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Download 58.69 KB ASIAN DEVELOPMENT BANK PPA:PHI 22187 PROJECT PERFORMANCE AUDIT REPORT ON THE INFRASTRUCTURE RESTORATION PROJECT (Loan No. 946-PHI[SF]) IN THE PHILIPPINES November 1996 CURRENCY EQUIVALENTS Currency Unit – Philippine Peso At Appraisal At Project Completion At Postevaluation P1.00 = $0.0467 $ 0.0362 $ 0.0400 $ 1.00 = P21.393 P 27.650 P 25.000 ABBREVIATIONS BOM - Bureau of Maintenance DBM - Department of Budget and Management DILG - Department of Interior and Local Government DOF - Department of Finance DPWH - Department of Public Works and Highways EIRR - Economic Internal rate of Return LGU - Local Government Unit O&M - Operation and Maintenance PCR - Project Completion Report PI - Project Inspectorate PPAR - Project Performance Audit Report RRP - Report and Recommendation of the President SDR - Special Drawing Rights VOC - Vehicle Operating Cost WEIGHTS AND MEASURES hectare - ha kilometer - km meter - m square meter - sq m NOTES (i) The fiscal year (FY) of the Government ends on 30 June. (ii) In this Report, “$” refers to US dollars. I. HIGHLIGHTS 1. Objectives and Scope. In 1988 the Bank introduced a new policy of lending for rehabilitation after disasters. The Infrastructure Restoration Project was the Bank's first under the new policy and was intended to help the Philippines cope with the aftereffects of a series of unusually severe typhoons. The aim was to promptly restore damaged schools, flood control structures, ports and roads which were essential to local communities or economies. The loan funded the selection, design, and implementation of a range of small-scale rehabilitation civil works under an emergency sector loan approach. 2. Cost, Financing, and Schedule. The Bank provided a loan from its Special Fund resources of SDR14.72 million ($20 million equivalent) towards a total Project cost of $25 million, including a $5 million component in Government funds. The actual Project cost amounted to $27.08 million equivalent with Bank financing of $20.23 million. The slight increment of the Bank loan was due to the depreciation of the US dollar against the Special Drawing Rights (SDR). Implementation of the Project took 34 months longer than expected because of delay in completing detailed design and the expansion of the scope of the Project. 3. Implementation. The Project was implemented to a Department of Public Works and Highways (DPWH) technical standard which was accepted by the Bank. The Project included more subprojects than had originally been expected. As the Loan Agreement did not bind the Government's fiscal agencies responsible for budgetary allocations to adhere to the emergency schedule, their procedures for fund release had to be followed by DPWH and this slowed construction. The quality of work completed was generally satisfactory but reflected the larger number of subprojects and a shortage of engineering skills among implementing staff. Completed structures generally just met DPWH minimum service-life standard. The Bank's objective of restoring structures to conditions which would minimize the risk of future typhoon damage was not fully achieved. 4. Institutional Aspects. The organizational and coordination arrangements adopted were adhered to and generally benefited the Project. The creation of a project inspectorate (Pl) of consultants was useful and justified its funding from the loan amount. The lack of an interagency steering body to oversee implementation as an emergency project, however, exposed the Project to major delays. 5. Environmental Aspects. Lack of post-construction maintenance and casual use of some flood control structures as garbage dumps poses a public health hazard; no other significant environmental impacts were observed. However, the Project experience illustrated that the growing threat of floods and landslides to coastal communities in central Philippines continues because of deforestation of nearby uplands. The Government should have a long-term plan to promote afforestation and watershed protection. 6. Cost/Benefit Assessment. A survey of selected subprojects confirmed that the Project was socially and economically beneficial. The 53 surveyed subproject clusters showed economic rates of return (EIRR) ranging from negative to 75 percent. The (Project cost) weighted average of the rates of all surveyed subprojects approximates 23 percent. Although no rates of return were calculated at appraisal or completion, this bears out the Project justification at appraisal. The Project is economically viable. 7. Overall Performance and Sustainability. The Project helped to restore essential physical facilities damaged by typhoons, thereby enabling the affected communities to maintain normal levels of economic and social activities in the aftermath of the calamities. Most subprojects performed well at postevaluation, generating a relatively high level of socioeconomic benefits. The Project is rated generally successful However, there is an urgent need to improve the maintenance of the restored structures to ensure the sustainability of the Project. 8. Feedback. Speed of implementation is essential to the success of rehabilitation projects after disasters. The Project experience illustrates the disruptive potential of interagency coordination lags in the Philippines. While not all problems can be foreseen at appraisal, such emergency projects require the agreement of all lead agencies involved to the emergency implementation schedule and, as the case may be, an interagency steering body to ensure adherence to this commitment. Further, even where the Bank (in the interest of an effective crisis response) delegates its normal operational control functions to the executing agency and its advisors (consultants), the Bank must retain final controls. The Project indicates that it is essential for the Bank to remain actively involved in the determination of requisite skills, the selection process of advisors and, on a random basis, the supervision of subproject design. The monitoring and intervention rights of the Bank during implementation should be stressed in the Loan Aqreement. II. BACKGROUND A. Rationale 9. In late 1980, many of the Bank's developing member countries experienced natural disasters that often caused great hardship and economic disruption, with governments being ill-prepared to deal with such events. To supplement existing forms of emergency assistance which aim at relief and are grant-funded, the Bank introduced in 1988 a loan facility for rehabilitation projects after disasters. 10. The Philippines is situated in an active geotectonic zone and a major tropical cyclone belt, hence it is prone to natural calamities. Because of the country's geography, settlement patterns and a lack of infrastructure, such events have disruptive effects on livelihood activities of mostly rural communities. 11. In 1987 and 1988, severe typhoons occurred in the Philippines requiring disaster relief and rehabilitation measures in Southern Luzon, Eastern Visayas, and Mindoro. Damage to infrastructure in coastal zones was especially heavy, prompting emergency assistance from bilateral donors. The Bank could not respond promptly to a Government request for assistance in 1987 as a bankable project had to be prepared, based on approved policy. This was done in late 1988 when a further similar calamity occurred. The Bank therefore addressed the aftereffects of several storms1 with a single loan and project proposal, the Infrastructure Restoration Project. 1 The storms were named Sisanq, Unsanq, and Urinq. B. Formulation 12. The Project was an emergency sector loan with specific subprojects to be chosen and designed during implementation. To assist DPWH, the Executing Agency, a special Pl staffed with 15 consultants was established; this was funded from the loan. There was no project preparatory technical assistance as this would have delayed the Project. C. Objectives and Scope at Appraisal 13. The Project had twin objectives: (i) to support an economy then emerging from a prolonged political crisis and economic stagnation, and (ii) to help rural communities concerned to quickly overcome the threat to their livelihood from the destruction of local infrastructure. 14. The Project was part of a larger Government rehabilitation program. At inception, a Government field survey had identified 250 eligible core subprojects representing school buildings, and civil works for roads, bridges, ports, wharves, and flood control structures in need of rehabilitation or strengthening, as well as associated consulting services. These were to be augmented by additional subprojects during Project implementation. D. Financing Arrangements 15. The Bank loan of $20 million was from the Bank's Special Funds resources with a service charge of 1 percent per annum, 10 years' grace period, and 35 years maturity. The loan was to finance the entire foreign exchange component of the Project amounting to $11.6 million, and $8.4 million equivalent in local expenditures. Total Project cost as appraised was $25 million equivalent including $5 million equivalent in Philippine Government funds. The Borrower was the Republic of the Philippines. E. Completion 16. The Loan Agreement between the Bank and the Borrower was signed in February 1989 and became effective in April 1989. At appraisal, the Project was expected to be completed within a period of 18 months by 30 September 1990. However, after three extensions, the Project was completed in June 1993 and the loan account closed in August 1993. A Project Completion Report (PCR) prepared
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