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World Bank Document RESTR I CTED Report No. PTR-68a Public Disclosure Authorized This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness.The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Public Disclosure Authorized APPRAISAL OF A HIGHWAY PROJECT PHILIPPINES Public Disclosure Authorized March 25, 1971 Public Disclosure Authorized Transportation Projects Department Currency Equivalents: Currency Unit - Pesos (t) U$1 - = P 6.oo P 1 = U6$0.17 P 1 million = U$166,667 * The exchange rate has been floating since February 21, 1970; the rate used in this report is indicatedabove. Fiscal Year: July 1 to June 30 bystem of Weights and Measures: Metric Metric: British/USEquivalent 1 meter (m) = 3.28 feet (ft) 1 kilometer (km) = 0.62 mile (mi) 1 sqruarekilometer (km2) = 0.386 square mile (sq mi) 1 kilogram (kg) = 2.205 pounds (lb) 1 metric ton ( m ton) 0.98 long ton (lg ton) = 1.1 Ub short tons (sh tons) Abbreviationsand Acronyms: BPH Bureau of Public Highways UNDP = United Nations Development Programme NIP = Net Domestic Product PNR = Philippine National Railways PRC = Philippine Railroad Company BOC = Bureau of Customs BPW = Bureau of Public Works DPWC = Departmentof Public works and Communications GRT = Gross Register Ton PAL = Philippine Air Lines CAB = Civil Aviation Board HbF = Highway bpecial Fund AJJB = Asian Development Bank voC = Vehicle Operat ig Costs PHILIPPINES APPRAISALOF A HIGHWAYPROJECT TABLEOF CONTENTS Page No. SUMMARKY AND CONCLUSIONS .................. .. .. i-ii I. INTROD9UCTION ................. 1 II. BACKGROUND ........ o.. ...... 2 A. General . ................... 2 B. Transportation ..... 2... .. -. .. ... t. 2 C. Transport Planning and Coordination .... 4 III. TRE HIGHWAY SECTOR .5..................... 5 A. Highway Network ... .... 5 B. Highway Traffic .. .......... 6 C. HighwayAdministration . ...... 7 D. Highway Planning and Financing ......... 7 E. Highway Design and Construction 8 F. Highway Maintenance . ..... 9 IV. THE PROJECT ...................... .. ....... 10 A. General............. 10 B. Construction and Improvement ........... 10 C. Consulting Services for Detailed Engineeringand Construction Supervision... ... ........ 11 D. FeasibilityStudies 11 E. TechnicalAssistance to BPH. 11 F. Cost Estimates and Foreign Exchange Component a 12 G. Project Financing and Execution 14 H. Disbursements . .15 V. ECONOMIC EVALUATION ......................... 16 A. General ..... .. 000... .... 16 B. Cotabato - Digos Road .................. 16 VI. RECOMMENDATIONS 17 (Continued) TABLE OF CONTENTS (Continued) TABLES: 1. Domestic Goods and Passenger Transport 1968 2. Five-Year InfrastructureProgram FY 1971-1975 3. Highway Network 1969 4. Motor Vehicle Statistics1962-1969 5. Motor Vehicle Gasoline ConsumptionPY 1962-1969 6. Revenues from Use and Ownership of Motor thicles PT 19665w1969 7. Expenditureson Highways FY 1967-1975 8. Design Standards 9. Roads Included for FeasibilityStudies 10. Estimated Schedule of Disbursements 11. Estimated Traffic Volumes on Cotabato-DigosReo 1968-1992 12. Vehicle Operating Costs 13. Rates of Return of Cotabato-Digos Road ANNEX: Interim Measures for Reorganization of the Bureu oif Publie Highways CHART: Existing Bureau of Public Highways Organisation MAP Republic of the Philippines - Highway Project. PHILIPPINES APPRAISAL OF A HIGHWAYPROJECT SUHMARYAND CONCLUSIONS i. This report appraises a project in the Philippinesfor: con- struction and improvementin Mindanao of the 160 km road between Cotabato and Digos; consultingservices to the Bureau of Public Highways (BPH) for detailed engineeringof several roads and constructionsupervision of the above road; feasibilitystudies of about 1,000 km of roads; and technical assistance to improve the administrationand operationsof the BPH. This would be the second transportationloan to the Philippines;the first hav- ing been for harbor dredging in 1961. ii. The Philippine islands have historicallydepended on the sea and until recently, transport developmentwas oriented toward island and over- seas trading. The difficult terrain, heavy rainfall,and poor soil condi- tions have tended to discouragecheap land transport. During World War II, most land transport infrastructurethen in existencewas destroyed. Reha- bilitationof the land transport system has been slow, and economic growth has made increasingdemands on the inadequatesystem. For this reason, the Governmentof the Philippinesand the United Nations DevelopmentPro- gramme (UNDP) undertook in 1968 an overall Transport Survey for which the Bank acted as Executing Agency. Following the Survey's recommendations, the Governmentnow places highest priority on highway network improvements and intends to improve about 13,000 km during the next 5 years. iii. The 160 km Cotabato-DigosRoad, which was given high priority in the Transport Survey, is the only overland link between eastern and western Mindanao, the second largest Philippineisland. This road serves large corn and rice-producingregions rich in agriculturalpotential. Although it is heavily trafficked,most of the road is unpaved and is nearly impas- sable during the monsoon season. Improvementto a two-lane paved standard is, therefore,of high priority and should yield a rate of return of 18Z from savings in vehicle operating costs. Detailed engineeringof this road and of two other roads in Luzon (Lucena-Legaspiand Cabanatuan- Tuguegurao) is included in the project for retroactivefinancing (about US$750,000equivalent). The two latter roads, totalling 765 km, will be improved with bilateral assistancefrom Japan, which supplied equipment for this purpose. iv. The project also includes feasibilitystudies to determine priori- ties for improvementof a further 1,000 km of roads, together with technical assistanceto help the Government increase the efficiencyof the BPH. The Governmenthas requested financialassistance from the UNDP for both feasi- bility studies and technicalassistance, with the Bank as the Executing Agency. Consultingservices also will be provided under the project for subsequentdetailed engineeringof roads identifiedby the feasibility studies as being of highest priority. - ii - v. The total project cost, including contingenciesand interest during construction,is estimated at US$15.8 million equivalent. The foreign exchange costs, corresponding to 63% of, project costs, would be about US$9.9 million; of that amount the Government is requesting a Bank loan of US$8.0 million for constructioncosts and consulting services, and UNDP finance of US$1.9 million for studies and technical assistance. Local costs will be met by the Government. The constructioneontracts will be awarded after internationalcompetitive bidding; construction supervisionand other expert services will be carried out by consultants. The BPH will be responsible for project execution. vi. The project is suitable for a Bank loan of US$.O million equiva- lent. Based on the economic life of the project, an approptiate term of the proposed loan is 24 years including four years of grace. PHILIPPINES APPRAISAL OF A HIGHWAYPROJECT I. INTRODUCTION 1.01 The Governmen. of the Philippines has asked the Bank to help finance a highway project consistingof: (a) constructionand improvementof about 160 km of primary road between Cotabato and Digos; (b) consulting services to the Bureau of Public Highways (BPH) for detailed engineeringof a number of roads and for constructionsupervision of the above road; (c) feasibilitystudies of other high priority roads; and (d) technical assistance to the BPH. The project cost is about US$15.8 million equivalent. The proposed loan of US$8.0 million equivalent is for the foreign exchange costs of items (a) and (b) and for interest during construction. The Governmenthas requested US$1.9 million from the United Nations DevelopmentProgramme (UNDP) for items (c) and (d). 1.02 This would be the second Bank loan in the Philippines for trans- portation. The first loan (290-PH, June 1961) was US$8.5 million equivalent for harbor dredging. Performance for that project was only fair and the undisbursedbalance of about US$1.1 million was cancelledon the closing date. Groundwork for this current project was laid in 1967 when the Bank assisted the Government in requestingUNDP finance for a Transport Survey. The Survey was carried out in 1968/69 by METRA Internationalof Prance in associationwith SAUTI of Italy; the Bank acted as the Executing Agency. The current project is based on the findings of the Survey. 1.03 This report was written by Messrs. M. W. Dickerson (Engineer)and H. Hansen (Economist), who appraised the project in July 1970, and was edited by Mrs. P. Valad. Mr. A. Imperatrice (Consultant)participated in the appraisalmission to deal with organizationalmatters. II. BACKGROUND A. General 2.01 The Republic of the Philippines lies in the North'PacificOcean off the southeast coast of Asia and consists of some 7,000 islands with a land area of about 300,000 km2 (roughly the same size as.Italy). Luzon, which includes the capital city of Manila, and Mindanao'are=thetwo largest islands and make up about two-thirds of the area. They also account'for three-quarters of the 36.6 million population. The annual population growth rate of about 3.1% is among the highest in the world. 2.02 Agriculture is the basis of the economry. It geherates about 35% of the Net Domestic Product
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