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 They do not accept responsibility for its accuracy or completeness.The report may not be published nor may it be quoted as representing their views.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 (NDP), accounts for about 70% of export earnings (coconut,forestry products, and sugar), and employs about 55% of the labor force. About 28% of the areA is cultivated (primarily rice and corn) and about 33% is commercial forests. Manufacturing accounts for about 17% of the NDP, considerably more than in nearby Malaysia, Thailand, and Indonesia. The Philippines has abundant natural resources, with par- ticular potential for tropical agriculture,forestry, and mineral develop- ment (copper, gold, iron, chrome, and nickel). Economic growth in i970 was 4.4%. Gross National Product per capita is about US$160.

2.03 Economic development in the Philippines depends on access to the various geographicalregions. h'ithits many islands, trade has prin- cipallybeen by water. On the larger islands, however, the difficult terrain, heavy rainfall, and poor soil conditionshave tehidedto dis8- courage cheap land transport. As a result, the Philippines is cur'rently served by both a fairly extensivemaritime network linking scatterediS- lands and an inadequate system of land transportwithin the islands. In- dustrial and agriculturalactivity is, as a result, concentratedin the coastal areas. Table 1 shows domestic trAnsportvolumes by mode.

B. Transportation

(a) General

2.04 During World War II, most of the transport infrastructurewas destroyed. Since the War, funds for transportinfrastructure have been limited and reconstructionhas been slow. There have also been deficien- cies in transport administrationand organization. Emphasis has been placed on short-term requirementsrather than on long-termneeds. Rmc- ognizing these deficienciesand the importance of economic plannihg in the transportsector, the Government in 1968 requestedUN P finance for a Transport Survey (para. 1.02). This Survey reviewed the existing transport system and recommended improvements, based on a ten-year trans- port investment program (FY 1971-1980). Recoimenlations for organiza- tional changes were also included in the Strvey. Feasibility studies of high priority highways were carried out under the Survey. 2.05 The Government also, in 1968, created a Commission on Reorgani- zation which reviewed overall Government structure,including transport coordination,and is recommendingsteps for improvement. These recommend- ations will be submitted for Congressionalaction in May 1971 (para. 2.17).

2.06 The new Five-Year InfrastructureProgram (FY 1971-1975)reflects the high priority given to improvementof the transport system. Approximately 45% of the Program has been allocated to transportationwith 70% of this in- vestment going to highways (Table 2).

(b) Highways

2.07 The highway network (Table 3), consistingof about 13,000 ka of paved roads and about 51,000 km of unpaved roads, is concentratedon the islands of Luzon, Samar, Leyte, and Mindanao. Past highway planning,main- tenance, and constructionhave been inadequate. Vehicle overloading,fre- quent wash-outs of bridges, and an inadequatefeeder road network have resulted in pbor quality service and high road transport costs. The high- way system is discussed further in Chapter III.

(c) Railways

2.08 There are two Government-ownedrailways: the PhilippineNational Railways (PNR) and the Philippine Railroad Company (PRC). PNR is the most important, with 1,028 km ot single-linetrack on Luzon; PRC plays an insig- nificant role, with only about 117 km of line on the islands of Panay and Cebu. A number of other lines in Luzon are privately owned, mainly by sugar and logging companies, but they are not significantin the overall transportpicture. Traffic on PNR in FY 1969 was about 1,200 million passenger-kmand 150 million freight ton-km. While passenger traffic has recently increasedmoderately, freight traffic has been constant.

2.09 The Transport Survey concluded that, with rehabilitation,the railroad could play a useful role in the Philippine'stransport system. The Survey's proposals for PNR included a phased rehabilitationprogram for track and rolling stock. Changes in administration,operations, and financing were also proposed, and recommendations were made for increased freight rates and passenger fares. No improvement program was considered necessary for PRC at this time.

2.10 Although the Government agrees with the general conclusions of the Transport Survey and has included rehabilitationfunds in the InfrastructureProgram (Table 2), it is still reviewing specific proposals for rehabilitationof the PNR.

(d) Ports and ShippSn8

2.11 For both foreign trade and domestic transport,ports and shipping have been important to the economy. There are now about 80 national and 390 municipal ports, as well as numerous private piers and wharves. Although most ports are well located and naturally sheltered,many require continuous -4- dredging and lack adequate sheds and cargo handling equipment. The Bank is presently assisting the Government in defining the scope and consulting services required for feasibilitystudies of four ports to whose improve- ment the Governmenthas given high priority based on the TransportSurvey. These studies are expected to be financed by the UND? and will be the basis of a subsequentproject to be submittedto the Bank for consideration.

2.12 Ports in the Philippinesare run by both the national and municipal governments. National ports are operated by the Bureau of Customs (BOC) in the Ministry of Finance; design, construction, maintenance, and dredging, on the other hand, are the responsibilityof the Bureau of Public Works (BPW) in the Departmentof Public Works and Communications(DPWC). Coordi- nation has been inadequatebetween BOC and BPW, and thus port works have not always been related to needs; improvementsare expected under proposed Governmentreorganization plans (para. 2.17). Municipal ports are owned, operated,and maintained by municipalities.

2.13 The Philippinemerchant fleet totals about 1.2 million Gross Register Tons (GRT), includingabout 0.7 million GRT of ocean-goingvessels and 0.3 million GRT of inter-islandvessels. Also many small craft carry local traffic. Inter-islandshipping, particularlypassenger transport, has increased in recent years, and this service is adequate except to some smaller outlying islands.

(e) Aviation

2.14 Manila, the only internationalairport in the Philippines,is served by a number of the world's major airlines,as well as the Philippine Air Lines (PAL), which operateh both internationallyand within the coun- try. An extensive network of domestic airports is served by three domestic carriers. In addition, ten air taxi operatorsserve outlying areas with small traffic volumes. Domestic passenger transporthas been increasing rapidly (about 17Z p.a.), with PAL, which the Governmentpartly owns, carry- ing about three-quartersof the traffic. Air freight is still insignificant.

2.15 The TransportSurvey concluded that airport infrastructurehas not kept pace with increased traffic and that a pressing need exists for better runways, navigationalaids, and terminal facilities. It recommeaded revision of the existing tariff policy because airlines are losing money on domestic traffic. The Governmenthas accepted the Transport Survey's recommendations. It has allocated funds in the InfrastructureProgram for the suggested improvements,and is consideringrequests from the air- lines for increased domestic air fares. The United States Federal Aviation Administration will assist the Philippines in preparing development plans for local airports.

C. Transport Planninu and Coordination

2.16 Immediate economic and social problems, resulting from a large and rapidly expandingpopulation with consequenthigh uneamployment,have in the past received overriding attention,while long range problems such -5

as transport coordinati3nand planning have been handled inadequatelyon a piece-mealbasis. In the present administrativeframework, coordina- tion has been difficult as responsibilitieshave been diffused between a large number of offices and agencies. Responsibilityfor design, construc- tion, and maintenance relating to ports, highways, and aviation lies with the DPWC, in which the Land TransportCommission, BPW, BPH, and Civil Aviation Administrationare subordinateagencies. The railways are ac- countable to the Office of Economic Coordination,while the Civil Aviation Board (CAB) and the Bureau for Maritime Affairs report to the Department of Commerce and Industry. Road transport regulationswith respect to op- erating permits, route allocations,and rates are the responsibilityof the Public Service Commission. The CAB performs this function for air- lines, but scheduled domestic airline franchisesare awarded by Congress. Railway rates are supervisedperfunctorily by the Office of Economic Co- ordination.

2.17 The Transport Survey and the Commissionon Reorganizationgen- erally reached the same conclusionsabout the transportsituation. Both cited the confusion in transportationplanning and coordination,and con- cluded that all transportationmatters should be brought under the DPWC's authority and that the DPWC itself should be reorganizedand strengthened. The Commission'sproposals for overall Governmentreorganization are due to be presentedby the President to Congress in May 1971; the proposals will be presented as a package, to be either accepted or rejected by Con- gress. If accepted, the proposalswould be implementedduring 1971-73. During the loan negotiations,the Bank discussedwith the Government representativesthese proposals insofar as they affect transportation. The proposals incorporatea number of the Bank's comments and suggestions made during and subsequentto appraisal and, if accepted and implemented, would result in some operationalimprovements in the transportsector. There ia, however, some uncertaintyon how effective and efficient the proposed new DPWC organizationwill be in transportplanning and coordina- tion and this is a matter which will be reviewed and discussed further with the Governmentduring thieexecution of this project. Assurances were obtained during loan negotiationsthat the Governmentwill furnish the Bank a copy of the final proposals as submitted to Congress and will keep the Bank informed of the progress of the Bill and any subsequent implementation. For additionalassurances regarding BPH reorganization see para. 3.09.

III. THE HIGHWAY SECTOR

A. Highwy Network

3.01 The main highway network extends from north to south over the four islands of Luzon, Samar, Leyte, and Mindanao (Map). The principal artery of the country is the 2,000 km long Pan-PhilippineHighway, which extends from Aparri in North Luzonito Davao in southern Mindanao. The - 6 -

two major inter-island crossings on this highway are served by ferries. Minor highway networks exist on some of the other 7,000 islands, but they are small in relation to the main network.

3.02 The existing network consists of about 64,000 km, of which about 13,000 km are paved. The system is divided into five classes: express- way, primary, secondary,municipal, and feeder (Table 3). Expressways, primary roads, and about one-third of the secondary roads comprise the national system under the authority of the central Government. Provin- cial or city governmentsare responsiblefor the remainder of the second- ary roads, with municipal authoritieslooking after municipal and some feeder roads. Many feeder roads, constructedunder political pressure, are without an authority responsiblefor their maintenance. The ratio of 1 km of road to 600 people in the Philippines is better than that of similar insular countries (the ratio for Indonesiabeing 1 km to 1,400 people), but most roads are badly aligLnedand in poor condition.

3.03 While the Governmenthas been aware of deficienciesin the highi- way network, it has been hampered by lack of planning and a critical short- age of funds. However, from FY 1971-1975,it intends to improve about 13,000 km of the network, including 1,300 km of the Pan-PhilippineHigh- way which will be constructedwith Japanese assistance (primarilyequip- ment). Inter-islandvehicular ferry services will also be improved.

B. Highway Traffic

3.04 The motor vehicle fleet at the end of 1969 was about 447,000 units as compared with 199,000 in 1962, reflectingan average increase of 12% p.a. (Table 4). Of the total, about 80% are registeredin Luzon (about half of which are in greater Manila), 10% in Nlindanao,and 10% in the other islands. Gasoline consumptionfor the same period increased by about 10% p.a. (Table 5). There are about 110 inhabitantsper vehicle (comparedto about 300 in Korea, 120 in Thailand, anid50 in ilalaysia).

3.05 Trucking is carried out on an own-account basis (about 90%) and by general haulers (about 10%). Although there are no restrictionson entry into road haulage, the trucking rates which have been set by law are low and discourage the growth of the general haulers. Wider general trucking operationswould be encouragedby the improvementof the road network and by greater flexibilityin trucking rates. The latter could follow the review of transportpolicies which would be made after re- organizationproposals have passed into law.

3.06 Traffic counts have recently been carried out on all primary and secondaryhighways through a system of control and coverage stations. At control stations, about 200 km apart, traffic counts are taken 68 times a year and at coverage stations, about 20 km apart, twice a year. Although a significantamount of traffic informationis consaquentlyavailable, it is not yet fully used for highway planning and maintananceprogramming. During loan negotiations,assurances were obtained that traffic counts would be continuedand that the processingand retrievalof traffic data would be improved. - 7 -

3.07 Motor vehicle reFulationsare generally satisfactory. The legal vehicular load is 8,000 kg on a single axle and 14,500 kg on tandem axles. Patrols of the Land Transport Commissionand the national and local police are responsiblefor enforcing regulations. As there are no permanent weigh- ing stations and this commissionowns only a few portable units, overload- ing is widespread. Assuranceswere obtained during loan negotiationsthat effective axle load control measures would be introduced and enforced.

C. Highway Administration

3.08 The Bureau of Public Highways (BP3) is responsible for the national road network. This Bureau, which is part of the Departmentof Public Works and Communications (DPWC), is headed by a Commissioner(a political appointee) and administered by a Deputy Commissioner and a Chief Engineer. Proliferation of technical and administrativedivisions abounds at headquarters (Chart) and considerableoverstaffing exists both at headquartersand in the field. Though there has been only a minor increase in the road network, the number of districtshas doubled from 54 to 110 since 1954. These new districts appear to have been created to coincide with local political spheres of influence. Consequently, improvement programs are fragmented,overhead costs have increased, and financial control has suffered. Field operations, carried out by district engineers, are not effectivelycontrolled by BPH headquartersin 'Maniladue to the remotenessof the areas served and the poor communications.

3.09 Certain proposals by the Commissionon Reorganizationfor improve- ments in the BPH do not require legLslative action. These will be imple- mented under this project, together with other measures proposed by the Bank to improve BPH operations. Basically, tthese interinm measuires (detailed in tiheAnnex) are: reductioni of utaff, "pparaLion or admLnimtrative a3nd-tuch- nical fucticLonn, dLvIsioni of constructLoLl anid mainiteanace reaponsibiliLies, and revitalization of regional office functionss. During negotiations the Government confirmed that these measures were corisistent witlh the Commisq- sion's overall proposal.s. Also during negotlatlons, the Governlment gave Assurances tlhntit would implemenit thtese interim measures with the asist- ance of consultants over a period of two years.

D. Highway Planning and Financing

3.10 Highway planning begins at the local level with requests from mayors and other officials. District engineers draw up preliminary plans and cost estimates wiich are then checked and consolidatedby BPH head- quarters. The overall program is next reviewed by the National Economic Council and then by the PresidentialEconomic Staff and the Budget Commis- sion. The resulting program is the Five-Year InfrastructureProgram. An- nual budget requests based on this Program are presented to Congress for approval.

3.11 Most road works have involved short sections on existing pre- World War II alignmentsand little economic planning or analysis has been undertaken. The Governmenthas now adopted the investmentprogram suggested in the Transport Survey as the basis for its Five-Year Infrastruc- ture Program. Feasibilitystudies and detailed engineeringwill precede constructionof major projects, although political considerationsmay con- tinue to influence selection of smaller works.

3.12 Funds for highway construction,maintenance, and a.-inistration now come mainly from the Highway Special Fund (HSF), which w2s set up by legislationin 1953 (Table 6). HSF revenue is from motor fuel taxes and vehicle registrationfees; additionalhighway revenue comes from general budget allocationsand bond sales, making a total of P 400 million (about US$65 million) available for highways in FY 1970 (Table 7). Over the next few years, funds will also be available from the recently imposed Export Tax, 25% of which will be used toward the local currency costs of inter- nationally financed projects. By law, HSF funds are distributed44.5% each to maintenance and construction,with the riaaniniig11% being allocat- ed to administration and emergencies. Of the maintenance allocation, about one-third is distributed equally between provinces and cities; the remainder is distributedon the basis of road length, population,and vehicle registra- tion. Two toll roads exist, with the constructioncontractors collecting tolls to pay for their constructionand operation. In FY 1969, HSF's rev- enue covered the cost of highway administrationand maintenance,as well as about 50% of constructioncosts. If non-earmarkedcustoms duties on motor vehicles were added, total road user revenue would roughly equal highway expenditures.

3.13 The Government'sprevious Four-Year Highway Plan (FY 1967-1970) called for a total expenditureof about P 1,000 million (about US$170 million equivalent)and this target was substantiallyachieved. The currentlyproposed Five-Year InfrastructureProgram requires expenditure of about P 2,300 million (about US$370 million equivalent);of this, the Governmenthopes to obtain about P 500 million of external financing. The plan is ambitious and,some slippage may be expected into FY 1976.

E. Highway Design and Construction

3.14 At BPH headquarters,roads and bridges are designed by two separate divisions: HlighwayLocation and Design, and Bridge Design. As most recent projects have been small, a large part of the design work has been undertakenby Regional and District Offices and checked by headquarters. Although design staff are able, their offices could be better equipped and organized. These shortcomingswill be reviewed by the technicalassistance team (para. 4.08). Field Offices base their design on guidelinesprepared by BPH headquarters. Highway and bridge design standards are generally satisfactory. Although SAUTI (para. 1.02) is now the only foreign consultantemployed by the BPH, some major bridge projects have been bid on a design and constructbasis with overseas consultantsemployed by the bidders.

3.15 Until recently,highway constructionwas uadertakenby both force account (two-thirds)and contract (one-third),with the headquartersCon- struction Division acting as a clearing house and coordinatingagency for - 9 - district and regional proposals. To maintain better control of funds and to promote the local contractingindustry, the Governmentrecently put a P 75,000 (about US$12,500equivalent) ceiling on individualforce account projects. This is expected to reduce considerablythe amount of force account work.

3.16 Governmentcontracts are awarded on a competitivebasis with par- ticipation normally limited to local firms. In November 1970, a new law (Republic Act 6142) was enacted allowing the President to waive existing laws which prohibit bidding by foreign firms for works partiallyfinanced from external sources. International competitive bidding procedures can thereforebe employed for such works.

3.17 Recently awarded road contractsfor sections of the Pan-Philippine Highway have greatly increasedthe amount of work being undertakenby the domestic road contractingindustry. A few major contractors(some working with United States firms) have already gained roadworksexperience both on United States military base projects and on smaller Governmentand city works. Domestic road contractorsreadily form joint ventures to com?ete for larger works.

F. Highway Maintenance

3.18 Road maintenanceis poor, with routinemaintenance almost non- existent and periodic maintenanceconfined to reconstructionof small, isolated sections of pavement. At any time, therefore,the network con- sists of only short sections of new pavement interspersedwith rapidly deteriorating longer stretches.

3.19 Road maintenanceis the responsibilityof district and city engineers,and their work should be inspectedby the MaintenanceDivisions at Bureau headquarters and at regional level. In fact, this inspection does not occur. Consequently, the district engineers'tendency to favor minor improvementworks prevails at the expense of essential routine main- tenance. Similarly, failure to allocate equipment specifically for main- tenance has contributedto further deteriorationof the road network.

3.20 Road maintenanceprogramming is non-existent;district main- tenance allocationsare at the discretionof the district engineer. Maintenance funds (averagingabout US$500/kmp.a., excludingequipment depreciation)appear at first sight to be adequate,but chronic over- staffing and diversionof funds to improvementshave left little for routine maintenance. Furthermore,a sizeable portion of both maintenance and constructionfunds is spent on emergencywork, particularlytyphoon damage (14 occurrencesfrom 1968 to date).

3.21 The Government is aware that road maintenance must be improved and that reorganizationof the BPH is an essentialstep. Technical as- sistance to help with reorganizationand to assist BPH staff in improving road maintenancemethods (para. 4.08) is provided under this project. Preliminaryrecommendations by the technicalassistance team are expected - 10 -

to be available six months after work begins. During loan negotiations, assuranceswere obtained that on the basis of the above recommendations the Governmentwould: (a) formulatea program satisfactoryto the Bank for provision of adequate maintenance funds for the road network; and (b) take the necessary steps thereafterto improve road maintenanceoperations in accordancewith the agreed program.

IV. THE PROJECT

A. General

4.01 The project consists of the following:

(a) constructionand improvementof the 160 km Cotabato- Digos Road;

(b) consulting services to BPH for detailed engineering (the 160 km project road, 765 km of Japanese-financed Pan-PhilippineHighway, and about 700 km resulting from (c) below) and construction supervision of (a) above;

(c) feasibility studies of about 1,000 km of roads; and

(d) technical assistance to the BPH for administrative and operational improvements.

The Governmenthas asked the Bank to finance the foreign exchange costs of items (a) and (b) above and has requested financialassistance from the UNDP for items tc) and (d) above.

B. Constructionand Improvement

4.02 The 160 km road to be constructedand improved runs from Cotabato on the west coast of Mindanao to Digos on the east coast. Improvement of this road was given high priority in the Transport Survey (para. 1.02) and was confirmedin a detailed feasibilitystudy.

4.03 Short stretchesof the present road, totalling 50 km, have been paved recently,but the remainderis poorly aligned with unsurfacedstretches which are virtually impassablein the monsoon season. Under the project, these unimprovedsections will be upgraded and paved to two-lane standard (Table 8); the proposed design standardsare acceptableto the Bank. In addition, shoulder constructionand minor drainage works will be carried out where necessary on the recently paved sections. - 11 -

C. ConsultingServices for Detailed Engineering and Construction Supervision

(a) Current Detailed Engineering

4.04 The Government in 1969 retained the services of SAUTI to under- take the detailed engineering of the Cotabato-Digosproject road, as well as that of the Lucena-Legaspiand Cabanatuan-TugueguraoRoads on Luzon, totaling about 925 km (Map). The contract arrangementswere satisfactory and the Bank agreed to consider the inclusion of the foreign exchange costs of these services (about US$750,000) in the proposed loan for retroactive financing. The Government indicated that constructionof the latter two roads would be part of the proposed Bank project, but subsequentlyinformed the Bank that these roads would be constructed under bilateral assistance from Japan. Design work commenced in February 1970 and was completed by the end of that year. Maximum use of BPH staff was made in the work.

(b) ConstructionSupervision

4.05 SAUTI will also undertake constructionsupervision of the Cotabato-DigosRoad. BPH staff will again fill as many appropriateposts as possible in the consultants'supervision organization. This arrange- ment is satisfactoryand the staffing arrangementswere agreed during negotiations.

(c) Further Detailed Engineering

4.06 It is expected that the feasibilitystudies (para 4.07) will identify about 700 km of high priority roads, for which detailed engineer- ing would be justified and which could be the basis of further Bank lending for highway construction. Detailed engineeringby a firm of consultants, therefore, is included under this project.

D. FeasibilityStudies

4.07 Feasibilitystudies under the project will cover about 1,000 km of existing primary and secondary roads on Luzon (Table 9 and Map), as recommendedin the Transport Survey. These studies will be undertakenby a firm of consultants,and will include comprehensiveeconomic evaluations and identificationof alternative solutions for improving the roads, to- gether with plans for implementationof the optimum solutions. The Govern- ment has asked the Asian DevelopmentBank (ADB) to finance similar studies for roads in Samar and Mindanao, and close liaison will be kept with ADB.

E. Technical Assistance to BPH

4.08 The Government wants to improve BPH operations and has agreed that technical assistance be included in the project for this purpose. The assistancewill be provided by about 11 experts (including a transport economist) from a consulting firm. During a two-year period, the team will - 12 - reviewand assistin implementingthe interimBPH reorganization,as dis- cussedin the Annex, and will adviseon Overallroad maint6iance,workshop operations,and road planning. Trainingotocal t staffwill be provided both at headquartersand in the field. The team will test revisedmain- tenancetechniques in a selectednumber of pilot distrtitsfor subsequent implementationon a country-widebasis. Duritigloan negotiations,techni- cal assistancedetails rere agreedand an assurancewas obtainedthat, prior to completionof the team'stwo-year assignment and in consultation with the Bank, the Governmentwould reviewthle progress And aAsess the need for furthertechnical assistance.

F. cot In ExchAnge Conent

4.09 Totalproject colts, includingcontingencies, are estimatedas follows: - 13 -

Pesos Million US$ Million Equiv. Foreign Local Foreign Total Local Foreign Total Exchange

Part I. Items to be fi- nanced by Bank 1. Construction and im- provement of Cotabato- Digos Road (160km) 15.9 19.6 35.5 2.6 3.3 5.9 55 2. Consulting Services: (a) Detailed engineer- ing of 925 km /a of road including 1 4.2 4.5 8.7 0.7 0.8 1.5 /b 55 (b) Supervision of 1 1.8 3.6 5.4 0.3 0.6 0.9 65 (c) Detailed engineer- ing (about 700 km) resulting from 5 6.6 7.2 13.8 1.1 1.2 2.3 50 Sub-total 12.6 15.3 27.9 2.1 2.6 4.7 3. Contingencies: (a) On 1 - Physical (10%) 1.6 1.9 3.5 0.2 0.3 0.5 Price (11%) 1.6 2.0 3.6 0.3 0.4 0.7 (b) On 2 - Physical (10%) 1.2 1.5 2.7 0.2 0.2 0.4 Sub-total 4.4 5.4 9.8 0.7 0.9 1.6 4. Interest during con- struction - 7.2 7.2 - 1.2 1.2 Total of Items to be financed by Bank 32.9 47.5 80.4 5.4 8.0 13.4 60

Part II. Items to be fi- nanced by UNDP

5. Feasibility Studies (1,000 km) 1.6 4.2 5.8 0.3 0.7 1.0 70 6. Technical Assistance 1.1 6.0 7.1 0.2 1.0 1.2 85 7. Contingencies on 5 & 6 Physical (10%) 0.3 1.0 1.3 - 0.2 0.2 Total of Items to be financed by UNDP 3.0 11.2 14.2 0.5 1.9 2.4

Total Project Costs 35.9 58.7 94.6 5.9 9.9 15.8 63

/a Made up as follows: Cotabato-Digos (160 km), Cabanatuan-Tugegurao (375 km) and Lucena-Legaspi (390 kn). The latter two roads will be con- structed with Japanese bilateral assistance. /b Cost of completed detailed engineering for the 925 km was lower than normal as most of the field survey and soils exploration work was completed by BPH staff prior to commencement of consultants' assign- ment. - 14 -

4.10 SAUTI has made cost estimatesfor road constructionand improve- ments based on the quantitiesderived from detailed engineeringand the local costs of labor, equipment operation,materials and overheads,as well as comparablecosts for work elsewhere. Feasibilitystudy cost estimates are based on those of similar studies in the Philippinesand other coun- tries. Cost estimates for detailed engineeringare taken from the contract between the Governmentand SAUTI. Constructionsupervision estimates are based on a schedule of staffing requirementsand SAUTI's man-monthrates (para. 4.05). Estimatesof costs for further detailed engineering,result- ing from the feasibilitystudies, and the costs for technicalassistance, are based on comparableassignments elsewhere in SoutheastAsia. A 10l contingencyallowance for quantity overruns is believed to be adequate for constructionand consultingservices. The 11% price contingencyfor con- structionis based on 5% p.a. increase in the foreign componentand 6% p.a. increase in the local componentfrom the date of cost estimates (December 1970) to completionof construction(about mid-1974). During loan nego- tiations, final cost estimateswere agreed.

4.11 Foreign exchange componentsof the various items are determined by differentfactors. For road construction,if all work were done by foreign contractorsthe foreign exchange componentwould be 60% (US$3,6million equi- valent); if all work were undertakenby local contractorsthe foreign ex- change componentwould be 44% (US$2.6million equivalent). However, most local firms interested in the project have indicatedtheir intentionto form joint ventures with foreign firms (a 50-50 joint venture would result in a foreign exchange componentof 52%). On the basis that contractswill be won by joint ventures or a foreign firm (also likely to employ local sub-contractors)a 55% foreign exchange componentLas been used in the cost estimates. These foreignexchange estimateswere made by SAUTI and are consideredsatisfactory. For feasibilitystudies, the foreign exchange componentis based on the cost of foreign experts' salaries and equipment. The componentof detailed engineeringis lower than found in other coun- tries due to maximum use of BPH staff (on Government salaries);while constructionsupervision and technicalassistance reflect the rel4tively high input of foreign personnelwith foreign exchange componentsof 65% and 85% respectively.

G. Project Financingand Execution

4.12 The proposed loan to the Governmentwill finance the foreign ex- change componentof the constructionand detailed engineeringelements of the project together with interest and other charges during construction, with the feasibilitystudies and technicalassistance to be financed by the UNDP. 1/ Local cost financingwill be made available through an Ex- port Tax (para. 3.12) and no undue difficultiesare expected.

1/ The Government has submittedan applicationto the UNDP for the fi- nancing of these elements. UNDP management has indicatedthat the necessary funds will be included in the progrEm to be submitted to the Governing Council in June 1971. - 15 -

4.13 The BPH will be responsiblefor executing the project, assisted by qualified consultantsunder terms and conditionssatisfactory to the Bank. During loan negotiations,assurances were obtained that the Govern- ment will promptly retain consultantsfor constructionsupervision and, subsequently,for detailed engineering(para. 4.06).

4.14 To encourage the domestic contractingindustry to bid for the road works, the total contractwill be advertisedin two sections of about equal value with contractorsbidding for one or both sections. Contracts will be based on unit prices. The Governmenthas requestedand the Bank has agreed that contract documents require alternativebids for different types of pavement constructionusing asphalt or cement concrete. Contracts will be awarded on the basis of the lowest evaluatedbids.

4.15 The Governmenthas agreed to amend its present contract bidding and award proceduresin accordancewith the Bank's "Guidelineson Procure- ment". Amendmentspermitting foreign firms to compete on an equal basis for contractsof this nature are embodied in Republic Act 6142 which was enacted in November 1970 (para. 3.16). Other major amendments,such as bidding periods and bid evaluationnecessary to ensure compliancewith bidding proceduressatisfactory to the Bank have been made at Departmental level.

4.16 The potential of the project constructionfor relieving unemploy- ment in the Philippineshas been considered. Total unemploymentin the country is currently estimated at about 8%, but the unemployedare found primarily on the island of Luzon and in the larger urban areas (particu- larly Mlanila). In Iindanao, where the project is located, there is no serious unemploymentproblem and the populationis principallyengaged in year-round farming of the rich agricultureland, particularlyalong the project road (para. 5.03). The possibilityof moving unemployedlabor 1,200 km from the island of Luzon to Mindanao is impracticalbecause of ethnic differinces,the long arduous journey required, and a reluctance on the part of the urban unemployedto move away from potential city op- portunities. The constructionof the project road using labor intensive methods is therefore consideredimpractical.

4.17 Constructioncontracts will probably be awarded in the third quarter of 1971, and the works should be completed towards the middle of 1974. Feasibilitystudies will cormmencemid-1971 with completion ex- pected in the first quarter of 1972, to be followed by detailed engineer- ing (para. 4.06). The technicalassistance team would be retained from mid-1971 until mid-1973. The timing of project executionwas agreed during loan negotiations.

R. Disbursements

4.18 Disbursementsfrom the loan account would be on the basis of 55% of the cost of road construction;the actual foreign exchange cost of con- sultants'services; and the actual loan interest and other charges during construction. Surplus funds in the loan account on project completionwill b2 cancelled. The schedule of estimated disbursementsis given in Table 10. - 16 -

V. ECONOMIC EVALUATION

A. General

5.01 The Philippineshas traditionallyprovided for its highway improve- ment needs on a short-termbasis for small road sections rather than by long- term, comprehensiveplanning of constructionand maintenancefor the entire road network. Although this has resulted in a considerableamount of recent improvementtworks, a logical plan for future developmentis essential. The Governmenthas accepted the prioritiesrecommended by the TransportSurvey as a basis for future planning. Road works included in the current project are given high priority in the Survey.

5.02 The objectivesof the project are to:

(a) reduce transportcosts on the most i.nportantprimary highway in Mlindanao;

(b) establish the technicaland economic feasibility,and provide the detailed engineering,of other roads identifiedas being of high priority in the Transport Survey; and

(c) imuprovethe BPH organizationand its operations, particularlyfor road maintenance.

Benefits from feasibilitystudies and technicalassistance to BPH, (b) and (c) above, have not been quantified. Although no detailed economic eva- luationwas made of the two roads Lucena-Legaspiand Cabanatuan-Tuguegurao as they will be constructedwith bilateral assistancefrom Japan, they are expected to yield an acceptablerate of return based on the findings of the TransportSurvey and the feasibilitystudies.

B. Cotabato-Digos Road

5.03 The Cotabato-DigosRoad is the only east-west link in central Mindanao. It connects the two main cities and administrativecenters, Cotabato and Davao, and it serves an agriculturalarea includingthe main corn and one of the main rice-producingregions in the Philippines. Future agriculturalgrowth potential in this area is among the highest in the country. 1/

1/ SouthwestMindanao is one of the rice andCcorn priority areas, accord- ing to the National Food and AgricultureCouncil. It is expected to benefit from the recently approved Bank financed Rice Processing Proj- ect (Loan Na. 720-PH) and an ADB irrigatlonproject. - 17 -

5.04 Average daily trafficin 1968 on the Cotabato-DigosRoad was about 550 vehicles,of which about 65% were trucks and buses. Traffic volumes were somewhat higher at the two ends than in the middle. Past trafficgrowth informationis limited and variationsoccur between counting stations. However, based on availableinformation, passenger car and jeep- ney 1/ traffic recently grew by about 24% p.a. and 16% p.a., respectively, with truck traffic growingby about 8% p.a. and bus trafficremaining more or less constant. Table 11 shows present and expected traffic on sections of the road. Forecastsare based on past traffic trends and on projections by the UNDP consultantsof the total productionof goods and servicesand of per capita income in the influencezones. The forecastsused for passengercars and buses are somewhat lower than those used by the UNDP consultantsfor the feasibilitystudy and assume that the traffic growth rate will decline from about 11% p.a. through 1972 to about 6% by 1983. Growth rates are consideredreasonable.

5.05 Reductionin vehicle operatingcosts (VOC) due to improved run- ning surfacesis the readily quantifiablebenefit used in the economic evaluation. Benefits from the project are, however, somewhat underestimated because savings of passengertime and reductionin road maintenancecosts and accidentshave not been considered. Moreover,savings include only the differencebetween present and expectedoperating cost levels and do not take into account the future increasesin operating costs that would take place if the project is not carriedout.

5.06 Conditionsof terrain,cost, traffic,and other features are generallyconsistent throughout the length of the road, and its justifi- cation has, therefore,been evaluatedas a single entity. Based on savings in VOC (Table 12) and the estimatedtraffic growth over 20 years, the in- vestment in the road would yield a rate of return of 18%. The sensitivity of this result was tested on the basis of a plus or minus 10% change in constructioncosts, 20% change in traffic growth rates, and 20% change in VOC savings. This resulted in a range of 11-25% as the minimum and maximum possible returns. Returns on the various combinationsare given in Table 13. The project is, therefore,justified.

VI. RECOMMENDATIONS

6.01 During loan negotiations, assurances were obtained from the Gov- ernment that it would:

(a) implement the interimBPH reorganizationmeasures with the assistanceof consultantsover a period of two years in accordancewith the Annex (para. 3.09);

1/ Jeep-typevehicles convertedfor fare-payingpassengers and widely used for short distance travel in the Philippines. - 18 -

(b) with the assistanceof consultants,formulate a program satisfactoryto the Bank to provide adequate maintenance funds for the road network within one year of the date of the Loan Agreementand take necessary steps thereafter to improve road maintenanceoperations in accordancewith the agreed program (para. 3.21); and

(c) review the progress and assess the need for further tech- nical assistance,in consultationwith the Bank, prior to completionof the two-year assignmentof the technical assistanceteam (para. 4.08).

6.02 The project constitutesa suitable basis for a Bank loan of US$8.0 million equivalentwith a term of 24 years includinga four-year grace period. TABLE 1

PRIIPPDI2

HIGTWA! PROJECT

Domestic Goods and Passeager Transport 19681'

Goods Ton kilometers % (million)

Road Transport 3,520 57 Maritime Transport 2,,510 41 Railway Transport 150 2 Air Transport 10 -

Total 6j190 100

Passengers Passenger kilometers % (million) Road Transport 15,650 82 Maritime Transport 1,570 8 Railway Transport 1,210 6 Air Transport 780 4

Total 19,210 100

1/ Primary transport network, as defined in the Transport Survey, comprising 10,000 km of national highways, 37 national ports, 740 km of railroads, and 37 airports. No information or esti- mate available for balance of network.

Source: UNDPConsultants.

March 1971 TABLE 2

P440

HIGHWAYP%WV

Five-Year Infrastructure ?rogr ? aa

Local ForeignriTtely (iw2iion)

Highways 1,800 81 2,300 32.5

Airports and air navi- gational facilities 179 49 474 6.5

Railroad 30 26 186 2.6

Portworks _7 4

Sub-totalTransportation 2,166 185 3,273 46.0

Balance 1,859 1.2.5

Total Program 41,c5 100.025

1/ Based on exchange rate of US$ 1 - P 6.00.

Source: PresidentialEconomic Staff

March 1971 TABLE 3

PHILIPPINES

HIGHWAY PROJECT

Highway Network 1969 (km)

General Classification

Authority Classification Expressway Primary Secondary Municipal/Feeder Total

BPH 46 9,080 8,969 18,095

Provincial - - 23,775 23,775

city _ 5,408 _ 5,408

Municipal - - 16,315 16,315

Total 46 9_080 16,315 63,593

Road Trype Authority Concrete Bituminous Gravel Earth Total

BPH 1,836 4.,98 4 10,085 1,190 18,095 Provincial 152 2,166 15,691 5,766 23/,77/ City 182 1,679 2,377 1,170 5,4082/ Municipal 355 1,017 8,526 6,417 16,315 Total 2,525 9,846 36,679 14,543 63,593

1/ For maintenance purposes Government does not distinguish between municipal and feeder roads -- the mileage of the latter is uncertain and many of these roads are not maintained.

2/ 2,023 kn of provincial roads receive national aid. 3/ 359 km of city roads receivenational aid. cource: Bureau of Public Highways.

March 1971 TABLE4

PffILIPPINES

HIGHWAY PROJECT

Motor Vehicle Statistics 1962-196,:

Year Cars Jeeps Jeepneya Trucks Buses Other- Total

1962 55,693 26,217 14,353 60,222 14,055 24,122 198,662 1963 58,910 29,051 15,744 72,881 14,903 17,253 208,742 1964 71,262 34,477 16,585 8i,4oo 13,5542 37,618 254,884 1965 84,262 43,369 18,483 90,415 12,983- 23,711 273,22-3 1966 95,146 45,296 22,543 97,489 14,218 35,961 31J0,653 1967 118,729 53,075 24,582 104,524 12,028 50,110 363,04O 1968 135,872 66,131 31,137 118,447 14,327 47,303 413,217 1969 163,424 70,616 35,570 124,139 13,662 39,360 446,771

% Annual Change

1962-1969 16.6 14.6 13.8 10.9 (0.4) 4.9 12.3

Changing Composition

1962 28 13 7 31 7 14 100 1969 36 16 8 28 3 9 100

1/ Military, public service, etc.

Source: Land Transport Commission

March 1971 TABLE5

PHILIPPINBS

HIGJWAIPROJECT

Motor Vehicle Gaooline Consumption F 962-1969

Fiscal Year Annual Consu ption (million liters) 1962 1,109 1963 1,186 1964 1,375 1965 1,345 1966 1,486 1967 1,778 1968 1,878 1969 2,206

% Annual Increase

1961-1969 10.3%

Source: Bureau of Public Highways

March 1971 TABLIE6

PHILIPPINEs

HIGHWAYIRO1G

Revenues from Use and QwDrabip oi Motor Vehicles P11965-1969 (? miliion)

Fiscal bars 1965 1966 I6 Earmarkedfor Higfa,ya Special Fund

Gasoline and lubricat- ing oil tax 114.6 12j.6 145.1 152.9 181.3 Motor Vehicle Regis- tration fees 50.7 56.2 55.2 72.2 74.7 Licenses, plateo and miscellaneous 1J.)3-4 10.5 Total 170.6 ".2 21. 6 2

Other Revenues Customs duties on motor vehicle n.a. n.a. n.a. 100.9 92.1 Tolls 0.7 o.6 1.0 1.4 8.5

Total n.a. n.a. n.a. 100.6

source: Presidential Economic Staff;Bureau of PublicHighways and LTC

March 1971 TABLE

PHILIPPINES

HIGHWAYPIOJECT

r;xpenditureo on Highw%s' Ff1967-1M7 (F million)

Fiscal learn Item 1967 1966 1969 am 1971 1972 1974 197 (Actuaf - -c (Estimated) Ackainistration

Highwayspecial Fund 6.1 7.6 8.9 9.3 10.0 11.0 12.0 13.0 14.0 Construction

Highwaybpecial Fund 101.0 118.0 121.5 100.0 147.0 123.02/ 124.0 150.0 150.0 General Budget and Bond Salea 76.o 100.0 86.7 81.2 j6.01/ 115.0-/ 171.0 240.0 3D0.0 Foreign loans - lW4.5 3.6 34.0 44.0 60.o 72.0 93.0 115.0 Reparations - 1.2 39.5 65.6 31.0 22.0 22.0 22.0 22.0 Export tax _ _ _ 56.0 60.0 71.0 6. - bub-total(Construction) 177.0 363.7 251.3 280.8 314.0 j80.0 460.o 561.0 587.0 Maintenance

Highway dp.cialFuna 106.j 128.0 125.8 110.4 140.0 150.0 160.0 170.0 170.0 Total 289.4 49 .3 ,86.0 LC0.5 464. i1.0 63M 744.0 771.0

I/ bhowereplacement of General Budget funds by introduction of Export Tax

2/ f proposalb currently before Congress are approved, HbF revenues could increaae by about P130 million in this and subsequentyears, thus reducing the dependence on General Budget revenues. bource: Bureau of Public Highways, Presidential Economic btaff ana UNDPConsultant

March 1971 TABLE 8

PHILIPPIMI HIOWAY PR0JIT

Characteristics Unit Fl.t ta

Geometric: Speed k/}A 70.0 6o.o 50.0

Maximm gr*dAint % 3.0 4.0 5.0

Pavemt width a 6.7 6.7 6.7

Shour width a 3.0 2.5 2.0 Kinium raftug a 170.0 V 120.0 0.0

StopOiag *2ght distaaco 90.0 70.0 60.0 Right-of-way a 60.0 60.0 60.0

Pavewnt: ASUO sthod using an 18,000 lb alo

Bridg I AAHO H20.416

Minimuumon.y - 80 km/h employed for most oecT,ion tkroigh flat terrain,

Source: Bureau of Public Highways and UNDP Consultants

March 1971 TABLL 9

PHILIPPINES

HIGMWAYPROJECT

Roads Included for Feasibility Studios (See Map)

Approximate Langth ConstructionCost (km) (US$ miLlion)

Manila North Road (Obando-Tabang-Laoag) 427 22

Manila East Road (Pasig-Sta. Cruz) 95 4

San Fernando-Olongapo Road 79 2

Rosario-Bauang Road 70 2

Sta Tomas-Batangas-Cavite-Las Pinas Loop Road 194 5

Tarlac-Sta. Rosa & Gapan-San Fernando, Pampango 88 3

Bugallon-Damortis Road 51 2 Total 1.^ 4

Source: PresidentialEconomic Staff, Bureau of Public Highwqa, and UNDP Consultants

March 1971 TABLA10

PHILIPPINEb

HIGHwAYPROJECT

Estimated bchedule of Di**w..witS

MM Fiscal Year Cumulative Disbursebent and Quarter at gd of Mr

1972 beptswber JD, 1971 1,300 December ., 1971 1,625 March 31, 1972 1 7M40 June jD, 1972 2,585

deptaber 30, 1972 3s,85 December 31, 1972 4,275 March al, 1973 5,375 June J0, 1973 6,005

.eptemnber 30, 1973 6,505 December i,. 1973 6,890 March 31, 1974 7,190 June 3D, 1974 7,510 1975 eptem 30, 1974 7,510 Dember 31, 1974 7,750 March 31,. 1 975 7,750 June 30, 1975 8,000

bource: Bureau of Public Highway and Mission E;stimates

March 1971 RXIHWAI1RIQJCT

Estimated Traffic Vol=me on Cotabato-Ditos Road 1968-1992

Average Annual Dail Traffic timated Traffic Growth (% p.I.j Road Sections 1968 1973 1977 1962 1987 1992 1968-1972 1973-1977 1978-1982 1953-1987 1988-1992 (Actual) - - (Estimated)------

1 -Cars 78 157 247 405 606 858 15 12 10 8 7 Jeepneys 232 409 577 765 803 803 12 9 5 0 0 Buses 91 147 207 307 418 539 10 9 8 6 5 Trucks 255 411 580 860 1,172 1,510 10 9 8 6 5 2 -args 66 133 209 343 513 726 15 12 10 S 7 Jeepneys 94 166 234 310 325 395 12 9 5 0 0 Buses 95 153 216 320 437 563 10 9 8 6 5 Trucks 170 274 386 573 781 1,007 10 9 8 6 5

3 -Care 41 82 130 213 318 1451 15 12 10 8 7 JLepneys 130 210 338 41L 470 470 13 J 5 0 0 Du&" 154 248 30 £19 70 912 10 9 8 6 5 Trwks 16o 258 364 532 735 9s ID 9 a 6 5 it - cars 37 74 117 192 287 407 15 12 1D 7 J.epn,rs 76 140 198 262 275 334 13 9 5 0 0 Busea 74 119 168 249 310 438 10 9 8 6 5 Trucks 143 230 325 482 657 847 10 9 8 6 5

5 - Co 28 56 89 1145 217 309 15 12 10 8 7 Jmpneys 232 427 603 799 839 839 13 9 5 0 0 i.s" 151 2143 3143 509 6914 894 10 9 8 6 5 Trucks 392 631 891 1,322 1,802 2,322 10 9 8 6 5 6 - Cars 86 173 272 446 668 9463 15 12 10 8 7 J.epn.ys 119 210 285 375 393 393 12 8 5 0 0 Ause8 168 2n 368 521 678 833 10 8 7 5 4 Truc ks 300 462 628 U89 1,156 1,420 9 8 7 5

SwAre: Dur.m of Public naU,o NW tmt d YAMi8i 104UMU8

March 1971 TBES 12

pera

New odStioA4

s ~~~~ ";a1 3g6---767-67.6 32b9 8 4333 0,31j9 0.0319 o 265 0 o 47 N 0.O 43 0.02 32 0*231 o0.231 o 45 oo2 7 Swa?iTo 9.0 D-- :D D 0.2 S0 t~ 30%l 30% .ŽZ% 3% 29% OOpIIe k 3w3O:0 0st.$2971 M092 0.292 0 22. 0o30 Nw Road 03.246 0,243 0. 24 0.246 2~~wtxLg~~ 0.0 3 0.049 U~~~~i9b,oo1 0.5. % 2.&% 17 2.7%1 1X 8

"SlKieU t7 0X866 0.0- 0,832 -O.i2 0.1 o.343 ,Ieow Road o.W61 0 604 03604 o .60o4 0 o06.L 60 S&~Vbng ;TJUV~R 0.03272 % ISvIng % P9% 27% 21% 6) 29%

IWd.t3 RoA93 O 3 ,98 0 *et o1 0t701 0092.2 New Road C.6)'5 64 0.64 0,64. Dx60 o,

%6'3vL-g 31:-% 29% 2 -

Mar¢tMj,,98, TABLE13

PIIILIPPINES

HIGHWAYPROJECT

Rates of Retu?n of Cotabato-Digos Road

Assumptionsl/f2/ Rates of Return

Most likely values of investment, traffic growth,and VOC 18

Most likely values of investment and traffic growth, but conserva- tive assumption of VOC 15

Most likely values of investment and VOC, but conservativeassump- tion of traffic growth 15

Most likely values of traffic growth and VOC, but conservative assumptionof investment 17

Conservativeassumption of invest- ment, trafficgrowth,and VOC 31 Most likelyvalues of investment and trafficgrowth, but optimis- tic assumptionof VOC 21

Most likelyvalues of investment and VOC, but optimisticassump- tion of traffic growth 21 Most likelyvalues of traffic growthand VOC, but optimistic assumptionof investment 20

Optimisticassumption of invest- ment, traffic growth,andVOC 25 _

1/ Conservativeassumptions are: (i) 10% increasein investment;(ii) 20% decrease in trafficgrowth rates,and (iii) 20% decreasein vehicleoperating cost savings. 2/ Optimisticassumptions are: (i) 10% decreasein investment;(ii) 20% increase in trafficgrowth rates,and (iii) 20% increasein vehicleoperating cost savings. Source: MissionEstimates

March 1971

ANNEX Page 1

PHILIPPINES

HIGHWAYPROJECT

Interim Measures for Reorganizationof the Bureau of Public Highways

Introduction

In connectionwith the proposed highway project, certain interim measures to improve the efficiency and operationsof the BPH are to be undertaken;these do not require legislationfor implementation. The mea- sures are consistentwith the Commissionon Reorganization'sproposals for all Government Departments,particularly with those for the DPWC and its sub-agencies(including BPH). Implementationof the measures will require outside technical assistance,which is part of the proposed highway project.

HeadquartersOrganization,_(Page 4)

(a) Establish the Post of Chief Administrator: To separate clearly technical and administrativefunctions, the Administratorshould be responsible for all administrativedivisions within the BPE. He should be on the same level as the Chief Engineer and should report directly to the Deputy Commissioneror the Commissioner.

(b) Detach Internal Audit and Legal Services: These should become staff offices reporting directly to the Deputy Commissioneror Commissionerand should not continue to operate as two of many administra- tive and technical divisions.

(c) Reduce the Present Number of AdministrativeDivisions: The present six administrativedivisions should be consolidatedinto two or three divisionswith the following functions:

(i) Administrative; (ii) Accounting and Finance; and (iii) Personnel.

(d) Reduce the Present Number of Technical Divisions: The present nine technicaldivisions should be consolidatedinto six with the followingfunctions:

(i) Programming and Planning; (ii) Design; (iii) Construction; (iv) Maintenance; (v) Materials and Research; and (vi) Equipment and Workshops. ANNEX Page 2

Field Ormanization

(a) nReorgaizeRegional Offices: These offices (presently named divisions) should have six sections:

(i) Administration; (ii) Design; (iii) Construction; (iv) Maintenance; (v) Materials; and (vi) Equipmentand Workshops.

Thes,esectioas should be staffed and equipped to cater to expected workload in differentregions. In this respect, design activitiesshould be con- centratedAt regional level and not within districts,as at present. To allow Regional Offices to function efficiently,their authority and respon- sibility should be extended to the maximum presently allowed (Administrative Order No. 2, 1954).

(b) Establish Regional Workshops: Only four of seven regional workshops in the ten BPH regions are not operative. Workshops should be establishedin each region with staff and facilitiescommensurate with expected regional workload.

(a) Refrain from Creating New Highway Districts: The Commission proposes to rcduce the number of districts from 110 to equal the number of provinces (68); however, as this requires legislation,the Governmentfirst should refrain from creating new districts.

(d) Separate Highwa Constructionand MiaintenanceFunctions within the Districts: Because construction(including betterments and rehabilitation)has in the past been carried out at the expense of main- tenance, these two activitiesshould be separated at district level. Sec- tions should be created for each and equipment permanentlyassigned for maintenance.

(a) Establish District Workshops: These will carry out normal servicing of equipment, together with minor repairs. M4ajor repairs will be made at reglonal level.

(f) IntroduceHighway Mlaintenance Planning: Planning of all maintenanceactivities should be undertaken,based upon expected traffic volumes, surface type, etc. This skftld be underzakenat all levels (headquarters,regional and distriat) and should form the basis for future allocationof funds. Maintenancetedhniques also should be reviewed and, where possible, improved. ANTEX Page 3

(g) Define Lines of Command: Present procedures neither en- courage efficient field operations,nor clearly define authority and re- sponsibility,and it is necessary to establish clear lines of command from specialist divisions at headquartersthrough the appropriateregional sec- tions to the district level.

(h) Reduce Staff and Improve Staff Training Facilities: Refrain from engaging additional head office staff except specialistsrequired to implement the interim measures; generally staff should be reduced to equate with actual requirements. In the field, positions should be reduced to a minimum. Instituteat regional level training facilitiesfor district staff, including instruction(both theory and practice) to supervisors, foremen, and artisans.

Timiingand Execution

It is proposed t[hatthe above measures will be implementedwith the assistanceof a technical assistance team. The team's assignmentwill be in the following two phases:

(a) Phase 1 (5 men for 6 months):

(i) review the Commission on Reorganization'slatest pro- posals for the BPR and also the BPH's own recommenda- tions;

(ii) prepare a program.for the reduction and merging of the administrative and teclhnical divisions;

(iii) review the requirements of individual Regional Offices and prepare a program for setting up (or reducing) the internal sections;

(iv) estimate the equipmentworkshop needs for each region and the necessary facilities to be provided; and

(v) review, similarly, the overall highway maintenance needs of the country and prepare a plan for estimating district needs and implementingthe proposed improve- ments in operations.

(b) Phase 2 (11 men for 18 months): This phase will consist of implementationof the program prepared with the assistance of the Phase 1 team. Emphasis will be placed on improvingorganizational procedures and operations at field level and it is expected that three districts will be chosen for pilot schemes.

PHILIPPINES HIGHWAYPROJECT INTERIM BUREAU OF PUBLICHIGHWAYS REORGANIZATION MEASURES

COMMISSIONER|

INTERNALAUDI = =~-F EUYCMISOE LEGAL

CHIEFADMINISTRATOR HIG CHIEFE HIGHWAYSENGINEER P

ADMIISTRTION ANDCFINANC PERSONNEL AN LNIGDESIGN MATERIALS

CONSTRUCTION MAINTENANCE EQUIPMENT

10 REGIONAL OFFICES > WITH Z DlISTRI CT AN D CITY OFFi CES G)Z SOURCE:Mission Proposals X IBRD-5374(R)

PHILIPPINES HIGHWAYPROJECT EXISTING BUREAU OF PUBLIC HIGHWAYSORGANIZATION

......

SECRETARY FOR PUBLIC WORKS AND COMMUNICATIONS

.C...... S...... E......

COMMISSIONER

DEPUTY COMMISSIONER|

CHIEF HIGHWAY ENGINEER

SPECIAL SERVICES DIVISIONS SPECIALIZED ENGINEERING DIVISIONS

PROGRAMMING BRDEDSG HGWYElN PESNEL ACCODUNTING INTERNAL AUDIT LEGAL ADMINISTRATION EQUIPMENT AND PLANNING BIG EIN HGWYDSG

BUDGET ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~DEVELOPMENT ANDGFNNET MAAEETPROPERTY MAINTENANCE MTRASOEINLNSPROJECTS CNTUTO

10 HIGHWAY ENGINEERING FIELD DIVISIONS (REGIONS)

ABOUT 11 DISTRICTS l AND 5 CITY OFFICES PER DIVISION IBRD 5375 SOURCE: Bureou of Public High-oy ond UNDP Consultorts.

iu8S i~~~~~~~~~~~~~~~~~~~~~~~~~~1220 1l40

Aporrih R E P U B L I C £VIMNA HANGHAi Laoag OF T H E P H I L I P P I N E S -a-- NTRiOM_AWA R-6 -c-pR6 20- PA CIFIC 20-

OCEAV Lti t_ > uguegorao HIGH WAY PROJ ECT

logan L AU z N _ t JX Jr j S~~~~~~~~~~~~~~~~~~~ABANi 0 0' S_ Fenando -A

hon Jos W 14

ation e PAPUS..~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~2. bonJseu0

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Jose Pongariban 14- -14' ~~~~Nas

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0 SEA

IOu -~~~ 6t/OLfr su%:~i~ 'P .. S.Car2 ea

'e rtoPricesa_ L E G E N D- ri ( i < J ~~~~~~PriminryHighwcys > PROJECT ROADS: M/ D A N A O Construction V, …-Detaied Engineering S E A Butuan -- FeasibilityStudies an de Or -.---.--.-- o- PMPlippineNa#tonal Ritwoys Ozamia Iligan ** .-- e-.--. - PPhippineRailroad Company B.- 8- a Principal Ports 4 Principal Airports

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3418 22I NOVEMB Ee 1970 IBRD 3789 NOVEMBER 1970