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Document of FILE COPY The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized ReportNo. P-3299-PH REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONALBANK FOR RECONSTRUCTIONAND DEVELOPMENT Public Disclosure Authorized TO THE EXECUTIVEDIRECTORS ON A PROPOSED LOAN TO THE REPUBLIC OF THE PHILIPPINES Public Disclosure Authorized FOR A NATIONAL FISHERIESDEVELOPMENT PROJECT April 30, 1982 Public Disclosure Authorized This documenthas a restricteddistribution and may be used by recipientsonly in the performanceof their official duties. Its contents may not otherwisebe disclosed withoutWorld Bank authoriation. CURRENCY EQUIVALENTS Currency Unit = Peso (P = 100 centavos) P 1.00 = US$0.123 US$1.00 = P 8.1 GLOSSARY AND ABBREVIATIONS ADB - Asian Development Bank BFAR - Bureau of Fisheries and Aquatic Resources (of MNR) DBP - Development Bank of the Philippines FIDC - Fishery Industry Development Council (of MNR) FRR - Financial rate of return GT - Gross tons ICB - International competitive bidding LCB - Local competitive bidding MNR - Ministry of Natural Resources PFDA - Philippine Fisheries Development Authority (of MNR) PU - Project Unit SEATI - Samar Sea-Ticao Pass Fisheries Development Coporation FISCAL YEAR January 1 to December 31 FOR OFFICIAL USE ONLY PHILIPPINES NATIONAL FISHERIES DEVELOPMENT PROJECT Loan and Project Summary Borrower: Republic of the Philippines Beneficiary: Republic of the Philippines and Samar Sea-Ticao Pass Fisheries Development Corporation (SEATI). Amount; $22.4 million equivalent (including capitalized front-end fee)./l Terms: Repayable in 20 years, including 5 years of grace, with interest at 11.60% per annum. Relending Terms. $12 million of the loan proceeds would be relent by the Borrower to SEATI with the same grace and repayment period and at the same interest rate as the Bank loan. Interest accrued during the grace period would be capitalized. The Government would bear the foreign exchange risk and the corporation would pay a foreign exchange risk fee. The balance of the loan would be allocated by the Government to the Ministry of Natural Resources for institution building. Project Description: The proposed project is designed to help municipal (small- scale) fishermen, and to improve sector management through institution-building activities. To achieve its first objective, the project would assist municipal fishermen in one of the poorest regions of the Philippines (Masbate/ Ticao Pass/Western Samar) through the establishment of marketing facilities for the efficient collection, transport and distribution of fish, and the provision of input supplies. To meet the second objective, the project would strengthen the three fisheries agencies of the Ministry of Natural Resources - the Philippine * Fisheries Development Authority (PFDA), the Bureau of Fisheries and Aquatic Resources (BFAR), and the Fishery Industry Development Council (FIDC). Project funds would finance (a) an area development subproject, comprising the construction of physical facilities in seven sites, including landing areas, jetties, ice plants, offices, auction halls, bulk fuel storage and related facilities /1 Front-end fee amounts to $331,034. 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. - ii - Project and the provision of carrier boats, vehicles and input Description. supplies, and (b) training programs, technical assistance (cont'd) and vehicles for PFDA, BFAR and FIDC. The area development subproject would be implemented by SEATI and operated under private management. The project would benefit directly about 2,500 participating small-scale fishermen who would realize higher incomes for their catch through better marketing, improved quality of fish, reduced spoilage and, to some extent, increases in productivity from the integration of input supplies with market outlets. The strengthening of the operations of the fisheries agencies would lead to improved policy direction in fisheries development, better assessment and management of fisheries resources, improved research and extension, and more effective enforcement of fish conservation regulations. The main risks associated with the proposed project are: (a) the innovative approach to establishing the corporation to implement the development subproject; (b) the present weakness of the fisheries agencies; (c) the lack of reliable data on existing fish resources which are believed to be over-exploited; and (d) the sensitivity of the benefits of the motorized fishing craft to relatively small decreases in the price of fish. To address the first issue, the Government has contracted with a competent private firm, experienced in fish marketing, to manage the corporation. To address the second issue, the project provides for a comprehensive program to strengthen the existing institutions. The third issue would be addressed in the project throughiprovisLons for improved fishery resource surveys, marine studies and strengthening of the marine enforcement and conservation capabilities of BFAR to ensure a more orderly exploitation of resources. Historically, revenue from fish sales has increased more than inflation and the risk associated with price sensitivity is not expected to be great. In addition, motorized crafts are a small component, and returns to the corporation are much less sensitive to changes in revenues. Although the risks associated with the project are high, Bank support is justified because of the extreme poverty of the project beneficiaries; in addition, municipal fishermen have so far received little effective assistance from the Government. - iii - Estimated Cost: Foreign Local Total …---- ($ million) = Area Development 4.6 8.4 13.0 BFAR 3.8 1.6 5.4 PFDA 1.4 0.5 1.9 FIDC 0.7 0.3 1.0 Studies by MNR - 0.5 0.5 Total Base Cost Estimate 10.5 11.3 21.8 e~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ Physical Contingency 0.6 0.8 1.4 Expected Price Increases 5.4 8.0 13.4 Total Cost /1 16.5 20.1 36.6 Front-end fee 0.4 - 0.4 Total Financing Requirements 16.9 20.1 37.0 Financing Plan: Foreign Local Total - ($ million)… IBRD 16.5 5.5 22.0 Government/PFDA - 14.3 14.3 Private Participant - 0.2 0.2 Subborrowers - 0.1 0.1 Total 16.5 20.1 36.6 Front-end fee .4 - .4 Total Financing Requirements 16.9 20.1 37.0 Estimated Disbursements; Bank FY FY83 FY84 FY85 FY86 FY87 FY88 FY89 FY90 --------------- ($ million ) --------------- Annual 1.1 2.4 4.3 5.2 3.9 3.7 1.7 0.1 Cumulative 1.1 3.5 7.8 13.0 16.9 20.6 22.3 22.4 Economic Rate of Return: 24% and 36% for the area development corporation and motorized fishing boats, respectively. Staff Appraisal Report: No. 3387-PH, dated April 19, 1982. /1 Total costs include identifiable taxes of about $350,000. REPORT AND RECOMMENDATIONOF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTIONAND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE REPUBLIC OF THE PHILIPPINES FOR A NATIONAL FISHERIES DEVELOPMENT PROJECT a~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 1. I submit the following report and recommendation on a proposed loan to the Republic of the Philippines for the equivalent of $22.4 million to help finance a national fisheries development project. The loan, which includes a capitalized front-end fee of 1.5% on the Bank loan, would have a term of 20 years, including 5 years of grace, with interest at 11.60% per annum. Part of the loan proceeds, $12 million, would be relent by the Government to a fisheries corporation at the same interest rate and over the same grace and repayment periods as the Bank loan. The Government would bear the foreign exchange risk, and the corporation would pay a foreign exchange risk fee to the Government. The balance of the loan would be allocated by the Government to the Ministry of Natural Resources for the institution-building component. PART I - THE ECONOMY /1 2. An economic report, entitled "The Philippines: Domestic and External Resources for Development" (No. 2674-PH), was distributed to the Executive Directors under SecM79-822, dated November 16, 1979. A special report, "Aspects of Poverty in the Philippines: A Review and Assessment" (No. 2984-PH), was distributed to the Executive Directors on December 1, 1980 under SecM80-919. An economic mission visited the Philippines in September 1981 and is now preparing its report./2 Country data are given in Annex 1. Performance in the 1970s 3. During the 1970s, economic performance improved considerably, raising the trend GNP growth rate to 6% at the end of the decade. The ratio of fixed investment to GNP rose from 16% to 25% during this period. Half of this increase was in the public sector; the ratio of public fixed investment to GNP rose from 1.5% to 6.5% during the decade, reflecting substantially expanded revenues and improved implementation capacity. Export growth was accelerated, particularly in nontraditional manufactures, while growth in /1 This section is substantially the same as that contained in the President's Report for the Textile Sector Restructuring Project which was approved by the Executive Directors on April 20, 1982. /2 Expected to be distributed to the Executive Directors in May, 1982. imports of oil and consumer goods was restrained. Overall, expansion in agricultural production was quite rapid, and rice deficits were eliminated in the second half of the decade. Population