/. Project justifications must be advanced after a careful examination of all possible alternatives. Because without analysis, there are no questions; without questions, no facts are investigated on such essential matters as "at what cost' and "why". The key problems and

1/ 'The lack of consistent series of statistical data in the past has severely hampered the effort to carry out economic analysis of candidate nroiects or to make periodic forecasts of the demand for transport services. In order to correct this deficiency, the institution of an information system to collect and process data on all modes has been recently developed by NEDA as required in the Loan Govenants of the Bank's Second Highwuay and Second Po-t Loans. The NEDA is in a good position to set up a management infor-- mation svstem for facilitatinp transoort nlanninz bult measures must, be taken to ensure a free flow of information aiaong various tar;- port agencies as well as other seoteral agencipes

2/ The Gnovernmen.t is well aware of this weakness and has cont ra'- out a study to develop a methodology for project ranking. Wi-n the assi-stancen of the Uni.er Statnf Agncy, F' TAc.nrnton. l (con t - 13 -

bottlenecks are revealed only when detailed analysis at a micro-level io attempted. Therefore, this stage of analysis should not be bypassed in qrder to assure the pinpointing of the major transport problems in specific areas, the quantification of needs, and the ranking of priorities.

The Government recognizes these weaknesses and there is a-growing awareness of the need to develop indigenous and local planning capabilities and to move away from the past heavy reliance on foreign consultants to determine the, country's investment needs. The problem is mainly one of developing and strengthening local capabilities to assemble relevant material to identifv bottlenecks, examine alternatives and undertake proji- ect analyses.

The Philippine archipelago, with its chain of over 7000 islands, pDrovides a strong case for delegatinga greater nlann+ng responsibilities to regions. While effective' transfer of these. responsfbiities can be accomnlished onlv in a long-term period, a beginning must be mad'e now. Neither the PPDO nor the modal agencies in Manila can possibly dispatch its Aersonnel to all regions to narticina-te in' the colTection of renuired information, on all transport modes- nor should- the, dta collection activi- tiAs hp a one-time affai'r. There is therefore- a need to est-ahlish a training program for regional and district staff t-o undertake planning

(continued). Developm.ent (pSa m), an -nter-agency team (';ncldi--ng NDA, the Development Academy of' the Philippines, PPDO' and thee-Presidential .i ,^onS+vaff'ha ~ been dwevelop; - a +mre+vhodolo6y 'for'v provect ranking. A preliminary report of'the' "Methodology for Project Pank-1ing" has Ibeen prepared 'Ky vhe D-oject Ec--- .i'^ ofpNEA.--Pf The approach of the team is to estimate the performance of a proposed project on a large num.ber ofrf -4i w4 are related to particular development objectives, and then t'orank proecta aoi ' thir po'entisl' for V;.1 .L'va goals set out in the PhiYi#pines"' development strategy. Thes'e

per'ormiance, Jnad JLC . MV±LL toUUV r±V-gVtinoe'll IJ pYVJ±ulIcInce rating. Theses overal'l perfbrmance ratings can then bVe used to select pproJects. T'Le gOarus V-Ii VUJUtU IJ dgd.J W11C±I pI JVCUSIare rated are much-broader than economic efficiency as measured by tratdl-tionasL cost:-Lbe"nelpit'anal.y 8|s |- te-il;l'' -uCFojc ve as jobpcreationnandAa--more equitableh'distribu'ti6onrof income'. In

ordue r .dauttch.wei -ht to-Ith varLu gUA-L, PIA-L VIJ su'vty- Owere used to determine. th'e Philippine society' s" relative-'valua`tion of the goals. *Lreappro is± 9bill being UUV±Utpe'Ul LAU application has been only, on an experimental basis' byt''the'IATCTP. However, tne mouel coulU result in arn Umprovemuent ln the pruIUN Of project selection and a better alignment between the investment program and the nation's overall'development goals, if operating agencies are similarly required to apply the proposed model for project selection at the micro-level. - 14 -.

based on their intimate local knowledge of the transport facilities, under their control. This program snould train them to identify the priorities for new transport links, for developmentaliroads, poirts and shipping, and for rehabilitation ana maintenance of- racilities.

!I. Operational Strategies

The major focus of the N-EA and the transport modal agencies has been on developmental planning for physical facilities. Such investment programming, prepared in isolation from the effort to improve the operational efficiency of existing facilities and, administrative procedures, would overlook an important opportunity to reduce the, need for capital expenditures or, at least, make it possible to postpone investment needs. Currently, plans are being formulated to improve vehicle operations in metropolitan Manila through a comprehensive scheme of traffic management. Such efforts must be applied to road, port, airport and railway operations. Operational improvements would make existing and future investments more productive. Investments in the maintenance of roads or ports, or in a restructuring of the management staffing or procedures for the operation of a port, often indicate much higher benefit-cost ratios than similar sized investments in ncw projects. Thus, the identification and analysis of physical infrastructure projects must be undertaken with concurrent analysis of trade-offs for operational improvements. Moreover, the benefits of free competition which makes transport industries more productive must be promoted by reforming some of the present regulatory practices. Chapter IV identifies the operational aspects in need of improvement for each mode.. In this section, the report will focus only on the need for an effective regulation of transport under the overall responsibility of the proposed central transport planning agency (see Chapter V). The present Board of Transport (BOT) carries out certain regulatory functions which unfortunately tend' to stifle, rather than encourage, competition, such as road transport tariff fixing or restriction of entry into road transport industry. These functions also are discussed in the next chapter under each transport mode and areas for improvement are pointed out. In general, the purpose of transport regulation should be to help create an environment for free and effective competition in the transport industry, and the principal elements of such a regulation are the following two measures, a judicious implementation of which would render many other regulatory measures redundant:

(a) Enforcement of Traffic Regulations. As in manv other couptries, overioading, violation of vehicle size and weight regulations. and the lax enforcement of safety regul=ations in the Philinnines appear to give undue advantage to highway transport over other modes. Overloading and oneration of trucks whose size and weig'ht. are heyond the design strength and capacity of the country's highway system not ninv rpsult. in wist.'flil niuhl i. e.nPndiftnre hpenii;s nf the neerd to rpnnir the damage caused by these vehicles, but also affect the operation of other transport modes adversely due to uneornomir t.raffic dive'rsion. Thus, the total national resources required to handle traffic by road rather than by rail or ships could be larger if trucks capture the latter's traffic based on the advantages arising from these violations of - 15 -

regulations. There is also a tendency for the small truckers to neglect vehicle maintenance to realize lower operating costs with which to capture traffic, but the total public resource cost would be greater due to frequent accidents involving loss of lives and property damage. lb order to prevent this waste and unfair competition, the BOT, in cooperation with the Highway Constabulary, should set up an effective system for policing of traffic and more stringent inspections of vehicles, such as increasing the number of highway police, construction of weigh stations and spot checks of vehicle weight by portable scales.

On the other hand, the BOT's present policy of requiring a minimum of five trucks to enter the road transport industry lacks a rationale and hinders the development of trucking industry. This policy should be liberalized.

(b) Pricing Policy. Transport tariffs are powerful tools for the proper allocation of traffic among modes and for signalling effective demand for transport. Also they can assure adequate revenues for operating, maintaining and expansion of transport facilities. More- over, they can help achieve redistribution of income, promote growth of particular regions or industries and may help control congestion. At present, the potential of pricing policy tools has not been adequately exploited in the-Philippines. This has been partly due to the dispersed regulatory functions carried out separately and independently by the BOT, PNR, MTC, MARINA, and CAB, making it impossible to institute a uniform regulation of different transport modes. In order to make competition rational and fair, the principle applied in setting prices in the transport sector should be uniform among all modes. For example, if railways are expected to cover all operating costs and depreciation of assets, and earn a return on its net fixed assets, the highway users should be required to pay for the cost of construction and maintenance of the highway system. Whether pricing should be based on full or partial recovery of costs depends on the Government's policy on to what extent transport activities should be encouraged through public subsidy and on the pricing policies in other economic sectors.

A comnlete review of the transport pricine and tariff structure is desirable to inject some rationality in this area. Expertise in this field is relatively scarce and therefore this is one of the areas where the experts to be retained through the technical assistance program, discussed below, should assist the Government.

C. Pronosed Technical Assistance for Planning

The mission believes that the Philinnines needs technical assistance by outside experts to assist:

(1) The Government in completing the National Trans- po-t,Sy+. Studpm qnria.i tn prepare a transpnrt investment program for 1977-80 on the basis of the study; and - 16 -

(2) the planning staffs of the central and modal transport agencies for two years.

while it is the missionis belief that planning is a continuous process which should be carried out by the Government's own experts, it is considered necessary, in order to ensure a proper disposition of resources allocated to the transport sector for the next few years, to hire outside consultants to carry out the proposed technical assistance program.

The technical assistance program is composed of two parts as follows:

1. Technical assistance by a foreign consulting firm to undertake (complete) the National Transport System Study and to prepare a transport infrastructure investment program for the next four years. The consultants should work closely with the PPDO and the Port Study Group as well as the planning divisions of various transport agencies to avoid duplication of efforts in data collection and analysis. A team of six experts composed of a team leader, a transport economist, a highway expert, a railway expert, a ports/shipping expert, and an aviation expert would provide total services of 60 man-months at a cost of about US$510,000, with a foreign exchange component of about US$ 400,000 (see Table 7). The individual experts would participate in the work for varying periods of six months to a year, with the work to be completed in one year.

2. Technical assistance by four resident planning advisors to the central transport planning agency (DPWTC in the interim), DPH, PPA and MARINA for an initial assignment of two years. The composition of the team should be: One senior advisor to the head of the central transport planning agency for policy guidance; one transport economist with background in data system and transport pricing to work in the technical staff of the transport planning agency; one highway advisor to be assigned to the present DPH and one maritime advisor assigned to the central planning agency and to advise PPA and MARINA. The total manpower requirement would be 96 man-months and the cost would be about US$820,000 equivalent, with a foreign exchange component of about US$ 710,000 (see Table 8).

CHAPTER IV: PROGRAM, PLkNNING AND OPERATION nF TRAN.SYPnRT MnDFS

A. Highways and Road Transport

(i) Investment Program

The planned infrastructure program for highways 1976-79 calls for an expenditure of about 9 billin (see Table 3). A little 'es - 17 -

than one half of the total expenditures is expected to be devoted to 4-1t, corleton of and-ongo;n new j-c+a -receivi4 forei4n f,nancial assistance. These include the Japanese-financed Pan-Philippine High- wiay, the ADB-fnCanced Genral SanCob Vand thigan- Cagayan de Oro-Butuan Road in Mindanao, and the IBRD Second Highway rrjecUi compri5ngupglrduLj o. 64V hu o.f piAUMaL oUdsU, rthAbiLtU- tion of 700 km of minor roads connecting to the primary roads, and 56 az _' - _ _Z : A_T._ __ 1_ _ 4_ _ 4_441 _ _A_____ :sJ_ kmlU expressway exten s inA L"Uo . ong th newtW pro cUt toU bU in4itiatdUU in the current four-year program period are a third IBRD highway package, u1r ra tional anU feUeUd.LU dsU UUOUl n tLel Valyaa, and feederroadUs in Mindanao proposed for ADB financing, and projects to be financed under Japan's 9econd UO.Cr fiuancaifg.

The investment program also calls for an expenditure oi P 4.0 billion for purely locally-financed projects, representing over 40% of the total transport program expenditures. These local expenditurea were allocated to a multitude of small projects and the program's content was undetermined for the latter part of the period. This may have been due to the fact that a number of minor rehabilitation works have not yet been clearly identified. It appeared that the proposed projects were mostly short stretches of roads located in various parts of the country.

In addition to the national program, there is also the provincial road program which has been assisted by the u.S. Government as a part of the Provincial Development Assistance Program (PDAP). The focus is on the provision of technical assistance for planning, design, construction and maintenance of essential provincial feeder and farm-to- market roads. This program involves setting up of road building and maintenance equipment pools. The equipment is drawn from U.S. surplus stocks available in various locations in the Far East, completely rehabilitated and allocated to participating provincial governments along with supplies of spare and replacement parts. The program is well conceived but expenditures are relatively small, currently running at about US$750,000 annually.

(ii) Road Investment Planning

The Planning Division of the DPH which comprises some 45 staff members has a minimum impact on the allocation of the bulk of highway investment expenditures. The main vehicle for such decision has been the PTS (supplemented by subsequent feasibility studies carried out by foreign consultants), and important project decisions are usually made in conjunction with project financing by outside agencies.

If the 1975-76 budget for the Department is taken as a guide, it can be seen that about 75% of planned investments for the year are tied to foreign loans: - 18 -

1975-76 Highway Investment Budget Foreign Loan Locally Financed Projects -_ Projects (In Billion Pesosj

Foreign Loan Component 0.65

Pesos Counterpart Funds 1.07 0.57

Total 1.72 o.57

On the other hand, the locally available funds are allocated to many small projects, and most of these projects are for minor rehabilitation which is shown by the fact that, as indicated below, the total length of the roads to be improved with local funds in 1975-76 is three times that proposed for foreign financing but the amount of funds allocated for this purpose is only one-third that for foreign-financed projects 1/:

Foreign Loan Locally Financed Projects Projects

Roads (km) 1,607 5,363

Bridges (1 m) 4,000 9,644

The need for minor rehabilitation or Dartial upgrading of many stretches of road in the Philippines is recognized and many of these projects would, no doubt. brinp high returns. if well selected. However. the difficultv is to make any intelligent judgment, in the absence of objective analysis, as to whether all or even a maiority of these nrolects are of high nri- ority and how they are related to the Government's stated development strategies for regional snpecialization. increased food nroduction- and fuel conservation. Snecifically, the basis of project decisions at the DPH il unclear for the following reasonns

(a) Pronosals have not been aCnompanied by traffic or other pertinent economic data;

b) no definite formulae are applied for accepting nor yardstick particula proposals; and

achievement of targets with the consequence 4 of not knonhrnhow the approved f'inds a ac= tually spent in the past.

The DPH recognizes these shortcomings and now intends to carry vuir v rc-4-aynni- vv-i rcoirX vs _C v_-o~ flY'flf OP4-Cvv v

1/ It must be remembered that these capital outlays are in addition to the anniual roau rnain+tenlianlce uurrUent'lycpeiures ±uix Ua P 23U 1r1±l±.±VA. - 19 -

(iii) Strengthening Planning Capabilities of the DPH Regional Offices

The first order of priority for immediate implementation towards strengthening planning capabilities of the DPH is to devise concrete procedures for a systematic collection of required data by the field offices. The DPH regional offices should be instructed to supply2

(a) Data on geometric characteristics and surface conditions of all roads by classification to enable the central office to compile a road inven- tory system;

(b) regular traffic counts at permanent stations from which traffic densitv maps by type of vehicle (cars, trucks, buses and jeepneys) are established for local and through-traffic in each district; and

(n) nriain and destinatinn suirvpv which give infrrnma- tion on average hauling distance, occupants per vEphinlA- average pav-load. tvnes of comrmoditien and directions of movement.

It only needs a minimum amount of guidance and training to imrnrove the quality of inputs at the regional and district leve.1. The discipline of having to collect information and to put it in a form useAhl byohArshv on areiilnr hbais is urgantly needed t-o update con- tinuously costs, implementation schedules, projects' economic merits, and priorities.

The task of data collection should be acconmepanied by insti- tuting nationwide training programs for district engineers and planners 4 toa nm,arnv 4-na, iques for i ,-,nn4 nte ~rp0 reti ng ni'armn,fl 4- inomatnfar. eoa ,nor.ic evaluation, which includes analysis of 0-D surveys, demand forecasting, determining desigrn sa+ndards, and analysis of trade-offs and alternative formulation of projects. The process of improving local transport plan- nlgexpe-tse should be duplicated at DPH headquarters where --- the concerned staff should receive similar training on a continuing basis. The Deve--lop.ent A-a-der ofP the Ph;ip,4-in 4a nwTr bp4nerin engrage to help improve DPH planning.

(iv) Increased Imphasis on Developmental and Feeder Roads 1/

An important part of road investment planning in the future will

1/ Projects included in the Feeder Road Program are mostly for improvement and rehabilitation due to their present deteriorated condition. The cost of improving or rehabilitabing feeder roads vary from P-10,000 to P 20,000 per kilometer. Developmental roads refer to new construction and have a longer stretch than feeder roads, usually 20 or more kilometers. They are constructed to a higher standard as they will later on be incorporated into the national system. The minimum surface width is 6.00 meters with 1.50 meters shoulder on each side and a minimum road right-of-way of 30 meters. The cost varies from P 50,000 to P 100,000 per kilometer. - 20 -

country's food production programs and regional development. This emDhasis represents a broadening of highway development policy which has hitherto been largely limited to the improvement of trunk roads. Although not vet large in terms of the amount of funds allocated for this purpose as a percentage of the total highway expenditures, it is significant that a policy reorientation has been made to improve secondary roads in line with the country's development strategies. Or- ganizatinnallv. the DPH4 established in Mav 1975 a Bureau of Barangav Roads to give technical assistance to Barangay councils in building and maintaining' farm-to-market feeder roads. The Bureau at nresent is drafting policies and procedures for the execution of Barangay roads.

Despite some efforts to improve minor roads as a part of the Spcond TRRn Highwav Proniet and the USATD-assisted feeder road development program, the level and quality of physical accomplishments and frindin fo%r this npirpoqe have thns far heen niqitBe limited. (lrrrentl,v the planning and improvement of feeder and access roads are assigned a hniah nrir%ritxr.v annf nrp rpenivi-na aroptr nt.+..nf-iion hi), t.he NF.T)h nnd PPTY1

The m.ission's attempt to determine the level of past and planned expenditures for the improvement of developmental and feeder ro,ads was made difficult bir the l1ackn of co-mfparabilit the4 physica accomplishments and funds expended for each year. Accomplishments are only reported if the project is fully paved with gravel even if fuinds had been expended to construct them in the previous year. No accom- ,-1ishm.en+ is reported if the project i9 not fuillv siirfane'.d wt+h cranvl. Therefore, what appears to be small expenditures in relation to the phYysical length. accomplished in one particular year may be due to the accountability of surfacing expenditures only. Despite this difficulty, when the two=.yUear peri..od between FY73 7 4 nd Y74=75 ji9._7CI ad toget3a. Vsa.he-r (the only data supplied to the mission), the DPH expended a total of P 23 million to Jmprove 2,383 1- of roads (P 9,600 per Ian) and 1 8.2 million to construct 2,020 km (P 4,059 per km) of developmental roads 1/.

It seems that although available data are sketchy, much of

tlhe fuLnUds appear-s to bUe dissipated on shiVort sUreUtches o.f roC2'.Ads WhiLch[1 Ud not necessarily form an integrated road network. Field trips revealed ljUdIa the potent fo±IJ.±r rorieUur±-utra is1Lofte U nU realized becaus roads connecting particular points are mixed with good/bad gravel sur- lace:s . Iti wou'lU seerli moure desialel- if fttulv FIU aL4iJ±L21 1u1 UsUv;|LVUPItl1IUClI±/ feeder roads would focus on concentration of funds in smaller numbers of high priority proJects.

Under the Second and Thlrd InDw Highway rojects, some l,OO km of minor roads will be rehabilitated; the ADB is expected to finance about 800 km of farm-to-market/feeder roads in Mindanao, and, as indicated before, the USAID will continue to assist the provincial road development program. The Government's long-term goai is to provide 1 km

1/ Based on feasibility studies, the IBRD estimates the cost of upgrading 216 km of minor roads (mostly gravel surface) in the Neg-cs, Panay and Mindanao at P 50 million, an average of P 233,000 (US$ 33,000) per km. - 21 -

of effective feeder roads per 100 hectares of cultivated land; this would require about 75;000 km of feeder roads for the nresentlv cultivated area of the country. Even if all the required funds for developmental/feeder road construction become available. questions still remain whether there are adequate administrative, engineering and construction canabilities to attain the planned targets and on what basis the priority projects are going to be selected for implementation. The ohiective should be to make a solid beginning on a small scale.

The cPvPle.nmPnt. of farm-tn-yymarket/feeder roads rpnnires an integrated approach and interdisciplinary studies far beyond the capacity of public works auhit is+.hritq nlnne A bhcnnina eof suirh an pnnreoach to project preparation was made by PPDO-USAID which have recently completed a fessibility study of farm=to-a.rket/feeder roads as part of a multi= sectoral program of developing water resources and agricultural develop- 4 4 mon 4"r, h^, 04^ anl 04 war'a f i-an 'Pa nAell i- A en,aa aP c.naanh nn.. AhI 4" +vUA J. -..J S4 . L A. . J nL. v P ^.L- v_ v v U . L. -, - proach, it is essential to enlist local government cooperation and part- 4 1 icipatilo in4 -not-fction and -in n4-an- of local roads . Th i a el also be a concrete step towards increasing local participation in rural develaopm.ent prografs, one of4whicb couldA be A0 oa.nfh+al /Pr,.a road.a

9LLAA ANee __eco| `--A`vL-n _= AA _ ;-t -Ig eve;l ~t ment road programs is urgent in order to determine the priorities of 1 roads based on forestry, gicu- - -- mn4 44nut 1 develop,ents. The mission believes that such an inter-sectoral coordination can best

be erns-uredu by gi Jung a great.er ro'le tAo the Rl,eg,ional eiv±Zelopm,ent- rCLoun- cils (RDC's). Unfortunately, the role of the RDC's at present is impaired because the De-partment of Agriculture has not yeet established regional offices. Nevertheless, it is through the RDC's that an improved approach to the coordinated planning of road development in the regions may be attained.

Mention has been made in earlier Bank reports of the weaknesses of tihe nC1s arising from lack of strong coordinating chairmen, and the fact that they have no budgetary authority. This weakness is serious, and unless corrected could negate much of the long-term potential inherent in the concept of development programming through RDC's. To enable the RDC!s to carry out the intended planning task, the central authority may consider making an annual allocation to the RDC's for local road improvement programs. 'Within some overaii ceiiing on national Govern- ment spending for local roads, the annual allocation among all RDC's could, in the first instance, be based on, say, population and land areas -i. Within the given allocation of funds, the choice of roads to be improved and/or maintained would be tne responsibility of individual HLU's. buch an approach would provide the RDC's with a regular flow of funds for improving and maintaining minor roads; it would also encourage the development of local capabilities to plan, select, design and implement projects.

1/ If the central authority wishes, it could develop and apply a more refined index comprising km/ha, farm and population density, soil type and topography along with specific studies on particular regions to facilitate a more rational allocation of funds for minor roads. - 22 -

(v) Road User Charges

Vehicle owners in the Philippines pay (i) import duties on vehicles, tires, parts as well as purchase taxes on domestically manufactured tires and parts and assembled vehicles, (ii) motor fuel taxes, and (iii) motor vehicle registration and license fees. Prior to the abolishment of all special funds, including the Highway Special Fund (SHF) in July 1975 1/, the proceeds from motor fuel taxes and registration and license fees were earmarked for the HSF. Since its creation in 1953, almost two-thirds of the HSFis revenues came from fuel oil taxes and the remainder from registration and license fees, which have provided m6st of the funds for the administrative costs of the DPH (BPH before the creation of DPH) and for maintenance of national roads, and about 40-45% of the funds for improvement or national roads. The HSF was also an important source of subsidies, under a national assistance program for maintenance and improvement of provincial, city and municipal roads.

In 1972, consultants undertook a study on highway finance in which they recommended that the levels of various road user charges be substantially increased in order to obtain the funds required to meet growing needs. The consultants also recommended a major revision in the existing rules of apportionment which placed more emphasis on maintenance than on construction. Following the consultants' recommenda- tion, the taxes on all petroleum products and other road user charges were increased in 1973 and again in 1974 through Presidential decrees. For instance, an 8 centavos tax on a liter of gasoline, in effect since 1956, was raised to 25 centavos by 1974. The present schedule of taxes (accruing to HSF) is as follows:

Schedule of Taxes on Petroleum Products (May 1975) Items Deposit to HSF (Pesos)

1. Motor vehicle registration and license fees 80% of all collection

2. Specific taxes on refined and manufactured oil.s and'uUl other fuels_ L per lser--.

a. Nph'4dpLA, gasoline d other ts of distillation 0.25 U. Iu LbriadUting oiL 0. 3 c. Diesel fuel oil 0.10 d. Kerosene 0.0 s e. Alcohol 0.01 f. Process gas 0.02 g. Thinners and solvents 0.15 n. Liquefied petroleum gas 0.09 i. Asphalts 0.05 j. Greases, waxes and petroleum 0.35 k. Bunker fuel oil 0.01 i/ As an interim measure, the abolition of HSFr was irmediately folIowed by setting up of a "Highway Special Account" in the General Treasury to segregai,e thue r-e-venues PreviUb ±y ea;edviUmU for Uth FlOr for use on highway purposes. - 23 -

As a result of increased taxes, the HSF revenues increased ~ ,-,s-,C irnr-I .. -nI- -I -I n4 4 1 P-4-LV'7ff - -, -- A- + , Irom P )LU If3ulLLon J_n £.L toIA rP 1,1U0U61IL.L±±UIJ -nL.o Fu ) and'- a p e to increase further to P 1,285 million by FY79. Thus, road users in the Phiinippines ha-ve paid sufiL IeLC J UeL pecificdA4OL41 user otan 4ta cover the maintenance expenditure for the national highway system of 21,0U0V i, whic have amounted to F 475 million 4(nclud-ngtheaA istrative costs) in 1973-74 and P 661 million in 1974-75. However, in VieW Uo. ULthe UeAxtr,UelY L1ec_LtedUt1r-- situa-ion of highway .,.aitean Section (vii) below), the budget expenditure for maintenance may not b eU -LI IU± Uec oftheV. real r,.agn,i uUe ofi i,ma"4tenance need's. Moreover, since there is no reliable basis to estimate the real cost _- I - I _ __3______- _L -.4.45_ - 4.-___A5__2srL1t1r n ar|A7n Vi maI"Jl Ud±LLLj Ing kthe pruVinci2.Ld1 dilU 1IIUIj! EC.I)d±EUUc1U WilLULA dAauu up )u IvJ,VVV km, it is not possible to determine the magnitude of expenditures needed to mantiain to an adequate level the total road network of the Philip- pines. Nevertheless, it may not be unreasonable to assume that the over P 1 billion collected annually in user charges is perhaps adequate to cover the total maintenance needs of the road system, and, in this sense, the road users could be considereu to have paiu more than the margirnal cost of the highway infrastructure. The mission believes, however, from the point of view of resource mobiiization for development financing, a possibility for increased road user taxes exists, particularly in gasoline taxes, to help meet the DPHts pianned highway expenditures during the next four years which amount to about P 2.8 billion p.a. In some developing countries (for exampie, Mexico and Brazil), the proceeds from similar road user charges exceed their annual road expenditures, including those for construction.

Even with the last increase in gasoline tax to 25 centavos per liter, the tax element as a percentage of total retail prices of the fuel is still relatively low at 20u. Comparative data for 1971 compiled by the Petroleum Institute of the Philippines, Inc. showed that the tax component amounted to over 60% of gasoline prices in Smigapore and Kuala Lumpur, 42% in Hong Kong and 28% in Bangkok. Since automobiles account for a large portion of total gasoline consumption in the country, the restraining impact of higher fuel taxes may result in an increased use of public transit and energy economy. Of course, such a policy must guard against producing detrimental effects on the development and operation of truck, bus and jeepney companies by granting, if deemed necessary, discounts on gasoline purchases and maintaining lower diesel fuel prices.

In deciding whether or not user charges should be raised to cover a greater proportion of new road construction costs, policy makers must carefully weigh such factors as:

(i) The relative simplicity of collecting revenue through fuel taxes;

(ii) the income redistribution effects of higher fuel taxes;

(iii) economic costs as a result of the restricted utilization of highways or traffic distortions that would be created by unduly high charges; and - 24 -

(iv) the availability of funds for highway construction from other sources, and the im- plications of such funding on public finance.

As a part of their review of transport tariffs, the question of road user charges should be considered as a priority task which the resident advisors to be financed under the proposed technical assistance should deal with.

While the gasoline tax may be increased, the Government should consider taking measures to encourage the use of diesel oil. With the sharp increase in petroleum prices since 1973, the use of diesel oil in road transport should have been increased as the use of diesel engines by large buses and trucks generally results in more efficient energy use for long-distance travel.

However, the reverse has happened. As shown in the table below, since the "oil crisis" of 1973, the price of diesel oil has increased by tenfold while the gasoline price increased by about five times. Although diesel fuel is still cheaper than gasoline, the margin between the prices of gasoline and diesel oil has considerably narrowed from 140% to 23%.

Motor Fuel Retailed Prices in Manila (Centavos per Liter)

Before 1973 Oil Crisis June 1975

Diesel Oil 10 99-100

Gasoline 24 122-123

As a consequence. the vehicle onerators interviewed bv the mission claimed that they would avoid the purchase of diesel vehicles since their hiwher nurchase costs cannot be off-set hv savinos in fel7p costs. Based on the information available to it, the mission cannot determine the reasons for the differential price rises between the two fuels. It is recommended that a careful review of fuel pricing policy be made tx nrovide the basis for both a rational motnr fuel t3x poliev and realizing energy economy.

(vi) Regulation of Road Transport

Some of the obvious anomalies in transport regulation by the Board of Transport (BOT) rla+t to i+t policies on t trckn i and on its fare regulation of buses and jeepneys.

Trucking

While entry into the trucking industry is relatively free (although, as said before, the require-,-ent of a m u-of fv t4-rucks act- as a constraint), only about 10% of the trucking is carried out by general - 25 -

haulage operators. The remaining 90% of freight services are provided A4 recu'4 1 -- ; 4., h tr.uck ow.ed by en4------for- hau'l 4- 4heir o good-- and the utilization ratio of these trucks appears to be low.

A major reason for the proliferation of private truck owner- hII.Lp bJy 4..L.LIfIl !JpparswU Lith wlu ±VV Ufole UL. adUVanLJ LD OLJUUacodU to them. Since privately owned trucks are not regarded as general haulers, Ulhey are neuiUber subject to tariff regulations nor Iuo 'UUe taxes adu fees levied on commercial truckers. Moreover, private-truckers can inflate their trucki1ng costs and charge them against their other business operations for tax purposes. These loopholes create a situation where companies find it more profi table o o-wn their own trurcks despite their Low utilization rather than hiring general haulage operators. A review should be made of the existing taxes on private trucks and the economic nature of their operations.

Another factor which deters the growth of efficient commercial trucking is the unrealistically low trucking rates. The present rates, which have been in force for some years without adjustment, are 30 centavos (about US¢4) per ton/km with a minimum charge of P 2.50 per ton. These rates are applicable to all types of haulage regardless of distance, the kind of commodity carried, or load factor. Although the prescribed rates are not strictly observed in practice, they nevertheless tend to reduce the incentive to engage in the general haulage business. The present tariff structure needs to be examined and a realistic policy on trucking charges formulated.

Buses and Jeepneys

Public passenger services are provided by privately operated buses, jeepneys and taxis for both intra-city and inter-city travels. Jeepneys are the most popular mode of transport for short trips while buses cater to longer distance travel. Their routes and rates are regulated by the BOT and, unlike the case of the trucking industry, entry is difficult, if not impossible, especially in metropolitan Manila where a moratorium on new entries has been in effect for some years. Although there are some exceptions, route concessions to operators generally in- volve time consuming hearings and high costs, and applications are often rejected. Long lines of passengers waiting for buses and jeepneys in metropolitan Manila during peak hours and frequent overloading observed on inter-city highways suggested a need for expanded capacity for passenger movement. In order to ameliorate the situation, regulatory policies need to be re-examined with a view to liberalizing the present restrictive policy.

In 1974, the basic rate for both jeepneys and buses was increased from 2.5 centavos per passenger/km to 4.0 centavos, with a minimum charge of 20 centavos. The uniform rate for both jeepneys and buses tends to favor the jeepney industry. Passengers generally prefer this mode as it stops anywhere along the route, provides almost door-to-door service in the outlying areas, and makes better time as jeepneys can weave in and out of traffic. All this convenience and flexibility is - 26 -

provided at the same cost as buses. Buses have been profitable only when high occupancy rates were obtained. As a result, the number of registered buses has more or less remained the same over the past several years while the number of jeepneys has been increasing at an average rate of 10-12% n.a.

Tt is desirable tn encourage the use of buses to realize an economic use of the road space of heavy traffic routes and to have jeennevs concentrate on less travelled secondary roads- To this end, consideration should be given to require jeepneys to charge higher prices for their sunerior services than the buses. The operating rosts of buses and jeepneys are not clearly known at the present time, but such data should be collected to provide a basis for determining the proper spread in the fares of the two types of passenger transport.

(vii) Maintenance

In the past, one of the major problems in the highway sub- secto-r .h--S been the neglect. of mnJn+ten_qance M-nn natlonal p-rmnm.ry andr secondary roads deteriorated to the extent that they were not even close tor +l,c, M. oa;erKnol SAac; an n+r ;n,,,n mr o- '-- n - tainable. As a result, the buli of highway expenditures has hitherto been devoted to reconstruction and upgradin of deteriorated hihas Field trips revealed that the maintenance levels observed for gravel roads weroe entir+elIy -rncardequate. + lnkhethe.r the problem is one of funding, diverted use of funds intended for maintenance, lack of quality control, frequent overloadin-, or poor initial design and construction, the condition has to be corrected to protect the value of capital investments.

Recently, a Bank-financed road maintenance study has been com,pleted Lby consu ltants,IK1ampsax adIU Beree, whVo IrUUIomUteIIUeud a yVt- Year Maintenance Program. On the basis of their review of the existing ma±inUeniLacle prcUuuure, thLi UOIJZUiL'dIUj have:

(i) Outlined the steps required to improve management procedures for procurement and maintenance of equipment;

(ii) identified equipment needs, including the replacement of overaged equipment and purchase of spare parts for regional workshops; and

(iii) proposed a revised system of apportioning maintenance funds based on technical parameters, referred to as !!equivalent maintenance kmIn (EMK), such as type and condition of surfacing, area of travelway and traffic volume, arriving at an estimated average per km maintenance cost of national roads of P 8,018 p.a. - 27 -

The consultants' estimate of P 8,018 per EMK was based on the assumption that the national highway system would be restored to "maintainable standards" which they recommended. The restoration program would cost P 358 million during the five-year period, 1975/76- 1979/80, with a required expenditure for the first year (1975/76) of P 59.8 million. Together with the estimated maintenance expenditure of P 264.2 million, the total maintenance budget requirement estimated by the consultants for the current fiscal year amounts to P 324 million. The DPH 1975/76 budget for maintenance at a level of P 231 million falls short of the recommended expenditure. Additional allocation to maintenance from the revenues earmarked for the Highway Special Account should be made.

Increased fund availability must be coupled with improved maintenance nrocedures and onerations. At the national level. DPI must expedite release of funds and equipment to the regional offices and set up a maIntenanGe monitoring Svstem to revipw work comnleted and plan work to be done. At the local level, the field offices must obtain 9qtaf'f in suiifficipnt. niimhbr and c-alihbr hoth tn nrogram maintenance needs (equipment, material and personnel) and execute the programmed work on a reolgar cnntinning hnsiR. Tn this connet-.oAn, W sttrnnglv nsiunpor+. DPH's experimental program in two regions to test the i-mplementation of the consuiltants' rennm.m.ndationn and proceduresv for the mnnagement and maintenance of equipment and for the planning, programming, execution and mrnitrnrnc of rof'mvd maninte.PnanceP npva+rq-nns Thp AYnrHmPn+.n1 nrngam has demonstrated convincingly the effectiveness of proper management of retgrion-al omii-n?nri+.e re r so9 that arvailabl euiipenon+. i fui1%r ti+4147d. This program should be carefully extended to other regions. At the same t mes~, £A L shou.ld ex*amin the exS.tentSfl an t414 U ofr overloa ng tba reduce.45UAOU*~4A the economic life of pavements and cause heavy maintenance expenditures, with a view to devising an effective means of enforcing veh4ile weight regulations.

The DPH appears to rely on heavy capital expenditure to reduce Man, enan ce needs. T.hus, n,nyr of thle newr and rAcons+--u,ctd hig,hways.,.mn ', .ae now being paved with cement concrete at two to three times the cost of bitwm.in surface tr-atr.ent even w en the daAi4ly traffic 4is Ies t-han 5.4.UAIL .Aw"l5. 5.544..0 .S 0LhI* 0V01 144 VLA- 5.0444 U54W.L.5., 45 .50-35 UIIO 500-600 vehicles. This practice is followed in the belief that such hi;gh +roadyp -ast '10longer witout+.. a ntenance. This- ob,"ously is a 14445 V.jJ0U .LJOAAS -.- V5. .L.WAA4504 71. U5.LA UA 154 4 U A44 45.0 .5.44.5 'JJV J.5.itS J..J .55 04 4 uneconomical solution to the maintenance problem. The high capital in- vestrM4ent4 thlat- cement concrete pavem.ent requ-LrMeS kCU 11canhaLrd LJyb JUOiL..L.L±U for those roads with.relatively low traffic volumes if its incremental _4{.__ -: 4 - ._ : ..- _r -__ X ___a_t 4. _- cosU overt; i tu1I±Uu OU.rU ld±U1 UtratUdW11enU -L QUJizp1redU fov r Uxampl,U withUL the discounted present value of future incremental maintenance cost of an asphalt paved road with adequate traffilc policing. The DPH needs to review the present policy for pavement design standards.

B. The Railways: The Philippine National Railway (PNR)

(i) Railway Planning: Rehabilitation Plans

The rationale for the PNR rehabilitation plans has been mainly based on the inherent advantage of railroads over roads in terms of - 28 -

energy economy in hauling high-density bulk commodities for medium- and .long-uisLdsLance traffic. ThJHorne quest.l oi L. theiher th1e PNRJ.shI'o lIdu u De maintained, expanded or abandoned had long been discussed during the sixtUies -without any conclusive resultU. Then n 1971, through a congressional act (RAG 366), the PNR's capitalization was increased from P 250 million to P 650 million to absorb PNR's indebtedness. Tne act, 9lso provided US$19.25 million foreign exchange plus P 86.37 million for rehabilitation work and P 40.2 million as working capital. This financial assistance enabled the PNR to undertake its First Rehabilita- tion Plan for 1971-75 which essentially consisted of the purchase and rehabilitation of locomotives and rolling stock for use on main lines, minor track improvements and installations of signalming facilities.

The PNR was to undertake a study during the implementation period of the First Rehabilitation Plan to determine its future in the longer run and, specifically, to decide whether it should undertake a Second Rehabilitation Plan (1975-80). A series of studies have been carried out since the late sixties, the latest of which was the ADB- financed feasibility study for the rehabilitation of the Southern Line. This project has an estimated cost of US$44 million equivalent, with a US$25-30 million foreign exchange cost. The project essentially consists of civil engineering works, notably an improvement of the track and bridges.

If the PNR is to continue to provide services on the Southern Line, the present dilapidated roadbed, track and cross ties have to be replaced. Since new rolling stock has already been purchased or rehabilitated under the First Rehabilitation Plan, the Government contends that the use of new powerful rolling stock would require a strengthened roadbed to realize its potential and to protect the life of the equipment.

Besides the Second Plan, the PNR has a longer-term plan to initiate a number of new projects in the latter part of the seventies which are proposed for foreign financial assistance, and the scope of these projects go far beyond rehabilitation or even modernization. In fact, they call for the building of two entirely new extension lines, one to the Cagayan Valley in the North and the other to Sorsogon in the South. The projects which the PNR put forward for the Second Rehabilita- tion and a longer-term indicative Development Plan are estimated to cost more than P 3 billion and include:

Estimated Cost (Million Pesos)

1. Rehabilitation of Ratanpas Line L1.5 2. Development of TFI (formerly Greater M nnln Te-rminalI fo-r Foodt Market.) Terminal Complex 57.0 3. Bisudeco Spur Line I.4 4. Rehabilitation of Poro Point Railway Line 3.0 5. Southern Main Line 305.0 6. Northern Main Line 208.0 7. CorLmmuter Service Phases II and III 298.0 - 29

Estimated Cost (Million Pesos)

8. Electrification of Commuter Service 602.0 9. Cagayan Valley Railroad Extension 938.0 10. Sorsogon Railroad Extension 272.0 11. Restoration of Branch Lines 7.1 12. Cayanga Project 7.0 13. Additional Rehabilitation 48.8 14. Studies and Consulting Services 12.0 15. Utilities 27.5 16. Rehabilitation and Selected Modernization in Program 220.0

Total Peso Equivalent 3,048.3 (US$435.5 million)

Actual work has already begun under the Second Plan on items 7, 12 and 16, and bids for the supply of 30 commuter cars undler the Phase II program are being evaluated. For the remainder, selected feasibility studies have been proposed except for the Southern Line for which, as already mentioned, a feasibility study has been completed. (The estimated flow of expenditure for the period of 1976-79 and the balance to be spent in later years are shown in Table 4).

Clearly, the estimated costs (as of March 1975 before the July devaluation) of these projects are large. And yet, due botn to inflation and the lack of engineering, these figures are likely to prove to be a gross underestimation by the time any of these projects are ready for implementation.

Regardless of cost, however, the Government appears to endorse the PNit's expansionary policy and extended financial support by increasing further the PNR's capitalization from the present P 650 million to P 1.5 billion in July 1975 by decree (No. 741). The en-tire increase will be subscribed by the Government. The decree also empowers the PNR to contract loans, credits and indebtedness with foreign governments, international financial agencies, or with firms extending supplier's credits.

(ii) Criteria for Railway Project Review; the Secondi Plan

In the hope of allowing the railways to render competitive low- cost services, the Government wants tc carry out immediatelv the rehabilitation of the l4anila-Legaspi Line (the Southern Line) as a firs' order of prioritv. The various investigations thus far carried out on this nroiect; including those by the ADB, showed that the rail transport costs (including terminal costs but excludin,7 nrnvisior, nf siding7s) werr chpanPr t.hIn roAnd or water transport costs for a distance of 240 km or longer. The implicit assumnntion in this analysis is that long-disitnnrce traPfifjc fnr which the estimated railway transport cost is cheaper than that of highways or coastal shipnine. would in fact. Ghnose to use the railway. This is a somewhat simplistic view of users' choice. Since the users' valuation - 30 -

of convenience, reliability, and regularity of transport services cannot normally be translated into transport cost estimates, the comparison of highway and railway transport and coastal shipping costs is not a sufficient basis for predicting the traffic division between these modes. In addition to the theoretical cost analysis, in order to support the Southern Line Project, it is necessary to have a market (user) survey with which to appraise the likely response of the users to the railway services to be offered after the rehabilitation project. The mission was informed that such investigation has been carried out recently which revealed a substantial number of potential railway users. The mission cannot coimment on the outcome of this investigation as no written report was made available.

One word of caution may be in order. There appears to be a need for a close coordination among transport modes in planning the Southern Line Rehabilitation Project. At present, the DPH's highway project preparation in this region does not seem to take into account the possibility of the railway line being rehabilitated. In case a decision is made to rehabilitate the railway line, then the contemplated major road developments in this region would have to be deferred. In the near and medium term, there is little evidence that the expected level of economic activity in this narrow peninsula would require both the rehabilitated rail line and the planned development of highways.

Existing traffic volumes for the PNR are quite low. In 1974, the PNR carried only 347,000 tons of freight (with much smaller volumes in 1972 and 1973) which has produced only 20% of total PNH revenues. In light of the highway development, whether the PNR, after the rehabilitation, can recover, for example, its peak traffic of 1.3 million tons of freight achieved in 1960 is quite uncertain. In order to capture traffic, the PNiR must, in addition to physical rehabilitation, malce a drastic improvement in its operational efficiEncy.

In view of uncertainties and problems, there is a need to carefully re-examine the present expansionary policy of the PNR. It would appear that the effort should be focussed on the feasibility of the Southerni Line as a demonstration project to gauge the prospects for the future role of the railway.

(iii) Improvement of PNR Operations: An Essential Condition for Rail Rehabilitation

In order to obtain full benefits of the Rehabilitati-on Program, the PlNR must improve its operational efFiciency. In recent years, the PN4R management has taken a number of constructive stens aimed at improving its operational andi financial results. In 1974, the declining trend of both passenger and freight traffic has been reversed, it.s lhbor force has been cut by nearly 1,300 or an 18,;' reduc-tion over the 1972 level, and as indicated in Chanter TI. an onerating deficit nf P 7.5 million in 1972 was turned into an operating surplus of P 6.5 million in 1974. These are commendahle arhievements, particularly in light of the past phyIsical and financial neglect and stop gap maintenance with consequent deteriora- tion of physicalassets. These operational mprovements notwithstanding, t.he PNR needsq -nnsiinderable nqqiqsance- frnm. n1i+-slHec ex-perts. in the m. plementation of the planned modernization program if it is to attain and main+tin a reasonable degree of operational efficiency. This view is shared by the ADB which would recommend a two-year technical as- 3istance program if it decides +^ f4nntn'o t-he Soiuhe,rn TAnne Pehal4 tion Project. It appears that the PNR management is reluctant to grant executive responssibA it to tnhe ousd A xet under technlcal assistan^e, which the ADB recommends. The PNR would rather retain the experts as ad- -f4 o-. onx,

'illi-e thile PNR!sgllcorncer-sJ tblatu suchl -technical assistance m,ight result in foreigners taking over its management is understandable, to mI1ake 1le±J. rV0.VUU te.L.L?j% I ±Ve, Lthe outsLiL d pUuerUs WJou-ld have tU ub iLvenI some executive responsibility. Experience elsewhere suggests that foreign expe.r-ts eugagedu pure'Ly as au v±u-o- darue Vofuten ±IxiffcLVt-v L1n reto0UrinJg lthe health to an ailing transport enterprise. The purpose of giving some executive responsibALity tLJotO L'Ie consultants is nAo ALA) yield any executive power to them but to make the outside experts more readily accountable adiJu responsibile for 46 Uth.ei Uo * To±O.U±I tUILLO is U, ULheir Ute-0 VI refrence should be carefully spelled out so that responsible assistance can be se- cur-edL from bLeri, while guardu.ng against.anly unwarrAntd nuu r±rence on matters on which the PNR management feels itself to be the best judge.

In view of the magnitude and complexity of the problems which the outside experts would have to deal with in their attempt to improve PNR operational efficiency, the mission feels that the suggested two- year period of technical assistance may be too short to train the PNR staff and effect a transfer of management techniques. If the experts are engaged shortly after the loan signing with the ADB, their two-year assignment would be completed long before the rehabilitation project is -inished, which is expected to take rour years. it is tne mission's view

tha Q the outside experts' services are needed in operating the rehabilitated facilities. Therefore, it wouId appear that the minimum period for technical assistance should be perhaps five years with a possibility of renewing their contracts for a further period.

r, Ports and Shipping

(i) The Port Investment Program and Strategy

During the 1976-79 period, the Government intends to expand and modernize the North Harbor of the Manila Port in addition to the limited work on Pier 3 in the South Harbor currently being financed by the Federal Republic of Germany (FRG), and has decided that there should be a thorough study and evaluation of further investment requirements for the Manila Port. In addition, the few small regional ports at which projects can be jus-tified have already become the subject of external lending assi9tance from the Bank, the ADB and the FRG. The port projects are to be executed during the period 1976-79. The port facilities at Cagayan de Oro and General Santos are being improved with the assistance of the Bank's Second Port Loan. In addition, external finance is bein,J provided for three other Mlindanao ports: Cotobato, financed by ADB, artl Iligan and Davao, financed by the FRG. The locally funded part of the port investment program for- the 1976-79 period for which about P 300 million, or nearly one half of the total port investment expenditure, is aliocated (see Table 5) appears to be a typical example of maintenance operations rather than an investment program. This part of the program envisages improving some 300 small ports with an average planned expenditure per project ranging between US$13,v00 to US$100,000. The question is whether such a pattern of expenditure is in the best interest of developing an efficient port system. In the days when overland transport had not developed, each small hinterland had to be served by its own small port. This accounts for the development of many roadsteads and shallow water ports in the past. However, the construction and upgrading of highways in recent years have radically changed the situation in most parts of the country, especially in Luzon. Therefore, while it is natural for an archipelago nation to have many small ports, the improved overland mobility now makes it possible to concentrate port activities in a few selected locations, thereby realizing economies of scale. The selection of port location must be undertaken in the context of the total transport network based on a detailed investigation of the patterns of traffic, development potential of the widened hinterlands, the natural conditions of the harbor area, and the like. The selection of certain port locations might require further improvement of overland transport links. These investigations are necessary inputs for a sound programming of port investment. A two-year National Port System Study initiated in April 1975 jointly by N3DA and the Bureau of Public Works recognized the need to consolidate port facilities. It is hoped that the work of this group would provide a useful input in revising the Port Investment Program.

There is also a need to move away from the present focus on the provision of wharves and reclamation of harbor areas towards fur- nishing complete port service through the provision of on-shore facilities such as transit sheds for general cargo, paving and fencing open cargo areas, cargo handling and holding facilities and other fixed installations. The present practice is that large shippers build their own private por-ts or install cargo handling facilities in public ports for their own use. It is estimated that private ports and wharves currently handle as much as 60% of all cargo tonnage loaded and unloaded in the Philippines. The lack of on-shore facilities tends to make it difficult for small businesses to use public ports, with the likelv consequence that their growth is inhibited. This also means that outside the official investment program. substantial private investments are made in both port infrastructure and heavy equipment.

No doubt, much of the private investments are the proper concern of the private sector. 1However; the nresent. practice of nroviding on-shore facilities by private shippers does not facilitate the growth of industries in outlving areas- which requires the availabilitv of economical port services at public harbors. Moreover, the proliferation nf nprive+. pnort+.q and pir-vat Ioacdi-nc- ng i iindnloadinrgc qrpq in niichlin pnorsq has tended to result in uneconomical use of funds and underutilization of port capacities at both public and private ports. _ 33 -

It would be desirable to expand the on-shore facilities and services at public ports which are made available to both large and small shinners in order to increase the utilization of port capacity. -The present situation may lead to wasteful competition, diseconomies and inadeouate Government supervision over the development of port facilities. The Government should also give serious consideration to +he present and pronpectivP rnle nf private ports and piers in the- operation of the national port system.

(ii) Port Operations: Need to Improve Efficiency adr. Manintenarnce

Port capacity at most ports can be greatly ncreased by m proving the presently disorganized port operations, and ensuring main- are under the administration of the Office of the Special Commissioner on Port Adunsr+o (SOA ihnth-ra fCso-.s but no -de= quate supervision is provided to the private cargo shore handling compa- n_-n_ nno An t-h oration nA .a4 n+ena ,,naca gs nlyit n to in regional and municipal ports. Other than the Manila Port, there are, 4 v - 1 a g n n4- al;. 1 poart+ o innm -A; A'i, m e nn,nvi'v n wA A Ac " _ -i-, +-ke --- 4- under contract but without much supervision from OSCOPA. The result is r,.uc, contusiLon and cong,estion in cargo wVoLrkg areaa adu inefficnt4 movement of cargo. A reduction in the large number of operator-contractors at rarny port,s -will be helpful. AnotVher imp,ortJant, t1ask for operat,ional improvement is the implementation of uniform, orderly operating procedures under the strengthened port mnanagement to supervise the pri-vate cargo handling companies and control the movement of cargo and passenger traffic .

Poor port maintenance has been largely due to the lack oI administrative mechanism for coordinating the activities of OSCOPA which is charged with port operations and the uAreau of Public 'works within DPWTC charged with physical planning, construction and maintenance. The inadequate working relationships between these two agencies often resulted in the OSCOPA's insufficient attention to the adequacy of port rates and charges it levies in relation to the need for port maintenance funds. Consequently, the availability of port maintenance funds has been con- sistently insufficient and such funds as have been available have not been promptly released.

Many of the operational problems of the ports are due to inadequate port administration. in order to help resolve this problem, the Government agreed with the Bank, in connection with port loan nego- tiations in 1973, to establish an operationally and financially autonomous Philippine Port Authority (PPA) not later than January 1, 1976. The revised charter for the PPA, drafted by consultants, has been signed by the President for the official establishment of the PPA 1/. The mission believes that the fully operational PPA is a high priority need for the improvement of port operations. l/ Presidential Decree No. 857, signed on December 23, 1975. - 34 -

(iii) Government Program for Shipbuilding and the Merchant Marine

The Government has been aware of the inadequacies of inter- island shipping in the Philippines to serve its many scattered islands and economic centers. Conslderation is being given to a national policy of accelerated growth of the maritime industry, broadly defined as covering shipbuilding, ship repair, dry docking, the ownership and operation of vessel fleets, the manufacture of all types of ship equipment and supplies. For this purpose, the Government, in conjunction with IBRD?s First Shipping Project (Loan 1048-PH, October 29, 1974), has recently established the Maritime Industry Authority (MARI1A) to foster the development of shipping and to prepare an investment program which will provide guidelines for shipping industry. However, it will be some time before the agency can perform its intended role since the MARDI& is not yet adequately staffed. Meanwhile, technical assistance to MARDIA to prepare a medium-term program for shipping development is being extended by IBRD as a part of its effort to prepare a second shipping project, scheduled for appraisal in the fall of 1976.

The Philippine Shipbuilding Association has prepared a 10- year (1975-85) shipbuilding pr,gram. It includes a plan for the local construction of inter-island and other vessels which would meet over 80% of the total shipping capacity that is expected to be needed during the period. The total number of ships to be built during the period is estimated at 303 (totalling about 400,000 tons) of which 42 (about 22,400 tons) are planned to be built in 1975 and 1976. The program has been submitted to MARINA for approval, but no decision has as yet been taken.

Shipbuilding in the Philippines is in its infancy. While the Philippines appears to have a long-tern potential to develop a shipbuilding capacity primarily to cater for its own inter-island shipping requirements, capacity at present is limited, costs would be high and cther industries that are allied to shipbuilding (e.g., producers of steel plates, motors and navigational instruments) are not developed. It is,therefore, difficult to see the execution of an ambitious program. The mission believes, however, that in the short and medium term. the policy for fostering shipbuilding should be designed to permit, first, a rapid development of repair and maintenance facilities, and thereafter progressively build up the capacity and the technical skills in shipbuilding as well as other supoporting indiustries. The modest approach to the shipbuilding program suggested here deserves active outside as- sgis-tance both in the form of canital and technical know-how.

TD Airnorts and iMvil Aviation

(i) Thp TnvPqt.me.n+. Prnoram fnr Airnnrt..q qnri Civil Aviation

The 1976-79 Investment Program for about P 800 million (see Talep 8) forus iron (1) the ralatio nc anexnsnion of' +the exsing+nc, airports, emphasizing ihe improvement of the most important airports - 35 -

(three international and four trunk line airports) 1/, including Manila, and (2) a countrywide program to increase the safety of airport operations through improvements in air navigation facilities. In doing Bo, the Government is pursuing a proper strategy to direct a large part of investment funds to selected high priority major airports. The rehabilitation and limited improvement of the international airport of Manila is being financed with a US$29.6 million loan from the ADB at a total cost of US$73.5 million 2/. The rest of the program is comprised of works in a number of small and regional airports. The overall size of the program appears feasible for implementation within the plan period although some slippage might occur in some individual cases.

(ii) Coordination in_Airport Develc mnt

One major problem in airport planning is the split responsibility between the Civil Aeronautics Administration (CAA) and the DPH. According to a recent decree, the CAA is responsible for planning of superstructure (terminals, control towers, etc.) of airports and the DPH for "horizontal structure", i.e., runways, taxiways, parking areas, etc. The apparent reason for making the DPH responsible for the latter appears to be that the DPH's road building capacity is suited for such tasks. If so, then it would appear that the DPH's responsibility should be strictly one of engineering and physical construction. The determina- tion of size, design, layout and timing of investment must be based on traffic requirements (frequency of aircraft landing and take-off and their size and weight) which can best be left to the CAA. The "vertical" and "horizontal" structures in each airport must be planned and coordinated by one agency.

E. Urban Transport

(i) Urban Transport Problems and Metropolitan Manila Transport Plan

The major urban transportation nroblems of the Philipnines are centered on metropolitan Manila, where chronic congestion has become the normal condition. Other cities of the Philippines do not have the transport problems of the dimension and magnitude confronted by metropolitan Manila. Manila's transportation problems derive lareelv from (1) excessive crowding of population and activity into a small downtown area. and (2) the diqnrderlv arrangisment of land uses for the metropolitan area that is placing increasingly greater demands on transportation re- qflirempnta. The high building density and the concentration of emnlov- ment in downtown Manila have created a volume of passenger and freight movempent that ha- b'ecome incrAsAinalv difficIult to accommodate efPf'ectivelv regardless of transportation method. The lines of automobiles, jeepneys,

1/ International airports: Manila, Mactan and Zamboanga. Trunk4 line airpor T Bac310d, Tlo ' de Oro.

2/ Aa of I ovrl.er I719. - 36 -

buses, taxis and various other vehicles inching their way through Manila's nu.,erous-a49~ur J 4-tersect-ionsLLA .. JJ aare± VUV±'LW"-biu ,,aiettosoSICAI1.~Lito L,c0 U.±UIAa IL. a contiuig-'UIi ±1L.LL1r, d.lJu n growing imbalance between transportation demand and available transport capacity.

iii recognition of the urgent need to relleve existing congestion -,andfind means to provide greater transport capacity, a first major transport stuudy in metropolitan YManiLa -was carried out between 1971 and 1973 by a team of Japanese experts with DPWTC as counterpart agency 1/. This study reeommended an inter-modal transport plan and an investment program required to meet future transport needs based on the projected land use and employment and residential densities. The investment program for 1973-81 called for a network of six circumferential roads, ten radial roads, six elevated expressways, north-south commuter rail lines, and five subway lines. From this schematic plan, transport investment proposals have evolved which are estimated to cost upwards of P 7.9 billion (US$1.1 billion) for the medium term (1975-77). To implement the complete system for the long term (9d78-81) as proposed by the study would cost at least P 17.3 billion (US$2.5 billion), an amount far beyond that assessed as necessary for any sector in the metropolitan Manila area.

The major shortcomings of this study which argued for the proposed investments are that:

(a) It imposes no limits on resource availability. It fails to take into account the severe burden that the proposed capital expenditures, even if justified, would place on the metropolitan region's fiscal capacity.

(b) The traffic forecasts which provide the foundation for economic justification of a high-cost, high-capacity metro are based on estimates of activity distribution derived from physical planning exercises. In view of the lack of small area census data available in the metropolitan area, only gross figures in terms of a few generic land uses were used, but the impression is gi;en that the results are precise. The danger is that even small inaccuracies in the initial step of analysis can produce enormous errors when cross-multiplied in the subsequent stages of analysis.

(c) The most fundamental error in the economic analysis for expressways and rail transit was the complete disregard of the time dimension in quantifying benefits and costs. All expenditures incurred and benefits obtained were assumed to occur smnultaneously; no attempt was made to determine the present values of future streams of costs and benefits.

(d) The study adopted a methodology which was subject to a number of procedural weaknesses: (1) The split of transit passengers between rail and road was based on a "minimum time path" traffic assig_n- ment technique. In undertaking "all or nothing" traffic assignm&-

1/ G-overnment ofP Jn, Over s Tehnical C atin Agc It-. Transport Study in Manila Metropolitan Area, 197?. - 37 -

it was assumed that buses would operate as hitherto in mixed traffic, at average speeds of 5 kph in the center and 10 kph in the periphery, whereas new transit facilities were assumed to have operating speeds, including waiting times, of 30-40 kph. Thus, the comparison was between a system incorporating mass transport facilities on its own right- of-way with one based on automobiles and mass transport on shared rights- of-way. This technique is bound to favor rail development. (2) The study technique assumes completion of all the rail and road networks included in the analysis; elimination of any part would invalidate the traffic assignment results. Yet, on financial grounds alone, there is no possibility of constructing the entire network by 1987. (3) In the analysis of modal split, consideration of jeepney use was left out. It is an unfortunate omission in view of its popularity and the superior service characteristics which appear to satisfy travel needs of many re- sidents in Greater Manila.

The transport system recommendations that emerged from this study were a mixture of long-standing proposals and new elements. The basic pattern of radial and circumferential surface roads remained essentially the same as had been first proposed in the mid-1950's. The study apparently treated these as given elements and did not attempt to analyze their justifications or to determine whether some other pattern might be preferable. The new elements, principally the proposed subway system and the elevated expressways, were superimposed on the "given" system to provide the additional capacity purported to be needed by the favored land development pattern.

From the above discussion, it is clear that the study does not provide an adequate basis for assessing either the social and economic benefits and costs of these proposals or their physical and financial fPeasihi1ities. Rv ignoring the constraints on resonrce availahilitv for transport purposes, the study failed to establish even the scale of a feasible investment program, much less the priorities of its various elements.

(ii) Recommended Program of Low-Cost Solution

The capacity of the existing transport system can be greatly eynandpd throauh monrR ffecttivp traffic management and rewllat.orv nrocedures that can be implemented quickly requiring no or relatively little pnuhlic Nfirnd They inn-nr-cte

(a) The provision rof hb+ter traffic signals and thelr efficient use and a better utilization of existing facilities through improved traf- fi manaem.e nt+ and n measunt1P+res, suc1h asq rarkring and1 +t11riinbe in the central area, one-way and reversible flows, and bus and jeepney lanes. Th.ese im,.provem.ents would retly increase effe+tive road capacity and facilitate vehicular movements. Other improvement measures include clear rm ngsr, st+riiping, traffic signs, and bee++r regula+ion of pedest+ri4an crossings at specified intersections under appropriately signalled con- 4 diti--A4-4U..,.,ons. .-f-reover,V bietterl-,v44. dri-verAr n educationaA,i-- -rA and-1 improvedJ .-. -A traffic,nf~ coal'-.s - 38 -

enforcement should not be overlooked. At present, proposals are being received by the DPH in consultation with PPDO for a one-year study by outside consultants to identify bottleneck areas and outline types of necessary traffic control equipment and pedestrian overpasses in the entire metropolitan area. Completion of this study is an urgent priority. This study is expected to recommend an implementation program of improved traffic management and control measures.

(b) The present policy of restricted entries for bus and jeepney business should be abandoned in favor of encouraging development of new capacity within the limits of profitable competition, and development of new routes commensurate with population growth and trip making. Jeepneys and buses in metropolitan Manila provide a variety and frequency of services seldom found in other cities and do so at no direct capital or recurrent cost to the Government. Currently, according to an estimate by the PPDO, there is a shortage of 480 buses to accommodate the present level of traffic. For the next five years, pro.jected population increases for metropolitan Manila would require an additional demand for a 5% annual fleet expansion. This means a requirement for about 150 new buses and 750 new jeepneys per year during the next five years. If private bus and .jeepney operators are provided with easier entry, credit facilities and financial concessions accorded to MTC, such as exemptions from import duties and foreign exchange restrictions on imported spare parts, and BOT fees, they will be encouraged to invest in fleet expansion and rehabilitation to provide a higher level of service. The IBRD is considering a loan for a line of credit for bus and jeepney rolling stock (as well as traffic management, traffic signalling equipment and minor intersection improvements) as part of the first urban nroiect in the Philinnines.

(iii) Priority Program for Transport Infrastructure

Certain streets in Manila. Avenida Rizal and Taft Avenue. for example, are as congested as many central city streets in Western countries which are building TALht Rapid Transit Svstems at large nublic cost (e.g., Canada and Germany). Therefore, in addition to the improvement of traffiG management and exnanded bus and eepnnev onerations, a program of road expansion and intersection improvements is necessary to sunpplement the improvement measures discussed in the nrevinus seetionn Of course, fiscal constraints are more acute in metropolitan Manila. Nevertheless, an estimated P 131 million (US$22.3 million) would have to be allocated for the construction of three grade-separated inter- chaes,ra oand complete circumferenta and :raial roads 1 / The transport investment program should include minor intersection improvements throghout th6e reropolita+ " nare 'hril manJA or bottl.'-en ecks"' ex ist. Giv-en

-I /Th 61I,e breakdoLin, of the C09t iS no follos: P 70. 0M41..illo local cost

..L~ . C i ! CXrCC.JY C). LLC L JLJI L- 4.1-- -L . &4.TJ.,S Ij /* IU.L4L'JA _LLJ.0.. LCL and US$3.62 million foreign exchange cost for the construction of three grade-separated interchanges on C 4 A and P A60 million for the total cost of R 10, C 2 and C 3. - 39 -

the difficulty associated with acquisition of rights-of-way in the city, the time required for detailed engineering, and limited financial resources, it will not be feasible to implement more than this minimum program in the next five years.

(iv) Long-Term Planning: Coordination of Transport and Land Use

Transport is clearly a matter of great importance not only for the present functioning of metropolitan Manila but also because of its effect on future growth patterns. Any hope of coping with existing and future problems appears to lie in a two-fold approach. On the one hand, a concerted effort should be made to increase the capacity of the existing facilities and build a viable public transportation system, including some form of rapid transit, along with effective management and regulatory procedures as discussed above. However, it is equally important to plan for long-term transport requirements which mav have to be some form of rapid transit. In order to determine its type, required costs and timing, a thorough analysis should be made of all nossible alternatives to arrive at maximum benefit solutions. In arriving at transnort investment decisions and nrograms to reduce congestion and tE 2G- commodate growing volumes of traffic, a plan of action must be developed to deal with the underlying factors that generate it. Frperience elsewhere suggests that excessive population density in a rapidly expanding urban area characterized by the separation of housing facilities from employment centers will result in severe congestion no matter how large the supply of transit (Tokyto and Madrid) or how efficient the street systems (large U.S. cities and Caracas) are.

Effort should be made to combine transport planning with other urbar1 programs . P sar needed fr s arannts dsigne to minimize transport requirements and to provide transport to assist in the creation of combined new population-industrial1 enters notfsidre the concentrated areas. The location, design and redesign of streets and other transport infrastrutu can-re holp h-bring abo new usesof n Inda create new sites for housing, shopping, and industry, and enhance the appearance o-P the cit. T'he Philfp4nes, musta fowmul3t oan spatial strategy for metropolitan Manila as well as other secondary cen- +-era where ,more p i- s exist+nov to i-n fluence the- Anmderan ,, movement Once such strategies are formulated, a host of required fiscal and regu- 1 4 1 +O -n nol 4 o, -na,-f- -vA n.nr -4 m-m cm. nnr.-4. 1 .4 m-s4-4.,4-.A l.atoy policy- .easure and J.pl5)AI!5)U ,ech.anL iIoIU bewu -I L.titut ed. to tarry out desired programs. This planning complex can only be for-

-11"lated!ILa. AO.) a-nd LLA Jli.Jt,it1-1e,sne LO.. overVv;).L a- 4.relativelyO..0LI.LVO±3' _LLJIAIon FjJ0--- io.JAJV'4. ofU) 4tUl. 11441. MT---ll; U'VGov- - ernment has recognized this need to assure a rational transport frame- wo-r- for th-e "I-t-ure, n has co-tracted-- outside- t 4osu undertak-o ~L'±f.,.L5JJ 1111 -Lul _ andIS. ADk'.-I LAUL .. 1 -., U UQ. 1O.LUt; %.ASIAOULUL011IAUO UV0 UIIUUU KrLjd.I a one-year study to determine long-term transport requirements for metro- .;LLUCILJtadn ±iLL aLnU LUIliUidu lI0 a 11±cl0± stra'td%egy WhcILh Will ILirLLLUILiz tranL- nort needs 1/.

I/ This study is par-, of the IBRD urban project involving slum upgrading, sites and service; , environ-iiental sanitation, health and nutrition, traffic management, and a line of credit for buses and jeepneys. - 40 -

CHAPTER V: TRANSPORT ORGANIZATION: PLANNING AND COORDINATION

The discussions in the preceding chapters make it clear that if an effective transport system were to be provided at a least cost, policies and actions with respect to any one method of transport will need to be weighed with appropriate consideration of alternatives and relationships to other transport modes. Transport problems must be examined in the context of a total integrated system to arrive at investment decisions that avoid unnecessary duplication of facilities and services and adopt the most suitable technology for the tasks to be accomplished. That this task has not been carried out effectively in the Philippines has been in part due to the absence of an authority to oversee the planning work of the modal agencies and coordinate their operational policies.

In the absence of such a central authority, the planning activities have been mainly concerned with project identification, feasibility studies, detailed engineering and project implementation, independently undertaken by a multitude of transport agencies. The eleva- tion in 1974 of the Bureau of Public Highways of the Department of Public WVorks, Transport and Communications to a department level, i.e., the De- partment of Public Highways, has further fragmented national transportation planning responsibilities. The presently divided two separate en- tities, i.e., DPWTC and DPH, have tended to offer conflicting advice and pursue inconsistent policies and project implementation.

Regulation of transport activities, such as tariff setting, licensing, taxation and subsidization, is carried out by individual operating agencies on an ad hoc basis without coherent guidance from a central authority. To make the operation of transDort modes more efficient and complementary to each other, a strong central authority is necessary to provide clear-cut transport policy objectives within which well-timed priority investments can be planned and implemented and coordinated regulatorv measures can be formulated.

In recovnition of the need to integrate transnort nlanning responsibilities, an Inter-Agency Technical Committee on Transport Planning (TATCTP) under the National REonomic and nevelopment Authoritv (NEDA) was established in December 1974 by a Presidential directive. This Gnmmittee has made a start on providing some coordination of the planning effort; it has identified a number of planning studies that need to he earried ont and has assigned resnonsibili tv for iindertakina these studies to a number of different groups concerned with transport planning, constructio.n and operansJq 1/. The Committeej within the short period of one year, has provided a valuable link among transport agencies and a

1/ The major studies and activities of the IATCTP include: (1) National T-4--- M-A- 9Tran9port Zu4A-. (2) R-al Tra Sv .spor. for 4he Bicol Region and Samar-Leyte. (3) Metropolitan Manila Traffic Manage- ment and Transport "StuAdy. 4 esblt tde o Selected Pr-4 ority Airports. (5)Feasibility Studies for Principal Seaports. (6) Formulation of a Transport Policy Code. - 41 -

forum for discussion of important transport-related issues. Despite its well-represented membership, however, the Committee by its nature is not a full-time operating unit. The major factors that affect the effectiveness of the Committee are:

(a) It is not supported by a Secretariat which provides technical expertise and undertakes detailed analysis required to formulate a comprehensive transport investment program in tandem with management and operational improvements in the transport industry.

(b) The Committee composed of the planning bureau heads of the line agencies has not been given the authority to make final decisions in case of conflicts, arbitrate disputed issues when they arise, and adjust the direction of, or priorities in, the development budgets for the Philippine transport system.

(c) The Committee's technical support is supplied by the Planning and Project Development Office (PPDO) in the DPWTC which, under the present organizational set-up, does not have a strong influence on the decisions of the line agencies.

(d) It has little control over the regulatory powers vested in diverse authorities, i.e., the Board of Transport, the Philippine National Railways, the Metropolitan Transit Corporation, and the Maritime Industry Authority. Hence, it is difficult to consider measures to ensure fair and effective inter-modal competition.

While the Committee suffers from various limitations due to its nature, the expectations from the Cormmittee appear to be too great, i.e., many ills of transport planning can be taken care of by the actions of the Committee. There is no doubt that the Committee could continue to play an important role in bringing together the diverse views and interests of transport agencies with those of NEDA. Nevertheless, actual transport planning will have to continue to be the responsibility of the line agencies. Therefore, the mission believes that there is a need to establish a central transport planning agency with the power to:

(a) Coordinate the policies and operations of the linn ancies and the authoritv to nrovidR nolinv guidance, inter-modal planning, and industry relgula ti on

(h) diptde dIsqnwEd ; wi.is nmnng the. vnri niq trnns- port agencies on investment and operational nlanning;

(d) suggest to the Development budget Coordinating Committee (DBCC) 1/ the extent of the allocation of funds to eacn mode; and

(e) act as an umbrella organization for the Boards and Authorities concerned with transport which are at present variously located in the Presidentis Office, in the DPWTC, and the Department of Tourism. Such an agency must have a full-time staff with experience in the analysis and planning of transport systems.

The mission discussed two alternative forms of organization for such an agency with the Government. They are:

1. A Transport Council established under the aegis of NEDA, with a higher level representation than the present Committee; or

2. a separate Department of Transportation.

Since this discussion, the mission learned that the Government is considering establishment of a Department of Transportation (DOT), which was the alternative preferred by the mission. Also, consideration, it is understood, is being given to the possibility of grouping all public work functions, including construction and maintenance of highways, under another department. These arrangements, which the mission under- stands are a part of the general reorganization plan of the Government, are consistent with the mission's second alternative suggestion. Since the mission considered the idea of establishing a high-level Transport Council only as a second best solution which may be implemented if the Government wished to avoid a major reorganization of its structure, the mission endorses without reservation the Government's move to establish a DOr.

It appears that the logical move to implement this plan would be to consolidate the functions of the Bureau of Public Works of the DPWTC and those of the DPH in one department which may be called the Department of Public Works and Highways (DPWH). Under this arrangement, the DPWH would be Drimarilv an eneineering and construction agencv of the Government. At the same time, the remaining transport functions of the existing DPWTC. i.e.. minus the nublic works responsibility, should be entrusted to the Department of Transportation which is the central agency res6onsible for nolicv formulation, regulatory coordination and investment planning for transportation. In order to clarify what these arrangements would entail in their implementation. it would be useful to discuss in soime detail the functions and responsibilities of the two departments.

1/ Development Budget Coordinating Committee is the mechanism used by the Governmpent for allocatning budget fundil- Tt. currentlv has no secretariat, drawing on the contributing agencies such as NEDA and the BLd,-et Comm.icsinn fonr adivice. - 43 -

First, the DOT, as the central planning and regulatory agency on transport matters, should, among other things, include the functions of the existing agencies for planning and regulation, i.e., those of the Planning and Project Development Office and the Board of Transport.- Since, as we suggested in earlier chapters, investment planning and operational regulation are a part and parcel of transport policy, coordination of the two functions cannot be separated but should be assigned to one agency.

Second, investment planning by the DOT does not mean that the operating agencies, including DPWH, have no role in planning; on the contrary, the planning capability of these operating agencies should be strengthened. Since the planning by DOT is mainly aimed at coordination of the investment proposals of individual operating agencies, no meaningful planning at the DOT is possible without detailed work by these operating agencies. Planning cannot be done at one level in the govern- mental structure; it is a continuous process from the local agency level to the central planning office of the Government. Thus, for example, in the case of highways, data collection and estimates of traffic demand should begin at the level of distric-t engineers. The Planning Division of the DPWH in Manila should then decide the highway investment priority for the country as a whole. The program prepared by the DPWH Planning Division should then be reviewed by the DOT taking a wider view of overall transport development. Finally, the DOT plan would have to be reviewed by the NEDA taking into consideration the inter-sectoral implica- tions of transport investment plans. Needless to say, the scenario de- picted here is not to suggest that planning is a one-way street, i.e., bottom to top. In order to be effective and meaningful, planning must be a continuous two-way operation, that is, the upward referral of detailed planning initiated at the district level, and issuance of guidelines by the DOT to operating agencies and their local branches.

Third, while the civil engineering function for construction should be concentrated in the proposed DPWH, the responsibility for agency level planning should lie with each operating agency. For ex- ainple, for ports, proposals for port construction and expansion should come from the PPA. while the actual construction may be done by either contractors or the DPWH force. Such an assignment of planning respon- sibilitv to operating agencies is important because the agencies responsible for the operation of transport facilities are in the best position to determine the need for invest.ment. Giving the nlanning responsibility to the agency whose specialty is in civil construction is an undesirable nractice because f'reouentlv the concern of such an agency is the engineering perfection at the expense of the goal of economic efficiencv- Tn this regard- it is also imnortant to ensure that-,the highway planning staff in the DPWHrmaintain sufficient in- dependence from the construction hranch ofe the T)epartment ot-her than to :>ieive cooperation in preparing realistic cost estimates and designs.

Fourth, the responsibility for maintenance should be given tc operating agencies as this day-to-day function cannot be farnmed out to another agency with:ut undesirable effects on operating efficiency. 1:.''. oe t15Qhe Aopra t - r. t a ragencies should be abole to ount+ on t.he as- - 44 -

sistance of the DPWH on major maintenance problems or maintenance of facilities in isolated areas, such as small ports in outlying islands. but the initiative for such cooperation should always come from the operating agencies because otherwise the division of responsibility becomes blurred with the result that maintenance needs may not be adequately attended to.

Fifth, a successful operation of the DOT depends on improving the capabilities of the operating agencies since, as a coordinating body, the DOT can only be effective if the operating agencies are cap- able of improving the technical efficiency of transport modes and of preparing sound investment proposals. This means the need for strengthening the staff of these agencies and carrying out the Government's plans for the establishment of autonomous operating agencies, such as the PPA. This also means that the PNR, MARINA, as well as PPA, which are presently under the control of the President's Office, should be put under the supervision of the DOT.

Sixth, the existing Inter-Agency Technical Committee for Transport Planning under the NEDA may continue to function as a forum for exchange of views and ideas by various Government agencies and transport interests as an aid to the central planning efforts of the DOT. ANNEX A Page_ 1 o f' -1

TRANSPORT PLANNING

IN THE PHILIPPINES

Descriptive Tnfor-mation ona Transport Sector

I. Transport in the Economy

Achievement of the Philippines' development goals will depend on the availability of efficient transport services. This requires adequate facilities, including infrastructure, to move growing volumes of traffic that accompany an expanding economy and increasing population. Continued growth in industrial output will require the capacity to de- liver textiles, lumber, chemicals) cement, and other raw materials where and when they are needed. The big push in agricultural production is possible only if fertilizers, seeds, sprays, and other inputs can be de- livered at the right time, and if surplus produce can be transported to consuming centers. Costs of production and the competitive position of Philippine exports will be affected by the efficiency of transport services.

The primary means of goods and passenger transport in the Philippines are road and inter-island shipping, with both civil aviation and railways performing a secondary role. Although no systematic data have been collected and analyzed to indicate traffic growth rates since the 1969-70 Transport Survey, the available, fragmentary data suggest that the past traffic growth rate has been higher than the GNP growth (5.6% in the 1960's) and has been of the order of 7 to 10% p.a. Road transport is the dominant mode within the two major islands (Luzon and Mindanao) and probably accounts for nearly 60% of total freight movement, and for over 80% of passenger traffic 1/. Inter-island and coastal shipping is the second largest transport mode, estimated to account for nearly 40% of freight traffic, but less than 8% of passenger movement. Railroads at present are of marginal importance, carrying only a small fraction of total traffic. Domestic aviation is developing rapidly, mainly serving passenger traffic.

The major effort to expand transport capacity commenced with the undertaking of the UNDP-financed Philippine Transport Survey (PTS) of 1969-70 with IBRD as executing agency which provided the basis for the country's transport development program for the 1970's. Between 1962 and 1975, the transport sector received about half the total public capital formation although it represented barely 1% of GNP per year. The major focus of the transport program has been on the trunk road system, accounting for 80% of the total transport investment. In the past two years, ports and secondary roads have begun to receive foreign loans.

1/ These estimates were last made in the 1969-70 Transport Surrey: AThT'Y A Page 2 of 18

De sp 4te -th1,ese recent effo~rts, th-e qualy of,exitn trans-4- port facilities is still low, and available capacity wholly inadequate toJ cope wUL planned dev lo 4en .t1sksthe I .. kJJJ.LL4A3, the usual problems of transport faced by most countries are compounded by the insu-la chaaceInar CvetGe of the coutr the pouato of4 r..lion-1 .JJ~U.a.jL,IQ4 c~IJ ~ -J4 14LI1 ',4AJ1A.41 4JY UYIAVA. 14l1U k FIJALM.LO 14.UA VL. ~Vu L4V. 1I LL.L.LiUuI inhabit seven thousand islands spread out over 300,000 km of the Pacific

Ocean. T hL'.is means th±.atk 4 the L-UUtc O un r1 y Is d or,,es .Le tradeA LreqLu.res, .JA aUUi- tion to land transport infrastructure, many ports and ferries and complex nety-workAs of shippirig andu air turarnsportu services. Tirarnspor-u Witsh Philippines therefore has the triple task of: (1) providing an efficient c mumea ic a tIi on s niet;-woU-rLk w-wth ir the mlatj V 4rU Ueter of0 economUQlc actUl vit y, (2) linking these centers together, and (3) bringing the isolated outlying islands intI the orbit of development activities.

II. The Highway System and Road Transport

(i) The Network

The present road network in tne Pniiippines extends some 80,000 km, of which about 80% is of low quality earth and gravel, while asphalt surfacing covers approximately 15% and concrete surfacing tne remaining 4%. Available data show that between 1969 and 1974, the Philippines added over 8,u500 Km of new earth roads and paved over 4,000 km with asphalt and concrete and 3,000 km with gravel. The system growth between 1960 and 1972 has been at an average annual rate of 6.3%. The most important artery is the soon-to-be completed 2,000 km Pan-Philippine Highway which extends from Aparri in Northern Luzon to Davao in Southern Mindanao, including two inter-island crossings served by ferries.

Roads are generally built along the coasts or through valleys to avoid the numerous mountain ranges. In the mountain provinces, the main road arteries are often narrow, treacherous and winding, thus increasing travel distances. A large portion of earth and macadam sur- facings deteriorate rapidly during the rainy seasons. Road building and maintenance under these conditions, especially in the typhoon belt, constitute a heavy drain on scarce development resources 1/. These unsatisfactory trunk roads for motorized vehicles do not reach the majority of rural barrios. In 1972, only about an estimated 50-60% of over 33,000 barrios had access to gravel and dirt roads. Farmers from the hinterland had no alternatives but to walk foot trails half a day or more before reaching a second class road or an initial market. The time, energy, and cost of moving produce to motor transport terminals is a major discourage- ment to production of cash crops.

(ii) Road Conveyances

Between 1968 and 1973, the total registered vehicle fleet in the nation increased from 388,000 to 570,000, or 8.6% p.a., and the increase in gasoline consumption during the same period was estimated at 10% p.a. The motorization rate is relatively high with one vehicle per

1/ It would cost about US$200,000 per km for roads with 6.1 meter width and asphalt surface in the normal terrain. A TAThWY A Page 3 of 18

70ihbtts- 1973, co.ared *,-ith 12On - Thail and -an 2rl ora 7I ¼~J,±1AO J.J. UO tsLJ -.4 .I./ I J,, co p - VJ.. .4.L... -L LOJa A.A AA.'.. C¶' ..L I.. . VJVfLt0 .. However, geographic distribution of motor vehicles is highly uneven, -44t, Tuo accunin for80 (where E534 of the popula-t-on res-ldes)~and UY.± UUI Ai.J "VUIA 0."..A'VUJ.& U.LJJA.L 'SJ '.."Jj 1V k-~ ~J .~ .SJ/ Ui4 jLAJ .LaU .L'J.. 00.L.Auo I 0.tJ'S Mindanao only 10% of the total vehicles (comprising 21% of the population). III-LS siLua±UlnLVLA U1UCXUcrae 01 Lanintenely1V J LU,I1PUL.LVKV rIoad UI0.LJQJ1.s u 111tr,.et L Luzon which results in generally lower rates while the scarcity of good roads and hauling facilities in Minludanao and the Visayas gives rise to higher rates.

In the inadequately serviced rural areas, shipments of produce are initially by animal or human power (carabao-drawn sieds and head loads), then by wheeled cart, and finally by motorized transport ranging from trishaw, jeepney, buses to various sizes oI trucks. In these reia- tively inaccessible areas, purchases of inputs such as fertilizer, in- secticides and seed may be uneconomical because of high transport costs and marketing of output is difficult.

(iii) Highway Traffic and Vehicle Fleet

The composition or the volume of highway traffic is not analyzed on a regular basis. Traffic counts, previously made twice a year by DPH for all national highways, have, with some exceptions, been discontinued since 1970-71 while the proced:-res were being amended. Therefore, annual traffic growth in recent years on the trunk road system cannot be accurately ascertained. However, judging from the increases in the nation's motor vehicle fleet and the volume of gasoline consumption attributable to road transport, traffic growth has been substantial. Between 1968 and 1973, the total registered vehicle fleet in the nation increased from 388,000 to 570,000, or 8.6% p.a., and the increase in gasoline consumption during the same period was estimated at 10% p.a.

In 1973, the fleet was composed of 56% cars and other light vehicles, 24% trucks, 17% jeepneys and only 3% buses. Of the total, about 80% were registered in Luzon (or about half the total in metropolitan Manila), 10% in Mindanao, and the remaining in the other islands. The motorization rate is relatively high with one vehicle per 70 inhabitants in 1973, compared with 120 in Thailand and 206 in Korea.

(iv) Allocation of the Highway Special Fund (HSF)

Prior to 1972, 89% of the HSF income was allocated equally between maintenance and construction with the remainder set aside for administrative and miscellaneous expenses. The amounts available for miaintenance and construction were then allocated to each congressional district, chartered city and municipality, according to the established crit,eria. The criteria were not related to a technical evaluation of needs, either in terms of length and type of highways or the implementation capacity of local governments. The system resulted in under- allocation of funds to some areas and over-allocation for others.

The revised allocation system prior to the abolition of HSF in July 1975 was designed to give priority for maintenance (82% HSF) and t'o allocate funds based on technical requirements, i.e., totals ANNEX A Pag-64 V - . of4r' 11J of Equivalent Maintenance Kilometer (EMK) which are actual highway lengths.mul tpl4ed by correct.Lion fa.ctors for rad suA.L.rfacL widtLUh andU type, average daily traffic volume and length of bridges. The basic ct Lf ruahun tednance Lur each ajVil% ofL nadtionalh isYLId)-g.hw LO r 4,50U0. dU- justments to this basic cost were to be made annually on a region-by- reg-on basis * Tn order to obta n Punds, each district and city was required to present a maintenance program. Releases of maintenance funds were tuobUe made on'ly if 'loca l counterpart Dunds of 1lVV forE ciClty roads and 200% for provincial roads were available.

III. The Railways

(i) Network and Physical Facilities

There are two railway networks in the Philippines: The Philippine National Railways (PNR) and the Philippine Railroad Company (PRC). The PRC plays an insignificant role, having only about 117 km of antiquated track on the islands of Panay to serve sugar and passenger traffic. The PNR network, which totals about 738 km of main line and 321 km of branch lines and sidings, is a single-track (meter gauge) system. Most of the PNR branch lines and sidings are currently closed to traffic, and some are totally abandoned. Currently, only two main lines are in operation; one on the north between Manila-San Fernando, La Union (226 km) and the other in the south between Manila-Legaspi City (474 km). About 38 km in and near Manila serve the growing commuter traffic. This system, first started 83 years ago, serves four regions - Bicol, Southern Tagalog, Central Luzon and Ilocos, with a population of 14 million out of total 20 million in Luzon.

During the 1960's about 760 km of PNR's track was relaid with financing from reparation payments by the Japanese Government. The remainder of the track has not been rehabilitated since World War II. Even with the recent improvements, the track conditions are very bad. The track is worn, distorted and seriously over-stressed. Over one third of the sleepers are unserviceable. Stone ballast is grossly deficient, numerous bridges (over 700) are 50-70 years old. As a result of these deficiencies, there are frequent derailments despite the low train speeds, making travel unsafe.

(ii) Passenger Traffic

Passenger traffic accounts for 80% of total train/km and earns ap equal proportion of PNR revenues. In 1963, the PNR carried 11 million passengers (977 million pass./km) but this figure had fallen to about 5 million during the 1968-73 period due to a combination of road competition and a reduction of rail services stemming from deteriorated facilities. Since the acquisition of new rolling stock and the rehabilitation of rail cars under the Rehabilitation Program, traffic increased for the first time in 10 years to 7.1 million journeys in 1973 and an estimated 8 million in 1975. The greatest part of this increase has been accounted fnr bv the growing short-distance commuter traffic (average travel distance 15 km) in the Greater Manila area. More than half (60%) the total PNR traffic is carried on the Southern Line. ANNEX A P.a ge nof IA

(iii) Freight Traffic

Freight traffic comprises less than 20% of total train/km 4 1074. T- 1 OA +h-e ii- i' -" "A nom +4 n-a-,4- , f'4 cTar a 1 16 million tons. By 1969, this figure had fallen to 0.62 million tons 4 -nd by 1073, o ,,a 0.27l U114n +-ns. Th.4i downward trend was reversed ~A-, I Yt J .4, _I.J AU------.I. ~l*L_ -,j..4~%. * - _J. a., i..n a a .4CA - .aL . in 1974 when 0.45 million tons were carried or, on the average, only I 0 IA 4- ..4 4%; 1,A-4+ .r .. aan~+,~a~vra1tccUN~'I. ,.' ~ ., .-J C -U'ns^ ofUPfre.1 Ag.. peJ. day. The cuses of the severe losesesa -e .5it traffic during the last 10 years are the same as those which lost passenger traffic UV P?vTf..loreover, PlNP has 6 ep iy lo pasenger traffic; such locomotives as have been available have been allotted to passenger trains, with a few -^ggagea carsatch for epress freight and little or no effort has been made, until this year, to pro- d The- graea-r ml------A -- vJUJtde .UgUre -eu'lar~ an'du epenalfreihU'ra" U.U -services__. L.L-i±gL6w Ul.a.L±IJ 0t41VLUVZi* lilt: gl'tfaUll'da ability of locomotives in 1975 should increase PNR capacity to carry freight traffic.

PNR Traffic, mye9-74 Passengers Year Commuter Others Freight Express k uuu) (uuu0 iw'00uu Tons) i20uu Tons)

1958-59 - 9,226 1,153 56 1959-60 - 9,442 1,284 61 1960-61 - 10,271 1,206 61 1961-62 - 11,005 1,149 65 1962-63 - 11,020 1,091 69 1963-64 - 11,039 1,093 75 1964-65 - 8,235 889 61 1965-66 - 8,580 749 63 1966-67 - 5,851 654 66 1967-68 - 5,602 620 58 1968-69 - 5,887 564 62 1969-70 - 6,052 441 77 1970-71 - 5,133 351 64 1971-72 - 4,478 286 67 1972-73 1,266 3,755 196 80 1973-74 2,672 c4,451 347 102

PNR Traffic Units FY59-74 (Pass./Km or Ton/Km)

..Passengers Year Commuter Others Frei ht Express Tmn.) (mn.) -Tm-n-7mn.]

1958-59 - 743 177 16 1959-60 - 793 194 18 1960-61 - 867 195 18 1961-62 - 940 186 19 1962-63 - 957 173 20

(continued) R )Ji'.414A A Page 6 of 18

(continued) Passengers Year Commuter Others Freight Express (mn.) (mn.) (mn.) Fmn.)

1963-64 977 175 22 1964-65 867 148 18 1965 -66 - 933 131 18 1966-67 - 809 108 19 1967-68 - 828 105 19 1968-69 - 749 105 19 1969-70 794 72 26 1970-71 718 59 25 1971-72 - 692 67 27 1972-73 32 a/ 726 37 32 1973-74 67 a! 932 72 36

a/ Estimated on the basis of' 25 km average commuter journey.

However. excent for siding to sidinrg traffic and lmunorofit2blet biulk traffic such as sugar cane, it will be difficult to win back the traf'- fin lost. tn road tran.spnort. nan'tinularlv as the nresent, PNRIs average haul of 200 km is vulnerable co road competition. A quick build-up in rail freight trnffic does not seem nnronhhle (i;r) F>rpq qnd R_q*.P..q \ -_* I ______

Tn the -ast+three years +.here have hben twoAjNincreas3qsQ in fares and rates which had remained the same for many years. These increases did not have an adverse effect on traffic growth. The +triffT QtrMiuro is based on a zonal system, with three classes of passenger travel (econor.y, tourist, and deluxe), and nine classes of' freight plu9 excep- tional rates. The PNR economy class fares (80% of total travel) are sig4vhtlyr l r tha-'honbus c,htca onh fPreih+ ra f-ar nra ubontio1 1 ler,. than truck charges. Road rates would allow generous ceilings for railway price com,.petition if PNP. can provide adequate se.vices.

117Care3 and' rates are not- detoImdined buy reference I-^- cost3 wLIJChh are not accurately known at present. A systematic collection of statistics i9 n eededU I) uet,MHAJne rail-dwa.y lierating cJ.JJosts.I whiOLchI willJ serve as thIe basis for pricing policy and investment decisions.

Timely adjustments of fares and rates will be required in view of increasing fuei and other costs. infoniation onIcosta is also im- portent to help the Government determine the relative merits of PNR vis- a-vis other modes of transport in formulating a national transport' policy.

(v) Financiai PerQormance

PNR has a long hiatory of heavy deficit operation (and since 1961 cumulative arrears of' maintenance and a reduction in services to the AEX9y A Page 7 of 18

pu,blc to abu 30 trn a rda.r A rdecl.4ne -in ati- s l-e to a 'decline in traffic and revenues, which in turn led to a further decline 4 J4 ma4Lnt en=&4CV {a 'AAf -0U vCLk S . T_ - _ n4-*--4- 4- _1-- 1 -+ o P 4-, - - . ._- Lii li JL L ULAU 111 U UV1I.V Wo VU V 1V4 L ULII V;>;U±UUO cycle of financial deficits, underinvestment and declining services-, tie rJV ernment.passedA an Act-in 1L7 g1 I absLorb PNriMfs indUettedUnJe, to provide working capital and to make funds available for a rehabilitation and modernization program. The obJective is to mVake PNR finmancialy viable by 1975 and self-supporting thereafter. As a result of improved ser-vices r,aue possbleU±L thugh-ULA 'he ft-habLltUcU_LVi rPLnI, ±71'-(.D, traffic increased. This was accompanied by increasing fares and containing operating costs.

inese facucors enabieu a financiai recovery i' iY94 wnen an operating deficit of P 17.5 million in 1972 was turned into an operating surplus of P 6.5 million in 1974. An operating ratio of 157 in 1972 was reduced to 98 in 1974. However, this recovery does not mean that PNR is firmly launched on the road to long-term financial viability. A longer period than one year is needed to determine whether this performance can be sustained. Analysis of the income account figures gives rise to doubts about:

(i) PNR's ability to win back substantially more freight traffic which has been allowed to decline sharply for many years;

(ii) PNR's ability to contain staff costs, particularly increases in wages required to meet inflation; and

(iii) PNR's ability to offset increases in costs by timely and matching increases in charges.

The cash flow projections given in the table on next page, prepared by PNR, postulate only certain fixed percentage increases in revenues and expenses.

These percentage increases are not related to any through going traffic estimates nor are they translated to locomotives and train miles to determine investment requirements. Since the assumptions for cash flow projections are unclear, it is difficult to determine financial viability unless continued Government capital investment is forthcoming.

The latest published balance sheet shows that the greater part of the capital investment is Government equity and PNR is making no interest payments on that equity. PNR's turnover ratio (gross operating revenue as a percentage of average net fixed assets) was 11% in 1972. Sucht'a low figure points to under-utilization of assets 1/ and/or too low a level of charges. Bank experience shows that a ra lway is unlikely to operate profitably if its turnover ratio is less than 25'.

1/ Asset values will be overstated to the extent that they are not net of full depreciation. ANNEX A

Ina geZ3 UQ U-Lof ±LJ-18

PNR Income Account l/ (In Million - - All Years FY Ending June 30) Estimated Forecast 1969 1970 1971 1972 1973 1974 1975

Revenue

Operating Income 38.28 38.08 38.47 36.95 38.95 57.20 66.00 Non-Op. Income 4.47 1.97 1.00 6.75 2.51 3.50 6.00

Total 42.75 4O.05 39.47 43.70 41.46 60.70 72.00

Expenses

Operating Costs 40.35 41.23 46.72 51.15 39.30 45.20 54.00 Depreciation 2.84 2.70 3.76 3.34 4.40 5.50 6.50

Total 43.19 43.93 50.48 54.49 43.70 50.70 60.50

Net Operating Revenue (Deficit) (4.91) (5.85) (12.01) (17.54) (4.75) 6.50 5.50

Net Revenue, including Non-Op. Income (0.44) (3.88) (11.01) (10.79) (2.20) 10.00 11.50 Deficit

Operating Ratio* 120 122 142 157 123 98 102

* The operating ratio has been calculated on the basis of doubling the depreciation provision in each vyar as shown in the tbhlp tn give a more realistic ratio.

1/ An income account forecast through 1979 would have been desirable.

Howevernoweerts PNR1P doeoes notl not .monanL e orc3s dataJaeutfo-r sm,ore -hanAe one year ahealLA an'a even these are not on an adequate data base. ANNEX A Page9 of 18

PNR Revenue, FY59-74 (P '000)

Passenger Passenger as Percent Year Commuter Others Freight Express of Total

1958-59 _ 12,763 7,435 2,189 57.0 1959-60 - 13,486 8,077 2,398 56.3 1960-61 - 15.087 7,925 2,393 59.4 1961-62 - 16,825 7,463 2,547 62.7 1962-63 - 17.393 7,048 2,696 64.1 1963-64 - 18,394 7,121 2,942 64.6 1964-65 - 15,357 5,625 2,402 65.7 1965-66 - 16,915 14,7148 2,1457 70.1 1966-67 - 20.539 5,433 2.952 71.0 1967-68 - 21,670 6,025 2,863 70.9 1968-69 - 2L.873 5.673 2.955 7Li.2 1969-70 - 26,041 4,230 3,515 77.1 1970-71 - 27,233 4.167 3.176 78.8 1971-72 - 26,570 14,207 3,463 77.6 1972-7? )412 29i3514 2U727 4,.2412 81=0 1973-74 1,158 41,386 7,072 6,737 75.5

Tv Por+-A nnd Rhirni?na

( i ) %4r:eUnnnd

Wi+h the increa9ng eamphasis on regional specialization in production patterns and rural development, the need to improve hitherto neglected jn+-r_wis nrnd _h_ppingj including ferrv *_onnnecriAnn port and storage facilities, and land access in the hinterland of port terminals, has +t-kenan added importance. 'The efficient jnterisland and coas+nl transport facilities can help achieve the nation's development goals. where cross-island road construction is made difficult by mountainous 4 terrain rbe,- h-n+rlandAcs nar of'+en asemrved hii nnThroa aroads+eads a-n shallow water ports which have developed in the past where land access was severer.malyTl.ited. are so... atnanlA and.- A 390 munici-p1--- ports throughout the Philippine archipelago, plus numerous private piers and `wharves TheV lon-etalihe pulc ot hv enerall-y, been site dA with a view to natural protection and, in many cases, this has resulted i1n sed.UUViO LiaJ.VIA plemjsLvAU0. flUWeVe.L, tLhIe more r.odernI privaLtLVIU piAes A wharves, designed to handle the import or export of bulk commodities,

L 5 s __ _; _ ._ _ _1 _ _ 2A - - 41 4_ , - ' A -- _- .- _ . -' I A is generally a problem only during typhoons and many ports do not have Oreakwa- ur.- i-O9t of the public ports have no' been `lanned for moeri- cargo handling techniques and sheds are often lacking, though nearby private warehouses are usuaily avaiiaoie. iMny of these port areas ANNEX A P agev of 1 appear to be small, which is mainly caused by generally disorganized portu operation 0.Po'U facik,litie9L~ a2.re geneaK,lCZl_y poory m-n.1Uined3.L , andJ there is a lack of equipment.

Manila is much the largest general cargo port, accounting for about 7h0 of all imports and 5% of all exports. * ore than 50% o MlaniIa S cargo is loaded or unloaded by lighter, although more could be handled by use of quays. A distUnguishing feature for the PhilippiLes is tnat the bulk of exports and of imports are handled through private ports. The port statistics, collected by customs districts, are tnerefore mis- leading because the data do not indicate whether the exports are shipped out from a public port or not. Logs which represent about 40% of the export volume of principal exports are normally loaded offshore. In the remaining export trade, the sugar centrals, copra-crushing mills and mining plants each have built their individual piers equipped with conveyor belts and, in respect of the first two, pipelines for bulk shipments of liquid molasses and coconut oil. The pineapple and banana growers also have their own deep-water piers for the shipment of large consignments mainly to U.S. and Japan. In all these and similar private installations, constructed at a waterside site convenient to the rirm's works or storage area, the pier and cargo handling equipment has been built and installed by the comr any concerned as an integral part of their production line. As a result, the exports can be handled more efficiently and at a considerably lower cost than by use of public ports. The same applies to bulk inter-island shipping (cement, fuels). Petroleum firms have built piers with their oil storage tanks nearby, and the flour mills have built waterside premises and wharves equipped with suction plants for bulk discharge of grain from ship to site. This applies also to Manila where an estimated 60% of imports or some 6 million tons were unloaded at private piers owned by oil companies, steel and flour mills located alona Pasig River. As a total, some 18 million tons, or 70% of the total exports and imports in 1970, were not loaded or unloaded through public port facilities.

It is obviou,s that this is of central importance in evaluating the port improvement needs. In addition, there is no indication that this development trend will be reversed; the public ports handle cargo generated by the traditional sector of the economy, which shows a lower growith in economic activity, while the private ports handle cargo generated by the expanding sectors of the economy like mining and new manu- facturing and agricultural industries. Local development authorities, like that for Mariveles in Baitaan province, aim to develop their own supporting infrastructure facilities for well-programmed growth industries located within these areas. This trend will further affect the development possibilities of traditional public ports. There is an ur36ht need to assess in quantitative terms the future distribution of goods shipped between public, private and semi-private ports, even more so because this type of evaluation has never before been carried outs as was explicitly stressed in the Philippine Transport Survey (PTS) (Vol. I, p. 5). ANNEX A Page 11 of 18

Administration and control of the National Ports have been in the hands of the Bureau of Customs (BOC) while physical planning, -nn.Rtruilt.inn and maintAnaneA are the resnonsibilitv of the Rurean of Public Works (BPW). There has, in the past, been no administrative meehanism for coordinating the activities of BOO and RPW; with the result that port investments have often been unrelated to port needs, and required maintenance i9 neglected= A'frther proble-m has 'hpn the inadequacy of records in the OC, making it impossible to develop a sound data hbas for analyzing port and inter i tffic r m11-slnm by route and commodity breakdown. This created problems for evaluating port investmen+t foev,rt.he PIRS anri in the mTnnnr ni"rng pr feasib;'it studies. More recently (May 1975) an inter-agency port study group was set- up +, u'vAndertak at,wurve1,rtf +t,res and tilm.es ofP ,,om,-..odi- e moved among 38 ports. This study group is expected to organize the collecti-on of data on all aspects of port and shipping., n4-4 +- in= cluding commodity flows, and will provide needed economic analysis tu..ereop.UtL I I1IJ'WrVVJ.,Hoevr 4theUILAV~ 9vudyQVUU4Y V,Lgroup E. aAJ.Lshul .A L4A AULAJn'ot U focusJL4J%A on 4theLL kJUV.A..L%public portsJI . IJVP alone but expand its effort to set up a system for the orderly collec- t-ion andl processing of bDett eer t4-ig4-4cs 4or +"e at-rafi pivat piers and wharves in view of their important role in port operations and shipping.

vile UJ. Ijflt Iuuav, .UJUJVrId.L UtVULUYJliVI4U UULJJC L, VUO aIuJ±o0U .-LJ the PTS and included in the preparation of the 10-year port investment program 1971-80 was the im-rov-euent of l'an access to por I, p. 8). This is a serious problem only at Manila, however. Public ports in the Philippines are usually located aat population centers which generate some major transport demand by themselves. In no case does the traffic generated by the ports represent a major s'nare of the total traffic on the roads leading to such centers. In those few cases where there is a problem -- e.g., General SantOS -- Xremedial 9twp9 a re already under- way to improve and upgrade the existing main access roads. The reasons for small traffic volumes at most of the ports must be sought elsewhere, mainly in their sheer number and, in some cases, in their poor administration and accompanying low operating efficiency. As regards the private ports, access to the port has been planned as one integrated entity. (ii) Port Works Fund and Port Charges Port dues and cargo charges at national and private ports plus a percentage of the arrastre contractors' income are credited to the Port Works Fund. Also revenues from the rental of reclaimed land are collected by BOC and, after deduction of expenses incurred by OSCOPA, credited to this fund. The fund is also fed, on the basis of formulas established by BOC, by sharing the revenues of private arrastre operators (on share cargo handling companies) at Manila, Davao, Zamboanga, floilo and San Fernando (La Union). Revenue sharing formulas have not as yet been established at other ports. A Government company performs arrastre Page 12 of 18 services at Cebu. Municipal ports contribute nothing to the fund, since they are not manned by representatives of the BOC; but they frequently request and obtain disDursements from the fund for maintenance. A few municipal ports collect charges against users. The fees are retained by the municipalities. They are sometimes used for port maintenance.

Disbursements from the Port Works Special Fund have been administered by DPW, Division of Ports and Harbors. As stated, the staff and other administrative expenses of OSCOPA are paid from the fund. In addition, similar expenses of the Division of Ports and Harbors and the Division of Dredging and Reclamation are also so paid. The Philip- pine Coast Guard receives an allocation for the maintenance of lighthouses, buoys and other navigational aids. The balance is first used to pay service of debt incurred for port development and, thereafter, 50% of remaining funds may be used for port development, including dredging and major repairs, and 50% for maintenance.

Unfortunately, during the last four years, the resources of the funds available for port development and maintenance have not been fully released by the Bureau of Budget. During this period, unspent funds have accumulated to an amount of P 80 million or 23.5% of the total collected; even though ports generally have insufficient routine maintenance. Consequently, the fundrs surplus grew from P 15 million in 1972 to P 33 million in 1974, which was accrued for maintenance and construction. The Port Works Fund system has not been well conceived or applied. Facilities contributing nothing, such as the municipal ports, receive considerable sums for maintenance without justification, and large contFributors to the fund from dockage and wharfage fees, such as at private facilities, received little or nothing in return. Along with other special funds, the Port Works Special Fund was abolished as of July 1, 1975 by Decree No. 711. While the Decree was not specific as to the alternatives, discussions during the mission indicate that the funding of port operations, maintenance and administration will continue as in the past but through special accounts of the general treasury. It is intended, however, that the PPA will retain all its revenues from port services and be provided with a commercial accounting system when and as it becomes operational.

Aside from the level of port charges levied, the port tariff structure requires close scrutiny and restructuring. The present tariff structure embodies a large element of cross-subsidization from foreign trade traffic to domestic traffic as port charges are collected from from foreign trade vessels and on cargos assessed by the Customs only. No charge is collected at municipal ports while maintenance funds for these port^s are derived from the Port Works Special Fund to whi ch nort. charges collected from foreign trade traffic are credited. The current shipping tariffs are t.hnqp originally prescrAhed in 1928 to which "across-the-board" upward adjustments have been made over the years ith. no s+ruc+vurl adu11Qtment. EvevOthe structure of the original 1928 rates is open to question since it had no reasonable relationship to the o-.C n,r,r anr v~n ~o1ni+llW~ rn+oa! mnn_I + h'%4-+ losts and prvishr haulsn andr. to bot lample,an m unlshipte apys t long and short hauls and to both large and small shipments. kNNRFX A Page 13 of 18

PORT WORKS SPECIAL FUND ThcoME.lANDN 7XPnTrM-- = 17o/71-19Q73/7), (PESOS '000)

1Q70/71 9071/79 1072/73 1Q73/74 SOtrRCES OF INCOME 1. Wharlfage (TIports) .,A). 28163 1.1. i7 An60 .4 2. Wharfage (Exports) 15,552 14,049 23,775 23,325

3.. La.L (CDo. ,.L'esi / - - - 79 7 4. Premium on Wharfage - - _ 400 , er-th-g, .er Gh-arges ,6 U,3,266 13,09 6. Entrance and Clearance 307 1,542 1,704 2,001 7 Z 4- o rag e7 , n , ) 1 n lt'7 I * - L, t 7 IvU II IL,YJl 8. Arrastre Service 2,508 3,228 3,411 4,726 A -.. - o ff '3 7' £ -II -n A neI'7 Subtotal 56,885 58,701 125,987 In T- 2--I .3 T '1A er,O0nl I0. £Icoiwe-R"1.e±cldI11U e LiandUs 2u0 1,° 16

m... -. rI"N-, 4 rHO O^r^ 9 19 . 21 r-n 'UWC I U I,IJ pu,uyy yl(yyLz lOC)

1. Surveys, Plan Preparation 1,433 1,628 2,641 2,722 2. Operation and Maintenance 18,7914 18,852 30,0804 37,i7I4 3. Special Operations, Phil. Navy (Lighthouse Service) 200 250 300 383 4. GAO Service 7 8 8 8 5. Debt Service 13,573 15,789 15,500 16,421 6. Construction: National Ports 18,552 5,076 ,11,22 36,i17 Municipal Ports (Note 1) 9,916 1,814 919 571 Lighthouses 14 105 1 - Total Construction 28,669 6,995 12,042 36,688

Total Expenditures 62,669 43,522 60,575 93,396

Reduction of Balance 5,578 Addition to Balance 15,377 37,349 32,757

Note 1, This item is mostly if not all maintenance rather than construction

Source: Bureau of Customs A)fThrWY A Page 14 of 1l

The transport user charges and tariffs which differ from one mode to another result in subsidies and cross-subsidies, distort the competitive positin of transpot modes which could lead to Incrret investment decisions and often go counter to the Government's objective- of' region1al development and dispersal of industrie. e overnment should carry out a detailed review of user charges and tariff rates wit,h a vieir to aoptn4 a -4ore 4ratlonal4 rc4ngpliy__nso' W±1,i10 V±~ 1,0auU U.LA6~ Ck IlIJIU. 1 2U.LULICt-L U1.0IACJ0~JV±U J~J.L.LL-LIA J p V, L4'.;.Y

Tihe UdevelopIi-ent of e.'0 i1JiL-LeL1U ldJU _J.JUt-,.L JO±JU and coasal Utradn- port facilities is essential for continued growth of the economy and expansiLon of itus geographical spreadu. Ti[he nwierous public diJ prU-vd ports throughout the Philippine archipelago are served by an estimated 450 inter-island vessels of' over 100 gross tons and a much greater number of smaller ships. Small watercraft (bancas, batels and kumpits) play an important role In providing low-cost transport of small lots of agricultural products for short hauls to local as well as inter-island markets. In addition, barges are used extensively to rmove raw and refined sugar and sometimes on a "backload" basis for rice and other produce.

Despite its importance, the fuli potential oI inter-island and coastal shipping has not yet been realized. In part this has been due to inadequate port facilities for local shipping and the antiquated local shipping fleet. More than 34% of the inter-island fleet and 41% of the ocean-going fieet were 30 or more years old in 1974. Many of the active inter-island ships are converted World War II landing craft. In 1965, seven new cargo/passenger vessels, of 7,000 dwt each, were bought with aid from the Federal Republic of Germany for inter-island services. More recently, there were a few cargo vessels acquired through private financing (mainly PDCP) and some tankers have been financed by the private oil companies.

There are about 50 Philippine shipping companies, but the majority of the fleet is owned by only 10. These 10 companies are closely related to the operations of the private ports. While the numerous small shipping lines handle general cargo, the petroleum, mining, cement, sugar, flour, forestry-based and major agricultural industries have their own ships, which, together with the private ports, provide a complete transport service from production site to market. These ships are relatively new, are built for the particular commodities shipped, and can be considered to be as competitive as any efficient foreign operation. While accurate figures are not available, the Government estimates 1968 coastal movements to total 16 million tons. Inter-island passenger movements are mostly seaborrie; however, accurate figures are lacking.

Inter-island shipping rates, in the past determined by the Public Service Commission (PSC), are regulated by the Board of Trans- port. The cost structture of inter-island shipping is not known. ANNEX A Page 15 of 18

Therefore, it is not possible as yet to assess whether the tariffs bear any relation to the real costs; similarly, it is now known whether these tariffs are actually followed. It may be observed that a considerable part of the inter-island shipping is carried on by producers (cement. fuels) and middlemen (notablv rice). which do not account for any tariffs. The old PSC, and now the Board of Transport, also issues "certificates of nublic convenience npermittin" vepe.1s to onprate as common carriers, although there is no route licensing as such. The Thiresu of Customs is responsbilhe fnr reiistrat_onj licensin andn fatv inspection of vessels built or owned in the Philippines, and for licers- ing of mnrinn nffTicerqs The Philippnenn oasnt. gatnrd is resnrpnRih1a for administering loadline requirements, and for enforcement of provisions rcgardntina safatv ruiles for sqhipsq andr -regulnatins go rniry c-rew rrequirements.

VI. Airports and Civil Aviation

aw,= 7R rtawnmon+_.rsaT.s+oA n +;rna1a -4r_+ a one TlhereA ~~I v v_ *fl4_a v vy '-a,nA _*4_ % ___tzv ¼__ international airport at Manila which is served by 19 international and regional scheduled air carriers. Although sufficient in number and location, most of the airports are technically deficient and need modernization or expansion to cope W+vh the growth ofp a trafiv There are also 253 private airstrips owned by logging or mining corporations, plantations, or id4-ivduals, wh"h cater to general aviat'on.

iNine-teen in-turnational andu regiLonl-ai.lnec..zisopr1 regular scheduled services through or to Manila. In addition, Philip- pine Air Lines (PAL) operates within th±e Ph'ppinues andu iLl L.e ±onaliy through Southeast Asia, to North America, Australia and Europe, and the Iwo othL.L a rr.iers JJAirL J'UUInUcorportIedaiu U rVi±pL.pUas OriLeLnt niLlwdyu, which previously served domestic routes have been merged with PAL.

International and domestic passenger traffic has been increasing at average annAual rales of 12%aril 8pa rvely .n the past 10 years. Air freight traffic has been negligible due to high costs. The poten- tia.La fr cargo traffic -L _L.U1I.LU,eU .iA thet nJearJ fLUture as tULI ±larLest nL.1- creases in freight shipments will be registered in the movement of bulk commodities. Aircrafts are resorted to only in emergencies to ferry relief cargos to disaster stricken areas, when no other suitable means ofL transport ius readily avallaule.

Air transport is becoming increasingly importuant as the nation:s tourism industry is growing rapidly. The Department of Tourism has projected the num-lber of tourLsts to the Philippines to increase to 395,000 in 1975 and 523,000 in 1977. While these projections take.place provided that the necessary facilities are available. Air transport will play an important role for both international and domestic travel.

In the air transport field, the most pressing problem is the rehabilitation and limited improvement of the international airport of Manila. The Government commissioned Airways Engineering Corporation (USA) to carry out master planning and project feasibility studies of M-1A. ANNEX A Page 16 of 18

Based on this master plan, the ADB extended a loan of US$26 million to finance the US$44 million project. The project is composed of: (i) extension of the main runway 06-24 and taxiway; (ii) expansion of the present International passenger terminal building; (iii) construction of a new domestic terminal building; (iv) construction of two new cargo handling terminals; (v) construction of new apron areas to service the terminal buildings; (vi) construction of new and improvement of existing ground access, circulation road, and parking facilities; and (vii) installation of navigational aids, lighting and utilities. The facilities to be provided under the project are intended to meet the traffic needs for the year 1983 and was designed to enable the construction of staged expansions to meet future needs.

The Government's proposed investment program for airports and air navigation aides for the period 1976-79 is presented in Table 6. It would appear that because the program calls for the dispersal of funds over a large number of works in many small and regional airports, some slippage in executing the program will occur. However, for the period as a whole, the size of this program appears feasible.

VII. Urban Transport: Metropolitan Manila

(i) Existing Transport Network in Metropolitan Manila.

The transport system in metropolitan Manila is almost entirely road-based with rail commuter traffic comprising less than 1% of daily passenger trips. The network of metropolitan Manila's major roads consists of four semi-circumferential roads, all of which are around the Central Business District (CBD) and none of which is complete, plus nine radial roads, most of which are complete, extending from the CBD to outlying areas. Most of these roads have either four or six lanes.

Otherwise, Manila's road system consists of narrow and winding roads running through densely settled areas. Most of these roads have been built to standards that are .iadequate for today's traffic. T-Dical features are narrow rights-of-way and land widths, poor drainage and for the most nart. an antiquated grid pattern. Laid out long before the auto age and designed principally for convenient real estate platting and access to nronertv. these nhsolete riphts-of-wav are now crowded on both sides with commercial activities and dwellings. Most important, the concent.ration of traffic on narrow streets with many crossings makes lJt. impossible to realize the speed and service potentials of the motor vehirle. Moreover- due to noor drainage and maintenance road conditions are generally poor with numerous potholes and cracked surfaces. TherePr only a few grade-sepnarated intersections on maior corridors and about 65 intersections are signalized, many of which are poorly placedi and arp f?requentlyv nut, of onperation.

The maior t-rnnprnt. wonrks undertaken in metropolitan Manila since the 1960's include the construction of circumferential road C-4 and the two inter-city expressways emenating from G-4 to the north ann south. The construction cost of C-4 cannot readily be estimated, as ANNEX A Pang 17 nf 18S the road was constructed in stages and by sections over several years wi+.h federal loca1l and provincial unds. Bevond t-he provisvion of C-h and the northern and southern expressways, which were built primarily +.r~giver betteor an.ccsF.sto other economic centecrs in thecouont+ry, t.here has been only a minor upgrading of a few radial roads inside C-4. At present, som.e of the m.issiJng, links,G-1 aintd G-2 are bheg com.- pleted but road construction in the urban center moves at a snail's pace.

(ii) Travel Patterns: Dependence on Jeepneys and Buses

In 1974 it was estimated that about 4.3 million inhabitants JL 'JL±LL~2 i7l±.LdL.J. I * L AILLJ..LJ_ .Lps C2VI. ofm.etopo4i_, an -n:amade 7.8 -1m1'lon t-rip inaA a 4typicl workL Uaj a rate of 1.8 trips per inhabitant. The most important means of travel h'Aave lbeen 4eepneys anid buses, L,L'he ma Jor fo±IV , of mass transpora u iorA accounting for three-quarters of the total trips. By far the most dominant r,loue of. LlransportjV i9 4eepneys which accountUe d LLd buLJUL LICIha.l the1t UU La-L with buses comprising 25% and the remaining 25% spread out among cars, tdax-is ardIJ coi^ul[ut rL.L.

Jeepneys andLbuses 'n met-ropoXdlin ianl a provide a variety and frequency of services seldom found in other cities and do so at no directv capLtal or recurrent cost' to the Government. The system has been largely developed through private investment and operated with the vitality of private entrepreneurship. These two modes carry a non- directional hourly flow of 15,000-20,000 persons on the main roads during peak hours. in contrast, only aDout l,500-2,000 passengers are moved by cars, although private cars are a numerically predominant mode of vehicular traffic, often comprising 50% or more. On the Guadalupe Bridge where 92,000 daily vehicular traffic were recorded in the 1971 survey, private cars accounted for 64-70% of total vehicular movements and buses only 4.5% but buses carried almost as many passengers as private cars 1/.

This fact indicates the importance of expanding and improving mass transport services which will provide options for the present and potential automobile traveller as well as the growing number of passengers solely dependent on pu-blic transport. The Government should make a concerted effort to institute a variety of measures to discourage the uneconomic use of private cars, particularly for the journey to work. An examination of the full range of available administrative tools to encourage the use of public transport should include special licensing, increased parking fees, control of on-street parking, banning of priva-te vehicles in the most congested parts of the city, and traffic control systems which give priority to public transport.

(iii) Urban Transport Administration At present, there are a number of agencies concerned with urban transport policy, planning, regulation, programming, and budgeting in metropolitan Manila, often resulting in overlaps and conflicting

1/ This analysis assumed a vehicle occupancy ratio of 3 for private cars and hO for buses as found in Urban Transnort Studv in Manila Metropolitan Area, Government of Japan, Overseas Technical Coopera- t4i-.n Aat.nr-v 1973 A 'n Page 1 of lt

vie-wpou1I U0 I rlhe noarud of1 TIrpor t ( ) i is empoweredto 'u iu s er- tificates of public convenience, establish routes and prescribe fares. The BOT-s policy has been restrictive with respect to service entries. For many years, the BOT maintained a moratorium on jeepney entries and granted only a limited number of bus franchises in metropolitan maniia. A reorganization in 1974 has resulted in a partial transfer of BOT's regulatory powers to the Mletropolitan Transit Corpora-tion (MnC). The MTC was established by decree to-introduce coordinated management and opera-tion of public transport. Within a short period oI one year, the MTC has successfully operated 60 buses enjoying a high degree of public appreciation and patronage. The I-TC has the distinct advantages over its private competitors of access to public funds and exemption from import duties on its rolling stock anid rom payment or common carrier's taxes. Moreover, MTC was given veto powers on route allocations and changes proposed by its competitors. These special privileges clearly result in unfair competition vis-a-vis private operators.

In order to eliminate some of the shortcomings in the existing structure, a proposal to create a Metro Manila Transport Council (MMTC) is under consideration as a part of the World Bank's first urban project in Manila. This agency, if created, will be given a mandate to integrate policy, planning, regulation, prograimning and budgeting functions re- lating to urban transportation, with MPC remaining as an operating agency. The establishment of a coordinated planning and regulatory mechanism is a positive step forward. Its potential will be realized only if competent staff is appointed and sufficient authority is- given to- enforce recommended measures.

(iv) Fu-ture Transport Requirements

lI4etropolitan Manila's growth has far outstripped-the capacity of mass transport facilities and the road network. The provision of public transport services has not kept pace with the increased travel demands generated by the emerging distribution of metropolitan employ- rnent and residence locations and the antiquated system of roads has been strained for many years. Minor additions to the network have offered very little relief, and that not for long; and the strains a-re becoming increasingly severe as -the motor vehicle population and vehicle use continue to increase rapidly in what is already a highly motorized city.

It is estimated that the volume of daily trips will rise- to 14 million by 19-87, or almost double the present level. When this daily figure is converted to directional movements during peak hours, the cap.acity constraints of the road and mass transport facilities would be overwhelming. Peak hourly movemen-ts migh-t reach as high as three times the present level. A radical denarture from the past to one of accel- erating transport capacity expansion is obviously necessary.

May 1976 ANNEX B Page 1 of 3

TRANSPORT PLANNING

IN THE PHILIPPINES

Presidential Decrees and Transport Policy' fl4-ctr-a

Presidential Decree 505 (Philippine Port Authority Decree)

"It is hereby declared to be the policy of the State to implement an

;, nA-. mn -4 4A-AA., - r. ^ nf Aana nnm^n i + a An+_1 _ 4 na a anA--4 - - int-egrated a114 .H 0; .J. pw-vHv- uUi i .. JS U .LJA. EAvut A U.LwLA V ; tUL t J.L'J A . - cordance with the following objectives: (a) to streamline and op- ize th e pl anni,ng, d4e-vrelo-p,.enl , constuctLon, r,..intenance a - tion of ports, port physical plants and facilities, (b) to ensure 4tbe ui.i~~I~~ sm,oo-thuJls ._L.LU4 owv ofP-A. wat-erborneITO U L4. IAJJJ1 o,,ecpasnthugtecutr',. J O J. JV.JIJ1..J. UUA6L1 UIJIU %UUAI I.L4 - 6 ports in the conduct of international and domestic trade, (c) to pro- mo_, -4-I U 41AJ,--L 4jki- A J_.A -' AJ 1 _O.A_ O AL,±± LIsU> st;r,_LV1C2. "s;=UVOLUFIIIULI U11AVUr,LJ ULIIU %.A.OPUszal of industies arAu commercial activity throughout the different regions, (d) to foster .Lree ent-erprise andJsutin the grow`th t-Pandel. oth i industries, and (e) to redirect port administration beyond its spe- cifLc andU traduitional uuties n Lldhrbor, cargo and ravenuu operationls to the broader function of total port district development, including the full and fruitful utilization of the port's hinterland and tri- butary areas".

Presidential Decree 474 (Maritime Industry Decree)

"it is hereby declared the policy of the State to accelerate the integrated development of the maritime industry of the Philippines to attain the following objectives: (a) to increase production and produc- tivity in the various islands and regions of the archipelago through the provision of effective sea iinkage, (b) to provide for the economical, safe, adequate, and efficient shipment of raw materials, products, commodities and people, (c) to enhance the competitive position of Philippine flag vessels in the carriage of foreign trade, (d) to strengthen the balance of payments position by minimizing the outflow of foreign exchange and increasing dollar earnings, and (e) to generate new and more joob opportunities".

Republic Act No. 6366 - Act Providing for the Rehabilitation and-lodernization of the Philippine National Railways

"Section 1 - Statement of Policy - The Philippine National Railways, being a factor for socio-economic development and growth shall be a part of the infrastructure program of the Government and as such shall remain in and under Government ownership during its corporate existence. The Philippine National Railways must be administered with the view of serving the interests of the public by providing them the maximum of service and, while aiming at its greatest utility by the public, the economy of operation must be ensured so that service can be rendered at the minimumn passenger and freight prices possible". ANNEX B Page 2 of 3

Presidential Decree L92 (Manila Transit CorDoration)

"It is hereby declared to be the policy of the State to rationalize and integrate public transportation services in order to attain the following obiectives: (1) to integrate public transportation operations in Metropolitan Manila (herein used as defined by the BCS) into one corporate entitv such that the onerators. with franchis.ces to operate within the area, may transfer their assets involved in the transnort hiiness in exchange for ennity participation in the corporation; (2) to establish and operate an integrated public trans- nortation system in Metropolitan Manila whinh will (a) e1.iminate destructive competition and service duplications among different transnort. mocdes qnd firrn! (h) r-tinnali;7.Q rmte. nlInnntion Ani nrnuxiri proper balance of commuter service in all routes; (c) effect economies in operations ann overhead facilities and logistic support; (d) develop a financially strong and operationally efficient metropolitan transport firm; (e) wn-orke fnwa-rrd the 9tandrdizatin of 'rli stlck equipment and other facilities - in order to satisfy the requirements of t.he ridiing pulich i".1

Presidential Decree 101

"Whereas, it is the policy of the State, as swiftly as possible, to Lmprove th,e deplo1-rable condition of ve-hicullar traff c-, obai mx,4 utilization of existing public service motor vehicles, eradicate the ha.rmful and unlawdl trade of claeop by or allowing them to become legitimate and responsible operators, and update th4e slMndards that should hencefor-th, b~e followTed i h prto of public utility motor vehicles".

Meiorand1um Order No. 39)

h'nereas thue ruIe isd 11 teeUd tA gear '[heI cooperati syLs-VtLIto LiwarUd tneU integration and rationalization of the public transit and transport system, not only as a means to efLfect econiomny and efficiency in the movement of passenger and goods but also as a potent measure to ameliorate the social and economic conditions of public utility vehicle drivers, particularly jeepney drivers, and to mitigate and forestall a serious and impenading shortage of energy arising to national welfare and economy".

Republic Act No. 770 (Section 4), DeclaratiOu1f0roicies

"In the exercise and performance of the powers arju dutie under biLd Act, the Civil Aeronautics Board and the Civil Aeronautics Administra- tion shall consider the following, among other things, as beeing in the public interest and in accordance with the public convenience and necessity: ANNEX B Page 3 of 3

(a) The development and utilization of the air potential of the Philippines; (b) the encouragement and development of air transportation system properl,y adgapted to the present and future of foreign and domestic commerce of the Philippines, of the postal service, and of the national d,efense; (c) the regulation of air transportation in such manner as to recognize and preserve the inherent ad- v,antages of, asspre th, highest degree of safety in, and foster sound ec-p n cpndit_olppi ip, suh t panspportp.tp and t.o imprpve the rela- tions between and co rdi-nate trapspo.rtation by air carrier; (d) the promotion of adequate, ecoprorpical axd efficient service by air carrier at reasonable charges, without uipj!st discrimination under pre- ferences or adyantages, or unfair or destructive competitive practices".

Mn.ir 1076 THE PHILIPRPfL3

Transport Investment EEo_ram_ 197 6 -79, by Made (Million Pesos)

Total Esti- Four--Year- Mode mated Cost 1/ Total 1976 1977 1978 1979 Later Years

Highways

Foreign Assisted 7,616.5 4,127.6 1,383.2 949.4 958.3 837.7 1,489.8 Locally Funded 7,568.0 4,820.2 574.5 1,151.C 1,407.4 1,6137.1 2,583.0

Sub--total 15,184.5 8,9417.8 1,957.7 2,]00 1; 2,365.7 2,524.8 4.L072

Foreign Assisted 2,625.1 661.2 100.9 146.59 197.6 21:5.1 1,964.o Locally Funded 200.8 182.8 63.9 52.8 50.5 15.6 _ Sub-total 2,825.9 844.0 164.8 199.7 248.1 230.7 1,964.0

Ports

Foreign Assisted 740.0 3544.9 90.5 86.43 87.9 89.6 155.4 Locally Funded 794.4 299.4 69.8 74.() 78.5 77.0 432.5 Sub-total 1,534.4 65 4.3 160.3 1L60.9 166.4 166.6 587.9

Airports Foreign Assisted 824.6 6:L2.1 112.0 1L88.8 166.3 144.9 44.0 Locally Fuided 411.2 180.4 32.6 28.7 39.3 79.9 225.3

Sub-total 1,235.8 792.5 144.6 217.5 205.6 224.8 2659.3

TOTAL 2C,780.6 _11 __38.6 2,27.4 2,6t78.5 2,9585.8 3,146. 485i.09

1/ Total estiimated co-st of ongoing projects in this table and tables 2-6 includes investment made in previous years. January 1976 THE PHILIPPINES

Transport Investment rgram, 197'6-759,by Project Status -M-illion Pescs ) Total Esti- Four-Year roject Statuls mated Cost 1,/ Total1 1976 1977 197'8- 197'9 Latier Years (a) Ongoi

Foreign Assisted 5,350.4 2,919.9 1,552.0 819.6 4.0.9 1:36.9 35.1 Locally Funded. 1,571.3 1,033.1 294.4 312.0 255.8 170.9 299.2

Sub-tota] 6,921.7 3,953.0 1,846.4 1,131.6 666.7 307.8 334.3 (b) New

6 Foreign Assisted., ,4l5.8 2,837.1 134.2 552.1 9598.8 1,150.5 3,618.7

Locally Funded 7,403.1 4,449.7 446.5 994.5 1,320.0 1,688.7 2,941.6

Sub. tot3.l 13,58..9 7 580.7 1,546.6 2,318.8 2,8:39.2 6,560.3 TOTAL 20,780.6 11.239.8 .~~~~~~~~~4 2,427.1 2,678.2 2,985.5 3,14.7.0 6 _i6 __2 _L _ _

:L/ See footnote on Table 1.

January 1976 THE PHILIPPINES

Hi y Iinvestment Program, '976-79 Tlioin Peso0)

Total Esti.- Four -Year mated (Jost 1/ Total 1976 1977 1978 1979 Later Years

Ongoing,

Foreign AssistEtd 14,676.7 2,078.83 1,289.7 567.1 222.0 --

Locally Funded 83:3.4 637.6 171.5 212.0 159.0 95.0 31.0

Sub-total t,910o.1 2,716-4 ;1,461.2 779.1 381.0 95.0 31.0

New

Foreign Assisted 3,539.3 2,.49.5? 93.5 382.3 735.6 837.4 ],489.8

Locally, Funded 6,734.7 4,1L82.6 403.0 939.0 1,248.5 1,592.1 2,552.0

Sub--total 10,274.0 6,232.1 496.5 1,321.3 1,984.1 2,429.5 It,041.8

TOTAL 11- 8l-4 8 948.5 1,957.7 2 100.4 2 365.1 2 5 24.5 4,07;2.8

1/ See footnote on Table 1.

January 1976 THE PHIIIPP:INES

RB-ilwaLty Avestment__Pr 1_76-79 - ]iiiiOIT Pe90os9)

Total Esti.- Four-Year mated Cost 1/ Total 1976 1977 1978 1979 Later Years

OgoinF.

Foreign Assisted 298.9 264.1 71.1 265.1 76.8 90.1 35.1 Locally Funded 158.8 142.3 59.6 40.3 32.5 10.0 Sub-total 457.7 406.4 13(.7 66.4 109.3 10'0.1 35.1 New

Foreign Assisted 2,326.6 :397.]L 30.6 120.8 120.8 125.0 1,9259.5 Locally Funded lt2.0 40-5 4.4 12.5 18.0 5.6

Sub-total 2,368.6 437.6 35.0 133.3 138.8 130.6 1 ,92S1.5

TOTAL 28,?L6.3 844. 16'5.7 19'9.7 2418.1 230.7 1 ,964.6

1/ See footnote on Table 1. January 1976 THE; PHILIPPINBE

Port Investment Pro

Total Fsti- Four-Year mnated Cost 1/ Total, 1976 1977 1978 1979 Later Years

Or o ir

Foreign Assisted 386.6 157.4 82.7 66.6 3.8 3.8 -

Locally FEnded 403.1 148.3 35.8 :38.0 :38.5 36.0 202.5

Sulb-total 789.7 305.7 1188.5 1(4.6 142.3 39.8 202.5 New

Foreign Assisted 353.4 198.0 6.6 20.0 84.4 35.8 155.4

Local:Ly Funded 391.3 151.0 34.0 :36.0 o40.0 41.o 230.0

Sub-total 744.7 349.0 40. 6 56. 0 124.4 126.8 385.4 TOTAL 1,534.4 654.7 159.1 160.6 166.7 166.6 587.9

1/ See footnote on Table 1.

January 1976 THE PHILIPPINES

Airport ITvestmen t. Proa 1976-79 7TiL=ion Pesos)

Total Esti- . Four-Year mited Cost 1/ Total 1976 1977 1978 1979 Later Years

Ongoirg

Foreign Assisted 588.2 419.65 l0B.5 159.8 108.3 L43.0

Locally Funded 176.0 104.9 27.5 21.7 25.8 29.9 6',.7 Sub-total 76k4.2 252. 136.0 181.5 134.1 7P2.9 65'.7

NeW Foreign Assisted 236.5 192.1 3.5 29.0 58.o 102.3 hh.o Locally Funded 235.1 75.56 5.1 7.0 13.5 c0.0 159'.6 Sub-total 471.6 268.L 8.6 36.0 71.5 152.3 203.6

TOTAL 1,235.8 792.6 144.6 217.5 205.6 225.2 269'.3

1/ See footnote on Table 1. 0\

January 1976 THE PHILIPP2EES

Invesitment Program Survey

Tentative Gcist Estimate

Time' Fore n Cost LocaL Cost (P30nths g - TF )PesosY Salar Travel Subsistence Transport

Head of Team 12 6o,ooo) 3,000 18,000 1,000

Transport Economi-st 12 48,000 3,000 :18,000 1,000

Highway Expert 12 48,000 3,0(0 18,000 1,000

Railway EXpert 6 24,000 3,000 9,000 500

Ports and Shipping E>pert 12 413,000 3,000 18,000 1,000

Aviation Expetrt 6 24+0 0 3,000 2.92000 500

60 252,0010 18,000 90,000 5,000

Total 365,000 P:roductio:n of Reports 2 000 36~7, 600 Contingency 10% 36,700 03,700

Say 400,000 of which 300,000 Foreign 100,000 Local January 1.976 THE PHILIPPINES

Technical Assistance

Tentativ'e Cost Estimate

FAreiEm Cost _Wcal Cost Months Salary 'Travel & RelocatiLon Housing (t@'$700 Monthly)

Senior Advisor 24 120,000 20,000 16,800

Transport Eco3nomist 24. 96,00C) 20,000 16,800

Advisor, Highways 24 96,00C) 20.,000 16,800

Advisor, Ports and Shipping 24L 96,00C) 20,000 16,800

9c 408,000C 80 ,000 67,200

Total 555,2(0 Contingency 10% 55,520 gLO, 720

Say 600,000) o:F which 530,000 Foreign 70,000 .Local

January 1976 coj