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Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No. 3916-PH REPORT ON THE TRANSPORT SECTOR IN THE PHILIPPINES Public Disclosure Authorized September 14, 1983 Public Disclosure Authorized Transportation Division 2 Projects Department Public Disclosure Authorized East Asia and Pacific Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS Currency Unit - Peso (P) US$1.00 = P 8 (October 1981) WEIGHTS AND MEASURES 1 meter (m) = 3.28 feet (ft) 1 kilometer (km) = 0.62 mile (mi) 1 kilogram (kg) = 2.2 pounds (lb) 1 metric ton = 0.98 long ton (ton) ABBREVIATIONS ADB - Asian Development Bank BAT - Bureau of Air Transportation BLT - Bureau of Land Transportation BOT - Board of Transportation BP - Batasang Pambansa CAB - Civil Aeronautics Board CHPG - Constabulary Highway Patrol Group DBP - Development Bank of the Philippines GNP - Gross National Product IATCTP - Inter-Agency Technical Committee on Transport Planning INPF - Integrated National Police Force LTC - Land Transportation Commission MARINA - Maritime Industry Authority METROCOM - Metropolitan Command MLGCD - Ministry of Local Government and Community Development MMTC - Metro Manila Transport Commission MND - Ministry of National Defense MOB - Ministry of Budget MOT - Ministry of Tourism MOTC - Ministry of Transport and Communications MPWH - Ministry of Public Works and Highways NEDA - National Economic and Development Authority NTPP - National Transportation Planning Project PADC - Philippine Aerospace Development Corporation PAL - Philippine Airlines PC - Philippine Constabulary PCG - Philippine Coast Guard PD - Presidential Decree PHILSUCOM - Philippine Sugar Commission PMU - Port Management Unit PNR - Philippine National Railways PPA - Philippine Ports Authority UNDP - United Nations Development Program USAID - United States Agency for International Development GOVERNMENT OF THE PHILIPPINES FISCAL YEAR January 1 - December 31 SR85761/TT-157/D1368/63 PHILIPPINES TRANSPORT SECTOR MISSION Main Report Table of Contents Page No. PRINCIPAL FINDINGS AND RECOMMENDATIONS . (i) 1. THE ROLE OF TRANSPORT IN THE PRILIPPINE ECONOMY . 1 A. Transport and the Economy . B. Role of Government in Transport Development . 2 C. Major Transport Issues and Outline of Report . 2 2. RECENT DEVELOPMENTS IN THE TRANSPORT SECTOR . 3 3. ORGANIZATIONAL AND INSTITUTIONAL STRUCTURES . 6 A. Institutions and Agencies . 6 B. Ministry of Transportation and Communications . 7 C. Ministry of Public Works and Highways . 8 D. Regulation of the Sector ... 9 E. Transport Tariffs . ll F. Planning for the Sector .2.. 12 G. Recommendations .... 12 4. ORGANIZATION AND ADMINISTRATION OF HIGHWJAYS . 13 A. Road Network .13 B. National Roads .14 C. Provincial Roads .16 D. Barangay Roads. 8 E. Training . 20 F. Recommendations .20 5. ROAD TRANSPORT . 22 A. General .... 22 B. Organization of the Industry . 23 C. Vehicle Fleet .... 25 D. Operational Characteristics . 26 E. Tariffs and Costs ... 28 F. Road User Charges ... 30 G. Recommendations. 30 SR85761/TT-157/D1368/64 - ii - Page No. 6. THE RAILWAYSUBSECTOR ... 31 A. PNR Track and Other Infrastructure . 31 B. Locomotives and Rolling Stock . 33 C. Management and Staff .. 35 D. Traffic and Operations .. .37 E. Finances .. 40 F. Recommendations .. 41 7. PORTS AND INTER-ISLAND SHIPPING . 43 A. The Port Subsector ... 43 B. Inter-island Shipping.. 48 C. Airports and Air Transport . 52 8. THE URBAN SUBSECTOR .... ...... 55 A. Introduction .... 55 B. Adequacy and Financing of Urban Road Systems . 56 C. Public Transport .61 D. Urban Transport Institutions . 65 9. TRANSPORT INVESTMENT PLAN FOR 1983-87: NTPP REPORT . 69 A. Introduction .69 B. Recommended Investment Program . 70 C. HLighways .... 70 D. Railways .... 72 E. Ports .... 72 F. Airports . 73 MAP Transport Network - IBRD 16188 SR85761/TT-157/D1368/58 PRINCIPAL FINDINGS AND RECOMMENDATIONS 1. This report deals with the findings of a transport sector mission which visited the Philippines during the fall of 1981./1 The purpose of the mission was to undertake a review of the transport sector in the Philippines focussing especially on (a) organizational and institutional developments in the sector since the last Bank sector mission of 1975; (b) organization of planning, construction and maintenance of roads, including rural roads; (c) bus, truck and intermodal operations with a view to improving utilization and reducing cost, including the impact of taxation and regulations on their operations; (d) the railway-s operations, with a view to defining an appro- priate role for it, if any; and (e) the development of secondary ports with a view to improving inter-island transport services. 2. The Government has implemented the principal recommendations of the Bank-s sector review mission of 1975 (Report No. lOl7a-PH). That mission recommended, among other things, a technical assistance program for advisory services to various transport agencies and for the preparation of a national transport study and an investment program for 1983-87. Both tasks were addressed by the consultant team under the National Transportation Planning Project (NTPP) with financing from Loan 1860-PR. The transport study has since been completed and will form the basis for the 1983-87 investment plan for the sector. 3. The 1981 mission's most important findings concern the importance of highway maintenance, measures needed to improve the efficiency of the domestic transport industry,>in particular, trucking; the future of rail- ways; and the staffing problem faced by technical agencies in the Philippines on account of the relatively unattractive government salary levels. These are discussed in the following paragraphs. Highway Maintenance 4. That highway maintenance is inadequate is almost universally acknowledged in the Philippines. The problem is the combined result of several factors: inadequate budgetary allocations for maintenance, poor use of available funds, diversion of routine maintenance funds for emergency works, inadequate staffing, and unclear division of responsibility for maintenance among several agencies. /1 The mission comprised Messrs. M.S. Parthasarathi (Leader and Economist), G. Trnka (Highway Engineer), C. de Castro (Road Operations Expert), J. Kesson (Railway Engineer/Consultant), R. Scheiner (Port Engineer/ Consultant) and J. Sackey (YP - Economist). Mr. R. Podolske (Planner, Urban and Water Supply Division) contributed the chapter on "The Urban Sub-Sector." Finalization of the report was delayed to incorporate a summary of the NTPP's recommendations on new investments for 1983-87. SR85761/TT-157/D1368/59 - ii - 5. The mission recommends that MPWH should review the budgetary allocation formula regularly to ensure its adequacy in the face of increasing costs. It should seek an adequate, separate allocation for emergency maintenance based on past experience, so that routine maintenance funds can be fully used on routine maintenance. With the completion of major construction projects, MPWH should assign more experienced staff, with adequate powers, to maintenance activities especially in the field. (MPWH has already taken steps to upgrade several technical positions, but more remains to be done.) The division of administrative responsibility between MPWH (for national and Barangay roads) and MLG (for provincial and municipal roads) can continue but with technical responsibility fully resting with MPWH. Trucking Industry 6. There is excessive regulation, on paper, of the trucking industry with respect to entry, routes and rates, but none of these regulations are enforced in practice except on a random basis, giving rise to large-scale illegal operations. Nor are safety regulations on vehicle fitness, over- loading and driver training adequately enforced. An important consequence of lack of enforcement is that large numbers of T ("not for hire") trucks systematically operate for hire, depriving the Government of substantial revenues (about P 50 million annually) and competing unfairly with TH ("for hire") trucks. 7. The mission recommends the strict enforcement of all regulations that will promote safety and fair competition, but the abolition of all regulations that restrict or stifle competition, such as those on entry, routes and rates. (This recommendation applies equally to inter-island shipping.) The mission also favors either the abolition of the distinction between T and TH trucks or the strict licensing of T trucks to ensure that they are limited to cases where the need is clearly established. This move should substantially increase the number of TR trucks in operation, thereby improving the competitive climate on a fair basis, and simultaneously generate additional revenue to the Government from registration fees and turnover taxes. Future of the Railway 8. In the mission's opinion, the Philippine National Railway (PNR) does not have a useful role in the country's transport system in the present circumstances, with the possible exception of commuter services in Metro Manila and, perhaps, long-distance passenger traffic. There is no prospect of PNR's becoming financially viable in the foreseeable future. SR85761/TT-119/D1368/60 - iii - 9. However, since the Government has decided to keep PNR open for social and administrative reasons, it should install a strong management which could operate PNR reasonably efficiently
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