Document of The World Bank

FOR OFFICIAL USE ONLY Public Disclosure Authorized

Report No. 4757

PROJECT PERFORMANCE AUDIT REPORT Public Disclosure Authorized

PHILIPPINES SECOND HIGHWAY PROJECT (LOAN 950-PH) Public Disclosure Authorized

October 25, 1983

Public Disclosure Authorized Operations Evaluation Department

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.

FOR OFFICIAL USE ONLY PROJECT PERFORMANCE AUDIT REPORT

PHILIPPINES SECOND HIGHWAY PROJECT (LOAN 950-PH)

TABLE OF CONTENTS

Page No.

Preface...... i Basic Data Sheet...... ii Highlights...... iv

PROJECT PERFORMANCE AUDIT MEMORANDUM

I. INTRODUCTION...... 1

II. PROJECT IMPLEMENTATION AND RESULTS...... o ...... 2

III. POINTS OF PARTICULAR INTEREST...6

IV. CONCLUSIONS...... 10 Annexes: Borrower Comments ...... 12

PROJECT COMPLETION REPORT

I. Introduction...... 23 II. Project Preparaton, Appraisal and Negotiations...... 24 III. Project Implementation...... 25 IV. Cost Estimates and Disbursements...... 33

V. Economic Reevaluation...... 34 VI. Institutional Development...... 36 VII. Role of the Bank...... 39 VIII. Conclusions...... 40

Tables

1. Project Components and Cost Data...... 42 2. Status of Contracts (National Roads)...... 43 3. Olangapo-Gapan Road...... 44 4. Minor Roads Contracts...... 45 5. Consulting Services - Detailed Engineering (Highways III and IV)...... 46 6. Axle Load Control...... 47 7. Accumulated Disbursements...... 48 8. Comparison of Ex-Ante (Appraisal) and Ex-Post Economic Returns...... 49 9. Annual Traffic Growth Rates (ATG) in Percent and AADT - 1971 and 1979...... 50 10. Estimated Annual Traffic Growth Rates, 1979-98...... 51 11. Traffic Costs and Savings per km, 1980...... 53 12. Traffic Volume (AADT) and Economic Returns on Minor Roads...... 54 Map 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.

PROJECT PERFORMANCE AUDIT REPORT

PHILIPPINES SECOND HIGHWAY PROJECT (LOAN 950-PH)

PREFACE

This report presents a performance audit of the Second Highway Project in the Philippines for which Loan 950-PH for US$68.0 million was made in December 1973. Final disbursements were made in August 1980. The report consists of a Project Performance Audit Memorandum prepared by the Operations Evaluation Department (OED) and a Project Completion Report (PCR) prepared by the East Asia and Pacific Regional Office.

The memorandum is based on the PCR, completion reports prepared by the Government discussions by OED staff during an audit mission in January 1983, with Government officials and some staff of consulting and contracting firms in the Philippines, and interviews with Bank staff. The transcript of the Executive Directors' meeting of December 4, 1973, which considered the project, has been read and project files and documents have been reviewed.

The audit memorandum agrees with the PCR on most points. It especially emphasizes the concern that economic benefits of the project are negatively affected by a number of Government decisions and the less than optimal role played by the Bank.

Comments received from the Borrower have been reflected in the audit as well as annexed to the audit memorandum.

- ii -

PROJECT PERFORMANCE AUDIT BASIC DATA SHEET

PHILIPPINES SECOND HIGHWAY PROJECT (LOAN 950-PH)

KEY PROJECT DATA Original Actual or Item Plan Current Estimate Total Project Cost (US$ million) 128.20 189.60 Overrun (%) - 48 Loan Amount (US$ million) 68.00 68.00 Disbursed ) - 68.00 Repaid ) as of 07/31/83 - 11.49 Borrower's Obligation ) - 53 58/5 Project Completion Date 12/77 07/80 Proportion Completed by Expected Date (%) - 90 Proportion of Time Overrun (%) - 65 Economic Rate of Return (%) on national roads 22 27/b on minor roads na close to 0 Institutional Performance good poor Cumulative Estimated and Actual Disbursements (US$ million) FY74 FY75 FY76 FY77 FY78 FY79 FY80 Estimated 8.0 36.8 61.0 68.0 68.0 68.0 68.0 Actual 0.9 18.8 27.9 48.4 58.6 66.2 68.0 Actual/Estimated (%) 11 51 46 71 86 97 100

OTHER PROJECT DATA

Item Or Plan Actual First Mention in Files 02/72 Negotiations 10/73 10/30-11/02/73 Board Approval Date 11/73 12/04/73 Loan Agreement Date 12/12/73 Effectiveness Date 12/73 12/27/73 Closing Date 12/31/77 06/30/801c Borrower Republic of the Philippines Executing Agency Ministry of Public Highways/d Fiscal Year of Borrower January 1 - December 31 Follow-on Project Third Highway Fourth highway Loan Number 1353-PH 1661-PH Amount (US$ million) 95.0 100.0 Loan Agreement Date 01/12/77 03/09/79 /aInludesexchange adjustment of -US$2.93 mlin /b The Audit expects the economic return to be substantially lower but still satisfactory (para. 16). /c Final disbursements took place in August 1980. /d Now the Ministry of Public Works and Highways.

- iii -

MISSION DATA

Month/ No. of No. of Staff- Date of Item Year Weeks Persons weeks Report

Identification/a Preparation I 04/72 3.0 2 6.0 05/22/72 Preparation II 09/72 2.0 2 4.0 09/25/72 Preappraisal 12/07-11/72 0.6 1 .6 12/18/72 12/04-21/72 2.4 2 4.8 01/16/72 Appraisal 05/28-06/20/73 2.5 6 15.0 11/19/73 Supervision I 05/10-06/06/74 3.0 1 3.0 06/24/74 Supervision II 11/28-12/17/74 2.5 3 7.0 01/31/75 Supervision III 05/04-26/74 3.0 1 3.0 07/02/75 Supervision IV 09/15-10/12/75 3.0 3 9.0 10/23/75 Supervision V 05/13-06/01/76 2.7 3 8.1 06/21/76 Supervision VI 09/40-10/06/76 0.9 1 0.9 10/14/76 Supervision VII 02/24-03/22/77 2.0 1 2.0 04/21/77 Supervision VIII 10/01-11/07/77 0.3 2 0.6 01/20/78 Supervision IX 04/02-10/78 1.7 2 3.4 06/08/78 Supervision X 07/02-23/78 1.0 2 2.0 No report Supervision XI 10/08-11/04/78 3.7 1 3.7 12/01/78 Supervision XII 03/10/79 4.0 2 8.0 No report Supervision XIII 06/15-25/79 1.4 2 2.8 08/01/79 Supervision XIV ) 01/16-26/80 1.4 1 1.4 03/18/81 Supervision XV )

COUNTRY EXCHANGE RATES

Name of Currency (Abbreviation) Peso (P) Exchange Rate:

Appraisal Year 1973 US$1 = P6.80 1974 US$1 = P6.69 1975 US$1 = P6.98 1976 US$1 = P7.45 1977 US$1 = P7.40 1978 US$1 = P7.39 1979 US$1 = P7.40 "March 1980 US$1 = P7.40 July 1980 US$1 = P7.54 February 1981 US$1 = P7.54

/a Part of the project was identified in a 1968-69 UNDP-financed Transport Study for which the Bank was executing agency, and part was identified by feasibility studies carried out in 1971-72 by consultants.

- iv -

PROJECT PERFORMANCE AUDIT REPORT

PHILIPPINES SECOND HIGHWAY PROJECT (LOAN 950-PH)

HIGHLIGHTS

The purpose of the project was to stimulate economic development by providing cheaper and more reliable road transport in central Luzon and to strengthen the highway organization. This was to be achieved through construction and improvement of some 700 km of national highways, betterment of about 700 km of minor roads damaged by recent floods, and various forms of technical assistance. The project also included procurement of weighbridges.

The purpose of the project was largely achieved, except for some of the attempts aimed at institutional improvements which were only partially successful (para. 12). Particular difficulties were experienced with the construction of one road which largely contributed to the project's 65% time overrun. The construction program for minor roads was reduced to about half of the original target (in kms) and the cost overrun per km was 124%. With the cost of the nationaL highways being about 50% above appraisal estimates the overall project cost overrun was 48%. Bank staff have made a valuable contribution to the project but there were some weaknesses, mostly in project supervision (paras. 26 and 29).

Points of part:icular interest are:

- Significant construction difficulties and delays on one road coin- cided with substantial deviations from the Bank's normal procurement procedures (para. 7);

- All project highways were ultimately built to generally satisfac- tory standards, while other newly built highways in the Philippines frequently suffer from structural inadequacies which seems to prove the merits of the Bank's quality control system (paras. 8 and 28);

- When minor roads are financed under a Bank project there should be clear indications that adequate maintenance will be available (paras. 9-10; 29);

- The Government's ban excluding certain kinds of vehicles from the expressway and to an extent the tolls on the expressways have resulted in traffic diversion to a congested parallel road and incurred economic losses to the country (paras. 19-23, 30), - v -

- A more comprehensive approach towards vehicle overloading should have been part of the project (paras. 24 and 25); and

- Better coordination between the Bank and the Government and within the Government itself for the preparation of PCRs is desirable (para. 27).

PROJECT PERFORMANCE AUDIT MEMORANDUM

PHILIPPINES SECOND HIGHWAY PROJECT (LOAN 950-PH)

I. INTRODUCTION

1. The Philippines consists of some 7,000 islands, many of which are mountainous. These features have caused maritime transport to play an important role, with road transport remaining of lesser significance than it would normally be in a country of similar size. Difficult terrain and poor soil conditions form a constraint on road construction. However, during the last decade extensive work has been done to improve and extend the road network and road transport is increasing in importance. Railways play a very minor role in the Philippines, but air transport is well developed.

2. The Bank became involved in the roads subsector of the Philippines in 1971, when a 160 km long highway in Mindanao (southern Philippines) was financed..!/ This first project also included technical assistance to the Ministry of Public Works and Highways (MPWH)1/ and preparation of the next highway project. In total the Bank has financed in the transport sector, four road projects, three port projects and one shipping project. Audits for the second port and the shipping project are under preparation.

3. The purpose of the Second Highway Project which is the subject of this audit was to stimulate economic development by providing faster, cheaper and more reliable road transport in central Luzon. The project was also to make an important contribution to the strengthening of the highway organiza- tion. The project consisted of the following:

(a) construction on a new alignment of a 51 km national expressway with 6 km of access roads;

(b) reconstruction and improvement, largely along existing alignments, of seven national roads totalling 640 km in length;

(c) rehabilitation of 700 km of minor roads connecting to the above national roads;

1/ PPAR Philippines First Highway Project (Loan 731-PH), SecM79-208.

2/ The highways department has undergone a series of transitions in the past decade, from Bureau of Public Highways - Department of Public Highways - Ministry of Public highways - Ministry of Public Works and Highways. - 2 -

(d) consulting services for (i) construction supervision of the above roads; (ii) feasibility studies and detailed engineering (financed retroactively) of 137 km of roads included in (b); (iii) detailed engineering for future road projects; (iv) continuation of ongoing technical assistance; and (v) assessment of highway staff training needs;

(e) procurement and installation of weighbridges for axle load control on national roads; and

(f) consulting services financed by UNDP for reconnaissance studies of 1,800 km of roads and subsequent feasibility studies of selected road sections.

At the time of appraisal the total project cost was estimated at US$128.2 million equivalent. The Bank assisted with a loan for US$68.0 million equi- valent, while the UNDP was to contribute US$0.9 million equivalent for con- sulting services.

4. Special covenants included in the loan covered (a) the creation of a special office in MPWH to assist in the administration of the project and preparation and supervision of other similar projects; (b) submission of a complete plan regarding location, operation and maintenance for weighbridges to be procured under the project; (c) an accord in principle that tolls could be imposed on the Burol-Angeles expressway under procedures to be agreed with the Bank; (d) a commitment on proper maintenance of all highways in the national highway system and prompt provision for funds and other requirements for such; and (e) an agreement that steps were to be taken to ensure that dimensions and axle loads of vehicles would not exceed limits appropriate to the design standards of the highways.

II. PROJECT IMPLEMENTATION AND RESULTS

5. The purpose of the project has been largely achieved. Road improve- ments under the project led to faster and more reliable transportation at a substantially reduced cost. On the institutional side a certain amount of progress was also made, but success in that field is more difficult to mea- sure. The program of highway construction was mostly implemented as planned, even though in some cases with considerable difficulties and delays. The total distance of minor roads which were improved under the project is about half that estimated at appraisal (PCR, para. 3.07). Difficulties were exper- ienced with the implementation of several covenants.

6. For the construction of the national highways under the project, eight contracts were awarded to Philippino contractors, four to a Korean contractor and two to a Philippino/Taiwanese joint venture. Delays in com- pletion were caused by a variety of factors. Disruptions caused by the 1973 - 3 - oil price increase resulted in some shortages of equipment, fuel and mater- ials; the Government was late in acquiring the right-of-way and relocating utilities; Government procedures were complex; and the contractors in some cases suffered from shortages of working capital, poor job organization and lack of managerial skills. As a result, ten contracts were completed within nine months after the original completion date, two 1.5 years after the original date and the remaining two contracts suffered delays of 2.5 and 3.5 years. Because of problems which were beyond the control of the contractors construction time was officially extended; about half of the contracts were completed within this extended period, but for the remainder construction continued for periods ranging between two months and almost three years after the revised completion date.

7. The two contracts with the largest time overrun are of some inter- est because the delays were in large part caused by the Taiwanese partner in the joint venture who failed to participate. The audit mission was informed that this was caused by a shift in Philippino international policy which made it difficult for the Taiwanese firm to fulfill its obligations. The Philippino partner in the joint venture by itself had not been prequalified for the construction work and the contract should, therefore, have been reevaluated and probably rebid to adhere to competition rules as well as to ensure good quality. Instead, the contractor was allowed to proceed with the work for which it had neither the experience nor the capacity. Early Bank supervision reports do not refer specifically to the nonparticipation of the Taiwanese partner in the joint venture and merely express full confidence in the local contractor. In spite of numerous concessions by the Government to help the contractor, ultimately more than half of the contract had to be cancelled. The Governnent then proceeded, with the agreement of the Bank, to negotiate new contracts with local contractors. These were selected from a roster kept by MPWH, but the contractors were not prequalified in accordance with the system recommended by the Bank. Two of the new contractors again failed to perform and contracts were negotiated with other domestic contrac- tors selected from the Government's roster (PCR, para. 3.03). In the end, the 104 km of road were built under 12 separate contracts with construction requiring over five years. The contracting procedures used for construction of this road do not appear to have been in accordance with the intention of the Bank's guidelines and it is unclear why the Bank agreed to the deviations. The experience may point at the value of the Bank's system of prequalification and competitive bidding, even though often it is somewhat time consuming.

8. About 85% of the highways covered by the project have been in service for some six years and, other than one 7 km section on which the concrete pavement has Eailed, the roads reportedly are in satisfactory con- dition. The visit of the audit mission to some of the roads confirmed this view. Parts of the San Fernando-Gopan road, however, are on a low embankment which, according to MPWH officials, was decided on to reduce costs in order to find an adequate economic justification for this section. The major bridge in this road has now been completed, but the river bank on one side is still subject to erosion which could affect the bridge over the years. The condition of the project highways apparently forms a sharp contrast with major roads built some 6-8 years ago which were not financed by international organiza- tions and are now suffering from extensive pavement failures. This difference in road conditions may be considered an indication that the Bank's procedures and regular review of progress have made a positive contribution.

9. The minor roads included under the project required rehabilitation after they were damaged by a severe flood in 1972. Selection was done only in a general manner. The PCR describes the problems encountered in the implementation of this part of the project and is rather pessimistic about the results (PCR, paras. 3.07-3.10). According to project completion reports recently prepared by consultants (after the Bank's PCR was completed) all the roads included in the reduced program (para. 5) were properly built. The audit mission visited some of the roads and found these to be in all-weather condition which appears to be the most essential feature required to provide access to the rural areas. However, the surface was extremely coarse leading to low speeds and high vehicle operating costs. The mission could not deter- mine whether these were the intended road conditions or that the surface of selected materials had washed away. The latter may have been the case since apparently maintenance was negligible. The mission was informed that some of the minor roads rebuilt under the project in the region south of Manila are in poor condition. Maintenance is not the responsibility of MPWH since the roads now fall under provincial and barangay jurisdiction. The above, however, raises the question whether financing rehabilitation of these roads, which apparently never were in very good condition, is a valid exercise when there is no simultaneous effort to secure adequate maintenance.!Y

10. Some improvements in maintenance of the national highway system have been achieved but it still remains rather unsatisfactory. The Ministry of Transportation in their comments on the PPAR expresses strong agreement and mentions some of the steps required to achieve improvements (see Annex 2). The issue is also addressed under subsequent Bank financed highway projects and there appears to be some progress. Since the loan agreement refers specifically to maintenance of "all highways in its national highway system" the lack of maintenance on minor roads would not be a violation of the loan agreement.

11. The project included consultants' services for a variety of activi- ties (para. 3). For road design and construction supervision a gradual transition was achieved from exclusive use of foreign consultants to the use of local firms. This change is discussed in some detail in the audit report for the previous project. Since that time further progress has been made but, as the PCR points out, not much improvement was achieved in the organiza- tional ability of the local consultants' middle management staff.

1/ The Government expresses the view that the problem of inadequate mainte- nance of such roads should not be the foremost consideration in deciding to undertake the rehabilitation or construction of roads (see Annex 1).

2/ PPAR Philippines First Highway Project (Loan 731-PH), SecM79-208. - 5 -

12. The technical assistance has been fairly successful. The general consultants who assisted the design and supervision consultants made a posi- tive contribution. The consultants' work on organizational improvements for the highways department and recommendations dealing with highway maintenance organization and procedures met with mixed results. Many of the proposals on internal operations have led to improvements, but a reorganization of the department seemed to ignore part of the recommendations (PCR, para. 3.17).

13. The work done by a separate consulting firm to prepare a program for training highway staff provides an example of the dangers involved in using consultants who are insufficiently familiar with local conditions. The consultants based their recommendations largely on their experience in a nearby country with the result that they took insufficient account of the high standards of education in the Philippines. After the consultants' report was substantially revised it led to the introduction of a satisfactory training program under a subsequent highway loan.

14. The project required 65% longer to implement than was anticipated at the time of appraisal. The most serious delay was caused by the construc- tion problems described in para. 7. The overall cost overrun on the project was 48%. The construction costs of the expressway and the national roads components were, respectively, 53% and 54% over the appraisal estimate. The PCR ascribes most of the higher costs to inflation following the oil crisis and only a small part to physical changes which may indicate that design work was mostly satisfactory (PCR, para. 4.01). However, the cost of bids as awarded differed in many cases substantially from the appraisal estimate with variations ranging from 28% lower to 76% higher. The cost increase on the minor roads component was 18%, but since only slightly over half of the original program was implemented, the cost overrun per km was actually 124%. Part of this overrun was caused by inflation but more importantly the allow- ance made in the appraisal for the construction cost per km was completely inadequate (PCR, para. 4.02).

15. The PCR suggests that the reestimated economic return for the national roads component of the project (about 90% of total project cost) is 27% against 22% estimated in the appraisal report. Even though the PCR makes no reference to it, the returns evidently were reestimated by the MPWH staff and accepted by the authors of the PCR. It should be noted that the economic return is now reestimated for some roads at twice or even two and a half times the value expected at appraisal, with the Manila North road improvements reaching a very high economic return of 50% (PCR, Table 8).

16. The reasons for the substantial increase in the economic returns is not convincingly explained in the PCR. Vehicle operating costs increased, even in constant financial terms, because of the sharp increase in oil prices. However, the audit questions the PCR's use of a higher percentage of vehicle operating cost as road user savings than was found at the time of appraisal. Because the roads have been built mostly to the standards which were fore- seen at appraisal the higher percentage means an assumption that the roads - 6 -

were in worse condition than found at appraisal. To some extent this may have been the case, even though the point is difficult to substantiate since the old condition, when improvement started, is now a matter of memory and no actual measurements are available. However, it seems that a doubling of the savings percentage as suggested in the PCR appears unlikely. The audit mission has not been able to make its own reestimate of the economic return. In view of the nature of the highways and the amount of traffic using them the audit expects the economic return to be satisfactory but substantially lower than the results found in the PCR. In the case of the San Fernando- Olongapo road a major part of the user benefits does not directly accrue to the national economy. The predominant activity at the end of the road con- sists of a US naval base (Subic Bay) and the road provides the direct connec- tion to another US military base at Angeles.

17. The PCR is rather pessimistic about the economic justification of the minor roads. This conclusion is based on a sample of 15 roads out of the total of 40. Only five roads were found to have an economic return of 14-28%; the others were well below 10 with seven providing negative results (PCR, Table 12). Some roads apparently deteriorated rapidly after reconstruc- tion and, therefore, provide no user savings. In other cases, the road surface is so coarse that it leads to high operating costs. However, the audit believes that some of the roads are now passable in all seasons which would not have been the case without the project. Possibly, this has not led to increased agricultural activity, but if the destroyed road had not been rebuilt agricultural production might have deteriorated.

III. POINTS OF PARTICULAR INTEREST

18. A few aspects deserve separate discussion because they show that larger benefits could have been realized from the project than is now the case. Furthermore, they indicate that greater efforts by both the Borrower and the Bank and better coordination of these efforts would have prevented some of the problems and shortfalls of the project.

Economic losses resulting from less than optimal use of the expressway

19. In para. 16 some of the uncertainties involved in reestimating the economic return have been discussed. More important, however, seems to be the fact that certain actions by the Borrower prevent part of the project benefits from being realized. Some of the traffic which could be using the Manila North expressway on which the traffic flows are light, is now using the parallel Manila North road which is in parts extremely congested. This diversion is resulting in higher vehicle operating costs and extra time costs to vehicles, passengers and goods. It is also adding heavy traffic to a road which, though improved under the project, is still older and weaker than the new expressway. The problem is caused by the Government decision to charge tolls for the use of the expressway which results in some traffic diversion to - 7 -

the more congested parallel facility and by the partial ban on truck traffic on the expressway. At first the ban covered all vehicles except passenger cars, but now trucks can use the expressway at night and long distance buses can use it without restrictions. The audit mission has been unable to estimate the magnitude of the losses of the above actions to the national economy, but expects them to be significant.

20. At the time of negotiations the Bank had agreed in principle to the introduction of tolls for the expressway but under procedures to be agreed between the Bank and the Borrower before they were imposed. The agreement stipulated that tolls were to be on an experimental basis; the toll collection was to be operated by the Highways Department; and traffic was to be monitored and if this were to demonstrate that substantial traffic diver- sion was taking place the Borrower was to take all steps required to stop such substantial diversion, including the reduction or removal of such tolls.-Y In spite of these conditions the Government took a number of actions without prior consultation with the Bank which included an agreement with a private corporation to operate the toll system;/ restriction of certain types of traffic on the expressway; and a lack of systematic monitoring (PCR, para. 6.04). Because of the combination of limited data availability and the partial ban on expressway use by trucks, it was not possible to assess the amount of traffic diversion caused by the tolls.

21. The rationale behind the truck ban on the expressway extension is not entirely clear. The Government requested the company which was given the concession for the toll system to construct two additional lanes of the expressway to have a four lane facility as far as Angeles City. This decision was contrary to an understanding with the Bank that the extra lanes would be built only later. Work has been underway on this project since 1978. The most frequently given explanation for the truck ban suggests that the construction company obtained the Government's agreement to the ban to facilitate construction work and increase traffic safety by eliminating some of the slowest traffic on the existing two lane facility. These reasons are rather unusual because normally when parallel facilities are built traffic volumes on the original two lanes are much heavier than they would have been in this case while none of the traffic can be diverted. It is a fact, how- ever, that truck traffic in the Philippines moves at lower speeds than in many other countries.

1/ The Government comments that according to a recent survey 45.6% of the traffic in the Manila North road corridor uses the expressway which is in excess of the 40% which had been set as the minimum acceptable level (see Annex 1).

2/ The Ministry of Transport comments that this decision was taken to attract private sector investment in Government infrastructure projects (see Annex 2). - 8 -

22. The above actions were a clear violation of the loan agreement and have resulted in economic losses to the Philippine economy. When a Bank supervision mission first reported on the problem apparently all jeep, jeep- ney,.!/ bus and truck traffic was prohibited from using the expressway ex- tension. Yet, the Bank's reaction was very mild suggesting that the Bank "...would appreciate it if the Government would reconsider its decision and remove the traffic restrictions...".2 No official reply was received from the Government and the matter was pursued in further letters from the Bank. At the time of negotiations for the Fourth Highway loan (January 1979), confirmation was obtained from the Government "that it would review the sources of highway revenues with a view towards determining the appropriate levels of charges" (SAR, para. 2.18). No further details are given.

23. After more than four years the construction work is far from com- plete and when the audit mission visited the road little construction activ- ity was noticed. The mission discussed the problems with senior Government officials who admitted that because of the construction company's financial problems it may still take many years for the work to be completed. This implies that the truck ban has become almost indefinite unless the Bank were to make special efforts to have it removed. Recently the construction company became insolvent and was taken over by the Government. It is not known what effect this will have on construction of the road, but because of the Govern- ment's budgetary constraints speedy completion of the project is unlikely. The Government in their comments of August 1983 (see Annexes 1 and 2) mentions that after the visit of the audit mission it carried out a study on the effects of the truck ban. The study concluded that there were very strong economic arguments in favor of removing the ban. The Government's Toll Regulatory Board has given instructions that the ban be lifted immediately. However, the toll road operator may still take measures so that overloaded trucks will not use the expressway during the hours that the original ban was in force for safety reasons and to reduce maintenance costs.

Attempts to avoid excessive axle loading were too limited

24. The appraisal recognized the problem of overloaded vehicles damag- ing the road system. A standard covenant was included in the loan agreement that the Borrower was to take steps to ensure that the dimensions and axle load of vehicles using the highways would not exceed the design standards of the highways. However, the action to be taken under the project to ensure compliance with this undertaking was only limited and in the end, because of administrative and technical difficulties, little was achieved. Overloading of trucks is a serious problem in the Philippines. The resulting damage to highways is considerable, especially because many roads do not meet the

1/ Jeeps converted into small buses.

2/ Letter dated June 20, 1978. - 9 -

official design standards either due to age or as a result of unsatisfactory construction. The audLt mission found that the problem is recognized by senior Government officials. The mission noted that part of the Philippine truck fleet has been modified to facilitate excessive loading. This is done by extending the chassis thus providing a longer loading platform; not only is the distance between the front and rear axle longer than normal but there is also a considerable overhang of the platform behind the rear axle. In 1982, the Government and the Bank agreed that under funding from the Fourth Highway Project a study should be carried out to determine the optimal vehicle weights and dimensions. In retrospect, it would have been appropriate had the study been included under the Second Highway Project which would have made the results available almost ten years earlier.

25. The Second Highway Project included procuremnt of fifty portable and nine permanent weighbridges. Procurement of the portable scales took place without any special problems. The scales appear to be mostly in operat- ing condition, but it is difficult to ascertain how effectively they are being used since they were allocated to the different regional offices. Originally the permanent scales were to be of the mechanical type. The Government proposed to buy electronic scales but the Bank raised objections because there was no evidence that these could be maintained in the Philippines. Ulti- mately, however, at the insistence of the Borrower, the Bank agreed to the procurement of electronic scales. Experience indicates that the Bank's reservations were well founded because the scales are now mostly out of order because skilled personnel to make repairs is in short supply and there is also a lack of spare parts. It is, therefore, unfortunate that the Bank did not maintain its original position. MPWH officials mentioned the existence of enforcement difficulties, even when the scales are operational, but suggested that when truckers know that the scales are operating the amount of overload- ing tends to decrease.1/

The Bank's role

26. While the Bank's participation in the project has been positive, the supervision of the project varied in quality. The project was supervised by four engineers and on six occasions the supervision was carried out by engineers who had not participated in the previous mission. Furthermore, some of the engineers involved had rather contrasting views. A Bank staff member who had been seconded to the Philippines' Highways Department was, upon his return to the Bank, sent to supervise the project which would seem a conflict of interest. As noted earlier in this report, the competence of one of the contractors was wrongly assessed during project supervision (para. 7). Other problems included several departures from the normal procurement pro- cedures under Bank financed projects when Bank staff allowed an unquali- fied partner of a joint. venture to attempt the construction work on his own

1/ The Ministry of Transport has in their comments on the draft PPAR ex- panded on these problems (see Annex 2). - 10 - and, subsequently, by agreeing to the negotiation of new contracts without insisting on proper prequalification of the contractors nor on competitive bidding. Furthermore, the original staff assessment on the need to procure mechanical weighbridges should have been maintained (para. 25). A clearer position of the Bank on a number of issues before the start of the project would have been helpful. These might have included a prior study on vehicle weights and dimensions and an understanding on the maintenance of minor roads.

A more coordinated approach to the preparation of the PCR seems required

27. The Government of the Philippines has accepted the Bank's view that at the end of each project a completion report should be prepared. However, the quality of these reports is not uniform with some being very long and not providing an analytical review of the project experience. Delays in the preparation of the reports also tend to be a problem. As a result of the above there is some duplication of effort which should be avoided in the future. For the highway project which is the subject of this audit, MPWH prepared a report on part of the project in June 1979, and a summary evalua- tion of all main highway elements in June 1980. Final reports on construction of the feeder roads were submitted to MPWH in November 1977 and March 1980 by the two consulting firms which each were in charge of part of the works. Subsequently, in 1982, the National Economic Development Authority (NEDA) published a PCR on part of the project. The Bank wrote a PCR in March 1981, using some of the material from the MPWH reports. When NEDA wrote its report it had not received the Bank's PCR nor does it appear that it had access to all the MPWH material. Similar problems occurred with completion reports on the Second Port Project (Loan 939-PH). It is evident that further thought on the streamlining of PCR procedures is desirable to avoid wasting scarce resources. A senior official in NEDA suggested that the Bank might telex them when a project is completed. NEDA would then follow up with the executing agency of the project./

IV. CONCLUSIONS

28. The Bank's participation in the project has been positive. Not only was the financial support useful, but the project has helped to achieve higher quality highways than would have been the case without the active involvement of Bank staff. The latter may also have exerted a positive influence over highway construction practices in the Philippines in general. On the other hand, however, the audit concludes that more consistent adherence

1/ The Government has provided additional comments on their internal procedures for project completion reports and project evaluation (see Annex 1). - 11 - by the Bank to its own guidelines and professional views could have led to an even better result. The project experience further indicates that, when financing minor roads, it is of the utmost importance to have a clear agree- ment on the level of Government which will be responsible for these roads and to ensure that adequate maintenance can be provided.

29. The audit estimates that the economic return of the project will be satisfactory. However, substantial economic benefits are foregone through the use of tolls and especially the ban on trucks and some other categories of vehicles on part of the Manila North expressway. It would appear that the Philippines cannot afford these losses and it is undesirable for the Bank to be associated with such investments. It is, therefore, unfortunate that the Bank has made a further highway loan without the situation being corrected, thereby also throwing some doubts on the value of loan covenants. Efforts by the Government and the Bank in attempting to avoid damage to highways by overloaded vehicles have met with little success. - 12 - Republic of the Philippines ANNEX I NATIONAL ECONOMIC AND DEVELOPMENT AUTHORITY Page 1 P.0 Box 1116. Manila

Tels. 50-39-71 to 95 Cable Address NEDAPHII

August 16, 1983

Mr. Shiv S. Kapur Acting Director-General Operations Evaluation Department International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 USA

Dear Mr. Kapur:

This has reference to your letter dated 20 June 1983 requesting for our comments on the Draft Project Performance Audit Report on the Philippine Second Highway Project (Loan No. 950-PH) prepared by your office. Hereunder are our comments on the aforesaid Report, focusing on the points which we feel need clarification and/or elabo- ration.

On the Maintenance of Project Roads (para. 9 of the Report)

The mission raised the question of whether, in the absence of adequate maintenance, the financing for the rehabilitation of minor roads under the project was a valid exercise. While we recognize the necessity for adequate maintenance in order to achieve the desired level of benefits and to avoid wastage in financial resources, we feel that the problem of inadequate maintenance of such roads should not be the foremost consideration in deciding to undertake the rehabilitation or construction of roads. Rather, the problem should be given its proper focus so that the government would give more attention on how this requirement of maintenance could be met.

On the Imposition of Tolls (paras. 19 and 20 of the Report)

The Loan Agreement for the Second Highway Project stipulated, among others, that the Government may impose tolls on part of the project roads subject to the condition that if the monitoring of the traffic on the expressway during five years after it is opened demons- trates that substantial diversion is taking place, the Government shall - 13 - ANNEX I Page 2 take all steps required to stop such substantial diversion, including the reduction or remtoval of such tolls. A share of 40% for the Manila North Expressway Extension of the total corridor traffic along the Manila North Road was earlier set as the minimum acceptable level.

Pursuant to the aforesaid agreement, the Toll Regulatory Board (TRB), the government agency vested with regulatory powers over toll operations along the MNEE, conducted an actual traffic survey on the MNEE-MNR on April 14-20, 1982 and results of the survey show that the average MNEE traffic share was 45.6% which is above the minimum agreed upon. This finding was accordingly communicated by the Minister of Transportation and Communications in a letter dated 22 July 1982 to Mr. Stephen O'Brien of the Bank's East Asia and Pacific Region. The Philippine Government has, therefore, continued to comply with the provision of the Loan Agreement on toll imposition.

On the Truck Ban (paras. 19-21 of the Report)

Apprehension has been raised by the Mission that economic losses will be incurred if the truck ban continues to be enforced. We agree with the conclusion of the mission regarding these losses.

In this respect, the National Transportation Planning Project under the Ministry of Transportation and Communications (MOTC) came out in July 1983 with a report on the "Cost-Benefit Analysis of the North Luzon Expressway Truck Ban" where a recommendation was made to immediately lift the truck ban on the expressway on the basis of additional economic benefits that will be generated. Acting pursuant to this finding and recommendation, the Minister of Transportation and Communications, as Chairman of the TRE, issued a directive on 1 August 1983 to the Construction and Development Corporation of the Philippines (CDCP) to lift the truck ban on the expressway not later than 31 August 1983. The CDCP has also been directed to undertake measures, with the approval of the Board, so that overloaded trucks will not be allowed to enter the expressway from 6:00 A.M. to 9:00 P.M. for safety reasons and to reduce maintenance costs.

On the Preparation of Project Completion Reports (para. 27 of the Report)

The National Economic and Development Authority (NEDA) through its Projects Economic Staff which has a project evaluation unit, is presently working to coordinate the post-evaluation activities of govern- ment implementing agencies as regards the preparation of Project Completion Reports (PCR) and also with the major foreign lending - 14 - ANNEX I Page 3

institutions' post-evaluation units, particularly with the Asian Develop- ment Bank's Post-Evaluation Office (PEO) and the World Bank's Opera- tions Evaluation Department (OED), with respect to the preparation of Project Performance Audit Reports (PPAR), in order to reduce redundance of efforts by the agencies concerned, NEDA, as well as the ADB and the World Bank. This is part of NEDA's effort to institutionalize a post-evaluation system in the Philippines.

While the NEDA has been involved with PCR preparation in the past, it has withdrawn from this activity beginning in 1981, and is now concentrating on the preparation of PPARs which it is required to prepare under Presidential Letter of Instruction No. 902. Given sufficient time, exposure, and experience in the preparation of PCRs and PPARs, the implementing agencies and NEDA, respectively, hope to produce reports which would be more acceptable to the major foreign lending institu- tions.

We appreciate your giving us the opportunity to comment on the above-mentioned Report and we hope that our comments will be helpful in the finalization of the PPAR. We would also welcome opportunities for us to assist you in your post-evaluation activities in the Philippines as part of our continuing liaison with your office.

Best regards.

Very truly yours,

'Z T. MIER Director Projects Economic Staff - 15 - ANNEX II Page 1 Republic of the Philippines MINISTRY OF TRANSPORTATION AND COMMUNICATIONS PHILCOMCEN Building, Ortigo! Ave.,Posig, Metro Manilo OFFICE of the MINISTER

08 August 1983

Mr. Shiv S. Kapur Acting Director-General Operations Evaluation Department The World Bank 1818 H. Street, N.W. Washington, D.C. U.S.A.

Subject: DRAFT PERFORMANCE AUDIT REPORT ON THE PHTLIPPINE SECOND HIGHWAY PROJECT LOAN

Dear Mr. Kapur,

This Ministry is pleasedto forward herewith the attached detailed comments on the above subject audit report, as prepared by your department. Please note that the comments/ observations are principally geared towards "points of particular interest" of the report, as these relate to the activities of the National Transportation Planning Project (NTPP), the Toll Regulatory Board (TRB) and this Ministry.

It is hoped that the comments therein will be incorporated in the finalization of the draft final report. Thank you for giving this Ministry the opportunity to comment on the report.

Very truly yours,

J4.PD ,J. Minister)

/nam*

83L-MIN-947 173 - 16 -

ANNEX II Page 2

DETAILED COMMENTS

1. Modal Split, 1980

NTPP estimates of 1980 indicates that road transportation accounts for a major proportion in both freight and passenger traffic, and not maritime transportation as indicated in the audit report.

MODAL SPLIT, 1980

Freight T fic Passenger -rafflic

Ton-Km Pass-Km (Billion) (%) (Billion) (% Road 22.0 65 53.0 90 Sea 12.0 35 4.0 7 Rail 0.04 - 0.4 Air nil 1.2 2

2. Road Maintenance

This Minis+-y fully recognizes that the deteriorating condition o' the country's road network is one of the most critical 'ssues lac ng the t-anspor'ation sector. Undermaintenance, as apt'y placed by * audit report, has been the principal factor in th4s dep'orable .rer- over the past 10 years. For instance, the eight year -:72-1980) maintenance allocation should have been only e-ivalent 4or on'y ere year maintenance of the coun"ry's ex'sting road k' c e rave. Failure to provide adequate maintenance funds has, on one hand, 'e to the exorbitant transportation costs, and on the -ther hand to unnecessary investments.

In this light, the NTPP has strongly recommended that the governmer'- adopts po'icies that will ensure maintenance of roac o, adopts maintenance as the priority project that it is. Without th4s balanced program, the country will be faced by skeletal network or high grade roads and large network of extreme'y poor -oads. Cor -e 4 next f ve-year period, it has been recommended tiat voad maintenan funeiny requirements amount to ?1O.P bi'lion or abnut 40 to 5C D- cent above the 1981 level.

3. Expressway Operations

The loan agreement provided that the Government may 4mpose to" on the Burol-Angeles section (now the Manila North 9 2ressway Extension (MNEE)), but that, for the f-rst 14ve years a4ter the - 17 -

ANNEX II Page 3

expressway is opened to public use, traffic should be monitored Zo "determine semi-annually whether such tolls are causing diversion of a substantial part of the traffic to alternative roads" (Section 3.08 (a) (IV) of loan agreement). Similarly, toll collections shall continue only if a minimum share of 40% of the Manla North Road traffic is obtained in the MNEE.

In a traffic survey undertaken during the period 14-20 April 1982, it has been estimated that the average MNEE traffic share was 45.63 per cent. It has also been indicated that it may be expected to increase, if the truck ban obtaining in the MNEE during peak hours is lifted. It is further observed that while truck traffic from Balintawak to Sta. Rita in the North Luzon Expressway (NLE) is greater han MNR truck traff 4c, a reversa' c' the situation is observed at the section Sta. Rita to Ange' . Traffic composition details are shown in Figure 1 for the 1962 traf,c count, and Figure 2 for the 1983 counts (18 Apr ' - 1 May 1983). Expressway traffic are now regularly monitored, on an annual basis, since 1982.

The Government decision to grant the Construction Development Corporation of the Philippines (CDCP) a 30-year franci;se, under P.O. 113 (copy attached), has been premised to attract private sector investments in government infrastructure projects, thereby allowing the government to redirect its own resou-ces to other infrastructure projects. The franchise provided, among others, an annual concession fee to cover government expenditures on the North and South Luzon expressways and reimbursement to government for payments made for external debts in connection with the construction/improvement of the Burol-Angeles extension. For t"o period 1 February 1978 - 15 July 1983, about P38.5 m lion has already been col ected as concession fees from CO'O. Anothor P73.5 mil'ion will be collected over the five-year oeriod from CDCP, at P1.2 million monthly starting May 1983.

4. Truck Ban

Since 1977, a ban on trucks on the two-lane expressway sect;or. from Sta. Rita to Dau has been imposed from 6:00 A.M. to 9:00 A.M., mainly for safety reasons. The wide difference in speeds between trucks and other veh4c'es is considered potent-al' y dangerous on the two-lane "ac'lity, arid the road oortn,ness o many trucks has been believed to be poor. Moreo -, the genera' practice of overloading, in oayt,ular, of sands dnd gravel trucks, exarcebates both the,e problems. These trucks, which are known 'o be reconditioned and relatively cheap seco-d-hand equipment, are liable to breakdown and/or encounter serious mechan cal failures. Hence, this may again be a potena' sour- of congestion and danger on the two-lane facility. 4t6n t s context, the ban has been continuojs'y -n opera- on, and - 18 -

ANNEX II Page 4

ipparen+ly CDCP intends to continue the truck ban until such time as the additional paral1el two lanes presently under construct4on are completed some time in 1984.

It is informed that NTPP has undertaken an economic evaluation vis-a-vis the impact of removing the truck ban on the North Luzon corridor. It has been found that the economic arguments in favor o removing the truck bar are very strong. For ins-ance, an annual net savings of P32 million accrue to trucks, though all vehicle categories benefit, inclusive of time savings. It l kewise has exhibited that the expressway is much safer than the parallel road by a factor of 2-1/2 to 3, and a factor of 2 for trucks alone. Further, the toll fees, at current leve's of overloading, barely exceed the additional maintenance costs. A copy of the NTPP study on "Cost-Benefit Analysis of the North Luzon Expressway Truck Ban" is herewith attached, for your information and ready reference.

In the light of the foregoing conclusions, the Toll Regulat,'ry Board (TRB) and the NEDA Committee on Transport Planning have recently directed CDCP to lift the turck ban immediate'y, but not later than 31 August 1983. CDCP likewise has been directed to undertake measures, for TRB aorovj', that will provide tne corporation the option iot to allow overloaded trucks from entering the expressway section during the ban time period, in order to reduce its maintenance costs. CDCP and TRB shall subsequently monitor the ef'ects of the lifting of the truck ban for joint planning and operdtional purposes.

5. Axle -oads Contro'

At present, there are two relevant laws governing axle '-ad d stributions and weight 'imits, i.e., Republic Act No. 436, as ametded (The Transpotation and Traf" 4 c Code) and letter of Instructions No. 112. Data on ax'e ,oadings, GVWs and weight distribution gathered from loadmeter surveys of the Mn-:ry of Dub7ic Works & Highways (MPWH) obv4ous'y indicate over'oading tendency: 15% of all single axle trucks, 10% of all tandem axle -rucks and 30% of a 1 tandem ax'e semi-trailers are _oaded very much in excess of the allowable limits.

It is, thus, recognized that there is widespread practice of over'oading of trucks, particu'arly three-ax'e stra*ght vehic'es, in tie rountry, heaviest from the orth/ entral Luzon, and then tempe-e in Mindanao and tie '. ,ayas due to geographical terrain and roa surfaces. As --secouence, over'oaded trucks 'moose undue wear and tear on 11gnw, s:ructures, which is not adequately reflected in eithe- road maintenance procedures and expendtures or in road user charges on trucks. in erms of vehicle we;ghts and dimers'-os, tiere are apoarently tn,ee (3) - 19 -

ANNEX II Page 5 problem areas identified in the operation of current regu'ations; (a) the seeming confusion between axle 'oadings and gross vehicle weight (GVW), (3) the pena'ty placed on the operation of five axle truck-semi-trailer by weight rest- 4ctions, and (c) the laxity in the er,orcement of regulations.

To avert excessive axle loading and/or trucks overloading, NTPP 'as recommended the following major measures:

- If overloading can not be controlled and compliance with truck weight regulations can not effectively be enforced in the 'ong term, there may be need to ban importation of three-axle trucks since they impose the most wear and tear on highway structures.

- To continue the present system of ascribing the fare weight, carrying capacity, and GVW to individual trucks when vehicles are reg.stered, based upon the manufacturer's rated capacitec;, and amendments to these be allowed when it can be certified that vehicles have been strengthened to carry heavier weights safely. Registration procedures shall likewise take into account That the actual weights of veh*cles are recorded rather than the reduced weights often declared by truck operators.

More recently, a tripartrite memorandum of agreement (copy attached) has been forged between tie Ministry of Natiora' I)efense, MPWH and this Miristry to ormulate the imp'e-enting guide'ines, criteria nad procedures for the regulation, enforcement ind control o' "extra-ordinary" types of 1e;ght trucks and other vehicles (t-ose exceeding the perm ss: gross weight of 41,000 Kg.). Similarly, "Pavement Investigation, Axe Loads, and Veh 4cle Dimensions and Weights Study" is currently ongoing under a technical assistance grant unde- t9e World Bank 4th Highway Loan Project. ThE objectives of the study cover inter alia identification of optimum limits for vehlcle dimension, axle loads and gross vehicle combination, or trailing, weights, by island, or region or area; determination of the econom c feas4b4l 4ty,of utilizing "ex--a o, nary" good vehicles on the major nter-Urban routes and )ther me,or road system; investigation of the sjaetv a'spects ol 'a-ge vehicles ooerat;ng on various types of roads Q' diffe-en: conditions, ':cludinc irban areas; etc.

/nam* - 20 -

SUMMARY OF TRAFFIC COUNT Page 6 IN ESTIMATED 1983 AADT NORTH LUZON EXPRESSWAY

ANGELES NORTH

ANGELES SOUTH

CONTROL STA. 01 C J B T AADT - 602-r'-9111107 4231 7958

SAN FERNANDO COVERAGE STA. 02 C IJ IB 1T AAD 83961130711219 1509 1431 STO. DOMINGO

COVERAGE STA. 03 C J B T AADT 8569116351413 091 12708j

TIBAG

STA. RITA COVERAGE STA.04 TA.RITA -IC J IB T AADT TABANG251 612 i 155012569 17482 COVERAGE STA. 05 C J 8 T AADT 52781 - 11309129711 95g58 BOCAUE COVERAGE STA. 06 -- C IJ IB IT I AADT 1t9921 1 200?%324015855 31000

COVERAGE STA07 MEYCAUAYAN C I 8 1T* A ADT P"1460 13157162831 38539 A MA CONTROL STA. 08 C J B T AAOT

BALINTAWAK

Figure 2.0 - 21 - ANNEX II Page 7

SUMMARY OF TRAFFIC COUNT IN ESTIMATED 1962 AADT North Luzon Expressway

ANGELES NORTH

m ANGELES SOUTH

CONTROL STA. 07 YEA C IJ B TRK. AADT 198 S60S 207 '10601258 17130

SAN FERNANDO

COVERAGE STA. 06 YEAR J B6 TiKTAADT

1198283851253 11223 451 110312 ~0 STO.SO DOMINGOOIG

SUPPLEMENTAL STA. 05-2 YEAR C J 8 TRK.1 AADT 1962 9361 312 1323 557 i 11553 STIBAG SUPPLEMENTAL STA. OS- I YEAR C IJ TRK. AADT 1962 8699 412 1398 570 11079 CONTROL STA. 05 < STA. RITA YEAR C J B TRK. AADT 1085 16OS12232 17626 TABANG 11982 1270*

COVERAGE ST A. 04 BUROL (BIGAA) YEAR C J B AAT 2 198 3652 1408II96 2792 9248 BOCAUE COVERAGE STA. 03 YEAR C J 1 TRK AADT 19621223211 31701 3166! 5241 33905 COVERAGE, STA. 02 MEYCAUAYAN YEAR C J 8TRK. AADT 1982 2 19 18 4444 3231 4 33922 ALINTA CONTOL STA Of AR C J 8 TRK AADT 1982 24 6907 409 6642i 41876

BALINTAWAK

FIGURE 2.0 - 22 - ANNEX II Page 8 A COMPARISON OF 1982 AND 1983 AADT North Luzon Expressway

ANGELES SOUTH

ANGELES NORTH

SAN FERNANDO

STO. DOMINGO

L E15END:

TIBAG 1982 AADT

1983 AADT

STA. RITA

BUROL

BOCAUE

ME YCAUAYAN

MALINTA

BALINTAWAK

0 5 10 15 20 25 30 35 40 45 50 55 in thousand vehicles / day

Figure 2.4 - 23 -

PHILIPPINES

SECOND HIGHWAY PROJECT - LOAN 950-PH

PROJECT COMPLETION REPORT

1. ENTRODUCTION

1.01 During the sixties the demand for transport in the Philippines expanded at a greater rate than the average economic growth, and capital expenditures in the sector amounted to about 50% of public investment. By 1970 the investment share for highways was over three-quarters of total transport infrastructure expenditures, reflecting the dominant role of this mode which carried about 80% of passenger movements and 60% of freight.

1.02 To provide a better basis for transport investment planning, a UNDP-financed Transport Survey was carried out by consultants in 1968-69 with the Bank as executing agency. The survey highlighted the general lack of adequate capacity, standards and maintenance operation in all modes of transport, recommended a 10-year transport investment program, including a list of high priority roads for improvement, and proposed major organizational changes in Governmen: agencies dealing with transportation. A direct result of the survey was the start in 1970, with Japanese assistance, of construction of the 2,000 km Pan-Philippine Highway extending from the north of Luzon to the south of Mindanao. The survey was also the basis for the Bank's First Highway Project (Loan 731-PH for US$8.0 million, of April 14, 1971) which financed construction of a 160 km road in Mindanao and preparation of studies and designs Eor other high priority roads which form the main component of the Second Highway Project. The principal elements of the project are the reconstruction of about 700 km of trunk roads on the island of Luzon and about 700 km of secondary roads contiguous to the trunk roads included in the project, technical assistance to the executing agency, the Bureau of Public Highways, /1 and preinvestment studies of additional roads which were subsequenl:ly financed under the Third and Fourth Highway Projects (Loan 1353-PH for US$95 million of January 12, 1977, and Loan 1661-PH for US$100 million of March 9, 1979.)

1.03 This completion report is based on information obtained from the East Asia and Pacific Information Center, Appraisal and Supervision reports for Loan 950-PH and discussions with NPH and other Government officials.

/1 In 1974 the Bureau of Public Highways was separated from the Department of Public Works, Transportation and Communicatins and became the independent Department of Public Highways. In 1978 the name was changed to Ministry of Public Highways (MPH). 24 -

2. PROJECT PREPARATION, APPRAISAL AND NEGOTIATIONS

Preparation

2.01 Project preparation began with UNDP-financed feasibility studies by consultants of 1,200 km of roads which were identified as high priority roads after screening of the whole national road network (para. 1.02). Of this total 1,200 km examined, 554 km was found most feasibly and subsequently detailed engineering of these road sections was completed under the First Highway Project by one foreign consultant, five joint ventures of local and foreign consultants and a design team comprised of MPH staff. In 1972, following the severe flooding of Luzon, feasibility studies and detailed engineering were carried out by consultants for an additional 137 km of damaged main roads thus forming a total trunk road improvement program of 691 km. In addition, about 700 km of minor roads, some severely damaged by the floods, would be improved under the Project. The foreign consultant was designated by the MPH as the "Coordinating Consultant" with a view to obtaining standardization of designs, plans and tender documents. However, the consultant was also preparing detailed engineering for two road sections and their preoccupation with this work, coupled with an unclear definition of responsibilities for the coordinating role, resulted in rather wide variations in the design approach, plans and documents produced by the other design teams. The problems resulting from assigning such a dual and somewhat conflicting role to one consultant was recognized and avoided in preparing the ongoing Third and Fourth Highways Projects, for which one consultant was only assigned a coordinating role (para. 3.14).

Appraisal

2.02 The project was appraised in June 1973 and consisted of the following:

(a) construction on new alignment of a 51 km national expressway with 6 km of access roads;

(b) reconstruction and improvement, largely along existing alignments, of seven national roads totalling 640 km in length;

(c) rehabilitation of 700 km of minor roads connecting to the above national roads;

(d) consulting services for (i) construction supervision of the above roads; (ii) feasibility studies and detailed engineering (financed retroactively) of 137 km of roads included in (b); (iii) detailed engineering for future road projects; (iv) continuation of ongoing technical assistance; and (v) assessment of MPH training needs; - 25 -

(e) procurement: and installation of weighbridges for axle load control on national roads; and

(f) consulting services financed by UNDP for reconnaissance studies of 1,800 km of roads and subsequent feasibility studies of selected road sections.

2.03 Negotiations took place in Washington from October 29 to November 2, 1973 and on December 4, 1973 the project, amounting to US$68.0 million, was approved by the Executive Directors. The loan was signed on December 12, 1973 and became effective on December 27, 1973.

2.04 Details of the project agreed at negotiations and the cost estimate for the various elements as shown in the Appraisal Report are given in Table 1. The locations of the road elements are shown on the attached map.

III. PROJECT IMPLEMENTATION

A. National Roads

3.01 The national roads, including the expressway, were divided into 14 separate contracts for international competitive bidding by prequalified contractors. Bidding was carried out in six separate lots consisting of two or three contracts each ranging in estimated cost from a low of US$3 to a maximum of US$21 million with most in the US$5-8 million range. The six lots were bid over a period of five months at average intervals of about one month to generate maximum participation and contractors were given the option of bidding individual contracts or combinations; this resulted in generally good competition. Nine contracts were awarded to domestic contractors, four to a Korean contractor and one to a domestic/Taiwanese joint venture. The individual contracts and bid prices are listed in Table 2.

3.02 Practically all contracts suffered initial delays for a variety of reasons. Most important of these were:

(a) the oil crisis of late 1973/early 1974 which caused sharp price increases and shortages of equipment, fuel and certain materials. This created problems of working capital with many contractors in spite of advance payments (para. 6.07);

(b) delays by Government in acquisition of right-of-way and relocation of utilities;

(c) poor contractor job organization and lack of managerial skill, particularly among domestic contractors; and

(d) complex and time consuming Government procedures for processing interim payments certificates and construction change orders. - 26 -

In spite of these early problems, most contractors were able to complete the work in accordance with, or only slightly later than, revised schedules reflecting justified time extensions. There were, however, three notable exceptions. One was Contract No. 2 of the Taytay-Calamba Road which was completed some nine months later than the revised completion date; the total construction period was about 3-1/2 years. Extensive delays were encountered in the early stages of construction due mainly to the contractor's lack of equipment, poor management and shortage of funds. The latter two problems persisted for more than two years largely because of internal problems stemming from the fact that the contractor was a joint venture of several domestic firms whose individual responsibilities and contributions were not clearly spelled out in their agreement. Most of these matters were finally resolved but the lost time could not be recovered.

3.03 The other two contracts which were delayed extensively were the Olangapo-San Fernando and San Fernando-Gapan roads which were awarded to a domestic/Taiwanese joint venture. For reasons which remained unexplained, the Taiwanese partner never participated and the domestic contractor did not have the experience and capacity to carry out the work alone. Although the Government made numerous concessions in an effort to maintain the contracts, it was finally forced to terminate some 59 km of the original 104 km covered by the two contracts and award the deleted work to several other domestic contractors on a negotiated basis with three short sections being completed by MPH force account. The Bank was in agreement with the procedures for termination and negotiation of new contracts. Two of the new contractors proved incapable of fulfilling their obligations and part of their work was again awarded to domestic firms following negotiated agreements. The end result was that the 104 km of road work was finally divided into 12 separate contracts (Table 3) with construction taking a little over five years as compared to the original two year contract period. Although the road work has been completed, traffic is still unable to use the facility near Gapan at the eastern end because of an unfinished bridge over the Arayat River. The bridge was lost during a major flood in May 1976, due to excessive scour around the foundations; considerable soils investigations were required before a suitable substructure design could be prepared. Again, in 1978, during foundation construction which required special equipment and methods, more unexpected heavy flooding damaged the ongoing work and resulted in further delays. In May 1980, torrential floods once again destroyed one span of the nearly completed bridge; its completion has now been estimated by June 1981.

3.04 With only two small exceptions, the quality of construction on the expressway and national roads is good. The reconstructed deck of a bridge on Contract No. 3 of the Malinta-Rosario road needed to be replaced and a 7 km stretch of new cement concrete pavement on Contract No. 1 of the same road has cracked extensively and will need strengthening. The contractor has agreed to pay for the new bridge deck; the failed pavement will be repaired by MPH. - 27 -

3.05 Construction supervision was provided by the consultants and the MPH design team who prepared the detailed engineering. Details are provided in Table 2. In general, supervision was satisfactory. In the initial phases of construction, several local contractors felt that the specifications and scheduling requirements spelled out in the contract documents were being enforced too rigidl:r, but most of these problems were quickly resolved and good working relations were established on all contracts. Excellent oppor- tunities were afforded for on-the-job training of local consultants' field staff who comprised the majority of the supervisory teams. Although only a nominal number of expatriates were originally assigned to each contract, it was possible to reduce these numbers even further, as the work progressed, because of proved local staff capability.

B. Minor Roads

3.06 The project also included rehabilitation of about 700 km of minor roads contiguous to the national roads constructed under the project. The roads were to be seXected by MPH during project implementation. The cost of the rehabilitation was estimated at appraisal to average about US$10,000 per km on the basis of MPH's experience with construction of a similar type of road, and it was agreed at negotiations that the necessary designs would be prepared by the consultants supervising construction of the contiguous national roads with construction contracts to be negotiated with the national road contractors. Subsequently, however, MPH felt that the minor road program should be utilized to develop design and supervisory capabilities in the regions and districts and would afford good opportunities for small domestic contractors. Consequently, they proposed the following major procedural changes with which the Bank agreed:

(a) selection, necessary engineering and construction supervision would be carried out by the appropriate MPH Region with help from District 3taff in consultation with local officials and with technical assistance by an engineer appointed by one of the consultants supervising national road construction in that Region;

(b) construction contracts would be awarded after local competitive bidding with the contiguous national road contractor also allowed to bid regardless of nationality, or alternatively, by negotiations if this was considered most advantageous; and

(c) contracts would be sized and offered for bid or negotiations on a schedule which would offer maximum opportunity for small domestic contractor participation.

3.07 Following a detailed field inspection of all candidate roads, the Government determined that only 370 km (rather than 700 km as agreed) would be improved under the project because:

(a) 179 km had been or were to be designated as national roads and were already being improved with local funds or were - 28 -

to be studied further to determine the type of improvement required;

(b) about 126 km had already been repaired or improved by local Government authorities; and

(c) 25 km were very lightly traveled roads which were still passable and for which no improvements were considered feasible.

Since an additional 305 km would be or have been improved with the Government's own resources (as stated in para. 3.07(a) and 9b)), the Bank agreed in 1978 with the Government that its commitment to rehabilitate 700 km of minor roads would be substantially fulfilled.

3.08 There were some initial delays in organizing the regional survey and design teams and rather lengthy discussions of appropriate design standards with considerable pressure from local officials for higher class roads than warranted in many cases. The first contract was awarded in May 1975 and a total of 40 contracts ranging in size from about US$53,000 to a maximum of about US$600,000 were signed over a two-year period, all with domestic contractors; 31 were awarded after competitive bidding and nine were negotiated with Bank approval. Details of all contracts are given in Table 4.

3.09 Field inspection of selected minor roads by the Bank's latest supervision mission and MPH staff revealed generally poor road conditions due to both the low quality of rehabilitation as well as to the lack of maintenance. Only 4 out of 15 minor roads surveyed were found to be in fair condition (see results of economic analysis - Para. 5.09).

3.10 The major reasons for the poor implementation of this component appear to be:

(i) because of MPH interest in promoting small domestic contractors, the prequalification requirements were not stringent; and consequently, contracts were awarded to a number of inexper- ienced contractors with limited operating capital, old equipment, lack of trained personnel and inadequate management. The contractors- problems were compounded during the imple- mentation period by sudden price increases which were not reimbursed promptly by the Government, and by the heavy rains and floods which washed away road sections and temporary bridges; - 29 -

(ii) construction supervision by MPH Regional Offices was not carried out with the same thoroughness that generally accompanied supervision of national roads. Closer supervision and tighter quality control by the appropriate Regional Offices might have exacted better performances of the contractors; and

(iii) the minor roads included in the project were a mixture of national, provincial, municipal and barangay roads. Despite the clear administrative responsibility for maintenance of these different types of roads by various government agencies, little maintenance or repair work was carried by any of them, resulting in the rapid deterioration of road conditions.

C. Consulting Services

Supervision of Construction

3.11 Construction supervision of the expressway and national roads was adequate as explained in the preceding discussion (para. 3.05). However, the minor road rehabilitation component should have been supervised more carefully (para. 3.10).

Feasibility Studies II

3.12 The Bank was executing agency for UNDP-financed feasibility studies (Feasibility Studies II) carried out under this project for about 1,800 km of national and minor roads. The studies, prepared by consultants, were completed satisfactorily and on time in June 1975. The consultants identified throughout the country road sections having high priority for improvement or reconstruction and which formed the basis for the Bank's ongoing Third and Fourth Highway Projects.

Detailed Engineering for Third and Fourth Highway Projects

3.13 Based on :he findings of Feasibility Studies II (para. 3.10), about 610 km of national and 250 km of minor roads were designed under this project for possible inclusion in the Bank's Third Highway Project. In addition, some 410 km of national and 180 km of minor roads were designed for consideration as part of the Fourth Highway Project. While local consultants were responsible for most: of the design work on national roads, MPH Regional Offices executed the designs for minor roads, in order to improve their design capabilities. The design work was completed satisfactorily in August 1976 for the Third Highway Project and in October 1977 for the Fourth Highway Project. Details are shown in Table 5.

3.14 As the MPH headquarter units had no experience in organizing and supervising such a large and complex design operation, particularly when it - 30 -

involved relatively inexperienced consultants, it agreed with the Bank to retain a separate consultant for this purpose. This consultant was selected for the assignment with his terms of reference providing that he takes primary responsibility for supervising and coordinating the design work for the Third Highway Project with MPH, with the help of counterparts assigned from the headquarters design and construction divisions. Later, the counterparts would take the lead for the Fourth Highway Project, and the consultants would only assume an advisory role. The consultant, designated as "General Consultant," performed his assignment well for the Third Highway Project and rendered valuable assistance to the design consultants, and in particular to the four regional design units. However, the plan for training counterparts could not be implemented. Several counterparts posts were never staffed and most of those who were assigned were not of the rank and qualification required to subsequently take a responsible position in their parent unit for work on the Fourth Highway Project. As a result, the General Consultants were required to continue their line function for the Fourth Highway Project design phase and were instrumental in its satisfactory completion.

3.15 In general, the performance of the design consultants was satisfac- tory and they reacted favorably to the MPH/Bank decision to make them solely responsible for the work. All firms retained foreign associates to provide selected key staff who, together with the General Consultant, furnished needed assistance in job organization, management and in some areas of design particulars. There is no doubt that the local firms gained valuable design experience and training by undertaking such responsible roles but there is little evidence that most firms realized significant improvements in work organization ability through development of their own middle management staff. This matter has been discussed with MPH and the consultants and improvement of this deficiency will be given particular attention in future work.

Technical Assistance

3.16 Technical assistance by consultants, to help improve the organi- zation and operations of MPH, began in 1971 under the First Highway Project. The assistance was financed by the UNDP with the Bank serving as executing agency. A continuation of the assistance by the same consultant was included in this project with particular emphasis on improvement of road maintenance planning and methods, and development of a five-year road maintenance plan.

3.17 The consultants completed their work satisfactorily in May 1975. They produced a report on the principal efforts and accomplishments of the organizational improvements begun under the First Highway Project; issued maintenance manuals giving details of recommended field maintenance organizations, facilities and procedures; and proposed a Five-Year Highway Maintenance Program. However, the achievements resulting from these efforts are mixed. On the organizational side, many of the consultants' recommenda- tions for MPH internal operations were adopted and resulted in noticeable improvements. But, a major structural reorganization of MPH, which took place - 31 -

in May 1974 as part ot- Government-wide organizational changes', was carried out wihtout any consultations with the consultants and seemingly ignored some of their principal recommendations. Much of the consultants' maintenance manuals have been adopted officially but actual change in field practices have been spotty and quite slow; this aspect is being given considerable attention under both the Third and Fourth Highway Projects. Although the Five-Year Highway Maintenance Program was adopted by MPH and has been updated twice since its issue, implementation of its major recommendations under the follow-up Third Highway Project has been disappointing. There was good progress in effecting improvements in maintenance equipment repair, replacement and management, including expansion aad improvement of field workshops, but, for the first 8-9 months of the follow-on project there was essentially no progress in implementing the road restoration (deferred maintenance) program and agreed changes in road maintenance planning and budgeting. Beginning in early 1978 the Bank strongly took up the subject to bring about needed improvements in these latter areas and by the end of that year some noticeable progress had been made, including agreement on a detailed road maintenance action program. This key matter of improving road maintenance continues to be followed closely under both the Third and Fourth Highway Projects.

Training Assessment

3.18 The project included an overall assessment, by consultants, of training needs within the MPH and development.of a long-term training program. A consulting firm was retained for this service and they issued their draft report in February 1976. Both the MPH and the Bank felt that the consultants had not given adequate consideration to the generally high educational standards and "quick learning" ability of MPH staff, particularly in the field organization, with the result that the recommended training program appeared unnecessarily extensive. Following discussions, the consultants issued a revised report which proposed a more modest program focusing on development of an effective training unit within MPH and giving priority in initial training efforts to equipment and road maintenance. This program was accepted by MPH and is being implemented under the Third Highway Project with assistance by the same consultants. A separate training unit has been established at MPH headquarters, full-time training officers have been assigned in many of the field offices and most of the training courses are being designed, prepared and presented by the training officers with only nominal guidance by the consultants.

Weighbridges

3.19 Under the project, the Government agreed to institute a system for axle load and truck dimension control and enforcement. To assist in this program, the project included financing of 50 portable loadometers and weighbridges for nine permanent weighing stations. The 50 loadometers were received and distributed to the regions in late 1976 (Table 6) and a program for truck weighing throughout each region was initiated in May 1977. Reports - 32 -

so far indicate a reduction in overloading since the program started but there has recently been a marked reduction in the activity of the Bureau of Land Transport (Ministry of Transport and Telecommunications) which enforces the program. MPH is making efforts to correct this problem.

3.20 The nine permanent weighbridges were received in May 1977 and all but one weighbridges have been installed. However, as of early 1981 only one in Digos (Mindanao) was in operation for the various reasons described in Table 6. Repairs are being made presently (January-February 1981) with spare parts financed under the Fourth Highway Project.

IBRD Projects Office

3.21 Under the project a special office, the IBRD Projects Office, was created within the MPH in September 1973 to supervise and coordinate the work under this and subsequent Bank-financed highway projects. For the first two years the office was headed by a seconded Bank highway engineer after which the duties were taken over by the MPH engineer who had served as counter- part. Subsequently, at the Government's request, the Bank highway engineer returned in an advisory capacity for a second two-year period beginning in October 1976.

3.22 The office proved to be valuable in helping MPH coordinate prepara- tion and execution of this project and is continuing to function for the Third and Fourth Highway Projects. In the initial phase of this project the office performed a number of functions /1 which normally would be carried out by MPH headquarters units due mainly to time constraints and the fact that the MPH units had little or no experience in carrying out such a large and complex project. The policy was to transfer all work to the appropriate MPH units as soon as possible and reduce the office's role to one of strict project coordination and overall monitoring. This transfer was fairly quickly and successfully accomplished with respect to equipment procurement, workshop improvements and other matters handled by the MPH Bureau of Equipment and for all traffic and economic work carried out in the Project Planning and Development Office. However, there was essentially no progress in getting the Design, Construction and Maintenance Divisions (all part of the same headquarters Bureau) to take any responsible role in project implementation. Although the same situation still exists at this time, recent separation and promotion of road maintenance to a separate Bureau and assignment of new Bureau directors is expected to improve matters and eventually relieve the IBRD Projects Office of all functions except the intended coordinating role.

/1 Some of the principal items were: review of bid documents; bid evalua- tions; organizing and monitoring construction supervision; review of change orders and monthly contractor payment certificates; review of consultants- design work; and monitoring road maintenance and restoration programs. - 33 -

IV. COST ESTIMATES AND DISBURSEMENTS

4.01 A comparison between appraisal cost estimates and final costs is shown in Table 1 with details of costs for individual road construction contracts given in Tables 2, 3 and 4. The final project cost, excluding UNDP-financed feasibility studies and road right-of-way, is US$174.7 million, some US$53.7 million or 44% more than the appraisal cost estimate of US$121.0 million, including contingencies. As shown in Table 2, final costs of the expressway and national road construction, which constitute the major share of project costs, increased by US$50.0 million, or 53% over the appraisal estimate (including contingencies) and US$50.6 million or 54% over the total bid price. About 85% of the increase over bid price was due to inflation following the 1973/74 oil crisis and the small increase of US$7.6 million, or 5% of total construction costs due to physical changes attests to the quality of the design work and the close control exercised during construction by MPH and the supervising consultants. Regarding the latter, construction supervision costs incteased about 40% from the appraisal estimate of US$9.3 million, including contingencies, to US$12.6 million. This increase was due to the longer constru:tion time required for almost all contracts.

4.02 As shown in Table 4, the cost of minor road construction increased significantly from an appraisal estimate of US$7.7 million (including contin- gencies) for 700 km oE roads to US$9.1 million .for only slightly more than half the length (370 km). Here also inflation played a big part in the cost increase but the appraisal estimate of US$10,000 per km average cost plus 10% physical contingency allowance proved to be completely inadequate, although every effort was made in design and construction to keep costs as low as possible but with appropriate standards.

4.03 The totals in Table 1 show that in spite of the 44% increase in total project cost, the estimated actual foreign exchange cost of US$69.4 mil- lion is only slightly more than the US$68.0 million provided by loan funds. This is due almost entirely to the fact that all but four construction contracts were carried out by local contractors while the appraisal estimate was based on the majority of the work being awarded to foreign contractors and the assumption that their foreign exchange cost was nearly 50%.

4.04 Disbursements lagged well behind appraisal estimates throughout the project period as shown in Table 7. This was the result of the very slow startup on most construction contracts (para. 3.02) and the much slower rate of implementation than had been assumed at appraisal. The Closing Date was extended twice; first by 18 months from the original December 31, 1977 to June 30, 1979 and then by an additional 12 months to June 30, 1980. The loan funds were fully disbursed on August 6, 1980. The disbursement rate for Category I, Civil Works, was reduced in June 1975 from the original 55% to 35% when construction work had progressed to the point where a sizable cost overrun was certain. However, it later became clear that the foreign exchange cost of - 34 -

construction would not increase proportionately with the total cost; this was due to the fact that most of the works were executed by local contractors, and their foreign exchange requirements were lower than those estimated at the appraisal (para. 4.03). The disbursement percentage for that category was increased to 70% effective November 1, 1977 so that loan funds could be fully disbursed.

4.05 The allocation of loan funds was revised twice as shown below mainly to provide for the substantially increased cost of expressway and national road construction (Category I) and a small increase for minor road construction (Category II).

Original 1st 2nd Category 12/12/73 06/19/75 04/17/78 ----- (US$ million) --

I. Civil Works 43.00 49.50 52.78 II. Civil Works for Minor Roads 5.00 5.00 5.71 III. Consultants' Services 9.00 9.00 9.00 IV. Weighbridges 0.50 0.50 0.51 V. Unallocated 10.50 4.00 0.00

Total 68.00 68.00 68.00

V. ECONOMIC REEVALUATION

A. National Roads

5.01 The national roads improved under the project, located on Luzon, are generally oriented north-south, convergent on the Greater Manila area, with the exception of the San Fernando-Gapan-Olongapo road which runs eastwest and serves central Luzon. All these roads constitute the most important part of the road network, with the highest traffic volumes on the island. The areas served are densely populated with industrial development near the Metropolitan Manila area and Laguna de Bay and important agricultural production areas (particularly rice, sugar cane, coconuts, pineapples, vegetables and logs) in central Luzon where food processing industries, including sugar refineries and wood industries, are located.

5.02 The economic activities and inhabitants in the road influence areas benefitted substantially from lower transport costs and reduced travelling time made possible by the project. Thus, the project's major objective of reducing high transport costs has been achieved. The economic reevaluation - 35 -

of the project roads quantifies only the benefits from reduced vehicle operating costs from what they would be without the project. The rates of return estimated during appraisal ranged from 18%-to 29% with an overall rate of return of 22%, as compared with ex-post returns ranging from 21% to 50% with an overall return of 27% (Table 8).

5.03 The traffic and origin-destination surveys undertaken in 1974-79 on the project roads indicated that the actual traffic growth rates between 1974 and 1979 were much higher (7-9%) than those estimated during appraisal (5-7%), with the exception of the road section between Santo Tomas and Batangas City (43 km) where the average annual traffic growth rate remained about the same (5%) as projected at appraisal. Exceptionally high growth rates were observed on the Manila North Road, especially on the Malinta-Angeles section, where the average annual daily traffic (AADT) in 1979 reached over 15,000 vehicles, more than double the AAIT in 1971 (Table 9). The major reasons for such a high volume of traffic is the rapid urbanization and attendant expanded economic activities that have developed in this corridor since 1971, faster than foreseen during appraisal. The truck ban on the parallel expressway during the daylight hours (para. 6.11) has also contributed to the unusually high volume of truck traffic on this road.

5.04 In estimating future traffic growth rates (Table 10), it has been assumed that the truck ban on the Manila North Expressway Extension (parallel to the Manila North Road) would be lifted once the present two-lane facility is widened to four lanes (estimated year 1982), and that the Olongapo-San Fernando-Gapan Road would be completed by the end of 1981 (para. 3.03). The traffic estimates are based on the national averages adjusted for expected population and income growth and increase in agricultural production anticipated in the influence areas of the project roads.

5.05 The cost stream (net of duties and taxes) of the economic analysis includes the construction cost of the national roads including engineering, supervision and right-of-way, and the costs of periodic maintenance. Despite a 50% increase in overall construction cost, the returns are higher than appraisal estimates due to steeply increased fuel prices /1 generating larger savings in vehicle operations costs, combined with more rapid traffic growth than anticipated. The construction cost of the national roads comprises 76% of the total project costs. The savings in vehicle operating costs obtainable from improved road conditions range from 14% to 60% on the various roads (Table 11).

B. Minor Roads

5.06 During appraisal no economic analysis was undertaken of the minor road component: MP'H was to select 700 km out of 1,100 km of roads damaged

/1 The price of Saudi Arabian light crude oil f.o.b. was US$1.85/ barrel in January 1972. The current price in Decmeber 1980 is around US$30/barrel. - 36 -

in the 1972 disaster floods, using a simple priority ranking system. However, project selection criteria were not strictly applied by MPH to justify individual roads, and the Bank did not insist on a systematic procedure during supervision. Moreover, only 370 km of minor roads were improved with Bank funds (para. 3.07).

5.07 For the post economic evaluation, 15 (26% sampling in terms of length) out of a total of 40 minor roads were selected for analysis. These 15 roads were considered to represent a cross section of "typical" minor roads improved in each province under the project. In 1980 field data were obtained on detailed road conditions and traffic volumes, and farmers in the road influence areas (RIAs) were interviewed. Due to the lack of reliable agricultural data at the village level, a before/after comparison is not possible. However, interviews with farmers in the RIAs indicated that road improvements brought little development benefits. Therefore, the quantified benefits are solely in the savings in vehicle operating costs.

5.08 The volume of traffic on the 15 roads ranged from a low of 42 AADT to a high of 976 AADT with 5 roads having less than 100 AADT; 7, between 101 and 300 AADT; and 3, above 600 AADT (Table 12). Since traffic counts were never made before the 1980 survey, it is difficult to estimate traffic growth rates in the recent past. However, for future traffic forecasts it was assumed that growth rates on the minor roads would be the same as those forecast on the adjoining national roads.

5.09 The results of the economic analysis is not surprising considering the poor average conditions of many roads after improvement, as described in para. 3.09: the returns are negative on 7 roads; very low on 3 roads ranging from 0.2% to 4.2% and positive only for 5 roads at satisfactory levels of 14%-28% (see Table 12).

VI. INSTITUTIONAL DEVELOPMENT

Institution Building

6.01 Institutional improvements under this project were rather nominal but some significant changes took place and the project has served as a good basis for continued efforts toward better organization and operations under the Third and Fourth Highway Projects. While major organizational changes at MPH headquarters were not possible (para. 3.17), some notable internal improvements were made such as creation and staffing of a separate training unit (para. 3.18), substantially increased participation and responsibility by the Bureau of Equipment and the expanded role of the Project Planning and Development Office (para. 3.22). Failure of the Design, Construction and Maintenance Divisions to become active in the project was disappointing but efforts are being made to improve their performances under subsequent projects (para. 3.22). - 37 -

6.02 MPH reporting on project implementation was only fair for most of the project period but was unsatisfactory in the later stages. A basic problem was that reporting requirements were not discussed and agreed in any detail during negotiations. Reporting is somewhat better on the Third and Fourth Highway Projects.

Compliance with Covenants

6.03 In general, the Government complied with the loan covenants, namely Section 3.07 of the Loan Agreement which required Government to submit a plan for location and operation of weighbridges, Section 4.03 which required Government to submit by December 31, 1974, a proposal for a data collection system on all transport modes; and to a lesser extent with Section 4.05 which required Government to ensure that vehicle dimensions and axle loads do not exceed limits specified. There were, however, two exceptions; application of tolls on the expresaway and road maintenance. The substance of the two covenants and defici-encies in Government compliance are described below.

6.04 Section 3.08 of the Loan Agreement requires that.procedures for imposing tolls on the expressway be agreed with the Bank beforehand and that the system be experimental and operated by MPH; that a traffic monitoring program be implemented; and that the Bank be consulted in establishment of the initial toll rates and before making any subsequent changes. Despite these provisions, the Government, without any consultation with the Bank: (i) entered into agreement with a private corporation to operate the toll system; (ii) established a Toll Regulatory Board with authority to set toll rates; (iii) restricted expressway use to passenger cars and express buses with selected trucks allowed only at night; (iv) failed to set up a traffic monitoring system; and (v) is constructing two additional lanes to provide a full four-lane facility for the entire length and has indicated that any change in traffic restrictions and the start of a traffic monitoring system will be deferred uni:il the widening work is finished. The Government actions stated in (i) to (v) are in violation of the Loan Agreement. The Bank-s numerous efforts through letters and discussions to correct these violations were unsuccessful; the Bank has objected strongly particularly to the Government's ban on truck traffic on the expressway since the ban prevents benefits obtainable from reduced vehicle operating costs of trucks using the expressway to materialize, and the truck ban virtually made monitoring of traffic meaningless. However, during the negotiations for the Fourth Highway Project, the Government agreed that it would review the sources of highway revenues with a view towards determining the appropriate level of charges, and began, after some delay, to assemble relevant data. Government-s recommendations on this matter are expected by mid-1981.

6.05 Section 4.04 of the Loan Agreement requires the Government to maintain the national highways system properly and to provide all needed funds and other resources. While maintenance funding showed some improvement - 38 -

over the project period, maintenance of the road system continued to be generally unsatisfactory. Some organizational and administrative changes were made at the field level but there were no significant improvements in maintenance planning and operations. The Third and Fourth Highway Projects, particularly the latter, are addressing this issue and there have been some gains under these projects.

Project Execution

6.06 The MPH benefited significantly from the technical assistance (paras. 3.16 and 3.17) and creation of the IBRD Projects Office (paras. 3.21 and 3.22).

6.07 The MPH took some fairly inventive and positive steps under the project to stimulate participation and improve performance by local contrac- tors. Principal among these were:

(a) bid documents were revised to spell out more clearly the division of responsibility and authority between the MPH, the contractor and the supervising unit; this strengthened the supervisory role and improved relations between all parties;

(b) an interest-free cash advance was granted and partial payment was made for accepted materials on site as a means for improving con- tractors' cash flow; the partial payment for materials worked well and was beneficial but, although the idea of a cash advance was sound, control of its use was poor and there were a number of abuses by contractors; improved provisions have been made in the Third and Fourth Highway Projects; and

(c) concessions were granted to waive import duty for construction equipment to place domestic contractors on a par with foreign bidders in this respect.

The fact that 10 of the 14 major road contracts were won by domestic contractors and executed with only one partial failure, and that all 40 minor road contracts were carried out by local contractors with but two failures, attests to the general success of the MPH efforts in this regard.

6.08 Originally, the construction contracts did not contain provisions for price escalation but this was the subject of a Presidential Decree issued in May 1974 covering all ongoing Government contracts. The idea was excellent but the Decree did not spell out the method of implementation with the result that application varied widely throughout the Government and payments were delayed extensively. In fact, several of the contractors under this project have yet to be paid fully for price escalation. This problem has been avoided in the Third and Fourth Highway Projects by including price escalation provisions in the contract documents. - 39 -

6.09 With a few minor exceptions, adequate Local funds were provided promptly for project execution. The MPH made very significant improvements in procedures and time requirements for payments to consultants and contractors. There were also marked improvements within MPH in the review and processing of construction change orders but these gains were largely negated by a later Government requirement that all change orders be preaudited by the Commission on Audit. This caused extensive delays in the work and payments to contractors. The Bank is continuing efforts to ease the problem under the Third and Fourth Righway Projects.

6.10 Acquisition of right-of-way and relocation of utilities was not entirely satisfactory and was the basis of numerous claims by contractors for extra costs and time extensions on several construction contracts. Efforts toward improvement umder the Third Highway Project were only partially successful and further corrective steps are being taken under the Fourth Highway Project.

6.11 Additional problems and extensive time delays resulted from MPH concessions and reluctance to terminate the two contracts on the Olangapa- Gapan road when it became apparent that the contractor could not complete the work (para. 3.03). When it was finally decided to terminate part of both contracts, more difliculties and delays resulted from negotiating very small new contracts with several contractors. These problems have been avoided in the Third Highway P*roject where several contracts were terminated immediately when contractor performance and capability slipped to a certain level; rebidding of the full contract has been undertaken by prequalified con- tractors, rather than directly negotiating the works with another contractor.

6.12 MPH showed considerable initiative in expanding the use of local consultants and assigning them a greater share of the design and construction supervision responsibilities than in the past. These efforts have been generally successful and have contributed measurably to the growth and increased capability of the local consulting profession.

VII. ROLE OF THE BANK

7.01 The Bank contributed significantly to project identification and preparation, initially as executing agency for the 1968-69 UNDP-financed Transport Survey, later by financing preparatory detailed engineering under the First Highway Project.

7.02 Although it was fairly complex, the project's scope and size was, for the most part, appropriate for MPH capacity and provided a good basis for even larger follow-up projects. The implementation schedule proved to be overly optimistic and did not allow adequately for Government lengthy administrative procedures and the delaying effects on construction activities of usually difficult weather conditions. - 40 -

7.03 At the time of appraisal, essentially no preparatory work had been carried out for the minor roads improvement and cost estimates for this element were seriously inadequate. Although improvement of minor roads was added to the project during appraisal somewhat in the form and nature of an emergency operation, it seems, in retrospect, that the Bank should have requested MPH to make better identification and cost estimates in the several months available before loan negotiations. The items of technical assistance, training and special project coordinating office were well chosen. While gains realized under the project were nominal in some respects, these items have provided an excellent start for improving MPH operations, which is being confirmed under succeeding projects.

7.04 The Bank was quite receptive and flexible regarding MPH sugges- tions for improving the capacity and participation of local consultants and contractors. However, the Bank was too accommodating in allowing MPH to keep an obviously incapable contractor on the job far too long (para. 3.03) and subsequently adding to time delays and other problems by agreeing to dividing the work into small pieces and negotiating contracts with contractors of unknown ability.

7.05 There were 13 supervision missions during the six and half-years implementation period. The timing and length of these missions were generally appropriate and working relations between the Government and Bank staff were very good throughout.

VIII. CONCLUSIONS

8.01 Overall, the project was successful and met its main objectives of upgrading key sections of the road network, starting to improve the capa- bilities of MPH and preparing future projects. The advances made are being extended under the follow-up Third and Fourth Highway Projects.

8.02 Steps taken under this project to stimulate participation by local contractors and to improve their performance may provide useful guidance for similar efforts in other countries (para. 6.07). Although the efforts made were generally successful, improvements were needed in subsequent projects related to monitoring and controlling cash advances (para. 6.07) and development of procedures for prompt price escalation adjustments (para. 6.08). In addition, unnecessarily complex administrative procedures for processing construction change orders and interim payments caused financial problems and time delays to several contractors in the initial phases of construction. Although procedures were greatly improved during the project period, earlier attention to potential problems in this area would have saved much time and trouble. - 41 -

8.03 Also worthy of note is the initiatives taken under this project to expand the role and responsibilities of local consultants for both design and construction supervision (paras. 3.13-3.15). -Although consultant per- formance on technical matters such as design work and inspection related to construction supervision was adequate and showed improvements during the project period, similar progress was not made by the consultant's local staff in job organi::ation and management. The result is a continuing dependence on expatriate staff for key roles such as Project Managers and Resident Engineers. Measures directed toward development of management as well as technical competence warrant close attention on other projects where increased use of local consultants is proposed.

8.04 Results achieved by the technical assistance services provided under the project took place much slower than expected at the appraisal. This is, however, not surprising since it takes much effort and time to strengthen the Government's capacity for road administration. - 42 -

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r ozf.Q- Apr.rt1,e *et1ntee /s . Le.tt wen.:e e-.n /. /d e. fr~. tt-e D5-21PCI.% L5.l2 rer T> Local reI Total APPrat-. Acua ... a rI e -iv.,lzoe- Ttl pris -- F... .Ua - u.1.-i...l_~~

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8. Re:ccrtona.d impro, ... t of ational. Road» (6.0 k-) 171.2 207.6 378.8 25.4 30.5 55.7 640 634 429.3 214.2 543.5 59.6 29.8 59. .60

C. u, - 8ttio. .1 Minor Road& ( -0 k*) 37.3 15.0 52.4 3.5 2.2 7.7 700 370 47.4 14.4 62.0 7.0 2.1 9.1 +18

SUbto.C n to ) (,400 k) 3 758.1 6 6 51.2 le,.I 1 -3' 1.- 1 4 71.5 1,:05.7 .. -Cl . D. Coauting Sevice (1) Con. ~.":18a .uper.tqt= of 4. B cn C 31.3 32.2 63.7 4.6 4.7 9.3 43.2 47.4 40.6 6.0 6.6 12-4 +35 (2) stadies, detailed FeasibilityY*nghlrI 88 F8.8t.U n4gineering .er.iceI for floöd (19725 daae reada <137 ( k) 2.3 2.2 4.3 0.3 0.3 0.6 2.1 2.2 4.3 0.3 0.3 0.6 0 (3) Dectild enier ~to eda ,.1otndo be b easi b F...- bility Sudies II (fin..d by M'Dp ) for the po f l-u'.u hfit projec- 13.8 20.7 34.3 2.0 3.1 5.1 21.8 10.1 31.9 3.0 1.4 4.4 -14 (6) Technical asuistance for the con- TInCaton o.... s.nce In aking adtintativ:e and oeratoal impronnnts be&,n unider the. First Egh..y Pr..ct (flnar-d «c that ti1e by U':DP) 'n.ldt; .pci.1 cooulderation to be al-ae to 1:tT,oed n.1nte.ane .actices 1.5 11.2 1:.7 0.2 1.7 1.9 1.3 7.3 9.2 0.2 1.1 1.3 -33 (5) Inves:tgataan of training needs cf SPI et.. .ad prep.ain of traLnLic r-tram 0.2 0.8 1.0 • 0.1 0.1 0.1 0.1 0.8 - 0.1 0.1 0

S.btntai D 24.3 67.1 114. 7.1 9.4 17.0 69.5 6.3 134.8 9.- s .5 .r90 +'Z . Contnoutt P ef the re.j.et Frelerstln. and Str- .1t5 Offiay (13RD ?roject. Offiee) ,tI!.tnd under nke rIU-r FP 5way .Meet including enst of e.- retr±ate erre*.to Ca c- tt. offies ard doordlnat C npleent.tio- of .11 IErz high.ay Proj.ctn 2.2 0.8 3.0 0.3 0.1 0.5 .2 2.9 4.9 0.3 0.4 0.7 +40

F. Veighbridgeg 0.8 3.7 4.3 0.1 0.6 0.7 2.8 3.5 6.3 0.4 0.5 0.9 +29

Total 5ankn.striination (r1Ud681.0 .. . 6.2 1210 755.4 .. 71 17.7

I1. Yn.- .ei-nrt b.UN> Keron,a,ncano.,d' ea-llitty tud1. (1,5 km) 1.4 6.1 7.5 0.2 0.9 1.1 3.3 7.2 10.5 0, 1.0 1.5 436

1T. Il-, F1-ncId l- COvernn..t ICs.-.waycost. (E-or tAaA ta 41.6 C) - 41.6 4.1 - 6.i 96.5 - 96.5 13.4 - 13.4 +120 T.alFr.ot .t. 424.0 648.6 872.6 62.3 65.9 1:1.2 !U5. ,5'7.7 119.2 70.4 ' *84

la IncMling 10- psyslcal co^tingcaccs oa .1 Ite-, and .n .odiena 13 7-e conting.iies on conttctt-on ete,under . -d t.

- L_b At vSS1.20 P.o.e 6.P c-~r~ion of 1n-~! cont7 tn p«no9 o USS ey nt .:.-ye be ecbe benau.e of io.ctra inxooe ratne fro, 151.77 -- PS96 t ee~~ncnc of pro,,et to L5S1.00 • 97.42 at the end ei 19 9. A-.t.r d.rlng 1r!erverts e a appoin.tl L-......

Aug.t 1,0 - 43 -

FCONoPTCMrI4 pJ?C7 - 7.049 0f-"

7ajO3EC7 U1.108 61EP11T

ttate- of Centrftte (.at1,2.alst aå.)

Apr1s331es 0 .. st 0rigI..1 eseple er prehab1e

(ktd (P t) (P) (P) eMnre-t 2etLeI :.t .9.t1 dwpe da.

A. EurO!- O--/ 71r e3eC.o. 0 11 40.313,6951 63,9189.069 50 04/117/74 10/07/74 12/17/77 100 00/27/77 2. Cnreet 'o. 2 21.3 ) 014 424 250,4091.001 64 04/117/74 - 0/07/76 0119/77 100 01/18/77 3. Contraat 0.. 3 17.7 53,$64,833 al,761,94m 44 04/07/74 10/07/76 111/76 100 0/30/77

Su al (A) 31. .2 2344 77.962 400.200,116 20

C...tracties supervi3le (6) 22.9 5.434.000 23,272,= -2 4

3. .ali,taResario *..d' . era. .0 29,207.317 40.210.4135 0 00/13/74 01/03/74 0/3/71 OU 03/27/76 2. C...s.a 1:. 2 74.0 ) 30.04,002 47.065,633 13 0/13/74 03/03/74 0/14/76 10. 0M/27/76 3. Cor&s. 3 70.0 24.310.711 45,743.61 99 01/11/74 03/03/76 04/30/76 100 03/14/76

lub-.1 (4) 1. 013.4 31.532,511 13M,119,924 63 20

Coes1ructio *uperviste (3) 10.3 13,3>0,400 14.7%66$ a 63

: .\. 1 28.4 41.758,942 84,621,354 103 07/13/74 07/13/76 04/10/77 i00 07/3~/77 2. C -ntet 3..m 2 77.4 68.141.797 82.664.650 21 1111/74 11/13/76 C6/31/77 100 05/15/71

s.bC.C.I(0 .0 7 7 09.04,739167 299004 22 112

Co.ru.. 1-t..aspe.Lom (C) 7.0 11.623,600 13.774,:23 34 L22

0.9as ?.-e.4 tän, * 07.0 ) 3.1 63.626,024 104.737,8c/h 65 97 0/12/74 09/11/76 05/29/77 92 02/28/80

E. Ca.. 'ernarde-'sa Ro.4 13.4 217,721/b 11/15A 4 11/11/76 04/10/77 100 07/13./78 30.0 ) 23.1 44,249,036 21,070,015I 29 12 02/18/77 04/13/70 0/30/79 0oad 01C 44/30/19 0eed 12/31/79 Brid.. 60 07/31/80 trid

ebtotal 104 13 0236,7.7 10t07M0 16j1,1, 4 1t 16 7.0 11,628,600 18,301,703 39 264

P. 1.-e To ..S...t... F..d 43.0 22.3 31,916.06 36,117.831 13 62 09/21/74 03/21/74 0/21/77 100 02/f1/77 G. L. 'in,.

C....tue,lo.s.p.rvisie 4.0 7.600,000 3.433,000 -40 -0 (r + 0 (Bedget .st.)

. t. ..v Ro.d. ' 62.0 46,096.4p4 a2,1.6,882 29 34/08/74 08/23/74 11/01/76 100 09/13/74 2. Datupa1.a.4.ette 4 S4-ltaurbar-Cats.3ae 35.0 20.674.204 41,671.761 102 09/20/74 01/22174 12/03/76 100 12/03/76 Uttta R) g 69,770.69t t0l.6q0,1.13 L Cntr-tto *,pevlstee (1) 3.4 10.390.300 10,3:1,300 0 n7

ta10n u ~', • (0.ttenal R64..3 6 .6.4111 10± ",4 53 61 18 07/11/0 .4a1. Ek>p1 4 r hy7 (A S TF M.' .

.a! mrocts1. 9 17.0 1. 711.7cn 99 e 471 9 7 10 90/4 Trr~y Tr ~ .Trri r~-

2300cludi,h.13, 7 a..l and 32prie te.tingenciesfor eenetrostion,and 1M. f., 0.4lo% phy.icaL c.a:t f p.

. 2e. o neotiated ct . .u l rth ubse c-oerctor.. 3.. 7able 2.

_ chan64race used- 1S91.00 - f7.20. U. / . UTbl* 1.

e..9ary 0im - 44 -

&.C.dN I:,W4omof, 1.a r - a I~ ac.ta

PRnWfCT rf"! VT1**'¾f ot9'MeT

Appreaal Actu.aI lacrenaeo Prehable or ad settloo 1.aah estieste cost /c actual 1 actual CeWr (he) (poeoG) (Peioe) Apprelal Copletc pletion data Remsrke

A. San ycr.nde - ni.r,n (frisiin1 Contract to. 1) -(kU 47 ,57 *1'I)2...-

0r1t nal mr"'n r . t Ko 6.3 -;758.3 - Contract red.ced - ee* beov.

Fir.t FAto K. 61.1 -1L3.5/b (baladce) 34.4 - - Contratt reduced furthår - *ee bolov.

103.5 - 113.3 11.8 - 6,867,561 100 06/13/79

115.3 - 126.0 10.7 - Controct reduced - sta hela..

Seco~d Redvctton (1) 69.1 - balance) 29.3 - 54555,284,356 100 04/10/79

(2) 98.4 - 100.2 1.8 - 1,207,141 97 02/28/80

(3) 100.2 - 103.5 3.3 - Iicluded ta Item 8(a) blo..

(4) 103.5 - 115.3 (=o chazgi) 11.8 - 8,559.664 100 06/13/78

(5) 115.3 - 117.8 2.3 - 3,928,454 100 04/30/79

(6) 117.8 - 118.9 (balacce) 1.1 - 393,000 - Termated

(63) 117.8 - 119.9 3.4 - - io InctudedItea (8.) belo.

(7) 118.9 - 121.2 2.3 Included la Item (La) belo.

(5) 121.2 - 126.0 4.8 . - 2.414.120 - TrMiftatcd

(8<) 121.2 - 126.0 (balance) 4.8 . 22.467,334 62 02/28/80

(91 69.1 - 83.81C 16.7 - 7,852.445 100 04/30/79

(10) sta. Barbara 7ýldGe - - 1,651.274 100 09/17/77

sebtetal (4) 104,77,888 97 92 02/28/60

8. San Ferafido.;n (Orl.inal Coneraet No. 21 - b.0 or 0o to .1' + H OrtrH-t C-ntrace - d . 43.6 - - Conract red.ced - see belo..

Rednetten öo= 84.3 (b.lance) 15.6 - 21,117.721 100 07/13/78

84.3 - 114.3 30.0 - 21,070,015 100 C4/30/79

Aray.t Bridge - 18,000,000 70 07/31/91

Settocal 1) 2 "4n,147, 140 50 7 in", nnn it4W -

/ Asphalt cocrete g.er.pg oly. 45 -

Table 4 PHILIPPINES

SECOND RICGWAY PROJECT - LOAN 950-PH

PR0JECT COMPETION REPORT

Kunor Roadm Contracte

Langth_ Data Govern t Original Final Coneracc Road Bridge awarded astlata contrat a mt conract a~ount package (k) (P)M.) (P) (P)

FR-1 22.00 20.00 10/21/75 3,734,640.88 2,638,206.80 2,638,206.80 nt-2 9.32 10/20/75 1,051,169.30 908,835.40 921.736.96 FR-3 16.50 04/02/76 1,645,556.60 L,367,744.90 1,478,002.44 FR-4 0.60 31.80 10/09/75 489,919.90 527,939.32 550,612.57 F1-5 22.60 30.00 10/08/75 3,551,170.89 3,855,778.04 3,969,146.04 71-64 10.00 12/03/76 1,137.578.62 1,032,047.30 1,032,047.30 ri-68 8.50 12/03/76 1,058,343.50 960,380.85 960,380.85 FR-6C 9.70 12/03/76 1,333,472.00 1,211,488.55 1,211,488.55 71-6D 12.02 12/08/76 1,749,276.90 1,591,875.50 1,591,875.50 FR-7 13.82 04/01/76 2,015,164.90 2,015,164.90 2,263,025.20 FR-o 8.99 10/09/75 1,227,984.20 1,350.782.62 1,295,466.56 FR-9 8.26 04/08/76 1,043,581.20 726,669.31 806,577.67 F1-10 8.22 04/22/76 1,099,863.40 1,099,863.40 1,099,863.40 pRt-i 21.12 04/22/76 2.163,699.00 2,088,851.39 2,160,301.04

LA 21.00 08/04/75 416,666.90 409,365.60 5382,034.40 11 21.00 08/09/75 368,891.10 409,879.00 421,129.00 1C 36.00 08/09/75 401,834.12 442,017.30 442.017.30 1D 15.00 04/10/75 421,370.29 412,149.00 448,641.84 lE 27.00 06/29/75 360,139.65 396,152.76 445,963.56 11 4.39 07/23/75 1,189,777.22 1,308,754.90 1,025,551.52 2 11.32 04/02/76 1,008,788.14 1,109,666.95 L,173,628.05 3 24.41 04/02/76 3,924,285.04 4,348,426.54 4,543,230.24 4 11.30 09/28/76 1,814,332.71 1,170,955.70 1,170,955.70 5 12.96 06/18/76 2,358,694.30 1,791,492.82 1,791,492.82 6 2.44 09/29/76 552,408.02 525,605.95 525,605.95 7 5L.30 09/29/76 343,041.44 -367,356.24 409,983.13 8 19.05 09/29/76 3,144,583.40 2,148,852.70 2,148,852.70 9 16.39 09/29/76 2,394,578.74 2,471,170.65 2,471,170.65 10 4.86 03/25/77 938,898.02 1,032,787.82 1,032,787.82 11 14.06 12/06/76 1.997,796.90 1,929,292.50 1,929,292.50 12 9.80 04/05/77 1,410,929.83 992,152.77 992,152.77 13 7.78 211.60 04/05/77 1,344,897.12 1,479,386.75 1,479,386.75

4 4.95 10/03/75 1.824,320.90 1,559,510.00 1,091,532.43 3 (10.64) 10/03/75 2,500,000.00 2,010,320.00 1,743,874.55 a 10.64 02/28/80 3,500,000.00 3,500,000.00 3,500.000.00 FR-I 22.00 20.00 10/21/75 3,734,640.88 2,638,206.80 2,638,206.80

c 131.00 05/17/77 2.057,508.36 1,736,008.00 2,017,039.20 E (10.30) 04/05/77 3,916,979.30 2,853,545.00 831,413.06 !(1) 5.68 01/19/79 1,901,671.70 1,901,671.70 1,901,671.70 E(2) 4.62 02/06/79 733,244.40 733,244.40 733,244.40 t (14.82) 15.00 04/05/77 5,328,507.80 3,533,927.00 2,222,199.87 7(1 14.82 02/06/79 (1,846,502.98) 1,846,502.98 1,846,502.98 1 7.00 03/31/77 1,080,178.15 1,188,195.92 1,188,195.92 II 4.62 27.00 05/24/77 1,650,000.00 1,552,391.70 1,712,205.20 II1 6.87 06/08/77 1,413,443.92 1,554,788.30 1,664,807.82

369.69 45.1:M Totala - Peso* 75,445,692.34 68.091.199.23 65,4652 94.71 - (Us$ aillion) /a (10.48) (9.46)

/a Exchange rate u@ed: US$1.00 - e 7.20. Sca footnote /b, Table 1.

oce: Construction supervision carried out h7 MPRstaff aseisted by consultantz lsted Ln Table 1. YPR coat not shoun. Conaultanz' coats Lacluded in final amounte shown in Table 2.

February 1980 - 46 -

riami,rv.,E,

SFCOnD !Tr1trY PRO,?FT - tt4lO4-0-11

rR.:FrT C4 P N 9TIP1'0T

Con.sltinp 1ervtc*** - (.1u-( t-1etwrineTIT and IV)

Appraisal estinate Acetl cast la Ite Name of consultant Road section Length Local Foreign Ticar Local Foreign Total Status (ka) (VSS zillion) - - (US$ million)

A. 1ihways III

Consultants Bacolod-Silay 14 Bacolod-Kabankalan 92 Iloilo-Jaro 9 Naga-Toledo 35 so Cebu-Carmen 35 detail 185 shown 0.36 0.08 0.44 Completed in Consultants Puerto-Kibave 160 Appraisal estinate Consultants Jar:-Dao 102 Jaro-Sarotac Viejo 57 Zarraye-Passi 48 Carvasona-Duenas 12 Pasel-Callinog 14 Davtan-Banate 17 M 0.48 0.16 0.64 Completed

DPH Region 7 Legaspi-Tabaco 23 0.14 - 0.14 Completed

DPHIRerlons VT & Y?eeder roads 250 0.20 - 0.20 Ongoing b. phWays IV Consultants Fabrica-Valtchermoso 90 Vallehermoso-Sibucao 71 T;T 0.31 0.08 0.39 Completed

Consultant Dao-RoXas City 34 Lanat-B.Ailaa Estancia 14 Silay-Fabrica 62 110 0.33 0.C7 0.40 Completed

Consultatts Carme.*-San Pemigto 55 Digos-,aneral Santos 85 0.37 0.08 0.45 Comn-ted

DPR Regiorc "I & VIII Feeder roads 180 0.25 - 0.25 Completed

C. Caneral

Cenc*1 consultants 0.20 0.83 1.03 Compleaed

Total (A + " + C) 1.8 2.4 4.6 3.00 1.40 4.40

Zxcbarge rate used: US$1.00 - P 7.20. (S.2efootnoLe /b, Table 1.)

February 1930 47 -

Table 6

PUtLIPPINES

800OD HIOHAT PROJECT - LOAN 950-PH

P11=ECT COMPLETIONREPORT

Axle Load Control

Dee Cost of Station Location AAD X Ray delivered Installation /a civil vehi.Les Suspect comodity to Begion Z Compi. Compl. date b works Star and remarks

9 Permnent eigh StatIons I Pan Philippine Righway 6,468 27 Laging 09/07/77 97 04/15/80 471,000 Mnfunds for civil works between Cabastuasn in 1980 City and Ste. &ss 2 Maila North Road (south- 12.879/c 26 La ing. mining, segar- 01/20/78 100 07/01/78 437,000 Out of caliberation bound traffic) sear came, construction Tabang asterials. cement 7 3 Manila North Road (south- 6,82 /c 42 Loging 09/07/77 100 07/01/78 285,300 So power source bound traffic) near Balaemak

4 Nestle South Eapressay 46868/c 34 Logging. statg, sugar- 01/20/78 100 07/31/78 277,000 Not operating, lack of (southbound traffic) at cam, sostruction spare parts. 5ichols Interchange materials. camant

5 Sto. Tomse-ataSages Road, 13.347 21 Logging. aining, sugar- 01/20/78 100 07/31/76 692.260 go printout or display st Clasmb (Manila South case, construction Ispreseway Eat.) materials. camat

6 Cotabate-DigOs load, near 836 24 Logging 02/14/78 100 07/01/76 235.000 Nonoperational Cotabsto City

7 Cotabato-Digos Road, near 1,915 24 Loging 02/14/78 95 04/13/80 215,000 Operating since Sept. 19 DigoD

8 Aguean-Oavaeo Read, near 3,461 17 Loging 02/14/78 100 07/01/78 286,000 sonoperational Ampayon Junction

9 Magntliso Road, near 1,628 18 Mining 09/07/77 100 07/01/78 243,500 Struck by lightning Saguia City

Total 3,142.260

50 Portable Loadomaters /d Surveys and spot checks using this portable equipment began in May 1977.

/a the civil works for weighbridge installations were carried out by NFS through force account. Total cost of civil works to estimated at P 3,142,260. The weighbridges and associated equipment (including spare parts and training) were procured for approximately USS2.75 million equivalent. Total cost of the als load control program is estimated (including loadomers) at USS900,000. equivalent, sbout 50Z sore than the appraisal estimate.

A Operation of most installations began in September 1978.

/c 1976 counts.

/d 50 portable loadomters have been procured at a cost of US$51,293 and distributed to the MPG regional offices as follows:

Region go. of Units

I 4 II 2 III 4 IT-A 6 tv-3 Weas (will share with Regon IV-A) V 2 VI 2 VI 2 Vitt 4 IX-A Wone (will share with Region IX-S) II-B 4 IX 4 II 4

MPG equipment depot 2 (as reserve) PP00 (headquarterm) 6 (for surveys)

Total 50

February L960 - 48 -

Table 7

PHILIPPINES

LOAN 950-PH1 - SECO!D HICHWAY PROJEC7

PROJECT COkPLETION REPORT

Accumulated DiAbursements

Actual total disbursement IBRD fiscal year Appraisal Actual total as a percentage and quarter estimate disbursement of appraisal estimate

1974 Harch 31, 1974 4.4 0.4 9 June 30, 1974 8.0 0.9 11

1975 September 30, 1974 14.9 7.4 50 December 31, 1974 10.4 22.0 47 March 31, 1975 29.2 12.3 42 June 30, 1975 36.8 18.8 51

197 ( September 30, 1975 45.8 22.3 49 December 31, 1975 55.2 23.9 43 March 31, 1976 58.1 26.4 45 June 30, 1976 61.0 27.9 46

1977 September 30, 1976 63.9 31.4 49 D-ccmer 31, 1976 66.1 37.0 56 Harch 31, 1977 67.7 42.4 63 June 30, 1977 68.0 48.4 71

1978 September 30, 1977 51.3 75 December 31, 1977 53.4 79 March 31, 1978 54.1 80 June 30,.1978 58.6 86

1979 Sertember 30, 1978 60.6 89 December 31, 1978 61.9 91 March 31, 1979 62.5 92 June 30, 1979 66.2 97

1980 September 30, 1979 66.3 98 Decenber 31, 1979 66.3 98 March 31, 19800 66.4 98 June 30, 19800 67.0 99 September 30, 1980 68.0 100

September 1980 - 49 -

Table 8

PHILIPPINES

SECOND HIGHWAY PROJECT - LOAN 950-PH

PROJECT COMPLETION REPORT

Comparison of Ex-Ante (Appraisal) and Ex-Post Economic Returns

Best estimate Appraisal Ex-post

Burol-Angeles Expressway /a 18 21

Malinta-Rosario Road /b 19 50

Taytay-Calamba Road 19 38

San Fernando-Olongapo Road 28 27

San Fernando-Gapan Road 19 25

Santo Tomas-Batangas Road 24 29

Las Pinas-Tagaytay Road 19 38

Lingayan Roads 20 24

Overall. Returns 22 27

/a Manila North Expressway Extension.

/b Manila North Road

December 1980 - 50 -

Table 1

PHI LTPI'll1:FS

SECMND lIlC:WAY PrOTrPT - LOAN 950-ri1

PROJECT COMPLTTTON RFPORT

Annual Traffic Growth Qates (ATC) in Percent and AADT - 1971 and 1979

ATG 1971-79 AADT 1971 AADT 1479 Jeep- Jeep- Jeep- Care ncys Buses Trucks Cars neys Buses Trucks Cars nays Buses Trucks

anila !.rth Road Sections 101 Malinta-Ta ang 11.8 8.0 - 0.9 3,000 3,500 700/b 2,000 7,300 6,440 20 2,150 102 Tabang-Sto. Domingo /a 13.9 4.1 3.2 7.0 3,800 1,200 1,600 1,700 10,790 1,660 2,060 2,910 102 On expressway 4,460 1,660 870 2,790 103 St. Docingo-San Fernando /a 13.8 0.8 7.6 7.8 3,800 1,200 1,600 1,700 10,690 1,280 2,870 3,090 103 On expressway 4,500 1,280 1,680 3,000 104 San Fernando-Angeles S /a 12.1 0.8 12.0 9.4 4,480 1,020 1,000 1,500 11,180 1,090 2,480 3,070 104 On expressway 4,980 1,090 1,380 3.010 105 Angeles S-Angeles N /n 12.1 0.8 12.0 9.4 4,480 1,07 1,000 1,500 11,180 1,090 2,480 3.070 105 On expressway 4,980 1,00 1,380 3,010 106 Angeles N-Tarlac 6.4 1.2 6.4 4.3 2,500 500 1,100 1,000 4,120 550 1,800 1,400 108 Tarlac-Gerona 7.3 0.0 4.3 5.2 2,200 500 1,000 800 3,850 500 1,400 1,200 120-124 Gerona-Paniqui 5.6 0.0 5.2 5.2 2,200 500 1,000 800 3,400 500 1,500 1.200 110 Paniqui-Urdaneta 7.4 -2.3' 12.4 9.1 1,700 300 500 600 3,000 250 1,270 1,200 111 Urdaneta-Rosario 10.5 5.6 17.4 13.0 700 100 250 300 1,560 155 900 800

an Fer cndo-'.anan Sections 501 San i',ondo-Sto. Domingo /c 7.6 16.2 5.2 9.1 950 150 200 400 1,700 500 300 800 502 Fto. Dom.i;o-Gapan 3.7 9.9 19.4 -2.8 450 150 70 150 600 320 290 120

Ian Fernnndo-Jlonearm Sections 601 San Fernar.20-acolor /a 10.4 6.6 3.2 3.0 2,000 1,500 550 1,200 4,400 2,50(0 710 1,515 601 With bypa: 1,275 2,280 560 555 602 Bcolor-Lu:::o /a 8.4 6.0 3.2 3.0 2,300 1,700 550 800 4,385 2,710 .710 1,010 603 Lubao-Din,alupihan /c 9.1 29.1 4.5 3.3 1,500 100 500 750 3,000 770 710 970 604 Dinalupihan-Prov. Tdry. /c 9.1 14.7 9.1 4.3 700 100 250 500 1,400 300 500 700 605 Prov. dry.-Olongspo /c 9.1 13.0 9.4 10.8 850 150 400 400 1,700 400 820 900

!anila tEst Road Sectio-s *01,702 Through Taycay 10.7 8.8 18.1 7.8 2,500 2,000 900 800 5,650 3,935 3,400 1,455 7031 Taytay Bypass-Angono 10.7 12.1 16.2 9.1 2,400 1,200 900 600 5,400 3,000 3,000 1,200 7032 Through Angono 12.1 13.7 16.6 9.1 2,000 1,000 850 600 5,000 2.800 2,900 1,200 7033 Angono-Sinantonan 8.2 1.8 3.8 5.2 900 700 850 350 1,690 810 1,150 525 704 Binangonan-Morong 8.2 1.8 3.8 5.2 440 260 400 100 825 300 540 150 7051 :forong-Bypass 4.2 10.1 8.4 2.3 950 550 150 250 1,315 1,135 283 300 706 Pililia-Fa:y 11.6 6.1 17.0 10.9 125 125 20 70 300 200 70 160 707 Fa-y-Lumban 6.1 1.1 4.3 5.8 250 450 50 70 400 490 70 1iC 703 Lumban-Sta. Cruz 12.1 7.3 0.0 12.7 400 800 150 200 1,000 1,400 150 520 709 Through Sta. Crus 12.1 2.1 7.6 8.1 800 1,700 250 300 2,000 2,040 450 563 7101 Sta. Cruz-Pila 6.3 1.0 7.6 10.6 800 1,200 250 250 1,300 1,300 650 560 7102 Through Pila 6.3 1.0 7.6 10.6 800 1,200 250 250 1,300 1,300 450 540 7103 Pi]a-Calauan Bypass 6.3 1.1 7.6 10.6 800 550 250 250 1,300 600 450 550 Ill Calauan-Bay 5.9 4.0 2.3 1.3 1,900 1,100 500 650 3,000 1,500 600 700

Sto. T,-as-Sarano2r Citt -ond 'To. R!

LO1 Sto. Tomas-Lipa 5.2 2.0 5.2 6.8 2,300 1,200 400 650 3,440 1,too 600 1,10 8021 11irough Lips - - - - 2,300 1,200 400 650 3,460 ,:.3 600 1,10 "031 Lips-Batargas City 4.8 1.5 5.6 5.6 900 800 350 400 1,310 200 550 623

T.rav:3-7 as 7tnMI o0. Tdgaytay Circlc-Silang Bypas3 11.2 3.3 6.8 0.0 700 400 310 300 1.640 SN 590 Ico 8102 Through Silang 17.0 6.9 8.2 0.0 "00 500 400 500 2,800 850 75- 500 8112 Sliang Sypass-ssm=rinas 17.0 11.8 8.2 5.1 0CO 600 400 350 2,810 1,460 750 520 6122 Dascarinas-Las Pinas 3.7 9.1 3.3 4.1 1,800 700 400 400 2,11o 1,400 520 5' .

/ Corrijor traffic.

/b Mostly mini-bujcs whch' since 1971 have been grad-nlly replaced Iy jeepneys.

Ic Cnet :ted traffic in I of noroil tratfic: 307. - 51 -

Table 10 Page 1

PHILIPPINES

SECOND HIGHWAY PROJECT - LOAN 950-PH

PROJECT COMPLETION REPORT -

Estimated Annual Traffic Growth Rates, 1979-98 (Percent)

Generated 1979-84 1984-89 1989-94 1984-98 traffic /a

Burol-Angeles Expressway Cars, vans 9.0 7.0 6.0 5.0 Jeepneys 3.0 3.0 2.0 2.0 Buses 4.0 3.0 2.0 2.0 Trucks 8.0 7.0 6.0 5.0

Malinta-Tabang-Angele s Cars, vans 9.0 7.0 6.0 5.0 Jeepneys 5.0 3.0 2.0 2.0 Buses 2.0 3.0 2.0 2.0 Trucks 1.0 1.0 1.0 1.0

Angeles-Rosario Cars, vans 7.0 6.0 5.0 4.0 Jeepneys 0.0 0.0 0.0 0.0 Buses 5.0 4.0 3.0 3.0 Trucks 6.0 5.0 4.0 4.0

San Fernando-Gapan Cars, vans 6.0 6.0 5.0 4.0 Jeepneys 4.0 3.0 3.0 3.0 Buses 4.0 4.0 4.0 4.0 Trucks 5.0 4.0 4.0 4.0

San Fernando-Olongapo Cars, vans 8.0 7.0 7.0 6.0 Jeepneys 6.0 5.0 5.0 4.0 Buses 5.0 5.0 5.0 4.0 Trucks 3.0 3.0 3.0 3.0

Langayan Roads Cars, vans 8.0 7.0 7.0 6.0 Jeepneys 0.0 0.0 0.0 0.0 Buses 5.0 5.0 5.0 4.0 Trucks 5.0 5.0 4.0 3.0 - 52 - Table 10 Page 2

Generated 1979-84 1984-89 1989-94 1984-98 traffic /a

Taytay-Angono Cars, vans 9.0 7.0 6.0 5.0 Jeepneys 6.0 5.0 5.0 4.0 Buses 7.0 6.0 6.0 5.0 Trucks 8.0 7.0 6.0 5.0

Angono-Binangonan Cars, vans 7.0 6.0 5.0 4.0 Jeepneys 2.0 2.0 2.0 1.0 Buses 4.0 4.0 3.0 2.0 Trucks 5.0 5.0 4.0 4.0

Binangonan-Sta. Cruz Cars, vans 5.0 5.0 4.0 3.0 20 Jeepneys 4.0 4.0 4.0 3.0 20 Buses 4.0 4.0 4.0 3.0 20 Trucks 6.0 6.0 5.0 4.0 20

Sta. Cruz-Calamba Cars, vans 6.0 6.0 5.0 4.0 Jeepneys 2.0 2.0 2.0 1.0 Buses 8.0 7.0 6.0 5.0 Trucks 6.0 6.0 5.0 4.0

St. Tomas-Batangas Cars, vans 5.0 5.0 4.0 4.0 Jeepneys 2.0 2.0 1.0 1.0 Buses 5.0 5.0 4.0 4.0 Trucks 6.0 6.0 5.0 4.0

Las Pinas-Tagaytay Cars, vans 10.0 10.0 8.0 7.0 30 Jeepneys 4.0 4.0 3.0 3.0 10 Buses 7.0 7.0 6.0 5.0 20 Trucks 4.0 4.0 4.0 3.0 0

/a In percent of normal traffic.

December 1980 PHILIPINES

SECOND HIGHWAY PROJECT - LOAN 950-PH

PROJECT COMPLETION REPORT

Traffic Costs and Savings per ka 3 1980 /a (In pesos)

Cars, vans Jeepneys Buses Trucks Road Section BI AT Say. Z BI Al Say. z BI AT Say. I BI AI Say. 1

Including Time Costs Manila North Road (101) 1.11 0.83 0.28 25 1.17 0.86 0.31 26 3.13 2.31 0.82 26 2.78 1.98 0.80 29 San Fernando-Gapan (502) 1.40 0.65 0.75 54 1.52 0.65 0.87 57 4.18 1.54 2.64 63 3.55 1.42 2.13 60 San Fernando-Olongapo (603) 1.04 0.68 0.36 35 1.08 0.68 0.40 37 2.86 1.67 1.19 41 2.62 1.54 1.08 41 Manila East Road (708) 0.87 0.66 0.21 25 0.89 0.67 0.22 25 2.29 1.60 0.69 30 2.11 1.45 0.66 31 Sto. Tomas-Batangas (801) 0.90 0.64 0.26 29 0.90 0.64 0.26 29 2.30 1.56 0.74 32 2.21 1.42 0.79 36 Tagaytay-Las Pinas (809) 1.26 0.87 0.39 31 1.29 0.86 0.43 33 4.35 3.13 1.22 28 4.38 3.25 1.13 26 Manila North Expressway Ext. 0.84 0.62 0.22 26 0.80 0.69 0.11 14 2.14 1.50 0.64 30 1.79 1.40 0.39 22

Excluding Time Costs Manila North Road (101) 0.93 0.71 0.22 24 0.93 0.69 0.24 25 2.29 1.65 0.64 28 2.78 1.98 0.80 29 San Fernando-Gapan (502) 1.15 0.57 0.58 50 1.17 0.54 0.63 54 2.97 1.17 1.80 61 3.55 1.42 2.14 60 San Fernando-Olongapo (603) 0.89 0.60 0.29 33 0.87 0.57 0.30 35 2.16 1.27 0.89 41 2.62 1.54 1.08 41 Manila East Road (708) 0.76 0.58 0.18 24 0.73 0.55 0.18 25 1.74 1.20 0.54 31 2.11 1.45 0.66 31 Sto. Tomas-Batangas (801) 0.80 0.57 0.23 29 0.75 0.53 0.22 29 1.81 1.17 0.64 35 2.21 1.42 0.79 36 Tagaytay-Laa Pinas (809) 1.10 0.78 0.32 30 1.06 0.73 0.33 31 3.56 2.62 0.94 26 4.38 3.25 1.13 26 Manila North Expressway Ext. 0.73 0.56 0.17 23 0.66 0.56 0.10 15 1.61 1.15 0.46 29 1.79 1.40 0.39 22

/a A sample year.

Note: BI - Traffic costs before improvement (rounded). AI - Traffic costs after improvement (rounded).

December 1980 - 54 -

Table 12

PHILIPPINES

SECOND HIGHWAY PROJECT - LOAN 950-PR

PROJECT COMPLETION REPORT

Traffic Volume (AADT) and Economic Returns on Minor Roads

Contract Package No. Name of Road AADT Returns (%)

Pangasinan FR-1 Jct. Urdaneta-Dagupan 268 Negative Rd. 194.17-Bo. Asin FR-11 Jct. Tarlac-Damortis- 227 0.2 Bo. Pongosili

Tarlac FR-5 Jct. Tarlac-Lingayan- 83 Negative San Sotero FR-5 Jcet. Tarlac-Baldios 42 Negative FR-5 Jct. Tarlac-Timmaguab 115 Negative

Nueva Ecija No. 10 Sapan-Baluarte 195 26.4 No. 5 San Isidro-Baluarte 258 4.2

Bulacan No. 8 Marilao-San Jose 733 27.6 No. 4 San Marcos-Plaridel 684 20.3 No. 4 Iba-San Juan 115 14.4

Rizal A Dona Aurora Ave. 47 Negative E Jct. Taytay-Calamba- 68 Negative Angono-Antipolo E(1) Jct. Taytay-Calamba 976 21.2 37.0-Pilapila F Jct. Taytay-Calamba- 265 4.2 50.1-Lagundi F(1) Jct. Taytay-Calamba- 31 Negative 51.0 Pinugay .20- 122 l 4' 2 PHILIPPINES SECOND HIGH WAY PROJECT

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